Document:

Gryphon Gold Corporation: Exhibit 10.1 - Prepared by newsfilecorp.com

Exhibit 10.1

MEMBERSHIP INTEREST PURCHASE AGREEMENT 

This Membership Interest Purchase Agreement ("Agreement") is
made as of April ____, 2010 (the "Effective Date"), by Fronteer Development
(USA) Inc. a Delaware corporation ("Buyer") and Gryphon Gold Corporation, a
Nevada corporation ("Seller"). 

RECITALS 

A. Seller owns 100% of the membership interests (the
"Interests") of Nevada Eagle Resources LLC, a Nevada limited liability company
(the "Company"); 

B. Seller acquired the Interests pursuant to a Membership
Interest Purchase Agreement by and among Seller, the Company, and Gerald W.
Baughman and Fabiola Baughman (the "Baughmans") dated July 4, 2007 (the
"Baughman Agreement"); 

C. Seller issued the Baughmans, under the terms of the Baughman
Agreement, a 5% Convertible Note dated August 21, 2007 (Certificate No.
CN2007-001) and amended pursuant to an Option Agreement dated August 5, 2008 and
an Option Consideration Agreement dated February 5, 2010, with a principal
balance on the Effective Date of Two Million Five Hundred Thousand Dollars
(US$2,500,000), due March 30, 2012 (the "Baughman Note"); 

D. Seller desires to sell, and Buyer desires to purchase, the
Interests, and the Seller and Buyer entered into an Letter of Intent dated March
12, 2010 related to the purchase and sale of the Interests (the "LOI"); and E.
Seller agrees to sell, and Buyer agrees to purchase, the Interests for the
consideration and on the terms set forth in this Agreement. 

AGREEMENT 

The parties, intending to be legally bound, agree as follows:

	1. 	
      DEFINITIONS

For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1: 

"Applicable Contract"--any Contract material to the Company and
its business (a) under which the Company has or may acquire any rights, (b)
under which the Company has or may become subject to any obligation or
liability, or (c) by which the Company or any of the assets owned or used by it
is or may become bound, including without limitation, each lease, rental or
occupancy agreement, license, installment and conditional sale agreement, and
any other Contracts affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property. 

"Balance Sheet"--as defined in Section 3.4. 

"Baughman Note Extinguishment and Release"--the written release
and extinguishment and estoppel, for the benefit of the Seller and the Company,
in a form reasonably satisfactory to the Seller and Buyer, pursuant to which the
Baughmans have released Seller of any and all obligations under the Baughman
Note, including, but not limited to, any guaranty, security interest, obligation
to issue securities, conversion or other undertaking under or related to the
Baughman Note, in the form of Exhibit 2.4(b)(ii).

"Breach"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any material inaccuracy in or material breach of, or any material
failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, or (b) any material claim (by any Person) or
other occurrence or circumstance that is or was materially inconsistent with
such representation, warranty, covenant, obligation, or other provision, and the
term "Breach" means any material inaccuracy, breach, failure, claim, occurrence,
or circumstance. 

"Buyer"--as defined in the first paragraph of this Agreement.

"Closing"--as defined in Section 2.3. 

"Closing Date"--the date and time as of which the Closing
actually takes place. 

"Company"--as defined in the Recitals of this Agreement. 

"Consent"--any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization). 

"Contemplated Transactions"--all of the transactions
contemplated by this Agreement, including:

(a) the sale of the Interests by Seller
to Buyer; 

(b) the execution, delivery, and
performance of the Seller's Release,; 

(c) the performance by Buyer and Seller
of their respective covenants and obligations under this Agreement; and 

(d) Buyer's acquisition and ownership
of the Interests and exercise of control over the Company. 

"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding. 

"Copper Basin Project"--the property referred to as the Copper
Basin Project in Idaho, as more specifically identified on Schedule 3.6. 

"Damages"--as defined in Section 10.2. 

"Encumbrance"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership not disclosed to Buyer in this Agreement. 

"Environment"--soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource. 

"Environmental, Health, and Safety Liabilities"--any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to: 

(a) any environmental, health, or
safety matters or conditions (including on-site or off-site contamination,
occupational safety and health, and regulation of chemical substances or
products); 

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(b) fines, penalties, judgments, awards, settlements, legal or administrative
proceedings, damages, losses, claims, demands and response, investigative,
remedial, or inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law; 

(c) financial responsibility under Environmental Law or Occupational Safety and
Health Law for cleanup costs or corrective action, including any investigation,
cleanup, removal, containment, or other remediation or response actions
("Cleanup") required by applicable Environmental Law or Occupational Safety and
Health Law (whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource damages; or 

(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law. 

The terms "removal," "remedial," and "response action," include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. ' 9601 et seq., as amended ("CERCLA"). 

"Environmental Law"--any Legal Requirement that requires or relates to: 

(a) advising appropriate authorities, employees, and the public of intended or
actual releases of pollutants or hazardous substances or materials, violations
of discharge limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment; 

(b) preventing or reducing to acceptable levels the release of pollutants or
hazardous substances or materials into the Environment; 

(c) reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated; 

(d) assuring that products are designed, formulated, packaged, and used so that
they do not present unreasonable risks to human health or the Environment when
used or disposed of; 

(e) protecting resources, species, or ecological amenities; 

(f) reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances; 

(g) cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention; or 

(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets. 

"Facilities"--any real property, leaseholds, mining claims, or other interests currently owned or operated by the Company and any buildings, plants, structures, or equipment (including motor vehicles, tank cars, and rolling stock) currently owned or
operated by the Company..

"Governmental Authorization"--any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement. 

"Governmental Body"--any: 

(a) nation, state, county, city, town, governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal); 

(b) multi-national organization or body; or 

(c) body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any
nature. 

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"Hazardous Activity"--the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of
groundwater) of Hazardous Materials in, on, under, about, or from the Facilities or any part thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk
of harm to persons or property on or off the Facilities, or that may materially affect the value of the Facilities or the Company. 

"Hazardous Materials"--any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law,
including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials. 

"Interests"--as defined in the Recitals of this Agreement. 

"Interim Balance Sheet"--as defined in Section 3.4. 

"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law. 

"IRS"--the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury. 

"knowledge" of Seller and the Company means the actual knowledge or awareness of John Key and Bill Wilson. 

"Material Adverse Change"--any change (or any condition, event or development involving a prospective change) in the business, operations, results of operations, assets, capitalization, financial condition, licenses, permits, concessions, rights,
liabilities, prospects or privileges, whether contractual or otherwise, of the Company which has a Material Adverse Effect on the Company; 

"Material Adverse Effect"--any effect that is, or would reasonably be expected to be, material and adverse to
the business, operations, results of operations, assets, prospects, capitalization or financial condition of the Company; but “Material Adverse Effect” shall not include an effect resulting from (i) an action taken by the Company to which
the Buyer consented in writing; (ii) conditions affecting the mineral exploration industry generally in the jurisdictions in which the Company holds its assets, taken as a whole including, without limitation, changes in commodity prices or Taxes; or
(iii) general economic, financial, currency exchange, securities or commodity market conditions; 

"NER Operating Agreement"--the limited liability company operating agreement for the Company. 

"Order"--any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator. 

"Ordinary Course of Business"--an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if: 

(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person; 

(b) such action is not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar authority)
and is not required to be specifically authorized by the parent company (if any)
of such Person; and 

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(c) such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business as such Person. 

"Person"--any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. 

"Proceeding"--any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator. 

"Related Person" -- With respect to a specified Person: 

(a) any Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person; 

(b) any Person that holds a Material Interest in such specified Person; 

(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity); 

(d) any Person in which such specified Person holds a Material Interest; 

(e) any Person with respect to which such specified Person serves as a general
partner or a trustee (or in a similar capacity); and 

(f) any Related Person of any individual described in clause (b) or (c). 

For purposes of this definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse and former spouses, (iii) any other natural person who is related to the individual or the individual's spouse within the
second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or
other voting interests representing at least 50% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 50% of the outstanding equity securities or equity interests in a Person. 

"Release"--any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, or other releasing into the Environment, whether intentional or unintentional. 

"Representative"--with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors. 

"Securities Act"--the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. 

"Seller"--as defined in the first paragraph of this Agreement. 

"Seller's Release"--as defined in Section 2.4. 

"Subsidiary"--with respect to any Person (the "Owner"), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body,
or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner
or one or more of its Subsidiaries; when used without reference to a particular Person, "Subsidiary" means a Subsidiary of the Company. 

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"Tax Return"--any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax. 

"Threat of Release"--a substantial likelihood of a Release that may require action in order to prevent or mitigate damage to the Environment that may result from such Release. 

"Threatened"--a claim, Proceeding, dispute, action, or other matter will be deemed to have been "Threatened" if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event
has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future. 

	
2. 		
SALE AND TRANSFER OF INTERESTS; CLOSING

	

2.1. INTERESTS 

Subject to the terms and conditions of this Agreement, at the Closing, Seller will sell and transfer the Interests to Buyer, and Buyer will purchase the Interests from Seller. Buyer’s purchase of the Interests shall include all of the assets of
the Company, including but not limited to all data and databases pertaining to the mining claims, leases and other mineral assets of the Company and those assets listed in Schedule 3.6 attached hereto. 

2.2. PURCHASE PRICE 

The purchase price (the "Purchase Price") for the Interests shall be a total of Four Million Seven Hundred Fifty Thousand Dollars (US$4,750,000).  The Purchase Price will be paid at Closing and shall consist of (a) Two Million Two Hundred Fifty
Thousand Dollars (US$2,250,000) in a cash payment and (b) Two Million Five Hundred Fifty Thousand Dollars (US$2,500,000) by the assumption and release of Seller’s obligations under the Baughman Note and the delivery of the Baughman Note
Extinguishment and Release.

2.3. CLOSING 

The purchase and sale (the "Closing") provided for in this Agreement will take place by 5:00 p.m. (local time at the offices of Buyer’s counsel) on the Effective Date, or at such later time and place as the parties may agree. 

2.4. CLOSING OBLIGATIONS 

At the Closing: 

(a) Seller will deliver to Buyer:

(i) an assignment of the Interests in form and substance satisfactory to Buyer;
and  

(ii) A release in the form of Exhibit 2.4(a)(ii) executed by Seller (the "Seller's Release"). 

(b) Buyer will deliver to Seller: 

(i) by bank cashier's or certified check payable to the order of Seller or by wire transfer to accounts specified by Seller the amount of Two Million Two Hundred Fifty Thousand Dollars (US$2,250,000); and 

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(ii) the Baughman Note Extinguishment and Release (in the form of Exhibit 2.4(b)(ii)) . 

	
3. 		
REPRESENTATIONS AND WARRANTIES OF SELLER

	

Seller represents and warrants to Buyer as follows: 

3.1. ORGANIZATION AND GOOD STANDING 

(a) The Company is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Nevada, with full limited liability company power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under Applicable Contracts. The Company is duly qualified to do business as a foreign limited liability company and is in good
standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification. 

(b) Seller has delivered to Buyer copies of the articles of organization and the NER Operating Agreement, as currently in effect. 

3.2. AUTHORITY; NO CONFLICT 

(a) This Agreement constitutes the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms. Upon the execution and delivery by Seller of the Seller's Release and the assignment referenced to in Section
2.4(a)(i) (collectively, the "Seller's Closing Documents"), the Seller's Closing Documents will constitute the legal, valid, and binding obligations of Seller, enforceable against Seller in accordance with their respective terms. Seller has the
absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Seller's Closing Documents and to perform its obligations under this Agreement and the Seller's Closing Documents. 

(b) Neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time):

(i) contravene, conflict with, or result in
a violation of (A) any provision of the articles of organization of the Company, the NER
Operating Agreement or the articles of incorporation or bylaws of Seller or (B)
any resolution adopted by the Company or the board of directors or stockholders
of the Seller;

(ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Company or the Seller, or any of the
assets owned or used by the Company, may be subject;

(iii) contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by the Company or that otherwise relates to the business of, or any of the
assets owned or used by, the Company;

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(iv) cause the Company to become subject to, or to become liable for the payment
of, any Tax;

(v) cause any of the assets owned by the Company to be reassessed or revalued by
any taxing authority or other Governmental Body; 

(vi) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or 

(vii) result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets owned or used by the Company. 

Except as set forth in Schedule 3.2, neither Seller nor the Company is or will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions. 

3.3. CAPITALIZATION 

Seller is and will be on the Closing Date the record and beneficial owner and holder of the Interests, free and clear of all Encumbrances. The Interests are not evidenced or represented by certificates.  The Interests have been duly authorized and
validly issued and are fully paid and nonassessable. Except for this Agreement, there are no Contracts relating to the issuance, sale, or transfer of any membership interests or other securities of the Company. The Interests were not issued in
violation of the Securities Act or any other Legal Requirement. The Company owns no shares, interests or securities in any other Person except for the shares and warrants described on Schedule 3.3 attached hereto, which shares, interests or
securities will be transferred by the Company to the Seller prior to the Closing Date.

3.4. FINANCIAL STATEMENTS 

Seller has delivered to Buyer an unaudited balance sheet of the Company as at December 31, 2009 and the related unaudited statement of income for the period April 1, 2009 through December 31, 2009 (the "Balance Sheet"), and shall, three (3) days
prior to the Closing Date, deliver an updated balance sheet through the date of such delivery (the “Interim Balance Sheet”). Such financial statements fairly present or shall present the financial condition and the results of operations,
changes in members' equity, and cash flow of the Company as at the respective dates of and for the periods referred to in such financial statements, all in accordance with normal accounting principles as historically prepare by the Company. 

3.5. BOOKS AND RECORDS 

The books of account, minute books, membership interest record books, and other records of the Company, all of which have been made available to Buyer, are complete and correct and have been maintained in accordance with sound business practices.
The minute books of the Company contain accurate and complete records of all meetings held of, and limited liability company action taken by, the members, managers or managing member(s) of the Company, and no meeting of any such members, managers or
managing member(s) has been held for which minutes
have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company. 

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3.6. TITLE TO PROPERTIES; ENCUMBRANCES 

Schedule 3.6 attached hereto contains a complete and accurate list of all real property, leaseholds, surface rights, mineral rights, mineral claims, mining leases, easements, rights-of-way, or other interests therein owned by the Company. Seller has
delivered or made available to Buyer copies of the deeds and other instruments (as recorded) by which the Company acquired such real property and interests, and copies of all title insurance policies, opinions, abstracts, and surveys in the
possession of Seller or the Company and relating to such property or interests. The Company owns (with good and marketable title in the case of real property, subject only to the matters permitted by the following sentence) all the properties and
assets (whether real, personal, or mixed and whether tangible or intangible) that it purports to own located in the facilities owned or operated by the Company or reflected as owned in the books and records of the Company, including all of the
properties and assets reflected in the Balance Sheet. All material properties and assets reflected in the Balance Sheet are free and clear of all Encumbrances. Notwithstanding the foregoing, the parties acknowledge that prior to the Closing Date the
Company shall transfer to Seller the Copper Basin Project and such transfer shall be made without representation or warranty or other continuing liability of any nature on the part of the Company. In addition, Seller shall receive all cash in the
Company bank accounts as of Closing, net of payment of all liabilities (including a pro rata portion of accrued liabilities not yet due or owing, such as Taxes and filing fees) through the Closing Date. 

3.7. ACCOUNTS RECEIVABLE 

Except as set forth in Schedule 3.7, the Company has no accounts receivable. 

3.8. NO UNDISCLOSED LIABILITIES 

Except as set forth in Schedule 3.8, the Company has no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof. Immediately prior to the Closing hereunder the Company shall pay all outstanding accounts
payable and other liabilities through the Closing Date, including, without limitation, any inter-company loans or other payables.

3.9. TAXES 

(a) The Company filed or caused to be filed (on a timely basis since its inception) all Tax Returns that are or were required to be filed by or with respect to Company, either separately or as a member of a group of companies, pursuant to applicable
Legal Requirements. Seller has delivered or made available to Buyer copies of all such Tax Returns filed since the Company’s inception. The Company has paid, or made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment received by the Company. 

(b) There have been no audits of any such Tax Returns. 

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(c) The charges, accruals, and reserves with respect to Taxes on the books of the Company are adequate and are at least equal to the Company's liability for Taxes. There exists no proposed tax assessment against the Company except as disclosed in
the Balance Sheet. No consent to the application of Section 341(f)(2) of the IRC has been filed with respect to any property or assets held, acquired, or to be acquired by the Company. All Taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person. 

(d) All Tax Returns filed by (or that include on a consolidated basis) the Company are true, correct, and complete. There is no tax sharing agreement that will require any payment by the Company after the date of this Agreement. 

3.10. NO MATERIAL ADVERSE CHANGE 

Since the date of the Interim Balance Sheet, there has not been any Material Adverse Change in the business, operations, properties, prospects, assets, or condition of the Company, and no event has occurred or circumstance exists that may result in
such a material adverse change. 

3.11. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS 

(a) Except as set forth in Schedule 3.11(a): 

(i) the Company is, and at all times since July 4, 2007, and to the knowledge of
Seller and the Company since December 30, 2003, has been, in full compliance
with each Legal Requirement that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its assets; 

(ii) no event has occurred or circumstance exists that (with or without notice
or lapse of time) (A) may constitute or result in a violation by the Company of,
or a failure on the part of the Company to comply with, any Legal Requirement,
or (B) may give rise to any obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature;
and 

(iii) the Company has not received, at any time since July 4, 2007, and to the
knowledge of Seller and the Company since December 30, 2003, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of,
or failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature. 

(b) Schedule 3.11(b) contains a complete and accurate list of each Governmental Authorization that is held by the Company or that otherwise relates to the business of, or to any of the assets owned or used by, the Company. Each such Governmental
Authorization is valid and in full force and effect. 

(i) The Company is, and at all times since July 4, 2007, and to the knowledge of
Seller and the Company since December 30, 2003, has been, in full compliance
with all of the terms and requirements of each such Governmental Authorization; 

(ii) No event has occurred or circumstance exists that may (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any such
Governmental Authorization, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any such Governmental Authorization; 

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(iii) The Company has not received, at any time since July 4, 2007, and to the
knowledge of Seller and the Company since December 30, 2003, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and 

(iv) All applications required to have been filed for the renewal of all such
Governmental Authorizations have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies. 

 (c) Seller has, and has caused the Company to, make all filings required by Legal Requirements to be made by them in order to consummate the Contemplated Transactions.. 

3.12. LEGAL PROCEEDINGS; ORDERS 

(a) There is no pending Proceeding: 

(i) that has been commenced by or against the Company or that otherwise relates
to or may affect the business of, or any of the assets owned or used by, the
Company; or 

(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions. 

(b) To the knowledge of Seller and the Company, (1) no such Proceeding has been Threatened, and (2) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding. 

(c) There is no Order: 

(i) to which any of the Company, or any of the assets owned or used by the
Company, is subject;

(ii) Seller is not subject to any Order that relates to the business of, or any
of the assets owned or used by the Company; and 

(iii) to the knowledge of Seller and the Company, no member, manager, managing
member, agent, or employee of the Company is subject to any Order that prohibits
such member, manager, managing member, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of the
Company. 

3.13. ABSENCE OF CERTAIN CHANGES AND EVENTS 

Since the date of the Interim Balance Sheet, the Company has conducted its
businesses only in the Ordinary Course of Business and there has not been any of
the following: 

(a) change in the Company's membership interest ownership; grant of any
membership interest option or right to purchase the Company’s membership
interests; issuance of any security convertible into membership interests; grant
of any registration rights; purchase, redemption, retirement, or other
acquisition by the Company of any membership; or declaration or payment of any
distribution or payment in respect of membership interests; 

(b) amendment to the articles of organization and the operating agreement of the
Company; 

11

(c) payment or increase by the Company of any bonuses, salaries, or other compensation to any member, manager, managing member, officer, or (except in the Ordinary Course of Business) employee or entry into any employment, severance, or similar
Contract with any member, manager, managing member, officer, or employee; 

(d) damage to or destruction or loss of any asset or property of the Company, whether or not covered by insurance, materially and adversely affecting the properties, assets,
business, financial condition, or prospects of the Company, taken as a whole; 

(e) entry into, termination of, or receipt of notice of termination of any Contract; 

(f) sale (other than sales of inventory in the Ordinary Course of Business), lease, or
other disposition of any asset or property of the Company or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of the Company, including the sale, lease, or other disposition of any of the
Intellectual Property Assets; 

(g) cancellation or waiver of any claims or rights; 

(h) material change in the accounting methods used by the Company; or 

(i) agreement, whether oral or written, by the Company to do any of the foregoing. 

3.14. CONTRACTS; NO DEFAULTS 

(a) Schedule 3.14 contains a complete and accurate list and Seller has delivered to Buyer true and complete copies of each Applicable Contract. 

(b) Seller (and no Related Person of Seller) does not or shall not acquire any rights under, and Seller does not or shall not become subject to any obligation or liability under, any Contract that relates to the business of, or any of the assets
owned or used by, the Company. 

(c) Each Applicable Contract is in full force and effect and is valid and enforceable in accordance with its terms. 

(d) The Company is, and at all times since July 4, 2007, and to the knowledge of Seller and the Company since December 30, 2003, has been, in full compliance with all applicable terms and requirements of each Applicable Contract. 

(e) No event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a violation or breach of, or give the Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract. 

(f) The Company has not given to or received from any other Person, at any time since July 4, 2007, and to the knowledge of Seller and the Company since December 30, 2003, any notice or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of, or default under, any Contract, which could reasonably be expected to have a Material Adverse Effect. 

(g) Except as otherwise disclosed in Schedule 3.14, there are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to the Company or material terms under current or completed
Applicable Contracts with any Person and no such Person has made written demand for such renegotiation, which could reasonably be expected to have a Material Adverse Effect. 

3.15. INSURANCE 

 12

(a) Seller has delivered to Buyer true and complete copies of all policies of insurance to which the Company is a party or under which the Company, or any member, manager or managing member of the Company, is or has been covered at any time since
July 4, 2007. 

(b) All policies to which the Company is a party or that provide coverage to Seller, the Company, or any member, manager or managing member of the Company are valid, outstanding, and enforceable. 

(c) Neither Seller nor the Company has received (A) any refusal of coverage or any notice that a defense will be afforded with reservation of rights, or (B) any notice of cancellation or any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder. 

(d) The Company has paid all premiums due, and has otherwise performed all of its obligations, under each policy to which the Company is a party or that provides coverage to the Company or member, manager or managing member thereof. 

(e) The Company has given notice to the insurer of all claims that may be insured thereby. 

3.16. ENVIRONMENTAL MATTERS 

(a) The Company is, and at all times has been, in full compliance with, and to the knowledge of the Seller and the Company, has not been and is not in violation of or liable under, any Environmental Law. Neither Seller nor the Company has any basis
to expect, nor has any of them or any other Person for whose conduct they are or may be held to be responsible received, any actual or Threatened order, notice, or other communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any Facilities, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which Seller or the Company has had an interest, or with respect to any property or Facility
at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by Seller, the Company, or any other Person for whose conduct they are or may be held responsible, or from which Hazardous Materials
have been transported, treated, stored, handled, transferred, disposed, recycled, or received. 

(b) There are no pending or, to the knowledge of Seller and the Company, Threatened claims, Encumbrances, or other restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities or any other properties and assets (whether real, personal, or mixed) in which Seller or the Company has or had an interest. 

(c) Neither Seller nor the Company has any basis to expect, nor has any of them or any other Person for whose conduct they are or may be held responsible, received, any citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any alleged, actual, or potential obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which the Company had an interest, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, refined, transferred, imported, used, or processed by the Company, or any other
Person for whose conduct the Company is or may be held responsible, have been transported, treated, stored, handled, transferred, disposed, recycled, or received. 

 13

(d) Neither Seller nor the Company, or to the knowledge of the Seller and the Company any other Person for whose conduct they are or may be held responsible, has any Environmental, Health, and Safety Liabilities with respect to the Facilities or
with respect to any other properties and assets (whether real, personal, or mixed) in which the Company (or any predecessor), has or had an interest, or at any property geologically or hydrologically adjoining the Facilities or any such other
property or assets. 

(e) To the knowledge of the Seller and the Company, there are no Hazardous Materials present on or in the Environment at the Facilities or at any geologically or hydrologically adjoining property, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the
Facilities or such adjoining property, or incorporated into any structure therein or thereon. To the knowledge of the Seller and the Company, neither Seller, the Company, any other Person for whose conduct they are or may be held responsible, or any
other Person, has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the Facilities or any other properties or assets (whether real, personal, or mixed) in which Seller or the Company has or had an interest
except in full compliance with all applicable Environmental Laws. 

(f) To the knowledge of the Seller and the Company, there has been no Release or Threat of Release of any Hazardous Materials at or from the Facilities or at any other locations where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which Seller or the Company has or had an interest, or any geologically or
hydrologically adjoining property, whether by Seller, the Company, or any other Person. 

(g) Seller have delivered to Buyer true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by Seller or the Company pertaining to Hazardous Materials or Hazardous Activities in, on, or
under the Facilities, or concerning compliance by Seller, the Company, or any other Person for whose conduct they are or may be held responsible, with Environmental Laws. 

3.17. CERTAIN PAYMENTS 

Since July 4, 2007, and to the knowledge of Seller and the Company since December 30, 2003, neither the Company nor any member, manager, or managing member, officer, agent, or employee of the Company, or to Seller's knowledge any other Person
associated with or acting for or on behalf of the Company, has directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether
in money, property, or services (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, (iii) to obtain special concessions or for special concessions already obtained, for or in respect of
the Company or any Affiliate of the Company, or (iv) in violation of any Legal Requirement, (b) established or maintained any fund or asset that has not been recorded in the books and records of the Company. 

 14

3.18. DISCLOSURE 

(a) No representation or warranty of Seller in this Agreement omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. 

(b) There is no fact known to Seller that has specific application to Seller or the Company (other than general economic or industry conditions) and that materially adversely affects or, as far as Seller can reasonably foresee, materially threatens,
the assets, business, prospects, financial condition, or results of operations of the Company that has not been set forth in this Agreement. 

3.19. BROKERS OR FINDERS 

Seller and their agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. 

3.20. COMPANY EMPLOYEES AND BENEFIT PLANS 

 The Company does not have any employees or any employee pension plans, retirement plans or any other employee benefit plans (including, without limitation, any multi-employer contracts or multi-employer pension or other benefit plans). 

	
4. 		
REPRESENTATIONS AND WARRANTIES OF BUYER

	

Buyer represents and warrants to Seller as follows: 

4.1. ORGANIZATION AND GOOD STANDING 

Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. 

4.2. AUTHORITY; NO CONFLICT 

(a) This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Buyer has the absolute and unrestricted right, power, and authority to execute and deliver this Agreement and
to perform its obligations under this Agreement. 

(b) Neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer will give any Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to: 

(i) any provision of Buyer's articles of incorporation or bylaws; 

(ii) any resolution adopted by the board of directors or the stockholders of
Buyer; 

(iii) any Legal Requirement or Order to which Buyer may be subject; or 

(iv) any Contract to which Buyer is a party or by which Buyer may be bound. 

(c) Except as set forth in Schedule 4.2, Buyer is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated
Transactions. 

4.3. INVESTMENT INTENT 

Buyer is acquiring the Interests for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act. 

 15

4.4. CERTAIN PROCEEDINGS 

There is no pending Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer's knowledge, no
such Proceeding has been Threatened. 

4.5. BROKERS OR FINDERS 

Buyer and its officers and agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement and will indemnify and hold Seller
harmless from any such payment alleged to be due by or through Buyer as a result of the action of Buyer or its officers or agents. 

	
5. 		
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE

	

Buyer's obligation to purchase the Interests and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by
Buyer, in whole or in part): 

5.1. ACCURACY OF REPRESENTATIONS 

All of Seller's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this
Agreement, and must be accurate in all material respects as of the Closing Date as if made on the Closing Date. 

5.2. SELLER'S PERFORMANCE 

(a) All of the covenants and obligations that Seller is required to perform or to comply with pursuant to the LOI at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have
been duly performed and complied with in all material respects. 

(b) Each document required to be delivered pursuant to Section 2.4 must have been delivered. 

5.3. CONSENTS 

Each of the Consents identified in Schedule 3.2, and each Consent identified in Schedule 4.2, must have been obtained and must be in full force and effect. 

5.4. ADDITIONAL DOCUMENTS 

Each of the following documents must have been delivered to Buyer: 

(a) an opinion of Seller’s counsel, dated the Closing Date, in the form of Exhibit 5.4(a); and 

(b) such other documents as Buyer may reasonably request for the purpose of (i) evidencing the accuracy of any of Seller's representations and
warranties, (ii) evidencing the performance by Seller of, or the compliance by Seller with, any covenant or obligation required to be performed or complied with by Seller, (iii) evidencing the satisfaction of any condition referred to in this
Section
5, or (iv) otherwise facilitating the consummation or performance of any of the Contemplated Transactions. 

 16

5.5. NO PROCEEDINGS 

There must not have been commenced or Threatened against Buyer, or against any Person affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the Contemplated Transactions,
or (b) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Contemplated Transactions. 

5.6. NO CLAIM REGARDING INTEREST OWNERSHIP OR SALE PROCEEDS 

There must not have been made or Threatened by any Person any claim asserting that such Person (a) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any membership interests of, or any other
voting, equity, or ownership interest in, the Company, or (b) is entitled to all or any portion of the Purchase Price payable for the Interests. 

5.7. NO PROHIBITION 

Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), materially contravene, or conflict with, or result in a material violation of, or cause
Buyer or any Person affiliated with Buyer to suffer any material adverse consequence under, (a) any applicable Legal Requirement or Order, or (b) any Legal Requirement or Order that has been published, introduced, or otherwise proposed by or before
any Governmental Body. 

5.8. DUE DILIGENCE 

Buyer shall be satisfied, in its sole and absolute discretion, with the results of its investigation of the Company and the Company’s operations and assets.

5.9. BAUGHMAN NOTE EXTINGUISHMENT AND RELEASE 

Buyer shall have reached an agreement with the Baughmans to assume, extinguish or pay the Baughman Note and the Baughmans shall have delivered the Baughman Note Extinguishment and Release to the Seller. 

	
6. 		
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE

	

Seller's obligation to sell the Interests and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by
Seller, in whole or in part): 

6.1. ACCURACY OF REPRESENTATIONS 

All of Buyer's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this Agreement
and must be accurate in all material respects as of the Closing Date as if made on the Closing Date. 

6.2. BUYER'S PERFORMANCE 

 17

(a) All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to the LOI at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have
been performed and complied with in all material respects. 

(b) Buyer must have delivered each of the documents required to be delivered by Buyer pursuant to Section 2.4 and must have made the cash payments required to be made by Buyer pursuant to Sections 2.4(b)(i) . 

6.3. BAUGHMAN NOTE EXTINGUISHMENT AND RELEASE 

Buyer shall have reached an agreement with the Baughmans to assume, extinguish or pay the Baughman Note and the Baughmans shall have delivered the Baughman Note Extinguishment and Release to the Seller. 

6.4. CONSENTS 

Each of the Consents identified in Schedule 3.2 must have been obtained and must be in full force and effect. 

6.5. NO INJUNCTION 

There must not be in effect any Legal Requirement or any injunction or other Order that (a) prohibits the sale of the Interests by Seller to Buyer, and (b) has been adopted or issued, or has otherwise become effective, since the date of this
Agreement. 

	
7. 		
INDEMNIFICATION; REMEDIES

	

7.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE 

All representations, warranties, covenants, and obligations in this Agreement and any other certificate or document delivered pursuant to this Agreement will survive the Closing. The right to indemnification, payment of Damages or other remedy based
on such representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of Damages, or other remedy based on such representations, warranties, covenants, and obligations. 

7.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER 

Seller will indemnify and hold harmless Buyer, the Company, and their respective
Representatives, stockholders, members, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees, and, with respect to representations and
warranties contained in Section 3.16, costs of cleanup, containment, or other
remediation) or
diminution of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with: 

 18

(a) any Breach of any representation or warranty made by Seller in this
Agreement or any other certificate or document delivered by Seller pursuant to
this Agreement; 

(b) any Breach of any representation or warranty made by Seller in this
Agreement;

 (c) any Breach by Seller of any covenant or obligation of Seller in this
Agreement; or 

(d) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such Person with Seller or the Company (or any Person acting on
their behalf) in connection with any of the Contemplated Transactions. 

Buyer will be entitled to control any Cleanup, any related Proceeding, and, except as provided in the following sentence, any other Proceeding with respect to which indemnity may be sought in connection with a breach of Section 3.16. The procedure
described in Section 7.4 will apply to any claim solely for monetary damages relating to a matter covered by Section 3.16. 

The remedies provided in this Section 7.2 will not be exclusive of or limit any other remedies that may be available to Buyer or the other Indemnified Persons. Notwithstanding the foregoing, Buyer shall be entitled to indemnification under this
Agreement only if the aggregate amount of Damages suffered by Buyer exceeds US$200,000 (the “Basket”); provided however, that the Seller’s obligation to indemnify any Indemnified Persons under this Agreement shall not exceed
US$4,750,000 (the “Cap”); provided further, that to the extent that the Company would be entitled to indemnification from any third party under an Applicable Contract, Buyer shall be entitled to indemnification hereunder only after
Buyer and the Company shall have made commercially reasonable efforts to preserve and enforce its rights to such indemnification from such third party (the “Company Indemnity”). 

7.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER 

Buyer will indemnify and hold harmless Seller, and will pay to Seller and its Indemnified Persons, the amount of any Damages arising, directly or indirectly, from or in connection with (a) any Breach of any representation or warranty made by Buyer
in this Agreement or in any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been made by such Person with Buyer (or any Person acting on its behalf) in connection with any of the Contemplated Transactions. Notwithstanding the foregoing, Seller shall
be entitled to indemnification hereunder only if the aggregate amount of Damages suffered by Seller exceeds the Basket; provided however, that the Buyer’s obligation to indemnify any Indemnified Persons under this Agreement shall not exceed the
Cap; provided further, that to the extent that the Seller would be entitled to indemnification from any third party under an Applicable Contract, Seller shall be entitled to indemnification hereunder only after Seller shall have made commercially
reasonable efforts to preserve and enforce its rights to such indemnification from such third party (the “Seller Thirty Party Indemnity”). 

7.4. PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS 

 19

(a) Promptly after receipt by an indemnified party under Section 7.2 (subject to claims under Company Indemnity) or 7.3 (subject to claims under Third Party Indemnity) of notice of the commencement of any Proceeding against it, such indemnified
party will, if a claim is to be made against an indemnifying party under such Section, give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is prejudiced by the indemnifying party's failure to give such notice. 

(b) If any Proceeding referred to in Section 7.4(a) is brought against an indemnified party and it gives notice to the indemnifying party of the commencement of such Proceeding, the indemnifying party will, unless the claim involves Taxes, be
entitled to participate in such Proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such Proceeding and the indemnified party determines in good faith that joint representation would be inappropriate,
or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding
with counsel satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 10 for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the indemnified party in connection with
the defense of such Proceeding, other than reasonable costs of investigation. If the indemnifying party assumes the defense of a Proceeding, (i) it will be conclusively established for purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims  may be effected by the indemnifying party without the indemnified party's consent unless (A) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnified party, and (B) the sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or settlement effected by the indemnified party. 

(c) Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it or its affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld). 

(d) If any Proceeding referred to in Section 7.4(a) is brought against Buyer or
any Indemnified Person, Seller hereby consents to the non-exclusive jurisdiction
of any court in which such Proceeding is brought against any Indemnified Person
for purposes of any claim that an
Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein, and agrees that process may be served on Seller with respect to such a claim anywhere in the world. 

20

7.5 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS 

A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought, subject to claims under the Company Indemnity, the Basket and the Cap, and the Seller Third
Party Indemnity.

	
8.  		
GENERAL PROVISIONS 
	

8.1. EXPENSES 

Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions,
including all fees and expenses of agents, representatives, counsel, and accountants. Seller will cause the Company not to incur any out-of-pocket expenses in connection with this Agreement.  In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights of such party arising from a breach of this Agreement by another party. 

8.2. PUBLIC ANNOUNCEMENTS 

Any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Buyer determines. Unless consented to by Buyer in advance or required by Legal
Requirements, prior to the Closing Seller shall, and shall cause the Company to, keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person. Seller and Buyer will consult with each other concerning the
means by which Persons having dealings with the Company will be informed of the Contemplated Transactions, and Buyer will have the right to be present for any such communication. 

8.3. CONFIDENTIALITY 

(a) Between the date of this Agreement and the Closing Date, Buyer and Seller will maintain in confidence, and will cause the directors, officers, members, managers, managing members, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, and not use to the detriment of another party or the Company any information furnished by another party or the Company in connection with this Agreement or the Contemplated Transactions, unless (i) such information is already
known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (ii) the use of such information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated Transactions, or (iii) the furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings. 

(b) If the Contemplated Transactions are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request. Whether or not the
Closing takes place, Seller waives, and will upon Buyer's request cause the Company to waive, any cause of action, right, or claim arising out of the access of Buyer or its representatives to any trade secrets or other confidential information of
the Company except for the intentional competitive misuse by Buyer of such trade secrets or confidential information. 

21

8.4. NOTICES 

All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written
confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): 

Seller: 

Gryphon Gold Corporation 

5490 Longley Lane 

Reno, NV 89511 

Facsimile No.: 775-552-8511 

Attention: John Key, Chief Executive Officer 

Buyer: 

Fronteer Development (USA) Inc. 

Suite 1650 

1055 West Hastings Street 

Vancouver, BC 

Canada V6E 2E9 

Facsimile No.: 604 632 4678 

Attention: John Dorward, Vice President, Business Development 

8.5 JURISDICTION; SERVICE OF PROCESS 

Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Nevada, County of Washoe, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Nevada, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world. 

8.6 FURTHER ASSURANCES 

The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 

8.7. WAIVER 

The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this
Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of  the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement. 

 22

8.8. ENTIRE AGREEMENT AND MODIFICATION 

This Agreement supersedes all prior agreements between the parties with respect to its subject matter (including the LOI) and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. 

8.9. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS 

Neither party may assign any of its rights under this Agreement without the prior consent of the other parties, which will not be unreasonably withheld, except that Buyer may assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 

8.10. SEVERABILITY 

If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 

8.11. SECTION HEADINGS, CONSTRUCTION 

The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement. All
words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 

8.12. TIME OF ESSENCE 

 23

With regard to all dates and time periods set forth or referred
to in this Agreement, time is of the essence. 

8.13. GOVERNING LAW 

This Agreement will be governed by the laws of the State of
Nevada without regard to conflicts of laws principles. 

8.14. COUNTERPARTS 

This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement. 

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

Fronteer Development (USA) Inc.

	By: 	 	 
	Printed: 	 	 
	Title: 	 	 
	 	 	 
	 	 	 
	Gryphon Gold Corporation 	 	 
	 	 	 
	                                                                  
    
    	 	 
	John Key, Chief Executive Officer 	 	 

24

Schedule 3.2 

Seller’s Consents 

Company’s Consents 

Schedule 3.3 

Shares and Warrants

Schedule 3.6 

Company’s Assets 

Schedule 3.7 

Company’s Accounts Receivable 

Schedule 3.8 

Company’s Liabilities or Obligations 

Schedule 3.11(a) 

Legal Requirements 

Schedule 3.11(b) 

Governmental Authorizations 

Schedule 3.14

Applicable Contracts 

Schedule 4.2 

Buyer’s Consents 

25

Exhibit 2.4(a)(ii) 

Seller's Release 

Exhibit 2.4(b)(ii) 

Baughman Note Extinguishment and Release 

Exhibit 5.4(a) 

Opinion of Seller’s counsel 

26exhibit101.htm

    TEMPUR-PEDIC
INTERNATIONAL INC.

    Amended
and Restated Annual Incentive Bonus Plan for Senior Executives

    Terms and
Conditions

    

    Adopted:
February 22, 2010

     

    

     

    I. Compensation
Philosophy

     

    The
intent of this Amended and Restated Annual Incentive Bonus Plan (the “Incentive Plan”) of
Tempur-Pedic International Inc. (“Tempur-Pedic” or the
“Company”) is
to provide highly competitive total cash compensation through an annual variable
pay program that reflects the Company’s performance and the participant’s
performance against goals and objectives.

     

    Tempur-Pedic’s
compensation philosophy is to attract, motivate, retain and reward its
management talent with base salary, annual incentive bonuses and equity
compensation that competitively targets its market.  Tempur-Pedic’s
compensation programs are designed to reward its management for strong company
performance and successful execution of key business plans and strategies, based
on Tempur-Pedic’s and the senior manager’s achievement of pre-established
performance targets.   Tempur-Pedic believes that its
compensation philosophy aligns management incentives with the long-term
interests of Tempur-Pedic’s stockholders.

     

    This
Incentive Plan is an important variable component of the total compensation
package for the Chief Executive Officer (“CEO”), Executive Vice
Presidents (“EVPs”) and other
senior managers who may be designated from time to time for participation in
this Incentive Plan (collectively, the “Senior Executives”).
Tempur-Pedic believes that senior management who hold positions affording them
the authority to make critical decisions affecting Tempur-Pedic’s overall
performance should have a material percentage of their annual compensation
contingent upon Tempur-Pedic’s performance.

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    II.           Plan
Overview

     

    This
Incentive Plan is a cash bonus plan for Senior Executives, designed to reward
them for their roles in the achievement of Tempur-Pedic’s annual goals, as
established by the Board of Directors or Compensation
Committee.  Incentive Plan awards are determined on an annual basis,
based on whether and to what extent Tempur-Pedic achieves any applicable Company
Goals and each participant achieves any applicable Individual Goals for the
relevant Performance Period. The annual incentive bonus is a lump-sum cash
payment for each Senior Executive (the “Bonus”).

     

    Administration.  This Incentive
Plan shall be administered by the Compensation Committee (“Compensation
Committee”) of the Board of Directors of the Company; provided, however, that at
any time and on any one or more occasions the Board may itself exercise any of
the powers and responsibilities assigned the Compensation Committee under this
Incentive Plan and when so acting shall have the benefit of all of the
provisions of this Incentive Plan pertaining to the Compensation Committee’s
exercise of its authorities hereunder.  The Compensation Committee
shall have the full power and authority to administer this Incentive
Plan.  In applying and interpreting the provision, of this Incentive
Plan, the decision of the Compensation Committee shall be final.

     

    As used
in this Incentive Plan, the term “Administrator” refers
to either the Board or the Compensation Committee exercising its authority under
this Incentive Plan as described above.

     

    Performance
Period.  Unless otherwise
determined by the Administrator with respect to any Target Bonus, the Incentive
Plan year runs from January 1 – December 31 (the “Performance
Period”).

     

    Participants.  The CEO, the
EVPs and other Senior Executives designated from time to time by the
Administrator shall be entitled to participate in this Incentive
Plan.

     

    Target
Bonus. With
respect to any Performance Period and any Senior Executive, the Administrator
shall create a target Bonus for such Senior Executive, expressed as a percentage
of such Senior Executive’s base salary as in effect at the end of the
Performance Period (the “Target
Bonus”).

     

    Within
ninety (90) days of the commencement of each Performance Period, but in any event prior to
the expiration of twenty-five percent (25%) of the applicable Performance
Period, the Administrator shall set the targeted annual Bonus for each
Senior Executive.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    Components
of Bonus.  Unless otherwise
determined by the Administrator with respect to any Performance Period, each
participant’s Target Bonus shall be comprised of two or more
components:  one or more components based on the achievement of
Company-wide goals (the “Company Goals”) and
one or more components based on the achievement of individual goals created for
any particular Senior Executive (the “Individual
Goals”).

     

    If any of
the Company Goals components of a Target Bonus or any of the Individual Goals
components of a Target Bonus for any Senior Executive for any Performance Period
is intended to constitute “qualified performance-based compensation” within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”, with
any such compensation referred to as “Qualified Performance-Based
Compensation”) then (i) such component of the Company Goals or Individual
Goals, as applicable, selected by the Administrator shall be limited to the
specific otherwise illustrative goals identified below, (ii) each component of
the Bonus must be assessed separately to determine whether the Senior Executive
has achieved the Company Goals or Individual Goals applicable to that component,
and (iii) the Company Goals and Individual Goals shall be selected and evaluated
in such a manner that in no event shall the achievement or failure to achieve
any level of any of the selected Company Goals or Individual Goals in any
component shall have any bearing or effect on whether the Company Goals or
Individual Goals in any other component have been achieved.

     

    The
Administrator shall have the discretion to include or exclude extraordinary
items, restructuring charges, accounting changes or any other unusual or
nonrecurring items in its determination of whether a Company Goal or Individual
Goal has been satisfied; provided, that in the case of any Qualified
Performance-Based Compensation, the extent, if any, to which any such
adjustments shall be made shall be determined by the Administrator at the time
of establishing the relevant Company Goal or Individual Goal.  At the time any Company
Goals or Individual Goals are established, the outcome as to whether the
Performance Measures will be met must be substantially uncertain with respect to
any component of a Bonus intended to qualify as Qualified Performance-Based
Compensation.

     

    The
purpose of any Company Goals component, represented by financial targets and
other Company-wide performance metrics, and the purpose of the Individual Goals
component, represented by the achievement of targets based on a specific
segment, division or business unit or individual targets, are designed to focus
the Senior Executives on behaviors that support the overall performance and
success of the Company.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    Company
Goals.  The Company
Goals component will be tied to Tempur-Pedic’s achievement of specific financial
targets and other Company-wide performance metrics. The Company Goals component
metrics may include, but are not limited to, one or more of the following, any
of which may be measured either in absolute terms or as compared to any
incremental increase or as compared to results of a peer group:

    
       

      
        	
                • debt
      reduction

              	
                • pre-
      or after-tax net earnings

              
	
                • earnings
      before interest and taxes (EBIT) or EBIT margin

              	
                • price
      per share of stock

              
	
                • earnings
      before interest and taxes, depreciation and amortization (EBITDA) or
      EBITDA margin

              	
                • return
      on assets

              
	
                • earnings
      per share 

              	
                • return
      on capital

              
	
                • gross
      or net profit margin

              	
                • return
      on net assetss

              
	
                • market
      share

              	
                • return
      on stockholders' equity

              
	
                • net
      sales

              	
                • sales
      or net sales growth

              
	
                • operating
      cash flow

              	
                • stock
      price growth

              
	
                • operating
      earnings 

              	
                • stockholder
      returns

              

      

       

    

    These metrics are referred to as the
“Specific Company
Metrics.”

     

    Any
Company Goals component of the Bonus may be established using a matrix to allow
for maximum and minimum payments of the Target Bonus, depending on the level of
specified factors for the applicable Performance Period.  A failure to
meet the minimum requirement may result in no Bonus payment with respect to the
applicable Company Goals component of the Incentive Plan.

     

    Individual
Goals.  Each year,
individual incentive performance metrics and targets may be established as
Individual Goals for one or more of the Senior Executives. Any Individual Goals
component of a Target Bonus for a Senior Executive may be based on the
performance of a segment, division or business unit or goals unique to the
particular Senior Executive.  The Individual Goals are expected to
have a significant component based on the successful completion of individual
objectives.

     

    An
Individual Goals component will target 100% payout of the applicable portion of
the Target Bonus for the achievement of a Senior Executive’s Individual Goal or
Goals.  Payments can range from no bonus payment to more than 100% of
the targeted Individual Goals component, based on individual performance. Except
as required in the case of Qualified Performance-Based Compensation, the
determination of whether an Individual Goals component of the Bonus has been met
and to what degree will be based on the subjective determination of the
Administrator, and in exercising this discretion the Administrator will review
each Senior Executive’s performance against individual objectives and the
overall performance of the applicable Senior Executive within his or her
specific area of responsibility.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    Individual Goals may be based on any of
the Specific Company Metrics, as applied to any specific segment, division or
business unit, and may also include any one or more of following, as applicable
to a specific segment, division or business unit or an individual:

     

    
      
        	
                •
      Cost reduction initiatives

              	
                • H.R.
      management metrics

              
	
                •
      Enhance financial planning process

              	
                • Improve
      customer service metrics

              
	
                • Execution
      of Investor Relations plan

              	
                • New
      product launches

              
	
                • Expanding
      slots per stores

              	
                • Sales
      targets

              
	
                • Expand
      brand awareness

              	
                • Strategic
      planning and growth initiatives

              

      

       

    

    If the Individual Goals component of a
Target Bonus for any Senior Executive for any Performance Period is intended to
constitute Qualified Performance-Based Compensation, then the Individual Goals
component metrics shall be based on one or more objectively determinable
measures of performance, from which an independent third party with knowledge of
the facts could determine whether the performance goal or range of goals is met
and from that determination could calculate the Bonus to be paid.

     

    III.           Designation
of Participants

     

    For any
Performance Period, not later than the end of February of such Performance
Period, the Administrator shall determine whether any senior managers other than
the CEO and EVPs will participate in this Incentive Plan for that Performance
Period, in which case any of these other senior managers will constitute “Senior
Executives” under this Incentive Plan for that Performance
Period.  With respect to any other senior managers hired during the
course of a fiscal year, the Administrator shall determine within thirty (30)
days after the employment of such senior manager whether or not such senior
manager shall participate in this Incentive Plan for such year.  In
the event that the Administrator does not decide that such newly-hired senior
manager will participate in this Incentive Plan, such senior manager will not
participate in the Incentive Plan for such Performance Period.  In the
event that the Administrator determines that a newly-hired senior manager will
participate in this Incentive Plan for the remainder of the current Performance
Period, the Administrator will promptly determine the terms of the Bonus for
such Senior Executive, including with respect to the matters referred to in
Section IV below.

     

    Participation
in this Incentive Plan in one year does not automatically guarantee
participation in a future year.  Compliance with all Tempur-Pedic
policies, guidelines and applicable laws is a prerequisite to receiving an award
pursuant to this Incentive Plan.

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    IV.           Creation
of Bonus Terms for Any Fiscal Year

     

    For any
Performance Period, within ninety (90) days after the commencement of that
Performance Period, but in any event prior to
the expiration of twenty-five percent (25%) of the applicable Performance
Period, the Administrator shall determine the following for the Senior
Executives participating in the Incentive Plan for that Performance
Period:

     

    
      	
                  • the
      Target Bonus for such Senior Executive, expressed as a percentage of his
      or her base salary as of the end of the Performance
      Period;

            

    

    
      
        
          
             

            
              	
                          • whether
      there will be Company Goals for the Performance Period, and the type of
      Company Goals that will
apply;

                    

            

            
              
                
                   

                  
                    	
                                • for
      each Senior Executive, whether there will be Individual Goals for that
      Senior Executive;

                          

                  

                  
                    
                      
                        
                           

                          
                            	
                                        • the
      relative weighting between Company Goals and Individual Goals for any
      Senior
Executive;

                                  

                          

                          
                            
                              
                                
                                   

                                  
                                    	
                                                • any
      maximum or minimum payout with respect to any of the Company Goals or
      Individual
Goals;

                                          

                                  

                                  
                                    
                                      
                                         

                                        
                                          	
                                                      • whether
      any component of the Bonus is intended to qualify as Qualified
      Performance-Based Compensation;
  and

                                                

                                        

                                        
                                          
                                            
                                              
                                                 

                                                
                                                  	
                                                              • any
      other terms applicable to the Bonuses for any Senior Executives for that
      Performance
Period.

                                                        

                                                

                                                
                                                  
                                                     

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

        If the Bonus
is intended to constitute Qualified Performance-Based Compensation, then the
maximum amount payable under this Incentive Plan in respective of any one person
for any one Performance Period as Bonuses shall not exceed an amount equal to 1%
of the Company’s net sales for the fiscal year in which the Performance Period
ends.

     

    V.           Payment
Criteria

     

    Unless
otherwise provided in any employment agreement between the Senior Executive and
the Company or otherwise determined by the Administrator, a participant must be
employed by Tempur-Pedic on the Bonus payment date with respect to the
applicable Performance Period to be eligible to receive payment of an Award
pursuant to this Incentive Plan.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    Except as
noted above, all Bonus payments will be based on a participant’s base salary as
in effect at the end of the Performance Period, subject to the maximum amount
that may paid for awards intended to constitute Qualified Performance-Based
Compensation as set forth above.  Bonus payments will be made by March
15 of the year following the Performance Period.  Bonus payments will
be subject to all withholding required by applicable law.

     

    Nothing
in this Incentive Plan guarantees any Bonus payment will be made to any
individual.  Receipt of a Bonus payment in one year does not guarantee
eligibility in any future year.

     

    VI.           Termination,
Suspension or Modification and Interpretation of this Incentive
Plan

     

    Tempur-Pedic
may terminate, suspend or modify and if suspended, may reinstate with or without
modification all or part of this Incentive Plan at any time, with or without
notice to the participant.  Tempur-Pedic reserves the exclusive right
to determine eligibility to participate in this Incentive Plan and to interpret
all applicable terms and conditions, including eligibility
criteria.

     

    VII.           Other

     

    This
document sets forth the terms of this Incentive Plan and is not intended to be a
contract or employment agreement between the participant and
Tempur-Pedic.  As applicable, it is understood that both any
participant and Tempur-Pedic have the right to terminate the participant’s
employment with Tempur-Pedic at any time, with or without cause and with or
without notice, in acknowledgement of the fact that their employment
relationship is “at will.”

     

    This
Amended and Restated Incentive Plan amends and restates the Annual Incentive
Bonus Plan for Senior Executives originally adopted on February 18, 2009 (the
“Original
Plan”).  Any Target Bonuses created prior to the approval by
the stockholders of the Company of this Incentive Plan will be governed by the
Original Plan.

      
        
           

        

        
          7

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