Filed by Automated Filing Services Inc. (604) 609-0244 - EYI Industries, Inc. - Exhibit 10.38







Source Capital Group, Inc. 
	 Members NASD, SIPC  	 Investment Bankers / Brokers  	 tcoffin @sourcegrp.com  



W. Todd Coffin 

 Mr. Dori O'Neill 

  EYI Industries, Inc. 

  3960 Howard Hughes Parkway, Suite 500 

  Las Vegas, Nevada 89109 


May 25, 2004 


Dear Mr. O'Neill: 

 The purpose of this letter is to confirm the understanding
  and agreement (the "Agreement") between Source Capital Group, Inc., ("SCG")
  and EYI Industries, Inc. (or the "Company"), regarding the retention of SCG
  by the Company as its financial advisor for the purposes set forth herein.

 Under this Agreement, SCG will provide financial advisory services to the
  Company as follows: 

	A) 	Raising of Capital. SCG shall
        use its best efforts to provide up to $5 million in equity/debt financing
        for the Company.

	 	 
	B) 	Fees, Commissions & Expenses.
        The Company agrees to pay the following fees to SCG for its services.
      

	 	 	 
	 	 1.      	 SCG will be compensated 6% cash and 6% ("warrant")
        coverage on any funds introduced by SCG during this engagement. The exercise
        price of the warrants shall be equal to the issue price, conversion price
        or strike price of the stock, convertible security or warrant at the time
        of the sale and will be subject to adjustment in accordance with the terms
        of any adjustment provided for in the Financing document. Said warrants
        shall be exercisable for five (5) years from date of issuance. The terms
        of said warrants shall include such piggyback registration rights, anti-dilution
        rights, and "cashless" exercise provisions in the event of exercise by
        SCG. Such fees shall be paid at the closing from an escrow account at
        the same time any new investment is dispersed to the company. 

	 
	 	 2.      	 SCG will receive $-0- as a non-refundable retainer
        upon signing of this agreement. 

	 
	 	 3.      	 Expenses. In addition to any fees that may
        be payable to SCG under this Agreement, the Company agrees to reimburse
        SCG for its reasonable out-of-pocket expenses incurred in connection with
        the services rendered by SCG hereunder (including, without limitation,
        travel and lodging, data and word processing, graphics and communication
        charges, research costs, and courier services and 

	 


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	 Source Capital Group, Inc.  	 Page 2 of 6  


 

	 	 	 fees) provided expenses in excess of $200 shall
        require the prior approval of the Company. 

	 
	 	 4.      	 All cash payments under this Agreement shall be
        made in U.S. dollars and without withholding or deduction of any tax,
        assessment or other governmental charges unless required by law. Fees
        and retainers should be made payable and wired to: 

	 
	 	 	 Source Capital Group Inc. 

        Fleet Bank 

        ABA# 011900571 

        Acct.# 9361882644 

	 
	 	 5.      	 Mergers, Acquisitions & Joint Ventures ("MA&JV").
        The Company may at its discretion and on a case by case basis engage
        SCG to assist it in its discussions with potential Merger, Acquisition
        and or Joint Venture candidates, which may include directly negotiating
        on the Company's behalf and the rendering independent opinions as to valuation
        and formulae, among other things. Upon SCG's acceptance of any such assignment,
        The Company will pay SCG flat closing fee equal to 3.00% of the amount
        paid or received (in kind) in any transaction by and or between the Company,
        the MA&JV candidate and or the surviving company (the "M&A Fee").
      

	 	 	 
	C) 	Information. The Company
        will furnish or cause to be furnished to SCG, such information, as SCG
        believes appropriate to its assignment (all such information so furnished
        being the "Information"). The Company recognizes and confirms that SCG
        (a) will use and rely primarily on the Information and on information
        available from generally recognized public sources in performing the services
        contemplated by this Agreement without having independently verified the
        same, (b) does not assume responsibility for the accuracy or completeness
        of the Information and such other information, (c) is entitled to rely
        upon the Information without independent verification and (d) will not
        make an appraisal of any assets or valuation of the Company in connection
        with its assignment 

	 	 
	D) 	Confidentiality. Except
        as contemplated by the terms hereof or as required by applicable law or
        legal process, SCG shall keep confidential all non-public information
        provided to it by or at the request of the Company, and shall not disclose
        such information to any third party or to any of its employees or advisors
        except to those persons who have a need to know such information in connection
        with SCG's performance of its responsibilities hereunder. The Company
        understands that any documents, presentations or analyses prepared by
        SCG are proprietary and SCG is under no obligation to provide (by e-mail,
        floppy disk or otherwise) either the Company or its assigns with the computer
        files of such work product. Except as required by applicable law, any
        advice to be provided by 

	 	 


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	 Source Capital Group, Inc.  	 Page 3 of 6  


	 	 
	 	SCG under this Agreement shall not be disclosed publicly
        or made available to third parties without the prior written consent of
        SCG. In addition, SCG may not be otherwise publicly referred to without
        its prior written consent. All services, advice and information and reports
        provided by SCG to the Company in connection with this assignment shall
        be for the sole benefit of the Company and shall not be relied upon by
        any other person. 

	 	 
	E) 	 Indemnity. The Company acknowledges and agrees
        that SCG has been retained to act solely as financial advisor to the Company.
        In such capacity, SCG shall act as an independent contractor, and any
        duties of SCG arising out of its engagement pursuant to this Agreement
        shall be owed solely to the Company. The Company agrees to indemnify SCG
        in accordance with the indemnification agreement attached as Exhibit
        A. 

	 	 
	F) 	 Arbitration. Any and all disputes, demands,
        claims or controversies hereto arising out of or relating to this agreement
        or the breach thereof, shall be settled by binding arbitration in accordance
        with the rules of the American Arbitration Association ("AAA"). The arbitration
        shall be conducted in New York City under the rules of the AAA. Any judgment
        upon the award rendered by the arbitrator may be entered into any court
        or administrative tribunal having jurisdiction thereof. Costs associated
        with the arbitration, including reasonable attorney's fees, shall be borne
        by whichever parties the arbitrators shall deem just and fair. 

	 	 
	G) 	 Term & Termination. The term of SCG's engagement
        hereunder (the "Term") shall commence on the date hereof and shall end
        on the earlier of June. 30, 2005, upon 90 days written notice after a
        closing of an equity financing by SCG or upon 10 days written notice prior
        to the closing of any equity financing pursuant to this Agreement (the
        "Expiration Date") without cause by either the Company or SCG. Notwithstanding
        the foregoing, the provisions relating to the payment of fees and expenses
        accrued through the Expiration Date, the status of SCG as an independent
        contractor and the limitation on to whom SCG shall owe any duties will
        survive any such termination, and any such termination shall not affect
        the Company's obligations under the indemnification agreement. 

       SCG will be entitled to the fees set forth above in
        the event that within 18 months following the Expiration Date, a Financing
        is consummated with an investor who was introduced to the Company by SCG
        prior to the Expiration Date and which investor is included on a schedule
        of investors delivered by SCG to the Company within 10 calendar days following
        the Expiration Date. 

	 	 
	H) 	 Right of First Refusal. Upon successful completion
        of a financing SCG shall retain the right of first refusal on any additional
        financing. 

	 	 
	I) 	 Exclusivity. During the Term of this agreement,
        The Company's relationship with SCG will be non-exclusive. Except in the
        normal course of business operations, during the Term of this agreement
        the Company will not engage any other financial advisor for the purpose
        of performing an equity financing or receive or agree to receive any equity
        based financing from an individual or entity without notifying SCG. 

	 	 


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	 Source Capital Group, Inc.  	 Page 4 of 6  


	 	 
	 J)      	 Advertisements. The Company acknowledges
        that SCG may, at its option and expense, place an announcement in such
        newspapers and periodicals as it may choose, stating that SCG has acted
        as the financial advisor to the Company. SCG agrees that the Company will
        have the right to approve the form of such announcement, which approval
        shall not be unreasonably withheld or delayed. 



 This Agreement (including the attached indemnification) embodies
  the entire agreement and understanding between the parties hereto and supersedes
  all prior agreements and understandings relating to the subject matter hereof.
  If any provision of this Agreement is determined to be invalid or unenforceable
  in any respect, such determination will not affect such provision in any other
  respect, which will remain in full force and effect. No waiver, amendment or
  other modification of this Agreement shall be effective unless in writing and
  signed by each party to be bound thereby. This Agreement shall be governed by,
  and construed in accordance with, the laws of the State of New York applicable
  to contracts executed in and to be performed in that state. 

 Please confirm that the foregoing correctly sets forth our
  agreement by signing and returning to SCG the duplicate copy of this Agreement,
  the indemnification agreement attached hereto as Exhibit A. 

	  	 By:  ______________________________
	  	 W. Todd Coffin, Managing Director  
	  	 Source Capital Group, Inc.  
	  
	  
	  
	 By:  ______________________________	  
	 Dori O'Neill  	  
	 EYI Industries, Inc.  	  


 

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	 Source Capital Group, Inc.  	 Page 5 of 6  


 This Exhibit A is a part of and is incorporated into
  that certain letter agreement, May 25, 2004 (the "Agreement"), by and between
  EYI Industries, Inc. an Nevada corporation (with its wholly-owned subsidiaries
  collectively, the "Company"), and Source Capital Group, Inc. (the "Placement
  Agent"). Capitalized terms used herein and not otherwise defined shall have
  the respective meanings provided in the Agreement. 

 The Company agrees to indemnify and hold harmless the Placement
  Agent, its affiliates and each person controlling the Placement Agent (within
  the meaning of Section 15 of the Securities Act), and the directors, officers,
  agents and employees of the Placement Agent, its affiliates and each such controlling
  person (the Placement Agent, and each such entity or person. an "Indemnified
  Person") from and against any losses, claims, damages, judgments, assessments,
  costs and other liabilities (collectively, the "Liabilities"), and shall reimburse
  each Indemnified Person for all fees and expenses (including the reasonable
  fees and expenses of one counsel for all Indemnified Persons, except as otherwise
  expressly provided herein) (collectively, the "Expenses") as they are incurred
  by an Indemnified Person in investigating, preparing, pursuing or defending
  any claim, action, proceeding or investigation, whether or not any Indemnified
  Person is a party thereto (collectively, the "Actions"), (i) caused by, or arising
  out of or in connection with, any untrue statement or alleged untrue statement
  of a material fact contained in any offering documents prepared by the Company
  (including any amendments thereof and supplements thereto) (the "Offer Documents")
  or by any omission or alleged omission to state therein a material fact necessary
  to make the statements therein, in light of the circumstances under which they
  were made, not misleading (other than untrue statements or alleged untrue statements
  in, or omissions or alleged omissions from, information relating to an Indemnified
  Person furnished in writing by or on behalf of such Indemnified Person expressly
  for use in the Offer Documents) or (ii) otherwise arising out of or in connection
  with advice or services rendered or to be rendered by any Indemnified Person
  pursuant to the Agreement, the transactions contemplated thereby or any Indemnified
  Person's actions or inactions in connection with any such advice, services or
  transactions; provided, however, that, in the case of clause (ii) only,
  the Company shall not be responsible for any Liabilities or Expenses of any
  Indemnified Person that have resulted primarily from such Indemnified Person's
  (x) gross negligence, bad faith or willful misconduct in connection with any
  of the advice, actions, inactions or services referred to above or (y) use of
  any offering materials or information concerning the Company in connection with
  the offer or sale of the Securities in the Transaction which were not authorized
  for such use by the Company and which use constitutes negligence, bad faith
  or willful misconduct. The Company also agrees to reimburse each Indemnified
  Person for all Expenses as they are incurred in connection with enforcing such
  Indemnified Person's rights under the Agreement, which includes this 

 Exhibit A. 

 Upon receipt by an Indemnified Person of actual notice of
  an Action against such Indemnified Person with respect to which indemnity may
  be sought under the Agreement, such Indemnified Person shall promptly notify
  the Company in writing; provided that failure by any Indemnified Person so to
  notify the Company shall not relieve the Company from any liability which the
  Company may have on account of this indemnity or otherwise to such Indemnified
  Person, except to the extent the Company shall have been prejudiced by such
  failure. The Company shall, if requested by the Placement Agent, assume the
  defense of any such Action including the employment of counsel reasonably satisfactory
  to the Placement Agent, which counsel may also be counsel to the Company. Any
  Indemnified Person shall have the right to employ separate counsel in any such
  action and participate in the defense thereof, but the fees and expenses of
  such counsel shall be at the expense of such Indemnified Person unless: (i)
  the Company has failed promptly to assume the defense and employ counsel or
  (ii) the named parties to any such Action (including any impeded parties) include
  such Indemnified Person and the Company, and such Indemnified Person shall have
  been advised in the reasonable opinion of counsel that there is an actual conflict
  of interest that prevents the counsel selected by the Company from representing
  both the Company (or another client of such counsel) and any Indemnified Person;
  provided that the Company shall not in such event be responsible hereunder for
  the fees and expenses of more than one firm of separate counsel for all Indemnified
  Persons in connection with any Action or related Actions, in addition to any
  local counsel. The Company shall not be liable for any settlement of any Action
  effected without its written consent (which shall not be unreasonably withheld).
  In addition, the Company shall not, without the prior written consent of the
  Placement Agent (which shall not be unreasonably withheld), settle, compromise
  or consent to the entry of any judgment in or otherwise seek to terminate any
  pending or threatened Action in respect of which indemnification or contribution
  may be sought hereunder (whether or not such Indemnified Person is a party thereto)
  unless such settlement, compromise, consent or termination includes an unconditional
  release of each Indemnified Person from all Liabilities arising out of such
  Action for which indemnification or contribution may be sought hereunder. The
  indemnification required hereby shall be made by 

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	 Source Capital Group, Inc.  	 Page 6 of 6  


 periodic payments of the amount thereof during the course
  of the investigation or defense, as such expense, loss, damage or liability
  is incurred and is due and payable. 

 In the event that the foregoing indemnity is unavailable to
  an Indemnified Person other than in accordance with the Agreement, the Company
  shall contribute to the Liabilities and Expenses paid or payable by such Indemnified
  Person in such proportion as is appropriate to reflect (i) the relative benefits
  to the Company, on the one hand, and to the Placement Agent and any other Indemnified
  Person, on the other hand, of the matters contemplated by the Agreement or (ii)
  if the allocation provided by the immediately preceding clause is not permitted
  by applicable law, not only such relative benefits but also the relative fault
  of the Company, on the one hand, and the Placement Agent and any other Indemnified
  Person, on the other hand, in connection with the matters as to which such Liabilities
  or Expenses relate, as well as any other relevant equitable considerations;
  provided that in no event shall the Company contribute less than the amount
  necessary to ensure that all Indemnified Persons, in the aggregate, are not
  liable for any Liabilities and Expenses in excess of the amount of fees actually
  received by the Placement Agent pursuant to the Agreement. For purposes of this
  paragraph, the relative benefits to the Company, on the one hand, and to the
  Placement Agent on the other hand, of the matters contemplated by the Agreement
  shall be deemed to be in the same proportion as (a) the total value paid or
  contemplated to be paid to or received or contemplated to be received by the
  Company in the transaction or transactions that are within the scope of the
  Agreement, whether or not any such transaction is consummated, bears to (b)
  the fees paid to the Placement Agent under the Agreement. Notwithstanding the
  above, no person guilty of fraudulent misrepresentation within the meaning of
  Section 11(f) of the Securities Act of 1933, as amended, shall be entitled to
  contribution from a party who was not guilty of fraudulent misrepresentation.


 The Company also agrees that no Indemnified Person shall have
  any liability (whether direct or indirect, in contract or tort or otherwise)
  to the Company for or in connection with advice or services rendered or to be
  rendered by any Indemnified Person pursuant to the Agreement, the transactions
  contemplated thereby or any Indemnified Person's actions or inactions in connection
  with any such advice, services or transactions except for Liabilities (and related
  Expenses) of the Company that have resulted primarily from such Indemnified
  Person's gross negligence, bad faith or willful misconduct in connection with
  any such advice, actions, inactions or services. 

 The reimbursement, indemnity and contribution obligations
  of the Company set forth herein shall apply to any modification of the Agreement
  and shall remain in full force and effect regardless of any termination of,
  or the completion of any Indemnified Person's services under or in connection
  with, the Agreement. 

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