[Revised]
November 8, 2004
PERSONAL & CONFIDENTIAL
Wilon Resources, Inc.
931 Ashland Terrace
Chattanooga, Tennessee 37415
Attention: Harry Thompson
Dear Mr. Thompson:
Midas Securities, Inc. ("Midas") is pleased to be engaged by WILON
RESOURCES, INC. ("the Company") to act as placement agent or underwriter in
connection with the proposed offering, issuance and sale of the Company's common
stock, preferred stock, convertible debentures, debt or any other securities
(the "Securities") by the Company or other similar financing transaction (the
"Transaction'). The term of this letter shall commence on the date hereof and
continue until the earlier of the closing of the Transaction or May 31, 2005
(the "Term"). This letter agreement will confirm our mutual, understanding of
the terms of this engagement.
In connection with its engagement, Midas will perform services which are
normal and customary for a placement agent to perform in connection with the
Transaction. In this capacity, Midas will endeavor to obtain commitments from
investors ("Investors") to purchase the Securities. Any financing arranged by
Midas will be as the Company's agent (on a reasonable efforts basis) and not on
an underwritten basis. To facilitate our efforts to place the Securities, you
agree to direct to Midas all inquiries from prospective Investors during the
period this engagement is in effect.
The Company agrees to pay Midas for its services under this letter agreement:
i. a fee (a "Transaction Fee') equal to ten percent (10.00%) of the
aggregate gross proceeds received or to be received by the Company from the sale
of Securities in any Transaction during the Term. The Transaction Fee shall be
due and payable on the closing of any Transaction.
ii. five year warrants (the "Warrants") to purchase an amount of Securities
equal to ten percent 10%) of the Securities sold in the Transaction at a per
share exercise price equal to the offering price of the Securities.
Whether or not any Transaction is consummated, and in addition to any fees
payable to Midas under this letter agreement, the Company agrees to reimburse
Midas, upon its request from timetotime, for its outofpocket expenses (including
for travel) related to Midas's activities under this letter agreement, including
the reasonable fees and disbursements of its legal counsel, up to a maximum of
$15,000. In no event will Midas be responsible for expenses incurred in
connection with the offer and sale of the Securities (including the fees and
expenses of any counsel for Investors or the Company).
If during the Term, or a period of twelve (12) months following the Term,
the Company decides to conduct a purchase or sale transaction or other
extraordinary corporate transaction or a public or private offering or other
type of financing, the Company agrees to notify Midas of the Company's intention
and provide Midas in good faith with the opportunity to compete for the position
of financial advisor, underwriter, placement agent or such other role as may be
appropriate for the transaction contemplated. Any engagement of Midas by the
Company in, connection with such a transaction shall be at fees, and upon terms,
customary and consistent with industry practice that would be agreed between the
Company and Midas in good faith. If Midas agrees to act in such capacity, the
Company and Midas will enter into an appropriate form of engagement letter
agreement. The Company acknowledges that this letter agreement is neither an
expressed nor an implied commitment by Midas to act in any capacity in any such
transaction. Midas acknowledges than this letter agreement is neither an
expressed nor an implied commitment by the Company to engage Midas in connection
with any such transaction.
Nothing contained herein constitutes a commitment on the part of the
Company or Midas to complete any Transaction, and Midas shall not have the power
or authority to bind the Company to any terms or conditions of a Transaction. It
is understood and agreed that this letter does not constitute a commitment by
Midas to purchase or underwrite the sale of any Securities and that Midas shall
have no obligation hereunder to place any Securities.
The Company will furnish Midas with such information and documents
regarding the Company and its business and financial condition (all such
documents and materials, including those documents and materials prepared for
Investors, shall be referred to herein as the "Information") as Midas believes
relevant and appropriate to its services under this letter agreement and will
prepare and furnish Midas with an offering memorandum relating to the Company
and the Transaction (the "Offering Memorandum"). The Company agrees to cooperate
fully with Midas in connection with its engagement hereunder, including making
members of management and other employees available to Midas for purposes of
satisfying Midas's due diligence requirements and consummating the Transaction,
and agrees to commit such time and other resources as are reasonably necessary
or appropriate to secure reasonable and timely success of the Transaction. The
Company authorizes Midas to transmit to prospective Investors copies of the
Offering Memorandum and any purchase agreements or other legal documentation
approved by the Company for use in connection with a Transaction.
The Company recognizes and agrees that, in performing the services
contemplated in this letter agreement, Midas will be relying solely on, and will
not be independently verifying, the information, the Offering Memorandum arid
information available from public sources. Accordingly, the Company agrees that
the Information will be complete and accurate in all material respects and not
misleading and that the Offering Memorandum will not, when delivered nor at any
time prior to or at the closing of a Transaction, contain any untrue statement
of a material fact or omit to state a material fact necessary to snake the
statements therein, in light of the circumstances under which they were made,
not misleading. In addition, the Company agrees that all information regarding
the Securities, including any term sheet, descriptions or other documentation,
shall be complete and accurate in all respects and not misleading. The Company
shall advise Midas promptly if it learns of any material inaccuracy, any
omission of a material fact or any misleading statement in the Information or
the information regarding the Securities previously delivered to Midas and of
the occurrence of any event or any other change prior to the closing which
results in, the Offering Memorandum containing any untrue statement of a
material fact or omitting to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. The Company agrees that Midas does not have any
responsibility for the accuracy or completeness of the Information or the
Offering Memorandum.
Neither the Company nor any parties acting on its behalf will, directly or
indirectly except through Midas, offer or sell, or solicit any offer to buy, any
of the Securities during the Term. As used in this agreement, the terms "offer'
and "sale" have the meanings specified in Section 2(3) of the Securities Act of
1933, as amended.
The Company shall have the right to approve, and Midas shall have the right
to review, every form of written communication from the Company or any parties
acting on its behalf (including Midas) to any offeree or purchaser in connection
with the offer and sale of the Securities. Neither the Company nor any parties
acting on its behalf shall distribute any written communication to any offeree
or purchaser if Midas reasonably objects to such written communication. Neither
the Company nor any parties acting on its behalf (including Midas) will offer or
sell the Securities by any form of general solicitation or general advertising,
including, but not limited to, the methods described in Rule 502(c) under the
Act.
Each of the Company and Midas agrees to conduct the offering and sale of
the Securities in a manner intended to comply with the registration or
qualification requirements, or available exemptions therefrom, under applicable
state "blue sky" laws and applicable securities laws of other jurisdictions. The
Company shall be responsible for compliance with the filing requirements of the
securities laws of states and other jurisdictions and shall make all filings and
take all other actions as are required in connection with compliance with such
laws. Neither the Company nor its affiliates will, directly or indirectly, make
any offer or sale of any of the Securities or any securities of the same or a
similar class as the Securities, the result of which would cause the offer and
sale of the Securities to fail to be entitled to the exemptions from
registration and qualification requirements under applicable federal securities
laws, state "blue sky" laws or the securities laws of any other jurisdiction
(collectively, the "Registration Exemptions"). The Company has not engaged in
any offering of its securities that would jeopardize the availability of the
Registration Exemptions.
In the event the Company requests that Midas deliver certain documents and
information relating to this engagement via electronic transmissions, the
Company acknowledges and agrees that the privacy and integrity of electronic
transmissions cannot be guaranteed due to the possibility that third parties
could intercept, view or alter such electronic transmissions. To the extent that
any documents or information relating to this engagement are transmitted
electronically, the Company agrees to release Midas from any loss or liability
incurred in connection with the electronic transmission of any such documents
and Information, including the unauthorized interception, alteration or
fraudulent generation anal transmission of electronic transmissions by third
parties but excluding gross negligence and/or willful misconduct on Midas's
part. Under no circumstances will Midas be liable for any ordinary, direct,
indirect, consequential, incidental, special, punitive or exemplary damages
arising out of the foregoing, regardless of whether Midas has been apprised of
the likelihood of such damages occurring.
The Company acknowledges and agrees that Midas has been retained to act
solely as placement agent to the Company, except as provided herein. In such
capacity, Midas will act under this letter agreement as an independent
contractor and any duties of Midas arising out of its engagement pursuant to
this letter agreement shall be owed solely to the Company. It is understood that
Midas's responsibility to the Company is solely contractual in nature and that
Midas does not owe the Company, or any other party, any fiduciary duty as a
result of its engagement.
Since Midas will be acting on the Compan's behalf in connection with its
engagement hereunder, Midas requires that the Company enter into a separate
letter agreement, dated the same date hereof, providing for indemnification of
Midas and certain related entities and persons by the Company.
No advice rendered by Midas, whether formal or informal, may be disclosed,
in whole or in part, summarized or otherwise referred to without Midas's prior
written consent. The Company will not disclose, either orally or in writing, the
terms of this agreement without the prior written consent of Midas, except that
Midas consents to this letter be made an exhibit to the SB-2 filing being made
by Company. In addition, Midas may not be otherwise referred to without its
prior written consent.
Midas is a full service investment banking and capital markets securities
firm and as such may from time to time effect transactions for its own account
or for the account of its customers, and may hold positions (long or short) in
securities of, or options on, securities of the Company.
The scope of Midas's engagement shall be limited to those matters expressly
set out in this letter agreement and shall not include tax, legal, regulatory,
accountancy or other technical advice or services. This letter shall not
constitute an offer, agreement or commitment to lend by Midas or its affiliates.
This engagement may be terminated with or without cause by the Company or
Midas at any time and without liability or continuing obligation to the Company
or Midas (except for compensation to be paid hereunder and expenses incurred by
or on behalf of Midas to the date of termination) upon written notice to the;
other party. Notwithstanding the foregoing, Midas shall be entitled to its full
compensation pursuant to this letter agreement in the event that, during the
Term, any Transaction is consummated or the Company enters into an agreement
which subsequently results in a Transaction. If a Transaction is consummated
with a Midas Identified Party (as defined below) during the twelve (12) month
period following the Term, Midas shall be entitled to a Transaction Fee. For
purposes of this letter agreement, a Midas Identified Party means a party Midas
contacted or identified during the Term in good faith and with whom Midas
engaged in activities customarily employed by a placement agent to illicit
interest and ultimately participation in a financing of the type contemplated by
this letter agreement. At the written request of the Company, Midas will provide
a list of Midas Identified Parties within thirty (30) days of such request.
Furthermore, the payment of expenses, preservation of the private placement
exemption, the status of Midas as an independent contractor, tile limitation on
to whom Midas shall owe any duties, the waiver of the right to trial by jury,
the confidentiality provisions and the indemnification, limitation on the
liability of indemnified persons, contribution and settlement provisions
contained in the indemnification letter agreement, will, survive and remain
operative regardless of any such termination.
This letter agreement shall be governed by, and construed in, accordance
with, the laws of the State of California without regard to its conflicts of law
principles. Midas and the Company (on its own behalf arid, to the extent
permitted by law, on behalf of its securityholders) each waives any right to
trial by jury in any action, claim, suit or proceeding with respect to Midas's
engagement as placement agent or its services hereunder. Solely for the purpose
of enforcing this agreement and the related indemnification letter agreement,
the Company hereby submits to the nonexclusive jurisdiction of any federal or
state court in the State of California, City and County of Los Angeles, and
irrevocably agrees that all claims in respect of such action, claim, suit or
proceeding may be determined in any such court. Service of process, summons,
notice or document by mail to the Company's address set forth above shall be
effective service of process for any suit, action or other proceeding brought in
such courts. The Company irrevocably and unconditionally waives any objection to
the laying of venue of any suit, action or other proceeding in such courts
relating to this letter agreement or the indemnification letter agreement and
irrevocably and unconditionally waives and agrees not to plead or claim that any
such suit, action or other proceeding has been brought in an inconvenient forum.
The Company hereby waives all immunity from jurisdiction, service of process,
attachment (both before and after judgment) and execution to which it might
otherwise be entitled with respect to any such enforcement action. The Company
also waives, and will not raise or claim, any immunity to the enforcement of any
judgment relating to any such enforcement action.
The Company agrees that Midas, at its option and expense, has the right to
place advertisements in financial and other newspapers anal journals describing
its services to the Company hereunder. If requested by Midas, the Company shall
include a mutually acceptable reference to Midas in the press release (or other
public announcement) made by the Company announcing the Transaction.
This letter agreement may not be assigned by either Midas or the Company
without the written consent of the other party, which shall not be unreasonably
withheld. The benefits of, and the obligations and liabilities assumed in, this
letter agreement shall inure to the benefit of, and be binding upon any
successors and permitted assigns.
No waiver, amendment or other modification of this letter agreement shall
be effective unless in writing and signed by each party to be bound thereby.
If the foregoing meets with your approval, please sign both copies of this
letter agreement and both copies of the indemnification letter agreement and
return, one fully executed copy of each to us. We look forward to working with
WILON RESOURCES, INC. in this important undertaking.
Very truly yours,
MIDAS SECURITIES, INC.
By:_____/s/ Jay Lee________________________
Name: Jay Lee
Title: President
Agreed and Accepted as of the
Date First Written Above:
Wilon Resources, Inc.
By: ____/s/ Harry Thompson____________________________
Name: Harry Thompson
Title: President/CEO
LA-74551 v2 0950000-0102