NETWORK SYSTEMS INTERNATIONAL, INC.
ANNOUNCES SALE OF ITS COMMON STOCK
GREENSBORO, NORTH CAROLINA: Monday, July 10, 2000: NETWORK
SYSTEMS INTERNATIONAL, INC. (NASDAQ: NESI-news; www.nesi.net)
announced today that it has entered into an agreement for the
sale of 1,666,667 newly issued shares of common stock at $0.60
per share to seven investors in a private placement organized by
Millennium Holdings Group, Inc. Network intends to use the
proceeds from the sale of this stock to reduce its outstanding
indebtedness to Wachovia Bank, N.A. The sale is expected to
close in July.
During the past nine months, Network has experienced a
substantial reduction in revenues and has suffered large
operating losses. As a result of these two factors, Network is
in default of its financial loan covenants contained in its
revolving credit agreement with Wachovia. As stated in Network's
Quarterly Report on Form 10-QSB filed with the Securities and
Exchange Commission on May 15, 2000: "Until the Company can
renegotiate its current revolving credit agreement or secure
refinancing with another lender, the Company's principle sources
of liquidity are funds generated by operations. These matters,
along with the slowdown in software license sales, raise doubt
about the ability of the Company to continue as a going concern."
Network has been unable to arrange for adequate financing to
replace the Wachovia credit facility. After pursuing a number of
other alternatives, Network's Board of Directors concluded that
the sale of its stock to the Millennium investors is the best
alternative available at this time.
As a condition to the sale of stock, four of Network's
current management shareholders, Robbie M. Efird (the current
Chairman of the Board and Chief Executive Officer of Network),
E.W. "Sonny" Miller, Jr., David F. Christian and James W.
Moseley, have agreed to sell an aggregate of 2,700,000 of their
shares of Network stock to Herbert Tabin, a managing partner of
Millennium, for $1,500,000, or approximately $0.56 per share, in
a second private placement arranged by Millennium. The sale is
also conditioned upon all of the current directors of Network
resigning effective as of the closing date in favor of a
representative of the new investors. The current officers of
Network also plan to resign as of the closing date.
As a condition to completing the sale of the new
shares to the Millennium investors, Messrs. Efird, Miller,
Christian and Moseley will also grant Network an option, expiring
in forty-five days after the date of the stock sale, giving
Network the right to require the former management group to
purchase all of the operating assets of Network's business as
currently conducted for $3,000,000. During this 45-day period,
Network will determine the value of these assets and evaluate
whether it is in the best interests of Network and its
shareholders for Network to sell the assets to the former
management group at the option price, to sell the assets to a
third party, to retain the assets or to take other appropriate
action.
If Network elects to exercise the option, the former
management group will make an initial cash payment of $1,500,000
for the assets and will deliver a non-recourse promissory note in
the principal amount of $1,500,000, for the remaining purchase
price. The note will be secured by the former management group's
remaining 2,925,856 shares of Network stock. Millennium will use
its best efforts to place the pledged shares with accredited
investors on behalf of the former management group for at least
$1,500,000, or approximately $0.51 per share. Millennium will
remit the proceeds generated by the sale of the former management
group's remaining shares to Network to satisfy the remaining
balance of the purchase price for the assets. If the remaining
shares are sold for an amount greater than $1,500,000, Millennium
will retain the excess. Of the $3,000,000 paid for the assets, it
is intended that $2,000,000 will be used by Network to reduce
outstanding indebtedness to Wachovia under the revolving credit
arrangement. If Millennium cannot sell the remaining shares for
at least $1,500,000, Network will extinguish the promissory note
at maturity and retain the remaining shares in satisfaction of
the outstanding purchase price for the sale of the assets.
NETWORK SYSTEMS INTERNATIONAL, INC. is a vertical market
company that specializes in providing industry specific solutions
to the textile, apparel, home furnishings and printing
industries. The Company's integrated applications provide
customers a complete system for managing the enterprise and
supply chain. Founded in 1985, NETWORK SYTEMS INTERNATIONAL,
INC. is headquartered in Greensboro, North Carolina with offices
in Dallas, Texas and Duncan, South Carolina.
Safe Harbor Act Disclaimer: This release may contain forward
looking statements that involve risk and uncertainties, including
without limitations, continued acceptance of the Company's
products and services, increased levels of competition, new
products and technological changes, the Company's dependency on
financing third party suppliers and intellectual property rights,
material customers, the Company's business concentration risk
within the textile industry, and other risks. The Company's
actual consolidated financial results during 2000, and beyond,
could differ materially from those expressed in any forward
looking statements made by, or on behalf of, the Company.
Network Systems International, Inc.
www.nesi.net
