EXHIBIT 1.1
May ___, 1998
Berthel Fisher & Company Financial Services, Inc.
100 Second Street S.E.
Cedar Rapids, Iowa 52401
Westport Resources Investment Services, Inc.
315 Post Road West
Westport, Connecticut 06880
Marion Bass Securities Corporation
4000 Park Road
Charlotte, North Carolina 28209
Ladies and Gentlemen:
HLM Design, Inc., a Delaware corporation (the "Company"), of 121 West Trade
Street, Suite 2950, Charlotte, North Carolina 28202, hereby confirms its
agreement with Berthel Fisher & Company Financial Services, Inc. ("Berthel"),
Westport Resources Investment Services, Inc. and Marion Bass Securities
Corporation ("Marion Bass") ("Westport" and "Marion Bass") together with
Berthel, the "Managers") and members of the Underwriting Group (hereinafter, the
Managers and other members of the Underwriting Group being referred to herein as
the "Underwriting Group" or "Underwriters") as follows:
SECTION I
DESCRIPTION OF SECURITIES
The Company's authorized and outstanding capitalization when the
offering of the securities contemplated hereby is permitted to commence and at
the Closing Date (hereinafter defined), will be as set forth in the Registration
Statement and Prospectus included therein (each as hereinafter defined). The
Company proposes to issue and sell to the Underwriting Group an aggregate of One
Million Two Hundred Thousand (1,200,000) shares (the "stock") of its authorized
$0.001 par value common stock, at a price of $________* per share on the terms
as hereinafter set forth. The Underwriting Group shall also have an
over-allotment option to purchase up to an additional One Hundred Eighty
Thousand (180,000) shares as provided in Section 3.01 hereof.
The Company proposes to issue and sell to the Managers, on the Closing
Date at a price of $.01 per warrant, warrants (the "Warrants") to purchase
shares of the Company's common stock (the "Warrant Stock") as provided in
Section 3.03 hereof.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Underwriting Group to enter into this Agreement,
the Company hereby represents and warrants to and agrees with the Underwriting
Group as follows:
2.01. REGISTRATION STATEMENT AND PROSPECTUS. A registration statement on
Form S-1 (File No. 333-40616) (as amended to date the "Registration Statement"),
with respect to the Stock, including the related Prospectus, copies of which
have heretofore been delivered by the Company to the Managers, has been prepared
by the Company, and conforms in all material respects with the requirements of
the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations ("Rules and Regulations") of the Securities and Exchange Commission
(the "Commission") promulgated thereunder, and said Registration Statement has
been filed with the Commission under the Act; one or more amendments to said
Registration Statement, copies of which have heretofore been delivered to the
Managers, has or have heretofore been filed; and said Registration Statement has
been declared effective (as hereinafter defined) with the Commission.
As used in this Agreement, the term "Registration Statement" refers to
and means said Registration Statement on Form S-1 and all amendments thereto,
including the Prospectus, all exhibits thereto and financial statements, as it
became effective; the term "Prospectus" refers to and means the Prospectus
included in the Registration Statement when it became effective and a Prospectus
filed with the Commission pursuant to Rule 424 of the Act, after the Effective
Date; and the term "Preliminary Prospectus" refers to and means any prospectus
included in said Registration Statement before it became effective. The term
"effective" refers to the entry of an order by the Commission declaring the
Registration Statement effective pursuant to Section 8 of the Act. The term
"Effective Date" refers to the date the Commission declares the Registration
Statement effective.
2.02. ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The Commission has
not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Stock, and each Preliminary Prospectus conformed,
when so filed, in all material respects with the requirements of the Act and the
applicable Rules and Regulations of the Commission thereunder and to the best of
the Company's knowledge did not include at the time of filing any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein in light of the circumstances in which they were
made, not misleading. As of the date hereof, and on the Closing Date, the
Registration Statement and Prospectus and any further amendments or supplements
thereto will contain all statements which are required to be stated therein in
accordance
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with the Act and the rules and regulations for the purposes of the proposed
public offering of the Stock, and all statements of material fact contained in
the Registration Statement and Prospectus will be true and correct, and neither
the Registration Statement nor the Prospectus will include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances in which they were made, not misleading; provided, however, the
Company does not make any representations or warranties as to information
contained in or omitted from the Registration Statement or the Prospectus in
reliance upon information furnished on behalf of the Managers specifically for
use in connection with the preparation thereof.
2.03. FINANCIAL STATEMENTS. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus present fairly the financial position of the Company
and the results of its operations and the changes in its financial position at
the respective dates and for the respective periods for which they apply; such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied, throughout the periods indicated
except as otherwise stated therein.
2.04. INDEPENDENT PUBLIC ACCOUNTANT. Deloitte & Touche LLP, which has
certified certain of the financial statements filed with the Commission as part
of the Registration Statement and Prospectus, are independent certified public
accountants within the meaning of the Act and the rules and regulations
promulgated thereunder.
2.05. NO MATERIAL ADVERSE CHANGE. Except as may be reflected in or
contemplated by the Registration Statement or the Prospectus, since the dates as
of which information is given in the Registration Statement and Prospectus, (i)
there has not been any material adverse change in the condition, financial or
otherwise, of the Company or in its business taken as a whole; (ii) there has
not been any material transaction entered into by the Company other than
transactions in the ordinary course of business; (iii) the Company has not
incurred any material obligations, contingent or otherwise, which are not
disclosed in the Prospectus; (iv) there has not been any change in the capital
stock or long-term debt (except current payments) of the Company; and (v) the
Company has not paid or declared any dividends or other distributions on its
common stock.
2.06. NO DEFAULTS. The Company is not in any default, which default has not
been waived, in the performance of any obligation, agreement or condition
contained in any debenture, note or other evidence of indebtedness or any
indenture or loan agreement of the Company. Except with respect to such defaults
which have been waived in writing or for which consents have been obtained in
writing, the execution and delivery of this Agreement and the consummation of
the transactions herein contemplated, and compliance with the terms of this
Agreement will not conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, the certificate of
incorporation, as amended, or bylaws of the Company, any note, indenture,
mortgage, deed of trust, or other agreement or instrument to which the Company
is a party or by which it or any of its property is bound, or any existing law,
order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality, agency or body,
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arbitration tribunal or court, domestic or foreign, having jurisdiction over the
Company or its property. The consent, approval, authorization, or order of any
court or governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the Act or under the blue sky or securities laws of any state or
jurisdiction.
2.07. INCORPORATION AND STANDING. The Company is duly incorporated and
validly existing and is in good standing as a corporation under the laws of the
state of Delaware with authorized and outstanding capital stock as set forth in
the Registration Statement and the Prospectus, and with full corporate power and
authority to own its property and conduct its business, present and proposed, as
described in the Registration Statement and Prospectus; the Company has full
corporate power and authority to enter into this Agreement. The Company is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which it owns or leases real property or transacts business requiring such
qualification, except where the failure to so qualify or to be in good standing
would not result in a material adverse effect on the Company. The Company has no
subsidiaries other than as shown in Exhibit 21.1 to the Registration Statement.
2.08. LEGALITY OF OUTSTANDING STOCK. The outstanding common stock of the
Company has been duly authorized, validly issued and is fully paid and
nonassessable and will conform to all statements with regard thereto contained
in the Registration Statement and Prospectus. No sales of securities have been
made by the Company in violation of the registration provisions of the Act.
2.09. LEGALITY OF STOCK, WARRANT STOCK AND WARRANTS. The Stock and Warrant
Stock have been duly and validly authorized and, when issued and delivered
against payment therefor as described in this Agreement or in the Warrants, as
applicable, will be validly issued, fully paid and nonassessable. The Stock and
Warrant Stock, upon issuance, will not be subject to the preemptive rights of
any shareholders of the Company. The Warrants, when sold and delivered, will
constitute valid and binding obligations of the Company enforceable against it
in accordance with the terms thereof. A sufficient number of shares of common
stock have been reserved for issuance upon exercise of the Warrants. The Stock
and Warrants conform to all statements with regard thereto in the Registration
Statement and Prospectus.
2.10. PRIOR SALES. No securities of the Company or of an affiliate or of a
predecessor of the Company have been sold within one year prior to the date
hereof, except as set out in Item 15 of Part II of the Registration Statement.
2.11. LITIGATION. Except as set forth in the Registration Statement and
Prospectus, there is no action, suit or proceeding before any court or
governmental agency, authority or body pending or, to the knowledge of the
Company, threatened, which might result in judgments against the Company not
adequately covered by insurance or reserves established and reflected in the
Company's financial statements or which collectively might result in any
material adverse change in the condition (financial or otherwise), of the
business, or properties or assets of the Company.
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2.12. WARRANTS. Upon delivery of and payment for the Warrants to be sold by
the Company as set forth in Section 3.03 of this Agreement, the Managers and the
Underwriter's designees will receive good and marketable title thereto, free and
clear of all liens, encumbrances, charges and claims whatsoever arising through
or against the company; and the Company has, as of the date hereof, and will
have at the time of delivery of such Warrants full corporate right and power and
all authorization and approval required by law to sell, transfer and deliver
such Warrants in the manner provided hereunder.
2.13. FINDER. The Company knows of no outstanding claims for services in
the nature of a finder's fee or origination fee with respect to the sale of the
Stock hereunder resulting from its acts for which the Managers may be
responsible.
2.14. EXHIBITS. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or by
the Rules and Regulations which have not been so filed, and, except as may be
indicated in the prospectus, each contract to which the Company is a party and
to which reference is made in the Prospectus has been duly and validly executed,
is in full force and effect in all material respects in accordance with its
terms, and none of such contracts has been assigned by the Company; and the
Company knows of no present situation or condition or fact which would prevent
its compliance with the terms of such contracts, as amended to date. Except for
amendments or modifications of such contracts in the ordinary course of
business, the Company has no intention of exercising any right which it may have
to cancel any of its obligations under any of such contracts, and has no
knowledge that any other party to any of such contracts has any intention not to
render full performance under such contracts.
2.15. TAX RETURNS. The Company has filed all federal and state tax returns
which are required to be filed by it and has paid all taxes shown on such
returns and on all assessments received by it to the extent such taxes have
become due, except for such taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided. All taxes with respect to
which the Company is obligated have been paid or adequate accruals have been set
up to cover any such unpaid taxes.
2.16. PROPERTY. Except as otherwise set forth in or contemplated by the
Registration Statement and Prospectus, the Company has good title, free and
clear of all liens, encumbrances and defects, except liens for current taxes not
due and payable, to all property and assets which are described in the
Registration Statement and the Prospectus as being owned by the Company, subject
only to such exceptions as are not material and do not adversely affect the
present or prospective business of the Company.
2.17. AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action.
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2.18 LEGALITY OF OPERATIONS. The operations of the Company are in
material compliance with applicable state laws governing permitted owners of
engineering and architectural firms, and governing the splitting of professional
fees paid to engineers and architects with persons not licensed to engage in
such professions.
SECTION 3
PURCHASE AND SALE OF THE STOCK
3.01. PURCHASE OF STOCK AND OVER-ALLOTMENT OPTION. The Company hereby
agrees to sell to members of the Underwriting Group named in Schedule I hereto
(for all of whom the Managers are acting), severally and not jointly, and each
member of the Underwriting Group, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees to purchase from the Company, severally and not jointly, the number of
shares of Stock set forth opposite their respective names in Schedule I hereto
at a purchase price of $_____*per share.
The Company hereby grants to the Underwriting Group an option (the
"Option") for a period of 45 days after the date of the Prospectus to purchase
at a purchase price of $_____* per share up to One Hundred Eighty Thousand
(180,000) additional shares of Stock in order to cover over-allotments. The
Option shares of Stock shall be purchased for the account of each member of the
Underwriting Group as nearly as practicable in the proportion that the number of
shares of Stock set opposite the name of each Underwriter in Schedule I hereto
bears to One Million Two Hundred Thousand (1,200,000).
3.01.01. DEFAULT BY AN UNDERWRITER. If any of the Underwriters shall fail
to purchase the entire number of shares of Stock set opposite its name in
Schedule I hereto, and such failure to purchase shall constitute a default by
such Underwriter in the performance of its obligations under this Agreement, the
remaining Underwriters shall have the right and shall be obligated to take up
and pay for (in the respective proportions which the number of shares of Stock
set opposite the names of the several remaining Underwriters bears to the
aggregate number of shares of Stock set opposite the names of all the remaining
Underwriters) the entire amount of shares of Stock which the defaulting
Underwriter agreed but failed to purchase, provided, however, that the aggregate
amount of all such increases for all non-defaulting Underwriters shall not
exceed One Hundred Twenty Thousand (120,000) shares of Stock, and provided,
further, that in the event that such additional shares of Stock shall exceed the
foregoing maximum, the remaining Underwriters shall have the right, but shall
not be obligated, to take up and pay for (in such proportions as may be agreed
upon among them) the entire amount (but not less than all) of the remaining
shares of Stock which all defaulting Underwriters agreed but failed to purchase.
3.01.02. LIABILITY OF DEFAULTING UNDERWRITER. Nothing contained in this
Section 3.01 shall relieve any defaulting Underwriter of its liability, if any,
to the Company or to the remaining Underwriters for damages occasioned by its
default hereunder.
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3.01.03. RIGHTS OF REMAINING UNDERWRITERS. If any of the Underwriters
shall fail to purchase the entire number of shares of Stock set opposite its
name and such failure to purchase shall not constitute a default by such
Underwriter in the performance of its obligations under this Agreement, the
remaining Underwriters shall have the right, but shall not be obligated, to take
up and pay for (in such proportions as may be agreed upon among them) the entire
amount (but not less than all) of the shares of Stock which all withdrawing
Underwriters agreed but failed to purchase.
3.02. PUBLIC OFFERING PRICE. The Underwriters propose to offer the Stock to
the public at a public offering price of $______* per share as set forth in the
Prospectus. The Underwriters may allow such concessions and discounts upon sales
to selected dealers as described in the Registration Statement.
3.02.01. PAYMENT FOR STOCK. Payment for the Stock (including Option
shares) which the underwriters agree to purchase shall be made to the Company by
wire transfer of immediately available funds to a bank account designated by the
Company, upon delivery to the Managers of certificates for shares of stock and
Warrants in definitive form in such numbers and registered in such names as the
Managers request in writing at least two full business days prior to such
delivery.
3.02.02. CLOSING. The time and date of delivery and payment hereunder is
herein called the "Closing Date" and shall take place at the office of Berthel
in Cedar Rapids, Iowa at 11:00 A.M. central time on the third business day
following the execution of this Agreement. Should the underwriting group elect
to exercise any part of the over-allotment option pursuant to Section 3.01
above, the time and date of delivery and payment for said over-allotment shares
shall be as mutually agreed, but not later than the 45th calendar day after the
"Closing Date." Said date is hereinafter referred to as the "Over-Allotment
Closing Date."
3.02.03. INSPECTION OF CERTIFICATES. For the purpose of expediting the
checking and packaging of the certificates for shares and Warrants, the Company
agrees to make the form of certificates available for inspection by the Managers
at least one business day prior to the proposed delivery date.
3.03. SALE OF WARRANTS. The Company will sell and deliver to the Managers,
at a purchase price of $.01 per Warrant, Warrants, dated the date of Closing,
substantially in the form of Exhibit A, attached hereto and by this reference
incorporated herein, evidencing the right of designees of Berthel to purchase
_______________________ shares of Warrant Stock; the right of designees of
Westport to purchase ____________________________ shares of Warrant Stock; and
the right of designees of Marion Bass to purchase _____________________________
shares of Warrant Stock at the price per share and upon the terms and conditions
provided in the Warrants. The Company shall not be obligated to sell and deliver
the Warrants, and the Managers will not be obligated to purchase and pay for the
Warrants, except upon payment for the shares of stock pursuant to Subsection
3.02.01 hereof.
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3.04. UNDERWRITER'S EXPENSE ALLOWANCE. It is understood that the Company
shall reimburse the Managers for their actual out-of-pocket expenses in the
amount of UP TO 1.365% of the gross proceeds from the offering, excluding
proceeds from the sale of the over-allotment shares. At the Closing and, if
applicable, on the Over-Allotment Closing Date, the Company shall pay to
the Managers the unpaid balance of such allowance to defray the expenses
incurred by the Underwriters in connection with the offering. The Underwriters
shall be solely responsible for all expenses incurred by the Underwriters in
connection with the offering including, but not limited to, the expenses of
their own counsel, except with respect to costs of qualifying the stock under
the state securities or blue sky laws to the extent expressly set forth in
subsection 5.07 hereof.
3.05. REPRESENTATIONS OF THE PARTIES. The parties hereto respectively
represent that as of the Closing Date the representations herein contained and
the statements contained in all the certificates theretofore or simultaneously
delivered by any party to another, pursuant to this Agreement, shall in all
material respects be true and correct.
3.06. POST-CLOSING INFORMATION. The Managers covenant that reasonably
promptly after the Closing Date, they will supply the Company with all such
information as the Company may reasonably request to be supplied to the
securities commissions of such states in which the Stock has been qualified for
sale.
3.07. RE-OFFERS BY SELECTED DEALERS. On each sale by the Underwriters of
any of the Stock to selected dealers, the Managers shall require the selected
dealer purchasing any such Stock to agree to re-offer the same on the terms and
conditions of the offering set forth in the Registration Statement and
Prospectus.
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.01. DELIVERY OF REGISTRATION STATEMENTS. The Company shall deliver to the
Managers without charge two signed copies of the Registration Statement,
including all financial statements and exhibits filed therewith and any
amendments or supplements thereto, and shall deliver without charge to the
Managers five conformed copies of the Registration Statement and any amendment
or supplement thereto, including such financial statements and exhibits. The
signed copies of the Registration Statement so furnished to the Managers will
include signed copies of any and all consents and certificates of the
independent public accountant certifying to the financial statements included in
the Registration Statement and Prospectus and signed copies of any and all
consents and certificates of any other persons whose profession gives authority
to statements made by them and who are named in the Registration Statement or
Prospectus as having prepared, certified, or reviewed any part thereof.
4.02. DELIVERY OF PRELIMINARY PROSPECTUS. The Company will deliver to the
Managers, without charge, as many copies of each Preliminary Prospectus filed
with the Commission bearing
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in red ink the statement required by Regulation S-K, Item 501(c)(8) as may be
reasonably requested by the Underwriters. The Company consents to the use of
such documents by the Underwriters and by dealers prior to the Effective Date.
The Company will deliver at its expense such copies of the Preliminary
Prospectus as the Managers may deem reasonably necessary in order to recirculate
the Preliminary Prospectus and/or to permit compliance with the provisions of
Rule 15c-2(8)(b) promulgated pursuant to the Securities Exchange Act of 1934, as
amended ("Exchange Act").
4.03. DELIVERY OF PROSPECTUS. The Company will deliver, at its expense, as
many printed copies of the Prospectus as the Managers may reasonably request for
the purposes contemplated by this Agreement and shall deliver said printed
copies of the Prospectus to the Managers as soon as practicable on effectiveness
of this Agreement, but in no event more than one business day after the date of
this Agreement. The Company will deliver such additional copies at its expense
as may be reasonably necessary to permit dealers to comply with the requirements
of Rule 174 promulgated pursuant to the Act.
4.04. FURTHER AMENDMENTS AND SUPPLEMENTS. If during such period of time as
in the opinion of the Managers or their respective counsel a Prospectus is
required to be delivered under the Act, any event occurs or any event known to
the Company relating to or affecting the Company shall occur as a result of
which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time after the Effective Date
to amend or supplement the Prospectus to comply with the Act, the Company will
forthwith notify the Managers thereof and prepare and file with the Commission
such further amendment to the Registration Statement or supplemental or amended
Prospectus as may be required and furnish and deliver to the Managers and to
others whose names and addresses are designated by the Managers, all at the cost
of the Company, a reasonable number of copies of the amended or supplemented
Prospectus which as so amended or supplemented will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the Prospectus, in the light of the circumstances under which it
is delivered to a purchaser or prospective purchaser, not misleading, and which
will comply in all material respects with the Act.
4.05. USE OF PROSPECTUS. The Company authorizes the Underwriters in
connection with the distribution of the Stock and all dealers to whom any of the
Stock may be sold by the Underwriters to use the Prospectus as from time to time
amended or supplemented, in connection with the offering and sale of the Stock
and in accordance with the applicable provisions of the Act and the applicable
Rules and Regulations and applicable state blue sky or securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Underwriters that:
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5.01. OBJECTION OF MANAGERS TO AMENDMENTS OR SUPPLEMENTS. After the
Effective Date, the Company will not at any time, file any amendment or
supplement to the Registration Statement or Prospectus, unless and until a copy
of such amendment or supplement has been previously furnished to the Managers
within a reasonable time period prior to the proposed filing thereof, or to
which the Managers or counsel for the Managers has reasonably objected, in
writing, on the ground that such amendment or supplement is not in compliance
with the Act or the Rules and Regulations.
5.02. BEST-EFFORTS TO CAUSE AMENDMENTS TO BECOME EFFECTIVE. The Company
will use its best efforts to cause any post-effective amendment subsequently
filed, to become effective as promptly as reasonably practicable and will
promptly advise the Managers, and will confirm such advice in writing (i) when
any amendment to the Registration Statement shall have become effective and when
any amendment of or supplement to the Prospectus shall be filed with the
Commission, (ii) when the Commission shall make a request or suggestion for any
amendment to the Registration Statement or the Prospectus or for additional
information and the nature and substance thereof, (iii) of the issuance by the
Commission of an order suspending the effectiveness of the Registration
Statement pursuant to Section 8 of the Act or of the initiation of any
proceedings for that purpose, (iv) of the happening of any event, during the
period of time as in the opinion of the managers or their respective counsel a
prospectus is required to be delivered under the act, which in the judgment of
the Company makes any material statement in the Registration Statement or
Prospectus untrue or which requires the making of any changes in the
Registration Statement or Prospectus in order to make the statements therein not
misleading, and (v) of the refusal to qualify or the suspension of the
qualification of the Stock by any authority of competent jurisdiction for
offering or sale in any jurisdiction, or of the institution of any proceedings
by any authority of competent jurisdiction for any of such purposes. The Company
will use every reasonable effort to prevent the issuance of any such order or of
any order preventing or suspending such use, to prevent any such refusal to
qualify or any such suspension, and to obtain as soon as possible a lifting of
any such order, the reversal of any such refusal and the termination of any such
suspension.
5.03. PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The Company
will prepare and file promptly with the Commission, upon request of the
Managers, such amendments or supplements to the Registration Statement or
Prospectus, in form satisfactory to counsel to the Company, as in the opinion of
counsel to the Managers and of counsel to the Company may be necessary in
connection with the offering or distribution of the Stock and will use its best
efforts to cause the same to become effective as promptly as possible.
5.04. BLUE SKY QUALIFICATION. The Company will, when and as requested by
the Managers, use reasonable efforts in cooperation with the Managers to qualify
the Stock or such part thereof as the Managers may determine for sale under the
so-called blue sky laws of the States of North Carolina and Iowa and of so many
other states as the Managers may reasonably request, and to continue such
qualification in effect so long as required for the purposes of the distribution
of the Stock.
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5.05. FINANCIAL STATEMENTS. The Company at its own expense will prepare and
give and will continue to give such financial statements and other information
to and as may be required by the Commission, or the proper public bodies of the
states in which the Stock may be qualified.
5.06. REPORTS AND FINANCIAL STATEMENTS TO THE MANAGERS. During the period
of five years from the Closing Date, the Company will deliver to the Managers
(i) copies of each annual report of the Company and reports filed by the Company
pursuant to the Exchange Act, (ii) copies of all other statements, documents, or
other information which the Company shall mail or otherwise make available to
any class of its security holders, or shall file with Commission; and (iii) upon
request in writing from the Managers, furnish to the Managers such other
information as may reasonably be requested and which may be properly disclosed
to the Managers with reference to the property, business and affairs of the
Company and its subsidiaries, if any.
5.07. EXPENSES PAID BY THE COMPANY. The Company will pay, whether or not
the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement, including
all expenses incident to the authorization of the Stock and their issue and
delivery to the Managers, any original issue taxes in connection therewith, all
transfer taxes, if any, incident to the initial sale of the Stock to the public,
the fees and expenses of the Company's counsel and accountants, the costs and
expenses incident to the preparation, printing and filing under the Act and with
the National Association of Securities Dealers, Inc. of the Registration
Statement, any Preliminary Prospectus and the Prospectus and any amendments or
supplements thereto, the cost of printing, reproducing and filing all exhibits
to the Registration Statement, the underwriting documents and the Selected
Dealers Agreement, the cost of printing and furnishing to the Managers copies of
the Registration Statement and copies of the Prospectus as herein provided, and
the cost of qualifying the Stock under the state securities or Blue Sky laws as
provided in Section 5.04 herein, including expenses and disbursements of the
Managers incurred in connection with such qualification.
5.08. REPORTS TO SHAREHOLDERS. During the period of five years from the
Closing Date, the Company will, in compliance with the requirements of the
Exchange Act and rules for Small Cap listed companies on the National
Association of Securities Dealers Automated Quotation system,
render and distribute reports to its shareholders which will include audited
statements of its operations and changes of financial position during such
period and its balance sheet as of the end of such period, as to which
statements the Company's independent certified public accountants shall have
rendered an opinion.
5.09. SECTION 11(A) FINANCIALS. The Company will make generally available
to its security holders and will deliver to the Managers, as soon as
practicable, but in no event later than the first day of the sixteenth full
calendar month following the Effective Date, an earnings statement (as to which
no opinion need be rendered but which will satisfy the provisions of Section
11(a) of the Act) covering a period of at least 12 months beginning after the
Effective Date.
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5.10. POST-EFFECTIVE AVAILABILITY OF PROSPECTUS. Within the time during
which the Prospectus is required to be delivered under the Act, the Company will
comply, at its own expense, with all requirements imposed upon it by the Act, as
now or hereafter amended, by the Rules and Regulations, as from time to time may
be in force, and by any order of the Commission, so far as necessary to permit
the continuance of sales or dealings in the Stock.
5.11. APPLICATION OF PROCEEDS. The Company will apply the net proceeds from
the sale of the Stock substantially in the manner set forth in the Registration
Statement and Prospectus.
5.12. UNDERTAKINGS OF CERTAIN SHAREHOLDERS. The Company will deliver to the
Managers, on the effective date, the undertaking of each of Joseph M. Harris and
Vernon B. Brannon that such person shall not directly or indirectly offer or
sell to the public, or privately, any shares of common stock or other equity
securities of the Company for a period of twelve months from the Effective Date
without Berthel's prior written consent.
5.13. DELIVERY OF DOCUMENTS. At the Closing, the Company will deliver to
the Managers true and correct copies of the certificate of incorporation of the
Company and all amendments thereto, all such copies to be certified by the
Secretary of State of the State of Delaware; true and correct copies of the
bylaws of the Company and of the minutes of all meetings of the directors and
shareholders of the Company held prior to the Closing Date which in any way
relate to the subject matter of this Agreement; and true and correct copies of
all material contracts to which, the Company is a part, other than contracts for
the sale of products or services in the normal course of business.
5.14. COOPERATION WITH UNDERWRITER'S DUE DILIGENCE. At all times prior to
the Closing Date, the Company will cooperate with the Managers in such
investigation as the Managers may make or cause to be made of all the
properties, business and operations of the Company in connection with the
purchase and public offering of the Stock, and the Company will make available
to the Managers in connection therewith such information in its possession as
the Managers may reasonably request.
5.15. NO SALE PERIOD. No offering, sale or other disposition of any common
stock, equity securities will be made within one year after the Effective Date,
directly or indirectly, by the Company, otherwise than hereunder or with
Berthel's consent, except that the Company shall be permitted without further
consent from Berthel to offer, sell or otherwise dispose of common stock or
other equity securities as consideration for the execution of new Management and
Services Agreements.
5.16. APPOINTMENT OF TRANSFER AGENT. The Company has appointed First Union
National Bank as Transfer Agent for the Stock subject to the Closing. The
Company will not voluntarily
12
change or terminate such appointment for a period of three years from the
Effective Date without first obtaining the written consent of the Managers,
which consent shall not be unreasonably withheld.
5.17. COMPLIANCE WITH CONDITIONS PRECEDENT. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Underwriters in Section 8 hereof.
5.18. REGISTRATION UNDER THE EXCHANGE ACT. The Company has registered the
class of equity securities that includes the Stock by filing with the Commission
a registration statement (and such copies thereof as the Commission may require)
with respect to such security, to register a security pursuant to subsection (g)
of Section 12 of the Act.
5.19. APPLICATION TO NASDAQ SMALL CAP. The Company has applied for and
obtained admission for quotation of the Stock on the Small Cap listing of the
National Association of Securities Dealers Automated Quote system commencing the
next business day following the Effective Date.
5.20 BERTHEL'S Board OBSERVER. Following the Closing, and for a period of
three (3) years after the Closing, the Company will grant to Berthel the right
to designate one individual, to whom the Company shall give notice of, and whom
the Company shall permit to attend and observe meetings of the Board of
Directors of the Company.
5.21 KEY MAN LIFE INSURANCE. The Company has in force, and will maintain
for a period of five (5) years following the Closing, "key man" life insurance
on the life of Joseph M. Harris, in the amount of $1,000,000.
SECTION 6
INDEMNIFICATION
6.01. INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and hold
harmless the Underwriters and each person, if any, who controls any of the
Underwriters within the meaning of Section 15 of the Act against any and all
losses, claims, damages, liabilities or expenses incurred by them, arising out
of any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereto or
13
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, all as of the date when
the Registration Statement or such amendment, as the case may be, becomes
effective, or any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus (as amended or supplemented if the Company
shall have filed with the Commission any amendments thereof or supplements
thereto), or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the indemnity agreement contained in this subsection 6.01 shall not apply
to amounts paid in settlement of any litigation if such settlements are effected
without the written consent of the Company, nor shall it apply to the
Underwriters or any person controlling the Underwriters in respect of any such
losses, claims, damages, liabilities or actions arising out of or based upon any
such untrue statements or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information furnished in writing to the Company by any Underwriter specifically
for use in connection with the preparation of the Registration Statement and
Prospectus or any such amendment or supplement thereto. This indemnity agreement
is in addition to any other liability which the Company may otherwise have to
the Underwriters. The Underwriters agree within ten days after the receipt by
them of written notice of the commencement of any action against them or against
any person controlling them as aforesaid, in respect of which indemnity may be
sought from the Company on account of the indemnity agreement contained in this
subsection 6.01, to notify the Company in writing of the commencement thereof.
The failure of the Underwriters so to notify the Company of any such action
shall relieve the Company from any liability which it may have to the
Underwriters or any person controlling them as aforesaid on account of the
indemnity agreement contained in this subsection 6.01, but shall not relieve the
Company from any other liability which it may have to the Underwriters or such
controlling person. In case any such action shall be brought against the
Underwriters, or any of them, or any such controlling person and the Managers
shall notify the Company of the commencement thereof, the Company shall be
entitled to participate in (and, to the extent that it shall wish, to direct)
the defense thereof at its own expense, but such defense shall be conducted by
counsel reasonably satisfactory to the Managers or such controlling person or
persons, defendant or defendants in such litigation. The Company agrees to
notify the Managers promptly of commencement of any litigation or proceedings
against it or any of its officers or directors, of which it may be advised, in
connection with the issue and sale of any of its securities and to furnish to
the Managers, at their request, copies of all pleadings therein and permit the
Managers to be an observer therein and apprise the Managers of all developments
therein, all at the Company's expense. Notwithstanding the foregoing, in no
event shall the indemnification agreement contained in this Section 6.01 inure
to the benefit of any Managers (or any person controlling such Managers) on
account of any losses, claims, damages, liabilities or actions arising from the
sale of the common stock upon the public offering to any person by such Managers
if such losses, claims, damages, liabilities or actions arise out of, or are
based upon, an untrue statement or omission or alleged untrue statement or
omission in a Preliminary Prospectus and if the Prospectus shall correct the
untrue statement or omission or the alleged untrue statement or omission which
is the basis of the loss, claim, damage, liability or
14
action for which indemnification is sought and a copy of the Prospectus had not
been sent or given to such person at or prior to the confirmation of such sale
to him in any case where such delivery is required by the Securities Act, unless
such failure to deliver the Prospectus was a result of non-compliance by the
Company with Section 4.03 hereof.
6.02. INDEMNIFICATION BY UNDERWRITERS. The Underwriters severally agree to
indemnify and hold harmless the Company, the directors of the Company, each of
the Company's officers who signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of Section 15 of the Act
against any and all losses, liabilities, claims, damages and expenses described
in the indemnity contained in subsection 6.01 as incurred by them, but only with
respect to any statement in or omission from, or alleged untrue statement or
omissions made in the Registration Statement or any amendment thereto, or the
Prospectus (as amended or as supplemented, if amended or supplemented as
aforesaid) or any application or other document filed in any state or
jurisdiction in order to qualify the Stock under the blue sky or securities laws
thereof, or any information furnished pursuant to Section 3.05 hereof, if such
statement or omission was made in reliance upon information furnished in writing
to the Company by the Underwriters on its behalf specifically for use in
connection with the preparation thereof or supplement thereto. The Underwriters
shall not be liable for amounts paid in settlement of any litigation if such
settlement was effected without the consent of the Underwriters. In case of
commencement of any action in respect of which indemnity may be sought from the
Underwriters on account of the indemnity agreement contained in this subsection
6.02, each person agreed to be indemnified by the Underwriters shall have the
same obligation to notify the Underwriters as the Underwriters have toward the
Company in subsection 6.01 above, subject to the same loss of indemnity in the
event such notice is not given, and the Underwriters shall have the same right
to participate in (and, to the extent that they shall wish, to direct) the
defense of such action at their own expense, but such defense shall be conducted
by counsel reasonably satisfactory to the Company. The Underwriters agree to
notify the Company promptly of the commencement of any litigation or proceeding
against the Underwriters or against any such controlling person, of which it may
be advised, in connection with the issue and sale of any of the securities of
the Company, and to furnish to the Company at its request copies of all
pleadings therein and apprise it of all the developments therein, all at the
Underwriters' expense, and permit the Company to be an observer therein.
SECTION 7
There is no Section 7.
15
SECTION 8
CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS
The Underwriters' obligations hereunder to purchase the Stock and to
make payment to the Company hereunder on the Closing Date shall be subject to
the accuracy, as of the Closing Date, of the representations and warranties on
the part of the Company herein contained, to the performance by the Company of
all its agreements herein contained, to the fulfillment of or compliance by the
Company with all covenants and conditions hereof, and to the following
additional conditions:
8.01. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
has been made effective by the Commission, and no order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose shall have been initiated or threatened by the Commission or
shall be pending; any request for additional information on the part of the
Commission (to be included in the Registration Statement or Prospectus or
otherwise) has been complied with to the satisfaction of the Commission; and
neither the Registration Statement or the Prospectus nor any amendment thereto
shall have been filed to which counsel to the Managers shall have reasonably
objected in writing or have not given their consent.
8.02. ACCURACY OF REGISTRATION STATEMENT. The Managers shall not have
disclosed in writing to the Company that the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel to the Managers, is
material, or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein, or is necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
8.03. CASUALTY AND OTHER CALAMITY. Between the date hereof and the Closing
Date, the Company shall not have sustained any loss on account of fire,
explosion, flood, accident, calamity or any other cause, of such character as
materially adversely affects its business or property considered as an entire
entity, whether or not such loss is covered by insurance, and neither Joseph M.
Harris, President of the Company nor Vernon B. Brannon, Chief Financial Officer
of the Company shall have suffered any injury or disability of a nature which
would materially adversely affect his ability to properly function as an officer
and director of the Company.
8.04. LITIGATION AND OTHER PROCEEDINGS. Between the date hereof and the
Closing Date, there shall be no litigation instituted or threatened against the
Company and there shall be no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or foreign, wherein
an unfavorable ruling, decision or finding would materially adversely affect the
business, franchises, licenses, patents, operations or financial condition or
income of the Company considered as a whole.
16
8.05. LACK OF MATERIAL CHANGE. Except as contemplated herein or as set
forth in the Registration Statement and Prospectus, during the period subsequent
to the date of the last audited balance sheet included in the Registration
Statement and prior to the Closing Date, the Company (A) shall have conducted
its business in all material respects in the usual and ordinary manner as the
same was being conducted on the date of the last audited balance sheet included
in the Registration Statement, and (B) except in the ordinary course of its
business, the Company shall not have incurred any material liabilities or
obligations (direct or contingent) or disposed of any material portion of its
assets, or entered into any material transaction or suffered or experienced any
substantially adverse change in its condition, financial or otherwise. At the
Closing Date, the capital stock and surplus accounts of the Company shall be
substantially the same as at the date of the last audited balance sheet included
in the Registration Statement, without considering the proceeds from the sale of
the Stock, other than as may be set forth in the Prospectus, and except as the
surplus reflects the result of continued losses from operations.
8.06. REVIEW BY UNDERWRITER'S COUNSEL. The authorization of the Stock, the
Warrants, the Warrant Stock, the Registration Statement, the Prospectus and all
corporate proceedings and other legal matters incident thereto and to this
Agreement shall be reasonably satisfactory in all material respects to counsel
to the Managers.
8.07. OPINION OF COUNSEL. The Company shall have furnished to the Managers
the opinion, or opinions, dated the Closing Date, addressed to the Managers,
from counsel to the Company reasonably acceptable to the Managers and their
counsel, to the effect that based upon a review of the Registration Statement,
Prospectus, the Company's certificate of incorporation, bylaws, and relevant
corporate proceedings, an examination of such statutes as they deem necessary
and such other investigation as they deem necessary to express such opinion:
(i) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of Delaware, with full
corporate power and authority to own and operate its properties and to carry on
its business as set forth in the Registration Statement and Prospectus.
(ii) The Company is qualified as a foreign corporation in the
state of North Carolina and there is no other state in which the Company's
ownership of property or its conduct of business known to such counsel requires
such qualification and where the failure to so qualify would have a material
adverse effect on its operations.
(iii) The Company has authorized and outstanding capital stock
as set forth in the Registration Statement and Prospectus; the outstanding
common stock of the Company, the Stock, and the Warrants conform to the
statements concerning them in the Registration Statement and Prospectus; the
outstanding common stock of the Company has been duly and validly issued and is
fully-paid and nonassessable and contains no preemptive rights; the Stock and
the shares of Warrant Stock issuable upon exercise of the Warrants will be, upon
issuance thereof and payment therefor
17
in accordance with this Agreement and the Warrants, duly and validly issued,
fully paid and nonassessable, and will not be subject to the preemptive rights
of any shareholder of the Company.
(iv) The Warrants have been duly and validly authorized and
issued and are valid and binding instruments enforceable in accordance with
their terms under the laws of the State of Delaware.
(v) A sufficient number of shares of common stock have been
duly reserved for issuance upon exercise of the Warrants.
(vi) To the knowledge of such counsel, no consents, approvals,
authorizations or orders of regulatory agencies, offices or authorities are
known to such counsel which are necessary for the valid authorization, issue or
sale of the Stock hereunder, except as required under the Act or blue sky or
state securities laws or such as have been obtained.
(vii) The issuance and sale of the Stock, the Warrants, and
the consummation of the transactions contemplated by this Agreement and
compliance with the terms of this Agreement by the Company will not violate or
result in a breach by the Company of any of the terms, conditions, or provisions
of or constitute a default by the Company under the certificate of
incorporation, or bylaws of the Company, or any material note, indenture,
mortgage, deed of trust, or other material agreement or instrument known to such
counsel (as identified on a schedule attached to such opinion) to which the
Company is a party or by which the Company or any of its property is bound or
any existing law (provided this paragraph shall not relate to federal or state
securities laws), order, rule, regulation, writ, injunction, or decree known to
such counsel of any government, governmental instrumentality, agency, body,
arbitration tribunal, or court, domestic or foreign, having jurisdiction over
the Company or its property.
(viii) The Registration Statement has become effective under
the Act and, to the knowledge of such counsel, no order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or threatened by the
Commission under the Act; the Registration Statement and Prospectus, and each
amendment and supplement thereto, as of the effective date comply as to form in
all material respects with the requirements of the Act and the Rules and
Regulations thereunder; all contracts, to the extent described in the
Registration Statement or Prospectus, are sufficiently summarized or described
therein, or filed as exhibits thereto as required, and such counsel does not
know of any other contracts required to be summarized or disclosed or filed as
exhibits; and such counsel, does not know of any legal or governmental
proceedings pending or threatened to which the Company is the subject which
might reasonably be expected to result in a material adverse effect.
(ix) This Agreement has been duly authorized and executed by
the Company.
18
(x) The operations of the Company are in material compliance
with applicable state law governing permitted owners of engineering and
architectural firms, and governing the splitting of professional fees paid to
engineers and architects with persons not licensed to engage in such
professions.
As to routine factual matters such as the issuance of stock
certificates and receipt of payment therefor, the states in which the Company
transacts business, the adoption of resolutions reflected by the Company's
minute book and the like, such counsel may rely on the certificate of an
appropriate officer of the Company.
8.08.01. ACCOUNTANT'S LETTER. The Managers shall have received a letter
addressed to it and dated the date of this Agreement and the Closing Date,
respectively, from Deloitte & Touche LLP, independent public accountants for the
Company, stating that (i) with respect to the Company they are independent
public accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and the response to Item 509 of Regulation S-K
as reflected by the Registration Statement is correct insofar as it relates to
them; (ii) in their opinion, the financial statements examined by them of the
Company at all dates and for all periods referred to in their opinion and
included in the Registration Statement and Prospectus, comply in all material
respects with the applicable accounting requirements of the Act and the
published Rules and Regulations thereunder with respect to registration
statements on Form S-1; (iii) on the basis of certain indicated procedures (but
not an examination in accordance with generally accepted auditing standards),
including examinations of the instruments of the Company set forth under
"Capitalization" in the Prospectus, a reading of the latest available interim
unaudited financial statements of the Company, whether or not appearing in the
Prospectus, inquiries of the officers of the Company or other persons
responsible for its financial and accounting matters regarding the specific
items for which representations are requested below and a reading of the minute
books of the Company, nothing has come to their attention which would cause them
to believe that during the period from the last audited balance sheet included
in the Registration Statement to a specified date not more than five days prior
to the date of such letter (a) there has been any change in the capital stock or
other securities of the Company or any payment or declaration of any dividend or
other distribution in respect thereof or exchange therefor from that shown on
its latest audited balance sheet which was included in the Prospectus or in the
debt of the Company from that shown or contemplated under "Capitalization" in
the Registration Statement or Prospectus other than as set forth in or
contemplated by the Registration Statement or Prospectus; (b) there have been
any material decreases in net current assets or net assets as compared with
amounts shown in the last audited balance sheet included in the Prospectus so as
to make said financial statements misleading; and (c) on the basis of the
indicated procedures and inquiries referred to in clause (iii) above, nothing
has come to their attention which, in their judgment, would cause them to
believe or indicate that (1) the unaudited financial statements and schedules
set forth in the Registration Statement and Prospectus do not present fairly the
financial position and results of operations of the Company, for the periods
indicated, in conformity with the generally accepted accounting principles
applied on a consistent basis with the audited financial statements, OR (2) the
dollar amounts, percentages and other financial
19
information set forth in the Registration Statement and Prospectus under the
captions "Prospectus Summary," "Risk Factors," "Dilution," "Capitalization,"
"Management Stock Option Plan," "Principal Stockholders" and "Certain
Transactions," are not in agreement with the Company's general ledger, financial
records or computations made by the Company therefrom.
8.08.02. CONFORMED COPIES OF ACCOUNTANT'S LETTER. The Managers shall be
furnished without charge, in addition to the original signed copies, such number
of signed or photostatic or conformed copies of such accountants' letter as the
Managers shall reasonably request.
8.09. OFFICERS' CERTIFICATE. The Company shall have furnished to the
Managers a certificate of the Company, executed by the President and Chief
Financial Officer, dated as of the Closing Date, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct at and as of the Closing Date, and the Company
has complied with all the agreements and has satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing Date.
(ii) The Registration Statement has become effective and no
order suspending the effectiveness of the Registration Statement has been issued
and to the best of the knowledge of the respective signers, no proceeding for
that purpose has been initiated or is threatened by the Commission.
(iii) They have each carefully examined the Registration
Statement and Prospectus and any amendments and supplements thereto, and to the
best of their knowledge, the Registration Statement and the Prospectus and any
amendments and supplements thereto contain all statements required to be stated
therein, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto includes any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading and, since the Effective Date, there has occurred no
event required to be set forth in an amended or a supplemented Prospectus which
has not been so set forth.
(iv) Except as set forth in the Registration Statement and
Prospectus, since the respective dates as of which the periods for which
information is given in the Registration Statement and Prospectus and prior to
the date of such certificate (A) there has not been any substantially adverse
change, financial or otherwise, in the affairs or condition of the Company, and
(B) the Company has not incurred any material liabilities, direct or contingent,
or entered into any material transactions, otherwise than in the ordinary course
of business.
20
(v) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, no dividends or
distribution whatever have been declared and/or paid on or with respect to the
common stock of the Company.
8.10. TENDER OF DELIVERY OF STOCK. All of the Stock being offered by the
Company and the Warrants being purchased from the Company by the Managers shall
be tendered for delivery in accordance with the terms and provisions of this
Agreement.
8.11. BLUE SKY QUALIFICATION. The Stock shall be qualified in such states
as the Managers may reasonably request pursuant to Section 5.04, and each such
qualification shall be in effect and not subject to any stop order or other
proceeding by a regulating authority of competent jurisdiction on the Closing
Date.
8.12. APPROVAL OF UNDERWRITER'S COUNSEL. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Managers, whose approval shall
not be unreasonably withheld. The suggested form of such documents shall be
provided to the counsel for the Managers at least one business day before the
Closing Date. The Underwriter's counsel will provide a written memorandum
stating such closing documents which he deems necessary for their review. Such
memorandum shall be delivered five business days before the Closing Date to
counsel for the Company.
8.13. OFFICERS' CERTIFICATE AS A COMPANY REPRESENTATIVE. Any certificate
signed by an officer of the Company and delivered to the Managers or to counsel
for the Managers will be deemed a representation and warranty by the Company to
the Managers as to the statements made therein.
SECTION 9
TERMINATION
9.01. TERMINATION BECAUSE OF NON-COMPLIANCE. This Agreement may be
terminated by the Managers by notice to the Company at any time prior to the
Closing Date in the event that the Company shall have failed or been unable to
comply with any of the terms, conditions or provisions of this Agreement on the
part of the Company to be performed, complied with or fulfilled on or prior to
the Closing (including but not limited to those specified in Sections 2, 3, 4,
5, and 8 hereof) within the respective times herein provided for, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Managers in writing.
9.02. MARKET OUT TERMINATION. This Agreement may be terminated by the
Managers by notice to the Company at any time on or prior to the Closing Date
if, in the reasonable judgment of the Managers, payment for and delivery of the
Stock is rendered impracticable or inadvisable because (i) trading in securities
generally on the New York Stock Exchange, American Stock
21
Exchange, or NASDAQ shall have been halted, suspended or materially limited,
(ii) a general moratorium on commercial banking activities in New York, Iowa,
North Carolina or Delaware shall have been declared by either federal or state
authorities, or (iii) a war or other national calamity, crisis or change in
political, financial, or economic conditions, shall have occurred, the effect of
which on the financial markets of the United States is such that it would be
undesirable, impracticable or inadvisable in the reasonable judgment of the
Managers to proceed or continue with this Agreement or with the public offering.
Notice of such termination may be given to the Company by telegram, telecopy or
telephone and shall subsequently be confirmed by letter.
9.03. EFFECT OF TERMINATION HEREUNDER. Any termination of this Agreement
pursuant to this Section 9 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of any party thereto, except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it pursuant to
Section 5.07; and the Company and the Managers shall be obligated to pay,
respectively, all losses, claims, damages or liabilities, joint or several,
under Section 6.01 in the case of the Company and Section 6.02 in the case of
the Managers.
SECTION 10
UNDERWRITERS' REPRESENTATIONS AND WARRANTIES
The Underwriters represent and warrant to and agree with the Company
that:
10.01. REGISTRATION AS BROKER-DEALER AND MEMBER OF NASD. Each Underwriter is
registered as a broker-dealer with the Commission and is registered as a
broker-dealer in all states in which it conducts business and is a member in
good standing of the National Association of Securities Dealers, Inc.
10.02. NO PENDING PROCEEDINGS. There is not now pending or threatened
against the Managers any action or proceeding of which they have been advised,
by or before the Commission or any state securities commission concerning its
activities as a broker or dealer, nor has any of the Managers been named as a
"cause" in any such action or proceeding.
10.03. COMPANY'S RIGHT TO TERMINATE. In the event any action or proceeding
of the type referred to in Section 10.02 above shall be instituted or threatened
against the Managers at any time prior to the Closing Date, or in the event
there shall be filed by or against any of the Managers in any court pursuant to
any federal, state, local or municipal statute, a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
of any of the assets or if any of them makes an assignment for the benefit of
creditors, the Company shall have the right upon written notice to the Managers
to terminate this Agreement without any liability to the Managers of any kind
except for the payment of expenses as provided herein.
22
SECTION 11
NOTICE
Except as otherwise expressly provided in this Agreement:
11.01. NOTICE TO THE COMPANY. Whenever notice is required by the provisions
of this Underwriting Agreement to be given to the Company, such notice shall be
in writing addressed to the Company as follows:
HLM Design, Inc.
c/o Mr. Joseph M. Harris
121 West Trade Street, Suite 2950
Charlotte, North Carolina 28202
with a copy to:
Mr. Gary C. Ivey
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
11.02. NOTICE TO THE UNDERWRITERS. Whenever notice is required by the
provisions of this Agreement to be given to the Underwriters, such notice shall
be given in writing addressed to the Managers at the addresses set out at the
beginning of this Agreement, with a copy to:
Mr. Michael K. Denney
Bradley & Riley, P.C.
100 First Street S.W.
Cedar Rapids, Iowa 52404
SECTION 12
MISCELLANEOUS
12.01. BENEFIT. This Agreement is made solely for the benefit of the
Underwriters, and the Company, their respective officers and directors and (for
the limited purposes of Section 6 hereof) any controlling person referred to in
Section 15 of the Act, and their respective successors and assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successor" or the term "successors and assigns" as used in this Agreement
shall not include any purchasers, as such, of any of the Stock.
23
12.02. SURVIVAL. The respective indemnities, agreements, representations,
warranties, covenants and other statements of the Company or its officers as set
forth in or made pursuant to this Agreement and the indemnity agreements of the
Company and the Underwriters contained in Section 6 hereof shall survive and
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company or the Underwriters or any such officer or director
thereof or any controlling person of the Company or of the Underwriters, (ii)
delivery of or payment for the Stock, and (iii) the Closing Date. Any successor
of the Company and the Underwriters or any controlling person, officer or
director thereof, as the case may be, shall be entitled to the benefits hereof.
12.03. GOVERNING LAW. The validity, interpretation and construction of this
Agreement and of each part hereof will be governed by the laws of the State of
Iowa.
12.04. UNDERWRITERS' INFORMATION. The statements with respect to the public
offering of the Stock on the cover page of the Prospectus and under the caption
"Underwriting" in the Prospectus constitute the written information furnished by
or on behalf of the Underwriters referred to in subsection 2.02 hereof, in
subsection 6.01 hereof and subsection 6.02 hereof.
12.05. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
12.06 TERMINATION OF LETTER OF INTENT. Upon the execution and delivery
hereof, that certain Letter of Intent between Berthel and the Company executed
by the Company as of August 12, 1997 is hereby terminated and superseded in all
respects and is of no further force or effect.
24
SIGNATURE PAGE FOR UNDERWRITING AGREEMENT
Please confirm that the foregoing correctly sets forth the Agreement between you
and the Company.
Very truly yours,
HLM Design, Inc.
By: __________________________________
Joseph M. Harris, President
By: __________________________________
Vernon B. Brannon, Chief Financial Officer
25
ACCEPTANCE AND ACKNOWLEDGMENT PAGE FOR UNDERWRITING AGREEMENT
WE HEREBY CONFIRM AS OF THE DATE HEREOF
THAT THE ABOVE LETTER SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND THE
UNDERWRITERS.
Berthel Fisher & Company Financial Services, Inc.
(for itself and as representative of the members of the Underwriting Group)
By: ____________________________________
Thomas J. Berthel, Chairman
Westport Resources Investment Services, Inc.
(for itself)
By: ____________________________________
John Lane, Vice President
Marion Bass Securities Corporation
(for itself)
By: ____________________________________
Marion Bass, President
26
SCHEDULE I
UNDERWRITING COMMITMENTS
Berthel Fisher & Company Financial Services, Inc. shares
Westport Resources Investment Services, Inc. shares
Marion Bass Securities Corporation shares
27