Exhibit 10.29
MEMORANDUM OF AGREEMENT
VERTEX INDUSTRIES, INC., having a place of business at 00 Xxxxx
Xxxxxx, Xxxxxxx, Xxx Xxxxxx, 00000-0000 ("Vertex") and NETWEAVE CORP.,
having a principal place of business at 0000 Xxxxxxxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx, 00000, and SOMBERS GROUP, INC., located at
X.X. Xxx 0000, Xxxxxx, Xxxxxxxx, 00000, hereby express their intentions
and agreements, subject to the conditions and reservations expressed
herein, and subject to the approval of the Board of Directors and
Shareholders of the three above-referenced corporations:
X. Xxxxxxx Group, Inc., shall be legally merged into Netweave
Corp., after which Netweave Corp. shall have only one class of stock
outstanding. Either prior to or as a result of this merger, all ties,
intercompany transactions, and/or obligations with Sombers Associates,
Inc., or any other related or controlled entities or affiliates with
Sombers Group, Inc., must be eliminated.
II. It is the intention and agreement of the above corporations
that subject to the following conditions, any of which may be waived by
Vertex, but not by the resulting Netweave Corp., that the resulting
Netweave Corp., subsequent to its merger with Sombers Group, Inc.
(hereafter referred to as the "Merged Netweave Corp.") shall merge into
Vertex. It is the intent of the parties that the final merger decision
between Vertex and the Merged Netweave Corp. shall be made by March 31,
1997, subject to the following conditions:
A. Operating Requirements of the Merged Netweave Corp.:
1. The Merged Netweave Corp. must produce at least
break-even performance on their six-month operating
statement for the period August 1, 1996 through
January 31, 1997. This level of performance must be
achieved without regard to adjustments to prior periods
and shall not include up to $50,000.00 of legal and
audit expenses which may be required to resolve the
Amtrak billing dispute.
2. The Merged Netweave Corp. must demonstrate minimum total
revenues of $2,700.000.00 for the six-month period ended
January 31, 1997.
3. The net worth for the Merged Netweave Corp. must be
positive by January 31, 1997.
4. The Merged Netweave Corp. balance sheet as of January
31, 1997, must reflect a current ratio of one or better.
5. The Merged Netweave Corp. balance sheet as of January
31, 1997, cannot reflect any capitalized software or
product development unless approved by Vertex's
auditors.
6. The Merged Netweave Corp. must aid Vertex auditors in
the production of audited statements for the Merged
Netweave Corp. for the fiscal years 1994, 1995, and
1996. In addition, the financial statements for the six
months ended January 31, 1997 (the first six months of
fiscal 1997), must be reviewed by Vertex auditors. To
this end, it is necessary that the financials
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of January 31, 1997, be completed and provided to Vertex
by a date no later than March 15, 1997.
7. All long term debt of any kind or nature owing to
pre or post-merged Netweave Corp. personnel, directors,
shareholders, employees, and/or agents and all long term
debt owing to Sombers Group, Inc., personnel, directors,
shareholders, employees, and/or agents shall be elimi-
nated by January 31, 1997.
8. All royalty requirements between the Merged Netweave
Corp. and any of its principals, shareholders, directors,
employees, affiliates, or other related entities shall
be eliminated by January 31, 1997.
B. Marketing Consultant Agreement and Sales Representative
Agreement Between the Sombers Group, Inc., and Channel Group,
Inc.:
1. The Marketing Consultant Agreement between Sombers
Group, Inc., and Channel Group, Inc., and/or Xxxxxxx
X. Xxxxxxxx shall be terminated on or before January
31, 1997. The terms in the Marketing Consultant
Agreement providing for $1,050,000.00 in payments
due to Channel Group, Inc., and/or Xxxxxxx X. Xxxxxxxx
over a period of three years in the event of
termination, shall be renegotiated to eliminate such
payment in its entirety. This renegotiation must be
accomplished prior to July 31, 1996.
2. The Sales Representative Agreement between Sombers
Group, Inc., and Channel Group, Inc., and/or Xxxxxxx X.
Xxxxxxxx shall be revised such that the "territory" in
said
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agreement shall be defined as the States of Maine,
Vermont, New Hampshire, Massachusetts, Connecticut,
Rhode Island, and New York. This renegotiation must
be accomplished by July 31, 1996.
C. Recapitalization:
1. The Merged Netweave Corp. must successfully
complete an offering of its common stock for a gross
of $1,000,000.00 with a net dollar amount received
by the company of not less than $850,000.00.
D. Vertex Loan:
1. Vertex shall loan $100,000.00 to the Merged Netweave
Corp. under the terms of a Loan Agreement and Note
which requires that the loan be repaid out of the funds
received from the recapitalization referred to above.
The repayment shall be made by Vertex receiving
one-quarter of the funds collected on a monthly basis
until the Note is satisfied. The Note will carry an
interest rate of six (6%) percent per annum. It is
the intention of the parties that this loan shall be
used to pay urgent current payables.
E. Management Meetings:
1. For the interim period from the date of this
Memorandum of Agreement to the final merger between
Vertex and the Merged Netweave Corp., a Vertex
representative shall be invited to attend all Merged
Netweave Corp. management meetings and board of
directors meetings.
F. Resolution of Amtrak Billing Dispute:
1. The billing dispute between Amtrak Corp. and
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Sombers Group, Inc., (or the Merged Netweave Corp.)
must be resolved before January 31, 1997. It is
specifically understood that a resolution of this
dispute must not affect any of the other financial
conditions set forth above.
G. Sales Organization:
1. The Merged Netweave Corp. and Sombers Group, Inc.,
shall retain the existing European and West Coast
marketing organization intact.
III. Merged Netweave Corp. Formula: If all of the conditions
required by Vertex above are met, and all appropriate corporate
approvals are obtained, Vertex shall exchange shares of its common stock
for shares of the Merged Netweave Corp. in accordance with the formula
(the "Formula") attached hereto as Exhibit "A." The Vertex common stock
exchanged shall be registered shares with the Securities and Exchange
Commission. The maximum number of shares of Vertex common stock which
can be issued in this merger transaction is 3,500,000, even if the
Formula computation results in a higher share number. The Merged
Netweave Corp. agrees to be bound by the 3,500,000 share cap. For
purposes of this transaction and the number of Vertex shares issued, it
is agreed that Vertex stock shall be valued at One Dollar and Fifty
Cents ($1.50). In the event the market value of Vertex common stock on
the date of the signing of the Agreement of Merger is below One Dollar
($1.00), either Vertex or the Merged Netweave Corp. can terminate the
merger transaction in its entirety by written notice to the other, by
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facsimile or personal delivery, at the addresses set forth on Page 1
hereof.
The completion of the merger transaction between Vertex and
the Merged Netweave Corp. contemplated by this Memorandum of Agreement
is further subject to the execution by the parties of a
formal written Agreement of Merger and compliance with all applicable
federal and state laws, rules, and regulations.
VERTEX INDUSTRIES, INC.
BY: s/Xxxxxx X. Xxxx 5/23/96
XXXXXX X. XXXX, PRESIDENT
NETWEAVE CORP.
BY: s/X.X. Xxxxxxxxxx 5/23/96
X. X. XXXXXXXXXX, CHAIRMAN
SOMBERS GROUP, INC.
BY: s/X.X. Xxxxxxxxxx 5/23/96
X. X. XXXXXXXXXX, CHAIRMAN
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JDM/cmr
5-23-96
0514
EXHIBIT "A"
SGI/NETWEAVE VALUATION FORMULA
1. This valuation is based upon a formula using Revenues, Profit
and Shareholders Equity as factors.
2. The period used would be August 1, 1996 to January 31, 1997
annualized.
3. The following abbreviations are used:
N = Netweave
S = SGI
LR = License revenues (annual + initial)
TR = Total revenues
EBT = Earnings before taxes
B = Book value
4. The valuation formula is as follows:
Revenues Profit Book
[2(NLR)+(NTR-NLR)+STR] + [10(NEBT)+5(SEBT)] + [NSB]
Value = -----------------------------------------------------
3
Example:
Assume Total Netweave revenue = $2,450,000
Netweave License revenue = $1,400,000
SGI revenue = $3,200,000
Netweave EBT = $35,100
SGI EBT = $151,600
Book Value(combined) = ($260,000)
[2($1,400,000)+$1,050,000+$3,200,000] +
[10($35,100)+5($151,600)] + [-$260,000]
--------------------------------------- = $2,633,000
3
$2,633,000/$1.5 per share = 1,755,333 shares
AMENDMENT TO MEMORANDUM OF AGREEMENT
THIS AGREEMENT hereby amends the Memorandum of Agreement dated May
23, 1996, between Vertex Industries, Inc., having a place of business at
00 Xxxxx Xxxxxx, Xxxxxxx, Xxx Xxxxxx, 00000-0000 ("Vertex") and Netweave
Corp., having a principal place of business at 0000 Xxxxxxxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx, 00000, and Sombers Group, Inc., located at
X.X. Xxx 0000, Xxxxxx, Xxxxxxxx, 00000.
WHEREAS, the above parties entered into a Memorandum of Agreement
dated May 23, 1996; and
WHEREAS, the parties wish to amend said Agreement as set forth
hereinbelow:
NOW, THEREFORE, it is agreed as follows:
1. IIC-RECAPITALIZATION shall provide that the Merged Netweave
Corp. must successfully complete an offering of its common stock and
warrants (sold as Units consisting of 2,000 shares of common stock and
1,000 warrants to purchase Netweave stock during the period August 1,
1997 through July 31, 1999 at an exercise price of $3.00) for a gross of
$1,000,000.00 with a net dollar amount received by the Company of not
less than $850,000.00.
2. III-MERGED NETWEAVE CORP. FORMULA shall further provide that
the warrants to purchase the Merged Netweave Corp. shares will be
converted to warrants to purchase Vertex on a one for one basis with
terms identical to the original warrants. The Vertex warrants shall be
registered with the Securities and Exchange Commission.
VERTEX INDUSTRIES, INC.
BY: s/Xxxxxx X. Xxxx
XXXXXX X. XXXX, PRESIDENT
Netweave Corp.
BY: s/X. X. Xxxxxxxxxx
X.X. Xxxxxxxxxx, Chairman
Sombers Group, Inc.
BY: s/X.X. Xxxxxxxxxx
X.X. Xxxxxxxxxx, Chairman