Employment Agreement dated May 5, 2005



 Exhibit 10.21 
  
 EMPLOYMENT AGREEMENT 
  
 THIS AGREEMENT (“Agreement”) effective as of the Fifth day of May, 2005 
  
 BETWEEN: 
  
 Sterling Mining Company 
  
 2201 Government Way, Suite E 
  
 Coeur d’Alene, ID 83314 
  
 (the “Company”) 
  
 -and- 
  
 Michael L. Mooney 
  
 Secretary and Assistant Treasurer 
  
 10914 E. #5th Avenue 
  
 Spokane Valley, WA 99206

  
 (the “Executive”) 
  
 RECITALS 
  
 WHEREAS, the Company recognizes that the current business environment makes
it difficult to attract and retain highly qualified executives unless a certain degree of security can be offered to such individuals against organizational and personnel changes which frequently follow changes in control of a corporation; and

  
 WHEREAS, the Company desires to assure fair treatment of its
executives in the event of a Change in Control (as defined below) and to allow them to make critical career decisions without undue time pressure and financial uncertainty, thereby increasing their willingness to remain with the Company
notwithstanding the outcome of a possible Change in Control transaction; and 
  
 WHEREAS, the Company recognizes that its executives will be involved in evaluating or negotiating any offers, proposals or other transactions which could result in Changes in Control of the Company and believes that
it is in the best interest of the Company and its stockholders for such executives to be in a position, free from personal financial and employment considerations to be able to assess objectively and pursue aggressively the interests of the
Company’s stockholders in making these evaluations and carrying on such negotiations; and 







 WHEREAS, the Board of Directors (the “Board”) of the Company Believes it is essential to
provide the Executive with compensation arrangements upon a Change in Control which provide the Executive with individual financial security and which are competitive with those of other corporations and in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement. 
  
 WHEREAS the Executive is an Officer of the Company and is employed in the Business (as defined below) operated by the Company; 
  
 WHEREAS, the Board of Directors of the Company (the Board”), has determined that it is in the best interests of the Company and shareholders to
assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined herein) The Board believes it is imperative to diminish the inevitable distraction
of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control and to encourage the Executive’s full attention and dedication to the current Company and in the event of any threatened or
pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that arc Competitive with
those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. 
  
 NOW THEREFORE in consideration of the promises and mutual covenants herein contained, the parties hereto agree as follows: 
  
 1. Defined Terms 
  
 (a) “Cause” shall mean (i) the continued
failure by the Executive to perform his material responsibilities an duties toward the Company (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness), (ii) the engaging by the Executive in
willful or reckless conduct that is demonstrably injurious to the Company monetarily or otherwise, (iii) the conviction of the Executive of, or a plea of nolo contendre to, a felony or a crime of moral turpitude, or (iv) the commission or
omission of any act by the Executive that is materially inimical to the best interests of the Company and that constitutes on the part of the Executive common law fraud or malfeasance, misfeasance, or nonfeasance of duty, provided, however, that
“cause” shall not include the Executive’s lack of professional qualifications. For purposes of this Agreement, an act, or failure to act, on the Executive’s part shall be considered “willful” or “reckless”
only if done, or omitted, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. The Executive’s employment shall not be deemed to have been terminated for “cause”
unless the Company shall have (A) given or delivered to the Executive reasonable notice setting forth the reasons for the Company’s intention to terminate the Executive’s employment for “cause,” and (B) provided the
Executive a reasonable opportunity to cure the act or omission that is the basis for the proposed termination for cause, to the extent curable. 
  

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 (b) “Change in Control” shall mean: 
  
 (i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person “) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”), provided, however, that, for purposes of’ this Section 1(d), the following acquisitions shall not constitute a Change
in Control (i) any acquisition directly from the Company, (ii.) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or
(iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(b)(iii)(A), 1(b)(iii)(B) and 1(b)(iii)(C); 
  
 (ii) Any time at which individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board, provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent board, but excluding, for this purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; 
  
 (iii) Consummation of a reorganization, merger, statutory
share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business
Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or
substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as then ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent that such 

  

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ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; 
  
 (iv) A sale or disposition of all or substantially all of
the assets of the Company to an unrelated party; or 
  
 (v) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 
  
 (c) “Code” shall mean the Internal Revenue Code as of 2005, as amended 
  
 (d) “Disability” for purposes of this Agreement,
shall mean total disability as defined in any long-term disability plans sponsored by the Company in which the Executive participates or, if there is no such plan or it does not define such term, then it shall mean the physical or mental incapacity
of the Executive that prevents him from substantially performing the duties of the office or position to which he was elected or appointed by the Board for a period of at least 180 days and the incapacity is expected to cause death or last at least
one (1) year. 
  
 (e) The “Change in
Control Date” shall be any date during the term of this Agreement on which a Change in Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive’s employment or status as an elected officer with the
Company is terminated within six (6) months before the date on which a Change in Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated or
intended to effect a Change in Control or (ii) otherwise so arose in connection with or anticipation or a Change in Control, then for all purposes of this Agreement the “Change in Control Date” shall mean the date immediately before
the date of such termination. 
  
 (f)
“Parent” shall mean any entity that directly or indirectly through one or more other entities owns or controls more than 50 percent of the voting stock or common stock of the Company. 
  
 (g) “Subsidiary” shall mean a company 50 percent
or more of the voting stock, common stock or other economic interests of which are owned, directly or indirectly, by the Company. 
  
 (h) “Board” shall mean the Board of Directors of the Company. 
  
 (i) “Business” shall mean the business presently or hereafter carried on by the Company in the
area of mineral resource exploration and development. 
  
 (j) “Stock Option Plan” shall mean the incentive stock option plan of the Company for directors, officers, employees and other service providers of the Company. 
  

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 2. Employment 
  
 (a) The Company shall employ the Executive and the Executive shall serve the Company and its subsidiaries as
Secretary/Assistant Treasurer or in such other capacity or capacities as maybe determined by the Board from time to time. 
  
 (b) The Executive represents that he has the required skills and experience to perform the duties required of him as Secretary/Assistant
Treasurer and agrees to be bound by the terms and conditions of this Agreement. 
  
 (c) The Executive will be employed on a full-time basis for the Company and will devote himself exclusively to the Business and will not
be employed or engaged in any capacity in any other business which is in competition with the Business of the Company, without the prior written approval of the Company. 
  
 (d) The Executive acknowledges that in carrying out his duties and responsibilities: 
  
 (i) the Executive shall comply with all lawful and
reasonable instructions as may be given by the Chief Executive Officer of the Company or the Board; 
  
 (ii) the Executive will perform his duties with the highest level of integrity and in a manner which shall engender the Company’s
complete confidence in the Executive’s relationship with other employees of the Company and with all persons dealt with by the Executive in the course of employment; and 
  
 (iii) the Executive will perform his duties in a diligent, loyal, productive and efficient manner and use
his best efforts to advance the Business and goodwill of the Company. 
  
 (e) The Executive is employed on a full-time basis for the Company and he understands that the hours of work involved will vary and be irregular and are those hours required to meet the objectives of the employment.

  
 3. Compensation and Benefits 

 
 As compensation for the services to be rendered by the Executive to the
Company, the Company agrees to provide the remuneration and benefits set out in this clause 3. 
  
 (a) Base Salary and Discretionary Bonus 
  
 The Executive shall be paid a minimum annual base salary of US $85,000.00 to be reviewed annually by the Board. Said salary
shall be subject to all statutory and other deductions and shall be paid monthly or bi-monthly, in arrears, by check or deposit, or such other periodic installments as may be from time to time agreed. In addition, the Executive is entitled to
receive a discretionary performance bonus in such amount, if any, as the Board in its sole discretion may determine. If a Change in Control occurs, a bonus will automatically become payable and not be 

  

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less than 30% of the Executive’s annual salary. The minimum base salary shall become effective May 5, 2005. 
  
 (b) Grant of Stock Options, Shares, and
Bonuses 
  
 The Executive shall be eligible to receive
stock options granted pursuant to the Stock Option Plan, and, as may be effected for bonuses, on such terms and conditions as the Board in its discretion may determine but at a minimum of 100,000 shares per year. Upon a Change of Control, any and
all Common Shames, options, or other forms of securities issued by the Company and beneficially owned by the Executive (whether granted before or after the date of this Agreement) that are unvested, restricted, or subject to any similar restriction
that would otherwise require continued ownership by the Executive beyond the Change of Control Date in order to be vested in the hands of the Executive shall vest automatically without further action by the Board. 
  
 (c) Health (Medical and Vision), Dental,
Long Term Disability and Life Insurance 
  
 The Executive
shall be entitled to receive and participate in health (medical and vision), dental, long-term disability and life insurance programs as are made available by the Company to other employees holding similar positions of importance to the Company,
provided that the Company may modify, suspend, or discontinue any or all of such benefits for its employees generally or for any group thereof, without obligation to replace any such modified, discontinued or suspended benefit with any other benefit
or to otherwise compensate the Executive in respect thereof. 
  
 (d) Stock Appreciation Award in the Event of a Change in Control 
  
 In the event of a contemplated Change in Control, the Executive shall become entitled to receive an additional equity stake equal to the equity stake he
then holds, contingent upon the occurrence of a Change in Control. Executive’s equity stake shall include all shares, options (vested and unvested), and warrants in Executive’s name or beneficially owned by Executive, and the additional
equity stake shall be provided in kind to the Executive. 
  
 (e) Long-term Incentive Plan 
  
 The long-term incentive plan will require the Company to issue stock options granted pursuant to the Stock Option Plan, 50,000 shares of Company stock per year which will vest at 25% per year on the grant date.

  
 (f) Signing Bonus

  
 A signing bonus award of 15,000 shares of common
stock will be issued to the Executive within 60 days of this agreement. 
  

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 4. Vacation 
  
 The Executive will he entitled to Fifteen (15) days of vacation for the first five years of employment and Twenty
(20) days after five years of employment during each twelve (12) month period plus usual statutory and other public holidays, the timing of such vacation to be mutually agreed upon between the Executive and the Company. In that the spirit
of this vacation provision is that the Executive should take vacation but may, because of the duties required of the Executive, prevent him from taking said vacation, the Executive shall be paid the cash equivalent of any unused vacation entitlement
at the end of each year, one week of unused vacation time may accrue to the next 12 month period. 
  
 5. Expenses 
  
 The Executive shall be reimbursed by the Company for any business, educational or organizational membership expenses incurred as a result of his work on
behalf of the Company The Company shall reimburse the Executive for such expenses upon presentation of supporting documentation satisfactory to the Company in accordance with the tax principles applicable in the United States for such reimbursement
and the Company’s established reimbursement policies, as those policies may be modified from time to time in the Company’s discretion. 
  
 6. Terms of the Agreement and Termination 
  

(a) This Agreement shall commence on May 5, 2005 and shall terminate three years hence on May 5, 2008, unless terminated
pursuant to the provisions hereof. 
  
 (b) The
Executive may terminate his employment pursuant to this Agreement by giving at least two (2) months’ advance notice in writing to the Company. Company may waive such notice, in whole or in part and if it does so, the Executive’s
entitlement to remuneration and benefits pursuant to this Agreement will cease on the date it waives such notice. 
  
 (c) The Executive’s employment shall he terminated upon the death of the Executive whereupon all stock options granted to the
Executive shall immediately vest and shall be exercisable by the Executive’s heirs, executors, administrators or personal representatives in accordance with the terms of the Stock Option Plan. 
  
 (d) The Executive’s employment shall be terminated upon
the Disability of the Executive whereupon all stock options granted to the Executive shall immediately vest and shall be exercisable by the Executive in accordance with the terms of the Stock Option Plan. 
  
 (e) In the event of an Effective Change of Control, the
Executive’s employment shall be deemed to have been terminated without cause and the Company shall be obligated to pay the Executive the amount of severance payments calculated in accordance with subparagraph 6(e) hereof in addition to the
benefits of subparagraph 3(b) hereof. 
  
 (f) The
Executive’s employment may be terminated without cause by majority vote of the Board. In the event that the Executive’s employment is so terminated, or is deemed to have been terminated pursuant to subparagraph 6(e) herein, without cause,
any stock 

  

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options granted but not vested shall be deemed to have immediately vested and the Company shall pay to the Executive 36 months salary, in compensation for
the Executive’s loss of employment, together with a payment equal to 100% of the greater of any target bonus or bonus actually earned for each year in such 24 month period and any other compensation which the Executive is entitled to receive.
Substantially similar health related benefits as provided by the company will also continue for a period of 24 months. The Executive shall not have the duty to mitigate damages. For the purpose of calculating such payments, all Federal and State
taxes and Federal excise taxes (parachute taxes) shall be grossed-up such that the Executive receives the amount specified after all taxes have been paid. 
  
 (g) The Company may terminate the Executive’s employment without notice or payment in lieu thereof, for cause. 
  
 7. Notices 
  
 (a) Any notice required or permitted to be given to the
Executive shall be sufficiently given if delivered to the Executive personally or if mailed by registered mail to the Executive’s address disclosed on the face page hereof (or such address as the Executive may later provide in writing to he
Chief Executive Officer or Secretary of the Company). 
  
 (b) Any notice required or permitted to be given to the Company shall be sufficiently given if delivered to the Chief Executive Officer or Secretary of the Company personally or if mailed by registered mail to the Company’s head office
at its address disclosed on the face page hereof. 
  
 (c) Any notice given by mail shall be deemed to have been given forty-eight hours after the time it is posted. 
  
 8. Entire Agreement 
  
 This Agreement terminates, replaces and supersedes all prior agreements, oral or written, between the parties hereto. This Agreement contains the final
and entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and they shall not be bound by any terms, conditions, statements, covenants, representations, or warranties, oral or written, not herein
contained with respect to this subject matter hereof. 
  
 9. Headings 
  
 The headings in
this Agreement are for convenience of reference only, and under no circumstances should they be construed as being a substantive part of this Agreement nor shall they limit or otherwise affect the meaning hereof. 
  
 10. Warranty 
  
 The parties represent and warrant that there are no restrictions, agreements
or limitations on their rights or ability to enter into and perform the terms of this Agreement. 
  

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 11. Severability 
  
 In the event that any provision of this Agreement is found to be void, invalid, illegal or unenforceable by a court of
competent jurisdiction, such finding will not affect any other provision of’ this Agreement. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.

  
 12. Modification 
  
 Any modification of this Agreement must be in writing and signed by both the
Executive and the Company or it shall have no effect and shall be void. 
  
 13. Waiver 
  
 The wavier by either
party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach or violation. 
  
 14. Assignment of Rights 
  
 The rights which accrue to the Company under this Agreement shall pass to its successors or assigns. The rights of the Executive under this Agreement are
not assignable or transferable in any manner. 
  
 15.
Independent Legal Advice 
  
 The Executive
acknowledges that he has read and understands this Agreement, and acknowledges that he has had the opportunity to obtain independent legal advice with respect to it. 
  
 16. Indemnification 
  
 The executive, including heirs, executors, administrators, or estate of the executive shall be indemnified by the Company to
the full extent permitted by the Idaho Business Corporation Act against any liability, judgment. fine, amount, paid in settlement, costs and expenses including attorney’s fees, incurred as a result of any claim arising in connect on with such
person’s conduct in his capacity, or in connection with his status as an officer of the Company. The indemnification provided by this provision shall not be exclusive of any other rights to which he may be entitled under any other By-laws or
agreement, vote of disinterested directors, or otherwise, and shall not limit in any way any right that the Corporation may have to make different or further indemnification with respect to the same or different person or class of persons.

  
 17. Time of Essence 
  
 Time shall be of the essence of this Agreement. 
  

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 18. Governing Law 
  
 The Agreement shall be governed by and construed in accordance with the laws of’ the State of Idaho. Any dispute
between the Company and Executive shall be brought exclusively in the State or Federal Courts located in Idaho State. In the event of such dispute, the prevailing party shall be entitled to recover its reasonable attorneys fees and costs.

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

									
	 	 	 	 	STERLING MINING COMPANY
				
	 	 	 	 	By:	 	 
	 Michael L. Mooney
	 	 	 	 	 	 Ray Demotte
 President & CEO

				
	 ATTEST
	 	 	 	 	 	 
				
	 	 	 	 	 	 	 
	 Gene Higdem, Treasurer
	 	 	 	 	 	 

  

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