A 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