James H. Wiesenberg
10040 E Happy Valley Rd. #454
Scottsdale, AZ 85255-2388
[email protected]
October 27, 2000
Mr. Joseph P. Gebbardt
As an individual guarantor
And as Managing Member of
And on behalf of
New Wave Networks LLC
250 South Martin
Zephyr Cove, Nevada 89448
Dear Joe:
I have received some telephone calls and correspondence from Mr. Douglas C.
MacLellen, who represented that the is acting on your behalf in the capacity of
merchant banker. As you know, Mr. MacLellan has urged me to accept a payoff of
my loan to New Wave Networks, LLC ("NWN") and has indicated that NWN, Joe and
Prime Companies, Inc ("Prime") desire that I accept a payoff of my loan and
letter of intent for the exchange of stock in Prime for 100% of the membership
interest in NWN. Mr. MacLellan, as you know, has asked me to sign a separate
letter that would be signed only by me, you and NWN. In either case, Mr.
MacLellan tells me that the desire of you, NWN and Prime is that I not
participate in the equity exchange and that I accept certain cash in exchange
for outstanding principal and accrued interest owed to me or that will be owed
to me by NWN.
As I have expressed to Mr. MacLellan, I am not adverse to that concept. But, I
need to ensure that certain protections of my loan remain in place pending a
payoff, and that I have the opportunity to reconsider foregoing my loan
conversion right in the event that there is any increase by Prime in the
proposed payments to you or anyone else who is connected with NWN. Further, I
will need direct assurances from Prime in the binding letter of intent and in
the definitive agreement that my loan will be paid if the deal between Prime,
NWN and you ultimately closes. Finally, as a creditor, I do not believe it is
appropriate for me to sign the binding letter of intent or any other document
which memorialized the proposed merger between Prime and NWN. Accordingly, I
will not sign the binding letter of intent and although its form may be attached
to this letter, it is not binding on me in any way.
To ensure that my concerns are adequately addressed, I hap prepared the
following offer to NWN and you. This offer describes what I will do and what
you, NWN and Prime will be required to do to address what you want from me.
Please bear in mind that this offer can be withdrawn by me at any time prior to
is acceptance for any reason or no reason at all.. Further, this offer cannot be
accepted by one or more, but less than all, of you and NWN. Finally, your
acceptance of this offer will not be complete until I receive nine thousand
dollars ($9,000.00) by wire transfer in payment of interest due me under the
loan agreement through August 20, 2000. Thus, I will continue to have the
absolute right to withdraw this offer even after it is fully signed if that wire
transfer has not been completed. I hope you understand what I am trying to
accomplish.
Here are the offer terms:
1. During the period between October 27, 2000 and February 20, 2001. I
will not exercise my options to convert the whole or any part of my loan to NWN
to membership interests in NWN, provided, however, that I will cease being bound
by this non-conversion pledge in the event of (a) any incurred default of the
loan agreement by either NWN or you, (b) any amendment to the binding letter of
intent
------------------------
1 Wire transfer instructions appear at the end of this letter.
<PAGE>
attached hereto (and bearing my counsel's initials solely for purposes of
identification). (c the execution of any agreement or superceding or
implementing that letter of intent that provides for greater or different
consideration to you, anyone associated with NWN or with respect or NWN
membership interests that is provided in the attached letter of intent, (d) the
abandonment of the merger described in the attached letter of intent by one or
more of the signatories to it, or (e) the failure of the signatories to the
attached letter of intent to one or more of the signatories to the attached
letter of intent to execute and to deliver to me by December 31, 2000 a fully
executed and effective agreement (the "Merger Agreement") implementing the
attached letter of intent. Each of you and NWN agree to promptly inform me of
the details of any of the conditions (a) through (d) after any one of you obtain
any notice of the condition.
2. If the closing of the Merger Agreement occurs on or before December 31, 2000,
Prime shall pay me US$550,000. If the closing of the Merger Agreement occurs
after December 31, 2000, Prime or NWN shall pay me in addition $175 for each day
after December 31, 2001 up to and including the closing time. I am not obligated
to perform the arrangement outlined in this letter if all necessary application
and forms to the FCC and all assignments and transfers are not posted for public
notice on or before February 20, 2001. Accordingly, this arrangement is void
after that date unless extended by me through written correspondence to you and
NWN. The amounts set forth in this paragraph 2 do not include reimbursement of
interest that would apply if the default rat of interest were applied to my loan
to NWN or amounts that I incur in collection or attempts to collect or enforce
the loan agreement. Those amounts also must be paid. The February 20, 2001 dates
appearing in paragraphs 1 & 2 of this letter will be extended until the earlier
of 5 days after the grant of the FCC's consent to the transfer of control of NWN
to Prime or April 20, 2001.
3. In exchange for the payments required by paragraphs 1 &2, I will execute UCC
Lien releases on NWN's assts, including license rights, and will tender to NWN a
receipt for the amount under paragraph 2, above. The closing of the Merger
Agreement and the delivery of those lien releases, the delivery of that receipt
and the delivery of the cash specified in paragraph 2 will occur simultaneously,
with the recipe of such money being a condition precedent to the delivery of the
lien release and receipt. To ensure an orderly closing, a face-to-face closing
conference will be held where the lien releases and the receipt will he held in
escrow pending the receipt of confirmation that the moneys specified in
paragraph 2 have in fact been received by me. Wire transfer instructions for the
delivery of those moneys will be the same as listed at the end of this letter,
unless I provide you with different instructions, which different instructions
will be deemed substituted for those at the end of this letter.
4. Upon my delivery of that receipt and those lien releases and subject to the
following exemption, you and NWN shall be deemed to have release me from any
claim or liability and I shall be deemed to have release you and NWN from any
claim or liability. The exception to those releases shall be claims based upon
my fraud or claims based upon the fraud of you or NWN. After the payment of
those moneys to me, neither NWN, you nor Prime may seek the restoration of those
moneys. It is understood that after that payment, each of NWN, you and Prime
stands behind and assures my right to retain and use those moneys. By paying the
moneys to me as per paragraph 2, you and NWN will also be representing and
warranting to me that none of the conditions (b), (c), or (d) in paragraph 1
above, have occurred.. In the event that any court of competent jurisdiction
requires me to repay any of those moneys, then, my security interests under my
loan agreement will be automatically restored, you shall remain a guarantor of
the unpaid amount and NWN's other obligations under the loan agreement and you
and NWN will take such actions promptly as is required to restore my security
interests to first priority liens.
5. By signing this offer, I am representing (subject to the execution of this
document by you and NWN) that I have the authority to enter into an agreement
based upon this offer. By signing this offer, each of you and NWN will be
representing to me that he or it has authority to execute this document and is
not insolvent. Any loss resulting from any misrepresenting party (including
payment t of the attorney's fees of the party to whom the misrepresentation was
made). The loan agreement between NWN and me, as guaranteed by you remain in
full force and effect and is unchanged except as amended by this letter. A copy
of the loan agreement is attached to this letter for your convenience. Please
bear in mind that the time frames provided in this offer are of the essence and
will be strictly adhered to by me.
<PAGE>
If this arrangement meets your approval, then please execute this letter and
return it by fax to me plus mail your original signature too. When I receive fax
and original respectively, I will send each back to you similarly.
Thank you in advance for your cooperation and best wished on the completion of
this merger.
Sincerely,
/s/ James H. Wiesenberg
-----------------------------
James H. Wiesenberg
Attachments
cc Mr. Douglas C. MacLellan
Tom Dougherty, Esq.
(both w/attachments)
ACCEPTED:
NEW WAVE NETWORKS, LLC
By: /s/
----------------------------
Joseph P. Gebhardt
Managing Member
JOSEPH P. GEBHARDT
By: /s/
----------------------------
Joseph P. Gebhardt
A natural person
<PAGE>
October 27, 2000
BINDING LETTER OF INTENT
between
New Wave Networks LLC
and
Prime Companies, Inc.
relating to the non-taxable acquisition of issued Units in the Unit capital of
NEW WAVE NETWORKS LLC
<PAGE>
This Binding Letter of Intent (the "Agreement") is made on October 27, 2000
Between:
(1) NEW WAVE NETWORKS LLC, a Nevada limited liability company, whose
United States representative offices are at 250 South Martin,
Stateline, Nevada 89448 ("NWN"); and
(2) PRIME COMPANIES, INC., a company incorporated under the laws of the
State of Delaware, whose United States offices are at 409 Center
Street, Yuba City, California, 95991-5400 ("PCI").
It is agreed that the NWN and PCI (herein after "the Parties") will
conclude a Definitive Agreement (the "Definitive Agreement") no later than by
December 31, 2000 and will submit all necessary applications and forms to the
FCC and all assignments and transfers will be posted for public notice no later
than February 20, 2000 and the Parties will conclude the approved Transaction
within 5 business days of the receipt of FCC approval and no later than April
20, 2001 (the "Closing"). It is acknowledged that Mr. Jim Wiesenberg is only a
creditor in the proposed Transaction and is not a principal of NWN and does not
waive any of his rights under his loan agreements with NWN. This Definitive
Agreement and any FCC approval applications are to be drafted by PCI's legal
council. All expenses related to discussion, negotiations and other activities
between the Company are the sole responsibility of the party that incurs them.
The following are terms and conditions that have been agreed to by the Parties
as deal points within any Definitive Agreement. Also see the attached "side
letter" executed between and among NWN, Mr. Joseph P. Gebhardt and Mr. Jim
Wiesenberg and incorporated by reference herein.
1. Sale or Exchange of Units
NWN Unit holders shall exchange Units ("Units") and PCI will exchange
Common Stock Shares in PCI ("Shares"), relying on (amongst other things)
the representations, warranties and undertakings to be structured under a
Unit for Share non-taxable merger transaction that will be necessarily
considered non-taxable under United States Internal Revenue Service Rules
and Regulations and Code. NWN warrants that NWN will be debt free upon the
Closing of the Transaction.
2. Consideration
2.1 The consideration for NWN Unit holders to enter into the Definitive
Agreement and exchanging 100 percent of all outstanding Units in NWN and
the elimination of Mr. Jim Wiesenberg's outstanding debt, PCI will pay at
the Closing US$550,000 directly to Mr. Jim Wiesenberg (plus US$175.00 per
day in additional interest if not paid by December 31, 2000 which is
deductable from the US$50,000 in cash to be paid to NWN by PCI), and will
provide US$50,000 in cash and 1,500,000 Shares of Common Stock in PCI
directly to NWN Unit holders. As part of the
<PAGE>
Closing of this Transaction Mr. Jim Wiesenberg, Mr. Joseph P. Gebhardt and
NWN agree to enter into a mutual release between and among the parties.
This exchange ratio is based upon PCI's Common Stock shares being valued at
$1.00 per common stock share and values NWN's gross 1990 POPs of 577,043 at
US$3.63 per POP or a total transaction value of US$2,100,000.00 (made up of
US$550,000 in debt elimination, US$50,000.00 in cash and 1,500,000 shares
of PCI common stock). This valuation assumes US$4.00 per POP for the `A'
band license (386,507 POPs) or US$1,546,028.00 and US$2.90 per POP for the
`B' band license (190,536 POPs) or US$553,972.00. The shares and the cash
to be issued to NWN may be designated to multiple parties to be provided in
a schedule within the Definitive Agreement. The Common Stock shares to be
granted to NWN from PCI must be registered under the 1933 Act ("the Act")
utilizing a registration statement. The registration statement must be
filed with the SEC within 120 days of the execution of the Definitive
Agreement.
2.2 Upon execution of this Binding Letter of Intent PCI shall pay to NWN the
non-refundable sum of US$10,000.00 as a good faith deposit. In the event
that the Definitive Agreement is not executed this deposit will be retained
by NWN as a break-up fee. In the event that NWN terminates the Agreement
then, NWN must refund the good faith deposit to PCI. NWN will not engage in
business combination discussions with any other company or organization
from the signing of this Agreement through December 31, 2000. The good
faith deposit funds are to be wire transferred to the account to be
provided by NWN within 2 business days of the execution of this Agreement.
In the event that the Definitive Agreement is executed then the good faith
deposit will be included as part of the cash component in the Definitive
Agreement. The US$550,000 due to Mr. Jim Wiesenberg at the Closing will be
wire transferred to an account(s) designated solely by Mr. Jim Wiesenberg.
2.3 Following the completion of the Definitive Agreement PCI agrees to review
NWN business plan and determine the capital needs of NWN and PCI agrees to
arrange for debt and equity financing required in the business plan.
3. Conditions
Completion of the Definitive Agreement is anticipated to be conditional
upon satisfaction of the following conditions:
3.1 PCI being satisfied on or before December 31, 2000 in its sole and absolute
discretion with a detailed and wide ranging due diligence exercise to be
carried out by it and its professional advisors on its behalf and in
relation to the direct interests being acquired by virtue PCI's purchase or
acquisition of the Units.
3.2 This proposed transaction is necessarily based upon PCI having access to an
anticipated equity credit line that would allow PCI to meet the cash
components of the transaction. In the event that PCI is unable to access
this capital pool by 2/13/2000 the transaction may be terminated by either
party or extended upon the mutual consent of all Parties.
<PAGE>
3.3 Obtaining all necessary consents and approvals from PCI's and NWN's
respective Board of Directors and, if necessary, their respective
stakeholders.
3.4 The Parties to any submission for the approvals of issuance and or
registration of the Shares of PCI, to be received by NWN's Unit holders in
respect of the exchange of the Shares to the Securities Exchange Commission
("SEC") shall be prepared by, made in the name of and at the expense of
PCI, subject to the input of NWN and that all requests and enquiries from
any government, governmental, or regulatory body shall be dealt with by PCI
and or NWN in consultation with each other and each shall promptly
co-operate with and provide all necessary information and assistance
reasonably required by such government, or agency upon being requested to
do so.
3.5 In the event that NWN's debt holder (Mr. Jim Wiesenberg) converts his
outstanding debt to Units in NWN or he does not accept US$550,000, plus any
additional interest if any accrued after December 31, 2000, as payment in
full for his debt with NWN, then PCI has the right to immediately terminate
this Agreement. In the event that the Agreement is terminated by PCI due to
Clause 3.5 then NWN will return the good faith deposit money.
3.6 NWN will commence a 2 year and 9 month audit of its business that must be
completed before the completion of the Definitive Agreement. The costs
associated with the audit will be initially underwritten by PCI. In the
event that the audit cannot be completed by NWN, then NWN will reimburse
PCI for any audit related costs paid by PCI.
4. Employment Agreement:
4.1 Mr. Joseph P. Gebhardt will be provided by PCI with a one year renewable
employment agreement on the following terms.
4.2 Mr. Gebhardt's base salary will be US$78,000.00.
4.3 Mr. Gebhardt will receive a bonus plan of US$40,000.00, to be paid half in
cash and half in common stock calculated at the market value on the date of
grant of any bonus, if Mr. Gebhardt assists PCI in acquiring a group of
BTA's consisting of 1 million POPs and will be paid an additional US$40,000
bonus under the same terms, for each additional 1 million POPs acquired by
PCI.
4.4 Mr. Gebhardt will receive at the execution of the Definitive Agreement a
total of 50,000 three year common stock options that will vest 1/12 each
month over the period of the Employment Agreement. The options will be
priced at the closing price of PCI's common stock on the date of the
Closing and PCI agrees to register the underlying shares to these options
during 2001 or before.
<PAGE>
4.5 Mr. Gebhardt will receive health care coverage provided through PCI
equivalent to that of other senior executives at PCI.
4.6 Mr. Gebhardt's title shall be Head of Acquisitions. He will also be invited
to attend any regular sessions of PCI's Board of Directors meetings as a
Senior Advisor on Acquisitions to the Board of Directors during the period
of his Employment Agreement.
4.7 In the event that Mr. Gebhardt is terminated without cause during the
period of his Employment Agreement, all options will immediately vest and
he will receive a severance payment in a lump sum of US$50,000.00.
<PAGE>
4.8 PCI agrees to interview and, if found appropriate, hire Mr. Lee Cluff as an
employee to assist PCI and Mr. Gebhardt in general business and acquisition
analyst at a starting salary of US$2,000 per month.
5. Announcements
5.1 Pending completion of the Definitive Agreement, the Parties shall, subject
to the requirements of law or any regulatory body or the rules and
regulations of any recognized stock exchange, consult together as to the
terms of, the timetable for and manner of publication of, any formal
announcement or circular to shareholders, employees, customers, suppliers,
distributors and sub-contractors and to any recognized stock exchange or
other authorities or to the media or otherwise which any party may desire
or be obliged to make regarding this Agreement. Any other communication
which the Parties may make concerning the foregoing matters shall, subject
to the requirements of law or any regulatory body or the rules and
regulations of any recognized stock exchange, be consistent with any such
formal announcements or circular.
6. Notice
6.1 Any notice or other communication requiring to be given or served under or
in connection with this Binding Letter of Intent shall be in writing and
shall be sufficiently given or served if delivered or sent:
In the case of NWN:
Facsimile: 702-588-0805
Attention: Mr. Joseph P. Gebhardt
President
P.O. Box 6928
250 S. Martin
Stateline, Nevada 89449
Tel: 775-588-1995
In the case of PCI at its registered office:
Facsimile: 530-671-3215
Attention: Mr. N. J. Lima
President and CEO
409 Center Street
Yuba City, CA 95991-4500
Tel: 530-755-3580
7. Counterparts
This Binding Letter of Intent may be executed in any number of counterparts
each of which shall be deemed an original, but all the counterparts shall
constitute one and the same instrument.
IN WITNESS WHEREOF, NWN and PCI have caused this Binding Letter of
Intent to be duly executed as of the day and year first above written.
New Wave Networks LLC Prime Companies, Inc.
By: ______________________________ By: ___________________________
Mr. Joseph P. Gebhardt Mr. N. J. Lima
President President and CEO
DCM/nhm
