AMENDMENT
TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is executed this 1st day of October,
1997 by and between NORTH LILY MINING COMPANY ("North Lily") and XXXXXXX X.
XXXXXXXX ("Employee").
RECITALS
Employee and North Lily executed an Employment Agreement dated April 1,
1996. From May 1994 through September 30, 1997 Employee has performed services
for North Lily and in conjunction therewith has accrued $402,500 of salary that
has not been paid to date. Pursuant to prior understandings, as referenced in
notes to North Lily's financial statements, Employee has agreed from time to
time to defer demand for payment and has now agreed with the Board of Directors
to waive his claim for such salary in consideration of the receipt of 805,000
shares of common stock of North Lily. Said shares are subject to a risk of
forfeiture as provided for herein.
IN CONSIDERATION OF the premises and the mutual covenants set forth herein,
the parties hereto do hereby agree as follows:
1. Waiver of Compensation Claim. Upon issuance of the shares described in
Section 2 below, Employee hereby agrees to waive all of his right to the
$402,500 of compensation due him but unpaid as of September 30, 1997. Employee
does not waive any other amounts of compensation or claims for compensation.
2. Shares. Upon the filing of a Form S-8 Registration Statement covering
issuance and resale of the shares to be issued, North Lily shall issue Employee
805,000 shares of the common stock of North Lily. If the Registration Statement
has not been filed by January 1, 1998, Employee at his discretion may request
that the shares be issued nonetheless. Said shares shall be duly issued, fully
paid and non-assessable.
3. Risk of Forfeiture.
(a) If Employee Terminates his Employment by North Lily, or an
affiliate thereof, on or before June 30, 1998, Employee shall forfeit 805,000 of
the shares of North Lily common stock received pursuant hereto, except to the
extent that the shares have become non-forfeitable as provided for herein:
Aggregate Number of
Event Nonforfeitable Shares
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North Lily issues, subsequent to the date hereof,
shares of its common stock for not less than
$200,000 at an average price per share of not less
than $0.25 210,000
North Lily issues, subsequent to the date hereof,
shares of its common stock for not less than
$1,550,000 at an average price per share of not
less than $0.41 (taking into account any share
issuance referred to in the preceding paragraph
for purposes of determining both the total issue
amount and the average price) 385,000
North Lily issues, subsequent to the date hereof,
shares of its common stock for not less than
$2,550,000 at an average price per share of not
less than $0.42 (taking into account any share
issuance referred to in the preceding two
paragraphs for purposes of determining both the
total issue amount and the average price) 495,000
North Lily issues, subsequent to the date hereof,
shares of its common stock for not less than
$5,350,000 at an average price per share of not
less than $0.43 (taking into account any share
issuance referred to in the preceding three
paragraphs for purposes of determining both the
total issue amount and the average price) 805,000
(b) "Terminates" shall mean the resignation of Employee without cause
or the refusal of Employee without cause to continue his Employment and the
termination of Employee by North Lily for cause, but shall exclude the
termination of Employee's Employment as a result of death, disability,
Employee's resignation for cause or refusal to continue employment for cause or
a termination by North Lily without cause. "Terminates" shall also exclude a
change in Employee's title or position with North Lily.
(c) "Employment" shall mean the performance of at least 50 hours of
service on behalf of North Lily each calendar month.
(d) In determining the amount for which shares have been issued, it
shall be assumed that all warrants and options lapse unexercised and convertible
debt instruments are not converted, unless and until any warrants or options are
exercised or debt instruments converted. The price per share shall be the lowest
price obtained by varying all assumptions as to whether warrants and options
lapse or are exercised and convertible debt instruments or convertible preferred
shares are not converted or are converted.
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4. Cash in Lieu of Shares.
--------------------------
(a) During the month of May 1998 Employer shall have the right to notify
Employee that Employer has elected to pay Employee cash on July 1, 1998 for all
shares that remained subject to the risk of forfeiture, as provided in section
3, as of June 29, 1998. The obligation to pay cash shall exist only if Employee
has not Terminated his Employment by North Lily on or before June 30, 1998. The
amount of cash shall be fifty cents ($.50) per share that remained subject to
the risk of forfeiture.
(b) Upon receiving a timely notice from Employer as provided in paragraph
(a), Employee shall have twenty (20) days to elect either to accept cash in lieu
of shares or to extend all time periods in section 3 and this section 4 by six
(6) months. An election to accept cash shall be accompanied by stock
certificates, duly endorsed, for the forfeitable shares. If Employee elects to
extend, then the notice set forth in paragraph (a) shall be of no further
effect, but Employer shall have the right to provide another notice six (6)
months later with respect to all shares that remain forfeitable, and Employee
shall have the right to extend again.
(c) The Employer's rights in paragraph (a) and the Employee's rights in
paragraph (b) shall be repeated every six months until (i) Employer refrains
from electing to pay cash, (ii) Employee refrains from electing to extend, or
(iii) the Employment of Employee Terminates.
5. Loan. North Lily acknowledges that, under Section 83 of the Internal
Revenue Code of 1986, Employee will recognize income for federal and state
income tax purposes relative to such shares, either as Employee elects to be
taxed currently notwithstanding the risk of forfeiture or as the risk of
forfeiture lapses. In order to induce Employee to accept shares of stock subject
to a risk of forfeiture in lieu of cash compensation, North Lily agrees to loan
Employee an amount equal to forty per cent (40%) of any income Employee
recognizes with respect to said shares as provided in this section 4, which
excludes income recognized on a sale of the shares. Said loan shall be a
recourse loan, shall bear interest at a rate equal to the prime rate quoted by
the Wall Street Journal from time to time, and shall be secured by Employee's
shares of North Lily common stock that are issued hereunder.
6. Stock Legend. Until the risk of forfeiture has lapsed with respect to
any shares of common stock of North Lily, said shares shall bear the following
legend.
The shares of stock represented by this certificate are
subject to an Agreement dated as of October 1, 1997
between North Lily Mining Company and Xxxxxxx X. Xxxxxxxx. A
copy of that Agreement and any amendments thereto is on file
at the principal office of the corporation. Such Agreement
provides for the forfeiture of said shares under certain
conditions. The forfeiture provisions are binding upon any
holder of the shares regardless of how acquired.
As the risk of forfeiture lapses with respect to any shares, Employee may
deliver the legended certificate to North Lily and North Lily shall issue a new
certificate without such legend. In addition, such certificate shall bear such
securities legend as may be required by North Lily.
7. Miscellaneous. Employee's Employment Agreement, as amended hereby, sets
forth the entire agreement among the parties with respect to its subject matter.
No provision of this Amendment to Employment Agreement may be waived, amended or
revoked except by an instrument in writing signed by North Lily and Employee.
This Amendment to Employment Agreement shall be governed by the laws of the
State of Colorado in all respects. This Amendment to Employment Agreement shall
extend and be binding upon the successors, assigns and legal representatives of
Employee.
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IN WITNESS WHEREOF the parties hereto have caused this Amendment to
Employment Agreement to be duly executed on the date and year first above
written.
NORTH LILY MINING COMPANY
By: /s/ XXXX XXXX /s/ XXXXXXX X. XXXXXXXX
-------------------------------- ----------------------------------
Executive Vice President XXXXXXX X. XXXXXXXX
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