STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT ("Agreement") made as of the 29th day of
July, 1997 by and among HLM Design, Inc., a Delaware corporation (the
"Company"), Xxx Xxxxxx ("Xxxxxx"), Xxxxxx Xxxxxxx ("Xxxxxxx"), Xxxx Xxxxxxx
("Xxxxxxx"), and Pacific Capital, L.P., a Delaware limited partnership ("Pacific
Capital"), Equitas, L.P., a Delaware limited partnership ("Equitas"), and Xxxx
Xxxxxxxx ("Xxxxxxxx") and Xxxxxxx XxXxx ("XxXxx").
W I T N E S E T H:
WHEREAS, the parties hereto own the securities of the Company as set
forth on Schedule I; and
WHEREAS, the parties desire to enter into certain agreements with
respect to the voting and transfer of the securities of the Company and various
other matters, all as set forth herein: supplementing those agreements made in
the Note Purchase Agreement (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
DEFINITIONS
"Board" means the Board of Directors of the Company.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company, as filed with the Secretary of State of Delaware, on March 6,
1997.
"Common Stock" means the Common Stock of the Company.
"Holders" means all parties to this Agreement.
"Note Purchase Agreement" means that certain Note Purchase Agreement
dated as of May 30, 1997 by and between the Company, Xxxxxx Xxxx Xxxxx Inc., an
Iowa corporation, BBH Corp., a Delaware corporation, Pacific Capital and
Equitas, as amended from time to time.
"Public Offering" means a bona fide firm commitment initial
underwritten offering of Common Stock pursuant to a registration statement filed
with and
declared effective by the Securities and Exchange Commission which yields
proceeds to the Company of at least Five Million Dollars ($5,000,000).
"Venture Investors" means Pacific Capital, Equitas, Xxxxxxxx and XxXxx
and their permitted successors and assigns.
SECTION 1
GENERAL
SECTION 1.1 Board Composition. So long as the Secured Indebtedness (as
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defined in the Note Purchase Agreement) is outstanding, Pacific Capital and
Equitas each will hold one seat on the Board as provided under the Note Purchase
Agreement. Any vacancy in the Board occurring because of the death, resignation
or removal of a director designated by Pacific Capital and/or Equitas shall be
immediately filled by designation by Pacific Capital and/or Equitas, as
applicable, provided however, any such replacement director designated by
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Pacific Capital and/or Equitas shall be subject to the prior unanimous written
approval of all the directors of the Company, which approval shall be at the
sole discretion of such other directors. A director designated by Pacific
Capital and/or Equitas may be removed from the Board without cause only by
Pacific Capital and/or Equitas, as applicable. Notwithstanding the foregoing,
the business of the Company's Board of Directors shall not be delayed by the
failure of either Pacific Capital or Equitas to designate a representative to
the Company's Board.
SECTION 1.2 Further Assurances. Each Holder shall (i) vote all Common
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Stock, (ii) execute and deliver such further documents, (iii) take such further
action, and (iv) use such Holder's best efforts to cause the Board to vote in
such a manner as may be necessary or desirable to carry out the purposes and
intent of this Agreement and the Note Purchase Agreement. Each Holder agrees to
vote all Common Stock owned by such Holder, and to take all such other actions
as may be necessary, to ensure that the Company's Certificate of Incorporation
and Bylaws do not, at any time, conflict with the provisions of this Agreement.
SECTION 1.3 No Other Voting Arrangements. The parties hereto
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acknowledge that the execution and performance of this Agreement by the parties
hereto is a condition of the execution and performance by Pacific Capital and
Equitas of the Note Purchase Agreement and the transaction contemplated thereby.
Each party hereto represents and warrants to each other party hereto that such
party has no knowledge of any written or oral agreements or arrangements with
respect to the voting of securities of the Company, other than set forth in this
Agreement, the Note Purchase Agreement and Transaction Documents as such term is
defined in the Note Purchase Agreement and in the Stockholders' Voting Agreement
dated as of May 29, 1997 by and among Xxxxxx, Xxxxxxx and Xxxxxxx. Any
agreements or arrangements other than those set forth above shall be void as
against, and shall not be recognized or given effect by, the parties hereto.
Each party shall promptly notify each other party hereto upon learning of the
existence of any such agreement or arrangement.
SECTION 1.4 Outstanding Capital Stock. Subject to the provisions of the
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Note Purchase Agreement (which shall control in case of conflict), for purposes
of this Agreement and
notwithstanding any provision to the contrary set forth herein, immediately upon
and following the date hereof (i) all shares of Common Stock to which each of
the Venture Investors in entitled upon the exercise of their respective common
stock purchase warrants as set forth on Schedule I shall be deemed to be issued
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and outstanding Common Stock held in the name of such Venture Investor, as
applicable, and (ii) each Venture Investor shall be deemed a Holder entitled to
all rights set forth in this Agreement as if all the shares of Common Stock
underlying such unexercised common stock purchase warrants or any portion
thereof were issued and outstanding shares held in the name of such Venture
Investor; provided, however, that until exercise of the applicable warrants the
Venture Investors shall not have voting rights or other rights as a stockholder
of the Company, as provided in the Note Purchase Agreement.
SECTION 2
RESTRICTION ON TRANSFER
SECTION 2.1 Legend. So long as this Agreement remains in effect, there
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shall be noted conspicuously upon each certificate representing shares of Common
Stock the following statement:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS (THE "LAWS"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT IT MAY BE
TRANSFERRED IN COMPLIANCE WITH THE ACT AND THE LAWS. THE
TRANSFER OR OTHER DISPOSITION OF THIS SECURITY IS SUBJECT TO
CERTAIN RESTRICTIONS CONTAINED IN A STOCKHOLDERS' AGREEMENT
DATED AS OF _____________, 1997, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME TO WHICH THE HOLDER OF THIS SECURITY IS A
PARTY, AND THIS SECURITY SHALL NOT BE TRANSFERRED EXCEPT IN
COMPLIANCE WITH SAID AGREEMENT. A COPY OF SAID AGREEMENT IS ON
FILE WITH THE COMPANY.
SECTION 2.2 Permitted Transfers. Notwithstanding anything to the
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contrary contained herein, any Holder may sell any or all of the Common Stock
owned by such Holder without the necessity of complying with any of the terms
and conditions of this Agreement under any of the following circumstances:
(a) pursuant to any pledge, hypothecation, assignment as
collateral security or other encumbrance entered into by any Holder in
connection with a bona fide borrowing of money or guaranty thereof not designed
or intended to circumvent the provisions of this Agreement and any sale by the
creditor in such transaction upon foreclosure of such borrowing or enforcement
of such guaranty, provided that, prior to taking such collateral security, such
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creditor (i) agrees that the shares of Common Stock acquired by it are subject
to the provisions of this Agreement and (ii) gives the other Holders a thirty
(30) day right of first refusal to buy the Common Stock upon any sale thereof by
such creditor; and
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(b) if such Transfer is to an "affiliate" of such Holder (as
that term is defined in Rule 144 promulgated under the Securities Act of 1933)
or to any member of such Holder's immediate family, his heirs, executors or
legal representatives of trustees of an inter vivos trust or testamentary trust
for the benefit of members of such Holder's immediate family, provided, that any
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Common Stock so Transferred shall remain subject to the terms of this Agreement.
SECTION 2.3 Agreement by Transferee. Notwithstanding any other
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provision herein, no Holder shall transfer any Common Stock to any third party,
including affiliates of such Holder pursuant to Section 2.2 or otherwise, unless
and until such third party shall have executed an agreement in form and
substance reasonably satisfactory to the Company and the other Holders, pursuant
to which such third party agrees that the Common Stock acquired by it are
subject to the provisions of this Agreement.
SECTION 3
CO-SALE RIGHTS
If a Holder ("Selling Holder"), other than any or all of the Venture
Investors, proposes to sell any of his Common Stock to a prospective purchaser
(a "Co-Sale Event"), each of the Venture Investors shall have the right and
option to require such prospective purchaser to purchase all, or at the election
of the Venture Investor, a portion, of such Venture Investor's Common Stock at
the same price and upon the same terms and conditions given the Selling Holder
("Co-Sale Rights"), provided that such Co-Sale Rights shall not permit any
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Venture Investor to require such prospective purchaser(s) to purchase a greater
percentage of such Venture Investor's Common Stock holdings than is being sold
by the Selling Holder (e.g. if Selling Holder is selling a number of shares
equal to 60% of his respective common stock holdings in the Company, each of the
Venture Investors is entitled to Co-Sale Rights with respect to the number of
shares of Common Stock equal to 60% of such Venture Investor's respective common
stock holdings in the Company). For purposes of this Section 3, each of the
Venture Investors shall be entitled to exercise their respective common stock
purchase warrants for the number of shares of Common Stock necessary to
effectuate the transactions contemplated by this Section 3. The Selling Holder
shall give each of the Venture Investors written notice of the Co-Sale Event
including the proposed terms and conditions thereof ("Written Notice of Co-Sale
Event"). The Venture Investor(s) may exercise their Co-Sale Rights by delivering
written notice to the Selling Holder within twenty (20) days after the Venture
Investor receives the Written Notice of Co-Sale Event. In the event of the
exercise of such a right by a Venture Investor, the purchase of such Venture
Investor's Common Stock by the prospective purchaser(s) upon the same terms and
conditions as offered to the Selling Holder shall be an express condition to
the consummation of the Selling Holder's sale of his Common Stock to such
prospective purchaser(s). The term "prospective purchaser" as used herein shall
include any third party and any party to this Agreement.
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SECTION 4
ISSUANCE OF ADDITIONAL CAPITAL STOCK
The Company shall not issue or sell any additional shares of Common
Stock except in compliance with the provisions of the Note Purchase Agreement
and the applicable common stock purchase warrant agreement.
SECTION 5
MISCELLANEOUS
SECTION 5.1 Binding Effect. Subject to the limitations on transfer set
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forth herein, this Agreement and all the provisions hereof shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 5.2 Amendment. This Agreement may be amended or supplemented,
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and the observance of any term hereof of thereof may be waived, only with the
written consent of all the parties hereto.
SECTION 5.3 Termination. This Agreement shall terminate and have no
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further force or effect upon the closing of, or with respect to, a Public
Offering.
SECTION 5.4 Governing Law. The interpretation, validity and
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performance of the terms of this Agreement shall be governed by the laws of the
State of Delaware, regardless of the law that might be applied under principles
of conflict of law.
SECTION 5.5 Notices. All communications under this Agreement shall be
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in writing and sent by certified or registered mail, return receipt requested,
courier or overnight mail (i) if to a Holder as of the date hereof, to such
Holder's address set forth on the signature page hereto, or at such other
address as such Holder may have furnished to the other parties hereto in
writing, (ii) if to a Holder who became such after the date hereof, to such
Holder's address listed in the securities transfer books of the company, or at
such other address as such Holder shall have furnished to the other parties
hereto in writing, and (iii) if to the Company to HLM Design, Inc., Suite 2950,
000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000, or at such other address as is shall
have furnished to the other parties hereto in writing. Any written communication
so addressed, sent by certified or registered mail, return receipt requested,
courier or overnight mail, shall be deemed to have been given when sent or
mailed. All other written communications shall be deemed to have been given upon
receipt thereof.
SECTION 5.6 Headings. The section and other headings contained in this
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Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
SECTION 5.7 Counterparts. This Agreement may be executed and delivered
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in two or more counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same agreement.
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SECTION 5.8 Specific Performance. The parties hereto
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acknowledge that payment of monetary damages may not be sufficient to adequately
remedy a breach or prospective breach of the terms and provisions of this
Agreement and, therefore, the parties hereto consent to the application of
equitable remedies, including, without limitation, specific performance, to
enforce the terms and provisions of this Agreement.
IN WITNESS WHEREOF, this Stockholders 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:
Company:
HLM Design, Inc.
By: /s/ Xxx Xxxxxx
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Title: President
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Shareholders:
/s/ Xxx Xxxxxx
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Xxx Xxxxxx
Address: 21120 Blakely Shores
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Xxxxxxxxx, XX 00000
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/s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
Address: 0000 Xxxxxxxx Xxxx, Xxxxxxxxx, XX 00000
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/s/ Xxxxxxx Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Address: 000 Xxxxxx Xxxxxx X.X., Xxxxx, XX 00000
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(continuation of signature page to Stockholders' Agreement)
PACIFIC CAPITAL, L.P.
By: Pacific Capital Corporation
Its: General Partner
By: /s/ illegible signature
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Title: Vice Chairman
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Address: 0000 Xxxxxxxx Xxxx, Xxxxx
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Xxx Xxxxx, XX 00000
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EQUITAS, L.P.
By: Tennessee Business Investments, Inc.
Its: General Partner
By: /s/ Xxxxxxx XxXxx
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Title: President
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Address: 0000 Xxxx Xxxx Xxxx, Xxxxx 00
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Xxxxxxxxx, XX 00000
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/s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
Address: 000 Xxxxxxxxx Xxx, Xxxxxxxxx, XX 00000
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/s/ Xxxxxxx XxXxx
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Xxxxxxx XxXxx
Address: 000 Xxxxx Xxxxx, Xxxxxxxxx, XX 00000
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SCHEDULE I
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Shares of Common Stock Deemed Outstanding*
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Xxx Xxxxxx 20,500
Xxxxxx Xxxxxxx 20,500
Xxxxxxx Xxxxxxx 7,500
Pacific Capital, L.P.** 7,761
Equitas, L.P.** 4,887
Xxxx Xxxxxxxx** 862
Xxxxxxx XxXxx** 862
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TOTAL*** 62,872
* To be adjusted for stock splits, stock dividends, recapitalizations
and the like.
** Number of shares include the number of shares of Common Stock
underlying those certain Common Stock Purchase Warrants issued
by the Company in favor of each of these parties, which shares shall
be deemed issued and outstanding for purposes of this Agreement.
** Total Number of Shares deemed issued and outstanding for purposes of
this Agreement (but not reflected in the 62,872 total) shares held by
other shareholders whom are not parties to this Agreement.
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