HLM DESIGN, INC.
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement ("Agreement") is entered into as
of the 30th day of May, 1997, by and between HLM DESIGN, INC. ("Seller"), a
Delaware corporation; and ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ INC. ("▇▇▇▇▇▇ ▇▇▇▇"), an Iowa
corporation, and BBH Corp. ("BBH"), a Delaware corporation (▇▇▇▇▇▇ ▇▇▇▇ and BBH
being collectively referred to herein as "Guarantor"); and PACIFIC CAPITAL, L.P.
("Pacific"), a Delaware limited partnership, and EQUITAS, L.P. ("Equitas"), a
Delaware limited partnership (Pacific and Equitas being sometimes referred to
herein, each as "Purchaser," and collectively as "Purchasers").
W I T N E S E T H:
WHEREAS, Seller has agreed to sell to Purchasers, and
Purchasers have agreed to purchase from Seller, certain Promissory Notes of even
date herewith evidencing indebtedness owed by Seller to the Purchasers in the
aggregate amount of $2,000,000.00, on certain terms and conditions as set forth
in this Note Purchase Agreement;
WHEREAS, concurrently with the purchase of the Notes, Seller
shall extend credit to BBH in the amount of $3,200,000.00 to fund BBH's
obligations pursuant to the Merger Transaction (as defined herein) whereby BBH
will merge with and into ▇▇▇▇▇▇ ▇▇▇▇, with ▇▇▇▇▇▇ ▇▇▇▇ being the surviving
entity;
WHEREAS, one condition to each Purchaser's agreement to
purchase the respective Notes from Seller is that Purchasers, Seller and
Guarantor must enter into a comprehensive agreement setting forth the terms and
conditions of such purchase; and
WHEREAS, another condition to each Purchaser's agreement to
purchase the respective Notes from Seller is that Guarantor, which will directly
benefit from Purchasers' extension of credit to Seller, execute a guaranty in
favor of Purchasers.
NOW, THEREFORE, as an inducement to cause Purchasers to
purchase the Notes from Seller, and for other valuable consideration, the
receipt and sufficiency of which are acknowledged, it is agreed as follows:
I. NOTE PURCHASE
1.1. Sale and Purchase of Note. The Seller hereby transfers
and sells to each Purchaser, and each Purchaser hereby accepts and purchases
from the Seller, the respective promissory notes at the respective purchase
prices set forth below:
(A) Promissory Note of even date herewith in the original
principal amount of $1,200,000 made payable to Pacific, in the
form attached hereto as Exhibit ▇- ▇ (together with any
amendments, modifications, extensions or renewals thereof, the
"Pacific Note") to be purchased for a purchase price of
$1,188,000; and
(B) Promissory Note of even date herewith in the original
principal amount of $800,000 made payable to Equitas, in the
form attached hereto as Exhibit A-2 (together with any
amendments, modifications, extensions or renewals thereof, the
"Equitas Note") to be purchased for a purchase price of
$792,000;
(the Pacific Note and the Equitas Note being collectively referred to herein as
the "Notes").
1.2. Prepayment. Prepayment of principal or accrued interest
under the Notes may be made, in whole or in part, at any time without penalty.
Any such prepayments shall be made concurrently to each Purchaser in proportion
to each Purchaser's pro rata share of the original principal amount advanced to
Seller hereunder.
1.3. Use of Proceeds. The proceeds of the sale of the Notes
shall be used by Seller for funding Seller's loan to BBH in the approximate
principal amount of $3,200,000 pursuant to a promissory note made by BBH payable
to the order of Seller in form and substance satisfactory to Purchasers (the
"Affiliate Note"), which proceeds shall be used by BBH to fund its payment
obligations pursuant to that certain Merger Agreement dated as of April 3, 1997
by and between BBH and ▇▇▇▇▇▇ ▇▇▇▇ (the "Merger Agreement"). Pursuant to the
terms of the Merger Agreement, BBH shall merge with and into ▇▇▇▇▇▇ ▇▇▇▇, with
▇▇▇▇▇▇ ▇▇▇▇ being the surviving entity (the "Merger Transaction"). Purchasers
will conduct a review of Seller's business records and operations within 30 days
after closing to verify the appropriate use of the proceeds of the sale of the
Notes and may require Seller to provide certifications or such other assurances
with respect thereto as Purchasers may determine in their discretion.
1.4. Definition of Secured Indebtedness. As used herein,
"Secured Indebtedness" shall mean all present and future debts and other
obligations of Seller to Purchasers under this Agreement and the indebtedness
and obligations evidenced by the Notes, and all modifications, extensions and
renewals thereof.
II. CONDITIONS TO CLOSING
2.1. Documents. Concurrently with the execution hereof, in
connection with the sale of the Notes, Seller shall deliver to Purchasers the
following documents (the "Transaction Documents"), in form and substance
acceptable to Purchasers:
(a) This Agreement;
(b) The Notes, each executed by Seller;
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(c) Security Agreement executed by Seller covering all of
Seller's personal property and fixtures;
(d) Collateral Assignment of Promissory Note executed by
Seller, together with original Affiliate Note made by
BBH payable to the order of Seller, which promissory
note shall be duly endorsed by Seller to Purchasers
for collateral security;
(e) Collateral Assignment of Contract Rights executed by
Seller (with respect to the management agreements),
together with copies of the management agreements;
(f) Guaranty executed by Guarantor;
(g) Collateral Assignment of Life Insurance on ▇▇▇▇▇▇
▇▇▇▇▇▇▇ in the amount of $1,000,000.00 and, within 30
days after Closing, a Collateral Assignment of Life
Insurance on ▇▇▇ ▇▇▇▇▇▇ in the amount of
$2,000,000.00;
(h) Noncompetition Agreements executed by each of ▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (referred to herein,
respectively, as the "▇▇▇▇▇▇ Noncompete" and the
"▇▇▇▇▇▇▇ Noncompete");
(i) Personal Guaranty executed by ▇▇▇ ▇▇▇▇▇▇ (the "▇▇▇▇▇▇
Guaranty");
(j) Personal Guaranty executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the
"▇▇▇▇▇▇▇ Guaranty");
(k) The Warrants as described in Section 3.1 hereof;
(l) Registration Rights Agreement;
(m) Form of shareholders' agreement to be agreed to by
shareholders of HLM Design, Inc., Purchasers, ▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇, within 45 days following
Closing, and subject to further amendment and
modification to the satisfaction of Purchasers, ▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ following Closing as
provided herein;
(n) UCC-1 Financing Statements/Negative Pledge Agreements
to be filed in such jurisdictions as Purchasers may
require;
(o) Small Business Administration Forms 1031 Portfolio
Financing Report Form, 480 Size Status Declaration
and 652-D Assurance of Compliance; and
(p) Legal Opinion delivered by counsel for Seller in form
and substance acceptable to Purchasers.
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2.2. Other Closing Items. Concurrently with, or prior to, the
execution hereof, Seller shall also provide Purchasers with the following
documents and items, in form and substance acceptable to Purchasers:
(a) UCC-11, Judgment and Tax Lien Searches for Seller and
for Guarantor.
(b) If requested by Purchasers, Certificates of Insurance
insuring Seller's assets naming Purchasers as Loss
Payee/Insured Mortgagee accompanied by a detailed
listing of and copies of all insurance policies on
Seller's assets and facilities.
(c) Certified copy of Seller's Articles of Incorporation
issued by the Secretary of State of Delaware.
(d) Certificate of Seller's Good Standing and
Qualification to do Business under Delaware law
issued by the Secretary of State of Delaware, and in
all other states in which Seller does business.
(e) Copy of Seller's current By-laws, certified by
Seller's corporate secretary.
(f) Certified copy of Resolutions of Seller's Board of
Directors authorizing a named officer of Seller to
enter into this Agreement and to execute all related
documents on Seller's behalf.
(g) Certified copy of ▇▇▇▇▇▇ ▇▇▇▇ and BBH's Articles of
Incorporation/Charter.
(h) Certificate of ▇▇▇▇▇▇ ▇▇▇▇'▇ and BBH's Good Standing
and Qualification to do Business under the law in
which it was incorporated , and in all other states
in which Guarantor does business.
(i) Copy of ▇▇▇▇▇▇ ▇▇▇▇'▇ and BBH's current By-laws,
certified by Guarantor's corporate secretary.
(j) Certified copy of Resolutions of ▇▇▇▇▇▇ ▇▇▇▇'▇ and
Guarantor's Board of Directors authorizing a named
officer of Guarantor to enter into the Agreement and
to execute all related documents on Guarantor's
behalf.
(k) Merger documentation and diligence with respect to
the Merger Transaction, including a copy of merger
agreement, articles of merger and evidence that the
merger agreement was duly authorized and approved,
and consummation of the transactions contemplated
thereby, are not in conflict with, or in
contravention with or violation of any law,
regulation or agreement binding upon the parties
thereto, in such form and substance satisfactory to
Purchasers;
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(l) Payoff instructions and amounts with respect to the
BBH's funding obligations pursuant to the Merger
Agreement;
(m) Processing Fee in the amount of $40,000.00 plus
attorneys' fees for Boult, Cumming, Conners, & ▇▇▇▇▇,
PLC and related expenses;
(n) A pro forma balance sheet of the Seller and Guarantor
reflecting all of the transactions contemplated
above, including the Merger, issuance of the
Affiliate Note and the purchase of the Notes; and
(o) Closing Statement listing disbursements for all
closing expenses;
(p) Such other and further documentation as Purchaser may
require.
2.3. Completion of Due Diligence. As a condition to closing
the transactions referenced herein, including the purchase of the Notes,
Purchasers must have completed their due diligence review of Seller and
Guarantor with the results of such review being satisfactory to Purchasers in
their sole discretion.
2.4. Additional Conditions to Closing. Concurrently with the
execution hereof, the following additional conditions must be satisfied, in form
and substance acceptable to Purchasers:
(a) Purchasers shall have approved the management
agreements to be in force as of Closing between (i)
Seller and ▇▇▇▇▇▇ ▇▇▇▇, and (ii) Seller and HLM of
North Carolina, P.C. (collectively, the "Related
Party Management Agreements"), subject to further
amendment and modification to the satisfaction of
Purchasers following Closing as provided herein;
(b) Purchasers shall have approved and executed
Intercreditor Agreement among themselves;
(c) Payoff of any and all indebtedness of Guarantor to
Firstar Bank of Iowa, N.A. ("Firstar") together with
applicable release documentation and UCC termination
statements, including releases of any liens, security
interests or encumbrances by Firstar against the
assets of Guarantor;
(d) All necessary consents and approvals shall have been
obtained, including any necessary consents or
requirements by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company Leasing,
Inc. ("Berthel Leasing") with respect to the
sale-leaseback arrangement between Berthel Leasing
and Guarantor;
(e) All Purchasers shall have approved the aforementioned
sale-leaseback arrangement between Berthel Leasing
and Guarantor, and the documentation thereof,
and said transaction shall be consummated
as of Closing;
(f) All Purchasers shall have approved the extension of
credit by First Charter Bank to Seller in an amount
not to exceed $1,000,000, and the guarantee of such
indebtedness by Guarantor secured by the accounts of
Guarantor, and the documentation thereof, and said
transaction shall be consummated as of Closing;
(g) The Merger Transaction shall be consummated according
to the terms and conditions of the Merger Agreement.
III. EQUITY PARTICIPATION
3.1. Stock Purchase Warrant. For a total purchase price of
$20,000.00, Seller shall issue to Purchasers and their designees, concurrently
with the Closing, common stock purchase warrants (the "Stock Purchase Warrants"
or "Warrants") in substantially the same form of the Stock Purchase Warrant
attached hereto as Exhibit B, with respect to a total of initially 14,372 shares
of common capital stock of the Seller. Pursuant to applicable state law and the
applicable provisions of Title 13, Code of Federal Regulations, the value of the
Stock Purchase Warrants shall be deemed an equity participation and shall not be
characterized as interest, loan charges, commitment fees or brokerage
commissions.
IV. WARRANTIES AND COVENANTS
Seller and Guarantor hereby jointly and severally represent,
warrant and covenant to Purchasers as follows:
4.1. Capacity. Seller warrants that it is and shall remain a
duly organized Delaware corporation in good standing under the laws of Delaware,
and that Seller is and shall remain duly qualified to do business in each other
state in which qualification is necessary, except where failure to so qualify
would not have a material adverse effect on Seller's business or financial
condition. ▇▇▇▇▇▇ ▇▇▇▇ warrants that it is and shall remain a duly organized
Iowa corporation in good standing under the laws of Iowa, and that ▇▇▇▇▇▇ ▇▇▇▇
is and shall remain duly qualified to do business in Iowa, and the states of
California, Colorado, Virginia, Pennsylvania, Illinois and Florida, and each
other state in which qualification is necessary, except where failure to so
qualify would not have a material adverse effect on ▇▇▇▇▇▇ ▇▇▇▇'▇ business or
financial condition. BBH warrants that it is a duly organized Delaware
corporation in good standing under the laws of Delaware, and that BBH is duly
qualified to do business in each state in which qualification is necessary,
except where failure to so qualify would not have a material adverse effect on
BBH's business or financial condition. Seller and Guarantor further warrants
that each of its subsidiaries, if any, are in good standing and qualified to do
business in their respective states of incorporation and states in which they do
business. Seller and Guarantor each have all requisite power and authority to
own and operate their respective properties and assets and to carry on their
respective businesses as presently conducted and as proposed to be conducted.
Seller and Guarantor warrant that their execution, delivery and performance
under this Agreement and all related documents are permitted under and will not
violate any provision of Seller's or Guarantor's Charter or By-Laws. Seller and
Guarantor further warrant that the execution of all necessary resolutions and
other prerequisites of corporate action have been
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duly performed so that the individual(s) executing this Agreement and related
documents on behalf of Seller and Guarantor is duly authorized to bind Seller
and Guarantor by his or her respective signature.
4.2. Small Business Concern. Seller and Guarantor, together
with their "affiliates" (as that term is defined in ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code
of Federal Regulations ss. 121.401), if any, is a "small business concern"
within the meaning of ss. 121.802 of Title 13 of the United States Code of
Federal Regulations. The information set forth in the Small Business
Administration Form 480 and Form 652-D regarding the Seller and Guarantor is
true, accurate and complete.
4.3. Capitalization. The authorized capital stock of the
Seller is 100,000 shares of Common Stock par value $0.01 per share, of which
50,300 shares are or will be issued and outstanding immediately following
Closing. The Seller has reserved sufficient shares of Common Stock for issuance
upon exercise of the Warrants. All outstanding securities of the Seller were
issued in compliance with applicable federal and state securities laws. Except
as described above, there are no options, warrants, convertible securities,
reserved shares or other rights to purchase any of the Seller's authorized and
unissued capital stock.
4.4. Name. Seller and Guarantor warrant that neither Seller
nor Guarantor has been known under or done business under any name other than
the name used by Seller and Guarantor, respectively, in executing this Agreement
and related documents, except that Guarantor has done business under the name
"HLM of North Carolina, P.C." in the state of North Carolina and under the name
"HLM of Oregon, Architecture and Planning, P.C." in the state of Oregon. Seller
and Guarantor agree to give Purchasers at least fifteen (15) days prior written
notice before Seller or Guarantor begin using any name other than those used in
executing this Agreement and related documents.
4.5. Chief Executive Office. Seller warrants that Seller's
chief executive office is located at Suite 2950, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Guarantor warrants that Guarantor's chief
executive office is located at Suite 2950, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Neither Seller nor Guarantor shall move their chief
executive offices from their respective addresses without providing Purchasers
with at least 30 days prior written notice.
4.6. No Subsidiaries. Seller and Guarantor warrant that
neither Seller nor Guarantor presently has any subsidiaries or owns or controls,
directly or indirectly, any other equity interests in any corporation,
association, partnership or other business entity, except for HLM of North
Carolina, P.C., a North Carolina corporation, and HLM of Oregon, Architecture
and Planning, P.C., an Oregon corporation, which are affiliates of the Seller
due to management and service agreements that have been, or are anticipated to
be, entered into between the Seller and such corporations.
4.7. Corporate Records. Seller and Guarantor covenant to
maintain corporate minute books and stock ledgers current and complete in all
material respects and agree (a) to allow Purchasers to inspect the same at any
time; and (b) to make their representatives available to
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Purchasers to discuss such records and any other matters regarding Seller's or
Guarantor's business or financial condition as Purchasers may request.
4.8. Board of Directors' Designee. So long as the Secured
Indebtedness is outstanding two (2) designees of Purchasers shall be elected to
the Board of Directors of Seller, which Board of Directors shall consist of no
more than five (5) members without the prior approval of such two (2) designees,
and, in addition, a representative of the Purchasers shall be entitled to attend
all board of directors and shareholders meetings of Guarantor. Through May,
1999, and so long as the Secured Indebtedness is outstanding, the Board of
Directors of Seller shall schedule and hold monthly telephonic board meetings,
provided that, at least once every quarter, the Board of Directors shall
schedule and hold a duly-convened board meeting at which all directors of Seller
shall be invited to attend in person, which meeting shall be held at the
principal office of Seller or such other location as approved by the Purchasers.
The corporate documents of Seller and Guarantor shall be amended as necessary to
assure compliance with the foregoing sentence. Seller and Guarantor shall
provide Purchasers with notice of any such meetings at the same time and in the
same manner as given to shareholders and statutory directors, and shall provide
such designees and representative of Purchasers with all documents and reports
associated therewith. Purchasers, Seller and Guarantor agree that a breach by
Seller or Guarantor of any of the provisions of this paragraph will cause
irreparable damage to Purchasers incapable of precise valuation. Therefore, in
the event of such breach, Purchasers, in addition to any other remedy available
to it at law or in equity, shall be entitled to a specific performance order by
a court of competent jurisdiction ordering Guarantor or Seller, as the case may
be, to specifically perform in accordance with the provisions of this paragraph.
The existence of any claim or cause of action asserted by Guarantor or Seller
against Purchasers, whether arising from this Agreement or otherwise, shall not
constitute a defense to the enforcement of this Agreement by Purchasers, nor of
any Purchaser's right to obtain an injunction against Seller or Guarantor, as
the case may be, for the violation of this covenant. In the event Seller or
Guarantor breaches this paragraph and Purchasers must enforce any of the rights
herein granted through an attorney, then Seller and Guarantor shall be liable
for any and all reasonable attorneys' fees, expenses and court costs incurred in
connection with the enforcement of each Purchaser's rights with respect to this
paragraph.
4.9. ERISA. Seller and Guarantor have not incurred and shall
not incur a material accumulated funding deficiency within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and have
not incurred any material liability to the Pension Benefit Guaranty Corporation
established under ERISA (or any successor thereto under ERISA) in connection
with any retirement plan, and no reportable event has occurred and is continuing
or shall occur with respect to any such plans.
4.10. Books and Records. Seller and Guarantor covenant to
maintain financial books and records in accordance with generally accepted
accounting principles, consistently applied ("GAAP"), and to allow Purchasers to
inspect such records and to discuss such records with representatives of Seller
or Guarantor at any reasonable time.
4.11. Tax Matters. Each of Seller and Guarantor: (i) has
timely filed all tax returns that are required to have been or to be filed by
them with all appropriate federal, state, county and
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local governmental agencies, and will continue to do so throughout the term of
this Agreement; (ii) has timely paid all taxes owed by them, including those for
which they are obligated to withhold amounts owing to any employee (including
without limitation social security taxes), creditor or third party except such
taxes as are being contested in good faith and by proper proceedings, as to
which adequate reserves are maintained on the books of Seller or Guarantor, as
appropriate, in accordance with GAAP, and will continue to do so throughout the
term of this Agreement, and (iii) has not waived any statute of limitations with
respect to taxes or agreed to any extension of time with respect to a tax
assessment or deficiency. The assessment of any additional taxes for periods for
which returns have been filed is not expected to exceed the recorded liability
therefor, and, to the best of the Seller's and Guarantor's knowledge, there are
no material unresolved questions or claims concerning the Seller's or
Guarantor's tax liability. Seller's and Guarantor's tax returns have not been
reviewed or audited by any federal, state, local or county taxing authority.
There is no pending dispute with any taxing authority relating to any of said
returns which, if determined adversely to Seller or Guarantor, as applicable,
would result in the assertion by any taxing authority of any valid deficiency in
any material amount for taxes.
4.12. Disclosure of Litigation. Except as disclosed in
Schedule 4.12 hereto, Seller and Guarantor warrant that neither the Seller nor
Guarantor is presently a party to any pending litigation, arbitration or
administrative proceeding involving any relief, or to their knowledge the
subject of any investigation; that there is no litigation, arbitration or
administrative proceeding or investigation either threatened or, to their
knowledge likely to be instituted, in which Seller or Guarantor or any of their
property or assets will be a party; that neither Seller nor Guarantor is subject
to any outstanding court or administrative order; and that, to the best of
Seller's and Guarantor's knowledge, information and belief, no facts exist which
give rise to claims by third parties against Seller or Guarantor which have not
yet been asserted. Seller and Guarantor covenant to give Purchasers prompt
written notice of any litigation, arbitration, administrative proceeding or
investigation that may hereafter be instituted or threatened in which Seller or
Guarantor would be a party, whether or not Seller's or Guarantor's liability
under such proceeding would be covered by insurance.
4.13. Assistance in Litigation. Seller and Guarantor covenant,
upon request, to cooperate with Purchasers in any proceeding in which Seller or
Guarantor is not an adverse party to Purchasers and which concerns Purchasers'
rights regarding the Secured Indebtedness or any collateral securing its
payment.
4.14. Ownership of Patents, Licenses, Etc. Seller and
Guarantor warrant that they own or have the right to use all licenses, permits,
franchises, registrations, patents, copyrights, trademarks, tradenames or
service marks, or the rights to use the foregoing, that are necessary for the
continued operation of Seller's or Guarantor's businesses, respectively, without
infringing upon or otherwise acting adversely to the right of any other person
with respect thereto.
4.15. No Untrue or Misleading Representations. Seller and
Guarantor warrant that no written information, exhibit or report furnished to
Purchasers nor any written statement or representation made by Seller or
Guarantor to Purchasers in connection with the Secured
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Indebtedness contains any untrue statement of material fact or omits to state a
material fact necessary to make the foregoing not misleading.
4.16. No Defaults Under Other Agreements. Seller and Guarantor
warrant that, neither Seller nor Guarantor, nor, to the best of Seller's or
Guarantor's knowledge, information, and belief, any other party thereto, is
presently in default under or in breach of any contract or agreement which might
be material to the financial condition or prospects of Seller or Guarantor, and
no condition presently exists which, with the giving of notice, the passing of
time, or both, would cause such a default or breach.
4.17. No Burdensome Agreements. Seller and Guarantor warrant
that neither Seller nor Guarantor is a party to any contract or agreement or is
subject to any contingent liability that does or may impair Seller's or
Guarantor's ability to perform in all material respects under the terms of this
Agreement and related documents. Guarantor further warrants that the execution
and performance of this Agreement will not cause a default, acceleration or
other event under any other contract or agreement to which Seller or Guarantor
or any property of Seller or Guarantor is subject and will not result in the
imposition of any charge, penalty, lien or other encumbrance against any of
Seller's or Guarantor's property except in favor of Purchasers.
4.18. Legal and Binding Agreement. Seller and Guarantor
warrant that the execution, delivery and performance of this Agreement and any
other document necessary to effectuate this transaction will not violate any
judicial or administrative order or governmental law or regulation, and that
this Agreement is valid, binding and enforceable in every respect according to
its terms, except as enforcement may be limited by bankruptcy laws and other
laws affecting the rights of creditors generally and by principles of equity,
whether asserted in a proceeding at law or in equity.
4.19. No Consent Required. Seller and Guarantor warrant that
Seller's and Guarantor's execution, delivery and performance of this Agreement
does not require the consent of or the giving of notice to any third party
including, but not limited to, any other lender, governmental body or regulatory
authority, except such consents as have been received as of the date of this
Agreement.
4.20. Compliance with Law. Seller and Guarantor warrant that
Seller's and Guarantor's business activities are conducted in compliance with
all applicable laws and regulations, including environmental laws and
regulations, and Seller and Guarantor covenant that such activities shall
continue to be so conducted. In the event a governmental regulatory agency
notifies Seller or Guarantor of any violation by Seller or Guarantor of any laws
or regulations, Seller and Guarantor covenant to give prompt written
notification of such violation to Purchasers. Seller and Guarantor represent and
warrant that Seller's and Guarantor's operations are in compliance with all
architectural and engineering licensing laws and regulations in each of the
states in which they conduct business, and that Seller and Guarantor and their
respective employees have the necessary licenses to conduct business as
currently being conducted.
4.21. Financial Statements.
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A. Warranties. Seller and Guarantor warrant that all
financial statements delivered to Purchasers in connection with the Secured
Indebtedness have been prepared in accordance with GAAP, consistently applied,
and are true, accurate and complete in every material respect. Without limiting
the foregoing, Seller and Guarantor warrant that such financial statements
disclose all known contingent liabilities as well as direct liabilities, to the
extent required by GAAP. Seller and Guarantor acknowledge that Purchasers have
advanced (or shall advance) the Secured Indebtedness in reliance upon such
financial statements, and Seller and Guarantor warrant that no material adverse
change has occurred in the financial condition of Seller or Guarantor as set
forth in such financial statements. Seller and Guarantor further warrant that
Seller and Guarantor have good and absolute title to the assets disclosed on
Seller's and Guarantor's respective balance sheets disclosed to Purchasers,
subject only to liens, security interests and other encumbrances securing
liabilities listed thereon.
B. Absence of Changes. Since March 21, 1997: (a)
Seller and Guarantor have not entered into any transaction which was not in the
ordinary course of business, (b) there has been no materially adverse change in
the condition (financial or otherwise) or the business, property, assets or
liabilities of Seller or the Guarantor other than changes in the ordinary course
of business, none of which, individually or in the aggregate, has been
materially adverse, (c) there has been no damage to, destruction of or loss of
physical property (whether or not covered by insurance) materially adversely
affecting the business or operations of Seller or Guarantor, (d) neither Seller
nor Guarantor has declared or paid any dividend or made any distribution on its
stock, or redeemed, purchased or otherwise acquired any of its stock, (e)
neither Seller nor Guarantor has increased the compensation of any of its
officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of business, (f) there has
been no resignation or termination of employment of any key officer or employee
of Seller or Guarantor, (g) there has not been any change, except in the
ordinary course of business, in the contingent obligations of Seller and
Guarantor, by way of guaranty, endorsement, indemnity, warranty or otherwise,
(h) to the best knowledge of Seller and Guarantor, there has been no other event
or condition of any character pertaining to and materially adversely affecting
the assets, business or property of Seller or Guarantor, except for such
corporate filings and disbursements as may have been necessary to complete the
Merger.
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C. Reporting Requirements.
Seller and Guarantor covenant to furnish to
Purchasers the following:
(1) As soon as practicable after the end of
each fiscal year, and in any event within 90 days thereafter, balance sheets of
Seller and Guarantor as of the end of such fiscal year, and the related
statements of income and statements of cash flows for such year, prepared in
accordance with GAAP, all in reasonable detail and, if requested by Purchasers,
audited by an independent public accounting firm approved by Purchasers.
Concurrently with the delivery of such financial statements, Seller and
Guarantor shall provide a certificate of compliance by the chief financial
officer of Seller and Guarantor, certifying that Seller and Guarantor are not in
default under this Agreement or any of the loan documents relating to the
transactions described herein, or any other agreement for borrowed money to
which Seller or Guarantor may be a party, and that Seller and Guarantor are in
compliance with all representations, warranties and covenants contained herein
and in any of the related loan documents.
(2) Not less than 30 days prior to the
beginning of each fiscal year, an annual business plan for the upcoming year
with a monthly budget and a three-year strategic plan. Seller and Guarantor
represent and warrant that the assumptions on which the projections will be
prepared will be reasonably based on the facts known to Seller and Guarantor at
the time the projections are prepared.
(3) As soon as available, and in any event
not more than 30 days following the end of each fiscal month, unaudited
financial statements of Seller and Guarantor, including balance sheet as of the
end of such month and statement of income and statement of cash flows for such
month and year-to-date.
4.22. Estoppel Letters. Seller and Guarantor covenant to
provide Purchasers, within ten (10) business days after request, an estoppel
letter stating (i) the balance of the Secured Indebtedness, (ii) to the best of
Seller's and/or Guarantor's knowledge, whether Seller or Guarantor has any
defenses to payment of the Secured Indebtedness, and (iii) the nature of any
defenses to payment of the Secured Indebtedness. Such balance as presented for
confirmation and the nonexistence of defenses shall be presumed if Seller and/or
Guarantor fails to respond to such a request within the required period.
4.23. Default Certificates. Seller and Guarantor shall
immediately notify Purchasers in the event of a default under this Agreement or
any other credit agreement to which either of them is a party or in the event
any governmental regulatory agency has notified Seller, Guarantor or any of
their subsidiaries of any material violation of any laws or regulations.
4.24. Securities Filings. Seller and Guarantor shall provide
Purchasers with copies of any reports filed by Seller or Guarantor with any
governmental securities agency and copies of any communications with
shareholders.
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4.25. Management Contracts. Seller and Guarantor will provide
Purchasers copies of all management contracts, consulting agreements and other
similar agreements to which Seller or Guarantor is or hereafter becomes a party,
together with any and all modifications or amendments thereof.
4.26. Employment and Consulting Contracts. Seller and
Guarantor will provide Purchasers copies of all employment contracts, agreements
with third parties who provide consulting services to Seller or Guarantor (other
than third party consulting agreements with respect to architectural or
engineering services provided for clients of Seller or Guarantor) and other
similar agreements to which Seller or Guarantor is or hereafter becomes a party,
in which the aggregate annual compensation payable to the subject employee or
person is greater than $100,000.
4.27. Notice of Changes in Financial Condition and Defaults.
Seller and Guarantor covenant to give Purchasers prompt written notice when it
becomes aware of (i) the creation or discovery of any material additional
contingent liability or the occurrence of any other material adverse change in
the financial condition of Seller or Guarantor or, to their knowledge, any other
person or entity presently or hereafter liable for payment of all or part of the
Secured Indebtedness, and (ii) the occurrence of any event, or presence of any
condition, which constitutes a default hereunder or which with the giving of
notice, the passing of time, or both, would constitute a default. Seller and
Guarantor represents that their respective fiscal years for financial reporting
purposes ends on the last Friday in the month of April each year, and Seller and
Guarantor covenant that they will not change their fiscal years without
obtaining the prior written consent of Purchasers, which will not be
unreasonably withheld.
4.28. Further Assurances. Seller and Guarantor acknowledge
that each Purchaser is a Small Business Investment Company, licensed by the
Small Business Administration under 13 CFR 107. Throughout the term of this
Agreement, Seller and Guarantor covenant to execute such other assignments,
security agreements, financing statements, and other documents that Purchasers
may reasonably deem necessary in the ordinary course of business to further
evidence the obligations provided for herein or to perfect, extend, or clarify
Purchasers' rights in any property securing or intended to secure the Secured
Indebtedness and to amend, modify or add to any provisions of this Agreement or
any of the other Transaction Documents as may be necessary in order to comply
with rules and regulations of the Small Business Administration applicable to
Small Business Investment Companies.
4.29. Merger Transaction. Seller and Guarantor represent,
warrant and covenant that (i) the Merger Transaction will be completed in
compliance with all federal and state laws and regulations, (ii) no
misrepresentations were made and there were no omissions to state any material
fact or facts in soliciting the necessary shareholder votes for approval of the
Merger Transaction according to the terms set forth in the Merger Agreement, and
(iii) the approval of the Merger Transaction by the ▇▇▇▇▇▇ ▇▇▇▇ ESOP and
respective shareholders was conducted in compliance with all federal and state
laws and regulations including ERISA.
4.30. Solvency. Seller and Guarantor represent that neither
Seller nor Guarantor is insolvent and that Seller's and Guarantor's execution
hereof and the Transaction Documents does
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not render Seller or Guarantor insolvent, either before or after the
consummation of the Merger, for the purpose of state or federal fraudulent
transfer laws, other avoidance laws, laws regarding corporate distributions or
any other law.
4.31. Negative Covenants. Without Purchasers' prior written
consent, neither Seller nor Guarantor shall do any of the following:
A. Other Debt. Incur, create, assume or permit to
exist any indebtedness for borrowed money except:
(i) Indebtedness to Purchasers pursuant to the
Pacific Note and the Equitas Note.
(ii) Seller's indebtedness to First Charter Bank
which shall not exceed $1,000,000.00 at any
time, which indebtedness is guaranteed by
Guarantor, which guarantee is secured by the
accounts of Guarantor.
(iii) Debts existing as of the execution hereof
and disclosed in the financial statements
delivered to Purchasers, provided that (a)
Guarantor's indebtedness to First Charter
Bank shall not exceed $500,000, and (b) any
and all of Guarantor's indebtedness to
Firstar shall be paid in full at Closing and
refinanced pursuant to a sale-leaseback
arrangement between ▇▇▇▇▇▇▇ Leasing and
Guarantor, which lease obligations to
▇▇▇▇▇▇▇ Leasing shall not exceed $2,800,000
and shall reduce according to the terms of
said Lease Agreement between Guarantor and
▇▇▇▇▇▇▇ Leasing dated May 29, 1997 (the
"▇▇▇▇▇▇▇ Lease Agreement") with an
applicable monthly lease payment of no more
than $65,000 per month for a period of no
more than five (5) years.
(iv) Indebtedness of Guarantor to Seller pursuant
to Affiliate Note.
(v) Unsecured debts on open account incurred in
the ordinary course of business.
(v) Normal and recurring management fees due and
payable between the Guarantor and the Seller
pursuant to management and service
agreements which have been collaterally
assigned to the Purchasers.
B. Reorganization; Acquisition. Enter into any
agreement to merge, consolidate, liquidate, dissolve or otherwise reorganize or
recapitalize, or become the subject of any change of control.
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C. Affiliate Contracts and Transactions. Enter into
or permit to exist any management, consulting or other contract with any
director, shareholder, or officer of Seller or Guarantor, or any affiliate
thereof, or engage in any transaction with any affiliate or related party.
D. Compensation. Increase (except for cost of living
adjustments made in the ordinary course of business) the compensation payable to
▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
E. Disposition of Assets. Sell, lease, or otherwise
transfer any of its assets other than in the ordinary course of business.
F. Distributions. Declare or pay a distribution or
dividend (of cash or other property) with respect to Seller's or Guarantor's
capital stock.
G. Encumbrances. Incur, create or permit to exist any
encumbrance on any of Seller's or Guarantor's assets, except for Permitted
Encumbrances. As used herein, "Permitted Encumbrances" shall mean liens arising
by operation of law evidencing accounts not past due, including ad valorem tax
liens and artisan liens, and purchase money security interests, and with respect
to the Seller and Guarantor the lien in favor of Purchasers created pursuant to
this Agreement and the Transaction Documents and with respect to Guarantor, (i)
that certain security interest in the personal property of Guarantor granted to
▇▇▇▇▇▇▇ Leasing pursuant to the sale-leaseback arrangement between Guarantor and
▇▇▇▇▇▇▇ Leasing pursuant to the ▇▇▇▇▇▇▇ Lease Agreement and (ii) that certain
security interest in the accounts of Guarantor granted to First Charter Bank
securing Guarantor's guarantee of the $1,000,000 of indebtedness of Seller to
First Charter Bank and securing Guarantor's $500,000 of permitted direct
indebtedness to First Charter Bank, which liens and security interests, as
applicable, shall be released following the termination of said lease and loan
facilities, respectively.
H. Stock Transactions. Issue, redeem or agree to
redeem any stock, warrants or debt securities convertible into stock except as
contemplated herein.
I. Change of Business. Engage in any business other
than that in which it is presently engaged.
J. Corporate Amendments. Amend its corporate Articles
of Incorporation/Charter or By-Laws except for amendments which could not have
an adverse effect on Purchasers.
K. Guaranties. Guarantee any obligations of any other
business or individual, including any subsidiary, except through the endorsement
of items tendered to Seller or Guarantor as payment in the ordinary course of
business, provided that, Guarantor shall be permitted to guarantee the
obligations of Seller to First Charter Bank in amount not to exceed $1,000,000,
which guarantee shall be secured by the accounts of Guarantor.
L. Loans; Letters of Credit. Make any loan or provide
for the issuance of letter of credit to any party, except for the granting of
unsecured trade credit, employee advances
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(not to exceed $7,500 per employee) and the issuance of letters of credit to
suppliers, all in the ordinary course of Seller's or Guarantor's business, as
the case may be.
M. Action Outside Ordinary Course. Take any other
action outside the ordinary course of its business.
N. Rental Commitments. Incur any rental commitment,
if after such incurrence, the total minimum required rental commitments
(including equipment leases, real property leases and any and all other forms of
rental expense) of Seller and Guarantor on a consolidated basis for the twelve
(12) month period after such incurrence would be in excess of $3,100,000.
4.32. Access to Records, Premises. Purchasers shall have the
right to inspect, during normal business hours, Seller's and Guarantor's books
and accounts and premises and to discuss the business of Seller and Guarantor
with its respective officers, employees and accountants at any reasonable time.
4.33. Change in Management. At the option of the Purchasers,
the Secured Indebtedness shall become immediately due and payable if ▇▇▇▇▇▇
▇▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇ shall cease to remain active on a full-time basis in the
management of the Seller and Guarantor and if the Seller and Guarantor fail to
locate a replacement reasonably suitable to the Purchasers within ninety (90)
days thereafter.
4.34. Debt Service Coverage. Seller and Guarantor shall attain
and maintain on a consolidated basis and determined in accordance with GAAP, as
measured as of the end of each fiscal quarter, a Debt Service Coverage Ratio
greater than 1.50 to 1.00. For purposes hereof, "Debt Service Coverage Ratio"
means, as of the date of determination, that ratio calculated by dividing (i)
the sum of EBITDA plus capital lease expenses, all computed for the immediately
preceding twelve (12) fiscal month period, by (ii) the sum of interest, current
maturities of debt, capital lease expenses, all computed for the immediately
preceding six (6) month period and scheduled for the immediately following six
(6) month period. "EBITDA" means, at the date of determination, net revenue less
all operating expenses, excluding depreciation, amortization, interest income,
interest expenses, lease payments of Guarantor under the ▇▇▇▇▇▇▇ Lease
Agreement, and income taxes, all computed for the immediately preceding twelve
(12) fiscal month period. The term "capital lease expenses" as used herein does
not include lease payments of Guarantor under the ▇▇▇▇▇▇▇ Lease Agreement.
Within thirty (30) days following each fiscal quarter, Seller and Guarantor
shall deliver a certificate to each Purchaser certifying as to Seller's and
Guarantor's compliance with the Debt Service Coverage Ratio set forth herein and
providing a detailed calculation of the same, which certificate shall be
executed by the President or Chief Financial Officer of both Seller and
Guarantor.
4.35. Personal Guaranties. Upon the occurrence of an event of
default pursuant to Subsection 5.1(M) herein, the ▇▇▇▇▇▇ Guaranty and ▇▇▇▇▇▇▇
Guaranty, which were delivered at Closing, shall automatically and immediately
take full force and effect and be fully enforceable by Purchasers against either
or both ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, jointly and severally, until the Secured
Indebtedness is paid in full.
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4.36. Insurance. Seller and Guarantor shall maintain
insurance, in form, amounts, and with companies in all respects satisfactory to
Purchasers, and in accordance with customary practices in Seller's and
Guarantor's field of enterprise. Purchasers shall be designated as additional
insureds under the terms of the policies evidencing such insurance. Seller and
Guarantor each agree to provide and maintain commercially available policies of
professional liability insurance, satisfactory to Purchasers, as shall be
necessary to insure Seller and Guarantor and their employees against damages or
claims for damages which may arise from the rendering, or failure to render,
professional services, by any employee of Seller or Guarantor, or by any other
person for whose acts or omissions Seller or Guarantor are responsible.. The
amounts and extent of such professional liability insurance coverage shall be in
such form and such amounts as are satisfactory to Purchasers and in no event
less than $2,000,000 per occurrence and $2,000,000 in the aggregate, with a
deductible or retention of no more than $200,000 per year. Seller and Guarantor
shall, upon the request of Purchasers, provide evidence of such insurance
coverage meeting the foregoing minimum requirements and naming Purchasers as
additional insureds (if permitted under such policy), and shall notify
Purchasers in writing, at least thirty (30) days in advance of any material
adverse change to, or cancellation of, such coverage, and direct such insurance
companies to do the same.
4.37. Expenses. Upon demand, Seller will advance to Purchasers
or, at Purchasers' option, reimburse Purchasers for, the following expenses:
A. Taxes. All taxes that Purchasers may be required
to pay because of the Secured Indebtedness or because of Purchasers' interest in
any property securing the payment of the Secured Indebtedness (except federal or
state taxes payable on Purchasers' income);
B. Administration. All expenses that Purchasers may
reasonably incur in connection with the preparation, execution, administration
or enforcement of this Agreement or of any other document pertaining to the
Secured Indebtedness;
C. Protection of Collateral. All reasonable costs of
preserving, insuring, preparing for sale (whether by improvement, repair or
otherwise) or selling any collateral securing the Secured Indebtedness.
D. Other Expenses. All reasonable costs of preparing
for closing, and closing this transaction, whether or not this transaction is
actually closed, and all reasonable travel and out-of-pocket expenses necessary
for Purchasers' visits to Seller's or Guarantor's facilities in the event Seller
or Guarantor is in default or Purchasers reasonably expects or anticipates
Seller or Guarantor to be in default under this Agreement or any other agreement
between Seller and Purchasers, and all reasonable out-of-pocket expenses,
including travel, lodging and food expenses, incurred by Purchasers or its
designees or representative for attending Directors' and Shareholders' meetings.
E. Costs of Collection. All court costs and other
reasonable costs of collecting any debt or other obligation included in the
Secured Indebtedness;
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F. Litigation. All reasonable costs arising from any
litigation, investigation, or administrative proceeding (whether or not any
Purchaser is a party thereto) that any Purchaser may incur as a result of the
Secured Indebtedness or as a result of any Purchaser's association with Seller
or Guarantor including, but not limited to, expenses incurred by any Purchaser
in connection with a case or proceeding involving Seller or Guarantor under any
chapter of the Bankruptcy Code or any successor statute thereto;
G. Attorneys' Fees. Reasonable attorneys' fees and
expenses incurred in connection with any of the foregoing, including search and
recording fees.
If any Purchaser pays any of the foregoing expenses, they shall become a part of
the Secured Indebtedness and shall bear interest at the highest rate applicable
to the Secured Indebtedness from time to time. This Section shall remain in full
effect regardless of the full payment of the Secured Indebtedness, the purported
termination of this Agreement, the delivery of the executed original of this
Agreement to Seller, or the content or accuracy of any representation made by
Seller or Guarantor to Purchasers; provided, however, Purchasers may terminate
this Section by executing and delivering to Seller a written instrument of
termination specifically referring to this Section.
4.38. Recitals. Seller and Guarantor warrant and agree that
the recitals set forth at the beginning of this Agreement are true.
4.39. No Default. Seller and Guarantor warrants that, as of
the execution of this Agreement, no default exists hereunder and no condition
exists which, with the giving of notice, the passing of time, or both, would
constitute such a default.
4.40. Post Closing Items. Within forty-five (45) days
following Closing, (i) Seller and Guarantor agree to take such actions, and
execute such documents, as are requested by Purchasers to amend and modify the
Related Company Management Agreements and to enter into a similar management
agreement with HLM of Oregon, Architecture and Planning, P.C., which are in form
and substance satisfactory to Purchasers, and (ii) Seller agrees to enter into,
and to cause ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇ to enter into, and to
encourage such other existing shareholders of Seller to enter into, a
shareholders' agreement by, between and with, Seller, Purchasers, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇ (or their respective
permitted successors and assigns), which is in form and substance satisfactory
to Purchasers and which provides customary minority interest protections and
rights to the holders of the Warrants immediately upon the exercise thereof as
referenced in said Warrants. Any and all amendments or modifications proposed by
Seller or Guarantor with respect to any of the documents specified in the
foregoing sentence shall be subject to Purchaser's prior written approval.
V. DEFAULT
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5.1. Default Defined. The occurrence of any one or more of the
following events shall constitute a default under this Agreement:
A. Monetary Default. The failure of Seller to timely
pay any amount due Purchasers under the Secured Indebtedness, provided that such
failure is not cured within five (5) days after the due dates of any such
payments.
B. Breach of Covenant. The failure of Seller,
Guarantor or any other party to perform or observe any obligation or covenant
made with respect to the Secured Indebtedness.
C. Breach of Warranty. Purchasers' discovery that any
representation or warranty in connection with this Agreement or the Secured
Indebtedness is materially false.
D. Default Under Other Document. The occurrence of a
default under the terms of any document evidencing, securing, or otherwise
pertaining to the Secured Indebtedness, including the Transaction Documents.
E. Voluntary Bankruptcy. The institution of
proceedings by Seller, Guarantor or any other person primarily or secondarily
liable with respect to the Secured Indebtedness under any state insolvency law
or under any federal bankruptcy law.
F. Involuntary Bankruptcy. The institution of
involuntary proceedings against Seller, Guarantor or any other person primarily
or secondarily liable with respect to the Secured Indebtedness under any state
insolvency law or under any federal bankruptcy law, provided that Seller or
Guarantor shall have sixty (60) days from the date proceedings are instituted
against Seller or Guarantor, as the case may be, in which to cure said default.
G. Failure to Pay Debts. Seller or Guarantor becoming
insolvent or generally failing to pay its debts as they become due.
H. Misrepresentation. The existence of a material
misrepresentation of financial condition in any oral or written statement made
to Purchasers by Seller, Guarantor or any other person or entity primarily or
secondarily liable with respect to the Secured Indebtedness.
I. Criminal Proceedings. The instigation of legal
proceedings against Seller or Guarantor for the violation of a criminal statute
that could have a material adverse effect on the Seller or Guarantor.
J. Attachment. The issuance of an attachment against
property of Seller or Guarantor unless removed, by bond or otherwise, within ten
(10) days.
K. Liquidation. Seller's or Guarantor's liquidation
or cessation of business.
L. Financial Deterioration. A material adverse change
shall occur in Seller's or Guarantor's financial condition as determined by
Purchasers in their own discretion.
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M. Default under ▇▇▇▇▇▇ Noncompete or ▇▇▇▇▇▇▇
Noncompete. The occurrence of an event of default under either the ▇▇▇▇▇▇
Noncompete or the ▇▇▇▇▇▇▇ Noncompete.
With respect to any default described above that is capable of
being cured and that does not already provide its own cure procedure or period
(a "Curable Default"), the occurrence of such Curable Default shall not
constitute an event of default hereunder if such Curable Default is fully cured
and/or corrected within thirty (30) days (ten (10) days if such Curable Default
may be cured by payment of a sum of money) after written notice thereof to
Seller and Guarantor given in accordance with the provisions hereof; provided,
however, that this provision shall not require notice (written or otherwise) to
Seller and Guarantor and an opportunity to cure any Curable Default of which an
officer of Seller or Guarantor had actual knowledge for the requisite number of
days set forth above.
5.2. Cross Default. If the holder of any other indebtedness or
lease obligation in excess of $50,000 owed by Seller or Guarantor declares a
default related to such other indebtedness or lease obligation, or if an event
of default occurs with respect to any indebtedness or lease obligation of Seller
or Guarantor to either ▇▇▇▇▇▇▇ Leasing, First Charter or their permitted
successors or assigns, whether or not such indebtedness or lease obligation is
accelerated, such default shall immediately constitute a default under this
Agreement.
5.3. Remedies Upon Default. Upon default, Purchasers may
exercise any right that they may have under any document evidencing or securing
the Secured Indebtedness or otherwise available to Purchasers at law or equity.
5.4. Attorney-in-Fact. Seller and Guarantor hereby irrevocably
appoints each Purchaser as Seller's and Guarantor's attorney-in-fact to take any
action to facilitate Purchaser's exercise of its remedies hereunder following
the occurrence of a default and the lapse of any applicable cure period.
5.5. Application of Proceeds. All amounts received by
Purchasers for Seller's account by exercise of its remedies hereunder shall be
applied as follows: First, to the payment of all expenses incurred by Purchasers
in exercising its rights hereunder, including attorney's fees, and any other
expenses due Purchasers from Seller; Second, to the payment of all interest
included in the Secured Indebtedness, in such order as Purchasers may elect;
Third, to the payment of all principal included in the Secured Indebtedness, in
such order as Purchasers may elect; and Fourth, surplus to Seller or other party
entitled thereto.
VI. GENERAL PROVISIONS
6.1. Consent to Jurisdiction. Seller and Guarantor hereby
irrevocably consent to the jurisdiction of the United States District Court for
the Middle District of Tennessee and of all Tennessee state courts sitting in
Davidson County, Tennessee, for the purpose of any litigation to which any
Purchaser may be a party and which concerns this Agreement or the Secured
Indebtedness. It is further agreed that venue for any such action shall lie
exclusively with courts sitting in Davidson County, Tennessee, unless Purchasers
agree to the contrary in writing.
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6.2. Not Partners; No Third Party Beneficiaries. Nothing
contained herein or in any related document shall be deemed to render any
Purchaser a partner or venturer of Seller or Guarantor for any purpose. This
Agreement has been executed for the sole benefit of Purchasers, and no third
party is authorized to rely upon Purchaser's rights hereunder or to rely upon an
assumption that Purchasers have or will exercise their rights under this
Agreement or under any document referred to herein.
6.3. Indemnification. Seller and Guarantor each agrees to
jointly and severally indemnify, defend (with counsel satisfactory to
Purchasers) and hold Purchasers harmless against any loss, liability, claim or
expense, including reasonable attorneys' fees, that Purchasers may incur as a
result of any investigation or court or administrative proceeding involving
Purchasers' investment in and credit relationship with Seller or Guarantor,
except those resulting from Purchasers' gross negligence or willful misconduct.
6.4. Maximum Rate. It is the intention of Seller, Guarantor
and Purchasers to conform strictly to all laws applicable to Purchasers that
govern or limit the interest and loan charges that may be charged in respect of
the indebtedness evidenced hereby. Anything in any of the documents evidencing,
securing, or otherwise pertaining to the Secured Indebtedness to the contrary
notwithstanding, in no event whatsoever, whether by reason of advancement of
proceeds of the loan evidenced hereby, demand for repayment of the unpaid
balance of the indebtedness evidenced hereby or otherwise, shall the interest
and loan charges agreed to be paid to Purchasers for the use of the money
advanced or to be advanced hereunder exceed the maximum amounts collectible
pursuant to applicable law.
6.5. Counterparts. This Agreement may be executed in several
counterparts and all such counterparts so executed shall constitute one
agreement binding on all the parties hereto, notwithstanding that all parties
are not signatory to the original or the same counterpart.
6.6. No Marshaling of Assets. Purchasers may proceed against
collateral securing the Secured Indebtedness and against parties liable therefor
in such order as it may elect, and neither Seller nor any surety or guarantor
for Seller nor any creditor of Seller shall be entitled to require Purchasers to
marshal assets. The benefit of any rule of law or equity to the contrary is
hereby expressly waived.
6.7. Impairment of Collateral. Purchasers may, in their sole
discretion, release any collateral securing the Secured Indebtedness or release
any party liable therefor. The defenses of impairment of collateral and
impairment of recourse and any requirement of diligence on Purchasers' part in
collecting the Secured Indebtedness are hereby waived by Seller and Guarantor.
6.8. Business Days. If any payment date under the Secured
Indebtedness falls on a day that is not a business day of Purchasers, or if the
last day of any notice period falls on such a day, the payment shall be due and
the notice period shall end on the next succeeding Purchaser business day.
6.9. Notices. Any communications concerning this Agreement or
the credit described herein shall be addressed as follows:
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As to Seller:
HLM Design, Inc.
Suite 2950
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
As to Guarantor:
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Inc.
Suite 2950
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
BBH Corp.
Suite 2950
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ PA
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
As to Purchasers:
Pacific Capital, L.P.
Suite 1070
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
Equitas, L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
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With a copy to:
Boult, Cummings, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, PLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Communications to be given hereunder shall be effective when set forth in
writing and delivered to the addresses stated above. Any party may change its
address for receipt of notices by submitting the change in writing to the other
party.
6.10. No Reliance on Purchaser's Analysis. Seller and
Guarantor acknowledge and represents that, in connection with the Secured
Indebtedness, they have not relied upon any financial projection, budget,
assessment or other analysis by Purchasers or upon any representation by
Purchaser as to the risks, benefits or prospects of their business activities or
present or future capital needs incidental thereto, all such considerations
having been examined fully and independently by Seller and Guarantor.
6.11. Survival of Representations, Warranties and Covenants.
All representations, warranties and covenants contained herein shall survive the
execution and delivery of this Agreement and all of the Transaction Documents
and shall continue in full force and effect until the Secured Indebtedness is
irrevocably repaid in full.
6.12. Incorporation of Exhibits. All Exhibits referred to in
this Agreement are incorporated herein by this reference.
6.13. Indulgence Not Waiver. Purchasers' indulgence in the
existence of a default hereunder or any other departure from the terms of this
Agreement shall not prejudice Purchasers' rights to declare a default or
otherwise demand strict compliance with this Agreement.
6.14. Cumulative Remedies. The remedies provided Purchasers in
this Agreement are not exclusive of any other remedies that may be available to
Purchasers under any other document or at law or equity.
6.15. Amendment and Waiver in Writing. No provision of this
Agreement can be amended or waived, except by a statement in writing signed by
the party against which enforcement of the amendment or waiver is sought.
6.16. Assignment. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of Seller,
Guarantor and Purchasers, except that Seller and Guarantor shall not assign any
rights or delegate any obligations arising hereunder without the prior written
consent of Purchasers. Any attempted assignment or delegation by Seller or
Guarantor without the required prior consent shall be void.
- 23 -
6.17. Entire Agreement. This Agreement and the other written
agreements between Seller and Purchaser or Seller and Guarantor represent the
entire agreement between the parties concerning the subject matter hereof, and
all oral discussions and prior agreements are merged herein. Provided, if there
is a conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the Secured Indebtedness, the
provision most favorable to Purchasers shall control.
6.18. Jury Trial. PURCHASERS, SELLER AND GUARANTOR EACH WAIVE
THEIR RIGHT TO JURY TRIAL IN ANY MATTER RELATED TO THE SECURED INDEBTEDNESS OR
STOCK PURCHASE WARRANT. PURCHASERS, SELLER AND GUARANTOR AGREE THAT THIS WAIVER
IS KNOWINGLY AND VOLUNTARILY GIVEN FOLLOWING CONSULTATION WITH THEIR RESPECTIVE
LEGAL COUNSEL.
6.19. Severability. Should any provision of this Agreement be
invalid or unenforceable for any reason, the remaining provisions hereof shall
remain in full effect.
6.20. Time of Essence. Time is of the essence of this
Agreement, and all dates and time periods specified herein shall be strictly
observed, except that Purchasers may permit specific deviations therefrom by its
written consent.
6.21. Applicable Law. The validity, construction and
enforcement of this Agreement and all other documents executed with respect to
the Secured Indebtedness shall be determined according to the laws of Tennessee
applicable to contracts executed and performed entirely within that state, in
which state this Agreement has been executed and delivered, in which state
Purchaser resides and in which state payments hereunder will be made.
6.22. Gender and Number. Words used herein indicating gender
or number shall be read as context may require.
6.23. Captions Not Controlling. Captions and headings have
been included in this Agreement for the convenience of the parties, and shall
not be construed as affecting the content of the respective paragraphs.
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IN WITNESS WHEREOF, this Note Purchase Agreement has been
executed as of the date first written above.
THE UNDERSIGNED ACKNOWLEDGE
A THOROUGH UNDERSTANDING OF
THE TERMS OF THIS AGREEMENT
AND AGREE TO BE BOUND
THEREBY:
SELLER:
HLM DESIGN, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
GUARANTOR:
BBH CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
- 25 -
(continuation of Note Purchase Agreement signature page)
PURCHASERS:
PACIFIC CAPITAL, L.P.
By: Pacific Capital Corporation
Its: General Partner
By: /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Secretary-Treasurer
EQUITAS, L.P.
By: Tennessee Business Investments, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
- 26 -
EXHIBITS A-1 and A-2
[see copies of promissory notes attached hereto]
EXHIBIT B
[attach copy of warrant]