UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange
Act of 1934
Date of Report: July 10, 2000
NETWORK SYSTEMS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 0-22991 87-0460247
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or organization) Number) Identification Number)
200 North Elm Street, Greensboro, North Carolina 27401
(Address of principal executive officer) (Zip Code)
(336) 271-8400
(Registrants telephone number, including area code)
Item 5. Other Events
On July 10, 2000, Network Systems International, Inc. (the
"Company") issued a press release announcing that the Company
entered into a Stock Purchase Agreement dated July 10, 2000 (the
"Stock Purchase Agreement") with Richard T. Clark, Joel C. Holt,
D. Mark White, George D. Gordon, Bryan John, John Signorello and
Steven Elias (the "Initial Investors"). A copy of the Stock
Purchase Agreement is included as Exhibit 2 to this Current
Report on Form 8-K and incorporated herein by reference. Subject
to the terms and conditions of the Stock Purchase Agreement, the
Company will issue 1,666,667 new, restricted shares of the
Company's common stock at $0.60 per share to the Initial
Investors in a private placement organized by Millennium Holdings
Group, Inc. ("Millennium"). The sale under the Stock Purchase
Agreement is subject to the satisfaction of the following
conditions, which are discussed in more detail below: (i)
certain of the Company's current management shareholders must
agree to sell 2,700,000 shares of the Company's common stock to
accredited investors arranged by Millennium, (ii) these current
management shareholders must grant the Company a put option
giving the Company the right to require such management
shareholders to purchase substantially all of the assets
associated with the Company's business as currently conducted for
$3,000,000, (iii) all of the Company's current directors must
resign and a designated representative of the Initial Investors
must be appointed to replace the former directors effective as of
the closing date of the stock sale, and (iv) the Company must
receive the consent of its current revolving credit lender,
Wachovia Bank, N.A. ("Wachovia"). The sale under the Stock
Purchase Agreement is expected to close on or about July 21,
2000. After completion of the sale under the Stock Purchase
Agreement, the Initial Investors will collectively own 1,666,667
shares, or approximately 17.6%, of the Company's outstanding
common stock.
During the past nine (9) months, the Company has experienced
a substantial reduction in revenues and has suffered large
operating losses. As a result of these two factors, the Company
is in default of its financial loan covenants contained in its
revolving credit agreement with Wachovia. As stated in the
Company'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." The Company has been unable to arrange for adequate
financing to replace the Wachovia credit facility. After
pursuing a number of other alternatives, the Board of Directors
of the Company reached the conclusion that the transactions
contemplated by the Stock Purchase Agreement is the best
alternative available to the Company at this time. On June 26,
2000, the Company's Board of Directors approved the Company's
issuance of 1,666,667 new shares at $0.60 per share to the
Initial Investors pursuant to the terms of the Stock Purchase
Agreement.
The issuance of the new shares by the Company will generate
$1,000,000, and the Company intends to use these proceeds to
reduce a portion of its outstanding indebtedness to Wachovia.
The funds necessary to complete the sale of the shares sold under
the Stock Purchase Agreement will be escrowed pending closing. A
copy of the Escrow Agreement is included as Exhibit 99A to this
Current Report on Form 8-K and incorporated herein by reference.
As required by the Company's revolving credit agreement, the
Company will seek Wachovia's consent to this transaction and
other related matters.
On July 10, 2000, the Company sent a letter to its
shareholders discussing the Company's omission to seek
shareholder approval of the issuance of the new shares that would
otherwise be required under the Nasdaq Marketplace Rules pursuant
to the Company's reliance upon an exception contained in the
Nasdaq Marketplace Rules. A copy of the Company's July 10, 2000
letter to its shareholders is included as Exhibit 20 to this
Current Report on Form 8-K and incorporated herein by reference.
As a condition to the Initial Investors' obligations
pursuant to the terms of the Stock Purchase Agreement, four of
the Company's current management shareholders, Robbie M. Efird,
E. W. "Sonny" Miller, Jr., David F. Christian and James W.
Moseley (collectively, the "Selling Shareholders") will enter
into Investment Agreements dated July 10, 2000 (the "Investment
Agreements") to collectively sell 2,700,000 shares to Herbert
Tabin, a managing partner with Millennium, (the "Investment
Agreement Investor") for $1,500,000 (approximately $0.56 per
share) in a second private placement arranged by Millennium.
Additional information regarding Mr. Tabin is set
forth below. Copies of the Investment Agreements are included as
Exhibit 99B to this Current Report on Form 8-K and incorporated
herein by reference. The sales under the Investment Agreements
are expected to close immediately after the closing of the sale
pursuant to the Stock Purchase Agreement. After completion of
the sale under the Investment Agreements, the Initial Investors
and the Investment Agreement Investor (the "Millennium
Investors") will collectively own 4,366,667 shares, or
approximately 46.1%, of the Company's outstanding common stock.
Mr. Tabin will own 2,700,000 or approximately 28.5% of the
Company's common stock.
As a further condition to the Initial Investors' obligations
under the Stock Purchase Agreement, the Selling Shareholders will
grant the Company a put option, expiring forty-five (45) days
after the closing date, giving the Company the right to require
the Selling Shareholders to purchase substantially all of the
Company's operating assets and liabilities (the "Company Assets")
and substantially all of the operating assets and liabilities of
Vercom Software, Inc., a wholly-owned subsidiary corporation of
the Company ("Vercom") (the "Vercom Assets"; the Company Assets
and the Vercom Assets shall collectively be referred to as the
"Assets") for $3,000,000. The Assets include all of the
operating assets related to the Company's business as currently
conducted. During this 45-day period, the Company will
determine the value of the Assets and evaluate whether it is in
the best interests of the Company and its shareholders for the
Company to sell the Assets to the Selling Shareholders at the put
price, to sell the Assets to a third party, to retain the Assets
or to take other appropriate action.
In order to facilitate the Company's potential exercise of
the put option, prior to the closing of the sale under the Stock
Purchase Agreement, the Company will contribute the Company
Assets to a recently formed wholly-owned subsidiary corporation,
Network Systems International of North Carolina, Inc. ("NSI-NC").
As part of this process, the Company intends to assign its rights
and obligations under substantially all of its current agreements
(including its software license agreements, service agreements
and employment agreements) to NSI-NC. The Company, however, will
not assign its right and obligations under the Stock Option
Agreement between the Company and Christopher N. Baker, the
Company's current president, dated April 15,1999 (the "Baker
Option"). Under the terms of the Baker Option, consummation of
the anticipated change of control discussed above would trigger a
vesting of Mr. Baker's right to purchase 500,000 shares of the
Company's common stock at $1.00 per share. Mr. Baker and
Millennium have agreed that Millennium or its assigns will lend
Mr. Baker $500,000, which Mr. Baker would use to exercise the
option to purchase the 500,000 shares. In consideration for the
$500,000 loan, Mr. Baker will transfer 275,000 shares of the
Company's common stock to Millennium or its assigns and grant
Millennium or its assigns an option expiring one hundred twenty
(120) days from the date Mr. Baker resigns from the Company's
Board of Directors to purchase the remaining 225,000 shares
acquired pursuant to the Baker Option for a purchase price of
$3.00 per share.
The Stock Purchase Agreement also provides that, as a
condition to the Initial Investors' obligations, all of the
Company's current directors must resign effective as of the
closing date. The current officers of the Company also plan to
resign as of the closing date. The Stock Purchase Agreement
further provides that Herbert Tabin will be appointed as the sole
member of the Company's Board of Directors to replace the former
directors as of the closing date.
Mr. Tabin is currently a managing partner of Millennium and
a co-founder of International Internet, Inc., a Delaware
corporation ("IINN"), and has served as its Vice President since
its inception. Prior to starting IINN, Mr. Tabin was a Vice
President of Marketing with LBI Group, Inc., a merchant banking
and venture capital group, from April, 1995 to December, 1996.
Mr. Tabin received a Bachelor of Science in Business Economics
from the State University of New York in 1989, and has been
involved in financial consulting and investment counseling since
1989.
If the Company elects to exercise the put option and require
the Selling Shareholders to purchase the Assets for $3,000,000,
the Selling Shareholders will make an initial cash payment of
$1,500,000 to the Company. The Selling Shareholders will deliver
a non-recourse promissory note in the principal amount of
$1,500,000, payable in one hundred twenty (120) days, for the
remaining purchase price. The Selling Shareholders will pledge
all of their remaining 2,925,856 shares of the Company's common
stock (the "Pledged Shares") as security for the payment of the
promissory note. The Company's right to exercise the put option
will be conditioned upon the Company using $2,000,000 of the
sales price received for the Assets to reduce the obligation
under the revolving credit arrangement
with Wachovia. The Company plans to use $1,250,000 from the
Selling Shareholders' initial cash payment and $750,000 from the
sale, if any, of the Pledged Shares to reduce the outstanding
indebtedness. The sale of the
Pledged Shares is discussed below. As a further condition to the
Company's right to exercise the put option, the Company will also
agree to change its name on its corporate charter, to discontinue
the use of the name "Network Systems International" and to
transfer all rights to the name "Network Systems International"
to the Selling Shareholders.
The Company understands that Millennium will use its best
efforts to place the Pledged Shares with accredited investors on
behalf of the Selling Shareholders for at least $1,500,000, or
approximately $0.513 per share. Millennium will remit the
proceeds generated by the sale of the Pledged Shares, up to
$1,500,000, to the Company to satisfy the remaining balance of
the purchase price for the Assets. If Millennium arranges the
sale of all of the Pledged Shares to other accredited investors,
these other accredited investors and the Millennium Investors
will collectively own 7,292,523 shares, or approximately 77.0%,
of the Company's outstanding common stock .
If all of the Pledged Shares are sold for an amount greater
than $1,500,000, Millennium will retain the excess. If
Millennium cannot sell all of the Pledged Shares for at least
$1,500,000, Millennium will use its best efforts to place as many
of the Pledged Shares as possible with accredited investors on
behalf of the Selling Shareholders for approximately $0.513 per
share. Pursuant to the terms of the put option, the Company will
use the first $750,000 from the sale of the Pledged Shares to
reduce the obligation under the revolving credit arrangement with
Wachovia. If Millennium is unable to sell all of the Pledged
Shares, the Company will extinguish the promissory note at
maturity and retain any remaining shares in satisfaction of the
outstanding purchase price for the sale of the Subsidiaries to
the Selling Shareholders.
Millennium has informed the Company's current
management that the Millennium Investors plan to expand the
business through acquisitions after the transactions discussed
above are completed.
A copy of the press release discussing the above and certain
related matters is included as Exhibit 99C to this Current Report
on Form 8-K and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Exhibits
The following exhibits are filed herewith in accordance with the
provisions of Item 601 of Regulation S-B:
Exhibit No. Description of Exhibit
2 Stock Purchase Agreement dated July 10, 2000 between the
Initial Investors and the registrant
20 Letter to the registrant's shareholders dated July 10, 2000
regarding the exception to the shareholder approval requirement
in the Nasdaq Marketplace Rules
99A Escrow Agreement dated July 10, 2000 between Millennium
Holdings Group, Inc., G. David Gordon & Associates,
P.C. as escrow agent and the registrant
99B Investment Agreements dated July 10, 2000 between
Robbie M. Efird, E. W. "Sonny" Miller, Jr., David F.
Christian, James W. Moseley, and Herbert Tabin
99C Press Release issued by the registrant on July 10, 2000
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
NETWORK SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Michael T. Spohn
Michael T. Spohn,
Chief Financial Officer
Date: July 10, 2000
Exhibit 2
THE SHARES OF COMMON STOCK OF NETWORK SYSTEMS INTERNATIONAL,
INC., A NEVADA CORPORATION, PURSUANT TO THIS STOCK PURCHASE
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED OR
OFFERED FOR SALE OR TRANSFER UNLESS A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS
WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE
OPINION OF COUNSEL, SUCH REGISTRATION UNDER THE SECURITIES ACT
AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.
NETWORK SYSTEMS INTERNATIONAL, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of July 10,
2000, by and between NETWORK SYSTEMS INTERNATIONAL, INC. , a
Nevada corporation (hereinafter the "Corporation") and the
Investors whose names appear on the signature pages hereto
(hereinafter the "Investors," each an "Investor").
RECITALS
A. The Corporation desires to raise money by the sale of
1,666,667 common shares of the Corporation ("Stock") to the
Investors, subject to the terms and conditions of this Agreement.
B. The Investors desire to purchase the Stock from the
Corporation and the Corporation desires to sell such Stock to the
Investors on the terms and conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual agreements,
covenants, representations and warranties contained in this
Agreement, the parties agree as follows:
Section 1. Authorization and Sale of Stock.
a. Sale and Issuance of Stock. Subject to the terms
and conditions of this Agreement, the Investors agree to purchase
at the Closing (as defined below), and the Corporation agrees to
sell and issue to the Investors at the Closing, that number of
Shares (the "Shares") set forth opposite each such Investor's
name on the signature page attached to this Agreement, at the
purchase price of $.60 per Share, for an aggregate purchase price
of $1,000,000.
b. Closing. Subject to the terms and conditions
hereof, the closing of the purchase and sale of the Shares
(hereinafter the "Closing") shall occur on, or about, July 21,
2000, at 10:00 a.m., in Greensboro, North Carolina, or at such
other time which the Corporation shall determine (the date of the
Closing is hereinafter referred to as the "Closing Date").
c. Delivery. At the Closing, the Corporation will
deliver to each Investor a stock certificate registered in such
Investor's name, representing the Shares to be purchased by such
Investor, against payment of the purchase price therefore, by
certified funds payable to the Corporation, or at the election of
the Corporation by wire transfer per the Corporation's
instruction.
Section 2. Corporation's Representations and Warranties.
The Corporation hereby
represents and warrants as of the Closing as follows:
2.1 Organization and Corporate Power. The Corporation
is a corporation which will be, at the time of closing, duly
organized, in good standing under the laws of Nevada and is
qualified as a foreign corporation in all jurisdictions in which
the nature of its property owned or leased by it or the conduct
of its business requires such qualification except for such
jurisdiction where the failure to so qualify would not materially
and adversely affect the business, operations or financial
condition of the Corporation. The Corporation has all requisite
corporate power and authority necessary to own and operate its
properties and to carry on its business as now conducted and,
subject to obtaining such permits, licenses, consents and the
like as may be required in any jurisdiction in which the
Corporation intends to conduct business, which the Corporation
has no knowledge or reason to believe will not be reasonably
obtained, as proposed or contemplated to be conducted in the
future and enter into and to carry out the provisions of this
Agreement and the transactions contemplated hereby.
2.2 Corporate Capitalization.
a. Authorized Capital Stock. Immediately prior to the
Closing, the Corporation's authorized capital stock shall consist
of One Hundred Million (100,000,000) shares of common Stock, par
value $0.001 per share, of which Seven Million Eight Hundred
Thirteen Thousand One Hundred Fifty-Four (7,813,154) shares are
issued and outstanding and Twelve Thousand Five Hundred (12,500)
shares of preferred stock, par value $0.001 per share, of which
Three Thousand Four Hundred Fifty-Five (3,455) shares are issued
and outstanding. All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued, are
fully paid and nonassessable and have been issued in compliance
with all applicable state and federal securities laws.
b. Restrictions on Transfer. Except for any
restrictions imposed by applicable state and federal securities
laws, and as set forth on Schedule 2.2(b), there is no right of
first refusal, co-sale right, right of participation, right of
first offer, option or other restriction on transfer applicable
to any shares of the Corporation's Common Stock. Except as set
forth on Schedule 2.2(b), the Corporation is not a party to, or
is subject to any agreement that affects or relates to the voting
or giving of written consent with respect to any shares of the
Corporation's Common Stock.
2.3 Corporate Compliance; Authorization.
a. Compliance with Instruments. To the Corporation's
knowledge, the Corporation is not in violation, breach or default
of any term of its Certificate of Incorporation or Bylaws, or of
any material term or provision of any judgment, decree, order
statute, rule or regulation applicable to or binding upon the
material adverse affect on the Corporation's business or
financial condition.
b. Authorization. The Corporation has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement, and all corporate action on the
part of the Corporation, its officers, directors and
shareholders, necessary for the sale and issuance of the Shares
and the Corporation's obligations hereunder have been taken.
This Agreement, the Certificate of Incorporation and all
agreements attached hereto as Exhibits, are each legal, valid and
binding obligations of the Corporations enforceable in accordance
with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other laws and equitable principals relating to or affecting the
enforcement of creditors' rights in general and by general
principals of equity. Except for the Wachovia Bank Revolving
Credit Agreement dated June 16, 1999, the execution, delivery and
compliance with the performance by the Corporation of this
Agreement does not and will not (1) conflict with or result in a
breach of the terms, conditions and provisions of any contractual
obligation, (2) result in the creation of any, material lien,
security interest, charge or encumbrance upon the Corporation's
capital stock or assets.
2.4 Absence of Litigation. Except as set forth on
schedule 2.4, there are no (a) actions proceedings, arbitrations
or investigations pending or any threat thereof, or verdicts or
judgments entered against the Corporation before any court or
before any administrative agency or officer which might result in
any material adverse change in the business, properties or
condition, financial or otherwise, of the Corporation or (b)
violations by the Corporation of any foreign, federal, state or
local laws, regulations or order, including but not limited to
laws pending to workplace safety and environmental clean-up, the
violation of which would have a material adverse effect on the
business of the Corporation.
2.5 Tax Returns and Payments. The Corporation has
filed or caused to be filed and accurately prepared all federal
and state income tax returns and all other federal and state tax
returns which are required to be filed by the Corporation. Except
as set forth on schedule 2.5, the Corporation has paid or caused
to be paid or set aside adequate reserves for all taxes,
penalties, and interests due or which may become due as shown on
such returns.
2.6 Financial Statements. The Corporation's 10-KSB for
the period ending September 30, 1999, 10-QSB for the period
ending March 31, 2000 and unaudited financial statements for the
two month period beginning April 1, 2000 and ending May 31, 2000
(hereinafter collectively referred to as the "Financial
Statements")which have been delivered to the Investors and (a)
are complete and correct in all material respects, (b) are in
accordance with the Corporation's books and records, and (c)
present fairly its financial position as of the dates indicated
and the results of its operations for the period indicated.
2.7 Material Change. Since May 31, 2000, there has not
occurred:
a. Any material adverse change in the assets,
liabilities, business, prospects, condition (financial or
otherwise), or operating results of the Corporation from that
reflected in the Financial Statements;
b. Any material increase in the indebtedness or
liabilities of the Corporation over the level thereof as
reflected in the Financial Statements;
c. Any increase in the compensation (including,
without limitation, the rate of commissions) payable to, or any
payment of a cash salary bonus to, any officer, director or
employee of, or consultant to, the Corporation;
d. Any material change in the manner of keeping the
book accounts or records of the Corporation or in the accounting
practices therein reflected.
e. Any declaration or payment of any dividends other
than payments of dividends on its preferred shares, or
distribution to the Corporation's Shareholders by the
Corporation, any acquisition or redemption by the Corporation of
any of its equity securities or loan by the Corporation to any of
its security holders.
2.8 Liabilities. Except as set forth on schedule 2.8,
the Corporation, which will be a non-operational holding company
at the closing, will not have any liabilities or obligations,
absolute or contingent outstanding as of the Closing Date except
for liabilities which may have been incurred in the ordinary
course of business, none of which in the aggregate, total more
than $2,500.
2.9 Extent of Offering. Except as contemplated in this
Agreement, neither the Corporation, nor any agent acting on its
behalf, has offered or will offer or solicit any offers to sell
any securities to any person or persons so as to require the
issuance or sale of the Shares to be registered to the provisions
of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), or prevent the Corporation from utilizing the
provisions of Section 4(2) or Regulation D of the Securities Act
or any applicable state securities law exemption from
qualification.
2.10 Fees, Commissions and Expenses. The Corporation
does not have any agreement to pay any commission or finders'
fees which relate to proceeds received from the sale of stock
pursuant to this Agreement.
2.11 Validity of Issuance. The Shares to be purchased
and sold pursuant to this Agreement, will, when issued, sold, and
delivered, be duly and validly issued, fully paid and
nonassessable, and will be free and clear of any liens or
encumbrances caused or created by the Corporation.
2.12 Private Offering. At no time did the Corporation
present to the Investors or any other persons, or solicit the
Investors or any other person with, any leaflet, newspaper or
magazine article, radio or television advertisement, or any other
form of general advertising or solicitation, nor did the
Corporation invite the Investors or any other to attend a
promotional meeting otherwise than in connection and concurrently
with such communicated offer.
Section 3. Investor Representations and Warranties. Each
Investor represents and warrants to the Corporation that:
a. Investment. The Investor is acquiring the Shares
for investment for its own account and not with a view to, or
resale in connection with, any distribution thereof, and such
Investor has no present intention of selling or distributing any
such Shares. It understands that the Shares have not been
registered under the Securities Act by reason of a Section 4(2)
exemption.
b. Limitations on Resale or Transfer. The Investor
understands and acknowledges that the Investor's ability to sell
the Shares may be limited by the lack of a ready market in which
to sell the Shares and that the certificates issued will carry
the following 144 legend:
"The shares represented by this Certificate have not
been registered under the Securities Act of 1933 (the "Act") and
are "restricted securities" as that term is defined in Rule 144
under the Act. The shares may not be offered for sale, sold or
otherwise transferred except pursuant to an exemption from
registration under the Act, the availability of which is to be
established to the satisfaction of the Company."
c. Reliance by Company. Investor understands and
acknowledges that the Corporation will rely upon the
representations, warranties, agreements and understandings made
herein in making its decision whether to accept Investor's offer,
and that the foregoing representations, warranties, agreements
and understandings shall survive the closing of this Agreement.
d. Access to Data. The Investor has had an
opportunity to discuss the Corporation's business, management and
financial affairs with its management and to obtain any
additional information necessary or appropriate for deciding
whether or not to purchase the Shares. The Investor acknowledges
that no representation or warranties, oral and written, have been
made by the Corporation, or any other agent thereof except as set
forth in this Agreement.
e. Accredited Investor Status. The Investor
represents that it meets one or more of the following standards
(by initializing each applicable standard):
Standard One: The Investor is a
natural person who has an individual net worth or joint net worth
with his or her spouse in excess of $1,000,000. "Net Worth"
means the net fair market value of equity of the Investor's
assets and properties.
Standard Two: The Investor is a
natural person who has had individual income in excess of
$200,000 or joint income with his or her spouse in excess of
$300,000 during 1998 and 1999 and reasonably expects to have the
same income level in 2000.
Standard Three: The Investor is a
corporation partnership or trust with total assets in excess of
$5,000,000 and not formed specifically to acquire the securities
offered herein.
Standard Four: The Investor is an entity
in which all of the equity or beneficial owners are deemed to be
"accredited" investors by reason of each of them meeting either
Standard One, Two or Three above.
e. Previous Investments. The Investor is an investor
in securities of companies in the development stage and
acknowledges that it is able to fend for itself, can bear the
economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of
evaluating the merit and risks of the investment contemplated
herein.
f. Risks. The Investor understands that the
investment in the Corporation involves a high degree of risk and
is suitable only for investors who can afford a loss of their
entire investment and who have no need for liquidity from their
investment.
g. Private Offering. At no time was the investor
presented or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any form of
general advertising or solicited or invited to attend a
promotional meeting otherwise than in connection and concurrently
with such communicated offer.
h. Authorization. The Investor is a resident of the
state set forth in the address of the Investor shown on the
signature page of this Agreement. The Investor has all requisite
authorization to execute and deliver the Agreement and
understands that the Corporation is relying on the
representations and warranties of the Investor, including but not
limited to the Investor's financial sophistication and status as
an accredited investor, in determining the availability of an
exemption from registration under the Securities Act.
Section 4. Condition Precedent to Obligation of Investor to
Close
4.1. Representations and Warranties; Performance. Each
of the representations and warranties made by the Corporation
herein will be true and correct in all material respects as of
the Closing with the same effect as though made at that time
except for changes contemplated, permitted or required by this
Agreement; the Corporation will have performed and complied with
all agreements, covenants and conditions required by this
Agreement to be performed and complied with by it prior to the
Closing; and the Investors will have received, at the Closing, a
certificate of the Corporation, signed by the President, stating
that each of the representations and warranties made by the
Corporation herein is true and correct in all material respects
as of the Closing except for changes contemplated, permitted or
required by this Agreement and that the Corporation has performed
and complied with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by
it prior to the Closing.
4.2 Corporate Reorganization. The Corporation shall
cause its operating assets and liabilities, except as set forth
on Schedule 2.8, to be contributed to either a newly created
wholly-owned subsidiary, Network Systems International of North
Carolina, Inc. or its existing subsidiary, Vercom, Inc.
(collectively referred to as the "Subsidiaries"). The parties
acknowledge and agree that any federal tax benefits related to
the Corporation's losses through the later of (1) the date of the
contribution of assets to the Subsidiaries, or (2) if the put
option described in Section 4.5 is exercised, the date of such
exercise; shall follow the operating assets to the Subsidiaries.
Specifically, the parties acknowledge that except for any federal
or state tax payments made after the Closing with respect to any
pre-closing tax liabilities, all rights to the benefit of federal
income tax refunds shall be an asset of Network Systems
International of North Carolina, Inc. The Corporation will agree
to take all actions necessary to cause the monetary benefit of
these losses to inure to the benefit of Network Systems
International of North Carolina, Inc. Except as otherwise noted,
all agreements of the Corporation, including employment
contracts, will be assigned to the subsidiaries.
4.3 Board of Directors. All members of the Board of
Directors of the Corporation, except Robbie Efird, shall submit
their resignations to the Corporation to be effective prior to
the date of Closing. Also prior to Closing, the sole remaining
director, Robbie Efird, will appoint Herbert Tabin to the Board
of Directors and then immediately resign.
4.4 Sale of Corporation's Common Stock. Prior to
Closing, Robbie M. Efird, E. Miller, Jr., David F. Christian and
James W. Mosely (collectively the "Selling Shareholders") will
enter into an agreement to sell two million seven hundred
thousand (2,700,000)shares of the Corporation's common stock for
a purchase price of one million five hundred thousand dollars
($1,500,000). The Selling Shareholders agree to sell the shares
in the following amounts:
Name Shares
Robbie M. Efird 1,900,000
E. W. Miller, Jr. 600,000
David F. Christian 100,000
James W. Moseley 100,000
Section 4.5 Selling Shareholders Purchase of
Subsidiaries. The Selling Shareholders will enter into an
agreement which provides the Corporation with an option to
require the Selling Shareholders to purchase the Subsidiaries of
the Corporation for a purchase price of three million dollars
($3,000,000). The option to purchase of the Subsidiaries may be
exercised by the Board of Directors' after Closing, but within 45
days of Closing. If the option is exercised, the Selling
Shareholders will deliver as a consideration for the purchase of
the Subsidiaries $1,500,000 in cash and a secured, Non-Recourse
Promissory Note in the amount of $1,500,000 payable in 120 days.
The security on the Non-Recourse Promissory Note will be
2,925,856 shares of the Corporation's Common Stock which the
Corporation shall have the right to sell for a total of
$1,500,000. As part of the purchase of the Subsidiaries, and as
a condition to the Selling Shareholders' obligation to consummate
the purchase, the Corporation must commit to reduce the
Subsidiaries' indebtedness to Wachovia Bank by three million
dollars ($3,000,000).
Section 5. Condition Precedent to Obligation of Corporation
to Close. It shall be a condition precedent to the Corporation's
obligation to close the purchase and sale of the Shares under
this Agreement that the Corporation has obtained the consent of
Wachovia Bank, N.A. to the issuance and sale of the Shares and to
other matters described in the Form 8-K filed on or about July
10, 2000
Section 6. Miscellaneous.
6.1. Successors and Assigns. Except as otherwise
expressly provided herein, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto.
6.2. Entire Agreement. This Agreement and the exhibits
attached hereto and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement
between the Corporation and the Investors with regard to the
subjects hereof and thereof.
6.3. Notice. Any notice, payment, report or other
communication required or permitted to be given by one to any
other party by this Agreement shall be in writing and either (i)
served personally on the other party or parties; (ii) sent by
express, registered or certified first class mail, postage
prepaid, addressed to the other party or parties at its or their
address or addresses as indicated next to their signatures below,
or to such other address as any addressee shall have therefore
furnished to the other parties by like notice; (iii) delivered by
commercial courier to the other party or parties; or (iv) sent by
facsimile with the original sent by U.S. Mail. Such notice shall
be deemed received on the second day after transmittal if sent by
one day courier together with a transmission of such notice by
facsimile if the recipient has the capability to receive a
facsimile.
6.4. Finder's Fee and Broker's Fees. The Corporation
and the Investors hereto represent and warrant that they have
retained no finder or broker in connection with the transactions
by this Agreement, and hereby agrees to indemnify and to hold the
other harmless from any liability for any finder's or broker's
fee to any broker or other person or firm (and the cost and
expenses of defending against such liability or asserted
liability) for which such indemnifying person, or any of its
employees or representatives, are responsible.
6.5. Titles and Subtitles. The titles of the Sections
and subsections of this Agreement are for the convenience of
reference only and are not to be considered in construing this
Agreement.
6.6. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be original, but
all of which together shall constitute one instrument.
6.7. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year hereinabove first written.
CORPORATION
NETWORK SYSTEMS INTERNATIONAL, INC.
200 North Elm Street
Greensboro, NC 27401
Fax (336)-271-0852
By: /s/ Christopher Baker
Christopher Baker, President
INVESTOR INVESTOR
By: /s/ Richard T. Clark By: /s/ John Signorello
Richard T. Clark John Signorello
INVESTOR INVESTOR
By: /s/ Joel C. Holt By: /s/ Steven Elias
Joel C. Holt Steven Elias
INVESTOR INVESTOR
By: /s/ D. Mark White By: /s/ Bryan John
D. Mark White Bryan John
INVESTOR
By: /s/ George D. Gordon
George D. Gordon
Network Systems International, Inc.
Schedule 2.2(b)
Restrictions on Transfer
1. Stock Option Agreement dated April 15,1999, granting options
to 500,000 shares of Common Stock to Christopher Baker.
2. Stock Option Awards granted during 1999
3. Rights related to the Corporation's Preferred Stock.
4. Wachovia Revolving Credit Agreement, dated June 16,1999.
Network Systems International, Inc.
Schedule 2.4
Absence of Litigation Listing
1. Mediation Settlement Agreement between Network Information
Services, Inc. and Highland Industries, Inc., Network owes
Highland $150,000 as final payment of settlement. Confession of
Judgment to be issued on July 31, 2000 if not paid.
2. Canton Financial Services Corporations v. Network Systems
International, Inc. in the Circuit Court for the Thirteenth
Judicial Circuit in and for Hillborough County. State of Florida
Civil Division, Case No. 98-657, Division "A". Trial anticipated
for late September 2000.
3. Building Lien filed 6/9/00 in Guilford County by J. Wayne
Poole, Inc., P.O. Box 21585, Greensboro, NC 27420. Principal
owed $63,246.18.
4. Morales versus Rick Tuberosa and Network Systems
International, Inc. Shareholder is suing a former Director of
the company for approximately $10,000 in short swing profits
received while a Director. The company will receive any monies
collected less attorney fees.
Network Systems International, Inc.
Schedule 2.5
Tax Returns and Payments
The following list the Federal or State tax returns which have
been filed accurately but payment has not been made:
1. Network Systems International, Inc. and Subsidiaries Federal
Form 1120 filed on June 15, 2000 for the tax year ending
September 30, 1999. A tax liability of $169,002 remains to be
paid on a total tax liability of $432,897. Network Systems
International, Inc. and Subsidiaries has filed a Form 1138
"Extension of Time for Payment of Taxes by a Corporation
Expecting a Net Operating Loss Carryback" to utilize the
available NOL Carryback which is approximately $2,000,000 for the
year ended September 30, 2000.
2. Vercom Software, Inc. Federal Form 1120 filed on June 15,
2000 for the short tax period January 1, 2000 to June 16, 2000.
The entire tax liability of $72,780 remains to be paid for this
short period.
Network Systems International, Inc.
Schedule 2.8
Listing of Liabilities
1. Liabilities and/or obligations related to the matters
described on schedule 2.2(b)
2. Liabilities and/or obligations related to the matters
described on schedule 2.4
3. Liabilities and/or obligations related to the matters as
detailed in section 2.5
4. Liabilities and/or obligations of the Company under the
Contribution Agreement in which the operating assets of the
Company will be contributed to NSI-NC
5. All expenses incurred by Millennium
Exhibit 20
July 10, 2000
To: The Shareholders of Network Systems International, Inc. (the "Company")
Re: Notice of Exception to Shareholder Approval Requirement
of Nasdaq
Marketplace Rules
Dear Shareholder:
The purpose of this letter is to notify you that the Company
has applied for and has been granted conditional approval from
Nasdaq for its omission to seek shareholder approval of the stock
transaction described below.
On June 26, 2000, the Company's Board of Directors approved
the Company's issuance of 1,666,667 new shares of its common
stock for $1,000,000, or $0.60 per share, to seven investors in a
private placement pursuant to the terms and conditions of a Stock
Purchase Agreement dated July 10, 2000. Shortly after the
Company's issuance of the new shares of common stock, four of the
Company's major shareholders plan to sell 2,700,000 shares of the
Company's common stock to an investor for $1,500,000
(approximately $0.56 per share) in a second private placement.
The four major shareholders currently own 5,625,856 shares, or
72.0%, of the Company's common stock. The issuance of the new
shares by the Company and the placement of the major
shareholders' shares are part of certain transactions described
in a Form 8-K Current Report filed with the Securities and
Exchange Commission on or about July 10, 2000. A copy of the
Form 8-K Current Report is enclosed.
The Nasdaq Marketplace Rules require the Company to seek
shareholder approval in connection with the transactions
described above for two reasons: (1) the issuance is part of a
plan that will result in a change in control of the Company; and
(2) the common stock to be sold by the Company and the major
shareholders in these transactions is in excess of twenty percent
(20%) of the currently outstanding shares of the Company at a
price less than the current market value. However, the Nasdaq
Marketplace Rules provide that the Company may apply for an
exception to the shareholder approval requirement if the delay in
securing stockholder approval would seriously jeopardize the
financial viability of the Company, and reliance by the Company
on the exception is expressly approved by its Audit Committee.
During the past nine months, the Company has experienced a
substantial reduction in revenues and has suffered large
operating losses. The combination of these two factors has put
the Company in violation of its financial loan covenants
contained in its revolving credit agreement with Wachovia Bank,
N.A. As stated in the Company's 10-QSB Quarterly Report filed
with the Securities and Exchange Commission on May 15, 2000:
"Until the Company can renegotiate its current revolving credit
agreement or secure financing with another lender, the Company's
principal 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." Wachovia Bank has indicated that it is not
willing to renegotiate the terms of the revolving credit
agreement, and has stressed the need for the Company to reduce
its outstanding indebtedness to a level acceptable to Wachovia
Bank. To date, the Company has been unable to arrange for
adequate financing to replace the Wachovia Bank credit facility.
As a result, the Company began to consider other transactions,
such as the transaction described in the Form 8-K Current Report.
In the opinion of the Board of Directors, this transaction is the
best alternative available to the Company at this time. The
other parties to the transaction have indicated that they will
not complete the transaction if it is delayed by a proxy
solicitation process.
The Company's Audit Committee evaluated the Company's
present situation and determined on June 5, 2000, that the delay
necessitated by the mechanics of seeking shareholder approval
through a normal proxy solicitation process would seriously
jeopardize the financial viability of the Company.
Sincerely,
/s/ Robbie M. Efird
Robbie M. Efird
Chairman and CEO
Network Systems International, Inc.
RME/rkr
Enclosures: Form 8-K Current Report
cc: The Nasdaq Stock Market
Exhibit 99A
ESCROW AGREEMENT
This Escrow Agreement ( "Agreement") is made and
entered into as of July 10, 2000, by and among Network Systems
International, Inc., a Nevada corporation ("NESI"), Millennium
Holdings Group, Inc., a New York corporation ("MHG") and G. David
Gordon & Associates, P.C., an Oklahoma professional corporation,
as escrow agent ("Escrow Agent").
A. On July 10, 2000, NESI agreed to sell 1,666,667
shares of its authorized but unissued common stock ("NESI Stock")
in consideration for $1,000,000 to seven (7) accredited investors
located by MHG as listed on Exhibit "A" (the "Investors"),
pursuant to a stock purchase agreement dated July 10, 2000,
between NESI and the Investors (the "Stock Purchase Agreement").
B. NESI and certain NESI shareholders, pursuant to
the terms of the Stock Purchase Agreement, have agreed to cause a
corporate restructuring of NESI prior to the closing of the Stock
Purchase Agreement.
C. NESI has requested that the purchasers of
the NESI stock place $1,000,000 in escrow to assure their
purchase of the NESI Stock pursuant to the terms of the Stock
Purchase Agreement.
D. Escrow Agent has agreed to serve as the escrow
agent for MHG and NESI, in accordance with the terms of this
agreement.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Escrow. Concurrently with the execution hereof,
MHG will cause to be delivered and deposited with Escrow Agent
$1,000,000 in immediately available funds (the "Escrow Amount").
Except as otherwise directed under Section 4 hereof, the Escrow
Agent will hold the Escrow Amount in escrow with the $1,000,000
to be delivered to NESI as the purchase price for the NESI Stock
in accordance with the Stock Purchase Agreement.
2. Escrow Period; Retention and Distribution of
Escrow Amount. As used herein, the term "Escrow Period" means
that time period beginning on the date hereof and ending on the
earlier of the date on which the Escrow Agent receives written
instructions signed by MHG and NESI or a court order directing
the distribution of the Escrow Amount ("Escrow Release Date").
The Escrow Agent shall hold and invest the Escrow Amount during
the Escrow Period, in accordance with the terms of this
Agreement. The Escrow Agent shall distribute the Escrow Amount on
or promptly after the Escrow Release Date, in accordance with the
terms hereof.
3. Interest on Escrow Amount. During the Escrow
Period, the Escrow Amount will be deposited at Bank of America
N.A. with further credit to the G. David Gordon & Associates,
P.C. Trust Account (the "Escrow Account"). Any interest, if any,
earned on the Escrow Amount during the Escrow Period (the
"Interest") shall be distributed to MHG or its assigns promptly
after the Escrow Release Date. For tax reporting and withholding
purposes, all Interest shall be allocated to MHG.
4. Transfer of Escrow Amount.
(a) Completion of Stock Purchase. If the Escrow
Agent shall receive written instructions executed by MHG and
NESI advising the Escrow Agent that all pre-conditions of the
Stock Purchase Agreement have occurred or will occur and direct
that the Escrow Amount be distributed, the Escrow Agent shall
transfer the Escrow Amount to NESI and NESI shall promptly
deliver to the Investors one or more stock certificates
representing the number of shares of common stock of the Company
equal to 1,666,667 shares of the capital stock of NESI.
(b) Termination of Stock Purchase; etc. If the
Escrow Agent shall receive written instructions executed by MHG
and NESI advising the Escrow Agent that all preconditions of the
Stock Purchase Agreement will not occur by July 28, 2000, the
Escrow Agent shall transfer the Escrow Amount to MHG.
(c) Disagreement regarding Stock Purchase
Failure. If the parties disagree as to whether all preconditions
of the Stock Purchase Agreement have occurred, then the Escrow
Agent shall continue to hold the Escrow Amount in escrow until
the parties have either (1) agreed upon the manner in which the
Escrow Amount shall be distributed or (2) obtained an order from
a court of competent jurisdiction with respect to such matter.
(d) Contested Claims. In the event that the
Escrow Agent receives written direction from one, not both, of
MHG and NESI to distribute the Escrow amount, it shall give
notice of such direction to the other party, but shall continue
to hold the Escrow Amount until it receives written instructions
executed by both MHG and NESI or a court order directing the
distribution of the Escrow Amount.
5. Limitation of Escrow Agent's Liability.
(a) Escrow Agent will incur no liability with
respect to any action taken or suffered by it in reliance upon
any notice, direction, instruction, consent, statement or other
document believed by it to be genuine and duly authorized, nor
for any other action or inaction, except its own willful
misconduct, fraud or gross negligence. In no event shall the
Escrow Agent be liable for punitive damages. Escrow Agent will
have no duty beyond good faith to inquire into or investigate the
validity, accuracy or content of any document delivered to it.
Escrow Agent will not be responsible for the validity or
sufficiency of this Agreement. In all questions arising under
this Agreement, Escrow Agent may rely on the advice or opinion of
its counsel, and for anything done, omitted or suffered in good
faith by Escrow Agent based on such advice, Escrow Agent will not
be liable to anyone. Escrow Agent will not be required to take
any action hereunder involving any expense unless the payment of
such expense is made or provided for in a manner satisfactory to
it.
(b) In the event conflicting demands are made or
conflicting notices are served upon Escrow Agent with respect to
the Escrow Amount, Escrow Agent will have the absolute right, at
Escrow Agent's election, to do any of the following: (i) resign
so a successor can be appointed pursuant to Article 7 herein,
(ii) file a suit in interpleader and obtain an order from a court
of competent jurisdiction located in Tulsa County, Oklahoma (the
"Stipulated Jurisdiction") requiring the parties to interplead
and litigate in such court their several claims and rights among
themselves, or (iii) notify the other parties in writing that it
has received conflicting instructions and is refraining from
taking action until it receives written instructions from both
MHG and NESI. For the purpose of this Section 5(b) and for the
enforcement of any court order, the parties each consent to the
personal jurisdiction of the federal and State courts in the
Stipulated Jurisdiction and waive any objection to the venue and
rights to request dismissal on the grounds of forum non
conveniens or similar doctrines. In the event an interpleader
suit as described in clause (ii) above is brought and the Escrow
Amount is deposited as required by applicable procedural rules
governing litigation in interpleader in the Stipulated
Jurisdiction, Escrow Agent will be entitled (upon court order) to
be fully released and discharged from all further obligations
imposed upon it under this Agreement, and the party which does
not prevail in such action will pay Escrow Agent all costs,
expenses and reasonable attorney's fees expended or incurred by
Escrow Agent pursuant to the exercise of Escrow Agent's rights
under this Article 5; provided, however, that if such action is
settled, then, unless the parties otherwise agree, each of the
parties will pay the Escrow Agent an equal share all of such
costs, expenses and fees.
(c) Each party to this Agreement (other than
Escrow Agent), jointly and severally (each an "Indemnifying Party
and together the "Indemnifying Parties") hereby covenants and
agrees to reimburse, indemnify and hold harmless Escrow Agent,
Escrow Agent's partners, employees, counsel and agents (severally
and collectively, "Escrow Agent"), from and against any damage,
liability or loss suffered, incurred by, or asserted against
Escrow Agent including amounts paid in settlement of any action,
suit, proceeding, or claim brought or threatened to be brought
and including reasonable expenses of legal counsel,
(collectively, "Loss") arising out of, in connection with or
based upon any act or omission by Escrow Agent (and/or any of its
officers, directors, employees, counsel or agents) relating in
any way to this Agreement or Escrow Agent's services hereunder.
This indemnity will exclude any indemnification for any Loss
arising in whole or in part, directly or indirectly, from any
gross negligence, fraud or willful misconduct on Escrow Agent's
part.
(d) Each Indemnifying Party may participate at
its own expense in the defense of any claim or action that may be
asserted against Escrow Agent related to this Agreement, and if
the Indemnifying Parties so elect, the Indemnifying Parties may
assume the defense of such claim or action; provided, however,
that, if there exists a conflict of interest that would make it
inappropriate, in the sole discretion of Escrow Agent, for the
same counsel to represent both Escrow Agent and the Indemnifying
Parties, Escrow Agent's retention of separate counsel will be
reimbursable as herein above provided. Escrow Agent's right to
indemnification hereunder will survive Escrow Agent's resignation
or removal as Escrow Agent and will survive the termination of
this Agreement by lapse of time or otherwise.
(e) Escrow Agent hereby warrants that Escrow Agent will notify
each Indemnifying Party by letter, or by telephone or telecopy
confirmed by letter, of any receipt by Escrow Agent of a written
assertion of a claim against Escrow Agent arising out of this
Agreement, or any action commenced against Escrow Agent arising
out of this Agreement, within five (5) business days after Escrow
Agent's receipt of written notice of such claim. However, Escrow
Agent's failure to so notify each Indemnifying Party will not
operate in any manner whatsoever to relieve an Indemnifying Party
from any liability that it may have to Escrow Agent under this
Article 5 or otherwise unless such failure by Escrow Agent to
give such notice (or to give such notice within such five (5)
business day period) materially prejudices such Indemnifying
Party.
(f) Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder
either directly or by or through its agents or attorneys. Escrow
Agent will have no liability for the conduct of any outside
attorneys, accountants or other similar professionals it retains.
Nothing in this Agreement will be deemed to impose upon Escrow
Agent any duty to qualify to do business or to act as a fiduciary
or otherwise in any jurisdiction other than the State of
Oklahoma.
6. Expenses of Escrow Agent. All fees and expenses
(the "Fees and Expenses") of Escrow Agent incurred in the course
of performing its responsibilities under this Agreement shall be
invoiced to the parties, and shall be paid in equal shares by MHG
and NESI; it being understood that the Escrow agent does not
intend to charge any fees other than such out-of- pocket expenses
as it may incur and in those expenses described in Section 5(b).
7. Successor Escrow Agent. In the event Escrow Agent
becomes unavailable or unwilling to continue in its capacity
herewith, Escrow Agent may resign and be discharged from its
duties or obligations hereunder by giving notice of its
resignation to the parties to this Agreement, specifying a date
not less than ten (10) days following such notice date of when
such resignation will take effect. MHG will designate a
successor Escrow Agent prior to the expiration of such ten (10)
day period by giving written notice to Escrow Agent and NESI;
provided, however, that, MHG may appoint a successor Escrow Agent
without the consent of NESI only so long as such successor is a
bank or trust company which, together with its parent, has
capital and surplus of at least US $50 million, and may appoint
any other successor Escrow Agent with the consent of the parties
which will not be unreasonably withheld. Escrow Agent will
promptly transfer the Escrow Amount to such designated successor.
8. Limitation of Responsibility. Escrow Agent's
duties are limited to those set forth in this Agreement, and
Escrow Agent, acting as such under this Agreement, is not charged
with knowledge of or any duties or responsibilities under any
other document or agreement, including without limitation the
Stock Purchase Agreement. Escrow Agent may execute any of its
powers or responsibilities hereunder and exercise any rights
hereunder either directly or by or through its agents or
attorneys. Escrow Agent will not be responsible for and will not
be under a duty to examine into or pass upon the validity,
binding effect, execution or sufficiency of this Agreement or of
any agreement amendatory or supplemental hereto.
9. General Provisions
(a) Governing Law; Jurisdiction; Attorneys' Fees. This
Agreement shall be governed by and construed and interpreted in
accordance with the substantive laws of the State of North
Carolina as applied to contracts made and performed within the
State of North Carolina without regard to its conflicts of law
principles. Each of the parties to this Agreement hereby
irrevocably submits to the jurisdiction of any Oklahoma federal
court sitting in the County of Tulsa in respect of any suit,
action or proceeding arising out of or pertaining to this
Agreement and irrevocably accepts for itself/himself/herself and
in respect of its/his/her property, generally and
unconditionally, jurisdiction of the foregoing courts. Each of
the parties to this Agreement hereby irrevocably waives, to the
fullest extent such party may effectively do so under applicable
law, any objection that such party may now or hereafter have to
the laying of venue of any such suit, action or proceeding
brought in any such court and any claim that such suit, action or
proceeding has been brought in an inconvenient forum. Should
suit be brought to enforce or interpret any part of this
Agreement, the prevailing party will be entitled to recover, as
an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without
limitation, costs, expenses and fees on any appeal). The
prevailing party will be entitled to recover its costs of suit,
regardless of whether such suit proceeds to final judgment.
(b) Assignment; Binding Upon Successors and Assigns.
No party hereto may assign any of its rights or obligations
hereunder without the prior written consent of the other parties
hereto. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns.
(c) Severability. If any provision of this Agreement,
or the application thereof, will for any reason and to any extent
be invalid or unenforceable, then the remainder of this Agreement
and application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto.
(d) Counterparts. This Agreement may be executed in
any number of counterparts, each of which will be an original as
regards any party whose signature appears thereon and all of
which together will constitute one and the same instrument. This
Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of
all parties reflected hereon as signatories.
(e) Amendment; Waiver. This Agreement may be amended
by the written agreement of MHG, Escrow Agent and NESI, provided
that, if Escrow Agent does not agree to an amendment agreed upon
by MHG and NESI, Escrow Agent will resign and Buyer will appoint
a successor Escrow Agent in accordance with Article 7. No
amendment of the Stock Purchase Agreement will increase Escrow
Agent's responsibilities or liability hereunder without Escrow
Agent's written agreement. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement
will be effective unless such waiver is set forth in a writing
signed by such party. No waiver by any party of any such
condition or breach, in any one instance, will be deemed to be a
further or continuing waiver of any such condition or breach or a
waiver of any other condition or breach of any other provision
contained herein.
(f) Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
to have been duly given when the same shall be delivered (i)
personally, or (ii) by facsimile transmission (confirmed by mail)
or (iii) three business days after being sent by registered or
certified mail, postage prepaid, and addressed as set forth below
If to NESI: Network Systems International, Inc.
200 N. Elm Street
Greensboro, NC 27401
Attn: Chris Baker
Fax: (336) 271-0852
If to MHG: Millennium Holdings Group, Inc.
6413 Congress Avenue, Suite 240
Boca Raton, FL 33487
Attn: Herbert Tabin
Fax: (561) 988-0815
If to Escrow Agent: G. David Gordon & Associates, P.C.
7633 East 63rd Place, Suite 210
Tulsa, OK 74133
Attn: G. David Gordon, Esq.
Fax: (918) 254-2988
Any party may change the address to which notices are
to be addressed by giving the other party notice in the manner
herein set forth. Any notice delivered to the Escrow Agent shall
be effective only upon receipt. The Escrow Agent may assume
without inquiry that any document required to be delivered to the
Escrow Agent and any other person has been received by such other
person if it has been received by the Escrow Agent.
(g) Construction. This Agreement has been
negotiated by the respective parties hereto and their attorneys
and the language hereof will not be construed for or against
either party. Unless otherwise indicated herein, all references
in this Agreement to "Sections" refer to sections of this
Agreement. The titles and headings herein are for reference
purposes only and will not in any manner limit the construction
of this Agreement which will be considered as a whole.
IN WITNESS WHEREOF, the parties have duly executed this
Escrow Agreement as of the day and year first above written.
MHG: NESI:
MILLENNIUM HOLDINGS GROUP, INC. NETWORK SYSTEMS INTERNATIONAL, INC.
/s/ Gary Schultheis /s/ Chris Baker
Gary Schultheis , President Chris Baker, President
ESCROW AGENT:
G. David Gordon & Associates, P.C.
By: /s/ G. David Gordon
G. David Gordon, President
Exhibit A
Listing of Accredited Investors
1. Richard T. Clark
2. Joel C. Holt
3. D. Mark White
4. George D. Gordon
5. Bryan John
6. John Signorello
7. Steven Elias
Exhibit 99B
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into
this 10 day of July, 2000, by and among Herbert Tabin, a
resident of Florida, and his assigns (hereinafter referred to as
"Buyer"); and ROBBIE M. EFIRD, (hereinafter referred to as
"Seller"), being a shareholder of NETWORK SYSTEMS INTERNATIONAL,
INC., a Nevada corporation (hereafter referred to as "Company").
WHEREAS, Seller is the owner of record and beneficially owns
One Million Nine Hundred Thousand (1,900,000) shares of the
issued and outstanding shares of Common Stock of the Company
(herein referred to as"Shares"); and
WHEREAS, Seller desires to sell the Shares to Buyer, and
Buyer desires to purchase the Shares, upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, and subject to the accuracy of the
representations and warranties of the parties, the parties hereto
agree as follows:
I.
SALE AND PURCHASE OF THE SHARES
1.1 Sale and Purchase. Subject to the terms and conditions
hereof, at the Closing (as defined in paragraph 1.2 below),
Seller agrees to sell, assign, transfer, convey and deliver to
Buyer, and Buyer agrees to purchase the Shares from Seller.
1.2 Closing. The purchase shall be consummated at a
closing ("Closing") to take place at 9:00 o'clock a.m., at the
offices of Network Systems International, Inc. on or about July
21, 2000 ("Closing Date").
1.3 Purchase Price. The purchase price ("Purchase Price")
for the Shares shall be a cash payment of One Million Fifty-Five
Thousand Five Hundred Fifty Five Dollars ($1,055,555) payable to
the Seller in certified funds. At the closing, the Purchase
Price will be delivered and deposited with G. David Gordon &
Associates, P.C., as escrow agent ("Escrow Agent"). If the Put
Option described in Section 4.3 is exercised by the Company, the
Escrow Agent will deliver the Purchase Price to the Company as
the Seller's portion of the initial cash payment provided for
therein. If the Put Option is not exercised by the Company prior
to its expiration, the Escrow Agent will immediately release the
Purchase Price to Seller.
II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows:
(a) Title to the Shares. At Closing, Seller shall own
of record and beneficially the Shares of the Company, free
and clear of all liens, encumbrances, pledges, claims,
options, charges and assessments of any nature whatsoever,
with full right and lawful authority to transfer the Shares
to Buyer. No person has any rights of first refusal with
respect to any of the Shares. There exists no voting
agreement, voting trust, or outstanding proxy with respect
to any of the Shares. There are no outstanding rights,
options, warrants, calls, commitments, or any other
agreements of any character, whether oral or written, with
respect to the Shares.
(b) Authority. Seller has full power and lawful
authority to execute and deliver this Agreement to which he
is a party and to consummate and perform the Agreement as
contemplated thereby. This Agreement to which Seller is a
party constitutes (or shall, upon execution, constitute)
valid and legally binding obligations upon Seller,
enforceable in accordance with their terms. Neither the
execution and delivery of this Agreement to which he is a
party by Seller, nor the consummation and performance of the
Agreement contemplated thereby, conflicts with, requires the
consent, waiver or approval of, results in a breach of or
default under, or gives to others any interest or right of
termination, cancellation or acceleration in or with respect
to, any agreement by which Seller is a party or by which
Seller or any of his properties or assets are bound or
affected.
(c) Full Disclosure. All statements of Seller
contained in this Agreement and in any other
written documents delivered by or on behalf of Seller to
Buyer are true and correct in all material respects and do
not omit any material fact necessary to make the statements
contained therein not misleading in light of the
circumstances under which they were made.
2.2 Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows:
(a) Authority. Buyer has full power and lawful
authority to execute and deliver this
Agreement to which Buyer is a party and to consummate and
perform the Agreement as contemplated thereby. This
Agreement to which Buyer is a party constitutes (or shall,
upon execution, constitute) valid and legally binding
obligations upon Buyer, enforceable in accordance with their
terms. Neither the execution and delivery of this Agreement
to which Buyer is a party by Buyer, nor the consummation and
performance of this Agreement contemplated thereby,
conflicts with, requires the consent, waiver or approval of,
results in a breach of or default under, or gives to others
any interest or right of termination, cancellation or
acceleration in or with respect to, any agreement by which
Buyer is a party or by which Buyer or any of his properties
or assets are bound or affected.
(b) Investment Intent. Buyer is acquiring the Shares
for his own account, for investment
purposes only, and not with a view to the sale or
distribution of any part thereof, and Buyer has no present
intention of selling, granting participation in, or
otherwise distributing the same. Buyer understands the
specific risks related to an investment in the Shares,
especially as it relates to the financial performance of the
Company.
III.
COVENANTS
3.1 Covenants of Seller. Seller covenants and agrees that
from the date hereof to the Closing without the prior written
consent of Buyer:
(a) Maintain Books. Seller will use reasonable
efforts, as its Chairman of the Board, to cause the Company
to maintain its books, accounts and records in the usual,
regular ordinary and sound business manner and in accordance
with generally accepted accounting principles applied on a
basis consistent with past practices.
(b) Notice of Change. Seller will promptly advise
Buyer in writing of any material adverse change, or the
occurrence of any event which involves any substantial
possibility of a material adverse change, in the business,
financial condition, results of operations, assets,
liabilities or prospects of the Company, in the event he
becomes aware of any such circumstances.
IV.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF BUYER TO CLOSE
The obligation of Buyer to close the transactions
contemplated hereby is subject to the fulfillment by Seller prior
to Closing of each of the following conditions, which may be
waived in whole or in part by Buyer:
4.1 Compliance with Representations, Warranties and
Covenants. The representations and warranties of Seller
contained in this Agreement shall have been true and correct when
made and shall be true and correct as of the Closing with the
same force and effect as if made at the Closing. Seller shall
have performed all agreements, covenants and conditions required
to be performed by Seller prior to the Closing.
4.2 No Legal Proceedings. No suit, action or other legal or
administrative proceeding before any court or other governmental
agency shall be pending or threatened seeking to enjoin the
consummation of the transactions contemplated hereby.
4.3 Put Option. The Selling Shareholders (as that term is
defined in the Stock Purchase Agreement among the Company and the
Investors named therein dated July 10, 2000 (the "Initial Stock
Purchase Agreement")) shall have entered into an agreement to
provide the Company an option (the "Put Option") to require the
Selling Shareholders to purchase all of the issued and
outstanding shares of the Subsidiaries (as that term is defined
in the Initial Stock Purchase Agreement) for a purchase price of
three million dollars ($3,000,000), generally upon the terms and
conditions set forth in Section 4.5 of the Initial Stock Purchase
Agreement. Buyer acknowledges and agrees that the Company's
ability to exercise the Put Option will be conditioned upon (1)
compliance with the Company's Articles of Incorporation and
Bylaws; (2) the Company obtaining all requisite corporate
authorization with respect to the sale of all of the issued and
outstanding capital stock of the Subsidiaries; (3) compliance
with applicable laws with respect to the sale of all of the
issued and outstanding capital stock of the Subsidiaries; (4) the
Company's written commitment to reduce the Company's outstanding
obligation under its revolving credit arrangement with Wachovia
Bank, N.A., by three million dollars ($3,000,000); (5) the
Company's written commitment to amend its Articles of
Incorporation to change its name, to discontinue the use of the
name "Network Systems International" and to transfer all rights
to the "Network Systems International" name to Network Systems
International of North Carolina, Inc. ("NSI-NC"); and (6) the
Company's written commitment to transfer all benefits with
respect to the right to receive future tax refunds to NSI-NC.
4.4 Documents to be Delivered by Seller. Seller shall have
delivered the following documents to the Escrow Agent to be held
in escrow until delivery of the Purchase Price as provided in
section 1.3.
(a) Stock certificates representing all of the Shares,
duly endorsed to Buyer in blank or accompanied by duly
executed stock powers.
(b) Such other documents or certificates as shall be
reasonably required by Buyer or its counsel in order to
close and consummate this Agreement.
V.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER TO CLOSE
The obligation of Seller to close the transactions is
subject to the fulfillment prior to Closing of each of the
following conditions, any of which may be waived in whole or in
part by Seller:
5.1 Compliance with Representations, Warranties and
Covenants. The representations and warranties made by Buyer in
this Agreement shall have been true and correct when made and
shall be true and correct in all material respects at the Closing
with the same force and effect as if made at the Closing, and
Buyer shall have performed all agreements, covenants and
conditions required to be performed by Buyer prior to the
Closing.
5.2 No Legal Proceedings. No suit, action or other legal
or administrative proceedings before any court or other
governmental agency shall be pending or threatened seeking to
enjoin the consummation of the transactions contemplated hereby.
5.3 Payments. Escrow Agent shall have received from Buyer
the Purchase Price as provided in section 1.3.
5.4 Closing of Sale of Newly Issued Company Shares. The Company
shall have consummated the sale of1,666,667 shares of newly
issued common stock pursuant to the terms of the initial Stock
Purchase Agreement.
VI.
MODIFICATION, WAIVERS, TERMINATION
AND EXPENSES
6.1 Modification. Buyer and Seller may amend, modify or
supplement this Agreement in any manner as they may mutually
agree in writing.
6.2 Waivers. Buyer and Seller may in writing extend the
time for or waive compliance by the other with any of the
covenants or conditions of the other contained herein.
6.3 Termination and Abandonment. This Agreement may be
terminated and the purchase of the Shares may be abandoned before
the Closing:
(a) By the mutual consent of Seller and Buyer;
(b) By Buyer, if the representations and warranties of
Seller set forth herein shall not be accurate, or the
conditions precedent set forth in Article IV shall have not
have been satisfied by the closing date , in all material
respects; or
(c) By Seller, if the representations and warranties
of Buyer set forth herein shall not be accurate, or the
conditions precedent set forth in Article V shall not have
been satisfied by the closing date in all material respects.
Termination shall be effective on the date of receipt of
written notice specifying the reasons therefor.
VII.
MISCELLANEOUS
7.1 Representations and Warranties to Survive. Unless
otherwise provided, all of the representations and warranties
contained in this Agreement and in any certificate, exhibit or
other document delivered pursuant to this Agreement shall survive
the Closing for a period of one (1) year. No investigation made
by any party hereto or their representatives shall constitute a
waiver of any representation or warranty, and no such
representation or warranty shall be merged into the Closing.
7.2 Binding Effect of the Agreement. This Agreement and
the certificates and other instruments delivered by or on behalf
of the parties pursuant thereto, constitute the entire agreement
between the parties. The terms and conditions of this Agreements
shall inure to the benefit of and be binding upon the respective
heirs, legal representatives, successor and assigns of the
parties hereto. Nothing in the Agreement, expressed or implied,
confers any rights or remedies upon any party other than the
parties hereto and their respective heirs, legal representatives
and assigns.
7.3 Applicable Law. The Agreement are made pursuant to, and
will be construed under, the laws of the State of North Carolina.
7.4 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and will be deemed
to have been duly given when delivered or mailed, first class
postage prepaid:
(a) If to Seller, to:
Robbie M. Efird
200 North Elm Street
Greensboro, NC 27401
Telephone (336)-271-8400
Fax (336)-271-0852
(b) If to Buyer, to:
G. David Gordon, Esquire
7633 East 63rd Place, Suite 210
Tulsa, OK 74133
Telephone: (918) 254-4997
Fax: (918) 254-2988
These addresses may be changed from time to time by written
notice to the other parties.
7.5 Headings. The headings contained in this Agreement are
for reference only and will not affect in any way the meaning or
interpretation of this Agreement.
7.6 Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original and all of
which together will constitute one instrument.
7.7 Severability. If any one or more of the provisions of
this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable under applicable law this Agreement
shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. The remaining
provisions of this Agreement shall be given effect to the maximum
extent then permitted by law.
7.8 Forbearance; Waiver. Failure to pursue any legal or
equitable remedy or right available to a party shall not
constitute a waiver of such right, nor shall any such
forbearance, failure or actual waiver imply or constitute waiver
of subsequent default or breach.
7.9 Attorneys' Fees and Expenses. The prevailing party in
any legal proceeding based upon this Agreement shall be entitled
to reasonable attorneys' fees and expenses and court costs.
7.10 Expenses. Each party shall pay all fees and expenses
incurred by it incident to this Agreement and in connection with
the consummation of all transactions contemplated by this
Agreement.
7.11 Exhibits. All of the following Exhibits to this
Agreement are incorporated herein in the places referenced in
this Agreement as if fully set forth herein.
IN WITNESS WHEREOF, the undersigned parties hereto have duly
executed this Agreement on the date first written above.
"BUYER"
/s/ Herbert Tabin
Herbert Tabin
"SELLER"
/s/ Robbie M. Efird
Robbie M. Efird
"Escrow Agent"
G. David Gordon & Associates, P.C.
/s/ G. David Gordon
G. David Gordon, President
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into
this 10 day of July, 2000, by and among Herbert Tabin, a
resident of Florida, and his assigns (hereinafter referred to as
"Buyer"); and E.W. Miller, Jr., (hereinafter referred to as
"Seller"), being a shareholder of NETWORK SYSTEMS INTERNATIONAL,
INC., a Nevada corporation (hereafter referred to as "Company").
WHEREAS, Seller is the owner of record and beneficially owns
Six Hundred Thousand (600,000) shares of the issued and
outstanding shares of Common Stock of the Company (herein
referred to as"Shares"); and
WHEREAS, Seller desires to sell the Shares to Buyer, and
Buyer desires to purchase the Shares, upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, and subject to the accuracy of the
representations and warranties of the parties, the parties hereto
agree as follows:
I.
SALE AND PURCHASE OF THE SHARES
1.1 Sale and Purchase. Subject to the terms and conditions
hereof, at the Closing (as defined in paragraph 1.2 below),
Seller agrees to sell, assign, transfer, convey and deliver to
Buyer, and Buyer agrees to purchase the Shares from Seller.
1.2 Closing. The purchase shall be consummated at a
closing ("Closing") to take place at 9:00 o'clock a.m., at the
offices of Network Systems International, Inc. on or about July
21, 2000 ("Closing Date").
1.3 Purchase Price. The purchase price ("Purchase Price")
for the Shares shall be a cash payment of Three Hundred Thirty
Three Thousand Three Hundred Thirty Three Dollars ($333,333)
payable to the Seller in certified funds. At the closing, the
Purchase Price will be delivered and deposited with G. David
Gordon & Associates, P.C., as escrow agent ("Escrow Agent"). If
the Put Option described in Section 3.3 is exercised by the
Company, the Escrow Agent will deliver the Purchase Price to the
Company as the Seller's portion of the initial cash payment
provided for therein. If the Put Option is not exercised by the
Company prior to its expiration, the Escrow Agent will
immediately release the Purchase Price to Seller.
II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows:
(a) Title to the Shares. At Closing, Seller shall own
of record and beneficially the Shares of the Company, free
and clear of all liens, encumbrances, pledges, claims,
options, charges and assessments of any nature whatsoever,
with full right and lawful authority to transfer the Shares
to Buyer. No person has any rights of first refusal with
respect to any of the Shares. There exists no voting
agreement, voting trust, or outstanding proxy with respect
to any of the Shares. There are no outstanding rights,
options, warrants, calls, commitments, or any other
agreements of any character, whether oral or written, with
respect to the Shares.
(b) Authority. Seller has full power and lawful
authority to execute and deliver this Agreement to which he
is a party and to consummate and perform the Agreement as
contemplated thereby. This Agreement to which Seller is a
party constitutes (or shall, upon execution, constitute)
valid and legally binding obligations upon Seller,
enforceable in accordance with their terms. Neither the
execution and delivery of this Agreement to which he is a
party by Seller, nor the consummation and performance of the
Agreement contemplated thereby, conflicts with, requires the
consent, waiver or approval of, results in a breach of or
default under, or gives to others any interest or right of
termination, cancellation or acceleration in or with respect
to, any agreement by which Seller is a party or by which
Seller or any of his properties or assets are bound or
affected.
(c) Full Disclosure. All statements of Seller
contained in this Agreement and in any other
written documents delivered by or on behalf of
Seller to Buyer are true and correct in all
material respects and do not omit any material
fact necessary to make the statements contained
therein not misleading in light of the
circumstances under which they were made.
2.2 Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows:
(a) Authority. Buyer has full power and lawful
authority to execute and deliver this
Agreement to which Buyer is a party and to consummate and
perform the Agreement as contemplated thereby. This
Agreement to which Buyer is a party constitutes (or shall,
upon execution, constitute) valid and legally binding
obligations upon Buyer, enforceable in accordance with their
terms. Neither the execution and delivery of this Agreement
to which Buyer is a party by Buyer, nor the consummation and
performance of this Agreement contemplated thereby,
conflicts with, requires the consent, waiver or approval of,
results in a breach of or default under, or gives to others
any interest or right of termination, cancellation or
acceleration in or with respect to, any agreement by which
Buyer is a party or by which Buyer or any of his properties
or assets are bound or affected.
(b) Investment Intent. Buyer is acquiring the Shares
for his own account, for investment
purposes only, and not with a view to the sale or
distribution of any part thereof, and Buyer has no present
intention of selling, granting participation in, or
otherwise distributing the same. Buyer understands the
specific risks related to an investment in the Shares,
especially as it relates to the financial performance of the
Company.
III.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF BUYER TO CLOSE
The obligation of Buyer to close the transactions
contemplated hereby is subject to the fulfillment by Seller prior
to Closing of each of the following conditions, which may be
waived in whole or in part by Buyer:
3.1 Compliance with Representations, Warranties and Covenants.
The representations and warranties of Seller contained in this
Agreement shall have been true and correct when made and shall be
true and correct as of the Closing with the same force and effect
as if made at the Closing. Seller shall have performed all
agreements, covenants and conditions required to be performed by
Seller prior to the Closing.
3.2 No Legal Proceedings. No suit, action or other legal or
administrative proceeding before any court or other governmental
agency shall be pending or threatened seeking to enjoin the
consummation of the transactions contemplated hereby.
3.3 Put Option. The Selling Shareholders (as that term is
defined in the Stock Purchase Agreement among the Company and the
Investors named therein dated July 10, 2000 (the "Initial Stock
Purchase Agreement")) shall have entered into an agreement to
provide the Company an option (the "Put Option") to require the
Selling Shareholders to purchase all of the issued and
outstanding shares of the Subsidiaries (as that term is defined
in the Initial Stock Purchase Agreement) for a purchase price of
three million dollars ($3,000,000), generally upon the terms and
conditions set forth in Section 4.5 of the Initial Stock Purchase
Agreement. Buyer acknowledges and agrees that the Company's
ability to exercise the Put Option will be conditioned upon (1)
compliance with the Company's Articles of Incorporation and
Bylaws; (2) the Company obtaining all requisite corporate
authorization with respect to the sale of all of the issued and
outstanding capital stock of the Subsidiaries; (3) compliance
with applicable laws with respect to the sale of all of the
issued and outstanding capital stock of the Subsidiaries; (4) the
Company's written commitment to reduce the Company's outstanding
obligation under its revolving credit arrangement with Wachovia
Bank, N.A., by three million dollars ($3,000,000); (5) the
Company's written commitment to amend its Articles of
Incorporation to change its name, to discontinue the use of the
name "Network Systems International" and to transfer all rights
to the "Network Systems International" name to Network Systems
International of North Carolina, Inc. ("NSI-NC"); and (6) the
Company's written commitment to transfer all benefits with
respect to the right to receive future tax refunds to NSI-NC.
3.4 Documents to be Delivered by Seller. Seller shall have
delivered the following documents to the Escrow Agent to be held
in escrow until delivery of the Purchase Price as provided in
section 1.3.
(a) Stock certificates representing all of the Shares,
duly endorsed to Buyer in blank or accompanied by duly
executed stock powers.
(b) Such other documents or certificates as shall be
reasonably required by Buyer or its counsel in order to
close and consummate this Agreement.
IV.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER TO CLOSE
The obligation of Seller to close the transactions is
subject to the fulfillment prior to Closing of each of the
following conditions, any of which may be waived in whole or in
part by Seller:
4.1 Compliance with Representations, Warranties and
Covenants. The representations and warranties made by Buyer in
this Agreement shall have been true and correct when made and
shall be true and correct in all material respects at the Closing
with the same force and effect as if made at the Closing, and
Buyer shall have performed all agreements, covenants and
conditions required to be performed by Buyer prior to the
Closing.
4.2 No Legal Proceedings. No suit, action or other legal
or administrative proceedings before any court or other
governmental agency shall be pending or threatened seeking to
enjoin the consummation of the transactions contemplated hereby.
4.3 Payments. Escrow Agent shall have received from Buyer the
Purchase Price as provided in section 1.3.
4.4 Closing of Sale of Newly Issued Company Shares. The Company
shall have consummated the sale of
1,666,667 shares of newly issued common stock pursuant to
the terms of the initial Stock Purchase Agreement.
V.
MODIFICATION, WAIVERS, TERMINATION
AND EXPENSES
5.1 Modification. Buyer and Seller may amend, modify or
supplement this Agreement in any manner as they may mutually
agree in writing.
5.2 Waivers. Buyer and Seller may in writing extend the
time for or waive compliance by the other with any of the
covenants or conditions of the other contained herein.
5.3 Termination and Abandonment. This Agreement may be
terminated and the purchase of the Shares may be abandoned before
the Closing:
(a) By the mutual consent of Seller and Buyer;
(b) By Buyer, if the representations and warranties of
Seller set forth herein shall not be accurate, or the
conditions precedent set forth in Article III shall have not
have been satisfied by the closing date , in all material
respects; or
(c) By Seller, if the representations and warranties
of Buyer set forth herein shall not be accurate, or the
conditions precedent set forth in Article IV shall not have
been satisfied by the closing date in all material respects.
Termination shall be effective on the date of receipt of
written notice specifying the reasons therefor.
VI.
MISCELLANEOUS
6.1 Representations and Warranties to Survive. Unless
otherwise provided, all of the representations and warranties
contained in this Agreement and in any certificate, exhibit or
other document delivered pursuant to this Agreement shall survive
the Closing for a period of one (1) year. No investigation made
by any party hereto or their representatives shall constitute a
waiver of any representation or warranty, and no such
representation or warranty shall be merged into the Closing.
6.2 Binding Effect of the Agreement. This Agreement and
the certificates and other instruments delivered by or on behalf
of the parties pursuant thereto, constitute the entire agreement
between the parties. The terms and conditions of this Agreements
shall inure to the benefit of and be binding upon the respective
heirs, legal representatives, successor and assigns of the
parties hereto. Nothing in the Agreement, expressed or implied,
confers any rights or remedies upon any party other than the
parties hereto and their respective heirs, legal representatives
and assigns.
6.3 Applicable Law. The Agreement are made pursuant to,
and will be construed under, the laws of the State of North
Carolina.
6.4 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and will be deemed
to have been duly given when delivered or mailed, first class
postage prepaid:
(a) If to Seller, to:
E.W. Miller, Jr.
200 North Elm Street
Greensboro, NC 27401
Telephone (336)-271-8400
Fax (336)-271-0852
(b) If to Buyer, to:
G. David Gordon, Esquire
7633 East 63rd Place, Suite 210
Tulsa, OK 74133
Telephone: (918) 254-4997
Fax: (918) 254-2988
These addresses may be changed from time to time by written
notice to the other parties.
6.5 Headings. The headings contained in this Agreement are
for reference only and will not affect in any way the meaning or
interpretation of this Agreement.
6.6 Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original and all of
which together will constitute one instrument.
6.7 Severability. If any one or more of the provisions of
this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable under applicable law this Agreement
shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. The remaining
provisions of this Agreement shall be given effect to the maximum
extent then permitted by law.
6.8 Forbearance; Waiver. Failure to pursue any legal or
equitable remedy or right available to a party shall not
constitute a waiver of such right, nor shall any such
forbearance, failure or actual waiver imply or constitute waiver
of subsequent default or breach.
6.9 Attorneys' Fees and Expenses. The prevailing party in
any legal proceeding based upon this Agreement shall be entitled
to reasonable attorneys' fees and expenses and court costs.
6.10 Expenses. Each party shall pay all fees and expenses
incurred by it incident to this Agreement and in connection with
the consummation of all transactions contemplated by this
Agreement.
6.11 Exhibits. All of the following Exhibits to this
Agreement are incorporated herein in the places referenced in
this Agreement as if fully set forth herein.
IN WITNESS WHEREOF, the undersigned parties hereto have duly
executed this Agreement on the date first written above.
"BUYER"
/s/ Herbert Tabin
Herbert Tabin
"SELLER"
/s/ E.W. Miller, Jr.
E.W. Miller, Jr.
"ESCROW AGENT"
G. David Gordon & Associates, P.C.
/s/ G. David Gordon
G. David Gordon, President
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into
this 10 day of July, 2000, by and among Herbert Tabin, a
resident of Florida, and his assigns (hereinafter referred to as
"Buyer"); and David F. Christian, (hereinafter referred to as
"Seller"), being a shareholder of NETWORK SYSTEMS INTERNATIONAL,
INC., a Nevada corporation (hereafter referred to as "Company").
WHEREAS, Seller is the owner of record and beneficially owns
One Hundred Thousand (100,000) shares of the issued and
outstanding shares of Common Stock of the Company (herein
referred to as"Shares"); and
WHEREAS, Seller desires to sell the Shares to Buyer, and
Buyer desires to purchase the Shares, upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, and subject to the accuracy of the
representations and warranties of the parties, the parties hereto
agree as follows:
I.
SALE AND PURCHASE OF THE SHARES
1.1 Sale and Purchase. Subject to the terms and conditions
hereof, at the Closing (as defined in paragraph 1.2 below),
Seller agrees to sell, assign, transfer, convey and deliver to
Buyer, and Buyer agrees to purchase the Shares from Seller.
1.2 Closing. The purchase shall be consummated at a
closing ("Closing") to take place at 9:00 o'clock a.m., at the
offices of Network Systems International, Inc. on or about July
21, 2000 ("Closing Date").
1.3 Purchase Price. The purchase price ("Purchase Price")
for the Shares shall be a cash payment of Fifty Five Thousand
Five Hundred Fifty Six Dollars ($55,556) payable to the Seller in
certified funds. At the closing, the Purchase Price will be
delivered and deposited with G. David Gordon & Associates, P.C.,
as escrow agent ("Escrow Agent"). If the Put Option described in
Section 3.3 is exercised by the Company, the Escrow Agent will
deliver the Purchase Price to the Company as the Seller's portion
of the initial cash payment provided for therein. If the Put
Option is not exercised by the Company prior to its expiration,
the Escrow Agent will immediately release the Purchase Price to
Seller.
II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows:
(a) Title to the Shares. At Closing, Seller shall own
of record and beneficially the Shares of the Company, free
and clear of all liens, encumbrances, pledges, claims,
options, charges and assessments of any nature whatsoever,
with full right and lawful authority to transfer the Shares
to Buyer. No person has any rights of first refusal with
respect to any of the Shares. There exists no voting
agreement, voting trust, or outstanding proxy with respect
to any of the Shares. There are no outstanding rights,
options, warrants, calls, commitments, or any other
agreements of any character, whether oral or written, with
respect to the Shares.
(b) Authority. Seller has full power and lawful
authority to execute and deliver this Agreement to which he
is a party and to consummate and perform the Agreement as
contemplated thereby. This Agreement to which Seller is a
party constitutes (or shall, upon execution, constitute)
valid and legally binding obligations upon Seller,
enforceable in accordance with their terms. Neither the
execution and delivery of this Agreement to which he is a
party by Seller, nor the consummation and performance of the
Agreement contemplated thereby, conflicts with, requires the
consent, waiver or approval of, results in a breach of or
default under, or gives to others any interest or right of
termination, cancellation or acceleration in or with respect
to, any agreement by which Seller is a party or by which
Seller or any of his properties or assets are bound or
affected.
(c) Full Disclosure. All statements of Seller
contained in this Agreement and in any other
written documents delivered by or on behalf of
Seller to Buyer are true and correct in all
material respects and do not omit any material
fact necessary to make the statements contained
therein not misleading in light of the
circumstances under which they were made.
2.2 Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows:
(a) Authority. Buyer has full power and lawful
authority to execute and deliver this
Agreement to which Buyer is a party and to consummate and
perform the Agreement as contemplated thereby. This
Agreement to which Buyer is a party constitutes (or shall,
upon execution, constitute) valid and legally binding
obligations upon Buyer, enforceable in accordance with their
terms. Neither the execution and delivery of this Agreement
to which Buyer is a party by Buyer, nor the consummation and
performance of this Agreement contemplated thereby,
conflicts with, requires the consent, waiver or approval of,
results in a breach of or default under, or gives to others
any interest or right of termination, cancellation or
acceleration in or with respect to, any agreement by which
Buyer is a party or by which Buyer or any of his properties
or assets are bound or affected.
(b) Investment Intent. Buyer is acquiring the Shares
for his own account, for investment
purposes only, and not with a view to the sale or
distribution of any part thereof, and Buyer has no present
intention of selling, granting participation in, or
otherwise distributing the same. Buyer understands the
specific risks related to an investment in the Shares,
especially as it relates to the financial performance of the
Company.
III.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF BUYER TO CLOSE
The obligation of Buyer to close the transactions
contemplated hereby is subject to the fulfillment by Seller prior
to Closing of each of the following conditions, which may be
waived in whole or in part by Buyer:
3.3 Compliance with Representations, Warranties and Covenants.
The representations and warranties of Seller contained in this
Agreement shall have been true and correct when made and shall be
true and correct as of the Closing with the same force and effect
as if made at the Closing. Seller shall have performed all
agreements, covenants and conditions required to be performed by
Seller prior to the Closing.
3.4 No Legal Proceedings. No suit, action or other legal or
administrative proceeding before any court or other governmental
agency shall be pending or threatened seeking to enjoin the
consummation of the transactions contemplated hereby.
3.3 Put Option. The Selling Shareholders (as that term is
defined in the Stock Purchase Agreement among the Company and the
Investors named therein dated July 10, 2000 (the "Initial Stock
Purchase Agreement")) shall have entered into an agreement to
provide the Company an option (the "Put Option") to require the
Selling Shareholders to purchase all of the issued and
outstanding shares of the Subsidiaries (as that term is defined
in the Initial Stock Purchase Agreement) for a purchase price of
three million dollars ($3,000,000), generally upon the terms and
conditions set forth in Section 4.5 of the Initial Stock Purchase
Agreement. Buyer acknowledges and agrees that the Company's
ability to exercise the Put Option will be conditioned upon (1)
compliance with the Company's Articles of Incorporation and
Bylaws; (2) the Company obtaining all requisite corporate
authorization with respect to the sale of all of the issued and
outstanding capital stock of the Subsidiaries; (3) compliance
with applicable laws with respect to the sale of all of the
issued and outstanding capital stock of the Subsidiaries; (4) the
Company's written commitment to reduce the Company's outstanding
obligation under its revolving credit arrangement with Wachovia
Bank, N.A., by three million dollars ($3,000,000); (5) the
Company's written commitment to amend its Articles of
Incorporation to change its name, to discontinue the use of the
name "Network Systems International" and to transfer all rights
to the "Network Systems International" name to Network Systems
International of North Carolina, Inc. ("NSI-NC"); and (6) the
Company's written commitment to transfer all benefits with
respect to the right to receive future tax refunds to NSI-NC.
3.4 Documents to be Delivered by Seller. Seller shall have
delivered the following documents to the Escrow Agent to be held
in escrow until delivery of the Purchase Price as provided in
section 1.3.
(a) Stock certificates representing all of the Shares,
duly endorsed to Buyer in blank or accompanied by duly
executed stock powers.
(b) Such other documents or certificates as shall be
reasonably required by Buyer or its counsel in order to
close and consummate this Agreement.
IV.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER TO CLOSE
The obligation of Seller to close the transactions is
subject to the fulfillment prior to Closing of each of the
following conditions, any of which may be waived in whole or in
part by Seller:
4.1 Compliance with Representations, Warranties and
Covenants. The representations and warranties made by Buyer in
this Agreement shall have been true and correct when made and
shall be true and correct in all material respects at the Closing
with the same force and effect as if made at the Closing, and
Buyer shall have performed all agreements, covenants and
conditions required to be performed by Buyer prior to the
Closing.
4.2 No Legal Proceedings. No suit, action or other legal
or administrative proceedings before any court or other
governmental agency shall be pending or threatened seeking to
enjoin the consummation of the transactions contemplated hereby.
4.5 Payments. Escrow Agent shall have received from Buyer the
Purchase Price as provided in section 1.3.
4.6 Closing of Sale of Newly Issued Company Shares. The Company
shall have consummated the sale of1,666,667 shares of newly
issued common stock pursuant to the terms of the initial Stock
Purchase Agreement.
V.
MODIFICATION, WAIVERS, TERMINATION
AND EXPENSES
5.1 Modification. Buyer and Seller may amend, modify or
supplement this Agreement in any manner as they may mutually
agree in writing.
5.2 Waivers. Buyer and Seller may in writing extend the
time for or waive compliance by the other with any of the
covenants or conditions of the other contained herein.
5.3 Termination and Abandonment. This Agreement may be
terminated and the purchase of the Shares may be abandoned before
the Closing:
(a) By the mutual consent of Seller and Buyer;
(b) By Buyer, if the representations and warranties of
Seller set forth herein shall not be accurate, or the
conditions precedent set forth in Article III shall have not
have been satisfied by the closing date , in all material
respects; or
(c) By Seller, if the representations and warranties
of Buyer set forth herein shall not be accurate, or the
conditions precedent set forth in Article IV shall not have
been satisfied by the closing date in all material respects.
Termination shall be effective on the date of receipt of
written notice specifying the reasons therefor.
VI.
MISCELLANEOUS
6.1 Representations and Warranties to Survive. Unless
otherwise provided, all of the representations and warranties
contained in this Agreement and in any certificate, exhibit or
other document delivered pursuant to this Agreement shall survive
the Closing for a period of one (1) year. No investigation made
by any party hereto or their representatives shall constitute a
waiver of any representation or warranty, and no such
representation or warranty shall be merged into the Closing.
6.2 Binding Effect of the Agreement. This Agreement and
the certificates and other instruments delivered by or on behalf
of the parties pursuant thereto, constitute the entire agreement
between the parties. The terms and conditions of this Agreements
shall inure to the benefit of and be binding upon the respective
heirs, legal representatives, successor and assigns of the
parties hereto. Nothing in the Agreement, expressed or implied,
confers any rights or remedies upon any party other than the
parties hereto and their respective heirs, legal representatives
and assigns.
6.5 Applicable Law. The Agreement are made pursuant to,
and will be construed under, the laws of the State of North
Carolina.
6.6 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and will be deemed
to have been duly given when delivered or mailed, first class
postage prepaid:
(a) If to Seller, to:
David F. Christian
200 North Elm Street
Greensboro, NC 27401
Telephone (336)-271-8400
Fax (336)-271-0852
(b) If to Buyer, to:
G. David Gordon, Esquire
7633 East 63rd Place, Suite 210
Tulsa, OK 74133
Telephone: (918) 254-4997
Fax: (918) 254-2988
These addresses may be changed from time to time by written
notice to the other parties.
6.5 Headings. The headings contained in this Agreement are
for reference only and will not affect in any way the meaning or
interpretation of this Agreement.
6.6 Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original and all of
which together will constitute one instrument.
6.7 Severability. If any one or more of the provisions of
this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable under applicable law this Agreement
shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. The remaining
provisions of this Agreement shall be given effect to the maximum
extent then permitted by law.
6.8 Forbearance; Waiver. Failure to pursue any legal or
equitable remedy or right available to a party shall not
constitute a waiver of such right, nor shall any such
forbearance, failure or actual waiver imply or constitute waiver
of subsequent default or breach.
6.9 Attorneys' Fees and Expenses. The prevailing party in
any legal proceeding based upon this Agreement shall be entitled
to reasonable attorneys' fees and expenses and court costs.
6.10 Expenses. Each party shall pay all fees and expenses
incurred by it incident to this Agreement and in connection with
the consummation of all transactions contemplated by this
Agreement.
6.11 Exhibits. All of the following Exhibits to this
Agreement are incorporated herein in the places referenced in
this Agreement as if fully set forth herein.
IN WITNESS WHEREOF, the undersigned parties hereto have duly
executed this Agreement on the date first written above.
"BUYER"
/s/ Herbert Tabin
Herbert Tabin
"SELLER"
/s/ David F. Christian
David F. Christian
"ESCROW AGENT"
G. David Gordon & Associates, P.C.
/s/ G. David Gordon
G. David Gordon, President
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into
this 10 day of July, 2000, by and among Herbert Tabin, a
resident of Florida, and his assigns (hereinafter referred to as
"Buyer"); and James W. Moseley, (hereinafter referred to as
"Seller"), being a shareholder of NETWORK SYSTEMS INTERNATIONAL,
INC., a Nevada corporation (hereafter referred to as "Company").
WHEREAS, Seller is the owner of record and beneficially owns
One Hundred Thousand (100,000) shares of the issued and
outstanding shares of Common Stock of the Company (herein
referred to as"Shares"); and
WHEREAS, Seller desires to sell the Shares to Buyer, and
Buyer desires to purchase the Shares, upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, and subject to the accuracy of the
representations and warranties of the parties, the parties hereto
agree as follows:
I.
SALE AND PURCHASE OF THE SHARES
1.1 Sale and Purchase. Subject to the terms and conditions
hereof, at the Closing (as defined in paragraph 1.2 below),
Seller agrees to sell, assign, transfer, convey and deliver to
Buyer, and Buyer agrees to purchase the Shares from Seller.
1.2 Closing. The purchase shall be consummated at a
closing ("Closing") to take place at 9:00 o'clock a.m., at the
offices of Network Systems International, Inc. on or about July
21, 2000 ("Closing Date").
1.3 Purchase Price. The purchase price ("Purchase Price")
for the Shares shall be a cash payment of Fifty Five Thousand
Five Hundred Fifty Six Dollars ($55,556) payable to the Seller in
certified funds. At the closing, the Purchase Price will be
delivered and deposited with G. David Gordon & Associates, P.C.,
as escrow agent ("Escrow Agent"). If the Put Option described in
Section 3.3 is exercised by the Company, the Escrow Agent will
deliver the Purchase Price to the Company as the Seller's portion
of the initial cash payment provided for therein. If the Put
Option is not exercised by the Company prior to its expiration,
the Escrow Agent will immediately release the Purchase Price to
Seller.
II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows:
(a) Title to the Shares. At Closing, Seller shall own
of record and beneficially the Shares of the Company, free
and clear of all liens, encumbrances, pledges, claims,
options, charges and assessments of any nature whatsoever,
with full right and lawful authority to transfer the Shares
to Buyer. No person has any rights of first refusal with
respect to any of the Shares. There exists no voting
agreement, voting trust, or outstanding proxy with respect
to any of the Shares. There are no outstanding rights,
options, warrants, calls, commitments, or any other
agreements of any character, whether oral or written, with
respect to the Shares.
(b) Authority. Seller has full power and lawful
authority to execute and deliver this Agreement to which he
is a party and to consummate and perform the Agreement as
contemplated thereby. This Agreement to which Seller is a
party constitutes (or shall, upon execution, constitute)
valid and legally binding obligations upon Seller,
enforceable in accordance with their terms. Neither the
execution and delivery of this Agreement to which he is a
party by Seller, nor the consummation and performance of the
Agreement contemplated thereby, conflicts with, requires the
consent, waiver or approval of, results in a breach of or
default under, or gives to others any interest or right of
termination, cancellation or acceleration in or with respect
to, any agreement by which Seller is a party or by which
Seller or any of his properties or assets are bound or
affected.
(c) Full Disclosure. All statements of Seller
contained in this Agreement and in any other
written documents delivered by or on behalf of Seller to
Buyer are true and correct in all material respects and do
not omit any material fact necessary to make the statements
contained therein not misleading in light of the
circumstances under which they were made.
2.2 Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows:
(a) Authority. Buyer has full power and lawful
authority to execute and deliver this
Agreement to which Buyer is a party and to consummate and
perform the Agreement as contemplated thereby. This
Agreement to which Buyer is a party constitutes (or shall,
upon execution, constitute) valid and legally binding
obligations upon Buyer, enforceable in accordance with their
terms. Neither the execution and delivery of this Agreement
to which Buyer is a party by Buyer, nor the consummation and
performance of this Agreement contemplated thereby,
conflicts with, requires the consent, waiver or approval of,
results in a breach of or default under, or gives to others
any interest or right of termination, cancellation or
acceleration in or with respect to, any agreement by which
Buyer is a party or by which Buyer or any of his properties
or assets are bound or affected.
(b) Investment Intent. Buyer is acquiring the Shares
for his own account, for investment
purposes only, and not with a view to the sale or
distribution of any part thereof, and Buyer has no present
intention of selling, granting participation in, or
otherwise distributing the same. Buyer understands the
specific risks related to an investment in the Shares,
especially as it relates to the financial performance of the
Company.
III.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF BUYER TO CLOSE
The obligation of Buyer to close the transactions
contemplated hereby is subject to the fulfillment by Seller prior
to Closing of each of the following conditions, which may be
waived in whole or in part by Buyer:
3.5 Compliance with Representations, Warranties and Covenants.
The representations and warranties of Seller contained in this
Agreement shall have been true and correct when made and shall be
true and correct as of the Closing with the same force and effect
as if made at the Closing. Seller shall have performed all
agreements, covenants and conditions required to be performed by
Seller prior to the Closing.
3.6 No Legal Proceedings. No suit, action or other legal or
administrative proceeding before any court or other governmental
agency shall be pending or threatened seeking to enjoin the
consummation of the transactions contemplated hereby.
3.3 Put Option. The Selling Shareholders (as that term is
defined in the Stock Purchase Agreement among the Company and the
Investors named therein dated July 10, 2000 (the "Initial Stock
Purchase Agreement")) shall have entered into an agreement to
provide the Company an option (the "Put Option") to require the
Selling Shareholders to purchase all of the issued and
outstanding shares of the Subsidiaries (as that term is defined
in the Initial Stock Purchase Agreement) for a purchase price of
three million dollars ($3,000,000), generally upon the terms and
conditions set forth in Section 4.5 of the Initial Stock Purchase
Agreement. Buyer acknowledges and agrees that the Company's
ability to exercise the Put Option will be conditioned upon (1)
compliance with the Company's Articles of Incorporation and
Bylaws; (2) the Company obtaining all requisite corporate
authorization with respect to the sale of all of the issued and
outstanding capital stock of the Subsidiaries; (3) compliance
with applicable laws with respect to the sale of all of the
issued and outstanding capital stock of the Subsidiaries; (4) the
Company's written commitment to reduce the Company's outstanding
obligation under its revolving credit arrangement with Wachovia
Bank, N.A., by three million dollars ($3,000,000); (5) the
Company's written commitment to amend its Articles of
Incorporation to change its name, to discontinue the use of the
name "Network Systems International" and to transfer all rights
to the "Network Systems International" name to Network Systems
International of North Carolina, Inc. ("NSI-NC"); and (6) the
Company's written commitment to transfer all benefits with
respect to the right to receive future tax refunds to NSI-NC.
3.4 Documents to be Delivered by Seller. Seller shall have
delivered the following documents to the Escrow Agent to be held
in escrow until delivery of the Purchase Price as provided in
section 1.3.
(a) Stock certificates representing all of the Shares,
duly endorsed to Buyer in blank or accompanied by duly
executed stock powers.
(b) Such other documents or certificates as shall be
reasonably required by Buyer or its counsel in order to
close and consummate this Agreement.
IV.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER TO CLOSE
The obligation of Seller to close the transactions is
subject to the fulfillment prior to Closing of each of the
following conditions, any of which may be waived in whole or in
part by Seller:
4.1 Compliance with Representations, Warranties and
Covenants. The representations and warranties made by Buyer in
this Agreement shall have been true and correct when made and
shall be true and correct in all material respects at the Closing
with the same force and effect as if made at the Closing, and
Buyer shall have performed all agreements, covenants and
conditions required to be performed by Buyer prior to the
Closing.
4.2 No Legal Proceedings. No suit, action or other legal
or administrative proceedings before any court or other
governmental agency shall be pending or threatened seeking to
enjoin the consummation of the transactions contemplated hereby.
4.7 Payments. Escrow Agent shall have received from Buyer the
Purchase Price as provided in section 1.3.
4.8 Closing of Sale of Newly Issued Company Shares. The Company
shall have consummated the sale of1,666,667 shares of newly
issued common stock pursuant to the terms of the initial Stock
Purchase Agreement.
V.
MODIFICATION, WAIVERS, TERMINATION
AND EXPENSES
5.1 Modification. Buyer and Seller may amend, modify or
supplement this Agreement in any manner as they may mutually
agree in writing.
5.2 Waivers. Buyer and Seller may in writing extend the
time for or waive compliance by the other with any of the
covenants or conditions of the other contained herein.
5.3 Termination and Abandonment. This Agreement may be
terminated and the purchase of the Shares may be abandoned before
the Closing:
(a) By the mutual consent of Seller and Buyer;
(b) By Buyer, if the representations and warranties of
Seller set forth herein shall not be accurate, or the
conditions precedent set forth in Article III shall have not
have been satisfied by the closing date , in all material
respects; or
(c) By Seller, if the representations and warranties
of Buyer set forth herein shall not be accurate, or the
conditions precedent set forth in Article IV shall not have
been satisfied by the closing date in all material respects.
Termination shall be effective on the date of receipt of
written notice specifying the reasons therefor.
VI.
MISCELLANEOUS
6.1 Representations and Warranties to Survive. Unless
otherwise provided, all of the representations and warranties
contained in this Agreement and in any certificate, exhibit or
other document delivered pursuant to this Agreement shall survive
the Closing for a period of one (1) year. No investigation made
by any party hereto or their representatives shall constitute a
waiver of any representation or warranty, and no such
representation or warranty shall be merged into the Closing.
6.2 Binding Effect of the Agreement. This Agreement and
the certificates and other instruments delivered by or on behalf
of the parties pursuant thereto, constitute the entire agreement
between the parties. The terms and conditions of this Agreements
shall inure to the benefit of and be binding upon the respective
heirs, legal representatives, successor and assigns of the
parties hereto. Nothing in the Agreement, expressed or implied,
confers any rights or remedies upon any party other than the
parties hereto and their respective heirs, legal representatives
and assigns.
6.7 Applicable Law. The Agreement are made pursuant to,
and will be construed under, the laws of the State of North
Carolina.
6.4 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and will be deemed
to have been duly given when delivered or mailed, first class
postage prepaid:
(a) If to Seller, to:
James W.
Moseley
200 North Elm Street
Greensboro, NC 27401
Telephone (336)-271-8400
Fax (336)-271-0852
(b) If to Buyer, to:
G. David Gordon, Esquire
7633 East 63rd Place, Suite 210
Tulsa, OK 74133
Telephone: (918) 254-4997
Fax: (918) 254-2988
These addresses may be changed from time to time by written
notice to the other parties.
6.5 Headings. The headings contained in this Agreement are
for reference only and will not affect in any way the meaning or
interpretation of this Agreement.
6.6 Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original and all of
which together will constitute one instrument.
6.7 Severability. If any one or more of the provisions of
this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable under applicable law this Agreement
shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. The remaining
provisions of this Agreement shall be given effect to the maximum
extent then permitted by law.
6.8 Forbearance; Waiver. Failure to pursue any legal or
equitable remedy or right available to a party shall not
constitute a waiver of such right, nor shall any such
forbearance, failure or actual waiver imply or constitute waiver
of subsequent default or breach.
6.9 Attorneys' Fees and Expenses. The prevailing party in
any legal proceeding based upon this Agreement shall be entitled
to reasonable attorneys' fees and expenses and court costs.
6.10 Expenses. Each party shall pay all fees and expenses
incurred by it incident to this Agreement and in connection with
the consummation of all transactions contemplated by this
Agreement.
6.11 Exhibits. All of the following Exhibits to this
Agreement are incorporated herein in the places referenced in
this Agreement as if fully set forth herein.
IN WITNESS WHEREOF, the undersigned parties hereto have duly
executed this Agreement on the date first written above.
"BUYER"
/s/ Herbert Tabin
Herbert Tabin
"SELLER"
/s/ James W. Mosely
James W. Moseley
"ESCROW AGENT"
G. David Gordon & Associates, P.C.
/s/ G. David Gordon
G. David Gordon, President
Exhibit 99C
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
