EPIC FINANCIAL CORPORATION
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
000-000-0000
July 3, 2003
Xxxxxxx X. Xxxxxxx
c/o Mission Equity
00000 Xxxxxx Xxxxxxxxxx
Xxxxx X
Xxx Xxxx Xxxxxxxxxx, XX 00000
Dear Xx. Xxxxxxx:
This letter evidences our mutual understanding, in principle,
whereby Epic Financial Corporation, a Nevada corporation
("Epic"), will acquire from you, as the sole holder thereof (the
"Seller"), all of the issued and outstanding capital stock (the
"Mission Equity Stock") of Mission Equity, a California
corporation ("Mission"), on the terms outlined herein (the "Share
Exchange").
1. The Parties. Epic shall be the purchaser of the Mission
Stock. You, as the record and beneficial owner of all of the
Mission Stock, shall be the Seller.
2. Nature of the Transaction. Epic will acquire the Mission
Stock from the Seller. In consideration of the sale of the
Mission Stock by the Seller to Epic, Epic will deliver to Seller
a non-recourse promissory note of Epic in the original principal
amount of $150,000.00 (the "Epic Note"), with the principal
balance accruing interest at the rate of seven percent (7%) per
annum, all principal and accrued interest being due and payable
upon the first anniversary of the closing of the Share Exchange.
Epic's obligations under the Epic Note (and, as discussed below,
Epic's performance upon the Seller's exercise of his put rights
and Epic's performance upon its exercise of its call rights)
shall be secured by the Mission Stock by means of a Pledge and
Security Agreement in favor of the Seller. In addition, Epic
will issue and deliver to Seller three hundred fifty thousand
(350,000) shares of Series D Convertible Preferred Stock of Epic
(the "Epic Preferred Stock"). The attributes of the Epic
Preferred Stock shall include: (i) voting rights, only as
required by the Nevada General Corporation law, (ii) no dividend
rights, and (iii) certain conversion rights into shares of Epic's
common stock (the "Epic Common Stock"). A form of Certificate of
Designations, Preferences, and Rights governing the Epic
Preferred Stock will be finalized by the parties using our
respective best efforts in a manner standard for transactions of
this nature and magnitude. All of the Epic Preferred Stock shall
be validly issued, duly paid, non-assessable, and free and clear
of any liens and/or encumbrances. The Epic Preferred Stock shall
be issued pursuant to Section 4(2) of the Securities Act of 1933
and shall be subject to the restrictions on transfer as set forth
in Rule 144 as promulgated by the Securities and Exchange
Commission.
Xxxxxxx X. Xxxxxxx
July 3, 2003
Page 2
The Epic Preferred Stock will be subject to the following
limitations on conversion and Epic and the Seller will have the
following put and call rights regarding such shares:
* During the 12-month period that commences on the second
anniversary of the closing of the Share Exchange, the Seller
shall have the right, but not the obligation, to convert any or
all of the Epic Preferred Stock into Epic Common Stock; provided,
however, that, without the prior written consent of Epic, which
consent it may withhold, delay, or deny in its sole and absolute
discretion, the Seller may neither convert, nor offer to sell in
the public markets, more than an aggregate of 10,000 shares of
Epic Preferred Stock in any calendar month; provided, further,
that, upon the Seller converting such Epic Preferred Stock to
have received shares of Epic Common Stock with an aggregate
"value" (as that term is defined below) of $350,000, the Seller
shall tender any remaining Epic Preferred Stock to Epic for
cancellation without further consideration by Epic.
* During the 24-month period that commences on the first
anniversary of the closing of the Share Exchange, Epic will have
the right, but not the obligation, to "call" any or all of the
Epic Preferred Stock in one or more transactions for an aggregate
call price of $350,000, or $1.00 per share, which call shall be
reduced by all "value" previously received by the Seller in
respect of the Epic Common Stock. Further, Epic shall have the
right, but not the obligation, to exercise its call rights in
respect of any Epic Preferred Stock that the Seller has
transmitted a conversion notice to Epic.
* During first month following the third anniversary of the
Share Exchange, if the Seller has not received an aggregate of
$350,000, whether through the conversion of Epic Preferred Stock
or the exercise of Epic's call right or any combination thereof,
the Seller shall have the right, but not the obligation, to "put"
all remaining shares of Epic Preferred Stock to Epic for
cancellation at the rate of $1.00 per share of Epic Preferred
Stock (which put shall be reduced by all "value" previously
received by the Seller in respect of the Epic Common Stock).
For all purposes herein, the "value" of the Epic Common Stock
shall be determined as follows:
In the event that (i) the Seller sell any such shares of Epic
Common Stock in brokerage transactions in the public markets in
accordance with the limitations set forth above, (ii) such sales
are effectuated through a broker-dealer, whose commission
structure and fee schedules are reasonably acceptable to Epic,
and (iii) the trade dates of such sales are not later than 30
days following the issuance thereof due to conversion of Epic
Preferred Stock, the per-share "value"
of the Epic Common Stock shall be deemed to be the selling price
thereof, less commissions and fees directly attributable to such
sales.
In the event that any or all of such three events set forth in
the immediately preceding sentence shall not have obtained with
respect to any shares of Epic Common Stock, the per-share "value"
thereof shall be deemed to be the "calculated market price" of
Epic Common Stock. The "calculated market price" of Epic Common
Stock shall be deemed to be the volume-weighted average of the
final bid and asked prices for each of the ten trading days
preceding the date on which the Seller has notified Epic of such
a conversion.
As discussed above, Epic's performance upon the Seller's exercise
of his put rights and Epic's performance upon its exercise of its
call rights (and, as discussed above, Epic's obligations under
the Epic Note) shall be secured by the Mission Stock by means of
a Pledge and Security Agreement in favor of the Seller.
All of the Epic Common Stock to be issued to the Seller pursuant
to his conversions rights shall be validly issued, duly paid, non-
assessable, free and clear of any liens and/or encumbrances.
Such Epic Common Stock shall be issued pursuant to Section
3(a)(9) of the Securities Act of 1933 and shall be subject to the
restrictions on transfer as set forth in Rule 144 as promulgated
by the Securities and Exchange Commission.
Xxxxxxx X. Xxxxxxx
July 3, 2003
Page 3
3. Other Provisions.
(a) As a result of the proposed Share Exchange, Mission will
become a wholly-owned subsidiary of Epic. Epic also currently
intends and expects that, as of the date on which Mission becomes
a wholly-owned subsidiary of Epic, the present management of
Mission would be serving in their present positions and would be
eligible for continuation of their existing employment agreements
with Mission, if any, or new employment agreements to be mutually
agreed upon by Epic and such management.
(b) The parties agree that Mission shall pay the expense of
(i) an audit by an independent auditor of Epic's choice of the
financial books and records of Mission, including pro forma
information that will be required as a result of the proposed
Share Exchange, all pursuant to the Rules and Regulations of the
Securities and Exchange Commission.
5. Due Diligence and Conditions Precedent. Closing of the
Share Exchange is contingent upon completion by Epic of a due
diligence investigation, the results of which must be
satisfactory to Epic's board of directors, in its sole and
absolute discretion. Said due diligence investigation shall
include, but not be limited to, a review of the financial
statements, books, and corporate records of Mission. In
addition, prior to the closing of the Share Exchange, the Seller
shall be afforded the opportunity to obtain such information
about Epic as he may deem relevant to making the decision to
exchange all of the Mission Stock for Epic Preferred Shares.
6. Miscellaneous. This letter is an expression of our mutual
intent and, except as provided in Section 3, above, is not a
binding contract, although we expect that, subject to the above-
referenced due diligence approval, each of us will use our
respective best efforts to negotiate a definitive agreement and
to close the proposed Share Exchange in an expeditious manner.
Accordingly, we each contemplate that the proposed Share Exchange
will be concluded pursuant to the terms and provisions of a
definitive agreement to be negotiated by the parties in good
faith, which will be signed by Epic and the Seller. In this
regard, we contemplate that we will each make the usual and
customary representations and warranties concerning the business
and financial condition of Mission and Epic, as may be
appropriate in a transaction of this nature and
magnitude. The consummation of the proposed Share Exchange shall
also be subject to receipt of any necessary (a) approvals by the
board of director and stockholders of Epic and/or Mission,
(b) consents of third parties, and (c) governmental approvals.
If the foregoing is acceptable, in principle, please sign a copy
of this letter in the space provided below and return the same to
us.
Xxxxxxx X. Xxxxxxx
July 3, 2003
Page 4
Very truly yours,
EPIC FINANCIAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------
Xxxxxxx X. Xxxxxx, President
ACCEPTED AND AGREED TO
as of this 9th day of July, 2003:
/s/ Xxxxxxx X. Xxxxxxx
--------------------------
XXXXXXX X. XXXXXXX
