EXHIBIT 4.2
CONSULTING AGREEMENT
This consulting agreement (the "Agreement") is made this 10th day of
September, 2003 by and between Xxxxx Xxxxxxxx (hereinafter referred to as
"Consultant"), and El Capitan Precious Metals, Inc., formerly DML Services,
Inc., a Nevada corporation (hereinafter referred to as the "Company").
In consideration of the Consultant's engagement by the Company, of the
mutual covenants contained herein, the mutual reliance of the parties thereon
and the mutual benefits to be derived therefrom, including, but not limited to,
the enhancement of the Company's ability to raise capital, solicit investors,
sell product and increase the value of its stock (of which the Consultant is a
major shareholder) and to generally conduct its business; the parties hereto
hereby agree as follows.
(1) Xxxxx Xxxxxxxx shall be engaged by the Company in the capacity of
manager of the El Capitan Mine and the COD Mine. The Consultant shall have and
exercise such duties, responsibilities, privileges, powers and authority as may
be assigned to him by the President of the Company.
(2) The term of the Consultant's engagement pursuant to this Agreement
shall extend from the date hereof through December 31, 2004. The Consultant
shall be issued 200,000 shares of Company common stock (after registration on
Form S-8 with the SEC) upon execution of this Agreement. The Consultant shall
also receive an annual fee of $240,000 during the term of this Agreement
commencing with January 1, 2003, payable in equal monthly installments. The
Consultant, at the sole discretion of the Company, may receive all or any
portion of his monthly installment in free trading common stock of the Company
after registration on Form S-8 with the SEC, with such stock to be valued at the
closing price of the Company's common stock on the conversion date. In the event
the Company sells its El Capitan mining property (the "El Capitan") during the
term of this Agreement, the Company shall issue to the Consultant 500,000 free
trading shares of Company common stock. In addition, if the Company sells the El
Capitan during the term of this Agreement for a gross sales price of
$150,000,000 or more, the Company shall grant to the Consultant a five-year
option to purchase 2,000,000 shares of Company common stock at an exercise price
of $3.00 per share.
(3) Other than the capital appreciation of the Consultant's stock in
the Company or a uniformly disbursed dividend payment, or successions or bonuses
thereof, properly declared by the Board of Directors, or other benefits in an
amount or of a value not to exceed ten percent (10%) of the Consultant's gross
fee, the fee described in paragraph 2 above shall be the only compensation
received by the Consultant from the Company in consideration of his engagement.
The Consultant may participate in any Company profit sharing, pension, stock
option or other compensation plan as determined
by the Company's Board of Directors.
(4) The Consultant is hereby authorized to incur such expenses for
promoting the business of the Company as determined in advance by the Company's
Board of Directors. At the end of each month, upon presentation of receipts
therefor, the Company shall reimburse the Consultant for all expenses, including
entertainment, travel and miscellaneous other expenses previously approved to be
incurred in the promotion of the business of the Company or in performance of
his duties as a consultant hereunder.
(5) The Consultant shall devote his full time, attention and energies
to the Company (and its subsidiaries, if any) and shall not seek nor accept any
engagement or compensation outside of the Company, except for a position with
Gold & Minerals Co., Inc., the Company's largest shareholder ("GMC"). The
Consultant shall not be, directly or indirectly, alone or as a member of a
partnership, or as an officer, director or shareholder of a corporation, engaged
in or connected with any other commercial entities or pursuits which are in any
manner competitive with the Company, except for GMC.
(6) The Consultant shall promptly disclose to the Company, in writing
and form satisfactory to the Board of Directors thereof: all discoveries,
developments, improvements and inventions, whether or not patentable,
(hereinafter referred to as "Inventions"), conceived or made by the Consultant
during the term hereof, which are in any way related to the business of the
Company and whether conceived or made during regular working hours or any other
time. The Consultant shall likewise disclose to the Company any such Inventions
conceived or made by others which may be of benefit to the Company, the
knowledge of which the Consultant shall obtain during the term hereof.
(7) The Consultant hereby assigns, transfers and conveys all of his
rights, title and interest to or in any and all said Inventions to the Company.
The Consultant further agrees to execute such documents and to perform such
other actions and activities, at the expense of the Company, as may be necessary
or desirable as determined by the Company's Board of Directors thereof: (i) for
the filing of patent applications and issuance of patents (both domestic and
foreign) for such Inventions; and (ii) to complete exclusive ownership by the
Company of such Inventions and patent applications and patents. It is mutually
understood and agreed that the term "Inventions" as used herein shall be
construed to include all forms of intellectual property and the term "patent" as
used herein shall be interpreted to include all forms of intellectual property
protection, including, without limitation, patents, copyrights, international
copyrights and literary property.
2
(8) Except as permission may be specifically granted to the Consultant
by the Company's Board of Directors, the Consultant agrees to hold in confidence
and not to disclose to any third party, except to authorized persons in the
course of his work for the Company, said Inventions and any and all information
of a confidential nature not generally known or available to the public which is
delivered or made available to the Consultant in the course of his work for the
Company, or which the Consultant may obtain in connection with his engagement
with the Company, relating to the business or operations of the Company, or its
clients or customers, including, without limitation, scientific or technical
information, market or marketing information, personal contacts, designs,
processes, procedures, formulas or improvements. The Consultant further agrees
to hold and use articles representing or disclosing said Inventions and
information only in such manner as would benefit and protect the Company
including holding such information in confidence until the release thereof is
authorized by the Company's Board of Directors.
(9) The Consultant agrees to hold all such Inventions, contacts and
information as Trade Secrets and proprietary information of the Company and
further warrants never to use any such Inventions, contacts or information to
compete with or against the Company either during the term of this Agreement or
at any time thereafter. The Consultant further warrants that during the term
hereof he will maintain full fidelity to the stockholders of the Company and
guard and protect the interests thereof with the same prudence and diligence as
he would his own.
(10) In the event that the Consultant is mentally or physically
incapacitated or otherwise unable to perform his duties hereunder (the
"Disability"), all of the terms and conditions prescribed herein shall remain in
full force and effect for a period of six (6) months after the commencement of
the Disability. During the period of the Disability the Company's Board of
Directors may delegate or assign such duties, responsibilities, privileges,
powers or authority previously held or exercised by the Consultant to whatever
party or parties such assignment as it shall be deem to be in the best interests
of the Company, including the naming of a temporary or permanent successor or
successors as Consultant.
(11) All rights of the Company hereunder shall extend to its successors
and assigns. If the Company shall at any time be merged or consolidated into or
with any other corporation or entity, if the Company shall become a subsidiary
of another corporation or entity, or if substantially all of the assets of the
Company are transferred to another corporation or entity, the provisions of this
Agreement shall survive any such transaction and shall be binding upon and inure
to the benefit of the corporation or entity resulting from such transaction, and
this provision shall also
3
apply in the event of any subsequent merger, consolidation or transfer. The
Company, upon the occasion of any of the above-described transactions, shall
include in the appropriate agreements the obligation that the payments herein
agreed to be paid to or for the benefit of the Consultant shall be paid and that
the provisions of this Agreement shall be performed.
(12) Neither this Agreement nor any of his rights or duties hereunder
may be assigned by the Consultant without the written consent of the Company's
Board of Directors.
(13) The Company's Board of Directors may terminate this Agreement only
after receiving a written finding by an independent panel selected by the Board
of Directors of one or more of the following conditions: (i) the Consultant has
committed fraud, misappropriation, embezzlement, willful misconduct or the like;
(ii) the Consultant has violated any provision of this Agreement; or (iii) the
duration of the Disability described in paragraph 10 has extended beyond six
months.
(14) In the event the Consultant breaches this Agreement by terminating
his engagement prior to the expiration of the term provided in paragraph 2
above, or if Consultant is terminated by the Company pursuant to paragraph 13
above, the Consultant separately agrees, being fully aware that the performance
of this Agreement is important to preserve the present value of the property and
business of the Company, that for one (1) calendar year following the date of
such termination he shall not directly or indirectly engage in any business,
whether as proprietor, partner, joint venture, employer, agent, employee,
consultant, officer or beneficial or record owner of more than one percent (1%)
of the stock of any corporation or association, which is competitive to the
business conducted by the Company, any subsidiary of the Company or any other
affiliate of the Company in the current geographical service area of the Company
or in any geographical area served by the Company during the term of the
Consultant's engagement by the Company, except for GMC's business. Likewise,
within such areas, and during such period, the Consultant shall not solicit nor
do business competitive to the business conducted by the Company, any subsidiary
of the Company or any other affiliate of the Company, with any customers,
partners, employees or associates of the Company, any subsidiary of the Company
or any other affiliate of the Company, except for GMC's business.
(15) The Consultant agrees that the breach by him of any of the
foregoing covenants contained in paragraphs 5, 6, 7, 8, 9 or 14 hereof is likely
to result in irreparable harm, directly or indirectly, to the Company and
therefore the Consultant
4
consents and agrees that if he violates any of such obligations, the Company
shall be entitled, among and in addition to any other rights or remedies
available hereunder or otherwise, to temporary and permanent injunctive relief
to prevent the Consultant from committing or continuing a breach of such
obligations.
(16) It is the desire, intent and agreement of the parties hereto that
the restrictions placed upon the Consultant by paragraphs 5, 6, 7, 8, 9, 14 and
15 hereof shall be enforced to the fullest extent permissible under the law and
public policy applied by any jurisdiction in which enforcement is sought.
Accordingly, if, and to the extent that, any portion of the covenants contained
in these paragraphs shall be adjudicated to be unenforceable, such portion shall
be deemed amended to delete therefrom or to reform the portion thus adjudicated
to be invalid or unenforceable, such deletion or reformation to apply only with
respect to the operation of such portion in the particular jurisdiction in which
such adjudication is made.
(17) If it shall be necessary for the Company to place this Agreement
in the hands of an attorney at law for enforcement of any of the provisions
hereof, the Consultant shall be liable to the Company for all costs, expenses
and reasonable attorney's fees incurred in connection therewith, irrespective of
whether suit shall be commenced. The costs, expenses and attorney's fees
recoverable by the Company shall include, but not be limited to, costs, expenses
and attorney's fees incurred on appeal or in administrative proceedings.
(18) The parties hereto agree that this Agreement shall be construed
and interpreted and the rights of the parties determined in accordance with the
laws of the State of Arizona.
(19) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same instrument.
5
IN WITNESS WHEREOF the parties hereto have executed this Agreement,
effective as of the date first above written.
/s/ Xxxxx Xxxxxxxx
-------------------------------
Xxxxx Xxxxxxxx
El Capitan Precious Metals, Inc.
/s/ Xxxxxxx X. Xxxxxxx
By: _____________________________
Xxxxxxx X. Xxxxxxx, President
6
