Document:

chapeau10qsb123107ex10-1.htm

    
      

      

    

    Exhibit 10.1

     

     

     

     

    JOINT
VENTURE AGREEMENT

     

    between

     

    CHAPEAU,
INC.

     

    and

     

    TEFCO,
LLC

     

    

     

    Dated
as of December 14, 2007

     

    

     

     

     

    
 

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    TABLE OF CONTENTS

     

    
      	 
      	
              Page

            
	 
      	 
      
	
              ARTICLE I          
      DEFINITIONS

            	
              2

            
	
              Section
      1.1            
      Certain Definitions

            	
              2

            
	
              Section
      1.2             Terms
      Defined in Other Sections

            	
              2

            
	
              Section
      1.3            
      Other Definitional Provisions

            	
              5

            
	
              ARTICLE
      II         THE
    CLOSING

            	
              5

            
	
              Section
      2.1            
      Closing

            	
              5

            
	
              Section
      2.2            
      Deliveries at the Closing

            	
              5

            
	
              ARTICLE
      III        REPRESENTATIONS AND
      WARRANTIES OF INVESTOR GROUP

            	
              6

            
	
              Section
      3.1             Due
      Organization; Good Standing and Power

            	
              6

            
	
              Section
      3.2            
      Authorization; Noncontravention

            	
              6

            
	
              Section
      3.3            
      No Litigation or Regulatory Action

            	
              7

            
	
              Section
      3.4            
      Financing

            	
              7

            
	
              Section
      3.5            
      Prior Activities

            	
              7

            
	
              Section
      3.6            
      Brokers

            	
              7

            
	
              Section
      3.7            
      Securities Law Matters

            	
              7

            
	
              ARTICLE
      IV        REPRESENTATIONS AND
      WARRANTIES OF CHAPEAU

            	
              7

            
	
              Section
      4.1            
      Due Organization; Good Standing and Power

            	
              7

            
	
              Section
      4.2            
      Authorization; Noncontravention

            	
              8

            
	
              Section
      4.3            
      Capitalization

            	
              8

            
	
              Section
      4.4            
      Authorization of Securities

            	
              9

            
	
              Section
      4.5            
      Financial Statements

            	
              9

            
	
              Section
      4.6            
      No Undisclosed Liabilities

            	
              9

            
	
              Section
      4.7            
      Governmental Approvals

            	
              9

            
	
              Section
      4.8            
      Title to Assets; Absence of Encumbrances

            	
              9

            
	
              Section
      4.9            
      Absence of Restrictive Provisions

            	
              9

            
	
              Section
      4.10          
      Compliance with Laws

            	
              10

            
	
              Section
      4.11           Product
      Warranty; Product Liability

            	
              10

            
	
              Section
      4.12          
      Brokers

            	
              10

            

    

     

     

     

    
 

    
      
        
           

        

        
          i

          
            

          

        

        
           

        

      

    

     

    TABLE OF CONTENTS

    (continued)

    

      
        	 	
                Page 

              
	 	 
	
                Section
      4.13          
      Securities Law Matters

              	
                11

              
	
                Section
      4.14           Full
      Disclosure

              	
                11

              
	
                Section
      4.15           No
      Implied Representation

              	
                11

              
	
                ARTICLE
      V         COVENANTS, RIGHTS AND
      OBLIGATIONS

              	
                12

              
	
                Section
      5.1            
      Covenants, Rights and Obligations of the Company

              	
                12

              
	
                Section
      5.2            
      Covenants, Rights and Obligations of Chapeau

              	
                13

              
	
                Section
      5.3            
      Commercially Reasonable Efforts

              	
                15

              
	
                Section
      5.4            
      Further Assurances

              	
                15

              
	
                ARTICLE
      VI        CONDITIONS TO THE
      CLOSING

              	
                16

              
	
                Section
      6.1            
      Conditions to the Obligations of the Company

              	
                16

              
	
                Section
      6.2            
      Conditions to the Obligations of Chapeau

              	
                16

              
	
                ARTICLE
      VII       INDEMNIFICATION

              	
                17

              
	
                Section
      7.1            
      Survival

              	
                17

              
	
                Section
      7.2             Indemnification

              	
                17

              
	
                Section
      7.3            
      Indemnification Procedures

              	
                18

              
	
                Section
      7.4            
      Calculation of Losses; Tax Treatment of Payments

              	
                20

              
	
                ARTICLE
      VIII     MISCELLANEOUS

              	
                20

              
	
                Section
      8.1            
      Notices

              	
                20

              
	
                Section
      8.2            
      Costs and Expenses

              	
                21

              
	
                Section
      8.3            
      Amendments; Waiver

              	
                21

              
	
                Section
      8.4            
      Assignment

              	
                22

              
	
                Section
      8.5            
      Binding Effect

              	
                22

              
	
                Section
      8.6            
      Entire Agreement

              	
                22

              
	
                Section
      8.7            
      No Third-Party Beneficiaries

              	
                22

              
	
                Section
      8.8            
      Specific Performance

              	
                22

              
	
                Section
      8.9            
      Severability

              	
                22

              
	
                Section
      8.10           Governing
      Law; Jurisdiction

              	
                22

              
	
                Section
      8.11          
      Counterparts

              	
                23

              
	
                Section
      8.12           No
      Presumption

              	
                23

              

      

    

    
      
        
           

        

        
          ii

          
            

          

        

        
           

        

      

    

    

    JOINT
VENTURE AGREEMENT

     

    This
Joint Venture Agreement (this “Agreement”) is
entered into as of this 14th day of
December 2007, by and among Chapeau, Inc., a Utah corporation (“Chapeau”), and TEFCO,
LLC, a Virginia limited liability company (the “Company”).

     

    WITNESSETH

     

    WHEREAS,
the parties desire to establish a joint venture for the purposes of financing
certain turnkey projects for Combined Heat & Power (“CHP”) and Combined
Cooling Heat & Power (“CCHP”) applications
incorporating Chapeau’s EnviroGenTM Energy Modules or similar products
(collectively, the “Turnkey Projects”),
each of which Turnkey Project is subject to an executed discount energy service
agreement or similar contractual arrangement on terms and with counterparties
(“Customers”)
mutually agreeable to the Company and Chapeau in their reasonable discretion
(“DES
Agreement”) for the tolling of energy by each such Turnkey Project for
the benefit of such counterparties, and a Service and Maintenance
Agreement  between Chapeau and a counterparty reasonably and mutually
acceptable to the Company and Chapeau (“S&M Agreement”);
and

     

    WHEREAS,
the parties desire the Company to purchase the Turnkey Projects pursuant to
agreements having terms mutually agreeable to the Company and Chapeau in their
reasonable discretion (“Turnkey Project Purchase
Agreements”); and

     

    WHEREAS,
to induce the Company to enter into this Agreement and the transactions
contemplated hereby, Chapeau agrees to operate, service and maintain each such
Turnkey Project either directly or by subcontracting such activities to a
counterparty reasonably and mutually acceptable to the Company and Chapeau
pursuant to the terms of an S&M Agreement; and

     

    WHEREAS,
Chapeau, as the manufacturer of the Turnkey Projects, has as of the date of this
Agreement entered into certain discount energy purchase agreements (“Existing DEP
Agreements”) with Customers, as well as service and maintenance
agreements (“Existing
S&M Agreements”) in connection with certain of the Existing DEP
Agreements; and

     

    WHEREAS,
concurrent with or as soon as reasonably practicable following the execution of
this Agreement the Company shall be funded with the Initial Capital
Contribution  (as defined herein) in the amount as set forth on Exhibit A attached
hereto; and

     

    WHEREAS,
upon receipt of the Initial Capital Contribution, the Parties desire the Company
to immediately advance to Chapeau $10 million pursuant to the terms of a Senior
Secured Promissory Note (as defined in Section 5.1(b) of this Agreement);
and

     

    

    
      
        
           

        

        
          1

          
            

          

        

        
           

        

      

    

    

    WHEREAS,
subsequent to the Initial Capital Contribution (i) Chapeau desires to sell to
the Company and the Company desires to acquire from Chapeau some or all of the
Turnkey Projects that are the subject of the Existing DEP Agreements, and (ii)
Chapeau and the Company desire that Chapeau assign to the Company, the
corresponding (A) Existing DEP Agreements pursuant to the terms of an assignment
agreement to be mutually agreed (“DEP Assignment
Agreement”), and (B) Existing S&M Agreements pursuant to the terms of
an Existing S&M assignment agreement to be mutually agreed (“Existing S&M Assignment
Agreement”); and

     

    WHEREAS,
on or before the date of this Agreement, the Certificate of Formation of the
Company shall be executed, delivered and filed with the Secretary of State of
the State of Virginia; and

     

    WHEREAS,
the parties hereto agree to enter into such additional agreements and deliver
such additional documents to consummate the Transactions (the “Additional
Agreements” and, together with the other agreements, either existing or
to be entered into from time to time, referenced in this Agreement,
collectively, “Transaction
Documents”).

     

    NOW,
THEREFORE, in consideration of the foregoing premises, the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

     

    ARTICLE
I

     

    DEFINITIONS

     

    Section
1.1       Certain
Definitions.  For purposes of this Agreement, the following
terms shall have the following meanings.

     

    Section
1.2       Terms Defined in Other
Sections.

     

    “Action” means any
action, litigation, claim, suit, mediation, arbitration, inquiry, government or
other investigation or proceeding of any nature, whether criminal, civil,
legislative, administrative, regulatory, prosecutorial or otherwise, by or
before any mediator, arbitrator or Governmental Body or similar
Person.

     

    “Affiliates” means
with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, controls, or is controlled by, is under
common control, and the term “control” (including
the terms “controlled
by” and “under
common control with”) means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through ownership of voting securities, by contract or
otherwise.

     

    “Business Day” means a
day on which national banks are open for business in New York, New
York.

     

    

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    

    “Capital Contribution”
means the aggregate amount of money contributed to the Company pursuant to
Section 5.1 hereof, which amount shall include the Initial Capital Contribution
and the Secondary Capital Contributions, if any.

     

    “Chapeau Contracts”
means the Existing DEP Agreements and the Existing S&M
Agreements.

     

    “Contract” means any
contract, license, sublicense, permit, mortgage, purchase order, indenture, loan
agreement, note, lease, sublease, agreement, obligation, commitment,
understanding, instrument or other arrangement or any commitment to enter into
any of the foregoing (in each case, whether written or oral), including, any
schedules, exhibits, annexes, attachments, amendments or other modifications
thereto.

     

    “Encumbrance” means
any encumbrance, lien, pledge, mortgage, deed of trust, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude,
proxy, voting trust or agreement, transfer restriction under any shareholder or
similar agreement.

     

    “GAAP” means U.S.
generally accepted accounting principles, as in effect from time to
time.

     

    “Governmental Body”
means any government or governmental or regulatory body thereof, or political
subdivision thereof, whether foreign, federal, state, or local, or any agency,
board, commission, department, instrumentality or authority thereof, including
any court.

     

    “Indebtedness” of any
Person means, without duplication, (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments or letters of credit (or
reimbursement obligations in respect thereof), (iii) all obligations of
such Person to pay the deferred purchase price of property or services, except
for current accounts payable and accrued expenses arising in the ordinary course
of business, (iv) all indebtedness represented by obligations of such
Person under a lease that is required to be capitalized for financial reporting
purposes by such Person, (v) all obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities,
(vi) all obligations, contingent or otherwise, of such Person to guarantee
any Indebtedness of any other Person, (vii) all obligations under any
forward contract, futures contract, swap, option or other financing agreement or
arrangement (including, without limitation, caps, floors, collars and similar
agreements), the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices, and (viii) all Indebtedness
of the types referred to in clauses (i) through (vii) above of any other
Person secured by any mortgage, lien, pledge, charge or security interest on
property owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness.

     

    “Initial Capital
Contribution” means the amount set forth on Exhibit A attached
hereto.

     

    

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

    

    “Knowledge” of any
Person that is not an individual means, with respect to any matter in question,
the actual knowledge of such Person’s directors and executive
officers.

     

    “Laws” means all laws,
statutes, ordinances, codes, rules, regulations, decrees and orders of
Governmental Bodies, and any other legal pronouncement having the effect of
law.

     

    “Loss” means any
losses, claims, damages, fines, penalties, assessments by public agencies,
settlement, cost or expenses (including actual costs of defense and reasonable
attorneys’ fees) and other liabilities, but excluding, any consequential,
incidental, indirect, special or punitive damages, but including penalties and
additions to Taxes.

     

    “Material Adverse
Effect” means a material adverse effect on the business, assets,
properties, results of operations or financial condition of a Person, or (ii)
the ability of a party hereto to consummate the Transaction or perform its
obligations under this Agreement or the Transaction Documents.

     

    “Order” means any
judgment, order (consent or other), writ, stipulation, injunction, ruling,
decision or decree of any Governmental Body.

     

    “Ordinary Course of
Business” means the ordinary and usual course of day-to-day operations of
the business of Chapeau through the date hereof consistent with past
practice.

     

    “Permitted
Encumbrance” means (i) statutory Encumbrances arising by operation
of Law with respect to a liability incurred in the ordinary course of business
and which is not delinquent; (ii) such Encumbrances and other imperfections
of title as do not materially detract from the value or impair the use of the
property subject thereto or make such property unmarketable;
(iii) Encumbrances for Taxes and other governmental charges and assessments
not yet subject to penalties for nonpayment or which are being actively
contested in good faith by appropriate proceedings and for which adequate
reserves are maintained on the applicable taxpayer’s books and records;
(iv) mechanics’, materialmens’, carriers’, workmens’, warehousemens’,
repairmens’, landlords’ or other like Encumbrances and security obligations that
are not delinquent or the amount of which is being contested in good faith by
appropriate proceedings; (v) Encumbrances reflected in the financial
statements; and (vi) restrictions on transfer of securities imposed by
applicable state and federal securities laws.

     

    “Person” includes an
individual, body corporate, limited liability company, partnership, joint
venture, trust, unincorporated organization or any agency or instrumentality of
any government or any other entity recognized by Law.

     

    

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

    

    “Taxes” means
(A) all federal, state, local or foreign taxes or similar charges, fees,
imposts, levies and assessments, including all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties and similar fees, assessments and charges
imposed by any taxing authority, (B) all interest, penalties, fines,
additions to tax or additional amounts imposed by any taxing authority in
connection with any item described in clause (A), and (C) any liability for
the foregoing payable by reason of contract, assumption, operation of Law,
Treasury Regulation Section 1.1502-6 (or any predecessor or successor thereof of
any analogous or similar provision under Law), as a transferee or
otherwise

     

    “Transactions” means,
collectively, the Transaction Documents and the transactions contemplated
thereby.

     

    Section
1.3       Other Definitional
Provisions.  The Section headings of this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof.  Unless the context
otherwise requires, (i) all references to Sections contained in this Agreement
are references to sections of this Agreement, (ii) words in the singular include
the plural and vice versa and (iii) words of any gender include each other
gender.  As used in this Agreement, the following words or phrases
have the following meanings:  (i) “include”, “includes” or “including” shall be
deemed to be followed by the words “without limitation”; (ii) “hereby”, “herein”, “hereof”, “hereto”, “hereunder”, and words
of similar import refer to this Agreement as a whole and not to any particular
provision hereof; and (iii) “or” means
“and/or”.  References in this Agreement to any Persons shall include
such Persons and their successors and permitted assigns.

     

    ARTICLE
II

     

    THE
CLOSING

     

    Section
2.1       Closing.  Subject
to the conditions set forth in this Agreement, the execution of those
Transaction Documents that have not previously been executed (the “Closing”) shall occur
at 9:00 a.m. Eastern time at the offices of Sack, Harris & Martin, P.C.,
8270 Greensboro Drive, Suite 810, McLean, Virginia 22102, on December 14, 2007
(the “Closing Date”), or at
such other time or at such other place or on such other date as the Parties may
agree in writing.

     

    Section
2.2       Deliveries at the
Closing.  Upon the terms and subject to the conditions of this
Agreement, at the Closing:

     

    (a)        the
Company shall purchase from Chapeau and Chapeau shall sell to the Company those
Turnkey Projects subject to the Existing DEP Agreements and any and all executed
DES Agreements as set forth in Article V hereof or as otherwise mutually
agreed;

     

    

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

    

    (b)        each
of the Parties shall execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, as applicable, the Transactions Documents to which
it is a party.

     

    ARTICLE
III

     

    REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

     

    The
Company represents and warrants to Chapeau that:

     

    Section
3.1       Due Organization; Good
Standing and Power.  The Company is a limited liability company
duly organized, validly existing and in good standing under the Laws of the
State of Virginia, and has all requisite limited liability company power and
authority necessary to own or lease all of its properties and assets and to
carry on its business as it is now being conducted.

    

    Section
3.2       Authorization;
Noncontravention.  

     

    (a)        The
Company has all necessary limited liability company power and authority to
execute and deliver this Agreement and the Transaction Documents to which it is
a party and, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.  The
execution, delivery and performance by the Company of this Agreement and the
Transaction Documents to which it is a party, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary limited liability company action on the part of the
Company.  This Agreement has been duly executed and delivered by the
Company and, assuming due authorization, execution and delivery hereof by
Chapeau, constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar Laws of general
application affecting or relating to the enforcement of creditors’ rights
generally and (ii) is subject to general principles of equity, whether
considered in a proceeding at law or in equity (the “Bankruptcy and Equity
Exception”).  The Transaction Documents to which the Company is
a party will upon execution be duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by the other
parties thereto, will upon execution constitute the legal, valid and binding
obligations of the Company, enforceable against it in accordance with their
respective terms, subject to the Bankruptcy and Equity
Exception.

     

    (b)        The
execution and delivery by the Company of this Agreement and the Transaction
Documents to which it is a party do not, and neither the consummation by the
Company of the transactions contemplated by this Agreement and the Transaction
Documents to which it is a party nor the compliance by the Company with any of
the terms or provisions hereof and thereof will, (i) conflict with or
violate any provision of the certificate of formation or limited liability
company agreement of the Company, or (ii) (x) violate any Law or Order
applicable to the Company or any of its properties or assets, or
(y) violate or constitute a default under any of the terms, conditions or
provisions of any Contract to which the Company is a party or by which any of
its properties or assets is bound.

     

    

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    

    Section
3.3       No Litigation or Regulatory
Action.  There is no action, suit, proceeding, hearing or
investigation pending or, to his actual knowledge, threatened, against him or
his Affiliates that would reasonably be expected to prevent, hinder or delay the
consummation of any of the transactions contemplated hereby or that questions
the legality or propriety of the transactions contemplated hereby.

    

    Section
3.4       Financing
.  The Company has the financial resources and capability
necessary to satisfy its obligations under this Agreement and the Transaction
Documents.

     

    Section
3.5       Prior
Activities.  The Company has not conducted any operations, has
not incurred any obligations or liabilities nor has it made any commitments with
respect to any of the foregoing.

     

    Section
3.6       Brokers.  No
Person has acted, directly or indirectly, as a broker, finder or financial
advisor for the Company in connection with the Transactions, and no Person is
entitled to any fee or commission or like payment in respect
thereof.

     

    Section
3.7       Securities Law
Matters.  The Company understands and acknowledges that
interests in Chapeau have not been registered under the Securities Act of 1933,
as amended (the “Securities Act”), or
the securities laws of any state or foreign jurisdiction and, unless so
registered, may not be offered, sold, transferred, or otherwise disposed of
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and any applicable securities
laws of any state or foreign jurisdiction.  The Company is acquiring
the interests in Chapeau for investment and not with a view to the sale or
distribution of them within the meaning of Section 2(11) of the Securities
Act.

     

    ARTICLE
IV

     

    REPRESENTATIONS
AND WARRANTIES OF CHAPEAU

     

    Chapeau
represents and warrants to the Company that:

     

    Section
4.1       Due Organization; Good
Standing and Power.  Chapeau is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Utah, and has all requisite corporate power and authority necessary to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted.  Chapeau is duly authorized to do business and is in
good standing in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such qualification or authorization necessary, except where the
failure to be so qualified, authorized or in good standing would not reasonably
be expected to have a Material Adverse Effect on Chapeau.

     

    

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

    

    Section
4.2       Authorization;
Noncontravention.  

     

    (a)        Chapeau
has all necessary corporate power and authority to execute and deliver the
Transaction Documents to which it is a party, to perform its obligations
thereunder, and to consummate the transactions contemplated
thereby.  The execution, delivery and performance by Chapeau of the
Transaction Documents to which it is a party, and the consummation by Chapeau of
the transactions contemplated thereby, have been duly authorized and approved by
all necessary action on the part of Chapeau.  This Agreement has been
duly executed and delivered by Chapeau and, assuming due authorization,
execution and delivery hereof by the other parties hereto, constitutes a legal,
valid and binding obligation of Chapeau, enforceable against Chapeau in
accordance with its terms, subject to the Bankruptcy and Equity
Exception.  The Transaction Documents (other than this Agreement) to
which Chapeau is a party will upon execution be duly executed and delivered by
Chapeau and, assuming the due authorization, execution and delivery thereof by
the other parties thereto, will upon execution constitute the legal, valid and
binding obligations of Chapeau, enforceable against Chapeau in accordance with
their respective terms, subject to the Bankruptcy and Equity
Exception.

     

    (b)        None
of the execution and delivery of the Transaction Documents by Chapeau, the
consummation by Chapeau of the transactions contemplated thereby, or the
compliance by Chapeau with any of the terms or provisions thereof will,
(i) conflict with or violate any provision of the certificate of
incorporation and by-laws of Chapeau, or (ii) (x) violate any Law or
Order applicable to Chapeau or any of its properties or assets, (y) require
the consent or approval of, or any payment to, any third party or
(z) violate, conflict with, or constitute a breach of or default under, any
of the terms, conditions or provisions of any Contract to which Chapeau is a
party or by which any of its properties or assets is bound, except, in the case
of clause (ii), for such violations, consents, approvals, payments,
conflicts, breaches or defaults as would not reasonably be expected to have a
Material Adverse Effect on Chapeau.

     

    Section
4.3       Capitalization.  The
authorized capital stock of Chapeau consists of 325,000,000 shares of common
stock, $0.001 par value per share (the “Common
Stock”).  As of the date hereof, there are 60,280,795 shares of
Common Stock issued and outstanding and no shares of Common Stock are held by
Chapeau as treasury stock.  All of the issued and outstanding shares
of Common Stock were duly authorized for issuance and are validly issued, fully
paid and non-assessable and were not issued in violation of any purchase or call
option, right of first refusal, subscription right, preemptive right or any
similar rights.

     

    

    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

    

    Section
4.4       Authorization of
Securities.  When issued in accordance with the terms of a
stock purchase agreement, the shares of common stock issued to the Company (or
its designee(s)) pursuant to Section 5.1 (the “Common Stock”) will
be duly authorized, validly issued, fully paid and nonassessable, free and clear
of all Encumbrances.  The shares of Common Stock have been duly and
validly reserved for issuance.

     

    Section
4.5       Financial
Statements.  Chapeau’s audited balance sheet and statements of
income and cash flows as of and for the fiscal years ended June 30, 2004, June
30, 2005 and June 30, 2006 and the unaudited balance sheets and statements of
income and cash flows of Chapeau as of and for the three month period ended
September 30, 2007 (the “Financial
Statements”) have been prepared in accordance with GAAP throughout the
periods covered thereby, and present fairly, in all material respects, the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods.

     

    Section
4.6       No Undisclosed
Liabilities.  Chapeau does not have any Indebtedness or
Liabilities (whether or not required under GAAP to be reflected on a balance
sheet or the notes thereto) other than those (i) specifically reflected on and
fully reserved against in the Financial Statements, (ii) incurred in the
Ordinary Course of Business since the September 30, 2007 (the “Balance Sheet Date”)
or (iii) that are immaterial to Chapeau or that would not reasonably be expected
to have a Material Adverse Effect on Chapeau.

     

    Section
4.7       Governmental
Approvals.  No consents or approvals of, or filings,
declarations or registrations with, any Governmental Body are necessary for the
execution and delivery of the Transaction Documents by Chapeau, and the
consummation by Chapeau of the transactions contemplated thereby, other than
such consents, approvals, filings, declarations or registrations that, if not
obtained, made or given, would not reasonably be expected to impair the ability
of Chapeau to perform its obligations under the Transaction Documents, or
prevent or materially impede, interfere with, hinder or delay the consummation
of the Closing.

     

    Section
4.8       Title to Assets; Absence of
Encumbrances.  Chapeau has good and valid title to the Turnkey
Projects that are the subject of Turnkey Project Purchase Agreements being
delivered on the Closing Date, free and clear of all Encumbrances (except
Permitted Encumbrances).  Chapeau has the full right to contribute,
transfer and assign such Turnkey Projects, free and clear of all Encumbrances
(except Permitted Encumbrances).

     

    Section
4.9       Absence of Restrictive
Provisions.  Chapeau is not subject to any non-competition
provision, exclusivity provision, output or requirement Contract or right of
first refusal or other similar contractual restrictions on its ability to
conduct its business (collectively, “Restrictive
Provisions”).

     

     

    

    
      
        
           

        

        
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Section 4.10     Compliance with
Laws.  

     

    (a)        Except
as would not materially impair, delay or prevent the consummation by Chapeau of
the Transactions, Chapeau is in material compliance with all Laws and Orders as
in effect as of the date hereof applicable to the Turnkey Projects (and the
manufacturing, sale and installation thereof) and the Chapeau
Contracts.  Chapeau has in full force and effect all permits, licenses
and authorizations, the absence of which would not reasonably be expected to
have a Material Adverse Effect on Chapeau, to perform its obligations under the
Existing DEP Agreements.

     

    (b)        No
Order is in effect, that names Chapeau and is related to the Turnkey Projects
and the Chapeau Contracts, that imposes a material obligation on Chapeau and the
ongoing ownership and operation of the Turnkey Projects and the Chapeau
Contracts.  There are no Actions pending (to the Knowledge of Chapeau
with respect to investigations of Chapeau by any Governmental Bodies) or, to the
Knowledge of Chapeau, threatened, against or affecting Chapeau, or to the
Knowledge of Chapeau, any of its officers, directors, employees, agents or
stockholders in their capacity as such, in each case with respect to the Turnkey
Projects and the Chapeau Contracts and, to the Knowledge of Chapeau, there are
no facts or circumstances which may give rise to any of the
foregoing.

     

    (c)        There
are no Actions pending (to the Knowledge of Chapeau with respect to
investigations of Chapeau or any other Affiliate of Chapeau by any Governmental
Bodies) or, to the Knowledge of Chapeau, threatened, by or against Chapeau with
respect to the Transaction Documents, or in connection with any of the
Transactions, and Chapeau has no reason to believe there is a valid basis for
any such Action.

     

    Section
4.11     Product Warranty; Product
Liability.

     

    (a)        The
Turnkey Projects have been in material conformity with all product
specifications, all express and implied warranties and all applicable
Laws.  To the Knowledge of Chapeau, Chapeau does not have any material
liability for replacement or repair of any such products or other damages in
connection therewith or any other customer or product obligations not reserved
against on the Financial Statements.  Chapeau has not sold any
products or delivered any services that included a warranty for a period of
longer than one year.

     

    (b)        To
the Knowledge of Chapeau, Chapeau does not have any material liability arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of any of the Turnkey Projects.  To the Knowledge
of Chapeau, Chapeau has not committed any act or failed to commit any act, which
would result in, and there has been no occurrence which would give rise to or
form the basis of, any product liability or liability for breach of warranty
(whether covered by insurance or not) on the part of Chapeau with respect to the
Turnkey Projects.

     

    Section
4.12     Brokers.  Except
for Elisabeth R. Schreiber, whose fees shall be paid by Chapeau, no Person has
acted, directly or indirectly, as a broker, finder or financial advisor for
Chapeau in connection with the Transactions, and no Person is entitled to any
fee or commission or like payment in respect thereof.

     

     

     

    
      
        
        

      

      
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    Section
4.13     Securities Law
Matters.  Chapeau understands and acknowledges that interests
in the Company have not been registered under the Securities Act, or the
securities laws of any state or foreign jurisdiction and, unless so registered,
may not be offered, sold, transferred, or otherwise disposed of except pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and any applicable securities laws of any
state or foreign jurisdiction.  Chapeau is acquiring the interests in
the Company for investment and not with a view to the sale or distribution of
them within the meaning of Section 2(11) of the Securities
Act.

     

    Section
4.14     Full
Disclosure.  No representation or warranty of Chapeau contained
in this Agreement and no written statement made by or on behalf of Chapeau to
the Company pursuant to this Agreement or any of Transaction Documents contains
an untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading.  There are no facts which Chapeau has not disclosed to the
Company which could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

     

    Section
4.15     No Implied
Representation.  Notwithstanding anything contained in this
Article IV or any other provision of this Agreement, it is the explicit intent
of each party hereto that Chapeau nor any of its officers, directors,
shareholders, agents, employees or representatives is making nor has any such
person made any representation or warranty whatsoever, express or implied,
beyond those expressly given by Chapeau, in this Article IV, including any
implied warranty or representation as to the future business, results of
operations, financial condition or prospects of Chapeau; provided that nothing
contained herein shall in any way be construed as limiting the representations
and warranties contained in this Article IV or waiving any rights to
indemnification expressly provided in Article VI hereof.

     

    

     

    

    
      
        
           

        

        
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    ARTICLE
V

     

    COVENANTS,
RIGHTS AND OBLIGATIONS

     

    Section
5.1       Covenants, Rights and
Obligations of the
Company.

     

    (a)        Concurrent
with or as soon as reasonably practicable following the execution of this
Agreement the Company shall be funded with the Initial Capital Contribution in
the amount as set forth on Exhibit A attached
hereto and the Company’s designees set forth on Exhibit A attached
hereto shall be entitled to a 3% financing fee, which amount shall be paid to
the Company’s designees as set forth on Exhibit A in the form
of shares of Common Stock.

     

    (b)        Upon
receipt of the Initial Capital Contribution, the Company shall immediately
advance to Chapeau $10 million pursuant to the terms of a Senior Secured
Promissory Note in substantially the form attached hereto as Exhibit B (the
“Note”).

     

    (c)        The
Company shall purchase from Chapeau Turnkey Projects, in each case, based on and
subject to a project proposal (“Turnkey Project
Proposal”) presented by Chapeau to the Company, which are reasonably
acceptable to the Company  (such Turnkey Projects with corresponding
Turnkey Project Proposals, being the “Designated Turnkey
Projects”).  Each Turnkey Project Proposal shall
include:

     

    (i)           a
signed and executed DES Agreement and S&M Agreement or forms of such
agreements with terms and identified counterparties;

     

    (ii)           a
project funding schedule (“Project Funding
Schedule”) based upon a project management plan for each Turnkey Project,
projecting the funding requirements for each aspect of the project, (i.e.;
permitting, engineering, product development, construction, commissioning,
etc.), which Project Funding Schedules generally shall, unless otherwise
mutually agreed between the Company and Chapeau, provide for funding from the
Company to Chapeau as follows:

     

    (1)           35%
shall be paid to Chapeau upon execution of the DES Agreement;

     

    (2)           25%
shall be paid to Chapeau upon delivery of the prime mover engine(s) to Chapeau
for assembly;

     

    (3)           20%
shall be paid to Chapeau upon completion of 80% of the assembly of the
EnviroGenTM Energy Module(s) or similar products required for the corresponding
Turnkey Project;

     

    

    
      
        
           

        

        
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    (4)           10%
shall be paid to Chapeau upon delivery of the EnviroGenTM Energy Module(s) or
similar products required for the corresponding Turnkey Project to the
Customer’s site; and

     

    (5)           the
remaining 10% shall be paid to Chapeau upon commissioning of the Turnkey
Project;

     

    (iii)           a
Turnkey Project Purchase Agreement; and

     

    (iv)           any
additional information or data that the Company may reasonably
request.

     

    (d)                  The
Company shall be entitled to receive quarterly interest payments on the amounts
paid to Chapeau in accordance with Section 5.1(c)(ii) above, which interest
shall accrue at a rate of 17% per annum, and which interest payments shall be
made in shares of Common Stock with the amount of shares calculated by dividing
the dollar amount of interest accrued during the quarter in question by the
average closing price of Chapeau’s common stock over the 30 days immediately
preceding the end of the quarter in question, provided that, interest on such
advances shall cease to accrue upon the commissioning of the Turnkey
Project;

     

    Section
5.2       Covenants, Rights and
Obligations of Chapeau.

     

    (a)        Upon
receipt of the $10 million loan from the Company pursuant to the Note, Chapeau
shall issue to the Company or its designee(s) 5 million units (the “Units”) with each
Unit comprised of the following:

     

    (i)           An
option to purchase one share of Chapeau’s common stock in substantially the form
attached hereto as Exhibit C;
and

     

    (ii)           A
warrant to purchase one share of Chapeau’s common stock in substantially the
form attached hereto as Exhibit
D.

     

    (b)        All
sales of Designated Turnkey Projects, with the attendant DES Agreements, shall
be at a total sales price to the Company, inclusive of all installation, sales
tax, sales commissions and any other cost associated with the installation,
maintenance and provision of service by the Designated Turnkey Project, as is
necessary to provide the Company with an internal rate of return (“IRR”)
of 17% (or such lower amount as shall otherwise be reasonably acceptable to the
Company), based solely upon the specified future cash flows from the Minimum
Annual Electric Service (as that term is defined in the corresponding DES
Agreement) set forth in the corresponding DES Agreement for each such Turnkey
Project. 

     

    

    
      
        
           

        

        
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    (c)        Chapeau
hereby grants to the Company the exclusive right to finance all Turnkey Projects
pursuant to a DES agreement or similar arrangement by purchasing all Turnkey
Projects with a corresponding DES Agreement (or an Existing DEP Agreement)
generated by Chapeau for so long as the Company has the financial capability to
undertake these transactions and until such time as the Company and Chapeau have
executed Turnkey Project Purchase Agreements in the aggregate amount of $300
million.  During such period, Chapeau agrees to price any such sales
in accordance with the terms of Section 5.2 hereof.  If the Company
declines to purchase any such Turnkey Project, then Chapeau may secure
alternative financing for the manufacture and sale of such Turnkey
Project.

     

    (d)        The
Company shall have the exclusive right (provided the Company has the financial
capability to undertake these transactions) to, and will determine, in its sole
discretion, if it desires to finance up to an additional $300 million of Turnkey
Projects (the “Secondary Capital
Contributions”) on terms and conditions substantially similar to those
provided for in Section 5.2 of this Agreement but with an IRR of 15% (or such
lower amount as shall otherwise be reasonably acceptable to the Company), with
such other terms and conditions to be mutually agreed upon by Chapeau and the
Company. If the Company declines to finance any such additional Turnkey Projects
with the Secondary Capital Contributions, then Chapeau may secure alternative
financing for the manufacture and sale of any such Turnkey
Projects.

     

    (e)        If
the Company and Chapeau have executed Turnkey Project Purchase Agreements to be
financed in the aggregate by the entire $300 million of Secondary Capital
Contributions, then the Company shall have the exclusive right to finance all
Turnkey Projects generated by Chapeau for so long as the Company has the
financial capability to undertake said transactions, which financing shall be on
terms and conditions to be mutually agreed upon by Chapeau and the
Company.  If the Company declines to finance any such additional
Turnkey Projects, then Chapeau may secure alternative financing for the
manufacture and sale of any such Turnkey Projects.

     

    (f)         Chapeau
will use commercially reasonably efforts to originate and negotiate DES
Agreements for Turnkey Projects to be offered to the Company that (A) are (i)
master agreements with key customers reasonably and mutually acceptable to the
Company and Chapeau, requiring Turnkey Projects at multiple customer locations,
or (ii) single agreements with customers reasonably and mutually acceptable to
the Company and Chapeau and (B) have a term of 10 years or more, and such other
terms as are reasonably and mutually acceptable to the Company and
Chapeau.

     

    (g)        Chapeau
will be responsible for the monitoring, service, and maintenance of each Turnkey
Project sold to the Company and the performance of all obligations of “Owner”
under the associated DES Agreement or Existing DEP Agreement and “Service
Provider” under the associated S&M Agreement.  Chapeau shall use
commercially reasonable efforts, and the Company shall provide reasonable
assistance, to obtain the Customer’s consent to the assignment of (i) all of
Owner’s rights and obligations under each Existing DEP Agreement, and (ii) all
of “Service Provider’s” (as such term is defined in the S&M Agreements)
rights and obligations under each Existing S&M Agreement.

     

    

    
      
        
           

        

        
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    (h)        Chapeau
hereby guarantees an 85% uptime (“Guaranteed Uptime”)
on each Turnkey Project covered by an Existing DEP Agreement or DES Agreements
entered into from time to time, such that the Company will not be liable to
Customers for any deficit in the Guaranteed Uptime and Chapeau will fully
indemnify and hold the Company harmless if an Turnkey Project does not perform
in accordance with the terms of the relevant Existing DEP or DES
Agreement.

     

    (i)         Prior
to the Company establishing operational infrastructure, including hiring
personnel, Chapeau shall provide to the Company all required personnel and
support services and activities to the Company in the conduct of Company’s
business on terms to be mutually agreed between the Company and Chapeau and in a
manner reasonably acceptable to the Company.  In addition, Chapeau
shall manage for the Company all relationships with current and potential key
customers, industry participants, suppliers, and service providers, to provide
the Company with the benefit of Chapeau’s expertise and market/industry
knowledge.  Chapeau will also provide the Company with strategic
guidance through its designee to the Board of Directors/Managers of the
Company.

     

    (j)         If
the Company experiences a default in or cancellation of a DES Agreement or an
Existing DEP Agreement (A) prior to the installation of the corresponding
Turnkey Project at the facilities of the Customer, at the Company’s reasonable
direction, Chapeau shall use commercially reasonable efforts to either, obtain a
new DES Agreement and Customer on terms and with a counterparty reasonably and
mutually acceptable to the Company and Chapeau, or cancel the DES Agreement or
DEP Agreement (as applicable) and return to the Company all funds received in
connection therewith; or (B) at or after installation, Chapeau will use
commercially reasonable efforts to relocate the affected Turnkey Project and to
obtain a new DES Agreement therefor on terms and with a counterparty reasonably
and mutually acceptable to the Company and Chapeau prior to entering into a DES
Agreement for any other Turnkey Project of the same
size.     

     

    Section
5.3       Commercially Reasonable
Efforts.  Each of the parties hereto shall use its commercially
reasonable efforts to take, or cause to be taken, as promptly as practicable,
all actions and to do or cause to be done, as promptly as practicable, all
things necessary, proper or advisable in order to cause the conditions to
Closing to be satisfied as promptly as practicable and to consummate and make
effective, in the most expeditious manner practicable, the Transactions
(including the execution of documents, instruments or conveyances of any kind
that may be reasonably necessary or advisable to carry out any of the
Transactions).

     

    Section
5.4       Further
Assurances.  Each party hereto shall execute and deliver all
such further and additional instruments and agreements and shall take such
further and additional actions, as may be reasonably necessary or desirable to
evidence or carry out the provisions of this Agreement or to consummate the
Transactions.

     

    

    
      
        
           

        

        
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    ARTICLE
VI

     

    CONDITIONS
TO THE CLOSING

     

    Section
6.1       Conditions to the
Obligations of the Company.  The obligations of the Company to
consummate the Transactions shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions (any or all of which may be waived
by the Company, to the extent permitted by applicable Law):

     

    (a)        The
representations and warranties of Chapeau contained in Article IV that do
not expressly relate to a specific date shall be true and correct as of the date
hereof and as of the Closing Date with the same effect as though made on and as
of the Closing Date, except where the failure of such representations and
warranties to be so true and correct would not have a Material Adverse Effect on
Chapeau; and the representations and warranties of Chapeau contained in
Article IV that expressly relate to a specific date shall, as of the
Closing Date, remain true and correct as of such specific date, except where the
failure of such representations and warranties to be so true and correct would
not have a Material Adverse Effect on Chapeau; and

     

    (b)        Chapeau
shall have performed in all material respects and complied in all material
respects with all agreements and covenants contained in this Agreement required
to be performed or complied with by it prior to or at the Closing
Date.

     

    Section
6.2       Conditions to the
Obligations of Chapeau.  The obligations of Chapeau to
consummate the Transactions shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions (any or all of which may be waived
by Chapeau, to the extent permitted by applicable Law):

     

    (a)        The
representations and warranties of the Company contained in Article III that
do not expressly relate to a specific date shall be true and correct as of the
date hereof and as of the Closing Date with the same effect as though made on
and as of the Closing Date, except where the failure of such representations and
warranties to be so true and correct would not have a Material Adverse Effect on
the Company; and the representations and warranties of the Company contained in
Article III that expressly relate to a specific date shall, as of the
Closing Date, remain true and correct as of such specific date except where the
failure of such representations and warranties to be so true and correct would
not have a Material Adverse Effect on the Company; and

     

    (b)        The
Company shall have performed in all material respects and complied in all
material respects with all agreements and covenants contained in this Agreement
required to be performed or complied with by it prior to or at the Closing
Date.

     

    

    
      
        
           

        

        
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    ARTICLE
VII

     

    INDEMNIFICATION

     

    Section
7.1       Survival.  The
representations and warranties set forth in this Agreement shall survive the
Closing until the date that is (1) year from the Closing Date, except that the
representations and warranties set forth in Sections 3.1, 3.2, 4.1 and 4.2
shall survive indefinitely (the applicable period with respect to each
representation and warranty set forth in this Agreement, the “Survival
Period”).  No action can be brought with respect to any breach
of any representation or warranty pursuant to this Agreement unless a notice
that complies with Section 7.3 has been delivered pursuant to such
Section 7.3 prior to the expiration of the applicable Survival Period;
provided, however, that upon the giving
of such notice, notwithstanding any other provision of this Agreement, the
representation and warranty that is the basis of such action shall continue with
respect to such action beyond the time at which the representation and warranty
would otherwise terminate.

     

    Section
7.2       Indemnification.  

     

    (a)        Subject
to the other provisions of this Article VII, the Company hereby agrees, to
the fullest extent permitted by applicable Law, to indemnify, defend and hold
harmless Chapeau from, against and in respect of any Losses incurred or suffered
by Chapeau arising out of, in connection with or relating to:

     

    (i)           
Any failure of the representations and warranties of the Company in this
Agreement to be true and correct in all material respects as of the Closing
Date;

     

    (ii)           Any
failure of the Company to perform in all material respects any of its covenants
or obligations contained in this Agreement;

     

    provided, however, that the Company’s
indemnification obligations contained in clause 7.2(a)(i) above and
Chapeau’s indemnification obligations contained in clause 7.2(b)(i) below shall
be subject to a maximum liability for such Losses equal to the aggregate amount
of Capital Contributions made by the Company as of the date the amount of such
Losses is conclusively determined.

     

    (b)        Subject
to the other provisions of this Article VII, Chapeau hereby agrees, to the
fullest extent permitted by applicable Law, to indemnify, defend and hold
harmless the Company, as appropriate, from, against and in respect of any Losses
incurred or suffered by the Company arising out of, in connection with or
relating to:

     

    (i)           Any
failure of the representations and warranties of Chapeau in this Agreement to be
true and correct in all material respects as of the Closing Date;
and

     

    

    
      
        
           

        

        
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    (ii)           Any
failure of Chapeau to perform in all material respects any of its covenants or
obligations contained in this Agreement.

     

    (c)        Neither
the Company nor Chapeau shall be required to indemnify the other party hereto to
the extent of any Losses that a court of competent jurisdiction shall have
determined by final judgment to have resulted from the bad faith, gross
negligence or willful misconduct of the party seeking
indemnification.

     

    (d)        Notwithstanding
anything to the contrary elsewhere in this Agreement, no party shall, in any
event, be liable to any other Person for any consequential, incidental,
indirect, special or punitive damages of such other Person, including any loss
of revenue, income or profits, diminution of value or loss of business
reputation or opportunity arising out of or relating to the breach or alleged
breach hereof, except to the extent any such damages are required to be paid
pursuant to a third party claim determined by final judgment by a court of
competent jurisdiction.

     

    (e)        From
and after the Closing, except as provided for in Section 8.8, the sole and
exclusive remedy for any breach of any representation or warranty or any
covenant in this Agreement, shall be indemnification in accordance with this
Article VII.  In furtherance of the foregoing, from and after the
Closing, each of the parties hereto hereby waives, to the fullest extent
permitted by applicable Law, any and all other rights, claims and causes of
action (including rights of contributions, if any) known or unknown, foreseen or
unforeseen, which exist or may arise in the future, that it may have against any
other party hereto, as the case may be, arising under or based upon any federal,
state or local Law (including any such Law relating to environmental matters or
arising under or based upon any securities law, common law or
otherwise).  Notwithstanding the foregoing, nothing herein shall
prevent any party hereto from bringing an action based upon allegations of fraud
by the other party hereto in connection with this Agreement.

     

    Section
7.3       Indemnification
Procedures.  

     

    (a)        Any
Person against whom indemnification is sought pursuant to the provisions of
Section 7.2 shall be referred to as an “Indemnifying Party”,
and any Person seeking to be indemnified pursuant to the provisions of
Section 7.2 shall be referred to as an “Indemnified
Party”.

     

    (b)        If
an Indemnified Party determines that it has a claim for Losses against an
Indemnifying Party under Section 7.2 (other than as a result of a Third
Party Claim), the Indemnified Party shall give prompt written notice thereof to
the Indemnifying Party, which notice shall describe in reasonable detail the
nature of the claim, an estimate of the amount of Losses attributable to such
claim to the extent feasible and the basis of the Indemnified Party’s request
for indemnification under Section 7.2.  If the Indemnifying Party
disputes such claim or the amount of Losses attributable to such claim and such
dispute is not resolved by the parties, such dispute shall be resolved in
accordance with Section 7.3.

     

    

    
      
        
           

        

        
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    (c)        If
an Indemnified Party is notified of a claim of a third party (each such claim, a
“Third Party Claim”)
which may give rise to a claim for indemnification against an Indemnifying Party
under Section 7.2, then the Indemnified Party shall promptly notify such
Indemnifying Party thereof in writing (including copies of all papers served
with respect to such Third Party Claim), which notice shall describe in
reasonable detail the nature of the Third Party Claim, an estimate of the amount
of Losses attributable to the Third Party Claim to the extent feasible and the
basis of the Indemnified Party’s request for indemnification under
Section 7.2; provided however, that the failure to notify an Indemnifying
Party shall not relieve the Indemnifying Party of its obligations hereunder
unless and to the extent the Indemnifying Party shall be actually and materially
prejudiced by such failure to so notify.  Any Indemnifying Party shall
be entitled to participate in the defense of such Third Party Claim giving rise
to an Indemnified Party’s claim for indemnification at such Indemnifying Party’s
expense, and at its option (subject to the limitations set forth below) shall be
entitled to assume the defense thereof by appointing a reputable counsel
reasonably acceptable to the Indemnified Party to be the lead counsel in
connection with such defense; provided further, that, as a condition precedent
to Indemnifying Party assuming the defense of such claim, Indemnifying Party
must first agree in writing to be responsible for all Losses arising therefrom
(subject to the limitations in Section 7.2, as applicable) without any
reservations of rights, defenses or similar claims to provide full
indemnification for such Losses and demonstrate that, after giving effect to the
application of the limitations in Section 7.2, as applicable, Indemnifying Party
is reasonably likely to be responsible for a greater portion of the Losses than
Indemnified Party; provided, further,
that:

     

    (i)           the
Indemnified Party shall be entitled to participate at its own expense in the
defense of such claim and to employ counsel of its choice for such
purpose;

     

    (ii)          the
Indemnified Party shall cooperate in good faith with the Indemnifying Party and
its counsel in the defense or compromise of any claims;

     

    (iii)          the
Indemnified Party (and not the Indemnifying Party) shall be entitled to assume
control of such defense and the Indemnifying Party shall pay the fees and
expenses of counsel retained by the Indemnified Party if (i) the claim for
indemnification relates to or arises in connection with any criminal proceeding,
action, indictment, allegation or investigation; (ii) the claim seeks an
injunction or equitable relief against the Indemnified Party; (iii) a conflict
of interest exists between the Indemnifying Party and the Indemnified Party;
(iv) an adverse outcome of the claim could reasonably be expected to have a
Material Adverse Effect on the Indemnified Party or its business; or (v) the
Indemnifying Party failed or is failing to vigorously prosecute or defend such
claim; and

     

    

    
      
        
           

        

        
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    (iv)         if
the Indemnifying Party shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (not to be unreasonably withheld) before entering into any settlement of a
Proceeding.

     

    (d)        For
the avoidance of doubt, the defense of any claim includes the obligation to post
all appeal bonds, securities, guaranties or similar obligations in connection
with such claim or Third Party Claim related thereto.

     

    (e)        After
any final decision, judgment or award shall have been rendered by a Governmental
Body of competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement shall have been consummated, or the Indemnified Party
and the Indemnifying Party shall have arrived at a mutually binding agreement,
in each case with respect to any Third Party Claim hereunder, the Indemnified
Party shall forward to the Indemnifying Party notice of any sums due and owing
by the Indemnifying Party pursuant to this Agreement with respect to such matter
and the Indemnifying Party shall pay all of such remaining sums so due and owing
to the Indemnified Party by wire transfer of immediately available funds within
five Business Days after the date of such notice.

     

    Section
7.4       Calculation of Losses; Tax
Treatment of Payments.  The amount of any Losses for which
indemnification is provided under this Article VII shall be net of any
amounts actually recovered or recoverable by the Indemnified Party under
insurance policies or otherwise with respect to such Losses, including under
implied or express warranties, financial guarantees or other assurances, under
contractual indemnification rights with respect to third parties or as a result
of tax benefits (net of expenses incurred in connection with such
recovery).  The Indemnified Party shall use its commercially
reasonable efforts to recover under insurance policies for any Losses prior to
seeking indemnification under this Agreement.

     

    ARTICLE
VIII

     

    MISCELLANEOUS

     

    Section
8.1       Notices.  Any
notice, demand or other communication required or permitted to be given or made
hereunder shall be in writing and shall be delivered personally or by courier
during normal business hours on a Business Day at the relevant address set forth
below, or sent by facsimile or other means of recorded electronic communication
(provided such transmission is confirmed), in the case of:

     

    

    
      
        
           

        

        
          20

          
            

          

        

        
           

        

      

    

    

    (a)        Chapeau,
addressed as follows:

     

    1190
Suncast Lane, Suite 2

    El Dorado
Hills, California 95762

    
                             
Attention:  Guy
A. Archbold

    

    
                              Facsimile:  (916)
939-8705

    

    

    with a
copy to:

     

    Manatt,
Phelps & Phillips, LLP

    11355
West Olympic Boulevard

    Los
Angeles, California 90064

    Attention:  T.
Hale Boggs, Esq.

    Facsimile:  (650)
213-0288

     

    (b)        the
Company, addressed as follows:

     

    Sack,
Harris & Martin, P.C.

    8270
Greensboro Drive, Suite 810

    McLean,
Virginia 22102

    Attention:  Jim
Sack

    Facsimile:  (703)
883-0108

    

     

    Any
notice, demand or other communication so given shall be deemed to have been
given or made and received on the day of hand delivery, and on the next day
following its being sent by facsimile or other means of recorded electronic
communication, with confirmation of delivery received (provided such day is a
Business Day and, if not, on the first Business Day thereafter).  Each
party may from time to time change its address for notice by giving notice to
the other given in the manner aforesaid.

     

    Section
8.2       Costs and
Expenses.  Except as otherwise set forth in this Agreement,
each party shall be solely responsible for the payment of its own costs and
expenses incurred in connection with the negotiation and consummation of the
Transactions contemplated hereby.  

     

    Section
8.3       Amendments;
Waiver.  This Agreement may be amended, modified, or
supplemented only pursuant to a written instrument making specific reference to
this Agreement and signed by each of the parties hereto.  No waiver of
any provision hereof, or consent required hereunder, or any consent or departure
from this Agreement, shall be valid or binding unless expressly and
affirmatively made in writing and duly executed by the party to be charged with
such waiver.  No waiver shall constitute or be construed as a
continuing waiver or a waiver in respect of any subsequent default, either of
similar or different nature, unless expressly so stated in such
writing.

     

    

    
      
        
           

        

        
          21

          
            

          

        

        
           

        

      

    

    

    Section
8.4       Assignment.  No
assignment of this Agreement or of any rights or obligations hereunder may be
made by any party hereto, directly or indirectly (by operation of law or
otherwise), without the prior written consent of the other parties
hereto.  Any assignment by any party hereto in violation of this
Section 8.4 shall be null and void ab initio.

     

    Section
8.5       Binding
Effect.  This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, legal
representatives, successors, and permitted assigns.

     

    Section
8.6       Entire
Agreement.  This Agreement, including the Schedules and Annexes
hereto, and the other Transaction Documents constitute the entire agreement of
the parties with respect to the subject matter hereof.

     

    Section
8.7       No Third-Party
Beneficiaries.  Nothing express or implied in this Agreement is
intended or shall be construed to confer upon or give any person other than the
parties hereto and their respective heirs, successors, and permitted assigns any
right, benefits, or remedy under or by reason of this Agreement.

     

    Section
8.8       Specific
Performance.  The parties recognize the unique nature of the
obligations of each party hereunder and therefore agree that each party shall be
entitled to specific performance of the obligations of the other parties set
forth in this Agreement.

     

    Section
8.9       Severability.  If
any provision of this Agreement or the application of such provision to any
person or circumstance shall be held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable under the applicable Law of any jurisdiction,
(i) the remainder of this Agreement or the application of such provisions to
other persons or circumstances or in other jurisdictions shall not be affected
thereby, (ii) such invalid, illegal, or unenforceable provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such Law, and (iii) such invalid, illegal, or
unenforceable provision shall not affect the validity or enforceability of any
other provision of this Agreement.

     

    Section
8.10     Governing Law;
Jurisdiction.  This Agreement, and all claims or causes of
action) (whether in contract or tort) that may be based upon, arise out of or
relate to this Agreement or the negotiation, execution or performance of this
Agreement shall be governed by, and construed under and in accordance with, the
internal Laws of the State of Virginia (without regard to conflict of laws
principles thereof).  Each party to this Agreement hereby irrevocably
and unconditionally (i) agrees that any suit, action or proceeding against it by
any other party to this Agreement with respect to this Agreement shall be
instituted only in Fairfax County, Virginia; (ii) consents and submits, for
itself and its property, to the jurisdiction of such courts for the purpose of
any such suit, action or proceeding instituted against it by the other parties
prior to the Closing; (iii) agrees that a final judgment in any such suit,
action or proceeding instituted against it by the other parties shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law; and (iv) waives the right to a jury
trial in any such suit, action or proceeding instituted against it by the other
parties.

     

    

    
      
        
           

        

        
          22

          
            

          

        

        
           

        

      

    

    

    Section
8.11     Counterparts.  This
Agreement may be executed in multiple counterparts, each of which when so
executed and delivered shall be an original, and all of which when taken
together shall constitute one and the same instrument.

     

    Section
8.12     No
Presumption.  This Agreement shall be construed without regard
to any presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

    
      
        
           

        

        
          23

          
            

          

        

        
           

        

      

    

    

    IN
WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have
duly executed this Agreement as of the date first written above.

     

    CHAPEAU,
INC.

     

     

     

    
      	
              By:

            	 
      	
              /s/ Guy A. Archbold                          
      

            
	 
      	 
      	
              Name:
      Guy A. Archbold

            
	 
      	 
      	
              Title:
      Chief Executive Officer

            

    

    

     

    

     

    
      TEFCO,
LLC

    

     

     

     

    
      	
              By:

            	 
      	
              /s/ Gordon V.
      Smith                          
      

            
	 
      	 
      	
              Name:
      Gordon V. Smith

            
	 
      	 
      	
              Title:
      Manager

            

    

    

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
A

    

    Investor
Ownership of TEFCO, LLC

    

    
      	
              Investor

            	
              Investment
       

            	
              Ownership
      Percentage   

            
	
               

              Dwight
      Schar

              1300
      South Ocean Blvd.

              Palm
      Beach, FL 33480

               

            	
               

              $
      12,500,000

            	
               

              43.269
      %

            
	
              Gordon
      Smith

              8716
      Crider Brook Way

              Potomac,
      MD 20854

               

            	
              $
      10,600,000

            	
              36.693
      %

            
	
              Douglas
      I. Smith

              Ann
      U. Smith

              2800
      Pine Hollow

              Oakton,
      VA 22124

               

            	
              $
      1,000,000

            	
              3.462
      %

            
	
              Edward
      Skarbek

              Cynthia
      Skarbek

              2810
      Avenue of the Woods

              Louisville,
      KY 40241

               

            	
              $
      700,000

            	
              2.423
      %

            
	
              Bruce
      G. Smith

              220
      Burton Rd.

              Falls
      Church, VA 22046

               

            	
              $
      200,000

            	
              0.692
      %

            
	
              HNS,
      LLC

              8401
      Greensboro Dr. Suite 300

              McLean,
      VA 22102

               

            	
              $
      600,000

            	
              2.077
      %

            
	
              CFS,
      LLC

              8401
      Greensboro Dr. Suite 300

              McLean,
      VA 22102

               

            	
              $
      200,000

            	
              0.692
      %

            
	
              Thomas
      D. Hall

              8401
      Greensboro Dr. Suite 300

              McLean,
      VA 22102

               

            	
              $
      200,000

            	
              0.692
      %

            
	
              Chapeau
      Inc.

              1190
      Suncast Lane. Suite 2

              El
      Dorado Hills, CA 95762

               

            	
              –

            	
              10.000
      %

            
	
              Total
      Investment

            	
              $
      26,000,000

            	
              100
      %

            

    

    

    NOTE: Two
additional individuals, Guy Archbold, CEO of Chapeau, and Robert Medearis, a
Director of Chapeau, have evidenced a strong interest to invest up to one
million dollars each pending the liquidation of certain personal assets. Each
has been given 90 days to do so. Ownership percentage will be adjusted upon any
investment by them as though their investment were made on the original
investment date.

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    EXHIBIT
B

    

    SECURED
PROMISSORY NOTE

    

    
    

     

    
      	 Date: 
      December 14,
      2007	
               $10,000,000.00

            

    

     

     

    FOR VALUE
RECEIVED, the undersigned, Chapeau, Inc., a Utah corporation (the “Borrower”)
promises to pay to the order of TEFCO, LLC, a Virginia limited liability company
(the “Lender”)
at such address as the Lender may specify in writing, the
principal sum of TEN MILLION DOLLARS ($10,000,000.00) (the “Loan
Amount”), or if less, the aggregate unpaid principal amount outstanding,
with interest until maturity, whether by acceleration or otherwise, at the
interest rate of seventeen percent (17%) per annum (the “Interest
Rate”).  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 Loan Amount, less
      principal payments actually received 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.

            	
              As
      of the date first written above, interest shall accrue and be computed on
      the principal balance outstanding from time to time under this Note until
      the same is paid in full.  The Borrower shall make regular
      quarterly payments in arrears of all accrued and unpaid interest at the
      Interest Rate, 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 15th
      day of March 2008 and continuing on each quarterly anniversary 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
      interest amounts provided for in this Note as set forth
    below:

            

    

     

    
      	
               
      

            	
              a.

            	
              Payment
      of interest accrued under this Note shall be payable in shares of
      Borrower’s common stock, the number of which shares shall be determined by
      dividing the amount of interest accrued under this Note during the period
      in question by the average closing price of the Borrower’s common stock
      over the period in question (the “Shares”);
      provided, that such payment shall be made without setoff or counterclaim,
      within 5 business days of March 15, 2008 and each quarterly anniversary
      thereafter until the Maturity Date.

            

    

     

    
      	
               
      

            	
              b.

            	
              Any
      and all shares of the Borrower’s common stock issued under this Note shall
      be issued pursuant to a form of restricted stock award 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.

            

    

     

    
      	
              5.

            	
              All
      payments in cash under this Note shall be in immediately available United
      States funds.  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 Interest Rate during such extension. “Maturity Date”
      means December 15, 2009 unless paid or prepaid in full or otherwise
      accelerated in accordance with the terms of this
  Note.

            

    

     

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    
      	
              6.

            	
              The
      principal amount hereof, outstanding at such time, may be prepaid at any
      time, in whole or in part, together with any interest accrued thereon,
      without penalty or premium upon thirty (30) days prior written notice to
      the Lender.

            

    

     

    
      	
              7.

            	
              If
      this Note is not paid when due, the Lender may, at its 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.

            

    

     

    
      	
              8.

            	
              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.

            

    

     

    
      	
              9.

            	
              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;

            

    

    

    

    
      
        
           

        

        
          B-2

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (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

            

    

    

    
      	
               
      

            	
              (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.

            

    

    

    
      	
              10.

            	
              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.

            

    

     

    
      	
              11.

            	
              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.

            

    

     

    
      	
              12.

            	
              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 non-enforcement 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.

            

    

     

    
      	
              13.

            	
              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.

            

    

     

    
      	
              14.

            	
              The
      Lender makes the following representations, warranties and
      covenants:

            

    

     

    
      	
               
      

            	
              a.

            	
              This
      Note has been duly executed and delivered by the Lender and constitutes a
      legal, valid and binding obligation of the Lender enforceable against the
      Lender in accordance with its terms and conditions, subject to applicable
      bankruptcy, insolvency, reorganization and moratorium laws and other laws
      of general application affecting the enforcement of creditors' rights
      generally and general principles of
equity.

            

    

     

    
      	
               
      

            	
              b.

            	
              The
      Note, and if and when issued, the Shares, are being acquired for
      investment for the Lender’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
      Lender has no present intention of selling, granting any participation in,
      or otherwise distributing the Note or the Shares, in whole or in part. The
      Lender 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 Note or any of the
      Shares.

            

    

     

    

    
      
        
           

        

        
          B-3

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              c.

            	
              The
      Lender is an investor in securities of companies in the development stage
      and acknowledges that it is able to fend for itself, can bear the economic
      risk of its investment, has no need for liquidity with respect to its loan
      to the Borrower, and has such knowledge and experience in financial or
      business matters such that it is capable of evaluating the merits and
      risks of the investment in the Note and the
  Shares.

            

    

     

    
      	
               
      

            	
              d.

            	
              At
      no time was the Lender 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 offer, sale and
      purchase of the Note or the issuance of the
  Shares.

            

    

     

    
      	
               
      

            	
              e.

            	
              The
      Lender 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 Note and the Shares. The Lender further has had an
      opportunity to ask questions of and receive answers from the Borrower
      regarding the terms and conditions of the offering of the Note and to
      obtain additional information (to the extent the Borrower possessed such
      information or could acquire it without unreasonable effort or expense)
      necessary to verify any information furnished to the Lender or to which
      the Lender had access.

            

    

     

    
      	
               
      

            	
              f.

            	
              The
      Lender understands and acknowledges that the Note and the Shares that it
      is taking or may take 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 “Securities
      Act”), inasmuch as they were acquired from the Borrower in a
      transaction not involving a public offering and that under the Securities
      Act and applicable federal and state statutes and regulations such
      securities may be transferred without registration only in certain limited
      circumstances.

            

    

     

    
      	
               
      

            	
              g.

            	
              The
      Lender agrees not to transfer or make any disposition of all or any
      portion of the Note or the Shares unless and until the transferee has made
      in writing certain representations, warranties and covenants similar to
      those set forth herein and agreed to be bound by the following (each for
      the benefit of the Borrower), the Lender shall have (a) notified the
      Borrower of the proposed transfer and shall have furnished the Borrower
      with a detailed statement of the circumstances surrounding the proposed
      transfer; and (b) furnished the Borrower with an opinion of counsel,
      reasonably satisfactory to the Borrower, that such transfer will not
      require registration of the applicable securities under the Securities
      Act; and notwithstanding (b) above, no such opinion of counsel shall be
      necessary for a transfer by the Lender to any entity that is controlled
      by, controls or is under common control with the Lender; if the transferee
      agrees in writing to be subject to representations, warranties and
      covenants similar to those set forth
herein.

            

    

     

    
      	
              15.

            	
              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.

            

    

     

    
      	
              16.

            	
              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 Virginia 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 FAIRFAX COUNTY, VIRGINIA 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.

            

    

     

    

    
      
        
           

        

        
          B-4

          
            

          

        

        
           

        

      

    

    

    
      	
              17.

            	
              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.

            

    

     

    
      	
              18.

            	
              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.

            

    

     

    
      	
              19.

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

            

    

     

    

    
      
        
           

        

        
          B-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:   /s/ Guy
      A.
      Archbold                                  
      

            
	 
      	
              Name:  Guy
      A. Archbold

            
	 
      	
              Title:    
      Chief Executive Officer

            

    

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
C

    

    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 December 14, 2009

    

               
This Option is issued to TEFCO, LLC (the “Optionee”) by
Chapeau, Inc., a Utah corporation (the “Company”), as of December 14, 2007 (the
“Option Issue Date”).  This Option is issued pursuant to that certain
Secured Promissory Note dated as of December 14, 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 Five Million (5,000,000)
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 per
share (the “Exercise Price”) equal to 90% of the average closing price of the
Company’s common stock during the 30 days prior to December 14, 2007.  The number of shares of
Capital Stock issuable to this Section 1 as well as the Exercise Price of such
shares, shall be subject to adjustment pursuant to Section 8 below.

     

    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 twenty-four (24) 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.

     

    6.         Fractional
Shares

     

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

              

    

    
      
        
           

        

        
          C-2

          
            

          

        

        
           

        

      

    

    

    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.

     

    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.         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; or with the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed but may be
conditioned upon certain requirements and procedures mandated by the Company to
ensure compliance with federal and state statutes and regulations.

     

    

    
      
        
           

        

        
          C-3

          
            

          

        

        
           

        

      

    

    

    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 it is able to fend for itself, can bear the economic risk of
its investment, has adequate means for providing for its current needs and
contingencies and has no need for liquidity with respect to its investment in
the Company, and has such knowledge and experience in financial or business
matters such that it is capable of evaluating the merits and risks of the
investment in the Securities.

     

    11.3           The
Optionee is an “accredited investor” as that term is defined in Rule 501 of
Regulation D.

     

    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.

     

    

    
      
        
           

        

        
          C-4

          
            

          

        

        
           

        

      

    

    

    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.

     

    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.       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.

     

    14.       General
Provisions

     

    14.1           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.

     

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

     

    

    
      
        
           

        

        
          C-5

          
            

          

        

        
           

        

      

    

    

    14.3           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.

     

    14.4           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.

     

    14.5           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-6

          
            

          

        

        
           

        

      

    

    

    

     

    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”

     

    

     

                                                                

    By:           Gordon
V. Smith

    Its:           Manager

     

     

     

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    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:

    

    

    _________________________________________

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
D

    

    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 December 14, 2012

    

    This
Warrant is issued to TEFCO, LLC, or its registered assigns (the “Holder”)
by Chapeau, Inc., a Utah corporation (the “Company”), as of December 14, 2007
(the “Warrant Issue Date”).  This Warrant is issued pursuant to that
certain Secured Promissory Note dated as of December 14, 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 Five
Million (5,000,000) 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 10 below.

    

    2.           Exercise Price. The per share
purchase price for the Shares shall be equal to 150% of the average closing
price of the Company’s common stock during the 30 days prior to December 14,
2007, 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 fifth 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.

    

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

    

    (c)          The
Holder is an “accredited investor” as that term is defined in Rule 501 of
Regulation D.

    

    (d)          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.

    

    (e)          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.

    

    (f)           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.

    

    

    
      
        
           

        

        
          D-2

          
            

          

        

        
           

        

      

    

    

    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

    

    (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.

    

    

    

    
      
        
           

        

        
          D-3

          
            

          

        

        
           

        

      

    

    

    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.

    

    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.

    

    

    
      
        
           

        

        
          D-4

          
            

          

        

        
           

        

      

    

    

    (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.

    

    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 Utah.

    

    

    

    
      
        
           

        

        
          D-5

          
            

          

        

        
           

        

      

    

    

    IN WITNESS WHEREOF, this
Warrant to be executed by the Company and acknowledged by the Holder December
14, 2007.

    

    

    

    
      	 
      	CHAPEAU,
      INC.
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
               

            	                                              
      
	 
      	
              By:

            	
                  Guy
      A. Archbold

            
	 
      	
              Its:

            	
                 
      Chief Executive Officer

            

    

    

    

    

    ACCEPTED AND ACKNOWLEDGED BY
“HOLDER”:

    

    

                                                           

    By:           Gordon
V. Smith

    Its:           Manager

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    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:

    

    

    _________________________________________Exhibit 10.1

 

AGREEMENT

 

This Agreement
(this “Agreement”) is made and
entered into as of this 15th day of February, 2008, by and among Georgia Gulf
Corporation, a Delaware corporation (the “Company”),
and Sun Capital Securities Fund, LP, a Delaware limited partnership (“SCSF”).

 

RECITALS

 

WHEREAS, each of SCSF Equities, LLC, a
Delaware limited liability company, Sun Capital Securities Offshore Fund, Ltd.,
a Cayman Islands corporation, Sun Capital Securities Fund, LP, a Delaware
limited partnership, Sun Capital Securities Advisors, LP, a Delaware limited
partnership, Sun Capital Securities, LLC, a Delaware limited liability company,
Marc J. Leder and Rodger R. Krouse (collectively, the “Sun
Parties”) is the Beneficial Owner of the shares of common stock,
par value $0.01 per share (“Common Stock”),
of the Company set forth in the Statement on Schedule 13D, initially filed
jointly by the Sun Parties with the Securities and Exchange Commission (the “SEC”) on April 30, 2007 (as
amended through the date hereof, the “Schedule 13D”),
which shares represent approximately 12.5% of the outstanding shares of Common
Stock (the term “Beneficial Owner” as used in
this Agreement having the meaning ascribed to such term in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”));

 

WHEREAS, the Board of Directors of the Company
(the “Board”) is committed to
maintaining high standards of corporate governance and identifying and
attracting highly qualified individuals with appropriate experience, skill
sets, business acumen and diversity to become members of the Board and, in
furtherance thereof, the Board (upon the unanimous recommendation of the
Nominating and Corporate Governance Committee of the Board (the “Nominating Committee”)) has
unanimously determined that it is in the best interests of the Company and the
holders of Common Stock to appoint a designee of the Sun Parties to the Board
effective immediately following the Company’s 2008 Annual Meeting of
Stockholders; and

 

WHEREAS, SCSF and the Company are entering
into this Agreement to set forth the terms upon which (i) the Sun Parties
shall have the right to designate and have appointed to the Board one member of
the Board, (ii) the Sun Parties have designated Bud Terry as their
designee for these purposes, (iii) the Board will appoint such designee as
a Class II director to serve until the 2010 Annual Meeting of Stockholders
(and, for clarity, not cause him to stand for election at the 2008 Annual
Meeting), and (iii) the Sun Parties will agree to vote, in their
capacities as holders of Company Common Stock, for the election of each of the
Board’s nominees at the 2008 Annual Meeting of Stockholders of the Company and
to refrain from nominating any competing candidates.

 

NOW, THEREFORE, in consideration of the
premises and mutual promises herein made, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and SCSF hereby agree as follows:

 

 

1.             Board
Representation.

 

(a)           In
accordance with the Company’s Certificate of Incorporation (the “Charter”), Amended and Restated
Bylaws (the “Bylaws”), Corporate
Governance Guidelines (the “Corporate Governance
Guidelines”) and Nominating Committee Charter (the “Nominating Committee Charter”), the
Company agrees that, immediately following the 2008 Annual Meeting, the Board,
at a duly convened meeting of directors, will take the necessary action upon
the recommendation of the Nominating Committee providing that: (i) the
size of the Board shall be increased by one Class II seat and the size of
the Board shall be adjusted appropriately; (ii) Bud Terry or another
person designated by the Sun Parties and reasonably acceptable to the Board
(the “Sun Designee”) shall be
appointed as a director of the Company effective immediately to fill the
newly-created directorship (and vacancy) resulting from such increase in the
size of the Board (and, for clarity, not be required to stand for election at
the 2008 Annual Meeting); and (iii) the Sun Designee shall be appointed to
serve as a member of the Nominating Committee. 
In the event that a vacancy is created on the Board at any time prior to
the 2010 Annual Meeting by the death, disability, retirement or resignation of
Bud Terry, the Sun Parties, the Company, the Nominating Committee and the Board
shall take all such actions as necessary or appropriate to result in the prompt
election or appointment to the Board of a new individual designated by the Sun
Parties and shall take all of the actions referred to in the immediately
preceding sentence with respect to such new individual designated by the Sun
Parties, as applicable.  As promptly as
reasonably practicable after the date hereof, the Sun Parties shall provide the
Company with all such information as the Company shall reasonably request,
including, without limitation, all information about the Sun Designee as would
be required (including under Schedule 14A, Regulation 14A and Regulation S-K
promulgated under the Securities Act of 1933, as amended, and the Exchange Act
(collectively, the “Proxy Rules”)) to be included
in a proxy statement with respect to the nomination and election of directors.

 

(b)           The
Company agrees that, pending Mr. Terry’s appointment to the Board, the
Company shall (i) invite Mr. Terry to participate in all meetings of
the Board of Directors of the Company in a nonvoting observer capacity, (ii) give
Mr. Terry the same notice of any such meeting that it provides to its
directors at the same time the Company provides such notice to its directors, (iii) permit
Mr. Terry, at his election, to attend such meetings telephonically, (iv) give
Mr. Terry copies of all notices, minutes, consents, reports and other
material that the Company provides to its directors when such material is
provided to the directors, (v) permit Mr. Terry, during normal
business hours and after receipt of prior written notice, to have reasonable
access to the properties, books, records and contracts of the Company so long
as such access is not disruptive to the Company’s operations, and (vi) provide
Mr. Terry the opportunity to consult with senior management of the Company
from time to time as reasonably requested by him regarding the Company, and its
operations, properties, financial condition and affairs.

 

(c)           Notwithstanding
any provision to the contrary contained in this Agreement, the Company shall
not be required to nominate the Sun Designee or otherwise perform its
obligations under this Section 1 with respect to the Sun Designee 

 

2

 

unless at all
times after the date hereof and prior to the 2008 Annual Meeting the Sun
Parties satisfy the Minimum Condition.  “Minimum Condition”
shall mean the beneficial ownership by the Sun Parties of at least an aggregate
of 8% of the shares of Common Stock, adjusted proportionally in all cases to
reflect any stock dividend or distribution, stock split, reverse stock split,
combination, recapitalization or similar transaction affecting the outstanding
shares of Common Stock after the date hereof; provided, however, that the
Minimum Condition shall not be breached by any reduction in the percentage of
beneficial ownership caused by any increase in the Company’s shares
outstanding.

 

(d)           If,
at any time within the two year period after the Sun Designee is appointed to
the Board, the Sun Parties shall fail to satisfy the Minimum Condition, the Sun
Parties shall notify the Company promptly (and in any event within three
business days) and shall cause the Sun Designee on the Board to resign immediately
by executing and delivering an irrevocable resignation as a member of the
Board.

 

2.             Voting for Board
Nominees and Sun Designee at Annual Meeting.  At the 2008 Annual Meeting, the Sun Parties
shall cause all of the shares of Common Stock beneficially owned by them to be
present in person or represented by proxy at the 2008 Annual Meeting for quorum
purposes and to be voted at the 2008 Annual Meeting (i) for the election
(or re-election) of each of the Company’s existing directors, provided they are
nominated by the Nominating Committee and the Board; (ii) against any
stockholder nominations for election as director that are not approved by the
Board; (iii) in favor of retaining the Company’s independent auditors as
proposed by the board; and (iv) either in a manner consistent with the
recommendations of the Board or as an abstention for any other matters to come
before the 2008 Annual Meeting.

 

3.             Compensation.  The Sun Designee shall be compensated for his
service as a director and shall be reimbursed for his expenses on the same
basis as all other non-employee directors of the Company are compensated and
shall be eligible to be granted stock options (or other stock-based
compensation) on the same basis as all other non-employee directors of the Company;
provided that the Company may prohibit the exercise of any stock options
granted to the Sun Designee (and may prohibit the receipt of other stock-based
compensation by the Sun Designee) if such exercise (or receipt) would result in
any person or persons becoming an “Acquiring Person,” as defined in the Amended
and Restated Rights Agreement, dated as of December 5, 2000, between
Georgia Gulf and EquiServe Trust Company, N.A., as amended (the “Rights Agreement”).  In the event the Company prohibits the exercise
of any stock options granted to the Sun Designee as contemplated in the proviso
to the immediately preceding sentence, in lieu of any such stock option, the
Company shall grant to the Sun Designee a stock appreciation right (“SAR”) that is settled only in cash,
with the base price of the SAR to be equivalent to the exercise price that
would otherwise have been applicable if a stock option were granted, and that
otherwise has terms as similar as reasonably practicable to terms that would
have applied if an option were granted and, if the Company provides other
stock-based compensation to its non-employee directors the receipt of which by
the Sun Designee is prohibited by the Company in accordance with the proviso to
the immediately preceding sentence, the Company shall provide to the Sun 

 

3

 

Designee, in lieu thereof, phantom stock or other stock units that are
settled only in cash and that otherwise have terms as similar as reasonably
practicable to terms applicable to such stock-based compensation.

 

4.             Stockholder
Capacity.  The Company acknowledges
and agrees that SCSF is executing this Agreement for itself and on behalf of
the Sun Parties solely in their capacities as the Beneficial Owners of the
shares of Common Stock set forth in the Statement on Schedule 13D, and nothing
in this Agreement shall limit or restrict any partner, member, director,
officer, employee or affiliate (as such term is defined in Rule 12b-2
under the Exchange Act) of any of the Sun Parties who is or becomes during the
term hereof a member of the Board from acting, omitting to act or refraining
from taking any action, solely in such person’s capacity as a member of the
Board consistent with his or her fiduciary duties in such capacity as required
by applicable law.  In furtherance of
this acknowledgement, and in connection with approving this Agreement, the
Company’s Board of Directors has passed a resolution substantially in the form
attached hereto as Annex A relating to the waiver of the corporate opportunity
doctrine with respect to the Sun Designee’s service on the Board.

 

5.             Confidential
Information.

 

(a)           As
soon as reasonably practicable following the execution and delivery of this
Agreement, the Sun Designee and the Company will enter into an appropriate
confidentiality agreement for the purpose of allowing the Company to integrate
the Sun Designee into the business and affairs of the Company in anticipation
of his appointment to the Board after the 2008 Annual Meeting.

 

(b)           The
Sun Parties acknowledge their obligations under applicable law in connection
with the Sun Designee’s membership on the Board as contemplated by this
Agreement, including, without limitation, their respective obligations under
the Exchange Act and Regulation FD thereunder, and the Sun Parties agree to
maintain any material non-public information relating to the Company that they
may possess in confidence, until such time as such information is no longer
material and non-public, except as may be required by law.

 

6.             Standstill.

 

(c)           The
Sun Parties hereby acknowledge and agree that through the Expiration Date (as
defined below), neither the Sun Parties, nor their respective Representatives,
will on the Sun Parties’ behalf (and neither the Sun Parties nor their
respective Representatives on the Sun Parties’ behalf will assist, provide or
arrange financing to or for others or encourage others to), directly or
indirectly, acting alone or in concert with others (including by forming,
joining or entering a group (within the meaning of Section 13(d)(4) of
the Exchange Act)), unless specifically requested in writing in advance by the
Company’s Board of Directors:

 

4

 

(i)            with
respect to the Company or its Common Stock, make, engage or in any way
participate in, directly or indirectly, any “solicitation” (as such term is
used in the proxy rules of the SEC) of proxies or consents (whether or not
relating to the election or removal of directors); seek to advise, encourage or
influence any person with respect to the voting of any Common Stock (other than
Affiliates);

 

(ii)           except
as specifically and expressly set forth in this Agreement, seek, alone or in
concert with others, election or appointment to, or representation on, or
nominate or propose the nomination of any candidate to, the Board;

 

(iii)          initiate,
propose or otherwise “solicit” (as such term is used in the proxy rules of
the SEC) shareholders of the Company for the approval of shareholder proposals
whether made pursuant to Rule 14a-8 or Rule 14a-4 under the Exchange
Act, or otherwise, or cause or encourage or attempt to cause or encourage any
other person to initiate any such shareholder proposal, regardless of its
purpose, otherwise communicate with the Company’s shareholders or others
pursuant to Rule 14a-1(l)(2)(iv)(A) under the Exchange Act;

 

(iv)          seek
or propose to influence or control the management or policies of the Company
(provided that the actions of the Sun Designee as a member of the Board shall
not be deemed to violate the foregoing);

 

(v)           form,
join in or in any other way participate in a “partnership, limited partnership,
syndicate or other group” within the meaning of Section 13(d)(3) of
the Exchange Act with respect to the Common Stock or deposit any shares of
Common Stock in a voting trust or similar arrangement or subject any shares of
Common Stock to any voting agreement or pooling arrangement, other than solely
with other Sun Parties or one or more Affiliates of a Sun Party pursuant to
this Agreement;

 

(vi)          acquire
or agree, offer, seek or propose to acquire ownership (including, but not
limited to, Beneficial Ownership) of any assets or businesses of the Company or
any equity securities issued by the Company, or any rights or options to
acquire such ownership (including from a third party); provided, however, that
the Sun Parties and their Affiliates may acquire or agree, offer, seek or
propose to acquire Beneficial Ownership of additional shares of Common Stock
and rights or options to acquire Common Stock, but only to the extent that
ownership of such Common Stock and rights or options to acquire Common Stock
would not result in the Beneficial Ownership by the Sun Parties and their
Affiliates of an aggregate 15.0% or more of the outstanding shares of Common
Stock;

 

5

 

(vii)         propose
or enter into, directly or indirectly, any merger, share exchange,
consolidation, recapitalization, business combination or other similar
transaction involving the Company or any of its Affiliates;

 

(viii)        enter
into any discussions, negotiations, arrangements, agreements or understandings
with any third party with respect to any of the foregoing, or otherwise advise,
assist or encourage any other third party in connection with any of the
foregoing; and

 

(ix)           seek
or request permission to do any of the foregoing, request to amend or waive any
provision of this paragraph, or make or seek permission to make any public
announcement with respect to any of the foregoing.

 

(d)           As
used in this Agreement:

 

“Affiliate” means a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with the person
specified.

 

“Expiration Date” means the
earliest to occur of (a) the day immediately following the first
anniversary of the date of the election of Mr. Terry to the Board, (b) the
date that (i) a third party independently makes a public announcement of
its intention to or commences a tender or exchange offer or other such offer or
process with respect to a majority of the voting securities of the Company
without the prior approval of the board of directors of the Company or (ii) the
Company publicly announces that it has entered into a definitive agreement with
respect to a merger, acquisition or sale of all or substantially all of its
assets with a third party or is pursuing such an agreement, (c) May 31,
2009 or (d) such earlier time as may be determined by a majority of the
Board of Directors.

 

“Representatives” means, with
respect to any person, such person’s directors, officers, managers, employees,
investment bankers, financial advisors, accountants, attorneys, agents and
other representatives.

 

7.             Representations
and Warranties of the Company.  The
Company hereby represents and warrants to the Sun Parties as follows:

 

(a)           The
Company has the corporate power and authority to execute, deliver and carry out
the terms and provisions of this Agreement and to consummate the transactions
contemplated hereby.

 

(b)           This
Agreement has been duly and validly authorized, executed and delivered by the
Company, constitutes a valid and binding obligation and agreement of the
Company, and is enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting the rights of creditors and subject to general equity principles.

 

6

 

(c)           The
execution, delivery and performance of this Agreement by the Company does not
and will not (i) violate or conflict with any law, rule, regulation,
order, judgment or decree applicable to it or (ii) result in any breach or
violation of any of its organizational documents.

 

8.             Representations
and Warranties of SCSF.  SCSF hereby
represents and warrants to the Company, on behalf of itself and the Sun
Parties, as follows:

 

(a)           SCSF has the entity
power and authority, as applicable, to execute, deliver and carry out the terms
and provisions of this Agreement and to consummate the transactions
contemplated hereby.

 

(b)           This
Agreement has been duly and validly authorized, executed, and delivered by SCSF
on behalf of itself and each of the Sun Parties, constitutes a valid and
binding obligation and agreement of each of the Sun Parties, and is enforceable
against each of the Sun Parties in accordance with its terms, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting the
rights of creditors and subject to general equity principles.

 

(c)           The
execution, delivery and performance of this Agreement by SCSF does not and will
not (i) violate or conflict with any law, rule, regulation, order,
judgment or decree applicable to any Sun Party or (ii) result in any
breach or violation of any of any of the Sun Parties’ organizational documents.

 

9.             Miscellaneous.

 

(a)           This
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto. The failure or delay by any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights nor shall any single or partial exercise by any party to
this Agreement of any of its rights under this Agreement preclude any other or
further exercise of such rights or any other rights under this Agreement.  Any waiver shall be effective only in the
specific instance and for the specific purpose for which the waiver is given
and shall not constitute a waiver to any subsequent or other exercise of any
right, remedy, power or privilege hereunder.

 

(b)           All
notices, requests, claims, demands, waivers and other communications required
or permitted under this Agreement shall be in writing and shall be deemed duly
given (a) on the date of delivery if delivered personally, or by telecopy
or facsimile, upon confirmation of receipt by the recipient, or (b) on the
first business day following the date of dispatch if delivered by a recognized
next-day courier service.  All notices
hereunder shall be delivered addressed to the parties (and shall be deemed
delivered only if delivered by one of the means described in the immediately preceding
sentence) at the following addresses (or at such other address for a party as
shall be specified by notice hereunder):

 

7

 

	
   

  	
  if to any of
  the Sun Parties, to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCSF
  Equities, LLC

  	
   

  
	
   

  	
  c/o Sun Capital Partners, Inc.

  	
   

  
	
   

  	
  5200 Town
  Center Circle, Suite 600

  	
   

  
	
   

  	
  Boca Raton,
  Florida 33486

  	
   

  
	
   

  	
  Attention:

  	
  Phil Brown

  	
   

  
	
   

  	
   

  	
  C. Deryl Couch

  	
   

  
	
   

  	
  Facsimile:

  	
  (561) 394-0540

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy (which shall not constitute notice pursuant to this Section 9(b))
  to:

  
	
   

  	
   

  
	
   

  	
  Kirkland & Ellis LLP

  
	
   

  	
  200 East Randolph Drive

  
	
   

  	
  Chicago, Illinois 60601

  
	
   

  	
  Attention:

  	
  Douglas Gessner, P.C.

  	
   

  
	
   

  	
   

  	
  Gerald T. Nowak

  	
   

  
	
   

  	
  Facsimile:

  	
  (312) 861-2200

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  if to the Company, to:

  
	
   

  	
   

  
	
   

  	
  Georgia Gulf Corporation

  
	
   

  	
  115 Perimeter Center Place

  
	
   

  	
  Suite 460

  
	
   

  	
  Atlanta, Georgia  30346

  
	
   

  	
  Attention:

  	
  Joel I. Beerman

  	
   

  
	
   

  	
  Facsimile:

  	
  (770) 390-9673

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy (which shall not constitute notice pursuant to this Section 9(b))
  to:

  
	
   

  	
   

  
	
   

  	
  Jones Day

  
	
   

  	
  1420 Peachtree Street, N.E.

  
	
   

  	
  Suite 800

  
	
   

  	
  Atlanta, GA 30309-3053

  
	
   

  	
  Attention:

  	
  John E. Zamer

  	
   

  
	
   

  	
   

  	
  Lizanne Thomas

  	
   

  
	
   

  	
  Facsimile: 

  	
  (404) 581-8330

  	
   

  
							

 

(c)           The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.  Wherever the words “include”, “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without
limitation”.  The words “hereof”, “hereto”,
“hereby”, “herein” and “hereunder” and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.  
The words “date hereof’ shall refer to the date of this Agreement. The
term “or” is not exclusive.

 

8

 

(d)           This
Agreement may be executed in one or more counterparts (including by facsimile),
all of which shall be considered one and the same agreement.  This Agreement shall become effective when
one or more counterparts have been signed by each of the parties hereto and
delivered to the other parties.  Each
party need not sign the same counterpart.

 

(e)           This
Agreement (i) constitutes the entire agreement and supersedes all prior
agreements, understandings and negotiations, both written and oral, among the
parties hereto with respect to the subject matter of this Agreement and (ii) is
not intended to confer upon any person other than the parties hereto any rights
or remedies.

 

(f)            This
Agreement shall be governed by, and construed in accordance with, the internal
procedural and substantive laws of the State of Delaware, applicable to
instruments and agreements made and performed entirely in such state and
without regard to the conflicts of law principles of such state.

 

(g)           The
parties agree that irreparable damage would occur and that the parties would
not have any adequate remedy at law in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached.  It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in any state court in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in
equity.  In addition, each of the parties
hereto hereby agrees that any claim, suit, action or other proceeding, directly
or indirectly, arising out of, under or relating to this Agreement shall be heard
and determined in the Chancery Court of the State of Delaware or the United
States Federal District Court for the State of Delaware (and each agrees that
no such claim, action, suit or other proceeding relating to this Agreement
shall be brought by it or any of its affiliates except in such courts), and the
parties hereto hereby irrevocably and unconditionally submit to the exclusive
jurisdiction of such courts in any such claim, suit, action or other proceeding
and irrevocably and unconditionally waive (and agree not to plead or claim) the
defense of an inconvenient forum to the maintenance of any such claim, suit,
action or other proceeding. The parties hereto hereby agree that a final
judgment in any such claim, suit, action or other proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by applicable law.

 

(h)           Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned, in whole or in part, by operation of law or otherwise, by any Sun
Party, on the one hand, without the prior written consent of the Company nor by
the Company, on the other hand, without the prior written consent of SCSF, and
any assignment without such consent shall be null and void, except that the Sun
Parties may assign their rights hereunder to any affiliate (as such term is
defined in Rule 12b-2 under the Exchange Act) to whom any such entity
transfers shares of Common Stock, provided that in such case, such affiliate agrees
to be bound by the terms and conditions of this Agreement.  Any purported assignment in violation of this
Section 9(h) shall be void. 
Subject to the preceding sentences of this Section 9(h), this
Agreement shall be binding 

 

9

 

upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, personal
representatives, successors and assigns.

 

(i)            Each
party hereto hereby waives, to the fullest extent permitted by applicable law,
any right it may have to a trial by jury in respect of any suit, action or
other proceeding directly or indirectly arising out of, under or in connection
with this Agreement.

 

(j)            If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect.  Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the extent possible.

 

10

 

IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
as of the date first above written.

 

 

	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
  GEORGIA GULF CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Joel I. Beerman

  
	
   

  	
  Name: 

  	
  Joel I. Beerman

  
	
   

  	
  Title: 

  	
  Vice President & General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SCSF:

  
	
   

  	
   

  
	
   

  	
  SCSF EQUITIES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Philip E. Brown

  
	
   

  	
  Name:

  	
  Philip E. Brown

  
	
   

  	
  Its:

  	
  Vice President

  
						

 

11

 

ANNEX A — RESOLUTIONS RE: CORPORATE OPPORTUNITIES

 

WHEREAS, Bud Terry,
a Director of the Corporation, is affiliated with Sun Capital Partners, Inc.
(“Sun Capital”); and

 

WHEREAS, Mr. Terry will be appointed to serve as
a director pursuant to that certain Agreement, dated as of February     ,
2008, by and among the Corporation and certain affiliates of Sun Capital (the “Agreement”);
and

 

WHEREAS, Mr. Terry is the Sun Parties’ (as
defined in the Agreement) designee for purposes of the Agreement; and

 

WHEREAS, the Board
acknowledges that affiliates of Sun Capital may now or in the future engage in (i) the
same or similar activities or related lines of business as those in which the
Corporation, directly or indirectly, engages, and/or (ii) other business
activities that overlap with or compete with those in which the Corporation,
directly or indirectly, may engage, and/or (iii) other transactions,
potential transactions, business opportunities, activities or lines of business
in which the Corporation may have an expectancy, interest or desire to engage
(together, “Opportunities”); and

 

WHEREAS, the Board
desires to renounce any expectancy or interest in the Opportunities pursuant to
Section 122(17) of the Delaware General Corporation Law;

 

RESOLVED, that (i) no
transaction, potential transaction, business opportunity, activity or line of
business that is presented to Sun Capital or any of its affiliates and for
which the recipient or contact at Sun Capital or any such affiliate is a person
other than Mr. Terry (or his successor designee) shall constitute or be
deemed to constitute an Opportunity for the Corporation, (ii) the Board
hereby renounces, in the name and on behalf of the Corporation and to the
fullest extent legally permissible, any and all expectancy and interest in any
such transaction, potential transaction, business opportunity, activity or line
of business, (iii) neither Sun Capital nor any of its affiliates shall
have any duty to communicate or offer any such transaction, potential
transaction, business opportunity, activity or line of business to the
Corporation as a result of Mr. Terry’s (or his successor’s) service as a
Director of the Corporation, and (iv) neither Sun Capital nor any of its
affiliates shall have any duty to refrain therefrom (directly, indirectly or
through any assignee or transferee) as a result of Mr. Terry’s (or his
successor’s) service as a Director of the Corporation; and

 

FURTHER RESOLVED, that if any
transaction, potential transaction, business opportunity, activity or line of
business is presented 

 

12

 

directly to Mr. Terry (or his successor designee) as recipient or
contact, in each case other than as a direct result of Mr. Terry’s (or his
successor’s) service as a Director of the Corporation or in his capacity as
such a Director, then (i) no such transaction, potential transaction,
business opportunity, activity or line of business shall constitute or be
deemed to constitute an Opportunity for the Corporation, and the Board hereby
renounces, in the name and on behalf of the Corporation and to the fullest
extent legally permissible, any and all expectancy and interest in any such
transaction, potential transaction, business opportunity, activity or line of
business, (ii) neither Mr. Terry (or his successor designee) nor any
of his affiliates (including Sun Capital or any of its affiliates) shall have
any duty to communicate or offer any such transaction, potential transaction,
business opportunity, activity or line of business to the Corporation, and (iii) neither
Mr. Terry (or his successor designee) nor any of his affiliates (including
Sun Capital or any of its affiliates shall have any duty to refrain therefrom
(directly, indirectly or through any assignee or transferee) as a result of Mr. Terry’s
(or his successor’s) service as a Director of the Corporation;

 

FURTHER RESOLVED, that, in
addition to, and notwithstanding, the foregoing resolutions, a transaction,
potential transaction, business opportunity, activity or line of business (i) that
the Corporation is not financially able, contractually permitted, or legally
able to undertake, or (ii) that is, from its nature, not in the line of
the Corporation’s business, is of no practical advantage to the Corporation, or
is one in which the Corporation has no interest or reasonable expectancy, shall
not in any such case (i) or (ii), be deemed to constitute a corporate
opportunity belonging to the Corporation, and the Corporation hereby renounces
any and all interest therein to the fullest extent permitted by law; and

 

FURTHER RESOLVED, that the Board
shall not modify, amend or revoke (in whole or in part) either of the foregoing
resolutions unless it gives Mr. Terry (or his successor designee) written
notice received by him within one (1) business day following such action
that any such modification, amendment or revocation has taken place, setting
forth in full the specific action taken in respect thereof.

 

13

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