HLM DESIGN INC, S-1/A, 1998-04-10

HLM DESIGN INC
S-1/A, 1998-04-10
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT

Previous: OMNI DOORS INC, 424A, 1998-04-10

Next: ACME TELEVISION LLC, 10-K, 1998-04-10

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1998

REGISTRATION NO. 333-40617

===============================================================================

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO. 3

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------------

HLM DESIGN, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 8712 56-2018819
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

121 WEST TRADE STREET, SUITE 2950

CHARLOTTE, NORTH CAROLINA 28202

TELEPHONE (704) 358-0779

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

------------------------

MR. JOSEPH M. HARRIS

PRESIDENT AND CHAIRMAN OF THE BOARD

HLM DESIGN, INC.

121 WEST TRADE STREET, SUITE 2950

CHARLOTTE, NORTH CAROLINA 28202

TELEPHONE (704) 358-0779

(Name, address, including zip code, and telephone number, including
area code, of agent for service)

COPIES TO:

<TABLE>
<S> <C>
GARY C. IVEY, ESQ. MICHAEL K. DENNEY, ESQ.
PARKER, POE, ADAMS & BERNSTEIN L.L.P. BRADLEY & RILEY, P.C.
2500 CHARLOTTE PLAZA 100 FIRST STREET, S.W.
CHARLOTTE, NORTH CAROLINA 28244 CEDAR RAPIDS, IOWA 52404
TELEPHONE (704) 372-9000 TELEPHONE (319) 363-0101
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

===============================================================================

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED APRIL 10, 1998

PROSPECTUS

1,200,000 SHARES
HLM DESIGN, INC.
COMMON STOCK
------------------------

All of the 1,200,000 shares (the "Shares") of common stock, par value $.001
per share (the "Common Stock"), are offered hereby (the "Offering") by HLM
Design, Inc. ("HLM Design").

Prior to the Offering, there has been no public market for the Common
Stock. It is currently anticipated that the public offering price will be
between $6.00 and $7.50 per share. See "Underwriting" for information relating
to factors to be considered in determining the initial public offering price.

HLM Design has applied for quotation of the Common Stock on the Nasdaq
SmallCap Market under the symbol "HLMD."

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. THIS OFFERING INVOLVES A
HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

[CAPTION]
<TABLE>
================================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC DISCOUNT (1) COMPANY(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................................... $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
Total (3)........................................... $ $ $
==============================================================================================================================
</TABLE>

(1) HLM Design has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses, payable by HLM Design, estimated at $460,000.

(3) HLM Design has granted to the Underwriters an option, exercisable within 45
days of the date hereof, to purchase up to an aggregate of 180,000
additional shares of Common Stock solely to cover over-allotments, if any.
If such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to HLM Design will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------

The Shares are being offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Shares will be made in New York, New York on or about
, 1998.

BERTHEL FISHER & COMPANY FINANCIAL SERVICES, INC.

WESTPORT RESOURCES INVESTMENT SERVICES, INC.

MARION BASS SECURITIES CORPORATION
------------------------

The date of this Prospectus is , 1998.

<PAGE>
[Photographs of various projects completed by the Company]

HLM DESIGN INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY ITS INDEPENDENT AUDITORS AND WILL
MAKE AVAILABLE COPIES OF ITS QUARTERLY RESULTS FOR THE FIRST THREE QUARTERS OF
EACH YEAR.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."

ALL BROKER-DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK IN THE STATE
OF OKLAHOMA MUST COMPLY WITH THE REQUIREMENTS OF SECTION 660: 10-9-31 OF THE
RULES OF THE OKLAHOMA SECURITIES COMMISSION AND THE ADMINISTRATOR OF THE
DEPARTMENT OF SECURITIES TO DELIVER A PROSPECTUS PRIOR TO OR CONCURRENTLY WITH
ANY TRANSACTION IN THE COMMON STOCK UNTIL 90 DAYS AFTER THE EFFECTIVE DATE OF
THE REGISTRATION OF THE COMMON STOCK IN OKLAHOMA.

<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (A) GIVES RETROACTIVE
EFFECT TO AN EFFECTIVE 12.75-TO-1 STOCK SPLIT (EFFECTED IN THE FORM OF A STOCK
DIVIDEND) OF HLM DESIGN'S COMMON STOCK TO BE CONSUMMATED PRIOR TO THE
CONSUMMATION OF THE OFFERING (THE "STOCK SPLIT"), (B) ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED, AND (C) GIVES EFFECT TO
THE EXERCISE OF THE WARRANTS, INCLUDING THE WARRANTS HELD BY PACIFIC (AS DEFINED
HEREIN) TO BE EXERCISED IMMEDIATELY PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. SEE "DESCRIPTION OF
CAPITAL STOCK -- WARRANTS" AND "UNDERWRITING." UNLESS THE CONTEXT OTHERWISE
REQUIRES, REFERENCES HEREIN TO THE "COMPANY" MEAN HLM DESIGN, INC AND THE
ARCHITECTURAL, ENGINEERING AND PLANNING FIRMS ("AEP FIRMS") IT MANAGES
CONSIDERED AS ONE ENTERPRISE, REFERENCES TO A "MANAGEMENT AND SERVICES
AGREEMENT" MEAN A LONG-TERM AGREEMENT BETWEEN HLM DESIGN AND AN AEP FIRM AS
DESCRIBED HEREIN IN "BUSINESS -- HLM DESIGN OPERATIONS -- MANAGEMENT AND
SERVICES AGREEMENTS", AND REFERENCES TO THE "MANAGED FIRMS" MEAN (I) WITH
RESPECT TO THE PERIOD PRIOR TO THE DATE OF THIS PROSPECTUS, HLMI, HLMNC AND HLMO
(EACH AS DEFINED BELOW) WHICH ARE THE AEP FIRMS CURRENTLY OPERATING UNDER
MANAGEMENT AND SERVICES AGREEMENTS WITH HLM DESIGN, AND (II) WITH RESPECT TO THE
PERIOD FROM AND AFTER THE DATE OF THIS PROSPECTUS, HLMI, HLMNC AND HLMO AND SUCH
OTHER AEP FIRMS WITH WHICH HLM DESIGN SHALL, FROM TIME TO TIME, ENTER INTO
MANAGEMENT AND SERVICES AGREEMENTS. "HLM" IS A REGISTERED TRADEMARK OF HLM
DESIGN.

THE COMPANY

HLM Design, Inc. is a management company that enters into management and
services relationships with full service AEP Firms. It was formed in March 1997
to pursue a strategy of consolidating non-professional operations and providing
management expertise to individual AEP Firms. HLM Design believes it is the
first company to pursue such a consolidation strategy in order to take advantage
of operating efficiencies and provide geographic and service diversification for
clients. Prior to March 1997, the current management team of HLM Design operated
HLM Design of Northamerica, Inc. (formerly named Hansen Lind Meyer Inc.), an
Iowa corporation ("HLMI"), HLM Design of the Southeast, P.C. (formerly named HLM
of North Carolina, P.C.) ("HLMNC") and HLM Design of the Northwest,
Architecture, Engineering and Planning, P.C. (formerly named HLM of Oregon,
Architecture and Planning, P.C.) ("HLMO"). HLMI has been in operation for over
thirty years. HLMNC and HLMO were organized in 1996 but have had no operations
to date. These three AEP Firms have each entered into a Management and Services
Agreement with HLM Design. The Managed Firms operate offices in Atlanta,
Georgia, Iowa City, Iowa, Chicago, Illinois, Orlando, Florida, Bethesda,
Maryland, Denver, Colorado, Sacramento, California, Philadelphia, Pennsylvania,
Portland, Oregon and Charlotte, North Carolina. HLM DESIGN IS NOT ENGAGED IN THE
PRACTICE OF ARCHITECTURE, ENGINEERING OR PLANNING.

Joseph M. Harris and Vernon B. Brannon, executive officers and principal
stockholders of HLM Design, are also the principal stockholders and officers of
the Managed Firms, HLMI, HLMNC and HLMO. As officers of the Managed Firms, they
caused the Managed Firms to enter into Management and Services Agreements with
HLM Design and as stockholders of each of the Managed Firms they entered into
Stockholders' Agreements (as described below). See "Certain
Transactions -- Relationships with Managed Firms."

A full-service AEP Firm provides a spectrum of services in various
specialties to customers through a broad range of professionals, including
architects, mechanical, electrical, structural and civil engineers, landscape
architects, interior designers and construction administration personnel. HLM
Design has chosen to focus its effort on the management of full-service AEP
Firms because it believes these firms offer a competitive advantage -- the
ability to provide a full line of high-quality, cost effective services -- over
firms that provide a more narrow range of services. HLM Design believes that its
consolidation strategy will assist in attracting new AEP Firms as a result of
two major trends: (1) the increasing complexity, cost and competitiveness of the
design practice conducted by AEP Firms requiring operating and cost
efficiencies, and (2) AEP Firms' need for access to a wider pool of
geographically dispersed professionals in order to provide solutions for the
evolving needs of their clients.

As a management company, HLM Design's relationship with the Managed Firms
is contractual; it has no ownership interest in the Managed Firms. As a result,
stockholders in HLM Design will have no direct or indirect ownership interest in
the Managed Firms.

HLM Design's strategy is to expand revenues through (1) the development of
new long-term Management and Services Agreements with full-service AEP Firms
throughout the United States and (2) the expansion of services to existing
clients. Currently, HLM Design is not engaged in negotiations with any AEP
Firms.

<PAGE>
HLM Design's principal executive office is located at 121 West Trade
Street, Suite 2950, Charlotte, North Carolina and its telephone number is (704)
358-0779.

OPERATING STRATEGY

The Company provides, primarily through HLMI, a complement of
architectural, engineering and planning services to a variety of clients in
several industries. These services include, in addition to the provision of
architectural and engineering services, all phases of a construction project
starting with assistance in the funding process, development of a master plan,
and construction oversight. The services also may involve the redesign of a
workplace to make it efficient, reliable and easy to maintain. The Company has
developed a strength and is recognized as a national leader in the following
markets:

(Bullet) Healthcare -- In the last five years, HLMI has designed and
constructed more than 15 million square feet of healthcare facilities. Clients
have ranged from 20-bed hospitals in the rural mid-west to America's most
prestigious academic medical centers. Healthcare clients include Duke University
Medical Center, University of Chicago Hospitals, University of Iowa Hospitals
and Clinics, Rush-Presbyterian-St. Lukes Medical Center, Thomas Jefferson
University Hospital and Georgetown University Medical Center.

(Bullet) Justice -- HLMI has designed over 10 million square feet of
justice facilities in the last ten years. It has designed jail and prison
projects valued at over $500 million and has designed emerging court facility
projects valued at over $555 million.

(Bullet) High-tech Research Facilities -- HLMI has designed research
facilities valued at over $500 million. The Company's clients in this market
include some of the most prestigious in the country including Johns Hopkins
University, the National Institutes of Health, the Mayo Foundation, and
Georgetown University. Planning for high-tech research facilities is intended to
optimize space utilization and provide flexibility to adapt to changing
technology and funding constraints.

All of the Company's architecture, engineering and planning services are
provided through the Managed Firms, and not by HLM Design.

GROWTH STRATEGY

HLM Design intends to implement an aggressive, yet disciplined, expansion
program by pursuing Management and Services Agreements with (i) large "regional"
AEP Firms with established operating histories located in large metropolitan and
high-growth suburban geographic markets that the Company does not currently
serve and (ii) small firms that provide operational diversity in geographic
areas that complement the services that are either currently provided by the
Company in such geographic areas or that are intended to be provided in the
future. HLM Design believes its approach will be attractive to these large and
small AEP Firms because it will provide these firms with economies of scale and
the synergies that result from increased purchasing power, a greater breadth of
services, an increased pool of professionals, and geographical diversity.
Furthermore, this strategy will give these regional and local AEP Firms, as a
part of the Company, the ability to provide services to existing and future
clients with national operations that might otherwise have turned to "non-local"
firms to service their needs. The goal is for the Company to be the single
source provider for large national clients that have geographically diverse
operations.

HLM Design generally expects that AEP Firms that sign Management and
Services Agreements will retain existing high-quality professional employees and
continue to operate in an effective and efficient manner with architects,
engineers and planning professionals who understand the local market. HLM
Design's management team will provide all management and administrative services
to the AEP Firms. Management believes it is positioned to pursue larger, well
established AEP Firms as a result of the depth of HLM Design's management team,
HLM Design's capital structure and the reputation of the management team in the
design industry. Management also believes its growth strategy can be achieved at
less cost than that which would be incurred by AEP firms operating on a stand
alone basis.

CERTAIN RISK FACTORS

The Common Stock offered hereby involves a high degree of risk. Prospective
purchasers should consider that:

(Bullet) HLM Design's operating and growth strategies are predicated upon
its ability to achieve significant consolidation of AEP Firm
operations and to generate profits from those firms;

(Bullet) Conflicts of interest could arise between HLM Design and Joseph
Harris and Vernon Brannon, the President and Chief Financial
Officer, respectively, of HLM Design, in connection with the
operation and enforcement of the provisions of Stockholders'
Agreements and the Management and Services Agreements;

<PAGE>
(Bullet) HLM Design's revenues are currently derived from Management and
Services Agreements with three firms, only one of which had active
operations at October 31, 1997 and all of which are related to
each other, and to HLM Design, by common and principal
stockholders, Messrs. Harris and Brannon;

(Bullet) HLM Design's operating and growth strategies require substantial
capital resources resulting in the incurrence of long-term and
short-term indebtedness and may result in the public or private
issuance from time to time of additional debt or equity
securities, including the issuance of such securities in
connection with the execution of new Management and Services
Agreements;

(Bullet) AEP Firms that have entered into Management and Services
Agreements with HLM Design have the right to terminate such
agreements upon the filing by HLM Design of a petition of
involuntary bankruptcy and assignment for the benefit of
creditors, or upon other action taken voluntarily or involuntarily
under any federal or state law for the benefit of debtors;

(Bullet) Because of the unique structure of the relationship between HLM
Design and its Managed Firms, many aspects of these relationships
have not been the subject of prior regulatory interpretations and
there can be no assurance that a review of the Company's business
by applicable regulatory authorities will not result in
determinations that may adversely affect the operations of the
Company or prevent its continued operations;

(Bullet) The Company's success depends to a significant degree upon the
continued contributions of Messrs. Harris and Brannon; and

(Bullet) There is no existing market for the Common Stock and no assurance
can be given that one will develop following the Offering.

PROSPECTIVE INVESTORS SHOULD ALSO BE AWARE THAT AS OF THE DATE HEREOF, HLM
DESIGN HAS ENTERED INTO MANAGEMENT AND SERVICES AGREEMENTS ONLY WITH AFFILIATED
ENTITIES AND NO ASSURANCES MAY BE GIVEN THAT HLM DESIGN WILL BE SUCCESSFUL IN
ENTERING INTO SUCH AGREEMENTS WITH OTHER AEP FIRMS.

See "Risk Factors" beginning on page 7 for a discussion of factors that
should be considered by prospective purchasers of the Common Stock offered
hereby.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by HLM Design.................... 1,200,000 shares (1)
Common Stock to be outstanding after the Offering..... 2,075,087 shares (1)(2)(3)
Total............................................ 2,075,087 shares
Use of proceeds....................................... The net proceeds of the Offering will be used to repay certain
indebtedness of HLM Design, for working capital and for general
corporate purposes, including the funding of HLM Design's entering
into new Management and Services Agreements. See "Use of Proceeds."
Trading............................................... The Company has applied for quotation of the Common Stock on the
Nasdaq SmallCap Market ("Nasdaq"), under the symbol "HLMD."
</TABLE>

- ---------------

(1) Does not include up to an aggregate of 180,000 shares that may be sold by
HLM Design upon exercise of the over-allotment option granted to the
Underwriters. See "Underwriting."

(2) Excludes (i) 159,955 shares of Common Stock reserved for future issuance
under HLM Design's Stock Option Plan (as defined herein), including options
to purchase an aggregate of 115,908 shares of Common Stock that will be
granted immediately before the completion of the Offering, and (ii) 57,954
shares of Common Stock reserved for future issuance under HLM Design's ESPP
(as defined herein).

(3) Gives effect to the Stock Split.

<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA

The following summary historical and financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements of HLM Design and
Affiliates and the Predecessor Company (as defined below) and the related notes
thereto included elsewhere in this Prospectus.

The following summary historical financial data for the Predecessor Company
for each of the three fiscal years ended April 25, 1997 are derived from audited
financial statements, which are included elsewhere in this Prospectus. The
summary financial data (Predecessor Company) for the one month ended May 30,
1997 and the nine months ended January 24, 1997 are derived from the unaudited
financial statements of HLMI, which are included elsewhere in this Prospectus.
The selected financial data for the nine months ended January 30, 1998 are
derived from the unaudited combined financial statements of HLM Design and, for
the eight months ended January 30, 1998, of HLMI, HLMNC and HLMO, which are
included elsewhere in this Prospectus. In the opinion of management, these
unaudited financial statements reflect all adjustments necessary for a fair
presentation of its results of operations and financial condition. The results
of operations for an interim period are not necessarily indicative of results of
operations for a full fiscal year or any other interim period.

<TABLE>
<CAPTION>
PREDECESSOR COMPANY (1)
-----------------------------------------------------------------------
NINE
FOR THE YEAR ENDED MONTHS ONE MONTH
----------------------------------------- ENDED ENDED
APRIL 30, APRIL 26, APRIL 25, JANUARY 24, MAY 30,
1995 1996 1997 1997 1997
----------- ----------- ----------- ----------- -----------
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Revenue........................................ $29,122,557 $28,554,424 $26,754,710 $19,442,280 $2,233,036
----------- ----------- ----------- ----------- -----------
Costs and Expenses:
Direct cost of revenue......................... 15,685,671 14,261,952 13,376,251 9,917,627 898,979
Operating costs................................ 14,098,729 13,104,278 12,414,739 9,359,733 1,163,141
ESOP expenses.................................. 573,837 584,202 408,765 406,652
Amortization on intangible assets.............. 5,952 99,145 107,670 81,807 9,571
----------- ----------- ----------- ----------- -----------
Total costs and expenses....................... 30,364,189 28,049,577 26,307,425 19,765,819 2,071,691
----------- ----------- ----------- ----------- -----------
Income (loss) from operations.................. (1,241,632) 504,847 447,285 (323,539) 161,345
----------- ----------- ----------- ----------- -----------
Other income (expense):
Net interest................................... (142,744) (383,552) (396,007) (280,027) (36,951)
Non-operating income........................... 428,475 850,273 285,635
----------- ----------- ----------- ----------- -----------
Total other income (expense)............... 285,731 466,721 (110,372) (280,027) (36,951)
----------- ----------- ----------- ----------- -----------
Income (Loss) Before Income Taxes.............. (955,901) 971,568 336,913 (603,566) 124,394
Income tax expense (benefit)................... (360,080) 435,459 219,799 (143,517) 43,000
----------- ----------- ----------- ----------- -----------
Net income (loss) (3).......................... $ (595,821) $ 536,109 $ 117,114 $ (460,049) $ 81,394
=========== =========== =========== =========== ===========

BALANCE SHEET DATA:
Working capital(deficiency).................... $(1,029,547) $(1,620,488) $(1,902,363) $ (686,632) $(2,238,531)
Total assets................................... 10,519,859 12,577,992 12,874,503 13,402,269 17,639,673
Long-term debt................................. 840,302 564,577 103,792 769,742 2,476,008
Total liabilities.............................. 10,690,072 11,819,796 11,670,962 11,811,214 16,354,738
Warrants outstanding (4).......................
Stockholders' equity (deficiency) (5).......... (170,213) 758,196 1,203,541 1,098,829 1,284,935

<CAPTION>
HLM DESIGN
(COMBINED)
NINE
MONTHS
ENDED
JANUARY 30,
1998 (2)
-----------
INCOME STATEMENT DATA:
<S> <C>
Revenue........................................ $21,543,416
-----------
Costs and Expenses:
Direct cost of revenue......................... 9,979,581
Operating costs................................ 9,629,991
ESOP expenses..................................
Amortization on intangible assets.............. 114,549
-----------
Total costs and expenses....................... 19,724,121
-----------
Income (loss) from operations.................. 1,819,295
-----------
Other income (expense):
Net interest................................... (748,621)
Non-operating income...........................
-----------
Total other income (expense)............... (748,621)
-----------
Income (Loss) Before Income Taxes.............. 1,070,674
Income tax expense (benefit)................... 514,063
-----------
Net income (loss) (3).......................... $ 556,611
==========

BALANCE SHEET DATA:
Working capital(deficiency).................... $ (432,870)
Total assets................................... 18,043,555
Long-term debt................................. 4,357,057
Total liabilities.............................. 17,194,658
Warrants outstanding (4)....................... 200,068
Stockholders' equity (deficiency) (5).......... 648,829
</TABLE>

- ---------------

(1) The "Predecessor Company" is HLMI.

(2) Includes information for HLM Design and for the Managed Firms for the eight
months from May 31, 1997 to January 30, 1998 on a combined basis. HLM
Design's operations for the month ended May 30, 1997 reflected herein
include no revenues or expenses.

(3) Historical net income per share is not presented, as the historical capital
structure prior to the Offering is not comparable with the capital structure
of the Company that will exist after the Offering.

(4) Reflects Warrants held by Pacific and Equitas as of January 30, 1998.
Equitas exercised its Warrants in February 1998 and Pacific will exercise
its Warrants immediately prior to the effective date of the Registration
Statement of which this Prospectus is a part.

(5) Neither HLM Design nor the Predecessor Company has paid cash dividends from
May 1, 1994 to January 30, 1998.

<PAGE>
RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER AND EVALUATE ALL OF THE
INFORMATION SET FORTH IN THIS PROSPECTUS, INCLUDING THE PRINCIPAL RISK FACTORS
SET FORTH BELOW.

INNOVATIVE STRATEGY

HLM Design's operating and growth strategies are predicated upon its
ability to achieve significant consolidation of AEP Firm operations and to
generate profits from those firms. The process of identifying suitable
candidates for entering into Management and Services Agreements and proposing,
negotiating and implementing economically feasible affiliations with AEP Firms
is lengthy and complex. Such strategies require intense management direction in
a dynamic marketplace that is increasingly subject to cost containment and other
competitive pressures. There can be no assurance that these strategies will be
successful or that modifications to the Company's strategies will not be
required.

CONFLICTS OF INTEREST

Joseph Harris and Vernon Brannon, the President and the Chief Financial
Officer, respectively, of HLM Design, are also principal stockholders in each of
HLMI, HLMNC and HLMO and have entered into Stockholders' Agreements with respect
to those firms that, among other things, permit the management by HLM Design of
each of HLMI, HLMNC and HLMO. Conflicts of interest could arise between HLM
Design and Messrs. Harris and Brannon in connection with the operation and
enforcement of the provisions of these Stockholders' Agreements and the
Management and Services Agreements. See "Certain Transactions." The interests of
HLM Design could be materially adversely affected if circumstances arose in
which it would be in the interest of Joseph Harris and Vernon Brannon to
interfere with the performance by HLMI, HLMNC or HLMO of the Management and
Services Agreements. Upon the execution of new Management and Services
Agreements with AEP Firms, similar conflicts of interest would arise between HLM
Design and stockholders of such firms.

BENEFITS OF OFFERING TO INSIDERS

Joseph M. Harris and Vernon B. Brannon, stockholders, directors and
executive officers of HLM Design, will benefit personally from the Offering in
several ways. Both Mr. Harris and Mr. Brannon will be released from personal
guaranties in connection with the Pacific/Equitas Loan (as defined below) upon
the consummation of the Offering and the repayment of the Pacific/Equitas Loan
from the proceeds of the Offering. The Offering will result in increased
liquidity for Messrs. Harris and Brannon, as well as all other current
stockholders of HLM Design, with respect to the shares of Common Stock each such
person currently holds in HLM Design. Messrs. Harris and Brannon and Berthel
Fisher Company Leasing, Inc. ("Berthel Leasing") have, however, agreed to escrow
Common Stock owned by each of them pursuant to the requirements of the various
state securities commissions. For a description of restrictions on current
stockholders' ability to freely transfer Common Stock outstanding on the date
hereof and not sold in the Offering, see "Shares Eligible for Future Sale."
Additionally, in connection with the consummation of the Offering, Messrs.
Harris and Brannon have entered into Employment Agreements with HLM Design
whereby each will receive compensation and other benefits as well as options to
purchase 57,954 shares of HLM Design Common Stock. See "Management -- Employment
Agreements."

MANAGEMENT AND SERVICES AGREEMENTS WITH ONLY THREE FIRMS

HLM Design's revenues are derived solely from its contractual relationships
with the Managed Firms (for whom, as indicated below, HLM Design also provides
required financing). Currently, HLM Design has Management and Services
Agreements with three firms, only one (HLMI) of which had active operations at
January 30, 1998. All three of these firms are related to each other and to HLM
Design, by common principal stockholders, Joseph M. Harris and Vernon B.
Brannon. There can be no assurance that HLM Design will be able to successfully
enter into Management and Services Agreements with additional firms.

ADDITIONAL FINANCINGS

HLM Design's operating and growth strategies require substantial capital
resources, particularly since HLM Design, as the management company will be
responsible for the financing of working capital growth, capital growth and
other cash needs of the Managed Firms. See "Business -- HLM Design
Operating -- Management and Services Agreements." These requirements will result
in HLM Design incurring long-term and short-term indebtedness and may result in
the public or private issuance, from time to time, of additional debt or equity
securities, including the issuance of such securities in connection with the
execution of Management and Services Agreements. There can be no assurance that
any such financing will be

<PAGE>

obtainable on terms acceptable to HLM Design. If HLM Design is unable to obtain
a new revolving line of credit following the Offering, its ability to implement
its growth strategy will be adversely affected. Additionally, issuing securities
in connection with the execution of Management and Services Agreements will
dilute the percentage of Common Stock owned by stockholders prior to such
issuance. There is also no assurance that such financings will not cause
dilution in the book value per share of the Common Stock.

EFFECT OF BANKRUPTCY

AEP Firms that have entered into Management and Services Agreements with
HLM Design have the right to terminate such agreements upon the filing by HLM
Design of a petition in voluntary bankruptcy, an assignment for the benefit of
creditors, or upon other action taken voluntarily or involuntarily under any
federal or state law for the benefit of debtors. Because the substantial
majority of the assets of the Company are owned by the Managed Firms, if such
agreements are terminated, HLM Design would proceed through bankruptcy without
any meaningful assets. In such circumstances, it is likely that no significant
assets would be available for distribution to stockholders upon a liquidation.

GOVERNMENT REGULATION

The architectural and engineering industries are regulated at the state
level. The Company believes its operations are in material compliance with
applicable law. Nevertheless, because of the unique structure of the
relationships between HLM Design and its Managed Firms, many aspects of these
relationships have not been the subject of prior regulatory interpretation. The
Company has not discussed its structure with or received approvals from any
regulatory authorities, and is unaware of its business being reviewed by any
such regulatory authorities. There can be no assurance that a review of the
Company's business by applicable regulatory authorities will not result in
determinations that may adversely affect the operations of the Company or
prevent its continued operation. There also can be no assurance that the
regulatory environment will not change so as to restrict the Company's existing
operations or limit the expansion of the Company's business. Expansion of the
operations of the Company to certain jurisdictions could require structural and
organizational modifications of HLM Design's relationships with its Managed
Firms. Consequently, if the Company is unable or unwilling to undertake such
modifications, it may be limited in its ability to expand into certain
jurisdictions. As of the date hereof, the Company has not determined which
jurisdictions would require structural or organizational modifications of HLM
Design's relationships with the Managed Firms. Although the Company believes its
operations are in material compliance with existing applicable law, there can be
no assurance that the Company's existing Management and Services Agreements
could not be successfully challenged as, for example, constituting the
unlicensed practice of architecture, or that the enforceability of the
provisions thereof, including non-competition agreements therein, will not be
limited.

DEPENDENCE ON KEY PERSONNEL AND LIMITED MANAGEMENT AND PERSONNEL RESOURCES

The Company's success depends to a significant degree upon the continued
contributions of its management team (particularly its senior management) and
professional personnel. The loss of the services of one or more of these key
employees could have a material adverse effect on the Company. The Company
carries key employee insurance on each of Joseph M. Harris and Vernon B. Brannon
and has employment and/or noncompetition agreements with Messrs. Harris and
Brannon as well as with several members of its senior professional staff, but
does not have such agreements with all of its key personnel. There can be no
assurance that a court would enforce the noncompetition agreements as currently
in effect. A court might, for example, narrow the geographical or client
restrictions contained in such agreement, lessen the length of the agreements
or, in some cases, refuse to enforce any provisions thereof. If courts refuse to
enforce the noncompetition agreements of HLM Design or the Managed Firms, such
refusals could have a material adverse effect on HLM Design.

In addition, as the Company expands it may need to hire additional
personnel and will likely be dependent on the senior professional staff of any
firm with which HLM Design enters into a Management and Services Agreement. The
market for qualified employees in the industry and in the regions in which the
Company operates is competitive and may subject the Company to increased labor
costs in periods of low unemployment. The loss of the services of key employees
or the inability to attract additional qualified professional staff could have a
material adverse effect on the Company. In addition, the lack of qualified
professional staff or employees of the Company's potential candidates for
Management and Services Agreements may limit the Company's ability to consummate
future agreements. See "Business -- Growth Strategy," "Business -- Competition"
and "Management."

<PAGE>
RISKS INHERENT IN PROVISION OF SERVICES

The Managed Firms and certain employees of the Managed Firms are involved
in the delivery of services to the public and, therefore, are exposed to the
risk of professional liability claims. Claims of this nature, if successful,
could result in substantial damage awards to the claimants that may exceed the
limits of any applicable insurance coverage. Insurance against losses related to
claims of this type can be expensive and varies widely from state to state.
Although HLM Design is indemnified under its Management and Services Agreements
for claims against the Managed Firms and their employees, HLM Design maintains
liability insurance for itself and negotiates liability insurance for its
Managed Firms and the professionals employed by its Managed Firms. Successful
malpractice claims asserted against the Managed Firms, their employees or HLM
Design could have an adverse effect on the Company's profitability.

DEPENDENCE ON MANAGED FIRMS

HLM Design's revenues depend on fees and revenues generated by various AEP
Firms managed by HLM Design. Any material loss of revenue by such firms, whether
as a result of the loss of professionals or otherwise, could have a material
adverse effect on HLM Design. HLM Design is not engaged in the practice of
architecture, engineering or planning and, as a result, does not control (i) the
practice of architecture, engineering or planning by professionals or (ii) the
compliance with certain regulatory requirements directly applicable to the
Managed Firms.

COMPETITION

The business of providing architectural, engineering and planning related
services is highly competitive. The Company's competition includes many other
firms, including large national firms as well as regional or small local firms.
Several companies that have established operating histories and significantly
greater resources than the Company provide some of the services provided by the
Managed Firms. In addition, there are other companies with substantial resources
that may in the future decide to engage in activities similar to those in which
the Company engages. See "Business -- Competition."

CONCENTRATION OF VOTING POWER AND ANTI-TAKEOVER PROVISIONS

HLM Design's Certificate of Incorporation authorizes the Board of Directors
of HLM Design to issue 1,000,000 shares of preferred stock with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely effect the
voting power or other rights of the holders of HLM Design's Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of preferred stock, there can be no assurance that the Company will
not do so in the future. The application of any such provisions or the issuance
of preferred stock could prevent stockholders from realizing a premium upon the
sale of their shares of Common Stock upon an acquisition of the Company. See
"Description of Capital Stock."

Certain provisions of the Company's Certificate of Incorporation and Bylaws
make it more difficult for stockholders of the Company to effect certain
corporate actions. See "Description of Capital Stock -- Delaware Law and Certain
Charter and Bylaw Provisions." Under the Company's Stock Option Plan, options
outstanding thereunder become immediately exercisable upon a change in control
of the Company. See "Management -- Stock Option Plan." Additionally, HLM
Design's Bylaws provide: (i) for a Board of Directors divided into three classes
serving staggered terms, (ii) that special meetings of stockholders may be
called only by the President or by the Company's Secretary or Assistant
Secretary at the request in writing of the majority of the Board of Directors
and (iii) that any stockholder seeking to bring business before an annual
meeting of stockholders, or to nominate candidates for election as directors at
an annual or special meeting of stockholders, must provide timely notice thereof
in writing. These provisions will impair the stockholders' ability to influence
or control the Company or to effect a change in control of the Company, and may
prevent stockholders from realizing a premium on the sale of their shares of
Common Stock upon an acquisition of the Company. See "Description of Capital
Stock."

NO PRIOR PUBLIC MARKET FOR COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock. HLM Design has applied for quotation of its Common Stock on the Nasdaq
SmallCap Market. The initial public offering price of the Common Stock will be
determined by negotiations among the Company and representatives of the
Underwriters. See "Underwriting." There can be no assurance that the market
price of the Common Stock prevailing at any time after this Offering will equal
or exceed the initial

<PAGE>
public offering price. Quarterly and annual operating results of the Company,
variations between such results and the results expected by investors and
analysts, changes in local or general economic conditions or developments
affecting the architecture or engineering industries, the Company or its
competitors could cause the market price of the Common Stock to fluctuate
substantially. As a result of these factors, as well as other factors common to
initial public offerings, the market price could fluctuate substantially from
the initial offering price. In addition, the stock market has, from time to
time, experienced extreme price and volume fluctuations, which could adversely
effect the market price for the Common Stock without regard to the financial
performance of the Company.

LACK OF INDEPENDENT DIRECTORS

Upon completion of the Offering, the majority of the members of HLM
Design's Board of Directors will be employees of HLM Design or representatives
of holders of Common Stock. Although HLM Design intends to maintain at least two
independent directors on its Board following completion of the Offering, such
directors will not constitute a majority of the Board, and HLM Design's Board
may not have a majority of independent directors at any time in the future. In
the absence of a majority of independent directors, HLM Design's executive
officers, who also are principal stockholders and directors, could establish
policies and enter into transactions without independent review and approval
thereof, subject to certain restrictions under HLM Design's Certificate of
Incorporation and other undertakings by HLM Design. In addition, although HLM
Design intends to establish audit and compensation committees which will consist
entirely of outside directors, and has undertaken that all transactions between
the Company and any of its officers, directors and employees will be approved by
the outside directors. See "Management."

DILUTION

Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in the amount of $3.48 per share, or 58% of the initial
public offering price ($3.69 per share, or 62% of the initial public offering
price, giving effect to the Common Stock issuance and exercise of Warrants
subsequent to January 30, 1998), in net tangible book value per share from the
initial offering price, assuming an initial offering price of $6.00 per share
(the low point of the range of the initial offering price set forth on the cover
page of this Prospectus). See "Dilution."

POTENTIAL ADVERSE MARKET PRICE EFFECT OF ADDITIONAL SHARES ELIGIBLE FOR FUTURE
SALE

256,712 of the 875,087 shares of Common Stock owned beneficially by
existing stockholders of HLM Design and the 159,955 shares of Common Stock
reserved for future issuance under the Stock Option Plan are "restricted
securities" as defined in Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"), and may in the future be resold in compliance with Rule
144. See "Management -- Stock Option Plan" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." No prediction can be made as to the effect that resale of
shares of Common Stock, or the availability of shares of Common Stock for
resale, will have on the market price of the Common Stock prevailing from time
to time. The resale of substantial amounts of Common Stock, or the perception
that such resales may occur, could adversely affect prevailing market prices for
the Common Stock and the ability of HLM Design to raise equity capital in the
future. HLM Design has agreed, subject to certain exceptions, not to issue, and
all executive officers of HLM Design and the Managed Firms have agreed not to
resell, any shares of Common Stock or other equity securities of HLM Design for
365 days after the date of this Prospectus without the prior written consent of
the representatives of the Underwriters. See "Shares Eligible for Future Sale"
and "Underwriting." Additionally, Messrs. Harris and Brannon and Berthel Leasing
have agreed to escrow Common Stock owned by each of them pursuant to the
requirements of the various state securities commissions.

<PAGE>

USE OF PROCEEDS

The net proceeds to HLM Design from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $6.02 million ($6.99 million if
the Underwriters' over-allotment option is exercised in full), assuming an
initial public offering price of $6.00 per share (the low point of the range of
the initial public offering price set forth on the cover page of this
Prospectus) and after deducting the underwriting discount and estimated expenses
of the Offering.

HLM Design intends to use approximately $3.0 million of the net proceeds to
repay certain indebtedness consisting of (i) the $2.0 million due under the
Pacific/Equitas Loan (payable June 1, 2002 at an interest rate of 13.5%), (ii) a
$0.8 million term loan from Berthel Leasing, an affiliate of one of the
Underwriters (payable May 1, 1998, with an interest rate of 12% due in monthly
installments), and (iii) notes payable in an aggregate principal amount of $0.2
million to employee stockholders (payable at various dates until August 2002
including interest of 6.0%). The $3.0 million of indebtedness currently has an
effective weighted interest cost at an annual rate equal to 23%. (In connection
with the merger agreement between HLMI and BBH Corp. described elsewhere in this
Prospectus and the payment of the merger consideration to holders of HLMI's
common stock, the Company (i) incurred indebtedness in the aggregate principal
amount of $2 million to Pacific Capital, L.P. ("Pacific") and Equitas, L.P.
("Equitas") (the "Pacific/Equitas Loan") and assumed the above-referenced notes
payable to employee stockholders. The Berthel Leasing proceeds were used for
working capital.) See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

HLM Design intends to use the remaining expected net proceeds of the
Offering for working capital and other general corporate purposes, including
payments made by HLM Design in connection with the execution of new Management
and Services Agreements. Until utilized, the Company will invest the net
proceeds in short-term, interest bearing, investment grade instruments. The
following table illustrates HLM Design's intended use of proceeds in order of
priority:

<TABLE>
<CAPTION>
DOLLARS PERCENTAGE OF
USE OF PROCEEDS ($) PROCEEDS (%)
- ------------------------------------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
Underwriting Discount............................................................................ $ 720,000 10.00%
Payment of Expenses.............................................................................. 460,000 6.38%
Repayment of Pacific/Equitas Loan................................................................ 2,000,000 27.78%
Repayment of Berthel Leasing Loan................................................................ 800,000 11.12%
Repayment of notes payable to employee stockholders.............................................. 200,000 2.78%
Working Capital.................................................................................. 3,020,000 41.94%
---------- -------------
Estimated Net Proceeds to HLM Design........................................................... $7,200,000 100.00%
========== ============

</TABLE>

DIVIDEND POLICY

HLM Design has never declared or paid a dividend on its Common Stock. HLM
Design intends to retain all of its earnings to finance the growth and
development of its business, including the execution of new Management and
Services Agreements, and does not anticipate paying any cash dividends on its
Common Stock for the foreseeable future. Any future change in HLM Design's
dividend policy will be made at the discretion of the Board of Directors of HLM
Design and will depend upon HLM Design's operating results, financial condition,
capital requirements, general business conditions and such other factors as the
Board of Directors deems relevant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Description of Capital Stock."

<PAGE>
CAPITALIZATION

The following table sets forth, as of January 30, 1998, the combined
capitalization of HLM Design and Affiliates (a) on an actual basis (giving
effect to the Stock Split), and (b) on a pro forma basis, as adjusted to reflect
the Offering and the application of the estimated net proceeds thereof to be
received by the Company, and the Common Stock issuance and exercise of Warrants
subsequent to January 30, 1998. See "Use of Proceeds", "Dilution" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the unaudited pro forma financial statements of
HLM Design and Affiliates and the related notes thereto included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
JANUARY 30, 1998
-------------------------------
PRO FORMA FOR THE
COMMON STOCK
ISSUANCE AND
EXERCISE OF
WARRANTS
SUBSEQUENT TO
JANUARY 30, 1998
AND FOR THE
ACTUAL OFFERING(1)
---------- -----------------
<S> <C> <C>
Short-term debt:
Notes payable.............................................................................. $2,250,000 $ 1,500,000
Current maturities of long-term debt....................................................... 743,311 743,311
---------- -----------------
Total short-term debt................................................................... $2,993,311 $ 2,243,311
---------- -----------------
---------- -----------------
Long-term debt, excluding current maturities................................................. $4,357,057 $ 2,194,749
---------- -----------------
Warrants outstanding......................................................................... 200,068 0
---------- -----------------
Stockholders' equity:
Preferred Stock of HLM Design, $.10 par value, 1,000,000 shares authorized; no shares
issued and outstanding.................................................................. 0 0
Common Stock of HLM Design, $.001 par value, 9,000,000 shares authorized; 702,834 shares
issued and outstanding, actual; 2,075,087 shares issued and outstanding, as adjusted
(2)..................................................................................... 703 2,075
Common Stock of HLMI, $.01 par value; Class A, voting authorized 2,000,000 shares; issued
200; Class B, nonvoting, authorized 1,000,000 shares, no shares outstanding............. 2 2
Common Stock of HLMNC $.01 par value, 10,000 shares authorized; 300 shares issued and
outstanding............................................................................. 3 3
Common Stock of HLMO $.01 par value, 10,000 shares authorized; 300 shares issued and
outstanding............................................................................. 3 3
Additional Paid-in capital................................................................. 101,031 6,319,726
Retained earnings.......................................................................... 556,611 556,611
Stock subscription receivable -- HLM Design, HLMNC, HLMO (3)............................... (9,524) (9,524)
---------- -----------------
Total stockholders' equity.............................................................. 648,829 6,868,896
---------- -----------------
Total capitalization.................................................................. $5,205,954 $ 9,063,645
========== ===============

</TABLE>

- ---------------

(1) Adjusted to give effect to the Offering and the application of the net
proceeds thereof, the exercise by Equitas of Warrants to purchase 5,749
shares of Common Stock (73,300 shares after giving effect to the Stock
Split) at an exercise price of $0.01 per share and the exercise by Pacific
of Warrants to purchase 7,761 shares of Common Stock (98,953 shares after
giving effect to the Stock Split) at an exercise price of $0.01 per share.
See "Use of Proceeds", "Dilution", "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Certain Transactions."

(2) 2,255,087 shares if the Underwriters' over-allotment option is exercised in
full. See "Underwriting" and "Principal Stockholders." Excludes (i) 159,955
shares of Common Stock reserved for future issuance under HLM Design's Stock
Option Plan (including up to 115,908 shares of Common Stock reserved for
issuance upon exercise of options to be granted on or before the
consummation of the Offering pursuant to the Stock Option Plan), and (ii)
57,954 shares of Common Stock reserved for issuance under HLM Design's ESPP.
See "Management's Discussion of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Management -- Stock Option
Plan" and "Management -- Employee Stock Purchase Plan".

(3) Common Stock had not been funded as of January 30, 1998.

<PAGE>
DILUTION

The net tangible book deficit of the Company (defined as the combined net
tangible book value (deficit) of HLM Design, HLMI, HLMNC, and HLMO) as of
January 30, 1998 was $1,618,616, or $2.30 per share of Common Stock. Net
tangible book value (deficit) per share is determined by dividing the tangible
net worth of the Company by the total number of outstanding shares of Common
Stock. After giving effect to the sale of the 1,200,000 shares of Common Stock
offered hereby and the receipt of an assumed $6.02 million of net proceeds from
the Offering (based on an assumed initial public offering price of $6.00 per
share and net of underwriting discounts and estimated offering expenses), net
tangible book value of the Company at January 30, 1998 would have been $2.52 per
share. This represents an immediate increase in the net tangible book value of
$4.82 per share to existing stockholders and an immediate dilution of $3.48 per
share to new investors purchasing Common Stock in the Offering. The following
table illustrates this per share dilution (as of January 30, 1998 and without
giving effect to the Common Stock issuance or exercise of Warrants subsequent to
January 30, 1998):

<TABLE>
<S> <C>
Assumed initial public offering price per share...................................................................... $ 6.00
Net tangible book value per share (deficit) before giving effect to the Offering................................... (2.30)
Increase in net tangible book value per share attributable to the Offering......................................... 4.82
Pro forma net tangible book value per share after giving effect to the Offering...................................... 2.52

Dilution per share to new investors(1)(2)............................................................................ $ 3.48
Dilution per share as a percentage of the assumed initial public offering price(2)................................. 58%
</TABLE>

- ---------------

(1) Dilution is determined by subtracting the net tangible book value per share
of Common Stock after the Offering from the public offering price per share.

(2) Giving effect to the Common Stock issuance and exercise of Warrants
subsequent to January 30, 1998 the dilution per share to new investors would
be $3.69 and the dilution per share as a percentage of the assumed initial
public offering price would be 62%.

The following table sets forth the issuance of Common Stock to current
stockholders of HLM Design (giving effect to the Stock Split):

<TABLE>
<CAPTION>
NUMBER OF
STOCKHOLDER(4) DATE ISSUED SHARES ISSUED PRICE
- -------------------------------- ---------------------------------- ------------- --------------------------
<S> <C> <C> <C>
Joseph Harris March 20, 1997 261,375 an aggregate of $1,000
March 2, 1998 47,813 $4.00 per share (1)
Vernon Brannon March 20, 1997 261,375 an aggregate of $1,000
March 2, 1998 47,812 $4.00 per share (1)
Equitas February 12, 1998 73,300 an aggregate of $57.49 (2)
Pacific (4) 98,953 an aggregate of $77.61 (2)
Berthel Leasing December 26, 1997 43,631 an aggregate of $34.22 (2)
Clay R. Caroland November 10, 1997 7,166 an aggregate of $8.62 (2)
Other employee stockholders (3) May 16, 1997-November 1, 1997 29,835 an aggregate of $34,655.40
</TABLE>

- ---------------

(1) Represents price paid by Messrs. Harris and Brannon in purchase of shares
from a former director.

(2) Represents the exercise price of Warrants. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

(3) Each of such employees owns less than 1% of the Common Stock outstanding.

(4) Warrants to be exercised and shares issued immediately prior to the
effective date of the Registration Statement of which this Prospectus is a
part.

<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data for the Predecessor Company for each
of the three fiscal years ended April 25, 1997 are derived from audited
financial statements, which are included elsewhere in this Prospectus. The
following selected financial data for the Predecessor Company for each of the
two fiscal years ended April 30, 1994 are derived from unaudited financial
statements, which are not included in this Prospectus. The selected financial
data (Predecessor Company) for the one month ended May 30, 1997 and the nine
months ended January 24, 1997 are derived from the unaudited financial
statements of HLMI, which are included elsewhere in this Prospectus. The
selected financial data for the nine months ended January 30, 1998 are derived
from the unaudited combined financial statements of HLM Design and, for the
eight months ended January 30, 1998, of HLMI, HLMNC and HLMO, which are included
elsewhere in this Prospectus. In the opinion of management, these unaudited
financial statements reflect all adjustments necessary for a fair presentation
of its results of operations and financial condition. The results of operations
for an interim period are not necessarily indicative of results of operations
for a full fiscal year or any other interim period. All of the data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Financial Statements
and related notes included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
(PREDECESSOR COMPANY) (1)
-------------------------------------------------------------------------------------------------
NINE
FOR THE YEAR ENDED MONTHS ONE MONTH
------------------------------------------------------------------- ENDED ENDED
APRIL 30, APRIL 30, APRIL 30, APRIL 26, APRIL 25, JANUARY 24, MAY 30,
1993 1994 1995 1996 1997 1997 1997
----------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue.......................... $33,464,656 $27,841,902 $29,122,557 $28,554,424 $26,754,710 $19,442,280 $ 2,233,036
----------- ----------- ----------- ----------- ----------- ------------ ------------

Costs and Expenses:
Direct cost of revenue........... 18,371,876 15,925,434 15,685,671 14,261,952 13,376,251 9,917,627 898,979
Operating costs.................. 15,376,045 13,516,392 14,098,729 13,104,278 12,414,739 9,359,733 1,163,141
ESOP expenses.................... 474,403 564,918 573,837 584,202 408,765 406,652
Amortization on intangible
assets......................... 4,464 5,952 5,952 99,145 107,670 81,807 9,571
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total costs and expenses......... 34,226,788 30,012,696 30,364,189 28,049,577 26,307,425 19,765,819 2,071,691
----------- ----------- ----------- ----------- ----------- ------------ ------------
Income (loss) from operations.... (762,132) (2,170,794) (1,241,632) 504,847 447,285 (323,539) 161,345
----------- ----------- ----------- ----------- ----------- ------------ ------------
Other income (expense):

Net interest..................... (18,438) (43,058) (142,744) (383,552) (396,007) (280,027) (36,951)
Non-operating income............. -- -- 428,475 850,273 285,635
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total other income
(expense)................... (18,438) (43,058) 285,731 466,721 (110,372) (280,027) (36,951)
----------- ----------- ----------- ----------- ----------- ------------ ------------
Income (loss) before income
taxes.......................... (780,570) (2,213,852) (955,901) 971,568 336,913 (603,566) 124,394
Income tax expense (benefit)..... (260,000) (779,000) (360,080) 435,459 219,799 (143,517) 43,000
----------- ----------- ----------- ----------- ----------- ------------ ------------
Net income (loss) (3)............ $ (520,570) $(1,434,852) $ (595,821) $ 536,109 $ 117,114 $ (460,049) $ 81,394
=========== =========== =========== =========== =========== =========== ===========

BALANCE SHEET DATA:
Working capital(deficiency)...... $2,059,840 $1,229,211 $(1,029,547) $(1,620,488) $(1,902,363) (686,632) (2,238,531)
Total assets..................... 11,586,309 10,147,420 10,519,859 12,577,992 12,874,503 13,402,269 17,639,673
Long-term debt................... 1,598,727 1,050,330 840,302 564,577 103,792 769,742 2,476,008
Total liabilities................ 10,020,182 9,713,789 10,690,072 11,819,796 11,670,962 11,811,214 16,354,738
Warrants outstanding (4).........
Stockholders' equity (deficiency)
(5)............................ 1,566,127 433,631 (170,213) 758,196 1,203,541 1,098,829 1,284,935

<CAPTION>
HLM DESIGN
(COMBINED)
NINE
MONTHS
ENDED
JANUARY 30,
1998 (2)
-----------

<S> <C>

Revenue.......................... $21,543,416
-----------
Costs and Expenses:
Direct cost of revenue........... 9,979,581
Operating costs.................. 9,629,991
ESOP expenses....................
Amortization on intangible
assets......................... 114,549
-----------
Total costs and expenses......... 19,724,121
-----------
Income (loss) from operations.... 1,819,295
-----------
Other income (expense):
Net interest..................... (748,621)
Non-operating income.............
-----------
Total other income
(expense)................... (748,621)
-----------
Income (loss) before income
taxes.......................... 1,070,674
Income tax expense (benefit)..... 514,063
-----------
Net income (loss) (3)............ $ 556,611
===========

BALANCE SHEET DATA:
Working capital(deficiency)...... (432,870)
Total assets..................... 18,043,555
Long-term debt................... 4,357,057
Total liabilities................ 17,194,658
Warrants outstanding (4)......... 200,068
Stockholders' equity (deficiency)
(5)............................ 648,829
</TABLE>

- ---------------

(1) The "Predecessor Company" is HLMI.

(5) Neither HLM Design nor the Predecessor Company has paid cash dividends from
May 1, 1992 to January 30, 1998.

<PAGE>
HLM DESIGN, INC. AND AFFILIATES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

The following unaudited pro forma combined financial information includes
HLM Design, HLMI, HLMNC and HLMO to reflect their results assuming that the
acquisition of HLMI through the merger of BBH Corp., a non-operating entity
controlled by the controlling stockholders of HLM Design, into HLMI had occurred
at the beginning of the respective periods and that the Management and Services
Agreements and related Stockholder Agreements had been effective as of the
beginning of the respective periods.

The Company believes that the assumptions used in the following statements
provide a reasonable basis on which to present the pro forma financial data. The
unaudited pro forma combined financial data is provided for informational
purposes only and should not be construed to be indicative of the Company's
financial condition or results of operations had the transactions and events
described above been consummated on the dates assumed, and are not intended to
project the Company's financial condition on any future date or its results of
operation for any future period.

<TABLE>
<CAPTION>
(PREDECESSOR HLM DESIGN (COMBINED)
COMPANY) (COMBINED) PRO FORMA
ONE MONTH NINE MONTHS PRO FORMA FOR THE NINE
ENDED ENDED ADJUSTMENTS MONTHS ENDED
MAY 30, JANUARY 30, PRO FORMA FOR THE JANUARY 30,
1997 1998 ADJUSTMENTS(1) OFFERING 1998
----------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue................................... $ 2,233,036 $21,543,416 $23,776,452
Costs and expenses:
Direct cost of revenue.................... 898,979 9,979,581 10,878,560
Operating costs........................... 1,163,141 9,629,991 $ (3,800)(7) 10,761,332
(28,000)(3)
Amortization of intangible assets......... 9,571 114,549 4,800(2) 128,920
----------- ----------- ------------- ------------- ------------
Total costs and expenses.................. 2,071,691 19,724,121 (27,000) 21,768,812
----------- ----------- ------------- ------------- ------------
Income from operations.................... 161,345 1,819,295 27,000 2,007,640
Other income (expense)
Interest expense.......................... (36,951) (748,621) 26,000(4) $ (298,000)(6) (994,572 )
(35,000)(4) 355,000(6)
(48,000)(5) (209,000)(12)
----------- ----------- ------------- ------------- ------------
Total other expense..................... (36,951) (748,621) (57,000) (152,000) (994,572 )
----------- ----------- ------------- ------------- ------------
Income before income taxes................ 124,394 1,070,674 (30,000) (152,000) 1,013,068
Income tax expense........................ 43,000 514,063 (9,650)(9) (58,140)(8) 489,273
----------- ----------- ------------- ------------- ------------
Net income................................ $ 81,394 $ 556,611 $ (20,350) $ (93,860) $ 523,795
============ =========== ============= ============= ============

Pro forma net income per share (11)(14)... $ .25
------------
Weighted average shares outstanding
(000s).................................. 2,060
============

</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FOR THE TWELVE (1) ADJUSTMENTS FOR THE TWELVE
MONTHS ENDED PRO FORMA FOR THE MONTHS ENDED
APRIL 25, 1997 ADJUSTMENTS OFFERING APRIL 25, 1997
-------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Revenue.................................................. $ 26,754,710 $ 26,754,710
Costs and Expenses:
Direct cost of revenue................................... 13,376,251 13,376,251
Operating costs.......................................... 12,414,739 $(338,000)(3) 12,031,739
(45,000)(7)
ESOP expenses............................................ 408,765 (408,765)(10)
Amortization of intangible assets........................ 107,670 60,330(2) 168,000
-------------- ----------- ----------- --------------
Total costs and expenses................................. 26,307,425 (731,435) 25,575,990
-------------- ----------- ----------- --------------
Income from operations................................... 447,285 731,435 1,178,720
-------------- ----------- ----------- --------------
Other income (expense)
Interest expense......................................... (402,509) 311,000(4) $(240,000)(6) (1,118,509)
(425,000)(4) 400,000(6)
(580,000)(5) (182,000)(12)
Non-operating income..................................... 292,137 292,137
-------------- ----------- ----------- --------------
Total other expense.................................... (110,372) (694,000) (22,000) (826,372)
-------------- ----------- ----------- --------------
Income before income taxes............................... 336,913 37,435 (22,000) 352,348
Income tax expense....................................... 219,799 78,579(9) (8,415)(8) 289,963
-------------- ----------- ----------- --------------
Net income............................................... $ 117,114 $ (41,144) $ (13,585) $ 62,385
============== =========== =========== ==============

Pro forma net income per share (13)(14).................. $ .03
--------------
Weighted average shares outstanding (000s)............... 2,033
==============

</TABLE>

- ---------------

(1) On May 23, 1997 BBH Corp., affiliated with HLM Design through a
majority-in-interest of common stockholders, acquired HLMI in a transaction
accounted for under the purchase method of accounting. BBH Corp. purchased
50,000 shares in HLMI for $3.2 million, and in connection with this
transaction, BBH Corp. was merged into HLMI with HLMI being the surviving
entity. Upon the merger, each share of common stock in BBH Corp.
outstanding at the time of merger was converted into one share of common
stock in HLMI. All common stock of HLMI held by BBH Corp. (including HLMI
common stock contributed to BBH Corp. by Messrs. Harris and Brannon as
their initial capital contribution to BBH Corp.) were canceled and retired.
As a part of the foregoing, the stockholders of HLMI (other than BBH
Corp.), including the HLMI Employee Stock Ownership Plan (the "ESOP"),
redeemed their HLMI common stock a total of $64 a share. As a result, there
was a 90% change in voting control of HLMI. The assets and liabilities of
HLMI were restated to fair value as of May 31, 1997. Purchase accounting
was effected May 31, 1997 because (i) it was not materially different than
May 23, 1997, (ii) May 30, 1997 was the normal accounting close for HLMI
and (iii) a portion of the acquisition funding commitment for the
transaction was not finalized until May 30, 1997. The excess of the
purchase cost over the fair value of tangible net assets was recorded as
goodwill and will be amortized over fifteen years.

(2) Reflects the adjustment necessary for the amortization of goodwill arising
from the acquisition of HLMI by BBH Corp. and the merger of BBH Corp. into
HLMI.

(3) Reflects the adjustment necessary to record the net decrease in
depreciation expense as a result of the extended lives of depreciable
assets (furniture and fixtures) due to the establishment of remaining lives
subsequent to the acquisition by BBH Corp. Management estimated the
remaining useful lives of such assets from their date of acquisition or the
term of lease if less.

(4) Reflects the increase in interest expense resulting from the financing
arrangement for the HLMI acquisition, which was in the form of a
sale-leaseback agreement and which is reduced by the interest costs
associated with bank loans that were repaid. Although the transaction was
structured in the form of a sale leaseback, the transaction was in
substance a financing, and, therefore, no gain or loss resulted.

(5) Reflects the adjustment to record interest expense for the debt incurred to
effect the acquisition of HLMI by BBH Corp. through the merger of BBH Corp.
into HLMI.

(6) Reflects the decrease in interest expense resulting from the repayment of
certain indebtedness through the proceeds of the Offering which is offset
by an increase in deferred fee expense associated with the pay off of such
indebtedness. See "Use of Proceeds".

<PAGE>

(7) Reflects the adjustment necessary to record decreased depreciation expense
due to the reduction to fair value of certain leasehold improvements in
connection with the HLMI transaction.

(8) Reflects the change in provision for income taxes resulting from adjustment
(5) above.

(9) Reflects the change in provision for income taxes resulting from
adjustments above.

(10) Reflects the elimination of ESOP expenses as a result of the acquisition of
HLMI by BBH Corp. through the merger of BBH Corp. into HLMI.

(11) Pro forma net income per share is based upon the assumption that 2,075,087
shares of Common Stock are outstanding after the Offering. This amount
represents 1,200,000 shares of Common Stock to be issued in the Offering,
702,834 shares of Common Stock owned by the Company's stockholders prior to
the Offering, and the inclusion of Common Stock equivalents of 172,253
related to Warrants.

(12) Reflects the increase in interest expense resulting from the write-off of
deferred loan costs relating to Warrants attached to certain indebtedness
which was repaid with proceeds of the Offering. See "Use of Proceeds".

(13) Pro forma net income per share is based upon the assumption that 2,033,685
shares of Common Stock are outstanding after the Offering. This amount
represents 1,200,000 shares of Common Stock to be issued in the Offering,
618,375 shares of Common Stock owned by the Company's stockholders prior to
the Offering, and the inclusion of Common Stock equivalents of 215,310
related to Warrants.

(14) Fully diluted earnings per share are not materially different.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with HLM Design and
Affiliate's financial statements and the Predecessor Company's financial
statements and the related notes thereto included elsewhere in this Prospectus.

OVERVIEW

HLM Design is a management company which enters into management and
services relationships with full-service architectural, engineering and planning
firms. Currently, HLM Design has entered into Management and Services Agreements
with HLMI, HLMNC and HLMO. These three firms operate in ten offices in Atlanta,
Georgia, Iowa City, Iowa, Chicago, Illinois, Orlando, Florida, Bethesda,
Maryland, Denver, Colorado, Sacramento, California, Philadelphia, Pennsylvania,
Portland, Oregon, and Charlotte, North Carolina. A full service AEP Firm
provides a spectrum of services in various specialties to customers through a
broad range of professionals, including architectural, mechanical, electrical,
structural and civil engineers, landscape architects, interior designers and
construction administration personnel.

In May 1997, BBH Corp., a corporation controlled by Joseph Harris and
Vernon Brannon, controlling shareholders of HLM Design, merged into HLMI with
HLMI being the surviving corporation. Funding for the acquisition through the
merger and "cash-out" of HLMI's existing stockholders, including the redemption
of the ESOP, was provided by loans of $3.2 million from HLM Design to BBH Corp.
See "Certain Transactions -- Merger Transaction."

Immediately following the merger, the Managed Firms, HLMI, HLMNC and HLMO,
entered into Management and Services Agreements with HLM Design. HLM Design,
under the terms of such agreements, is the sole and exclusive manager and
administrator of all of the Managed Firms' day-to-day business functions,
including financial planning, facilities, equipment and supplies, management and
administrative services, and receives as compensation all but 1% of each firm's
positive cash flow following the payment by each firm of all such firm's
expenses.

PRO FORMA RESULTS OF OPERATIONS (EXCLUDING THE EFFECT OF THE OFFERING)

As a result of the acquisition of HLMI through the merger of BBH Corp. into
HLMI and the consummation of the Management and Services Agreements and
Stockholders' Agreements, the discussion and analysis of results of operations
for the nine months ended January 30, 1998 compared to nine months ended January
24, 1997 is presented on a pro forma basis that reflects the acquisition of the
assets of HLMI through the merger of BBH Corp. into HLMI and the consummation of
the Management and Services Agreements and Stockholders' Agreements as though
they occurred at the beginning of the respective periods.

NINE MONTHS ENDED JANUARY 30, 1998 COMPARED WITH NINE MONTHS ENDED JANUARY 24,
1997 -- PRO FORMA

This pro forma financial data does not give effect to the Offering.

<TABLE>
<CAPTION>
COMBINED COMBINED
PRO FORMA PRO FORMA
JANUARY 24, JANUARY 30,
1997 1998
----------- -----------
<S> <C> <C>
Revenue........................................................................................ $19,442,280 $23,776,452
Costs and expenses:
Direct cost of revenue......................................................................... 9,917,627 10,878,560
Operating costs................................................................................ 9,072,733 10,761,332
Amortization of intangible assets.............................................................. 126,000 128,920
----------- -----------
Total costs and expenses....................................................................... 19,116,360 21,768,812
----------- -----------
Income from operations......................................................................... 325,920 2,007,640
Other income (expense)
Interest expense............................................................................... (801,027) (842,572)
----------- -----------
Total other expense.......................................................................... (801,027) (842,572)
----------- -----------
Income (loss) before income taxes.............................................................. (475,107) 1,165,068
Income tax expense (benefit)................................................................... (77,517) 547,413
----------- -----------
Net income (loss).............................................................................. $ (397,590) $ 617,655
=========== ===========

</TABLE>

Revenues were $23.8 million for the nine months ended January 30, 1998
compared to $19.4 million for the nine months ended January 24, 1997, which is
an increase of 22.3%. The increase in revenues is attributable to management's
stronger focus on marketing efforts during the nine months ended January 30,
1998.

<PAGE>

Direct costs primarily include, direct labor, subconsultant costs, and
reimbursable expenses. Direct costs were $10.9 million, or 45.8% of revenues,
for the nine months ended January 30, 1998, as compared to $9.9 million, or
51.0% of revenues, for the nine months ended January 24, 1997. This decrease as
a percent of revenue is principally due to a decrease in direct labor incurred
as a percentage of revenues due to improved productivity as a result of
management's closer monitoring of each project, as well as a decrease in
subconsultant costs.

Operating expenses were $10.8 million, or 45.3% of revenues, for the nine
months ended January 30, 1998 as compared to $9.1 million, or 46.7% of revenues,
for the nine months ended January 24, 1997. This decrease as a percentage of net
sales was due principally to increased sales.

Amortization of intangible assets were $0.1 million for both the nine
months ended January 30, 1998 and January 24, 1997. The amortization expense
relates to the goodwill arising from the acquisition of HLMI by BBH Corp.
through the merger of BBH Corp. into HLMI. See Note 2 to the Notes to Combined
Financial Statements.

Interest expense was $0.8 million for the nine months ended January 30,
1998 as compared to $0.8 million for the nine months ended January 24, 1997.

Income tax expense for the nine months ended January 30, 1998 was $0.5
million as compared to an income tax benefit of $0.1 million for the nine months
ended January 24, 1997. The effective income tax rate was 48% for the nine
months ended January 30, 1998 as compared to 16.3% for the nine months ended
January 24, 1997. The effective income tax rate was higher due to non-deductible
goodwill amortization and the ratio of non-deductible penalties and meals and
entertainment expense to pre-tax income or loss.

PREDECESSOR RESULTS OF OPERATIONS

The following discussion and analysis and results of operations for the
fiscal years ended April 25, 1997, 1996 and 1995 relate to the Predecessor
Company, HLMI. HLM Design was incorporated on March 6, 1997 had no significant
activity as of April 25, 1997.

FISCAL 1997 COMPARED WITH FISCAL 1996

Revenues were $26.8 million in fiscal 1997 compared to $28.6 million in
fiscal 1996, which was a decline of 6.3%. The decline in revenues was primarily
attributable to HLMI's decentralization of architectural personnel from one
location to multiple locations, a shift in HLMI's mix from large academic
education facilities to smaller healthcare and criminal justice projects, and
HLMI's efforts to focus on the estimating process and selecting contracts with
profitability as the major goal, which resulted in some potential contracts not
being pursued. During fiscal 1997 and fiscal 1996, approximately 70% of HLMI's
revenues were related to health care projects and approximately 30% were from
criminal justice and other projects.

Direct costs include, among other things, direct labor, subconsultant
costs, and reimbursable expenses. Direct costs were $13.4 million, or 50.0% of
revenues, in fiscal 1997 as compared to $14.3 million, or 49.9% of revenues, in
fiscal 1996. This increase as a percent of revenue is principally due to an
increase in the use of subconsultants to meet project requirements (18.2% and
16.7% of revenue in fiscal 1997 and fiscal 1996, respectively) and an increase
in reimbursable expenses incurred (4.4% and 3.3% of revenue in fiscal 1997 and
fiscal 1996, respectively). This increase is offset by a decrease in direct
labor incurred due to improved productivity as a result of HLMI's focus on cost
containment of each project (24.7% and 26.7% of revenue in fiscal 1997 and
fiscal 1996, respectively). As a result of these fluctuations and decreased
sales, gross profit from revenue (revenue less direct cost of revenue) decreased
to $13.4 million in fiscal 1997 from $14.3 million in fiscal 1996.

Operating expenses decreased 5.3% to $12.4 million, or 46.4% of revenues,
in fiscal 1997 from $13.1 million, or 45.9% of revenues, in fiscal 1996. The
decrease of 5.3% is principally due to a reduction in personnel costs resulting
from HLMI's efforts to increase utilization of labor.

ESOP expenses were $0.4 million in fiscal 1997 as compared to $0.6 million
in fiscal 1996. These expenses represent principal and interest payments on the
ESOP debt.

Amortization of intangible assets was $0.1 million for both fiscal 1997 and
1996. The amortization relates to the goodwill arising from the acquisition of
MPB Architects, Inc. in April 1995. See Note 2 to HLMI Financial Statements
included elsewhere in this Prospectus.

Interest expense was $0.4 million for both fiscal 1997 and fiscal 1996.

<PAGE>

Non-operating income was $0.3 million in fiscal 1997 compared to $0.9
million in fiscal 1996. Non-operating income is principally due to the gain on a
lease termination as a result of the cumulative excess of lease expense over the
lease payments made as of the termination dates. In fiscal 1997 and fiscal 1996,
HLMI terminated facility leases resulting in a gain of $0.3 million and $0.8
million, respectively.

Income tax expense was $0.2 million in fiscal 1997 compared to $0.4 million
in fiscal 1996. The effective income tax rate in fiscal 1997 was 65.2% compared
to 44.8% in fiscal 1996. The effective tax rate was higher for fiscal 1997 as
compared to fiscal 1996 due principally to nondeductible penalties (17.4% in
1997) and meals and entertainment expenses (9.3% in 1997). The increase in
penalty expense is due to HLMI's inability to timely fund payroll taxes.

FISCAL 1996 COMPARED WITH FISCAL 1995

Revenues were $28.6 million in fiscal 1996 compared to $29.1 million in
fiscal 1995, a decline of 2.0%. The decline in revenues was primarily
attributable to HLMI's decentralization of architectural services from one
location to multiple locations and its efforts to focus on the estimating
process and selecting contracts with profitability as the major goal, which
resulted in some potential contracts not being pursued. During fiscal 1996,
approximately 70% of HLMI's revenues were related to health care projects and
approximately 30% were from criminal justice and other projects as compared to
during fiscal 1995, approximately 73% of HLMI's revenues were related to health
care projects and approximately 27% were from criminal justice and other
projects.

Direct costs include, among other things, direct labor, subconsultants
costs, and reimbursable expenses. Direct costs were $14.3 million, or 49.9% of
revenues, in fiscal 1996 as compared to $15.7 million, or 53.9% of revenues, in
fiscal 1995. This decrease as a percent of revenues is principally due to a
decrease in the use of subconsultants to meet project requirements (16.7% and
18.4% of revenue in fiscal 1996 and fiscal 1995, respectively), a decrease in
direct labor incurred as a result of HLMI's focus on cost containment of each
project (26.7% and 27.3% of revenue in fiscal 1996 and fiscal 1995,
respectively) and a decrease in reimbursable expenses incurred (3.3% and 5.3% of
revenue in fiscal 1996 and fiscal 1995, respectively). As a result of these
reductions, gross profit from revenue (revenue less direct cost of revenue)
increased to $14.3 million in fiscal 1996 from $13.4 million in fiscal 1995.

Operating expenses decreased 7.1% to $13.1 million, or 45.9% of revenues,
in fiscal 1996 from $14.1 million, or 48.4% of revenues, in fiscal 1995. The
decrease is principally due to a decrease in rent and occupancy costs resulting
from management's renegotiation of certain office leases and, to a lesser
extent, a decrease in the costs incurred for contingencies related to various
disputes and legal actions related to contract operations due to HLMI's focus on
prevention and resolution of such matters on an ongoing basis. This was
partially offset by an increase in salary and related costs and reproduction
costs.

ESOP expenses were $0.6 million for both fiscal 1996 and 1995. The expenses
represent principal and interest payments on the ESOP debt.

Amortization of intangible assets were $0.1 million in fiscal 1996 and
$5,952 in fiscal 1995. This increase relates to the goodwill arising from the
acquisition of MPB Architects, Inc. in April 1995. See Note 2 to Notes to HLMI
Financial Statements.

Interest expense was $0.4 million for fiscal 1996 and $0.2 million for
fiscal 1995. This increase is primarily due to increased borrowing for working
capital needs in fiscal 1996.

Non-operating income was $0.9 million in fiscal 1996 compared to $0.4
million in fiscal 1995. In fiscal 1996, the Company terminated facility leases
resulting in a gain of $0.8 million. In fiscal 1995, HLMI sold its airplane
which generated a gain on sale of assets of $0.4 million. See Note 4 to Notes to
HLMI Financial Statements.

Income tax expense was $0.4 million in fiscal 1996 compared to an income
tax benefit of $0.4 million in fiscal 1995. The effective income tax rate in
fiscal 1996 was 44.8% compared to 37.7% in fiscal 1995. The effective tax rate
was higher for fiscal 1996 as compared to fiscal 1995 due to the ratio of
non-deductible meals and entertainment expense to pre-tax income or loss.

LIQUIDITY AND CAPITAL RESOURCES

At April 25, 1997, HLMI's current liabilities of $11.6 million exceeded
current assets of $9.7 million, resulting in a working capital deficit of $1.9
million. During fiscal 1997, HLMI generated $0.5 million in cash from operating
activities. HLMI used $0.7 million in investing activities, primarily the
purchase of equipment. HLMI received proceeds from new debt

<PAGE>
of $0.5 million and repaid borrowings on notes payable of $0.4 million. These
transactions resulted in a net decrease in cash of $8,809 for the fiscal year.

At January 30, 1998, the Company's current liabilities of $12.8 million
exceeded current assets of $12.4 million resulting in a working capital
deficiency of $.4 million. During the nine months ended January 30, 1998, the
Company provided $0.2 million in cash for operating activities. The Company used
$0.5 million for investing activities, primarily the purchase of equipment. The
Company generated $0.4 million for financing activities, primarily from
long-term borrowings reduced by the payment of the ESOP buyback.

The Company received proceeds, in June 1997, from financing, in the form of
a capital lease of $2.8 million (the "Lease Financing") from Berthel Leasing.
The proceeds were used to repay a line of credit and a note payable due to
Firstar Bank of Iowa, N.A. In connection with the Lease Financing, HLMI granted
a security interest in all of its personal property to Berthel Leasing, and
Joseph Harris, Vernon Brannon and a former director of HLM Design, partially
guaranteed the amount due to Berthel Leasing. HLM Design also entered into an
$0.8 million term loan, in September 1997, with Berthel Leasing for working
capital purposes. In consideration for this borrowing, HLM Design sold Warrants
to purchase 3,422 shares of Common Stock (43,630 shares after giving effect to
the Stock Split), subject to adjustment in certain circumstances, to Berthel
Leasing (the "Berthel Warrants"). See "Certain Transactions -- Berthel Leasing
Lease Financing" and "Description of Capital Stock -- Warrants." In December
1997, Berthel Leasing exercised its Warrants and purchased 3,422 shares of
Common Stock (43,630 shares after giving effect to the Stock Split) at an
exercise price of $.01 per share.

In connection with the merger agreement with BBH Corp. and the payment of
the merger consideration to holders of HLMI common stock, the Company (i) issued
indebtedness in the aggregate principal amount of $2 million to Pacific and
Equitas, (ii) obtained financing from First Charter National Bank in the form of
a revolving line of credit in an aggregate principal amount of $1 million (the
"First Charter Loan") and obtained notes payable to employee stockholders for
$0.2 million. The Pacific/Equitas Loan is secured by, among other things, a
collateral assignment of HLM Design's interest in its Management and Services
Agreements and a security interest in HLM Design's personal property and
fixtures. Additionally, HLMI, as well as Joseph Harris and Vernon Brannon has,
under certain circumstances, guaranteed the Pacific/Equitas Loan. HLM Design
also sold Warrants to purchase 14,372 shares of Common Stock (183,242 shares
after giving effect to the Stock Split), subject to adjustment in certain
circumstances, to Pacific, Equitas, Shannon LeRoy, a representative of Equitas
and a member of the Board of HLM Design and Clay R. Caroland, a representative
of Pacific and a member of the Board of HLM Design (the "Pacific/Equitas
Warrants" and, together with the Berthel Warrants, the "Warrants"). See "Certain
Transactions -- Merger Transaction," "Description of Capital Stock -- Warrants"
and Note 4 to the Combined Financial Statements. In November 1997, Mr. Caroland
exercised his Warrants and purchased 862 shares of Common Stock (10,991 shares
after giving effect to the Stock Split) at an exercise price of $.01 per share
and Mr. LeRoy transferred his Warrants to purchase 862 shares of Common Stock
(10,991 shares after giving effect to the Stock Split) to Equitas. In February
1998, Equitas exercised its Warrants and purchased 5,749 shares of Common Stock
(73,300 shares after giving effect to the Stock Split) at an exercise price of
$.01 per share. Pacific will exercise its Warrants immediately prior to the
effective date of the Registration Statement of which this Prospectus is a part.
The First Charter Loan is secured by an unconditional guaranty from HLMI, which
is secured by a security interest in all of HLMI's accounts receivable. Joseph
Harris, Vernon Brannon and a former director have also guaranteed the First
Charter Loan.

The Company's growth and operating strategy will require substantial
capital and may result in the Company incurring additional debt, issuing equity
securities or obtaining additional bank financing. (As the management company,
HLM Design will be responsible for the financing of working capital growth,
capital growth and other cash needs of the Managed Firms. See "Business -- HLM
Design Operations -- Management and Services Agreements"). The Company has
received commitments for a new revolving line of credit contingent upon the
Offering and subject to other customary terms and conditions. The Company
believes that the net proceeds from the Offering, the new revolving line of
credit and anticipated funds from future operations will be sufficient to meet
its working capital needs for at least the next twelve months. If HLM Design is
unable to obtain a new revolving line of credit following the Offering, its
ability to implement its growth strategy will be adversely affected.

The Company's operations are professional services and as such are not
capital intensive. However, in order to enhance productivity, the Company has
increased its purchase of computer hardware and software. The Company currently
has no material commitments for purchases of additional equipment. Capital
expenditures during fiscal year 1997 were $0.7 million. The Company expects
fiscal 1998 capital expenditures to be comparable to expenditures in fiscal
1997.

Subsequent to the Offering, the Company expects to fund AEP Firm
affiliations with proceeds from the Offering and future offerings.

<PAGE>
SEASONALITY

The Company's operations are not seasonal in nature.

EFFECTS OF INFLATION

Due to the relatively low levels of inflation in fiscal years 1995, 1996
and 1997, inflation did not have a significant effect on the Company's results
of operations for those periods.

NEW ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 128, "Earnings Per Share." This Statement specifies
the computation, presentation and disclosure requirements for earnings per
share. The Company believes that the adoption of such Statement would not result
in earnings per share materially different than pro forma earnings per share
presented in the accompanying pro forma statements of income. It will be
effective for periods ending after December 15, 1997.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
Statement establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for HLM Design's fiscal year ending April 24, 1998,
and the Company does not intend to adopt this Statement prior to the effective
date.

On November 20, 1997, EITF 97-2, "Application of FASB Statement No. 94,
CONSOLIDATION OF ALL MAJORITY-OWNED SUBSIDIARIES, and APB Opinion No. 16,
BUSINESS COMBINATIONS, to Physician Practice Management Entities and Certain
Other Entities with Contractual Management Arrangements", was issued which
reached a consensus that arrangements similar to those between HLM Design and
the Managed Firms should be accounted for on a consolidated basis. The Company
intends to reflect this change prospectively in the fiscal year ended April 24,
1998 financial statements. If the change had been effected for the nine months
ended January 30, 1998, the effect would have been a reduction to stockholder's
equity by approximately $10,511, an increase in minority interest by
approximately $10,511 and a decrease in net income of approximately $10,509.

<PAGE>
BUSINESS
OVERVIEW

HLMI was founded in Iowa City, Iowa in 1962 to provide architectural,
engineering and planning services. HLMI enjoyed steady growth, expanding
geographically and establishing a national presence and is now recognized as a
leader in the healthcare arena. In 1987, the original founders of HLMI sold
their ownership in the company to the ESOP and a board of directors, consisting
of senior principals, took control of HLMI.

In 1994, as a result of the poor financial performance of HLMI, Joseph M.
Harris was hired as Chief Executive Officer and Vernon B. Brannon was hired as
Chief Financial Officer. Messrs. Harris and Brannon instituted significant
changes, cutting costs and personnel, with a focus on returning HLMI to
profitability. In 1996, HLMO and HLMNC were formed and the headquarters of HLMI
was moved from Iowa City, Iowa to Charlotte, North Carolina. HLMI, HLMO and
HLMNC currently operate offices in Atlanta, Georgia, Iowa City, Iowa, Chicago,
Illinois, Orlando, Florida, Bethesda Maryland, Denver, Colorado, Sacramento,
California, Philadelphia Pennsylvania, Portland, Oregon and Charlotte, North
Carolina.

On May 23, 1997, BBH Corp. merged into HLMI. See "Certain
Transactions -- Merger Transaction." Following the merger of BBH Corp. into
HLMI, Messrs. Harris and Brannon owned all of the outstanding common stock in
HLMI.

In March 1997, HLM Design was formed with the intent of managing the
nonprofessional operations of AEP Firms through Management and Services
Agreements. HLM Design believes it is the first company in the architectural,
engineering and planning industry to actively pursue the strategy of
consolidating non-professional operations and providing management expertise to
AEP Firms. Currently, HLM Design is not engaged in negotiations with any AEP
Firms. HLM Design believes its strategy will take advantage of operating
efficiencies for AEP Firms and provide service and geographic diversification
for its AEP Firm's clients. The process of developing and entering into
management and services relationships is complex and will likely require several
months to complete. In May 1997, HLM Design entered into forty-year Management
and Services Agreements with HLMI, HLMNC and HLMO. All three of these firms are
related through common principal stockholders and these stockholders have
entered into Stockholders' Agreements. See "Certain Transactions."

OPERATING STRATEGY

The creation of a management relationship between HLM Design and an AEP
Firm involves, among other things, the signing of a Management and Services
Agreement between HLM Design and the AEP Firm. Under the terms of the Management
and Services Agreement, HLM Design is the sole and exclusive manager and
administrator of all of the Managed Firm's day-to-day business functions. These
functions include financial planning, facilities, equipment and supplies, and
management and administrative services. Management and administrative services
include bookkeeping and accounts, general administration services, contract
negotiation and administration for all non-architectural and non-engineering
aspects of all agreements pertaining to the provision of architectural and
engineering services by Managed Firms to third parties, personnel, security and
maintenance, architectural and engineering recruiting and training, insurance,
issuance of debt and additional capital stock and billing and collections. For
these services, HLM Design receives all but 1% of the firm's positive cash flow
(as determined in accordance with generally accepted accounting principles
applied on a consistent basis) following the payment by the AEP Firm of all such
firm's expenses. See " -- HLM Design Operations -- Management and Services
Agreements."

In addition to the Management and Services Agreement, HLM Design will
require stockholders of Managed Firms to enter into Stockholders' Agreements
which will provide the stockholders of those entities with nominee stockholder
status. Generally, the Stockholders' Agreements will provide for the following:
(i) the repurchase by the Managed Firm of the stockholder's stock upon such
stockholder's death, (ii) restrictions on transferability of the stock, (iii) a
"call-right" on the stock by the AEP Firm and (iv) a voting agreement among the
stockholders and the Managed Firm. See " -- HLM Design
Operations -- Stockholders' Agreements."

The architects, engineers and planners employed by the Managed Firms offer
a broad range of specialty and ancillary services. The Managed Firms offer
services in master planning, architectural design, mechanical, electrical,
structural and civil engineering, interior design, environmental graphics,
landscape architecture, construction services and facility management. Each
office varies in the number and types of specialties offered. The Managed Firms
provide excellence in design and over the years have designed over a billion
square feet of buildings and completed hundreds of planning and feasibility
studies. Clients of the firms range from small companies to America's most
prestigious corporations. The professionals at the Managed Firms specialize in
the design of hospitals, criminal justice buildings and high-tech research
facilities. Design experience of professionals employed by the Managed Firms
includes corporate headquarters, physician office buildings, investment office
buildings, multi-use office complexes and related facilities. The Managed Firms'
professionals maintain

<PAGE>
full control over their architectural and engineering practices, determine which
projects to pursue and set their own standards of practice in order to promote
high-quality provision of services and retain ownership of all contracts with
clients. HLM Design is not engaged in the practice of architecture, engineering
or planning.

The following more fully describes the services provided by the Managed
Firms:

FOCUS ON HEALTHCARE. The Managed Firms design healthcare facilities that
help their clients improve patient care and reduce operating costs. During the
last 33 years, HLMI has designed over one billion square feet of healthcare
facilities. Its experience includes more than 325 healthcare clients and over
825 major healthcare engagements including:

(Bullet) 201 health facility master plans
(Bullet) 118 ambulatory care centers
(Bullet) 77 ambulatory surgery centers
(Bullet) 119 academic medical centers and teaching facilities
(Bullet) 64 cancer centers
(Bullet) 69 women's facilities
(Bullet) 13 replacement hospitals
(Bullet) 44 medical office buildings

FOCUS ON JUSTICE. The Managed Firms design justice facilities that help
their clients build efficient and effective public facilities in times where
financing of construction and operation of these public facilities is
continually being scrutinized. Its experience includes:

(Bullet) 25 federal and state projects
(Bullet) 1.8 million square feet for the federal government
(Bullet) 3 million square feet of courthouse renovation

By integrating design and planning, the Company's professionals meet
project objectives by improving staff efficiency, accelerating the project
schedule or even addressing sensitive urban design issues. Teams explore options
to optimize the return on construction dollars, for example, by creatively
combining renovation and new construction. The Company helps bridge the gap
between need and public acceptance through public information campaigns and cost
control. The results are buildings -- courts, police, detention or corrections
facilities -- that meet stringent cost requirements yet still achieve a high
quality of design.

FOCUS ON RESEARCH FACILITIES. The Managed Firms design laboratories for
clients that focus on optimizing space utilization and provide flexibility to
adapt to changing technology or funding constraints. Systems are designed to
control operating costs while protecting the demands of the research function
and making safety and security the highest priority. Often, the goal is to
produce environments that stimulate creativity, promote interaction, enhance the
client's ability to recruit the best and brightest and attract funding. The
Managed Firms have completed 30 projects totalling over 3 million square feet
valued at $540 million in construction.

GROWTH STRATEGY

HLM Design intends to implement an aggressive, yet disciplined, expansion
program by pursuing Management and Services Agreements with (i) large "regional"
AEP Firms with established operating histories located in large metropolitan and
high-growth suburban geographic markets that the Company does not currently
serve and (ii) small firms that provide operational diversity in geographic
areas that will complement the services that are either currently provided by
the Company in such geographic areas or that are intended to be provided in the
future. HLM Design believes its approach will be attractive to these large and
small AEP Firms because it will provide these firms with economies of scale and
the synergies that result from increased purchasing power, a greater breadth of
services, an increased pool of professionals, and geographical diversity.
Furthermore, this strategy will give these regional and local AEP Firms, as a
part of the Company, the ability to provide services to existing and future
clients with national operations that might otherwise have turned to "non-local"
firms to service their needs. The goal is for the Company to be the single
source provider for large national clients with geographically diverse
operations.

HLM Design generally expects that AEP Firms that sign Management and
Services Agreements will retain existing high-quality professional staff and
continue to operate in an effective and efficient manner with personnel who
understand the local market. Additionally, management believes it is positioned
to pursue larger, well established AEP Firms as a result of the depth of HLM
Design's management team, its capital structure and the reputation of the
management team in the design

<PAGE>
industry. Management also believes these goals can be achieved at less cost than
that which would be incurred by AEP firms operating on a stand alone basis.

HLM DESIGN OPERATIONS

Pursuant to its Management and Services Agreements, HLM Design manages all
aspects of the Managed Firm other than the provision of professional
architectural, engineering and planning services. The provision of these
services is controlled by the Managed Firms themselves. HLM Design enhances firm
growth by assisting in the recruitment of new professionals and by expanding and
adding ancillary services.

One of HLM Design's goals is to negotiate national arrangements and provide
cost savings to Managed Firms through economies of scale in areas such as
malpractice insurance, supplies, equipment and business functions.

MANAGEMENT AND SERVICES AGREEMENTS

The Management and Services Agreements with the Managed Firms are for a
period of forty years. These agreements cannot be terminated by HLM Design or
the Managed Firm without a material default or bankruptcy. Under these
agreements, HLM Design is appointed as the sole and exclusive manager and
administrator of all of the Managed Firms' day-to-day business functions,
including financial planning, facilities, equipment and supplies, and management
and administrative services (including bookkeeping and accounts, general
administration services, contract negotiation and administration for all
non-architectural and non-engineering aspects of all agreements pertaining to
the provision of architectural and engineering services by Managed Firms to
third parties), personnel, security and maintenance, architectural and
engineering recruiting and training, insurance, and billing and collections. HLM
Design has no authority, directly or indirectly, to perform any function of the
Managed Firm's operations pertaining to services which are required to be
performed by duly licensed architects and engineers pursuant to any and all
applicable laws, rules or regulations adopted by any authority regulating the
licensing of architects or engineers. The Managed Firms will retain ownership of
all contracts with clients. Additionally, HLM Design has the authority to
approve or deny, on behalf of the Managed Firm, any and all proposals by
stockholders of such firm to encumber, sell, pledge, give or otherwise transfer
the capital stock of the Managed Firm, as well as the authority to approve
issuance of common stock or incurrence of indebtedness.

As compensation for the provision of its services under the Management and
Services Agreement, HLM Design earns 99% of the net income of the Managed Firms,
as determined in accordance with generally accepted accounting principles.
However, for cash management purposes, the Management and Services Agreements
state that HLM Design is to receive all but 1% of the positive cash flow
(calculated as the change in the cash balances from the beginning of the period
to the end of the period for the Managed Firms). As the management company, HLM
Design will be responsible for the financing of working capital growth, capital
growth and other cash needs. The Management and Services Agreements are
structured so as not to force the Managed Firms to borrow money to satisfy their
inter-company obligations for the management fee (defined as 99% of the net
income of the Managed Firm). For the eight months ended January 30, 1998, HLM
Design earned $1,034,008; however, due to cash requirements of the Managed
Firms, the management fee required to be paid at January 30, 1998 was $450. The
remaining balance of $1,033,558 has been recorded as a receivable by HLM Design,
which will be paid with future positive cash flows.

Effective January 1, 1998, all HLMI employees were transferred to HLM
Design and now provide services to HLMI as HLM Design employees. From May 30,
1997 (the date of inception of the Management and Services Agreement), until
December 31, 1997, HLMI accrued no compensation bonuses for HLMI stockholder
officers.

STOCKHOLDERS' AGREEMENTS

Stockholders of Managed Firms will enter into a Stockholders' Agreement
which will generally restrict the ability of these stockholders to exercise
certain rights commonly associated with ownership of common stock and will
effectively provide stockholders of such entities with nominee stockholder
status. Generally, such Stockholders' Agreements will provide that:

(i) upon the death of a stockholder, the Managed Firm will purchase
and the personal representative of such stockholder's estate will sell to
the Managed Firm all the stock owned by such deceased stockholder;
provided, however, in certain circumstances the sale of such stockholder's
stock may be made to one or more third parties, subject to the approval of
the Managed Firm;

<PAGE>

(ii) stockholders may not sell, pledge, give or otherwise transfer any
or all of their stock to any third party, either voluntarily or
involuntarily, without first obtaining the Managed Firm's written approval
of such transfer;

(iii) the Managed Firm has the right at any time to purchase all, but
not less than all, of the stock then owned by any or all of the
stockholders; and

(iv) the stockholders agree that with respect to all matters which are
submitted to stockholder vote (and, to the extent that all or any of the
stockholders serve as a director of the Managed Firm, then also with
respect to all matters which are submitted to a vote of the board of
directors), the stockholders will, if not in unanimous agreement, follow
specified procedures to achieve unity in voting among all stockholders.

In addition, the Stockholders' Agreements will contain an acknowledgment on
the part of each stockholder that it is in the parties' best interest that
certain of the Managed Firm's administrative and managerial functions be
performed pursuant to a Management and Services Agreement with HLM Design and
that in order to ensure consistency and continuity in the management of the
firm's business and affairs, that with respect to all matters pertaining to the
initiation of stock "calls" and the approval or denial of proposed stock
transfers, the Managed Firm will in all cases act in accordance with the written
recommendation of HLM Design. The Stockholders' Agreement will provide that they
may be terminated upon the occurrence of any of the following events:

(i) cessation of the Managed Firm's business,

(ii) bankruptcy, receivership or dissolution of the Managed Firm, or

(iii) the voluntary agreement of all parties bound by the terms of
such Stockholders' Agreement.

Each of the stockholders of HLMI, HLMNC, and HLMO have entered into
Stockholders' Agreements which provide each stockholder with nominee stockholder
status. It is anticipated that Stockholders' Agreements among stockholders of
the AEP Firms with whom HLM Design enters into Management and Services
Agreements in the future will have similar terms.

PROPERTIES

HLM Design's principal executive offices are located at 121 West Trade
Street, Suite 2950, Charlotte, North Carolina and its telephone number is (704)
358-0779, where the Company leases 7,254 square feet. Its lease of such offices
is for a term of 5 years and expires in 2000. The Company believes the office
facility is adequate for its current uses and anticipated growth. In addition to
HLM Design's principal executive offices, the Company leases office space in
Sacramento, California, Denver, Colorado, Orlando, Florida, Atlanta, Georgia,
Iowa City, Iowa, Chicago, Illinois, Bethesda, Maryland, Portland, Oregon and
Philadelphia, Pennsylvania.

COMPETITION

The business of providing architectural, engineering and planning services
is highly competitive. Although HLM Design is not aware of any other company
actively pursuing a strategy of consolidating firms' administrative and
management functions, it believes that additional companies with similar
objectives will be organized in the future. Potential sources of competition
include larger, nationally known, multi-specialty professional groups or
professional firms and others, a number of which may have significantly greater
resources than those of the Company.

The Managed Firms are in competition with many other AEP firms, including
large, national firms as well as many small, local firms. The Managed Firms
compete with these firms on the basis of technical capabilities, qualifications
and availability of personnel, experience, reputation, quality performance and,
to a lesser extent, price of services.

GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS

Each state has enacted legislation governing the registration of architects
and engineers, and, in some cases, landscape architects, fire protection
engineers and interior designers. These state laws impose licensing requirements
upon individual design professionals and architectural-engineering firms and are
implemented by a more detailed set of administrative rules and regulations
overseen by a registration board. In general, the state laws define the practice
of architecture and engineering, restrict the use of the titles ARCHITECT and
ENGINEER to licensed individuals, establish rules for entry into the profession,
explain how professionals licensed in other states may become reciprocally
registered to practice in the jurisdiction and define and enforce standards of
professional conduct and misconduct.

<PAGE>

The state laws, or the regulations established by a registration board, may
also establish requirements for the practice of architecture or engineering by a
corporation or partnership. A few states do not permit the practice of
architecture or engineering in a corporate form. Some states require design
professionals who want to incorporate to do so as a professional corporation
authorized and certified by the secretary of state. Most states permit practice
through either a professional corporation or a general business corporation.
Even if a state permits practice in a corporate form, the state may require that
a certain number of principals in the corporation must be registered architects
or engineers. Some states specify that a certain percentage of the principals,
directors or stockholders of a corporate entity must be registered architects or
engineers in order to practice in the state. A corporation seeking to practice
in a state other than that in which it is incorporated must register as a
foreign corporation in the other state and satisfy all of the registration
requirements.

There can be no assurance that the regulatory environment in which the
Company operates will not change significantly in the future. For additional
information regarding uncertainties concerning governmental regulations relating
to the practice of architecture and engineering in light of the relationship
between HLM Design and the Managed Firms, see "Risk Factors -- Governmental
Regulation."

Federal, state and local environmental laws and regulations have not
historically had a material impact on the operations of the Company; however,
the Company cannot predict the effect on its operations of possible future
environmental legislation or regulations.

EMPLOYEES

Prior to January 1, 1998, all employees were employed with HLMI; however,
under HLMI's Management and Services Agreement and consistent with HLM Design's
strategy, all employees were transferred to HLM Design as of January 1, 1998. As
of January 1, 1998, HLM Design employed approximately 246 persons of which
approximately 92 were registered professionals (engineers, architects and
others), approximately 102 were degreed professionals and approximately 52 were
administrative personnel. None of HLM Design's employees or the Managed Firm's
employees is represented by a labor union. HLM Design considers its relations
with its employees and the employees of the Managed Firms to be satisfactory.

The registered professional architects and engineers generally have degrees
from accredited architecture or engineering schools, several years of work
experience and have passed licensing examinations. Both registered and degreed
architects have either a five year architectural degree or a four year degree
and a two year advanced architectural degree. The Company's degreed
professionals who are not registered have not yet passed the required licensing
examinations.

LEGAL PROCEEDINGS

From time to time HLM Design or one or more of the Managed Firms are named
in claims involving contractual disputes or other matters arising in the
ordinary course of business. Currently, no legal proceedings are pending against
or involve HLM Design or the Managed Firms that, in the opinion of management,
when considering insurance coverage, could reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of HLM Design.

<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS; KEY PERSONNEL

The executive officers, directors and key personnel of the Company, and
their ages as of the date of this Prospectus, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Joseph M. Harris 53 President, Chairman of the Board and Director*
Vernon B. Brannon 54 Senior Vice President, Chief Financial Officer, Treasurer,
Assistant Secretary and Director*
Clay R. Caroland III 43 Director
D. Shannon LeRoy 41 Director
Thomas G. Pinkerton, Sr. 53 Senior Vice President
Bradley A. Earl 50 Vice President
Viktor A. Lituczy 44 Vice President
Frank E. Talbert 41 Vice President
Robert P. Ludden 42 Vice President
</TABLE>

- ---------------

* Executive Officer

JOSEPH M. HARRIS, AIA, RIBA, has been President, Chairman of the Board, and
a Director of HLM Design since its organization in 1997. He has been President
and Chief Executive Officer of HLMI for the past three years. Prior to joining
HLMI in 1994, he served as President of Heery Architects and Engineers, Inc. and
an Executive Vice President and Director of Technical Services of Heery
International, Inc., one of the country's largest full-service
multi-disciplinary professional service firms. Prior to that, Mr. Harris was one
of the founders and served as President of Clark, Tribble, Harris and Li,
Architects, P.A. a multi-service architectural firm. Mr. Harris has over 30
years of professional experience and is an architect licensed in 32 states and
in the United Kingdom. Mr. Harris' initial term as a director of HLM Design will
expire at the annual meeting of stockholders of HLM Design to be held in 1999.

VERNON B. BRANNON has been Senior Vice President, Chief Financial Officer,
and a Director of HLM Design since its organization in 1997. Along with Mr.
Harris, he is a stockholder of HLMI which he joined in 1994 as Chief Financial
Officer and was appointed Senior Vice President soon after joining the firm.
Prior to joining HLMI, from 1988 to 1994, Mr. Brannon was Chief Operating
Officer of UAV Corporation, a video distribution firm, with responsibility for
manufacturing, finance, accounting, and all other functions except sales. Mr.
Brannon's initial term as a director of HLM Design will expire at the annual
meeting of stockholders of HLM Design to be held in 1999.

CLAY R. CAROLAND III has been a partner since 1987 in Health Investors, LP
and its affiliates. From 1996 to 1997 he also served as President of the General
Partner of Pacific Capital, L.P. Health Investors and Pacific are investment
firms. In 1989, he, along with Health Investors, organized and capitalized
ClinTrials, Inc., which grew to become a leading CRO. In 1981, he co-founded
Liberty Street Capital, NY, a Wall Street investment boutique and was Managing
Director there until 1987. Mr. Caroland has served on the boards of directors of
a number of companies including EquiVision and ClinTrials. Mr. Caroland's
initial term as a director of HLM Design will expire at the annual meeting of
stockholders of HLM Design to be held in 1998.

D. SHANNON LEROY currently serves as President of Tennessee Business
Investments, Inc., the general partner of Equitas, L.P., a licensed Small
Business Investment Company. From 1988 until 1994, Mr. LeRoy served as a Senior
Vice President of First Union National Bank of Tennessee, where he managed
commercial banking. Mr. LeRoy is a Director of Power Designs, Inc., a
manufacturer of power supply and power line conditional products, and Laure
Beverage Company, a consumer beverage company. Mr. LeRoy's initial term as a
director of HLM Design will expire at the annual meeting of stockholders of HLM
Design to be held in 1998.

BRADLEY A. EARL is a Vice President managing the Philadelphia office of
HLMI. He joined HLMI in 1996. Prior to that he served in various leadership
positions in architectural firms and as an independent architect. He was
Director of Architecture at The Klett Organization from 1994 to 1996 and
Executive Architect to Children's Hospital of Philadelphia from 1992 to 1994. He
is a registered architect with 21 years of experience.

VIKTOR A. LITUZAY rejoined HLMI in 1996 as Vice President managing the
firm's Portland, Oregon office. Prior to leaving HLMI in 1989. Mr. Lituczy was
Corporate Vice President for the Chicago office as well as director of high-tech
laboratory

<PAGE>
projects firmwide. From 1992 until 1996 he had his own architectural practice in
Portland and consulted with a number of healthcare clients and architects on
projects. From 1989 until 1992 he was an Associate Principal for KMD Architects
& Planners in Portland. He is a registered architect with 20 years of
experience.

ROBERT P. LUDDEN is a Vice President managing the Orlando office of HLMI.
He joined HLMI in 1993. Prior to that, from 1986 to 1993, he was a Vice
President at Cannon, a large architectural firm that focuses on healthcare
architecture. Mr. Ludden's career has focused on the leadership and direction of
significant architectural and engineering projects. His work spans a number of
markets including justice, healthcare, research and commercial. He is a
registered architect.

THOMAS G. PINKERTON is a Senior Vice President of the Company. He joined
the firm in 1994 as National Director of Justice Architecture. Prior to joining
HLMI he was an associate with Hellmuth, Obata & Kassabaum, Inc., one of the
largest architectural firms in the country. A registered architect with 33 years
of experience, he has devoted his practice exclusively to the design of justice
facilities.

FRANK E. TALBERT is a registered architect with 17 years experience. He
joined HLMI in 1994 and is Vice President managing the Chicago office of the
firm. Prior to joining HLMI he was President of FibreCem Corporation from 1992
to 1994 where he led the successful turnaround of that company. His success was
achieved with a combination of an intensive, hands-on sales effort, and a
reorganization of operations. From 1990 to 1992 he managed the Carolinas office
of Kajima International Inc., the world's largest turnkey developer/builder
where he established a program for financial enhancements on free standing not
leased retail projects. Mr. Talbert is a registered architect.

After the Offering, HLM Design intends to maintain two individuals not
employed by or affiliated with HLM Design to HLM Design's Board of Directors.

The Board of Directors of the Company is divided into three classes, each
of which, after a transitional period, will serve for three years, with one
class being elected each year. The executive officers are elected annually by,
and serve at the discretion of, HLM Design's Board of Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Since HLM Design's organization in March 1997, all matters concerning
executive officer compensation have been addressed by the entire Board of
Directors. Since HLM Design's organization, Vernon Brannon and Joseph Harris
have been executive officers of HLM Design and, together with Clay R. Caroland
III and Shannon LeRoy, who each represent creditors of HLM Design, have
constituted the majority of the Board of Directors. As soon as practicable after
the Offering, HLM Design intends to maintain two independent directors who will
thereafter comprise its Compensation Committee.

LIMITATIONS OF DIRECTORS' LIABILITY

HLM Design's Certificate of Incorporation includes a provision that
effectively eliminates the liability of directors to HLM Design or to HLM
Design's stockholders for monetary damages for breach of the fiduciary duties of
a director, except for breaches of the duty of loyalty, acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, certain actions with respect to unlawful dividends, stock repurchases or
redemptions and any transaction from which the director derived an improper
personal benefit. This provision does not prevent stockholders from seeking
nonmonetary remedies covering any such action, nor does it affect liabilities
under the federal securities laws. HLM Design's Bylaws further provide that HLM
Design shall indemnify each of its directors and officers, to the fullest extent
authorized by Delaware law, with respect to any threatened, pending or completed
action, suit or proceeding to which such person may be a party by reason of
serving as a director or officer. Delaware law currently authorizes a
corporation to indemnify its directors and officers against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit or proceeding
brought by a third party if such officers or directors acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful. Indemnification
is permitted in more limited circumstances with respect to derivative actions.
HLM Design believes that these provisions of its Certificate of Incorporation
and Bylaws are necessary to attract and retain qualified persons to serve as
directors and officers.

COMMITTEES OF THE BOARD

The Board of Directors of HLM Design intends to establish a Compensation
Committee and an Audit Committee consisting of independent directors. The
Compensation Committee will review and approve compensation for the executive

<PAGE>
officers, and administer, and determine awards under, the Stock Option Plan and
any other incentive compensation plan for employees of the Company. See
" -- Stock Option Plan" and " -- Employee Stock Purchase Plan." The Audit
Committee will recommend the selection of auditors for the Company and will
review the results of the audit and other reports and services provided by the
Company's independent auditors. HLM Design has not previously had either of
these committees.

DIRECTOR COMPENSATION

Members of the Board of Directors who are not employees of the Company will
be compensated for their services in amounts to be determined. The Company will
also reimburse all directors for their expenses incurred in connection with
their activities as directors of the Company. Directors who are also employees
of the Company receive no compensation for serving on the Board of Directors.

EXECUTIVE COMPENSATION

Set forth below is information for the years ended April 1997, 1996 and
1995 with respect to compensation for services to the Managed Firms:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- NUMBER OF
OTHER SHARES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION(S) YEAR SALARY(1) BONUS(2) COMPENSATION OPTIONS(3) COMPENSATION(4)
--------------------- ---- --------- -------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Harris 1997 $ 230,878 $ 50,000 -0- -0- -0-
Chairman, President 1996 192,307 0
and Director 1995 188,784 60,000
Vernon B. Brannon 1997 178,847 50,000 -0- -0- -0-
Senior Vice President 1996 144,281 0
Chief Financial Officer 1995 117,614 30,000
and Director
</TABLE>

- ---------------

(1) Does not include the dollar value of perquisites and other personal
benefits.

(2) The amounts shown are cash bonuses earned in the specified year and paid in
the first quarter of the following year.

(3) The Company's Stock Option Plan was adopted in February 1998. No options
were granted to any of the Company's executive officers in the years ended
April 1997, 1996 or 1995.

(4) The aggregate amount of perquisites and other personal benefits received did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for such executive officer.

EMPLOYMENT AGREEMENTS

HLM Design has entered into employment agreements with Messrs. Harris and
Brannon (the "Employment Agreements"), which provide for an annual base salary
and certain other benefits. Pursuant to the Employment Agreements, the base
salaries of Messrs. Harris and Brannon will be $300,000 and $250,000,
respectively. Messrs. Harris and Brannon will also receive a monthly automobile
allowance of $2,500 and such additional compensation as may be determined by the
Board of Directors. Each of the Employment Agreements is for a term of three
years and will automatically be renewed for successive periods of one year.
Additionally, Messrs. Harris and Brannon each will receive options pursuant to
the Stock Option Plan, for 57,954 shares of Common Stock, exercisable, in the
case of incentive stock options, at 110% of the initial public offering price,
and in the case of nonstatutory stock options, at $5.50 per share. See
" -- Stock Option Plan."

The Employment Agreements contain similar noncompetition provisions. These
provisions, during the term of the Employment Agreement, (i) prohibit the
disclosure or use of confidential Company information, and (ii) prohibit the
solicitation of the Company's clients, the participation or operation in any
business or service provided by the Company and, in the case of Mr. Harris, the
lending of his name to any business which provides architectural and engineering
services to persons who were clients or prospective clients of the Company. The
provisions referred to in (ii) above shall also apply for a period of three
years following the expiration or termination of an Employment Agreement.

<PAGE>
STOCK OPTION PLAN

In February 1998, the Board of Directors and stockholders of HLM Design
adopted the HLM Design, Inc. 1998 Stock Option Plan (the "Stock Option Plan") in
order to attract and retain key personnel. The following discussion of the
material features of the Stock Option Plan is qualified by reference to the text
of such plan filed as an exhibit to the Registration Statement of which this
Prospectus is a part.

Under the Stock Option Plan, options to purchase up to an aggregate of
159,955 shares of Common Stock may be granted to key employees of HLM Design and
its Managed Firms and to officers, directors, consultants and other individuals
providing services to the Company. Unless designated as "incentive stock
options" ("ISOs") intended to qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), options granted under the Stock Option
Plan are intended to be "nonstatutory stock options" ("NSOs").

The Compensation Committee of the Board of Directors of HLM Design will
administer the Stock Option Plan and will determine, among other things, the
persons who are to receive options, the number of shares to be subject to each
option, and the vesting schedule of options; provided, that the Board of
Directors of HLM Design will make such determinations with respect to the
initial grants made under the Stock Option Plan. Members of the Board of
Directors who serve on the Compensation Committee must qualify as "non-employee
directors," as that term is defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended. The Board of Directors of HLM
Design will determine the terms and conditions upon which HLM Design may make
loans to enable an optionee to pay the exercise price of an option. In selecting
individuals for options and determining the terms thereof, the Compensation
Committee may consider any factors it considers relevant, including present and
potential contributions to the success of the Company. Options granted under the
Stock Option Plan must be exercised within a period fixed by the Compensation
Committee, which period may not exceed ten years from the date of the grant of
the option or, in the case of ISOs granted to any holder on the date of the
grant of more than ten percent of the total combined voting power of all classes
of stock of HLM Design and its affiliated firms, five years from the date of
grant of the option. Options may be made exercisable in whole or in
installments, as determined by the Compensation Committee.

Options generally may not be transferred other than by will or the laws of
descent and distribution and during the lifetime of an optionee may be exercised
only by the optionee. Notwithstanding the foregoing, the Compensation Committee,
in its absolute discretion, may grant transferable options if such options are
not ISOs. The exercise price of options that are not ISOs will be determined at
the discretion of the Compensation Committee. The exercise price of ISOs may not
be less than the market value of the Common Stock on the date of the grant of
the option. In the case of ISOs granted to any holder on the date of grant of
more than ten percent of the total combined voting power of all classes of stock
of HLM Design and its affiliated firms, the exercise price may not be less than
110% of the market value of the Common Stock on the date of the grant of the
ISOs. The exercise price of NSOs will not be less than 85% of the market value
of the Common Stock on the date of grant of the NSOs. The exercise price may be
paid in cash, in shares of Common Stock owned by the optionee, in options
granted under the Stock Option Plan (except that the exercise price of an ISO
may not be paid in NSOs) or in any combination of cash, shares and NSOs.

Options granted under the Stock Option Plan may include the right to
acquire a "reload" option. In such case, if an optionee pays all or part of the
exercise price of an option with shares of Common Stock held by the optionee for
at least six months, then, upon exercise of the option, the optionee is granted
a second option to purchase, at the fair market value as of the date of exercise
of the original option, the number of whole shares used by the optionee in
payment of the exercise price of the original option. A reload option is not
exercisable until one year after the grant date of such reload option or the
expiration date of the original option. If the exercise price of a reload option
is paid for with shares of Common Stock that have been held by the Optionee for
more than six (6) months, then another reload option will be issued. Shares of
Common Stock covered by a reload option will not reduce the number of shares of
Common Stock available under the Stock Option Plan.

The Stock Option Plan provides that, in the event of changes in the
corporate structure of the Company or certain events affecting the Common Stock,
adjustments will automatically be made in the number and kind of shares
available for issuance and in the number and kind of shares covered by
outstanding options. It further provides that, in connection with any merger or
consolidation in which HLM Design is not the surviving corporation and which
results in the holders of the Common Stock owning less than a majority of the
surviving corporation or any sale or transfer by HLM Design of all or
substantially all its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, by any person or group of all or a majority
of the then-outstanding voting securities of HLM Design, all outstanding options
under the Stock Option Plan will become exercisable in full on and after (i) the
15th day prior to the effective date of such merger, consolidation, sale,
transfer or acquisition or (ii) the date of commencement of such tender offer or
exchange offer, as the case may be.

<PAGE>

The Board of Directors of HLM Design on or before the consummation of the
Offering intends to grant NSOs to purchase 40,568 shares of Common Stock and
ISOs to purchase 17,386 shares of Common Stock to each of Joseph Harris and
Vernon Brannon. No other grants of ISOs or NSOs will be made on or before the
consummation of the Offering.

The issuance and exercise of ISOs have no federal income tax consequences
to the Company. While the issuance and exercise of ISOs generally have no
ordinary income tax consequences to the holder, upon the exercise of an ISO, the
holder will treat the excess of the Common Stock's fair market value on the date
of exercise over the exercise price as an item of tax adjustment for alternative
minimum tax purposes. If the holder of Common Stock acquired upon the exercise
of an ISO holds such stock until a date that is more than two years following
the grant of the ISO and one year following the exercise of the ISO, the
disposition of such Common Stock will ordinarily result in capital gain or loss
to the holder for federal income tax purposes equal to the difference between
the amount realized on disposition of the Common Stock and the option exercise
price. If the holding period requirements described above are not met, the
holder will recognize ordinary income for federal income tax purposes upon
disposition of the Common Stock in an amount equal to the lesser of (i) the
excess of the Common Stock's fair market value on the date of exercise over the
option exercise price, and (ii) the excess of the amount realized on disposition
of the Common Stock over the option exercise price. Any additional gain upon the
disposition will be taxed as capital gains. The Company will be entitled to a
compensation expense deduction for the Company's taxable year in which the
disposition occurs equal to the amount of ordinary income recognized by the
holder. Any capital gain will be subject to reduced rates of tax if such shares
were held more than twelve months, and will be subject to further reduced rates
if such shares were held more than eighteen months.

The issuance of NSOs has no federal income tax consequences to the Company
or the holder. Upon the exercise of an NSO, NSO holders will recognize ordinary
income for federal income tax purposes at the time of option exercise equal to
the amount by which the fair market value of the underlying shares on the date
of exercise exceeds the exercise price. The Company generally will be allowed a
federal income tax deduction in the same amount. In the event of the disposition
of shares acquired by exercise of a NSO, any appreciation or depreciation after
the exercise date generally will be taxed as capital gain or loss; provided,
that any gain will be subject to reduced rates of tax if such shares were held
for more than twelve months and will be subject to further reduced rates if such
shares were held for more than eighteen months.

HLM Design intends to register the shares underlying the Stock Option Plan
if required by the federal securities laws. If such registration is not
required, such shares may be issued upon option exercise in reliance upon the
private offering exemption codified in Section 4(2) of the Securities Act.
Resale of such shares may be permitted subject to the limitations of Rule 144.

Following the effective date of the Registration Statement of which this
Prospectus is a part, the Company will not permit the total number of shares
subject to outstanding warrants (exclusive of the Underwriters' Warrants (as
defined herein)) and options granted or authorized to be granted to exceed 10%
of all shares of Common Stock outstanding.

EMPLOYEE STOCK PURCHASE PLAN

In February 1998, the Board of Directors and stockholders of HLM Design
adopted the HLM Design, Inc. Employee Stock Purchase Plan (the "ESPP"). The ESPP
is intended to promote the interests of the Company by providing employees of
the Company the opportunity to acquire a proprietary interest in the Company
through the purchase of Common Stock. The following discussion of the material
features of the ESPP is qualified by reference to the text of such Plan filed in
an exhibit to the Registration Statement of which this Prospectus is a part.

The ESPP is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code. The ESPP is administered by the Compensation Committee,
which, subject to the terms of the ESPP, has plenary authority in its discretion
to interpret and construe the ESPP. The Compensation Committee will construe the
provisions of the ESPP so as to extend and limit participation in a manner
consistent with the requirements of Section 423 of the Code. A total of 57,954
shares of Common Stock have been reserved for purchase under the ESPP.

On January 1 of each year during the term of the ESPP (and also on the
effective date of the ESPP) (the "Grant Date"), all eligible employees electing
to participate in the ESPP ("Participating Employees") will be granted options
to purchase shares of Common Stock. As of each Grant Date, each Participating
Employee will be deemed to have been granted an option to purchase that number
of shares of Common Stock that equals: (i) the Participating Employee's base pay
(as defined in the ESPP) as of the Grant Date divided by 1000, with fractional
amounts of .50 or more rounded up to the next dollar and fractional amounts of
less than .50 disregarded, multiplied by (ii) two. No Participating Employee may
be granted an option which would permit such employee to purchase stock under
the ESPP and all other employee stock purchase plans of HLM Design at a rate
which exceeds $25,000 of the fair market value of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.

<PAGE>
A Participating Employee may elect to designate a limited percentage of
such employee's base pay (as defined in the ESPP) to be deferred by payroll
deduction as a contribution to the ESPP. To the extent a Participating Employee
has accumulated enough funds, his or her contributions to the ESPP will be used
to exercise the option granted under the ESPP through purchases of Common Stock
on the last business day of January, April, July and October, on which the
principal trading market for the Common Stock is open for trading and on any
other interim dates during the year which the Compensation Committee designates
for such purpose (the "Exercise Date"). Contributions which are not enough to
purchase a whole share of Common Stock will be carried forward and applied on
the next Exercise Date in that calendar year.

The purchase price at which Common Stock will be purchased through the ESPP
shall be eighty-five percent of the lesser of (i) the fair market value of the
Common Stock on the applicable Grant Date, and (ii) the fair market value of the
Common Stock on the applicable Exercise Date. Any option granted to a
Participating Employee will be exercised automatically on each Exercise Date
during the calendar year of the option's Grant Date in whole or in part such
that the Participating Employee's accumulated contributions as of such Exercise
Date will be applied to the purchase of the maximum number of whole shares of
Common Stock that such contribution will permit at the applicable option price
limited to the number of shares available for purchase under the option.

Any option granted to a Participating Employee will expire on the last
Exercise Date of the calendar year in which granted. However, if a Participating
Employee withdraws from the ESPP or terminates employment prior to such Exercise
Date, the option may expire earlier.

Upon termination of a Participating Employee's employment for any reason
other than cause, death or leave of absence in excess of ninety days, such
employee may, at his or her election, request the return of contributions not
yet used to purchase Common Stock or continue participation in the ESPP until
the Exercise Date next following the date of termination of employment such that
any unexpired option held will be exercised automatically on such Exercise Date.
If a Participating Employee dies while employed by the Company or prior to the
Exercise Date next following the date of termination of employment, such
employee's estate will have the right to elect to withdraw all contributions not
yet used to purchase Common Stock or to exercise the Participating Employee's
option for the purchase of Common Stock on the Exercise Date next following the
date of such employee's death.

The Board of Directors of HLM Design may at any time amend, suspend or
terminate the ESPP; provided, however, that the ESPP may not be amended to
increase the maximum number of shares of Common Stock for which options may be
granted under the ESPP, other than in connection with a change in
capitalization, without obtaining the approval of HLM Design stockholders.

No federal taxable income will be recognized by Participating Employees
upon the grant of an option to purchase Common Stock under the ESPP. In
addition, a Participating Employee will not recognize federal taxable income on
the exercise of an option granted under the ESPP.

If the Participating Employee holds shares of Common Stock acquired upon
the exercise of an option granted under the ESPP until a date that is more than
two years from the Grant Date of the relevant option and one year from the date
of option exercise (or dies while owning such shares), the employee must report
as ordinary income in the year of disposition of the shares (or at death) the
lesser of (a) the excess of the fair market value of the shares at the time of
disposition (or death) over the option exercise price and (b) the excess of the
fair market value of the shares on the date the relevant option was granted over
the option exercise price. For this purpose, the option exercise price is 85% of
the fair market value of the shares on the date the relevant option was granted
(assuming the shares are offered at a 15% discount). Any additional income is
treated as long-term capital gain. If these holding period requirements are met,
the Company is not entitled to any deduction for income tax purposes. If the
Participating Employee does not meet the holding period requirements, the
employee recognizes at the time of disposition of the shares ordinary income
equal to the difference between the option exercise price for the shares and the
fair market value of the shares on the date of exercise, irrespective of the
price at which the employee disposes of the shares, and an amount equal to such
ordinary income is generally deductible by the Company. Any gain or loss
realized on the disposition of the shares will generally be capital gain or
loss; provided that any gain will be subject to reduced rates of tax if the
shares were held for more than twelve months and will be subject to further
reduced rates if the shares were held for more than eighteen months.

Because the ESPP is based on voluntary participation, benefits thereunder
are not determinable.

The Company intends to register the shares underlying the ESPP if required
by the federal securities laws. If such registration is not required, such
shares may be issued upon option exercise in reliance upon the private offering
exemption codified in Section 4(2) of the Securities Act. Resale of such shares
may be permitted subject to the limitations of Rule 144.

<PAGE>
CERTAIN TRANSACTIONS

RELATIONSHIPS WITH MANAGED FIRMS

Joseph Harris and Vernon Brannon, executive officers and principal
stockholders of HLM Design, are also the principal stockholders and officers of
the Managed Firms, HLMI, HLMNC and HLMO. As officers of the Managed Firms, they
caused the Managed Firms to enter into Management and Services Agreements with
HLM Design and as stockholders of each of the Managed Firms they entered into
Stockholders' Agreements. The primary purpose of the Stockholders' Agreement is
to restrict the ability of stockholders to exercise the rights commonly
associated with ownership of common stock and to effectively provide
stockholders of the Managed Firms with nominee stockholder status in order to
facilitate the execution and operation of the Management and Services
Agreements.

Future material transactions between HLM Design or any of the Managed Firms
and any of the Company's officers, directors or controlling persons will be made
or entered into on terms that are no less favorable to HLM Design than those
that can be obtained from unaffiliated third parties. Additionally, future loans
to, or forgiveness of any loans to, any of the Company's officers, directors or
controlling persons will be approved by a majority of HLM Design's directors and
by a majority of its independent directors who do not have an interest in the
transactions.

MERGER TRANSACTION

In April 1997, HLMI and BBH Corp., a Delaware corporation controlled by
Joseph Harris and Vernon Brannon, entered into a Merger Agreement (the "Merger
Agreement") whereby HLMI and BBH Corp. merged, with HLMI being the surviving
corporation. Upon consummation of the transactions contemplated by the Merger
Agreement each share of HLMI common stock (excluding shares of HLMI common stock
held by BBH Corp., which were (i) contributed to BBH Corp. by Messrs. Harris and
Brannon as their initial capital contribution to BBH Corp. and (ii) purchased
from HLMI with a $3.2 million loan from HLM Design) was converted into the right
to receive $64.00 in cash (the "Merger Consideration") and each share of BBH
Corp. then outstanding was converted into one share of HLMI common stock.
Following the consummation of the transactions contemplated by the Merger
Agreement, Joseph Harris and Vernon Brannon owned all of the outstanding common
stock of HLMI.

The payment of the Merger Consideration was financed indirectly by the
Pacific/Equitas Loan and the First Charter Loan through the purchase of
additional HLMI capital stock by BBH Corp., effective simultaneously with the
Merger. In connection with the Pacific/Equitas Loan, HLM Design issued the
Pacific/Equitas Warrants to Pacific, Equitas and Messrs. Caroland and LeRoy. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Company intends to repay the
principal of and interest on the Pacific/Equitas Loan from the proceeds of the
Offering. Once such loan is repaid, Messrs. Harris and Brannon will be released
from their personal guarantees of the Pacific/Equitas Loan.

BERTHEL LEASING LEASE FINANCING

Berthel Leasing, an affiliate of Berthel Fisher & Company Financial
Services, Inc., one of the Underwriters in the Offering, has entered into the
Lease Financing with HLMI and has provided HLM Design with an $0.8 million term
loan for working capital purposes. In addition, Berthel Leasing received the
Berthel Warrants and received certain registration rights which begin in
September 2000, with respect to the Common Stock which underlies the Berthel
Warrants. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." A portion of the
proceeds of the Offering will be used to repay the $0.8 million term loan. The
Company has also agreed, in connection with the Offering, to sell to the
Underwriters, including Berthel Fisher & Company Financial Services, Inc.,
certain warrants. See "Underwriting."

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of HLM Design's Common Stock as of March 27, 1998 by (i) each
stockholder who is known by HLM Design to own beneficially more than five
percent of the outstanding Common Stock, (ii) each director of HLM Design, (iii)
each executive officer of HLM Design, and (iv) all directors and executive
officers of HLM Design as a group, and as adjusted to reflect the sale by HLM
Design of the shares of Common Stock in this Offering.

<PAGE>

<TABLE>
<CAPTION>
PERCENTAGE OF ALL
OUTSTANDING
COMMON STOCK
NUMBER OF SHARES -----------------------
OF COMMON STOCK BEFORE AFTER
NAME (1) OWNED(2) OFFERINGP OFFERING(3)
- ------------------------------------------------------------------------------------- ---------------- -------- -----------
<S> <C> <C> <C>
Joseph M. Harris(4)(5) 367,142 39.3% 17.2%
Vernon B. Brannon(4)(5) 367,141 39.3% 17.2%
Clay R. Caroland III(4) 10,991 1.3% *
D. Shannon LeRoy(4) -- -- --
Berthel Leasing(6) 43,631 5.0% 2.1%
Pacific(7)(8) 98,953 10.2% 4.6%
Equitas(9) 73,300 8.4% 3.5%
All directors and executive officers as a group (4 persons) 745,274 85.2% 35.9%
</TABLE>

- ---------------
* Less than one percent.

(1) Unless otherwise noted, each person has sole voting and investment power
over the shares listed opposite his name subject to community property laws
where applicable.

(2) After giving effect to the Stock Split.

(3) If the Underwriters' over-allotment option is exercised in full, then after
the Offering the percentages of shares outstanding would be as follows:
Joseph Harris, 15.9%; Vernon Brannon, 15.9%; Clay Caroland III, less than
1%; Berthel Leasing, 1.9%; Pacific, 4.2%; Equitas, 3.3%; and all directors
and executive officers as a group, 33.0%.

(4) The address of such person is care of HLM Design at 121 West Trade Street,
Suite 2950, Charlotte, North Carolina 28202.

(5) Gives effect to currently exercisable options granted under HLM Design's
Stock Option Plan. See "Management -- Stock Option Plan."

(6) The address of such person is 100 Second Street Southeast, Cedar Rapids,
Iowa 52407.

(7) Includes shares of Common Stock which underlie currently exercisable
Warrants held by such person to be exercised immediately prior to the
effective date of the Registration Statement of which this Prospectus is a
part.

(8) The address of such person is Suite 1070, 3100 West End Avenue, Nashville,
Tennessee 37203.

(9) The address of such person is Suite 100, 2000 Glen Echo Road, Nashville,
Tennessee 37215.

DESCRIPTION OF CAPITAL STOCK

HLM Design's authorized capital stock consists of (i) 9,000,000 shares of
Common Stock, $.001 par value, and (ii) 1,000,000 shares of Preferred Stock,
$.10 par value. Upon completion of this Offering, HLM Design will have 2,075,087
outstanding shares of Common Stock (giving effect to the Stock Split and the
exercise by Pacific of its Warrants and not including Common Stock which
underlies the options granted pursuant to the Stock Option Plan) and no shares
of preferred stock.

The following summary description of HLM Design's capital stock does not
purport to be complete and is qualified in its entirety by reference to HLM
Design's Certificate of Incorporation, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Delaware
General Corporation Law (the "DGCL"). Reference is made to such exhibit and the
DGCL for a detailed description of the provisions thereof summarized below.

COMMON STOCK

The holders of validly issued and outstanding shares of Common Stock are
entitled to one vote per share of record on all matters to be voted upon by
stockholders. At a meeting of stockholders at which a quorum is present, a
majority of the votes cast decides all questions, unless the matter is one upon
which a different vote is required by express provision of law or HLM Design's
Certificate of Incorporation or Bylaws. There is no cumulative voting with
respect to the election of directors (or any other matter), but HLM Design's
Board of Directors is classified. The holders of a majority of the shares at a
meeting at which a quorum is present can, therefore, elect all of the directors
of the class then to be elected if they choose to do so, and, in such event, the
holders of the remaining shares would not be able to elect any directors of that
class.

The holders of Common Stock have no preemptive rights and have no rights to
convert their Common Stock into any other securities.

<PAGE>
Subject to the rights of holders of Preferred Stock, if any, in the event
of a liquidation, dissolution or winding up of HLM Design, holders of Common
Stock are entitled to participate equally, share for share, in all assets
remaining after payment of liabilities.

The holders of Common Stock are entitled to receive ratably such dividends
as the Board of Directors may declare out of funds legally available therefor,
when and if so declared. The payment by HLM Design of dividends, if any, rests
within the discretion of its Board of Directors and will depend upon HLM
Design's results of operations, financial condition and capital expenditure
plans, as well as other factors considered relevant by the Board of Directors.
See "Dividends."

TRANSFER AGENT AND REGISTRAR

HLM Design has appointed First Union National Bank as the transfer agent
and registrar for the Common Stock.

WARRANTS

In May 1997, September 1997 and December 1997, HLM Design issued Warrants
to purchase an aggregate of 226,874 shares of Common Stock at an exercise price
of $.01 per share to Pacific, Equitas and Berthel Leasing and two
representatives of Pacific and Equitas in connection with financing
arrangements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." By their terms,
the Pacific/Equitas Warrants will expire in July 2002 and the Berthel Warrants
will expire in September of that year; however, for a period of 30 days prior to
expiration the holder of any or all of the Warrants has the right and option to
sell to HLM Design any or all of the Warrants at a purchase price equal to the
Fair Market Value (as defined therein) of the shares of Common Stock issuable to
the holder upon exercise of the Warrant less the exercise price. The kind of
securities purchasable upon the exercise of the Warrants and the number of
shares of Common Stock purchasable upon exercise of the Warrants is subject to
adjustment upon the occurrence of certain events such as reclassification of
securities, consolidation or merger of HLM Design, subdivision or combination of
Common Stock or stock dividends. Additionally, if the indebtedness pursuant to
which the Warrants were issued is not repaid in full on or before May 30, 1999,
the number of shares of Common Stock each Warrant holder is able to purchase
will increase and will further increase on each May 30 thereafter until such
indebtedness is repaid in full. The Common Stock underlying the Berthel Warrants
and the Warrants issued to Pacific and Equitas are subject to certain
registration rights which begin in September 2000. Pursuant to the applicable
registration rights agreement, upon the request of holders of at least 25% of
Registrable Securities (as defined therein) HLM Design will, within 90 days,
effect registration under the Securities Act. Additionally, such agreements
provide Berthel Leasing, Pacific and Equitas with certain piggyback registration
rights that permit them to have their shares of Common Stock, as selling
security holders, included in any registration statements pertaining to the
registration of Common Stock for issuance by the Company or for resale by other
selling security holders. These registration rights will be limited or
restricted to the extent an underwriter of an offering, if an underwritten
offering, determines that marketing factors require a limitation of the number
of shares to be underwritten.

As of the date hereof, (i) all of the Warrants held by Berthel Leasing and
by Equitas have been exercised and the shares underlying such Warrants are
included in the currently outstanding shares reflected elsewhere in this
Prospectus, and (ii) Pacific will exercise all of its Warrants immediately prior
to the effective date of the Registration Statement of which this Prospectus is
a part. Except as the context otherwise requires, the shares underlying the
Warrants held by Pacific are included in the outstanding shares reflected
elsewhere in this Prospectus.

PREFERRED STOCK

No shares of Preferred Stock are outstanding. HLM Design's Certificate of
Incorporation authorizes the Board of Directors to issue up to 1,000,000 shares
of Preferred Stock in one or more series and to establish such designations and
such relative voting, dividend, liquidation, conversion and other rights,
preferences and limitations as the Board of Directors may determine without
further approval of the stockholders of HLM Design. The issuance of Preferred
Stock by the Board of Directors could, among other things, adversely affect the
voting power of the holders of Common Stock and, under certain circumstances,
make it more difficult for a person or group to gain control of HLM Design.

The issuance of any series of Preferred Stock, and the relative
designations, rights, preferences and limitations of such series, if and when
established, will depend upon, among other things, the future capital needs of
the Company, the then-existing market conditions and other factors that, in the
judgment of the Board of Directors, might warrant the issuance of

<PAGE>
Preferred Stock. As of the date of this Prospectus, there are no plans,
agreements or understandings for the issuance of any shares of Preferred Stock.

DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

Certain provisions of the DGCL and of HLM Design's Certificate of
Incorporation and Bylaws, summarized in the following paragraphs, may be
considered to have an antitakeover effect and may delay, deter or prevent a
tender offer, proxy contest or other takeover attempt that a stockholder might
consider to be in such stockholder's best interest, including such an attempt as
might result in payment of a premium over the market price for shares held by
stockholders.

DELAWARE ANTITAKEOVER LAW. HLM Design, a Delaware corporation, is subject
to the provisions of the DGCL, including Section 203. In general, Section 203
prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which such person became an interested
stockholder unless: (i) prior to such date, the Board of Directors approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; or (ii) upon becoming an
interested stockholder, the stockholder then owned at least 85% of the voting
stock, as defined in Section 203; or (iii) subsequent to such date, the business
combination is approved by both the Board of Directors and by holders of at
least 66 2/3% of the corporation's outstanding voting stock, excluding shares
owned by the interested stockholder. For these purposes, the term "business
combination" includes mergers, asset sales and other similar transactions with
an "interested stockholder." An "interested stockholder" is a person who,
together with affiliates and associates, owns (or, within the prior three years,
did own) 15% or more of the corporation's voting stock. Although Section 203
permits a corporation to elect not to be governed by its provisions, HLM Design
to date has not made this election.

SPECIAL MEETINGS OF STOCKHOLDERS. HLM Design's Bylaws provide that special
meetings of stockholders may be called only by the President or by the Secretary
or any Assistant Secretary at the request in writing of a majority of the Board
of Directors of HLM Design. This provision may make it more difficult for
stockholders to take action opposed by the Board of Directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. HLM Design's Bylaws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual or a special meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal executive office
of the Company, (i) in the case of an annual meeting that is called for a date
that is within 30 days before or after the anniversary date of the immediately
preceding annual meeting of stockholders, not less than 60 days nor more than 90
days prior to such anniversary date, and, (ii) in the case of an annual meeting
that is called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting, or in the case of
a special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth day following the day on which
notice of the date of the meeting was mailed or public disclosure of the date of
the meeting was made, whichever occurs first. The Bylaws also specify certain
requirements for a stockholder's notice to be in proper written form. These
provisions may preclude some stockholders from bringing matters before the
stockholders at an annual meeting or from making nominations for directors at an
annual or special meeting.

CLASSIFIED BOARD OF DIRECTORS. HLM Design's Bylaws provide for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. Classification of the Board of Directors expands the
time required to change the composition of a majority of directors and may tend
to discourage a takeover bid for HLM Design. Moreover, under Delaware Law, in
the case of a corporation having a classified board of directors, the
stockholders may remove a director only for cause. This provision, when coupled
with the provision of the Bylaws authorizing only the board of directors to fill
vacant directorships, will preclude stockholders of HLM Design from removing
incumbent directors without cause and simultaneously gaining control of the
Board of Directors by filling the vacancies with their own nominees.

<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, HLM Design will have outstanding
2,075,087 shares of Common Stock (excluding shares of Common Stock which
underlie options granted under the Stock Option Plan (115,908 shares) and
assuming no exercise of the Underwriters' over-allotment option). Of such
amount, the 1,200,000 Shares sold in this Offering will be freely transferable
and may be resold without further registration under the Securities Act, except
for any shares purchased by an "affiliate" of HLM Design (as defined below),
which shares will be subject to the resale limitations of Rule 144 under the
Securities Act ("Rule 144"). The 629,366 shares of Common Stock held by
affiliates of the Company are "restricted securities" within the meaning of Rule
144. The 361,629 shares of Common Stock, which (i) are held by non-affiliates of
the Company or (ii) which underlie (x) options granted on or before the
consummation of Offering under the Company's Stock Option Plan, and (y) the
Warrants are also "restricted securities." Such "restricted securities" may be
resold only pursuant to a registration statement under the Securities Act or
applicable exemption from registration thereunder, such as an exemption provided
by Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
for at least one year may, under certain circumstances, resell within any
three-month period, such number of shares as does not exceed the greater of one
percent of the then-outstanding shares of Common Stock or the average weekly
trading volume of Common Stock during the four calendar weeks prior to such
resale. Rule 144 also permits, under certain circumstances, the resale of shares
without any quantity limitation by a person who has satisfied a two-year holding
period and who is not, and has not been for the preceding three months, an
affiliate of HLM Design. In addition, holding periods of successive
non-affiliate owners are aggregated for purposes of determining compliance with
these one-and two-year holding period requirements.

Upon completion of this Offering, 618,375 of the 875,087 shares of Common
Stock outstanding on the date of this Prospectus and not sold in the Offering
will have been held for at least one year. The remaining 256,712 shares are
"restricted securities", and therefore may not be resold pursuant to Rule 144
upon completion of this Offering.

The availability of shares for sale or actual sales under Rule 144 and the
perception that such shares may be sold may have an adverse effect on the market
price of the Common Stock. Sales under Rule 144 also could impair the Company's
ability to market additional equity securities.

HLM Design and all directors and executive officers of HLM Design have
agreed not to offer, sell, contract to sell, or otherwise dispose of, any shares
of Common Stock or securities convertible into or exchangeable for Common Stock
for 365 days from the date of this Prospectus without the prior written consent
of the representatives of the Underwriters. Additionally, Messrs. Harris and
Brannon and Berthel Leasing have agreed to escrow Common Stock owned by each of
them pursuant to the requirements of the various state securities commissions.

<PAGE>

UNDERWRITING

Each of the underwriters named below (the "Underwriters") have severally
agreed, subject to the terms and conditions of the Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock set forth
opposite their respective names below. The nature of the obligations of the
Underwriters is such that if any of such shares are purchased, all must be
purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------------------------------------------------------------------------------------ ---------
<S> <C>
Berthel Fisher & Company Financial Services, Inc..........................................
Westport Resources Investment Services, Inc...............................................
Marion Bass Securities Corporation........................................................
---------

Total................................................................................
---------
</TABLE>

The Underwriters have advised HLM Design that they propose initially to
offer the Common Stock offered hereby to the public at the price to the public
set forth on the cover page of this Prospectus. The Underwriters may allow a
concession to selected dealers who are members of the National Association of
Securities Dealers, Inc. ("NASD") not in excess of $
per share, and the Underwriters may allow, and such dealers may reallow, to
members of the NASD a concession not in excess of $ per share. After the
public offering, the price to the public, the concession and the reallowance may
be changed by the Underwriters.

HLM Design has granted an option to the Underwriters, exercisable within 45
business days after the date of the Prospectus, to purchase up to an aggregate
of 180,000 additional shares of Common Stock at the initial price to the public,
less the underwriting discount, set forth on the cover page of this Prospectus.
The Underwriters may exercise the option only for the purpose of covering
over-allotments. To the extent that the Underwriters exercise such option, each
Underwriter will be committed, subject to certain conditions, to purchase from
HLM Design on a pro rata basis that number of additional shares of Common Stock
which is proportionate to such Underwriters' initial commitment.

HLM Design, certain stockholders and certain executive officers have
agreed, subject to certain exceptions, not to, directly or indirectly, (i) sell,
grant any option to purchase or otherwise transfer or dispose of any Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock, or file a registration statement under the Securities Act with respect to
the foregoing or (ii) enter into any swap or other agreement or transaction that
transfers, in whole or part, the economic consequence of ownership of the Common
Stock, without the prior written consent of Berthel Fisher, for a period of 365
days after the date of this Prospectus. Additionally, Messrs. Harris and Brannon
and Berthel Leasing have agreed to escrow Common Stock owned by each of them
pursuant to the requirements of the various state securities commissions.

At the request of HLM Design, the Underwriters have reserved up to 9,273
shares of the Common Stock for sale at the initial public offering price, and
otherwise on the same terms as sales pursuant to the Offering, to persons
designated by HLM Design. The number of shares of Common Stock available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares which are not so purchased will be
offered by the Underwriters to the general public on the same basis as the other
shares offered hereby.

Prior to this Offering, there has been no market for the Common Stock and
there can be no assurance that a regular trading market will develop upon the
completion of this Offering. The initial public offering price was determined by
negotiations between the Company and the Underwriters. The primary factors
considered in determining such offering price included the history of and
prospects for the Company's business and the industry in which the Company
competes, market valuation of comparable companies, market conditions for public
offerings, the prospects for future earnings of the Company, an assessment of
the Company's management, the general condition of the securities markets, the
demand for similar securities of comparable companies and other relevant
factors.

HLM Design has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act or to contribute to
payments the Underwriter may be required to make in respect thereof. Generally,
such indemnification or contribution rights relate to losses, claims, damages or
liabilities resulting from (i) untrue statements of material fact contained in
the Registration Statement or any application or other document filed to qualify
the Common Stock under "blue sky" or securities laws of any state, or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading.

<PAGE>
The Underwriters have advised HLM Design that they do not intend to confirm
sales of Common Stock offered hereby to any accounts over which they exercise
discretionary authority.

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriter and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Offering, I.E., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Underwriters may
reduce that short position by purchasing Common Stock in the open market. The
Underwriters may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.

The Underwriters may also impose a penalty bid on certain members of the
underwriting group and selling group members. This means that if an Underwriter
purchases shares of Common Stock in the open market to reduce the Underwriter's
short position or to stabilize the price of the Common Stock, they may reclaim
the amount of the selling concession from the underwriting group and selling
group members who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither HLM Design nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
HLM Design nor any of the Underwriters make any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

HLM Design has agreed to reimburse the Underwriters for actual out of
pocket expenses incurred by the Underwriters in connection with the Offering,
none of which has been paid as of the date of this Prospectus. HLM Design has
also agreed to pay all expenses in connection with qualifying the Common Stock
offered hereby for sale under the laws of such states as the Underwriters may
designate, including filing fees and fees and expenses of counsel retained for
such purposes by the Underwriters, and registering the Offering with the NASD.

In connection with this Offering, HLM Design has agreed to sell to the
Underwriters, for a price of $.01 per warrant, warrants (the "Underwriters'
Warrants") to purchase shares of Common Stock equal to 10% of the total number
of shares of Common Stock sold pursuant to this Offering, excluding shares
subject to the over-allotment option. The Underwriters' Warrants are exercisable
at a price equal to 120% of the initial public offering price ($7.20 assuming an
initial public offering price of $6.00 per share (the low point of the range set
forth on the cover of this Prospectus)) for a period of four years commencing
one year from the date of this Prospectus (the "Exercise Period").

Berthel Leasing, an affiliate of Berthel Fisher & Company Financial
Services, Inc., provided lease financing to HLMI in an aggregate principal
amount of $2.8 million under the Lease Financing and provided HLM Design with a
$0.8 million term loan for working capital purposes. More than 10% of the net
proceeds of the Offering will be received by Berthel Leasing, by reason of the
use of such proceeds to repay a portion of such borrowings. In addition, the
$0.8 million term loan constitutes more than 10% of the subordinated debt of the
Company. Accordingly, the Offering will be conducted in accordance with NASD
Conduct Rules 2710(c)(8) and 2820, which require that the public offering price
of the Common Stock be no higher than the price recommended by a Qualified
Independent Underwriter which has participated in the preparation of the
Registration Statement and performed its usual standard of due diligence with
respect thereto. Westport Resources Investment Services, Inc. will act as the
Qualified Independent Underwriter for the Offering, and the public offering
price will not be higher than the price recommended by Westport Resources
Investment Services, Inc.

LEGAL MATTERS

Parker, Poe, Adams & Bernstein L.L.P., Charlotte, North Carolina, counsel
to the Company, will render an opinion that the Shares offered hereby, when
issued and paid for in accordance with the terms of the Underwriting Agreement,
will be duly authorized, validly issued, fully paid and nonassessable. Bradley &
Riley, P.C., Cedar Rapids, Iowa, has served as counsel to the Underwriters in
connection with this Offering.

<PAGE>
EXPERTS

The audited financial statements of HLMI (Predecessor) as of April 25, 1997
and for each of the years in the three-year period ended April 25, 1997, and the
audited financial statements of HLM Design, Inc. as of April 25, 1997 and from
inception, March 6, 1997, to the period ended April 25, 1997, included in this
Prospectus and elsewhere in the Registration Statement of which this Prospectus
is a part, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein and elsewhere in the Registration
Statement, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-1 under the Securities Act with
respect to the Shares offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Shares offered hereby, reference is made to the Registration Statement,
including the exhibits and schedules filed as part thereof. Statements contained
in this Prospectus as to the contents of any contract or any other documents are
not necessarily complete, and, in each such instance, reference is made to the
copy of the contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
thereto. The Registration Statement, together with its exhibits and schedules,
may be inspected at the Public Reference Section of the SEC at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
SEC located at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any part of such materials may be obtained from
any such office upon payment of the fees prescribed by the SEC. Such information
may also be inspected and copied at the office of Nasdaq at 1735 K Street, NW
Washington, DC 20006-1500. The Commission also maintains a Website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.

<PAGE>
INDEX TO FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
HLM DESIGN, INC. AND AFFILIATES:
INDEPENDENT AUDITORS' REPORT......................................................................................... F-2
FINANCIAL STATEMENTS:
Balance Sheet at April 25, 1997 and unaudited Combined Balance Sheet at January 30, 1998.......................... F-3
Statements of Operations (unaudited) for the nine months ended January 24, 1997 (Predecessor), the one month ended
May 30, 1997 (Predecessor) and the Combined Statements of Income for the nine months ended January 30, 1998 (HLM
Design Inc.)..................................................................................................... F-4
Statements of Stockholders' Equity for the period ended April 25, 1997 and (unaudited) Combined statement of
stockholder's equity for the nine months ended January 30, 1998.................................................. F-5
Statements of Cash Flows (unaudited) for the nine months ended January 24, 1997 (unaudited) (Predecessor), the one
month ended May 30, 1997 (Predecessor) and Combined Statements of Cash Flows for the nine months ended January
30, 1998 (HLM Design Inc.)....................................................................................... F-6
Notes to Financial Statements..................................................................................... F-7

HANSEN LIND MEYER, INC. ("HLMI")
INDEPENDENT AUDITORS' REPORT......................................................................................... F-15
FINANCIAL STATEMENTS:
Balance Sheets at April 26, 1996 and April 25, 1997............................................................... F-16
Statements of Operations for the years ended April 30, 1995, April 26, 1996 and April 25, 1997.................... F-17
Statements of Stockholders' Equity for the years ended April 30, 1995, April 26, 1996 and April 25, 1997.......... F-18
Statements of Cash Flows for the years ended April 30, 1995, April 26, 1996 and April 25, 1997.................... F-19
Notes to Financial Statements..................................................................................... F-20
</TABLE>

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS
HLM DESIGN, INC.
Charlotte, North Carolina

We have audited the accompanying balance sheet of HLM Design, Inc. (the
"Company") as of April 25, 1997, and the related statements of stockholders'
equity, for the period from inception March 6, 1997 to April 25, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of April 25,
1997, and the changes in stockholders equity for the period from inception March
6, 1997 to April 25, 1997 in conformity with generally accepted accounting
principles.

DELOITTE & TOUCHE LLP
November 11, 1997 (January 30, 1998, February 13, 1998 and February 27, 1998 as
to the last paragraph in Note 1)
Charlotte, North Carolina

F-2

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

BALANCE SHEETS

APRIL 25, 1997 AND JANUARY 30, 1998

<TABLE>
<CAPTION>
HLM
DESIGN COMBINED
APRIL 25, JANUARY 30,
1997 1998
--------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash.............................................................................................. $ 2,771
Trade and other receivables, less allowance for doubtful accounts of $150,000 at January 30,
1998........................................................................................... 6,338,342
Costs and estimated earnings in excess of billings on uncompleted projects (Note 3)............... 5,471,799
Prepaid expenses.................................................................................. 591,819
-----------
Total current assets......................................................................... 12,404,731
-----------
OTHER ASSETS:
Deferred income taxes (Note 8).................................................................... 562,821
Goodwill, less amortization of $114,549 at January 30, 1998 (Note 2).............................. 2,467,513
Other noncurrent assets........................................................................... 774,950
-----------
Total other assets........................................................................... 3,805,284
-----------
PROPERTY AND EQUIPMENT:
Leasehold improvements............................................................................ 701,119
Furniture and fixtures............................................................................ 1,560,298
-----------
Total property and equipment................................................................. 2,261,417
-----------
Less accumulated depreciation..................................................................... (427,877)
-----------
Property and equipment, net.................................................................. 1,833,540
-----------
TOTAL ASSETS........................................................................................ $18,043,555
===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 4)............................................................................ $ 2,250,000
Accounts payable.................................................................................. 3,547,171
Accrued expenses.................................................................................. 1,444,022
Income taxes payable.............................................................................. 19,353
Billings in excess of costs and estimated earnings on uncompleted projects (Note 3)............... 3,188,791
Deferred income taxes (Note 8).................................................................... 1,644,953
Current maturities of long-term debt (Note 4)..................................................... 743,311
-----------
Total current liabilities.................................................................... 12,837,601
-----------
LONG-TERM DEBT (Note 4)............................................................................. 4,357,057
-----------
TOTAL LIABILITIES................................................................................... 17,194,658
-----------
COMMITMENTS AND CONTINGENCIES (Note 5, 6)
WARRANTS OUTSTANDING (Note 4)....................................................................... 200,068
-----------
STOCKHOLDERS' EQUITY:
HLM Design, Inc. Capital Stock
Common, $.001 par value, voting, authorized 9,000,000 shares; issued 618,375 and 702,834,
respectively.................................................................................. 618 703
Preferred, $.10 par value, voting, authorized 1,000,000, no shares outstanding.................
HLMNC and HLMO, Capital Stock, common, $.01 par value, authorized, outstanding 600................ 6
Hansen Lind Meyer Inc. Capital stock, common, $.01 par value:
Class A, voting, authorized 2,000,000 shares; issued 200....................................... 2
Class B, nonvoting, authorized 1,000,000 shares, no shares outstanding......................... -- --
Additional paid in capital........................................................................ 2,382 101,031
Retained earnings................................................................................. 556,611
Stock Subscription Receivable..................................................................... (3,000) (9,524)
--------- -----------
Total stockholders' equity.......................................................................... 648,829
--------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................................................... $ $18,043,555
========= ===========

</TABLE>

See notes to financial statements.

F-3

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

STATEMENTS OF OPERATIONS

ONE MONTH ENDED MAY 30, 1997 (PREDECESSOR) AND NINE MONTHS ENDED
JANUARY 24, 1997 (PREDECESSOR) AND JANUARY 30, 1998 (COMBINED)

<TABLE>
<CAPTION>
(HLM
(PREDECESSOR (PREDECESSOR DESIGN)
COMPANY) COMPANY) COMBINED
----------- ---------- -----------
NINE MONTHS ONE MONTH NINE MONTHS
ENDED ENDED ENDED
----------- ---------- -----------
JANUARY 24, MAY 30, JANUARY 30,
1997 1997 1998
----------- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
REVENUES (Note 1):
Fee income..................................................................... $18,439,931 $1,998,611 $16,160,923
Reimbursable income............................................................ 1,002,349 234,425 5,382,493
----------- ---------- -----------
Total revenues............................................................ 19,442,280 2,233,036 21,543,416
----------- ---------- -----------
CONSULTANT EXPENSES.............................................................. 3,573,159 192,862 3,802,734
----------- ---------- -----------
PROJECT EXPENSES:
Direct expenses................................................................ 522,063 35,404 744,579
Reimbursable expenses.......................................................... 877,693 68,617 630,190
----------- ---------- -----------
Total project expenses.................................................... 1,399,756 104,021 1,374,769
----------- ---------- -----------
NET PRODUCTION INCOME............................................................ 14,469,365 1,936,153 16,365,913
DIRECT LABOR..................................................................... 4,944,712 602,096 4,802,078
INDIRECT EXPENSES................................................................ 9,848,192 1,172,712 9,744,540
----------- ---------- -----------
OPERATING INCOME (LOSS).......................................................... (323,539) 161,345 1,819,295
----------- ---------- -----------
OTHER INCOME (EXPENSE):
Interest income................................................................ 3,575 54 1,888
Interest expense............................................................... (283,602) (37,005) (750,509)
----------- ---------- -----------
Total other income (expense), net......................................... (280,027) (36,951) (748,621)
----------- ---------- -----------
INCOME (LOSS) BEFORE TAXES....................................................... (603,566) 124,394 1,070,674
INCOME TAXES (Note 7):
Current tax expense (benefit).................................................. (23,713) (11,907) 58,000
Deferred tax expense (benefit)................................................. (119,804) 54,907 456,063
----------- ---------- -----------
Total income tax expense (benefit)........................................ (143,517) 43,000 514,063
----------- ---------- -----------
NET INCOME (LOSS)................................................................ $ (460,049) $ 81,394 $ 556,611
=========== ========== ===========

PRO FORMA NET INCOME PER SHARE (NOTE 1).......................................... $ .65
===========

PRO FORMA NUMBER OF SHARES USED TO COMPUTE PER SHARE DATA (NOTE 1)............... 859,973
===========

</TABLE>

See notes to financial statements.

F-4

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

STATEMENTS OF STOCKHOLDERS' EQUITY

INCEPTION MARCH 6, 1997 TO APRIL 25, 1997 AND THE
NINE MONTHS ENDED JANUARY 30, 1998 (COMBINED)

<TABLE>
<CAPTION>
COMMON STOCK STOCK TOTAL
------------------ ADDITIONAL RETAINED SUBSCRIPTION STOCKHOLDERS'
SHARES AMOUNT PAID-IN-CAPITAL EARNINGS RECEIVABLE EQUITY
-------- ------ --------------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ORGANIZATION OF HLM DESIGN,
MARCH 6, 1997................................ $ $ $ $ $
Issuance of HLM Design, Inc. shares.......... 618,375 618 2,382 (3,000)
-------- ------ --------------- ------------
BALANCE, APRIL 25, 1997........................ 618,375 618 2,382 (3,000)
-------- ------ --------------- -------- ------------ -------------
Equity of Combining Entities May 31, 1997
(UNAUDITED):
HLMI.................................... 200 2 2
HLMNC................................... 300 3 297 (300)
HLMO.................................... 300 3 297 (300)
Stock Issuance - HLM Design (unaudited)...... 84,459 85 98,055 (5,924) 92,216
Net Income -- Combined (unaudited)........... 556,611 556,611
-------- ------ --------------- -------- ------------ -------------
BALANCE JANUARY 30, 1998 -- COMBINED
(UNAUDITED).................................. 703,634 $ 711 $ 101,031 $556,611 $ (9,524) $ 648,829
======== ====== =============== ======== ============ -------------

</TABLE>

See notes to financial statements.

F-5

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

STATEMENTS OF CASH FLOWS

ONE MONTH ENDED MAY 30, 1997 (PREDECESSOR),
AND THE NINE MONTHS ENDED JANUARY 24, 1997 (PREDECESSOR) AND JANUARY 30, 1998
(COMBINED)

<TABLE>
<CAPTION>
(PREDECESSOR COMPANY) (HLM
-------------------------- DESIGN)
COMBINED
NINE MONTHS ONE MONTH NINE MONTHS
ENDED ENDED ENDED
----------- ----------- -----------
JANUARY 29, MAY 30, JANUARY 30,
1997 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................................... $ (460,049) $ 81,394 $ 556,611
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation................................................................. 431,073 55,544 247,463
Amortization of goodwill..................................................... 77,589 9,571 114,549
Amortization of deferred loan fees........................................... 108,526
Deferred rent................................................................ 4,249
Deferred income taxes........................................................ (110,228) 54,907 (17,844)
Changes in certain working capital items:
Increase in trade and other receivables.................................... (326,971) (1,500,472) (622,088)
Increase in costs and estimated earnings compared to billings on
uncompleted contracts, net................................................ 1,162,905 1,199,028 38,310
(Increase) decrease in refundable income taxes............................. (42,465) (11,157) 504,400
Increase in prepaid expenses............................................... (545,813) (10,427) (333,837)
(Increase) decrease in other assets........................................ 352,700 (1,152) (170,668)
Increase (decrease) in accounts payable.................................... (808,446) 233,659 (913,522)
Increase (decrease) in accrued expenses.................................... 718,998 (278,500) 643,475
Increase (decrease) in other non-current liabilities....................... (15,000) 15,000
----------- ----------- -----------
Net cash (used in) provided by operating activities..................... 438,542 (152,605) 155,375
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............................................. (600,377) (2,023) (549,848)
Note receivable from officer.................................................... (130,000) 30,000
----------- ----------- -----------
Net cash used in investing activities................................... (730,377) (2,023) (519,848)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on line of credit....................................................... 400,000 (2,360,000)
Proceeds from long-term borrowings.............................................. 100,000 2,800,000 6,712,307
Payments on long-term borrowings................................................ (216,974) (285,372) (3,305,100)
Payment of deferred loan fees................................................... (56,300)
Payment on ESOP buyback......................................................... (3,221,824)
Proceeds from issuance of notes payable to shareholders......................... 182,308
Proceeds from the issuance of warrants.......................................... 24,757
Proceeds from exercise of warrants.............................................. (135)
Proceeds from issuance of common stock.......................................... 28,910
----------- ----------- -----------
Net cash provided by financing activities............................... 283,026 154,628 364,923
----------- ----------- -----------
INCREASE (DECREASE) in Cash....................................................... (8,809) 450
CASH BALANCE:
Beginning of year............................................................... 11,130 2,321 2,321
----------- ----------- -----------
End of year..................................................................... $ 2,321 $ 2,321 $ 2,771
============ =========== ===========

SUPPLEMENTAL DISCLOSURES:
Cash paid (received) during the year for:
Interest..................................................................... $ 280,042 $ 6,827 $ 584,695
Income tax payments (refunds)................................................ $ 18,752 $ (750) $ 21,244
Noncash investing and financing transactions:
Retirement of common stock through issuance of note payable.................. $ 36,047
Reduction of ESOP debt....................................................... $ 336,231
Issuance of warrants to certain debtholders.................................. $ 238,752
</TABLE>

See notes to financial statements.

F-6

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS

INCEPTION MARCH 6, 1997 TO APRIL 25, 1997 AND THE NINE MONTHS ENDED JANUARY 24,
1997
(PREDECESSOR -- UNAUDITED), THE ONE MONTH PERIOD ENDED MAY 30, 1997
(PREDECESSOR -- UNAUDITED) AND THE NINE MONTHS ENDED JANUARY 30, 1998
COMBINED -- UNAUDITED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- HLM Design, Inc. ("Design") is a Management
Services Company incorporated March 6, 1997 for the purpose of providing
management and services to architectural, engineering and planning design
entities under long term management services agreement.

In May 1997, Design executed long term management and services agreements
with Hansen Lind Meyer Inc. ("HLMI"), HLM of North Carolina, P.C. ("HLMNC") and
HLM of Oregon, Architecture and Planning, P.C. ("HLMO"). HLMNC and HLMO,
organized in 1996 and have had no operations as of January 30, 1998 (HLMI, HLMNC
and HLMO are referred to herein collectively as "AEP"). Design and AEP are
referred to herein collectively as "the Company". In May 1997, HLMI entered into
a merger agreement with BBH Corp., a newly formed entity controlled by the
principal shareholders of Design, whereby Design loaned BBH Corp $3.2 million
which BBH Corp utilized to buy common stock in HLMI. Under the merger agreement,
BBH Corp merged into HLMI with HLMI being the surviving entity. As a part of the
merger agreement, HLMI redeemed previously outstanding common stock of HLMI,
from its' employee Stock Ownership Plan ("ESOP") and other shareholders, except
the shareholders of BBH Corp. the shares redeemed represented over 90% of the
pre-merger voting interest. As a result of the change in control, the assets and
liabilities of HLMI were fair valued using purchase accounting principles and
the excess of the fair value over the identified tangible net assets was
reflected as goodwill.

The management and service agreements are for 40 years. HLM Design is the
sole and exclusive manager and administrator of all of the Managed Firm's
day-to-day business functions including financial planning, facilities,
equipment and supplies, and management and administrative services (bookkeeping
and accounts, general administration services, contract negotiation and
administration for all non-architectural and non-engineering aspects of all
agreements (pertaining to the provision of architectural and engineering
services by Managed Firms to third parties), personnel, security and
maintenance, architectural and engineering recruiting and training, insurance,
issuance of debt and capital stock, billing and collections). For these
services, HLM Design receives all but 1% of the firm's positive cash flow (as
determined in accordance with generally accepted accounting principles applied
on a consistent basis) following the payment by the Managed Firm of all such
firm's expenses.

In addition, as a result of the consummation of the Management and Services
Agreements and the stockholders' agreements with the AEP's, the financial
statements of Design and the managed firm's are presented on a Combined basis
from May 31, 1997.

FINANCIAL STATEMENT PRESENTATION

The financial statements included herein reflect the following:

(Bullet) HLM Design, Inc. as of April 25, 1997, HLM Design, Inc. had no
operations or cash flows from March 6, 1997, date of inception, to
April 25, 1997

(Bullet) Hansen Lind Meyer Inc. (Predecessor Company) for the one month
ended May 30, 1997 (unaudited) and for the nine months ended
January 24, 1997 (unaudited)

(Bullet) HLM Design, Inc. combined with HLMI, HLMNC and HLMO, all from May
31, 1997 the effective date of the Management Services Agreements
a shareholders agreements, as of January 30, 1998 and for the nine
months then ended (unaudited).

HLMI provides architectural and engineering consulting and design services,
which constitutes one business segment nationally from offices in Iowa City,
Chicago, Denver, Orlando, Atlanta, Bethesda, Philadelphia, Portland and
Sacramento.

PROPOSED STOCK OFFERING -- HLM Design intends to undertake an initial
public offering of HLM Design's Common Stock (the "Offering"). In connection
with the anticipated Offering, HLM Design intends to issue shares of its common
stock.

F-7

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
FISCAL YEAR-END POLICY -- The Company uses a 52-53 week fiscal year for
accounting purposes which defines the fiscal year-end date as the last Friday in
April. Thus, the current fiscal year-end is April 25, 1997.

OPERATING CYCLE -- Assets and liabilities related to long-term contracts
are included in current assets and current liabilities in the accompanying
balance sheets, as they will be liquidated in the normal course of contract
completion, although this may require more than one year.

REVENUE RECOGNITION -- Revenue is recognized, at estimated collectible
amounts, in the period the services are performed. More specifically, the
Company recognizes revenues either on the percentage-of-completion method
measured by the percentage of cost incurred to date to estimated total cost for
each contract, or based upon a fixed hourly rate. Consultant expenses, project
expenses, direct labor and indirect expenses are charged to expense as incurred.
Provisions for estimated losses on uncompleted projects are made in the period
in which such losses are first subject to reasonable estimation. Unanticipated
changes in project performance, project conditions and estimated profitability
may result in revisions to costs and income and are recognized in the period in
which the revisions are determined.

The asset "costs and estimated earnings in excess of billings on
uncompleted projects" represents revenues recognized in excess of amounts
billed. The liability "billings in excess of costs and estimated earnings on
uncompleted projects" represents billings in excess of revenues recognized.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The most significant estimate impacting the accompanying financial statements
relates to revenue recognition.

PROPERTY AND EQUIPMENT -- Leasehold improvements and equipment are stated
at cost. Depreciation is computed using the double-declining balance or
straight-line method over the estimated useful lives of the assets or the lease
term, including anticipated renewals. The estimated useful lives are as follows:

<TABLE>
<CAPTION>
PREDECESSOR COMBINED
----------------------------- -----------------------------
<S> <C> <C>
Computer equipment and
software..................... 5 years 5 years
Furniture...................... 7 years 5 years
Lease term, not to exceed Lease term, not to exceed
Leasehold improvements......... the useful life of the asset the useful life of the asset
</TABLE>

GOODWILL -- Goodwill represents the excess of purchase price over the
estimated fair value of the net assets acquired (HLMI) and is being amortized
over a fifteen-year period (Combined) and over a four year period for
predecessor acquisition of MPB Architects.

DEFERRED INCOME TAXES -- Deferred income tax assets and liabilities are
calculated based upon differences between the financial statement and tax basis
of assets and liabilities that will result in taxable or deductible amounts in
the future. Such deferred income tax asset or liability computations are based
on enacted tax laws and rates applicable to periods in which the differences are
expected to affect taxable income.

FINANCIAL INSTRUMENTS -- The carrying amount of cash, accounts receivable,
accounts payable and accrued liabilities approximates fair value because of the
short maturities of these instruments. The Company's bank borrowings approximate
fair value because their interest rates are based on variable reference rates.

PREFERRED STOCK -- HLM Design's Certificate of Incorporation authorizes the
Board of Directors of HLM Design to issue 1,000,000 shares of preferred stock
with such designations, rights and preferences as may be determined from time to
time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely effect the
voting power or other rights of the holders of HLM Design's Common Stock. As of
January 30, 1998 there were no preferred shares outstanding.

F-8

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
STOCK SUBSCRIPTIONS RECEIVABLE -- The amount due from shareholders for
outstanding Common Stock.

NEW ACCOUNTING STANDARD -- Effective April 27, 1996, HLMI adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
during the year. It requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Management has reviewed all long-lived assets and
intangible assets as of January 24, 1997 and January 30, 1998 and believes that
the carrying amounts reported in the balance sheet will be recovered over the
remaining useful lives of those assets.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 128, "Earnings Per Share." This Statement specifies
the computation, presentation and disclosure requirements for earnings per
share. It will be effective for periods ending December 15, 1997. The Company
believes that the adoption of such statement would not result in earnings
materially different than pro forma earnings per share presented in accompanying
statements of income.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
Standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for the Company's fiscal year ending May 1, 1998,
and the Company does not intend to adopt this Statement prior to the effective
date.

On November 20, 1997, EITF 97-2, "Application of FASB Statement No. 94,
CONSOLIDATION OF ALL MAJORITY-OWNED SUBSIDIARIES, and APB Opinion No. 16,
BUSINESS COMBINATIONS, to Physician Practice Management Entities and Certain
Other Entities with Contractual Management Arrangements", was issued which
reached a consensus that arrangements similar to HLM Design and the Managed
Firms should be accounted for on a consolidated basis. The Company intends to
reflect this change prospectively in the fiscal year ended May 1, 1998 financial
statements. If the change had been effected for the nine months ended January
30, 1998, the effect would have been a reduction to Stockholder's Equity by
approximately $10,511, an increase in minority interest by approximately $10,511
and a decrease in Net Income of approximately $10,509.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the nine months ended January 24, 1997 (Predecessor) and January
30, 1998 (Combined) has been prepared on substantially the same basis as the
audited financial statements, and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
information set forth therein. The results for interim periods are not
necessarily indicative of the results to be expected for the entire fiscal year.

STOCK SPLIT AND PRO FORMA NET INCOME PER SHARE -- All share and per share
amounts included in the accompanying financial statements for all periods
presented have been adjusted to reflect an 11 for 1 stock split of the HLM
Design Common Stock effective as of January 30, 1998 and a 1.75 for 1 stock
split effective as of February 13, 1998, and a reverse stock split of .66 for 1
effective as of February 27, 1998 for an effective 12.75 for 1 stock split
("Stock Split"). In addition, there was a reduction in Common Stock par value to
$.001 effective as of February 13, 1998. Pro forma net income per share in the
accompanying financial statements has been prepared based upon the shares
outstanding without giving effect to the issuance of common stock related to the
offering.

F-9

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

2. BUSINESS ACQUISITION

Effective May 23, 1997, HLMI sold 50,000 newly issued shares to BBH Corp.,
a Delaware corporation, for approximately $3.2 million. On May 23, 1997, BBH
Corp. merged into HLMI and each BBH Corp. share outstanding at the time of
merger was converted into one share of HLMI's stock. All HLMI shares held by BBH
Corp. were canceled and retired.

Effective as of May 31, 1997, HLMI repurchased all 46,858 shares from the
ESOP for $64 per share as part of a merger agreement with BBH Corp. As a result
of this transaction, the ESOP will effectively cease once the proceeds of the
sale have been distributed by the Trustee to the ESOP's participants following
IRS approval of the ESOP's termination.

The total purchase price as well as acquisition costs has been allocated to
the assets and liabilities acquired at their estimated fair market value at
acquisition date as follows:

<TABLE>
<S> <C>
Accounts receivable........................................................ $ 5,716,254
Property and equipment..................................................... 1,531,155
Other assets............................................................... 6,320,087
Liabilities assumed........................................................ (12,761,346)
Goodwill................................................................... 2,573,867
-----------
Total...................................................................... $ 3,380,017
===========

</TABLE>

The following unaudited pro forma financial data is presented as if the
transaction had occured at the beginning of the respective nine month periods.

<TABLE>
<CAPTION>
9 MONTHS ENDED JANUARY 30,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Revenues................................................... $19,442,280 $23,776,453
=========== ===========

Net Income (loss).......................................... $ (397,590) $ 617,655
============ ===========

</TABLE>

The pro forma information presented above is not necessarily indicative of
the operating results that would have occurred had the transaction occurred at
the beginning of the respective nine month periods. These results are also not
necessarily indicative of the results of future operations.

3. CONTRACTS IN PROGRESS

Information relative to contracts in progress at January 30, 1998 is as
follows:

<TABLE>
<CAPTION>
JANAURY 30,
1998
-----------
<S> <C>
Costs incurred on uncompleted projects (excluding overhead).................................................... $35,988,413
Estimated earnings thereon..................................................................................... 38,170,640
-----------
Total.......................................................................................................... 74,159,053
Less billings to date.......................................................................................... 71,876,045
-----------
Net underbillings.............................................................................................. $ 2,283,008
===========

</TABLE>

Net underbillings are included in the accompanying balance sheet as
follows:

<TABLE>
<CAPTION>
JANUARY 30,
1998
-----------
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted projects......................................................................................... $ 5,471,799
Billings in excess of costs and estimated earnings on
uncompleted projects......................................................................................... (3,188,791)
-----------
Net underbillings.............................................................................................. $ 2,283,008
===========

</TABLE>

F-10

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

4. FINANCING ARRANGEMENTS

A summary of notes payable at January 30, 1998 is as follows:

In September 1996, the Company entered into a financing facility with First
Charter National Bank which provides a line of credit of up to $500,000.
Interest is charged at the bank's prime rate plus 1.5% and principal payments
are to be made at the Company's discretion. The loan has an annual maturity date
which is subject to review.

In May 1997, the Company entered into a financing facility with First
Charter National Bank which provides a line of credit of up to $1,000,000.
Interest is charged at the bank's prime rate plus 1.5% and principal payments
are to be made at the Company's discretion. The loan has maturity date of May
1998.

In September 1997, the Company entered into debt agreements with Berthel
Fisher, a planned Underwriter of the Offering, of $250,000 and $500,000.
Interest is charged at 12%, and monthly interest payments are due through May 1,
1998. The final payment for all accrued interest and principal is due on May 1,
1998.

A summary of long-term debt at January 30, 1998 is as follows:

<TABLE>
<CAPTION>
1/30/98
----------
<S> <C>
Notes payable to two key employees of the Company at 15%, with a final payment due December 31, 1997 in full.... $ 125,000
Notes payable to a former stockholder, due in annual payments of $49,522, plus interest at the prime interest
rate of Chase Manhattan Bank as of the date each installment is due (8.25% at April 25, 1997 and April 26,
1996); collateralized by 3,088 shares of the Company's unissued common stock, with a final payment due April
2000.......................................................................................................... 148,567
Notes payable to former stockholders, due in installments plus interest at prime plus 1% at various dates to
October 1999.................................................................................................. 13,594
Notes payable, MPB Architects, due in annual payments, including interest at a rate of 10.5%, with a final
payment due April 1, 1998..................................................................................... 114,850
Notes payable to Pacific Capital/Equitas, payable June 1, 2002 including interest of 13.5% due in monthly
payments...................................................................................................... 1,980,000
Notes payable to shareholders at 6% with final payment due at various dates to August 2002...................... 182,308
Lease financing with Berthel Fisher, due in monthly payments of $64,501, including interest at 14.07%, with
final lease and interest payments made on 4/30/2002........................................................... 2,536,049
----------
Total long-term debt............................................................................................ 5,100,368
----------
Less current maturities (based on refinanced terms)............................................................. 743,311
----------
Long-term portion............................................................................................... $4,357,057
==========

</TABLE>

In May 1997 HLMI entered into a financing arrangement, in the form of a
capital lease agreement, with Berthel Fisher Leasing, a subsidiary of Berthel
Fisher, the proposed underwriter, for $2.8 million. The substance of such
agreement is a financing arrangement and has been presented as such in the
financial statements.

Substantially all assets are pledged under lending agreements.

Under certain of the lending arrangements the company is restricted from
paying cash dividends. Certain of the financing agreements contain debt service
coverage ratios. As of January 30, 1998 the Company was in compliance with such
covenants.

Repayment of the various financing agreements are as follows:

<TABLE>
<S> <C>
Three months ended May 1, 1998.................................. $ 401,675
Fiscal 1999..................................................... 517,255
Fiscal 2000..................................................... 579,679
Fiscal 2001..................................................... 976,438
Fiscal 2002..................................................... 2,463,660
Thereafter...................................................... 161,661
----------
Total......................................................... $5,100,368
==========

</TABLE>

F-11

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

4. FINANCING ARRANGEMENTS -- Continued

In May 1997, warrants to purchase 14,372 shares of common stock (183,244
shares after giving effect to the Stock Split) were attached to the notes issued
to Pacific Capital and Equitas. In addition, warrants to purchase 3,422 shares
of common stock (43,630 shares after giving effect to the Stock Split) were
attached to the notes issued to Berthel Fisher in September 1997 and in December
1997. Each warrant allows holders to purchase a share of stock for $.01 a share
for a five year period. At January 30, 1998, all of the warrants held by Berthel
Fisher were exercised. All other warrants issued with debt were outstanding at
January 30, 1998.

In the event that the indebtedness owed by HLM Design to the Holder
pursuant to that Note issued to Holder from HLM Design is not repaid in full on
or before the two year anniversary of the issuance then the number of shares of
HLM Design's Common Stock that may be purchased by the Holder of this Warrant
shall increase by a predetermined amount on each annual anniversary thereafter,
until the indebtedness is paid in full.

HLM Design issued to the Holders the right and option to sell to HLM Design
this warrant for a period of 30 days immediately prior to the expiration at a
purchase price equal to the fair market value of the shares of common stock
issuable to the Holder upon exercise of this warrant less the exercise price.

The Company obtained, as of May 1997, a valuation of the Company as a basis
for assigning value to the warrants. The portion of such determined value in
excess of the amounts paid for the warrants was $238,753 and has been reflected
as deferred financing fees and is being amortized over the respective loan terms
using an effective yield method.

See Note 9 for discussion of warrant activity subsequent to January 30,
1998.

5. LEASE COMMITMENTS

The total minimum rental commitment under non-cancellable operating leases
at January 30, 1998, which has been reduced by minimum rentals to be received
under subleases, are as follows:

<TABLE>
<S> <C>
3 months ended May 1, 1998............................................................. $ 531,441
Fiscal 1999............................................................................ 1,960,201
Fiscal 2000............................................................................ 1,939,163
Fiscal 2001............................................................................ 1,852,952
Fiscal 2002............................................................................ 1,714,856
Thereafter............................................................................. 6,539,818
-----------
Total $14,538,431
===========

</TABLE>

6. CONTINGENCIES

The Company is involved in various disputes and legal actions related to
contract operations. In the opinion of Company management, the ultimate
resolution of these actions will not have a material effect on the Company's
financial position or future results of operations.

7. RELATED PARTY TRANSACTIONS

During the nine months ended January 30, 1998, the Company incurred $22,911
in financing advisory fees related to debt financings, for services provided by
a director. Such director resigned effective October 1997.

See Note 4 for related party transactions with respect to debt financing.

8. INCOME TAXES

The provision for income taxes is as follows:

F-12

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

8. INCOME TAXES -- Continued

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
JANUARY 24, JANUARY 30,
1997 1998
------------ -----------
<S> <C> <C>
Current:
Federal................................................................ $ (20,749) $ 50,750
State.................................................................. (2,964) 7,250
Deferred................................................................. (119,804) 456,063
------------ -----------
Provision for Income Taxes............................................... $ (143,517) $ 514,063
============ ===========

</TABLE>

The reconciliation of the statutory federal income tax rate with the
Company's federal and state overall effective income rate is as follows:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
JANUARY 24, JANUARY 30,
1997 1998
----------- -----------
<S> <C> <C>
Statutory federal rate...................................................... (35.0)% 35.0%
State Income Taxes, net of federal benefit.................................. (3.3) 3.3
Penalties................................................................... 9.8 2.7
Meals and Entertainment..................................................... 4.6 2.7
Other....................................................................... 0.1 4.3
----------- -----------
Effective Tax Rates....................................................... (23.8)% 48.0%
=========== ===========

</TABLE>

The tax effect of temporary differences giving rise to deferred income tax
assets and liabilities as of January 30, 1998 is as follows:

<TABLE>
<CAPTION>
JANUARY 30,
1998
-----------
<S> <C>
Deferred income tax liabilities -- difference between the accrual basis and cash basis
of accounting related to certain assets and liabilities.............................. $(1,644,953)
-----------
Deferred income tax assets:
Contribution carryforwards........................................................... 46,410
Property and equipment............................................................... 257,598
Net operating loss carryforward...................................................... 258,812
-----------
Total deferred income tax assets....................................................... 562,820
-----------
Deferred income tax liabilities, net................................................... $(1,082,133)
===========

</TABLE>

Management believes it is probable that the Company will realize the tax
benefits of these deductible differences that were available as of January 30,
1998.

At January 30, 1998, the Company has federal net operating loss
carryforwards of approximately $677,000 expiring in various amounts beginning in
2012; however, net operating loss carryforwards are subject to restriction under
Section 382 and the separate return limitation year rules of the Internal
Revenue Code due to the merger transaction.

HLM Design, Inc. and its Affiliates will file separate company federal and
state income tax returns.

9. SUBSEQUENT EVENTS (UNAUDITED)

In February 1998, 3,422 warrants were exercised resulting in the issuance
of 3,422 shares of common stock (43,630 shares after giving effect to the stock
split).

F-13

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

10. HLM DESIGN FINANCIAL INFORMATION (UNAUDITED)

HLM Design's balance sheet and income statement for the nine months ended
January 30, 1998 are as follows:

<TABLE>
<S> <C>
BALANCE SHEET
Current assets........................................................................... 42,561
---------
Non-current assets....................................................................... 5,141,018
---------
Total assets............................................................................. 5,183,579
=========

Current liabilities...................................................................... 2,182,886
---------
Non-current liabilities.................................................................. 2,162,307
---------
Total liabilities........................................................................ 4,345,193
=========

Total stockholders equity................................................................ 838,386
---------
Total liabilities & S/E.................................................................. 5,183,579
=========

INCOME STATEMENT
Revenues................................................................................. 1,034,008
Net interest, tax and other expense...................................................... 487,906
---------
Net income............................................................................... 546,102
=========

</TABLE>

F-14

<PAGE>
INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS
HANSEN LIND MEYER INC.
Charlotte, North Carolina

We have audited the accompanying balance sheets of Hansen Lind Meyer Inc.
("HLMI") as of April 25, 1997 and April 26, 1996, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended April 25, 1997. These financial statements are the
responsibility of HLMI's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of HLMI as of April 25, 1997
and April 26, 1996, and the results of its operations and its cash flows for
each of the three years in the period ended April 25, 1997 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP
October 31, 1997
Charlotte, North Carolina

F-15

<PAGE>
HLMI

BALANCE SHEETS

APRIL 26, 1996 AND APRIL 25, 1997

<TABLE>
<CAPTION>
APRIL 26, APRIL 25,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash......................................................................................... $ 11,130 $ 2,321
Trade and other receivables, less allowance for doubtful accounts of $399,000 at April 26,
1996; $111,000 at April 25, 1997.......................................................... 5,559,290 4,215,782
Costs and estimated earnings in excess of billings on uncompleted projects (Note 3).......... 3,512,711 5,181,432
Refundable income taxes...................................................................... 141,521 59,891
Prepaid expenses............................................................................. 106,250 205,381
----------- -----------
Total current assets.................................................................... 9,330,902 9,664,807
----------- -----------
OTHER ASSETS:
Deferred income taxes (Note 8)............................................................... 492,505 464,694
Goodwill, less amortization of $93,193 at April 26, 1996; $196,646 at April 25, 1997......... 345,807 242,354
Other noncurrent assets...................................................................... 352,700 511,972
----------- -----------
Total other assets...................................................................... 1,191,012 1,219,020
----------- -----------
PROPERTY AND EQUIPMENT:
Leasehold improvements....................................................................... 2,153,312 2,307,040
Furniture and fixtures....................................................................... 6,953,360 7,365,909
Automobiles.................................................................................. 16,813 16,813
Construction in progress..................................................................... 28,309
----------- -----------
Total property and equipment............................................................ 9,151,794 9,689,762
----------- -----------
Less accumulated depreciation................................................................ (7,095,716) (7,699,086)
----------- -----------
Property and equipment, net............................................................. 2,056,078 1,990,676
----------- -----------
TOTAL ASSETS................................................................................... $12,577,992 $12,874,503
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 4)....................................................................... $ 2,450,000 $ 2,860,000
Current maturities of long-term debt (Note 4)................................................ 778,392 642,432
Accounts payable............................................................................. 4,579,651 4,227,034
Accrued expenses............................................................................. 1,139,812 920,853
Billings in excess of costs and estimated earnings on uncompleted projects (Note 3).......... 876,245 1,661,086
Deferred income taxes (Note 8)............................................................... 1,059,316 1,255,765
Deferred rent (Note 5)....................................................................... 67,974
----------- -----------
Total current liabilities............................................................... 10,951,390 11,567,170
----------- -----------
LONG-TERM DEBT (Note 4)........................................................................ 564,577 103,792
----------- -----------
DEFERRED RENT (Note 5)......................................................................... 288,829
----------- -----------
OTHER NONCURRENT LIABILITIES................................................................... 15,000
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 5, 7, 9 and 10)
STOCKHOLDERS' EQUITY:
Capital stock, common, $.01 par value (Note 6):
Class A, voting, authorized 2,000,000 shares; issued 55,998 and 54,700, respectively...... 560 547
Class B, nonvoting, authorized 1,000,000 shares; issued 740 and 1,111, respectively....... 7 11
Retained earnings......................................................................... 1,140,403 1,202,983
----------- -----------
1,140,970 1,203,541
Less ESOP debt guarantee (Notes 4 and 9)....................................................... (382,774)
----------- -----------
Total stockholders' equity.............................................................. 758,196 1,203,541
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................... $12,577,992 $12,874,503
=========== ===========

</TABLE>

See notes to financial statements.

F-16

<PAGE>
HLMI

STATEMENTS OF OPERATIONS

YEARS ENDED APRIL 30, 1995, APRIL 26, 1996 AND APRIL 25, 1997

<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
APRIL 30, APRIL 26, APRIL 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Fee income.................................................................... $27,388,379 $27,206,637 $24,839,560
Reimbursable income........................................................... 1,734,178 1,347,787 1,915,150
----------- ----------- -----------
Total revenues........................................................... 29,122,557 28,554,424 26,754,710
----------- ----------- -----------
CONSULTANT EXPENSES............................................................. 5,351,073 4,782,482 4,857,891
----------- ----------- -----------
PROJECT EXPENSES:
Direct expenses............................................................... 854,540 936,962 716,449
Reimbursable expenses......................................................... 1,529,272 928,479 1,183,618
----------- ----------- -----------
Total project expenses................................................... 2,383,812 1,865,441 1,900,067
----------- ----------- -----------
NET PRODUCTION INCOME........................................................... 21,387,672 21,906,501 19,996,752
DIRECT LABOR.................................................................... 7,950,786 7,614,029 6,618,293
INDIRECT EXPENSES............................................................... 14,678,518 13,787,625 12,931,174
----------- ----------- -----------
OPERATING INCOME (LOSS)......................................................... (1,241,632) 504,847 447,285
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income............................................................... 13,936 10,516 6,502
Interest expense.............................................................. (156,680) (394,068) (402,509)
Gain on lease termination (Note 5)............................................ 841,809 344,059
Gain (loss) on sale of property............................................... 428,475 8,464 (58,424)
----------- ----------- -----------
Total other income (expense), net........................................ 285,731 466,721 (110,372)
----------- ----------- -----------
INCOME (LOSS) BEFORE TAXES...................................................... (955,901) 971,568 336,913
INCOME TAXES (Note 8):
Current tax benefit........................................................... (3,080) (114,560) (4,461)
Deferred tax expense (benefit)................................................ (357,000) 550,019 224,260
----------- ----------- -----------
Total income tax expense (benefit)....................................... (360,080) 435,459 219,799
----------- ----------- -----------
NET INCOME (LOSS)............................................................... $ (595,821) $ 536,109 $ 117,114
=========== =========== ============

</TABLE>

See notes to financial statements.

F-17

<PAGE>
HLMI

STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED APRIL 30, 1995, APRIL 26, 1996 AND APRIL 25, 1997
<TABLE>
<CAPTION>
COMMON STOCK ESOP DEBT
------------------ RETAINED GUARANTEE
CLASS A CLASS B EARNINGS (NOTES 4 AND 9)
------- ------- ---------- ---------------
<S> <C> <C> <C> <C>
BALANCE, APRIL 30, 1994....................................... $ 638 $ 3 $1,693,915 $(1,260,925)
Net Loss.................................................... (595,821)
Issuance of 2,119 shares of common stock.................... 21 135,616
Retirement of 7,782 shares of common stock.................. (75) (3) (528,185)
Class A common stock exchanged for Class B
common stock............................................. (11) 11
Proceeds on Employee Stock Ownership Plan debt.............. (106,000)
Payments on Employee Stock Ownership Plan debt.............. 490,603
------- ------- ---------- ---------------
BALANCE, APRIL 30, 1995....................................... 573 11 705,525 (876,322)
Net income.................................................. 536,109
Issuance of 44 shares of common stock....................... 2,489
Retirement of 1,743 shares of common stock.................. (10) (7) (103,720)
Payments on Employee Stock Ownership Plan debt.............. 493,548
Class A common stock exchanged for Class B
common stock............................................. (3) 3
------- ------- ---------- ---------------
BALANCE, APRIL 26, 1996....................................... 560 7 1,140,403 (382,774)
Net income.................................................. 117,114
Retirement of 927 shares of common stock.................... (9) (54,534)
Payments on Employee Stock Ownership Plan debt.............. 382,774
Class A common stock exchanged for Class B
common stock............................................. (13) 13
------- ------- ---------- ---------------
BALANCE, APRIL 25, 1997....................................... $ 547 $11 $1,202,983 $
======= ======= ========== ===============

<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCE, APRIL 30, 1994....................................... $ 433,631
Net Loss.................................................... (595,821)
Issuance of 2,119 shares of common stock.................... 135,637
Retirement of 7,782 shares of common stock.................. (528,263)
Class A common stock exchanged for Class B
common stock.............................................
Proceeds on Employee Stock Ownership Plan debt.............. (106,000)
Payments on Employee Stock Ownership Plan debt.............. 490,603
-------------
BALANCE, APRIL 30, 1995....................................... (170,213)
Net income.................................................. 536,109
Issuance of 44 shares of common stock....................... 2,489
Retirement of 1,743 shares of common stock.................. (103,737)
Payments on Employee Stock Ownership Plan debt.............. 493,548
Class A common stock exchanged for Class B
common stock.............................................
-------------
BALANCE, APRIL 26, 1996....................................... 758,196
Net income.................................................. 117,114
Retirement of 927 shares of common stock.................... (54,543)
Payments on Employee Stock Ownership Plan debt.............. 382,774
Class A common stock exchanged for Class B
common stock.............................................
-------------
BALANCE, APRIL 25, 1997....................................... $ 1,203,541
=============

</TABLE>

See notes to financial statements.

F-18

<PAGE>
HLMI

STATEMENTS OF CASH FLOWS

YEARS ENDED APRIL 30, 1995, APRIL 26, 1996 AND APRIL 25, 1997

<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
APRIL 30, APRIL 26, APRIL 25,
1995 1996 1997
----------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................................... $ (595,821) $ 536,109 $ 117,114
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation................................................................. 515,636 680,779 671,877
Amortization................................................................. 5,952 99,145 107,670
Deferred rent................................................................ (384,644) (1,093,278) (356,803)
Loss (gain) on sale of property.............................................. (428,475) (8,464) 58,424
Deferred income taxes........................................................ (357,000) 550,019 224,260
Other, net................................................................... 3,229 (49,345) (15,000)
Changes in certain working capital items:
(Increase) decrease in trade and other receivables......................... 990,949 (1,181,640) 1,343,508
Increase in costs and estimated earnings compared to billings on
uncompleted contracts, net................................................ (1,540,637) (1,857,829) (883,880)
(Increase) decrease in refundable income taxes............................. 144,707 87,777 72,056
(Increase) decrease in prepaid expenses.................................... 160,417 (176,989) (99,131)
Increase in other assets................................................... (159,272)
Increase (decrease) in accounts payable.................................... 401,561 2,642,228 (352,617)
Increase (decrease) in accrued expenses.................................... 410,559 (455,379) (218,959)
----------- ----------- ----------
Net cash (used in) provided by operating activities..................... (673,567) (226,867) 509,247
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business............................................................ (206,500)
Proceeds from sale of equipment................................................. 600,000 12,084 2,635
Purchases of property and equipment............................................. (882,719) (708,479) (662,179)
Note receivable from officer.................................................... (30,000)
----------- ----------- ----------
Net cash used in investing activities................................... (489,219) (726,395) (659,544)
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit................................................ 1,600,000 700,000 410,000
Proceeds from long-term borrowings.............................................. 500,000 145,000
Payments on long-term borrowings................................................ (90,189) (238,134) (410,952)
Proceeds from issuance of common stock.......................................... 135,616 2,489
Retirement of common stock...................................................... (528,185) (5,650) (2,560)
----------- ----------- ----------
Net cash provided by financing activities............................... 1,117,242 958,705 141,488
----------- ----------- ----------
(DECREASE) INCREASE IN CASH....................................................... (45,544) 5,443 (8,809)
CASH BALANCE:
Beginning of year............................................................... 51,231 5,687 11,130
----------- ----------- ----------
End of year..................................................................... $ 5,687 $ 11,130 $ 2,321
=========== =========== ==========

SUPPLEMENTAL DISCLOSURES:
Cash paid (received) during the year for:
Interest..................................................................... $ 138,783 $ 392,292 $ 370,167
Interest on Employee Stock Ownership Plan debt............................... $ 82,459 $ 55,199 $ 24,243
Income tax refunds........................................................... $ (150,867) $ (280,466) $ (86,091)
Noncash investing and financing transactions:
Retirement of common stock through issuance of note payable.................. $ $ 98,087 $ 51,983
Reduction of ESOP debt....................................................... $ 384,603 $ 493,548 $ 382,774
Purchase of business financed through issuance of note payable............... $ 311,500
</TABLE>

See notes to financial statements.

F-19

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 25, 1997 AND APRIL 26, 1996

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS -- Hansen Lind Meyer Inc. ("HLMI") provides
architectural and engineering consulting and design services nationally from
offices in Iowa City, Chicago, Denver, Orlando, Philadelphia, Atlanta, Bethesda,
Sacramento and Portland. Approximately 75%, 70% and 73% of HLMI's 1997, 1996 and
1995 revenues, respectively, are related to health care projects and
approximately 25%, 30% and 27% are from criminal justice and other projects. The
Company operates in one business segment.

FISCAL YEAR-END POLICY -- HLMI uses a 52-53 week fiscal year for accounting
purposes which defines the fiscal year-end date as the last Friday in April.
Thus, the current fiscal year-end is April 25, 1997. There were 52 weeks in this
fiscal year.

REVENUE RECOGNITION -- Revenue is recognized, at estimated collectible
amounts, in the period the services are performed. More specifically, HLMI
recognizes revenues either on the percentage-of-completion method measured by
the percentage of cost incurred to date to estimated total cost for each
contract, or based upon a fixed hourly rate. Consultant expenses, project
expenses, direct labor and indirect expenses are charged to expense as incurred.
Provisions for estimated losses on uncompleted projects are made in the period
in which such losses are first subject to reasonable estimation. Unanticipated
changes in project performance, project conditions and estimated profitability
may result in revisions to costs and income and are recognized in the period in
which the revisions are determined.

<TABLE>
<S> <C>
Computer equipment and software......................... 5 years
Furniture............................................... 7 years
Leasehold improvements.................................. Lease term, not to exceed the useful life of the asset
</TABLE>

GOODWILL -- Goodwill represents the excess of purchase price over the
estimated fair value of the net assets acquired from MPB Architects and is being
amortized over a four-year period.

DEFERRED INCOME TAXES -- Deferred income tax assets and liabilities are
calculated based upon differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future. Such deferred income tax asset or liability computations are based
on enacted tax laws and rates applicable to periods in which the differences are
expected to affect taxable income.

FINANCIAL INSTRUMENTS -- The carrying amount of cash, accounts receivable,
accounts payable and accrued liabilities approximates fair value because of the
short maturities of these instruments. HLMI's bank borrowings approximate fair
value because their interest rates are based on variable reference rates.

F-20

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
RECLASSIFICATION -- Certain amounts in the 1996 financial statements have
been reclassified to conform with the 1997 financial statement presentation.

NEW ACCOUNTING STANDARD -- Effective April 27, 1996, HLMI adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
during the year. It requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Management has reviewed all long-lived assets and
intangible assets as of April 25, 1997 and April 26, 1996 and believes that the
carrying amounts reported in the balance sheet will be recovered over the
remaining useful lives of those assets.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
Standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for HLMI's fiscal year ending April 24, 1998, and
HLMI does not intend to adopt this Statement prior to the effective date.

2. BUSINESS ACQUISITIONS

On April 1, 1995, HLMI acquired MPB Architects, Inc., an architectural firm
located in Philadelphia, Pennsylvania, for a total purchase price of $518,000.
The acquisition has been accounted for as a purchase and the results of
operations of MPB Architects, Inc., have been included in the accompanying
financial statements from the date of acquisition. The total purchase price has
been allocated to the assets acquired at their estimated fair market value at
acquisition date as follows:

<TABLE>
<S> <C>
Property and equipment........................................................ $ 79,000
Goodwill...................................................................... 439,000
--------
Total......................................................................... $518,000
========

</TABLE>

The following unaudited pro forma financial data is presented as if MPB
Architects, Inc. was acquired on May 1, 1994.

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1995
-------------------------
<S> <C>
Revenues......................................................... $31,743,366
-----------
Net Loss......................................................... $ (782,024)
===========

</TABLE>

The pro forma information presented above is not necessarily indicative of
the operating results that would have occurred had MPB Architects, Inc. been
acquired on May 1, 1994. These results are also not necessarily indicative of
the results of future operations.

3. CONTRACTS IN PROGRESS

Information relative to contracts in progress at April 30, 1995, April 26,
1996 and April 25, 1997 is as follows:

<TABLE>
<CAPTION>
APRIL 30, APRIL 26, APRIL 25,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Costs incurred on uncompleted projects....................................... $ 77,486,548 $ 67,612,169 $53,448,215
Estimated earnings thereon................................................... 46,358,806 42,252,119 33,500,189
------------ ------------ -----------
Total........................................................................ 123,845,354 109,864,288 86,948,404
Less billings to date........................................................ 123,066,717 107,227,822 83,428,058
------------ ------------ -----------
Net underbillings............................................................ $ 778,637 $ 2,636,466 $ 3,520,346
============ ============ ===========

</TABLE>

F-21

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

3. CONTRACTS IN PROGRESS -- Continued
Net underbillings are included in the accompanying balance sheet as
follows:

<TABLE>
<CAPTION>
APRIL 30, APRIL 26, APRIL 25,
1995 1996 1997
----------- ---------- -----------
<S> <C> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted projects............................................................ $ 2,571,447 $3,512,711 $ 5,181,432
Billings in excess of costs and estimated earnings on
uncompleted projects............................................................ (1,792,810) (876,245) (1,661,086)
----------- ---------- -----------
Net underbillings................................................................. $ 778,637 $2,636,466 $ 3,520,346
=========== ========== ===========

</TABLE>

4. FINANCING ARRANGEMENTS

Effective October 14, 1996, HLMI entered into a new financing arrangement
with Firstar Bank Iowa, N.A. ("Firstar"). In connection with this new financing
arrangement, two previous lines of credit, with a combined balance outstanding
at April 26, 1996 of $2,450,000, were consolidated into one revolving line of
credit providing for availability up to the lesser of $2,450,000 or 80% of
eligible accounts receivable through March 1, 1997. The line of credit will be
payable in full on May 1, 1998. Interest is payable monthly at Firstar's prime
rate plus 3% (11.5% at April 25, 1997).

Three term loans payable to Firstar with a combined amount outstanding at
April 26, 1996 of $423,903 were consolidated into one new term loan. Interest is
charged at the bank's prime rate plus 2%, and monthly principal and interest
payments of $45,000 are payable through February 1, 1997. The original loans
were made to enable the Company's ESOP (see Note 8) to acquire common stock from
certain stockholders.

This financing facility is collateralized by substantially all of HLMI's
assets.

In September 1996, HLMI entered into a financing facility with First
Charter National Bank which provides a line of credit of up to $500,000.
Interest is charged at the bank's prime rate plus 1.5% and principal payments
are to be made at HLMI's discretion. The loan has an annual maturity date which
is subject to review.

See Note 12 for financing events occurring subsequent to April 25, 1997.

A summary of notes payable at April 26, 1996 and April 25, 1997 is as
follows:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Line of credit -- Firstar......................................................................... $$2,450,000 $2,360,000
Line of credit -- First Charter................................................................... 500,000
---------- ----------
Total............................................................................................. $2,450,000 $2,860,000
========== ==========

</TABLE>

F-22

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

4. FINANCING ARRANGEMENTS -- Continued
A summary of long-term debt at April 25, 1997 and April 26, 1996 is as
follows:

<TABLE>
<CAPTION>
1996 1997
---------- --------
<S> <C> <C>
Term loan payable to Firstar, due in monthly payments of $45,000, including interest at 2% over the
Bank's prime rate................................................................................. $ 423,903 $
Note payable to Firstar, due in monthly payments of $16,405, including interest at 2.5% over the
Bank's prime rate................................................................................. 428,399 271,134
Notes payable to two key employees of the Company at 15%, with a final payment due December 31, 1997
in full........................................................................................... 145,000
Notes payable to a former stockholder, due in annual payments of $49,522, plus interest at the prime
interest rate of Chase Manhattan Bank as of the date each installment is due (8.25% at April 25,
1997 and April 26, 1996); collateralized by 3,088 shares of the Company's unissued common stock,
with a final payment due April 2000............................................................... 198,090 148,567
Notes payable to former stockholders, due in installments plus interest at prime plus 1% at various
dates to October 1999............................................................................. 74,270 66,673
Notes payable, MPB Architects, due in annual payments of $127,500, including interest at a rate of
10.5%, with a final payment due April 1, 1998..................................................... 218,307 114,850
---------- --------
Total long-term debt................................................................................ 1,342,969 746,224
Less current maturities (based on refinanced terms)................................................. 778,392 642,432
---------- --------
Long-term portion................................................................................... $ 564,577 $103,792
========== ========

</TABLE>

Scheduled maturities of long-term debt based on refinanced terms are as
follows:

<TABLE>
<S> <C>
Fiscal Year:
1999........................................................................... $642,432
2000........................................................................... 49,522
Thereafter..................................................................... 54,270
--------
Total............................................................................ $746,224
========

</TABLE>

Borrowings from Firstar are subject to certain restrictive covenants. At
April 25, 1997, HLMI was in violation of the negative working capital and the
current ratio requirements. As set forth in Note 12, all outstanding debt due to
Firstar has been repaid subsequent to April 25, 1997.

On May 30, 1997, HLMI entered into financing arrangement in the form of a
sale-leaseback agreement. Under this arrangement, HLMI sold all of its property,
excluding leasehold improvements, for $2.8 million. This property is being
leased back over 60 months. The proceeds of this transaction were used to repay
the line of credit and the note payable due to Firstar.

Under certain of the lending arrangements the Company is restricted from
paying cash dividends.

5. LEASE COMMITMENTS

At April 26, 1996, rent payments due under certain leases were less than
the amount of rent expense computed on a straight-line basis. The deferred rent
liability at April 26, 1996 was $356,803. There was no deferred rent liability
as of April 25, 1997.

In 1996, and 1997, HLMI terminated facility leases which were being
accounted for as operating leases, resulting in a gain of $841,809 and $344,059,
respectively. There were no facility lease terminations in 1995 which resulted
in a gain. The recorded gains represent the cumulative excess of lease expense
over the lease payments made as of the termination dates.

The Iowa City, Orlando, McLean and Charlotte facilities require the payment
of certain operating expenses in addition to the base rents.

F-23

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

5. LEASE COMMITMENTS -- Continued
Rent expense of $2,946,542 $1,112,562 and $1,606,678 as of April 30, 1995,
April 26, 1996 and April 25, 1997 is included in indirect expenses.

The total minimum rental commitment under non-cancellable operating leases,
at April 25, 1997, which has been reduced by minimum rentals to be received
under subleases, are as follows:

<TABLE>
<S> <C>
Fiscal Year:
1998..................................................................... $ 2,172,403
1999..................................................................... 1,899,397
2000..................................................................... 1,881,442
2001..................................................................... 1,798,392
2002..................................................................... 1,721,236
Thereafter............................................................... 6,664,881
-----------
Total...................................................................... $16,137,751
===========

</TABLE>

6. CAPITAL STOCK

HLMI's authorized capital consists of 3,000,000 shares of $.01 par value
common stock, consisting of two classes, 2,000,000 shares of Class A voting and
1,000,000 shares of Class B nonvoting. Class A stock may only be owned by
employees of the Company. Class A stock will be immediately converted to Class B
stock following the termination of a shareholder's employment with the Company.
See Note 12 for subsequent events regarding HLMI's ESOP.

7. RESTRICTIONS OF TRANSFER OF COMMON STOCK

The bylaws of HLMI contain certain restrictions on transfer of common
stock. Upon the death, disability or retirement of a stockholder, HLMI is
obligated to purchase the common stock if the estate of the stockholder or the
stockholder offers to sell. The stockholder's estate or the stockholder has the
right to offer the shares to the Employee Stock Ownership Plan which has the
right of first refusal with regard to this stock. The sale price shall be based
upon the most recent appraised value of HLMI stock. If a stockholder voluntarily
terminates employment, the employee shall sell, and the ESOP may acquire the
shares, or HLMI shall purchase all of the stockholder's stock based on the most
recent appraisal. If a stockholder is involuntarily terminated, the stockholder
may offer his stock to the ESOP or HLMI, and the ESOP may, or HLMI shall
purchase all of the shares based on the most recent appraisal. A stockholder who
is terminated from employment for cause shall sell, and the ESOP may, or HLMI
shall purchase all of the stockholder's shares at a price equal to 80% of the
most recent appraisal. The purchase price of any purchase will be paid by first
applying life insurance proceeds, if any, with the balance being paid in a
single payment or installments depending upon the circumstances of the sale and
upon the amount of the purchase price. If the aggregate of principal payments
for the purchase of stock shall exceed $120,000 within any six-month period,
HLMI may adjust downward all current payments proportionately to limit the
payments to the $120,000 amount. Transfers of shares of HLMI's stock to or from
the Employee Stock Ownership Plan Trust are exempt from the provisions of the
bylaws on restrictions of transfer.

8. INCOME TAXES

The provision for income taxes is as follows:

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- --------
<S> <C> <C> <C>
Current:
Federal............................................................................... $ (2,695) $(100,240) $ (3,903)
State................................................................................. (385) (14,320) (558)
Deferred................................................................................ (357,000) 550,019 224,260
--------- --------- --------
Provision for income taxes.............................................................. $(360,080) $ 435,459 $219,799
========= ========= ========

</TABLE>

F-24

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

8. INCOME TAXES -- Continued
The reconciliation of the statutory federal income tax rate with the
Company's federal and state overall effective income rate is as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------ ----- -----
<S> <C> <C> <C>
Statutory federal rate.............................................................................. (35.0)% 35.0% 35.0%
State Income Taxes.................................................................................. (2.0) 3.3 3.3
Penalties........................................................................................... .2 .4 17.4
Meals and Entertainment............................................................................. 4.3 4.4 9.3
Other............................................................................................... (5.1) 1.8 .3
------ ----- -----
Effective Tax rates............................................................................... (37.6)% 44.9% 65.3%
======= ===== =====

</TABLE>

The tax effect of temporary differences giving rise to deferred income tax
assets and liabilities as of April 25, 1997 and April 26, 1996 is as follows:

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Deferred income tax liabilities -- difference between the accrual basis and cash basis of
accounting related to certain assets and liabilities.......................................... $(1,059,316) $(1,255,765)
----------- -----------
Deferred income tax assets:
Contribution carryforwards.................................................................... 52,892 64,361
Property and equipment........................................................................ 63,368 96,177
Deferred rent liability....................................................................... 136,477 --
Net operating loss carryforward............................................................... 239,768 304,156
----------- -----------
Total deferred income tax assets................................................................ 492,505 464,694
----------- -----------
Deferred income tax liabilities, net............................................................ $ (566,811) $ (791,071)
=========== ===========

</TABLE>

As of April 26, 1996 and April 25, 1997, HLMI had approximately $627,000
and $795,000 of net operating loss carryforwards, respectively, for federal tax
purposes and no loss carryforwards for financial reporting purposes. These tax
net operating losses will respectively expire in fiscal years 2012 and 2011.

9. EMPLOYEE STOCK OWNERSHIP PLAN

In September 1987, HLMI established an Employee Stock Ownership Plan to
provide retirement benefits to its employees. In October 1987, the Plan obtained
a $4,800,000 bank loan, the proceeds of which were used to purchase 32,000
shares of common stock from certain stockholders. During the year ended April
30, 1991, the Plan acquired 11,597 shares of common stock from a shareholder at
a cost of $1,054,389, a portion of which was financed by borrowings from a bank
in the amount of $687,389. During the year ended April 30, 1995, the Plan
acquired 2,000 shares of common stock from a shareholder at a cost of $106,000,
which was financed by borrowings from a bank. HLMI is committed to make cash
payments to the Plan in an amount sufficient for the Plan to meet the debt
service requirements of these three notes. Accordingly, the debt was recorded in
the accompanying financial statements with a corresponding deduction from
stockholders' equity. The debt and the deduction from stockholders' equity are
reduced as principal payments are made on the loans. The terms of the notes
payable are disclosed in Note 4. These notes were repaid in full during the year
ended April 25, 1997.

Subject to certain provisions of the Plan, in the event a terminated plan
participant desires to sell his or her shares of HLMI's stock, or for certain
employees who elect to diversify their account balances, HLMI may be required to
purchase the shares from the participant at their fair market value. During the
year ended April 26, 1996, HLMI had stock purchases of 557 shares from plan
participants. As of April 26, 1996, 43,343 shares were allocated to participant
accounts and the fair value per share was $56.50 based on an April 30, 1995
valuation.

During the year ended April 25, 1997, HLMI did not purchase any shares from
plan participants and as of April 25, 1997, 46,858 shares were allocated to
participant accounts.

F-25

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

10. CONTINGENCIES

HLMI is involved in various disputes and legal actions related to contract
operations. In the opinion of HLMI management, the ultimate resolution of these
actions will not have a material effect on HLMI's financial position or future
results of operations.

11. RELATED PARTY TRANSACTIONS

During the years ended April 26, 1996 and April 25, 1997, HLMI incurred
$254,137 and $257,017, respectively, in financing advisory fees related to debt
financings, for services provided by a director.

12. OTHER MATTERS

On May 29, 1997, HLMI executed a Management and Services Agreement with HLM
Design Inc ("HLM, Design"). The majority shareholders of Design are officers of
HLMI and own 100% of the common stock of HLMI. Under the Management and Services
Agreement, Design will manage all functions of HLMI except for architectural
services regulated by the various states in which HLMI operates. As compensation
for such management services, Design will be entitled to substantially all the
net cash flow generated by HLMI. In addition, HLM, Design and the shareholders
of HLMI have entered into agreements that provide HLM Design with the right of
first refusal, by selection of qualified individuals, for any purchase or sale
of shares of HLMI's stock.

Effective May 23, 1997, HLMI sold 50,000 newly issued shares to BBH Corp.,
a Delaware corporation, purchased 50,000 shares in HLMI for $3.2 million. On May
23, 1997, BBH Corp. merged into HLMI and each BBH Corp. share outstanding at the
time of merger was converted into one share of HLMI's stock. All of HLMI's
shares held by BBH Corp. were canceled and retired.

F-26

<PAGE>

===============================================================================

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HLM DESIGN OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................... 3
Risk Factors......................................... 7
Use of Proceeds...................................... 11
Dividend Policy...................................... 11
Capitalization....................................... 12
Dilution............................................. 13
Selected Financial Data.............................. 14
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 18
Business............................................. 23
Management........................................... 28
Certain Transactions................................. 34
Principal Stockholders............................... 34
Description of Capital Stock......................... 35
Shares Eligible for Future Sale...................... 38
Underwriting......................................... 39
Legal Matters........................................ 40
Experts.............................................. 41
Additional Information............................... 41
Index to Financial Statements........................ F-1
</TABLE>

------------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

==============================================================================

1,200,000 SHARES
HLM DESIGN, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
BERTHEL FISHER & COMPANY
FINANCIAL SERVICES, INC.

WESTPORT RESOURCES
INVESTMENT SERVICES, INC.

MARION BASS
SECURITIES CORPORATION
, 1998

===============================================================================

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses to be borne by the Registrant
in connection with the issuance and distribution of the securities being
registered hereby other than underwriting discounts and commissions. All the
amounts shown are estimates, except for the registration fee with the Securities
and Exchange Commission, the NASD filing fee and the Nasdaq fees.

<TABLE>
<S> <C>
SEC Registration fee................................................................... $ 2,121.22
NASD filing fee........................................................................ 1,200
Nasdaq fees............................................................................ 7,500
Transfer agent and registrar fees...................................................... 15,000
Accounting fees and expenses........................................................... 195,000
Legal fees and expenses................................................................ 120,000
"Blue Sky" fees and expenses (including legal fees).................................... 15,000
Costs of printing and engraving........................................................ 90,000
Miscellaneous.......................................................................... 14,178.78
-----------
Total............................................................................. $460,000.00
===========

</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Bylaws effectively provide that the Registrant shall, to
the full extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as amended from time to time ("Section 145"), indemnify all
persons whom it may indemnify pursuant thereto. In addition, the Registrant's
Certificate of Incorporation eliminates personal liability of its directors to
the full extent permitted by Section 102(b)(7) of the General Corporation Law of
the State of Delaware, as amended from time to time ("Section 102(b)(7)").

Section 145 permits a corporation to indemnify its directors and officers
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlements actually and reasonably incurred by them in connection with any
action, suit or proceeding brought by a third party if such directors or
officers acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit and only with respect to matters
as to which they shall have acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interest of the corporation, except
that no indemnification shall be made if such person shall have been adjudged
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine upon application that the
defendant officers or directors are reasonably entitled to indemnification for
such expenses despite such adjudication of liability.

Section 102(b)(7) provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for willful or negligent conduct
in paying dividends or repurchasing stock out of other than lawfully available
funds or (iv) for any transaction from which the director derived an improper
personal benefit. No such provisions shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective.

The Company intends to obtain, prior to the effective date of the
Registration Statement, insurance against liabilities under the Securities Act
of 1933 for the benefit of its officers and directors.

Section 6.01 of the Underwriting Agreement (filed as Exhibit 1.1 to this
Registration Statement) provides that the Underwriters severally and not jointly
will indemnify and hold harmless the Registrant and each director, officer or
controlling person of the Registrant from and against any liability caused by
any statement or omission in the Registration Statement or Prospectus based upon
information furnished to the Registrant by the Underwriters for use therein.

II-1

<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Except as hereinafter set forth, there have been no sales of unregistered
securities by the Registrant within the past three years. The following
information excludes the effect of the Stock Split.

As of March 20, 1997, as part of the original organization of HLM Design,
the Registrant issued 20,500 shares of Common Stock to Joseph Harris, 20,500
shares of Common Stock to Vernon Brannon and 7,500 shares of Common Stock to
William Blalock in exchange for $1,000 from each person.

On May 16, 1997, May 19, 1997, May 28, 1997, July 7, 1997, July 8, 1997,
July 14, 1997, August 22, 1997 and November 1, 1997 the Registrant issued an
aggregate of 2,340 shares of Common Stock to senior level employees of the
Company in exchange for $14.81 per share. As of May 30, 1997, September 10, 1997
and December 24, 1997, the Registrant issued warrants to purchase 17,794 shares
of Common Stock for an aggregate of $23,500 in connection with financing
arrangements. On November 10, 1997, Clay R. Caroland exercised his Warrant and
purchased 862 shares of Common Stock at an exercise price of $.01 per share. On
December 26, 1997 Berthel Leasing exercised its Warrant and purchased 3,422
shares of Common Stock at an exercise price of $.01 per share. On February 12,
1998 Equitas exercised its Warrant and purchased 5,749 shares of Common Stock at
an exercise price of $.01 per share. In each of the foregoing transactions, the
securities were not registered under the Securities Act, in reliance upon the
exemption from registration provided by Section 4(2) of said Act in view of the
sophistication of the foregoing purchasers, their access to material
information, the disclosures actually made to them by the Registrant and the
absence of any general solicitation or advertising.

On or before the consummation of the Offering, the Registrant will issue to
Joseph Harris and Vernon Brannon, two of its officers and employees, pursuant to
the Registrant's Stock Option Plan, options to purchase 115,908 shares (taking
into account the Stock Split) of Common Stock in the aggregate. Such securities
will not be registered under the Securities Act because such grants will be
without consideration to the Registrant and, consequently, will not constitute
offers or sales within Section 5 of the Securities Act.

Pacific has indicated that it will exercise its Warrants immediately prior
to the effective date of this Registration Statement. Such securities will not
be registered under the Securities Act, in reliance upon the exemption from
registration provided by Section 4(2) of said Act in view of the sophistication
of Pacific, its access to material information, the disclosures actually made to
it by the Registrant and the absence of any general solicitation or advertising.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----- -------------
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Agreement Among Underwriters
3.1 Certificate of Incorporation of the Registrant, as amended to date
3.2* Bylaws of the Registrant
4.1** Form of Common Stock Certificate
4.2 Form of Common Stock Purchase Warrant
4.3* Registration Rights Agreement dated as of May 30, 1997 by and among
HLM Design, Inc., Pacific Capital, L.P. and Equitas, L.P.
4.4* Registration Rights Agreement dated as of September 10, 1997 by and
among HLM Design, Inc. and Berthel Fisher & Company Leasing, Inc.
5.1 Form of opinion letter of Parker, Poe, Adams & Bernstein L.L.P.
regarding the legality of the securities registered.
10.1* Management and Services Agreement dated as of May 29, 1997 by and
between Hansen Lind Meyer Inc. and HLM Design.
10.2* Management and Services Agreement dated as of May 29, 1997 by and
between HLM of North Carolina, P.C. and HLM Design.
10.3* Management and Services Agreement dated as of May 29, 1997 by and
between HLM of Oregon, Architecture and Planning, P.C. and HLM
Design.
10.4* Stockholders' Agreement dated as of May 29, 1997 by and among Joseph
M. Harris, Vernon B. Brannon and Hansen Lind Meyer Inc.
10.5* Stockholders' Agreement dated as of May 29, 1997, by and among Joseph
M. Harris, Vernon B. Brannon, Phillip J. Antis and HLM of North
Carolina, P.C.
10.6* Stockholders' Agreememt dated as of May 29, 1997 by and among Joseph
M. Harris, Vernon B. Brannon, Viktor A. Lituczy and HLM of Oregon,
Architecture and Planning, P.C.
10.7 Intentionally Left Blank.
</TABLE>

II-2

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----- -----------
<C> <S>

10.8* Note Purchase Agreement dated as of May 30, 1997 by and among HLM
Design, Inc., Hansen Lind Meyer Inc., BBH Corp., Pacific Capital,
L.P., and Equitas, L.P.
10.9* Promissory Note A-1 dated as of May 30, 1997 by HLM Design, Inc. in
favor of Pacific Capital, L.P.
10.10* Promissory Note A-2 dated as of May 30, 1997 by HLM Design, Inc. in favor
of Equitas, L.P.
10.11* Collateral Assignment of Contract Rights dated as of May 30, 1997 by
and between HLM Design, Inc. and Pacific Capital, L.P. and Equitas,
L.P.
10.12* Security Agreement dated as of May 30, 1997 by and between HLM Design,
Inc. and Pacific Capital, L.P. and Equitas, L.P.
10.13* Affiliate Promissory Note dated May 30, 1997 by BBH Corp. in favor of
HLM Design, Inc.
10.14* Collateral Assignment of Promissory Note dated as of May 30, 1997 by
and between HLM Design, Inc. and Pacific Capital, L.P. and Equitas,
L.P.
10.15* Unconditional Guaranty dated as of May 30, 1997 by and between Hansen
Lind Meyer Inc. and BBH Corp. in favor of Pacific Capital, L.P. and
Equitas, L.P.
10.16* Guaranty dated as of May 30, 1997 by Joe Harris in favor of Pacific
Capital, L.P. and Equitas, L.P.
10.17* Guaranty dated as of May 30, 1997 by Vernon Brannon in favor of
Pacific Capital, L.P. and Equitas, L.P.
10.18* Noncompetition Agreement dated as of May 30, 1997 by and between HLM
Design, Inc., Hansen Lind Meyer Inc. and Joseph M. Harris.
10.19* Noncompetition Agreement dated as of May 30, 1997 by and between HLM
Design, Inc., Hansen Lind Meyer Inc. and Vernon B. Brannon.
10.20* Lease Agreement dated as of May 30, 1997 by and between Berthel Fisher
& Company Leasing, Inc. and Hansen Lind Meyer Inc.
10.21* Security Agreement dated as of May 30, 1997 by and between Berthel
Fisher & Company Leasing, Inc. and Hansen Lind Meyer Inc.
10.22* Guaranty (Limited in Amount) dated as of May 30, 1997 by and among
Vernon B. Brannon, Joseph M. Harris, and a former director.
10.23* Form of HLM Design, Inc. Stock Option Plan.
10.24* Form of HLM Design, Inc. Employee Stock Purchase Plan.
10.25* Form of Employment Agreement between HLM Design, Inc. and Joseph M. Harris.
10.26* Form of Employment Agreement between HLM Design, Inc. and Vernon B. Brannon.
10.27* Promissory Note dated as of May 30, 1997 issued by HLM Design, Inc. in
favor of First Charter National Bank.
21.1* Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit
5.1 to this Registration Statement)
24.1* Power of Attorney (contained on the signature page to the Registration
Statement)

</TABLE>

- ---------------

* Filed previously

** To be filed by amendment

ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing or closings specified in the Underwriting
Agreement, certificates in such denominations and registered in such names as
may be required by the Underwriters in order to permit prompt delivery to each
purchaser.

The undersigned Registrant hereby further undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed part of this Registration Statement as
of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-3

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Charlotte, North
Carolina on April 10, 1998.

HLM DESIGN, INC.

By: /s/ VERNON B. BRANNON
----------------------------
VERNON B. BRANNON
SENIOR VICE PRESIDENT, TREASURER
AND CHIEF FINANCIAL OFFICER

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 Registration Statement has been signed by the following persons in the
capacities and on the date indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ------- -----

<S> <C> <C>
/s/* President, Chief Executive Officer (principal April 10, 1998
------------------
JOSEPH M. HARRIS executive officer) and Chairman

/s/VERNON B. BRANNON Senior Vice President, Treasurer, Chief April 10, 1998
--------------------
VERNON B. BRANNON Financial Officer (principal financial and
accounting officer) and Director

/s/* Director April 10, 1998
--------------------
CLAY R. CAROLAND III

/s/* Director April 10, 1998
-------------------
SHANNON LEROY
</TABLE>

*By: /s/ VERNON B. BRANNON
----------------------------------
VERNON B. BRANNON
(ATTORNEY-IN-FACT FOR EACH
OF THE PERSONS INDICATED)

II-4

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
1.2 Form of Agreement Among Underwriters
3.1 Certificate of Incorporation of the Registrant, as amended to date
3.2* Bylaws of the Registrant
4.1** Form of Common Stock Certificate
4.2 Form of Common Stock Purchase Warrant
4.3* Registration Rights Agreement dated as of May 30, 1997 by and among HLM Design, Inc., Pacific Capital, L.P.
and Equitas, L.P.
4.4* Registration Rights Agreement dated as of September 10, 1997 by and among HLM Design, Inc. and Berthel
Fisher & Company Leasing, Inc.
5.1 Form of opinion letter of Parker, Poe, Adams & Bernstein L.L.P. regarding the legality of the securities
registered.
10.1* Management and Services Agreement dated as of May 29, 1997 by and between Hansen Lind Meyer Inc. and HLM
Design.
10.2* Management and Services Agreement dated as of May 29, 1997 by and between HLM of North Carolina, P.C. and
HLM Design.
10.3* Management and Services Agreement dated as of May 29, 1997 by and between HLM of Oregon, Architecture and
Planning, P.C. and HLM Design.
10.4* Stockholders' Agreement dated as of May 29, 1997 by and among Joseph M. Harris, Vernon B. Brannon and
Hansen Lind Meyer Inc.
10.5* Stockholders' Agreement dated as of May 29, 1997, by and among Joseph M. Harris, Vernon B. Brannon, Phillip
J. Antis and HLM of North Carolina, P.C.
10.6* Stockholders' Agreememt dated as of May 29, 1997 by and among Joseph M. Harris, Vernon B. Brannon, Viktor
A. Lituczy and HLM of Oregon, Architecture and Planning, P.C.
10.7 Intentionally Left Blank.
10.8* Note Purchase Agreement dated as of May 30, 1997 by and among HLM Design, Inc., Hansen Lind Meyer Inc., BBH
Corp., Pacific Capital, L.P., and Equitas, L.P.
10.9* Promissory Note A-1 dated as of May 30, 1997 by HLM Design, Inc. in favor of Pacific Capital, L.P.
10.10* Promissory Note A-2 dated as of May 30, 1997 by HLM Design, Inc. in favor of Equitas, L.P.
10.11* Collateral Assignment of Contract Rights dated as of May 30, 1997 by and between HLM Design, Inc. and
Pacific Capital, L.P. and Equitas, L.P.
10.12* Security Agreement dated as of May 30, 1997 by and between HLM Design, Inc. and Pacific Capital, L.P. and
Equitas, L.P.
10.13* Affiliate Promissory Note dated May 30, 1997 by BBH Corp. in favor of HLM Design, Inc.
10.14* Collateral Assignment of Promissory Note dated as of May 30, 1997 by and between HLM Design, Inc. and
Pacific Capital, L.P. and Equitas, L.P.
10.15* Unconditional Guaranty dated as of May 30, 1997 by and between Hansen Lind Meyer Inc. and BBH Corp. in
favor of Pacific Capital, L.P. and Equitas, L.P.
10.16* Guaranty dated as of May 30, 1997 by Joe Harris in favor of Pacific Capital, L.P. and Equitas, L.P.
10.17* Guaranty dated as of May 30, 1997 by Vernon Brannon in favor of Pacific Capital, L.P. and Equitas, L.P.
10.18* Noncompetition Agreement dated as of May 30, 1997 by and between HLM Design, Inc., Hansen Lind Meyer Inc.
and Joseph M. Harris.
10.19* Noncompetition Agreement dated as of May 30, 1997 by and between HLM Design, Inc., Hansen Lind Meyer Inc.
and Vernon B. Brannon.
10.20* Lease Agreement dated as of May 30, 1997 by and between Berthel Fisher & Company Leasing, Inc. and Hansen
Lind Meyer Inc.
10.21* Security Agreement dated as of May 30, 1997 by and between Berthel Fisher & Company Leasing, Inc. and
Hansen Lind Meyer Inc.
10.22* Guaranty (Limited in Amount) dated as of May 30, 1997 by and among Vernon B. Brannon, Joseph M. Harris, and
a former director.
10.23* Form of HLM Design, Inc. Stock Option Plan.
10.24* Form of HLM Design, Inc. Employee Stock Purchase Plan.
10.25* Form of Employment Agreement between HLM Design, Inc. and Joseph M. Harris.
10.26* Form of Employment Agreement between HLM Design, Inc. and Vernon B. Brannon.
10.27* Promissory Note dated as of May 30, 1997 issued by HLM Design, Inc. in favor of First Charter National
Bank.
21.1* Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1 to this Registration Statement)
24.1* Power of Attorney (contained on the signature page to the Registration Statement)
</TABLE>

- --------------------------

* Filed previously

** To be filed by amendment

Exhibit 1.1

March ___, 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
- ----------------------
Charlotte, North Carolina ______

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 "Representatives") and members of the Underwriting Group (hereinafter, the
Representatives 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 of its authorized $0.01 par
value common stock (the "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 Representatives, 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.

<PAGE>

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) (the "Registration Statement") with respect to the
Stock, including the related Prospectus, copies of which have heretofore been
delivered by the Company to the Representatives, has been prepared by the
Company, and conform as of the date filed 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 Representatives, has or have heretofore been filed; and said
Registration Statement has been declared effective (as hereinafter defined) with
the Commision.

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
becomes effective; the term "Prospectus" refers to and means the Prospectus
included in the Registration Statement when it becomes 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 has not included 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 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

-2-

<PAGE>

or warranties as to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon written information furnished on
behalf of the Representatives 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 or shall certify certain of the financial statements filed or to be
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. 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 articles 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,
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

-3-

<PAGE>

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 23.1 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, 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 will 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.

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 Representatives
and the Underwriter's designees will receive good and marketable title thereto,
free and clear of all liens, encumbrances, charges and claims whatsoever; and
the Company has, as of the date hereof, and will have at the time of delivery of
such Warrants full legal right and power and all authorization and approval
required by law to sell, transfer and deliver such Warrants in the manner
provided hereunder.

-4-

<PAGE>

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 Representatives 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 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 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 and this
Agreement is the valid, binding and legally enforceable obligation of the
Company.

2.18 LEGALITY OF OPERTATIONS. 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

-5-

<PAGE>

Representatives 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 Closing 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 _________*.

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 _______* 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 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.

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 is described in the Registration Statement.

-6-

<PAGE>

3.02.01. PAYMENT FOR STOCK. Payment for the Stock (including Option
shares) which the Representatives 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 Representatives of certificates for shares and
Warrants in definitive form in such numbers and registered in such names as the
Representatives requests 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 p.m. C.S.T. on the third business day following
the execution of this Agreement. Should the Representatives elect to exercise
any part of the over-allotment option pursuant to Section 3.01 hereinabove, 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 certificates available for inspection by the Representatives
at the office of Berthel in Cedar Rapids, Iowa, at least one full business day
prior to the proposed delivery date.

3.03. SALE OF WARRANTS. The Company will sell and deliver to the
Representatives, at a purchase price of $_____* 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
Representatives will not be obligated to purchase and pay for the Warrants,
except upon payment for the shares pursuant to Subsection 3.02.01 hereof.

3.04. UNDERWRITER'S EXPENSE ALLOWANCE. The Company shall reimburse the
Underwriters for all out-of-pocket expenses (which shall not include
compensation or benefits for the personnel of the Underwriters) incurred by
Underwriters in connection with the Offering or this Agreement, including
Underwriters' attorney's fees. Underwriters shall provide an invoice for all
such expenses to be reimbursed (including the expenses offset against the
retainer) and payment of any expenses shall be made only after receipt by the
Company of such invoices.

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 Representatives covenant that
reasonably promptly after the Closing Date, they will supply the Company with
all such information as the

-7-

<PAGE>

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 Representatives 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
Representatives 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
Representatives 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
Representatives 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
Representatives, without charge, as many copies of each Preliminary Prospectus
filed with the Commission bearing 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
Representatives 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 Representatives may reasonably
request for the purposes contemplated by this Agreement and shall deliver said
printed copies of the Prospectus to the Representatives 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 Representatives 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

-8-

<PAGE>

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
Representatives 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 Representatives and to others
whose names and addresses are designated by the Representatives, 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:

5.01. OBJECTION OF REPRESENTATIVES 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
Representatives within a reasonable time period prior to the proposed filing
thereof, or to which the Representatives or counsel for the Representatives 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 Representatives, 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, and (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

-9-

<PAGE>

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
Representatives, 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 Representatives 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 Representatives, use reasonable efforts in cooperation with the
Representatives to qualify the Stock or such part thereof as the Representatives
may determine for sale under the so-called blue sky laws of the States of North
Carolina, Iowa and of so many other states as the Representatives may reasonably
request, and to continue such qualification in effect so long as required for
the purposes of the distribution of the Stock.

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 REPRESENTATIVES. During the
period of five years from the Closing Date, the Company will deliver to the
Representatives, (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 Representatives,
furnish to the Representatives such other information as may reasonably be
requested and which may be properly disclosed to the Representatives 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 Representatives, any original issue taxes in connection
therewith, all transfer taxes, if any, incident to the initial sale of the Stock
to the

-10-

<PAGE>

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
Representatives 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 Representatives incurred in connection with
such qualification.

5.08. REPORTS TO SHAREHOLDERS. During the period of five years from the
Closing Date, the Company will, as promptly as possible, not to exceed 120 days,
after each annual fiscal period 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 Representatives, 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.

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
Representatives, prior to or simultaneously with the execution of this
Agreement, the undertaking of each officer, director, and each employee of the
Company who owns 5% or more of shares of the Company (based on the number of
shares outstanding as of the date hereof) that such person shall not directly or
indirectly offer or sell to the public, or privately, any portion of the shares
of common stock owned prior to the date of this Agreement or hereafter acquired
by exercise of an option for a period of twelve months from the Effective Date
without the Underwriter's prior written consent.

5.13. DELIVERY OF DOCUMENTS. At the Closing, the Company will deliver to
the Representatives true and correct copies of the certificate of incorporation
of the Company and

-11-

<PAGE>

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 Representatives in such
investigation as the Representatives 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 Representatives in connection therewith such information in its
possession as the Representatives may reasonably request.

5.15. NO SALE PERIOD. No offering, sale or other disposition of any common
stock, equity or long-term debt will be made within one year after the Effective
Date , directly or indirectly, by the Company, otherwise than hereunder or with
the Underwriter's consent.

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 change or terminate such appointment for a period
of three years from the Effective Date without first obtaining the written
consent of the Representatives, 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 shall, within 90
days after the Effective Date, register the class of equity securities which
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.

5.19. APPLICATION TO AMEX. 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 upon release
by the Representatives of the Stock for offering after the Effective Date.

5.20 UNDERWRITERS' BOARD DESIGNEE. Following the Closing, and for a
period of five (5) years after the Closing, the Company will grant to Berthel
the right to designate one

-12-

<PAGE>

individual, whom the Company shall use its best efforts to have elected to the
Board of Directors of the Company. Berthel shall not be obligated to designate
such an individual.

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 who controls any of the Underwriters
within the meaning of Section 15 of the Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act or any other statute or at common law and to
reimburse persons indemnified as above for any legal or other expenses
(including the cost of any investigation and preparation) incurred by them in
connection with any litigation, whether or not resulting in any liability, but
only insofar as such losses, claims, damages, liabilities and litigation arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereto
or any application or other document filed in order to qualify the Stock under
the Blue Sky or securities laws of the states where filings were made, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein 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 such 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

-13-

<PAGE>

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 Representatives 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 Representatives or such controlling person or persons, defendant or
defendants in such litigation. The Company agrees to notify the Representatives
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 Representatives,
at their request, copies of all pleadings therein and permit the Representatives
to be an observer therein and apprise the Representatives 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 Representatives (or any person controlling such
Representatives) 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 Representatives 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 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
the extent of and only to the extent of their commitment pursuant to Schedule 1,
in the same manner as set forth in subsection 6.01 above, to indemnify and hold
harmless the Company, the directors of the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Act 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 such 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

-14-

<PAGE>

action at their own expense, but such defense shall be conducted by counsel of
recognized standing and 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.

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 Representatives shall have
reasonably objected in writing or have not given their consent.

8.02. ACCURACY OF REGISTRATION STATEMENT. The Representatives 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 Representatives, 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 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

-15-

<PAGE>

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.

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 Representatives.

8.07. OPINION OF COUNSEL. The Company shall have furnished to the
Representatives the opinion, dated the Closing Date, addressed to the
Representatives, from counsel to the Company reasonably acceptable to the
Representatives 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 not required to qualify or register as a
foreign corporation in any state and there are no jurisdictions in which the
Company's ownership of

-16-

<PAGE>

property or its conduct of business requires such qualification or registration
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 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 best of 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.

(vii) The issuance and sale of the Stock, the Warrants, 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, or bylaws of the Company, or any note, indenture,
mortgage, deed of trust, or other material agreement or instrument known to such
counsel 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 best of 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; and the Registration Statement and Prospectus,
and each amendment and supplement thereto, as of the effective issue date comply
as to form in all material respects with the requirements of the Act and the
Rules and Regulations thereunder, all contracts described in the Registration
Statement or Prospectus are sufficiently summarized or described therein or
filed as exhibits thereto as required, and such counsel, to the best of such
counsel's knowledge, does not know of any contracts required to be summarized or
disclosed or filed as exhibits, and such counsel, does

-17-

<PAGE>

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 and is a valid and binding agreement of the Company.

(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 Representatives 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 accounting principles),
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 discussions referred to in clause (iii) above,

-18-

<PAGE>

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, and (2) the
dollar amounts, percentages and other financial information set forth in the
Registration Statement and Prospectus under the captions "Prospectus Summary,"
"Risk Factors," "Dilution," "Capitalization," "Management Stock Option Plan,"
"Principal Shareholders," 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 Representatives
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 Representatives shall reasonably request.

8.09. OFFICERS' CERTIFICATE. The Company shall have furnished to the
Representatives 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.

-19-

<PAGE>

(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 Representatives
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 Representatives 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 Representatives, whose
approval shall not be unreasonably withheld. The suggested form of such
documents shall be provided to the counsel for the Representatives 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 Representatives or to
counsel for the Representatives will be deemed a representation and warranty by
the Company to the Representatives as to the statements made therein.

SECTION 9

TERMINATION

9.01. TERMINATION BECAUSE OF NON-COMPLIANCE. This Agreement may be
terminated by the Representatives 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 Representatives in writing.

9.02. MARKET OUT TERMINATION. This Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the Closing
Date if, in the reasonable judgment of the Representatives, 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
Exchange, or NASDAQ shall have been halted, suspended or

-20-

<PAGE>

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 Representatives 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 Representatives 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 Representatives.

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 Representatives any action or proceeding of which they have been
advised, by or before the Securities and Exchange Commission or any state
securities commission concerning its activities as a broker or dealer, nor has
either of the Representatives 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 Representatives at any time prior to the Closing Date, or in the
event there shall be filed by or against any of the Representatives 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 Representatives to terminate this Agreement without any liability
to the Representatives of any kind except for the payment of all expenses as
provided herein.

-21-

<PAGE>

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 Representatives 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.

-22-

<PAGE>

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.

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

-23-

<PAGE>

ACCEPTANCE AND ACKNOWLEDGMENT PAGE

WE HEREBY CONFIRM AS OF THE DATE HEREOF
THAT THE ABOVE LETTER SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND THE
UNDERWRITER.

Berthel Fisher & Company Financial Services, Inc.
(for itself and as Representative of the members of the Underwriting Group)

By: ____________________________________
Thomas J. Berthel, President

Westport Resources Investment Services, Inc.
(for itself and as Representative of the members of the Underwriting Group)

By: ____________________________________
John Lane, Vice President

Marion Bass Securities Corporation
(for itself and as Representative of the members of the Underwriting Group)

By: ____________________________________
Marion Bass, President

-24-

Exhibit 1.2

__________* Shares

HLM DESIGN, INC.

AGREEMENT AMONG UNDERWRITERS

May ___, 1998

Berthel Fisher & Company Financial Services, Inc.
100 Second Street S.E.
Cedar Raids, Iowa 52401

Westport Resources Investment Services, Inc.
315 Post Road West
Westport, Connecticut 06880

AS REPRESENTATIVES

Gentlemen:

We wish to confirm as follows the agreement among you, the undersigned
and the other Underwriters named in Schedule I to the Underwriting Agreement, as
it is to be executed (all such parties being herein called the "Underwriters"),
with respect to the purchase by the Underwriters severally from the HLM Design,
Inc., (the "Company") of the respective numbers of Shares (hereinafter the
"Shares") set forth in Schedule I to the Underwriting Agreement. The number of
Shares to be purchased by each Underwriter from the Company shall be determined
in accordance with Section 3 of the Underwriting Agreement. It is understood
that changes may be made in those who are to be Underwriters and in the
respective numbers of Shares to be purchased by them, but that the number of
Shares to be purchased by us as set forth in the Underwriting Agreement will not
be changed without our consent except as provided herein and in the Underwriting
Agreement. The obligations of the Underwriters to purchase the number of Shares
set opposite their respective names in Schedule I to the Underwriting Agreement,
as they may be increased by Section 3.01.01 of the Underwriting Agreement, are
herein called their "underwriting obligations." The number of Shares set
opposite our name in said Schedule I, as such number may be increased under said
Section 3.01.01, are herein called "our Shares." For purposes of this Agreement
the following definitions shall be applicable:

<PAGE>

(a) "Manager's Concession" shall be the compensation to you
for acting as Manager as provided in paragraph 1 of not less than forty
percent (40%) of the underwriting discount. The Manager's Concession
shall include the right to all warrants to be issued pursuant to the
Underwriting Agreement and the right of first refusal set forth in
Section 11 of the Underwriting Agreement.

(b) "Underwriting Group Concession" shall mean compensation to
members of the Underwriting Group for assuming the underwriting risk
and shall be not less than fifty percent (50%) of the underwriting
discount on the Shares for which each Underwriter is obligated
hereunder.

(c) "Underwriting Fee" shall mean additional compensation to
members of the Underwriting Group for assuming the underwriting risk
and shall be not less than ten percent (10%) of the underwriting
discount on the Shares for which each Underwriter is obligated
hereunder.

(d) "Dealer's Concession" shall mean compensation to Dealers
who are members of the Selling Group and shall, as to Dealers who have
executed an agreement with you, be not less than fifty percent (50%) of
the underwriting discount.

(e) "Dealer's Reallowance Concession" shall mean the
compensation allowed Dealers by Underwriters other than the Manager and
shall be one-half of the Dealer's Concession.

(f) It is contemplated that the underwriting discount will be
ten percent (10%) of the offering price. You in your absolute
discretion shall determine, within the foregoing limitations, the
precise allocation of the underwriting discount.

1. AUTHORITY AND COMPENSATION OF REPRESENTATIVES. We hereby authorize
you as our Representatives and on our behalf, (a) to enter into an agreement
with the Company substantially in the form attached hereto as Exhibit A (the
"Underwriting Agreement"), but with such changes therein as in your judgment are
not materially adverse to the Underwriters, (b) to exercise all the authority
and discretion vested in the Underwriters and in you by the provisions of the
Underwriting Agreement, and (c) to take all such action as you in your
discretion may deem necessary or advisable in order to carry out the provisions
of the Underwriting Agreement and this Agreement and the sale and distribution
of the Shares, provided that the time within which the Registration Statement is
required to become effective pursuant to the Underwriting Agreement will not be
extended more than 48 hours without the approval of a majority in interest of
the Underwriters (including yourselves). We authorize you, in executing the
Underwriting Agreement on our behalf, to set forth in Schedule I of the
Underwriting Agreement as our commitment to purchase the number of Shares (which
shall not be substantially in excess of the number of shares included in your
invitation to participate unless we have agreed otherwise) included in a wire,
telex, or similar means of communication transmitted by you to us at least 24
hours prior to the commencement of the offering as our finalized underwriting
obligation.

-2-

<PAGE>

As our share of the compensation for your services hereunder, we will
pay you, and we authorize you to charge to our account, a sum equal to the
Manager's Concession.

2. PUBLIC OFFERING. A public offering of the Shares is to be made, as
herein provided, as soon after the Registration Statement relating thereto shall
become effective as in your judgment is advisable. The Shares shall be initially
offered to the public at the public offering price of $_____* per share as
determined by you and the Company. You will advise us by telegraph or telephone
when the Shares shall be released for offering and shall advise us at or prior
to that time of the allocation of the underwriting discount. We authorize you as
Representatives of the Underwriters, after the initial public offering, to vary
the public offering price, in your sole discretion, by reason of changes in
general market conditions or otherwise. The public offering price of the Shares
at the time in effect is herein called the "Offering Price."

We hereby agree to deliver all preliminary and final prospectuses
required for compliance with the provisions of Rule 15c2-8 under the Securities
Exchange Act of 1934 and Section 5(b) of the Securities Act. You have heretofore
delivered to us such preliminary prospectuses as have been requested by us,
receipt of which is hereby acknowledged, and will deliver such final
Prospectuses as will be requested by us.

3. OFFERING TO DEALERS AND GROUP SALES. We authorize you to reserve for
offering and sale, and on our behalf to sell, to institutions or other retail
purchasers (such sales being herein called "Group Sales") and to dealers
selected by you (such dealers being herein called "Dealers") all or any part of
our Shares as you may determine. Such sales of Shares, if any, shall be made (i)
in the case of Group Sales, at the Offering Price, and (ii) in the case of sales
to Dealers, at the Offering Price less the Dealer's Concession.

Any Group Sales shall be as nearly as practicable in proportion to the
underwriting obligations of the respective Underwriters. Any sales to Dealers
made for our account shall be as nearly as practicable in the ratio that the
Shares reserved for our account for offering to Dealers bears to the aggregate
of all Shares of all Underwriters including you so reserved. The over-allotment
option provided for in Section 3.01 to the extent exercised shall be exercised
by you as a Representative of the Underwriters, and shall be exercised only for
the purpose of making Group Sales or sales to Dealers by you. Such sales for our
account of the over-allotment option shall as nearly as practicable be in
proportion to the underwriting obligations of the respective Underwriters. On
any Group Sales or sales to Dealers, including those pertaining to the
over-allotment option, made by you on our behalf we shall be entitled to receive
only the Underwriter's Concession.

You agree to notify us not less than 24 hours prior to the commencement
of the public offering as to the number of Shares, if any, which we may retain
for direct sale. Prior to the termination of this Agreement, you may reserve for
offering and sale as hereinbefore provided any Shares remaining unsold
theretofore retained by us and we may, with your consent, retain any Shares
remaining unsold theretofore reserved by you.

-3-

<PAGE>

Sales to Dealers shall be made under a Selected Dealers Agreement,
attached hereto as Exhibit B, attached hereto and by this reference incorporated
herein. We authorize you to determine the form and manner of any communications
with Dealers, and to make such changes in the Selected Dealers Agreement as you
may deem appropriate. In the event that there shall be any such agreements with
Dealers, you are authorized to act as managers thereunder and we agree, in such
event, to be governed by the terms and conditions of such agreements. Each
Underwriter agrees that it will not offer any of the Shares for sale at a price
below the Offering Price or allow any concession therefrom except as herein
otherwise provided. We as to our Shares may enter into agreements with dealers,
but any Reallowance Concession shall not exceed half of the Dealer's Concession.

It is understood that any person to whom an offer may be made as
hereinbefore provided shall be a member of the National Association of
Securities Dealers, Inc. or dealers or institutions with their principal place
of business located outside of the United States, its territories or possessions
and not registered under the Securities Exchange Act of 1934 who agree to make
no sales within the United States, its territories or possessions or to persons
who are nationals thereof or residents therein and, in making sales, to comply
with the NASD's interpretations with respect to free-riding and withholding.

We authorize you to determine the form and manner of any public
advertisement of the Shares.

Nothing in this Agreement contained shall be deemed to restrict our
right, subject to the provisions of this Section 3, to offer our Shares prior to
the effective date of the Registration Statement, provided that any such offer
shall be made in compliance with any applicable requirements of the Securities
Act of 1933 and the Securities Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission thereunder and of any
applicable state securities laws.

4. REPURCHASES IN THE OPEN MARKET. Any Shares sold by us (otherwise
than through you) which, prior to the termination of this Section or such
earlier date as you may determine, shall be contracted for or purchased in the
open market by you on behalf of any Underwriter or Underwriters, shall be
repurchased by us on demand at a price equal to the cost of such purchase plus
commissions and taxes on redelivery. Any Shares delivered on such repurchase
need not be the identical Shares originally sold by us. In lieu of delivery of
such Shares to us, you may (i) sell such Shares in any manner for our account
and charge us with the amount of any loss or expense or credit us with the
amount of any profit, less any expense, resulting from such sale, or (ii) charge
our account with an amount not in excess of the concession to Dealers on such
Shares.

5. DELIVERY AND PAYMENT. We agree to deliver to you at or before 9:00
a.m., Cedar Rapids Time, on the Closing Date referred to in the Underwriting
Agreement, at your office, a certified or bank cashier's check payable to the
order of [Berthel Fisher & Company Financial Services, Inc./Westport Resources
Investment Services, Inc.]* for the offering price of the Shares less Dealer's
Concession of the Shares which we retained for direct sale by us, the proceeds
of which check shall be delivered by you, in the manner provided in the
Underwriting

-4-

<PAGE>

Agreement, to or for the account of the Company against delivery of certificates
for such Shares to you for our account. You are authorized to accept such
delivery and to give receipts therefor. You may advance funds for Shares which
have been sold or reserved for sale to retail purchasers or Dealers for our
account. If we fail (whether or not such failure shall constitute a default
hereunder) to deliver to you, or you fail to receive, our check and/or payment
for sales made by you for our account for the Shares which we have agreed to
purchase, you, individually and not as Representatives of the Underwriters, are
authorized (but shall not be obligated) to make payment, in the manner provided
in the Underwriting Agreement, to or for the account of the Company for such
Shares for our account, but any such payment by you shall not relieve us of any
of our obligations under the Underwriting Agreement or under this Agreement and
we agree to repay you on demand the amount so advanced for our account.

We also agree on demand to take up and pay for or to deliver to you
funds sufficient to pay for at cost any Shares and other shares of common stock
of the Company purchased by you for our account pursuant to the provisions of
Section 9 hereof, and to deliver to you on demand any Shares sold or
over-allotted by you for our account pursuant to any provision of this
Agreement.

We authorize you to deliver our Shares, and any other shares purchased
by you for our account pursuant to the provisions of Section 9 hereof, against
sales made by you for our account pursuant to any provision of this Agreement.

Upon receipt by you of payment for the Shares sold by us and/or through
you for our account, you will remit to us promptly an amount equal to the
Underwriter's Concession on such Shares. You agree to cause to be delivered to
us, as soon as practicable after the Closing Date referred to in the
Underwriting Agreement, such part of our Shares purchased on such Closing Date
as shall not have been sold or reserved for sale by you for our account.

In case any Shares reserved for sale in Group Sales or to Dealers shall
not be purchased and paid for in due course as contemplated hereby, we agree to
accept delivery when tendered by you of any Shares so reserved for our account
and not so purchased and pay you the offering price less the Dealer's and
Underwriter's Concessions.

6. AUTHORITY TO BORROW. We authorize you to advance your funds for our
account (charging current interest rates) and to arrange loans for our account
for the purpose of carrying out this Agreement, and in connection therewith to
execute and deliver any notes or other instruments and to hold or pledge as
security therefor all or any part of our Shares or any other shares of common
stock of the Company purchased hereunder for our account. Any lending bank is
hereby authorized to accept your instructions as Representatives in all matters
relating to such loans. Any part of our Shares or of such other common stock
held by you may be delivered to us for carrying purposes and, if so delivered,
will be redelivered to you upon demand.

7. ALLOCATION OF EXPENSE AND LIABILITY. We authorize you to charge our
account with and we agree to pay (a) all transfer taxes on sales made by you for
our account, except

-5-

<PAGE>

as herein otherwise provided, and (b) our proportionate share (based on our
underwriting obligations) of all expenses in excess of those reimbursed by the
Company incurred by you in connection with the purchase, carrying and
distribution, or proposed purchase and distribution, of the Shares and all other
expenses arising under the terms of the Underwriting Agreement or this
Agreement. Your determination of all such expenses and your allocation thereof
shall be final and conclusive. Funds for our account at any time in your hands
as our Representative may be held in your general funds without accountability
for interest. As soon as practicable after the termination of this Agreement,
the net credit or debit balance in our account, after proper charge and credit
for all interim payments and receipts, shall be paid to or paid by us, provided
that you in your discretion may reserve from distribution an amount to cover
possible additional expenses chargeable to the several Underwriters.

8. LIABILITY FOR FUTURE CLAIMS. Neither any statement by you, as
Representative of the Underwriters, of any credit or debit balance in our
account nor any reservation from distribution to cover possible additional
expenses relating to the Shares shall constitute any representation by you as to
the existence or non-existence of possible unforeseen expenses or liabilities of
or charges against the several Underwriters. Notwithstanding the distribution of
any net credit balance to us or the termination of this Agreement or both, we
shall be and remain liable for, and will pay on demand, (a) our proportionate
share (based on our underwriting obligations) of all expenses and liabilities
which may be incurred by or for the accounts of the Underwriters, including any
liability which may be incurred by the Underwriters or any of them based on the
claim that the Underwriters constitute an association, unincorporated business,
partnership or any separate entity, and (b) any transfer taxes paid after such
settlement on account of any sale or transfer for our account.

9. STABILIZATION. We authorize you, until the termination of this
Agreement, (a) to make purchases and sales of the shares of common stock of the
Company, in the open market or otherwise, for long or short account, and on such
terms and at such prices as you in your discretion may deem desirable, (b) in
arranging for sales of Shares, to over-allot, and (c) either before or after the
termination of this Agreement, to cover any short position incurred pursuant to
this Section 9; subject, however, to the applicable rules and regulations of the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
All such purchases, sales and over-allotments shall be made for the accounts of
the several Underwriters as nearly as practicable in proportion to their
respective underwriting obligations; provided that our net position resulting
from such purchases and sales and over-allotments shall not at any time exceed,
either for long or short account, 15% of the number of Shares agreed to be
purchased by us.

If you engage in any stabilizing transactions as Representative of the
Underwriters, you shall notify us of that fact. Each of us agrees to file with
you, within five business days following the date of termination of such
transactions, triplicate originals of a report "not as manager" on Form X-17A-1
in accordance with the requirements of Rule 17a-2(e) under the Securities
Exchange Act of 1934. You shall, as such Representative, file such reports with,
and make the requisite reports on such transactions as required by, the
Securities and Exchange Commission in accordance with Rule 17a-2 under the
Securities Exchange Act of 1934.

-6-

<PAGE>

We agree to advise you, from time to time upon request until the
settlement of accounts hereunder, of the number of Shares at the time retained
by us unsold, and we will upon request sell to you for the accounts of one or
more of the several Underwriters such number of our unsold Shares as you may
designate, at the Offering Price less such amount, not in excess of the
concession to Dealers, as you may determine.

10. OPEN MARKET TRANSACTIONS. We agree that except with your consent
and except as herein provided upon advice from you we will not make purchases or
sales on the open market or otherwise or attempt to induce others to make
purchases or sales, either before or after the purchase of the Shares, of any
shares of common stock of the Company, and prior to the completion (as defined
in Rule 10b-6 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of our participation in the distribution, we will
otherwise comply with Rule 10b-6. Nothing in this Section 10 contained shall
prohibit us from acting as broker or agent in the execution of unsolicited
orders of customers for the purchase or sale of any securities of the Company.

11. BLUE SKY. Prior to the initial offering by the Underwriters, you
will inform us as to the states under the respective securities or Blue Sky laws
of which it is believed that the Shares have been qualified or are exempt for
sale, but you do not assume any responsibility or obligation as to the accuracy
of such information or as to the right of any Underwriter or Dealer to sell the
Shares in any jurisdiction. We authorize you, if you deem it unadvisable in
arranging sales of Shares for our account hereunder to sell any of our Shares to
any particular Dealer or other buyer because of the securities or Blue Sky laws
of any jurisdiction, to sell our Shares to one or more other Underwriters at the
Offering Price less, in the case of a sale to a Dealer, such amount, not in
excess of the concession to Dealers thereon, as you may determine. The transfer
tax on any such sales among Underwriters shall be treated as an expense and
charged to the respective accounts of the several Underwriters in proportion to
their respective underwriting obligations.

12. DEFAULT BY UNDERWRITERS. Default by one or more Underwriters in
respect of their obligations under the Underwriting Agreement shall not release
us from any of our obligations. In case of such default by one or more
Underwriters, you are authorized to increase, pro rata with the other
nondefaulting Underwriters, the number of Shares which we shall be obligated to
purchase from the Company, provided that the aggregate amount of all such
increases for all non-defaulting Underwriters shall not exceed 10% of the
Shares, and, if the aggregate number of the Shares not taken up by such
defaulting Underwriters exceeds such 10%, you are further authorized, but shall
not be obligated, to arrange for the purchase by other persons, who may include
yourselves, of all or a portion of the Shares not taken up by such Underwriters.
In the event any such increases or arrangements are made, the respective numbers
of Shares to be purchased by the non-defaulting Underwriters and by any such
other person or persons shall be taken as the basis for the underwriting
obligations under this Agreement, but this shall not in any way affect the
liability of any defaulting Underwriters to the other Underwriters for damages
resulting from such default.

In the event of default by one or more Underwriters in respect of their
obligations under this Agreement to take up and pay for any shares of common
stock purchased by you for their

-7-

<PAGE>

respective accounts pursuant to Section 9 hereof, or to deliver any such shares
of common stock sold or over-allotted by you for their respective accounts
pursuant to any provisions of this Agreement, and to the extent that
arrangements shall not have been made by you for other persons to assume the
obligations of such defaulting Underwriter or Underwriters, each non-defaulting
Underwriter shall assume its proportionate share of the aforesaid obligations of
each such defaulting Underwriter without relieving any such defaulting
Underwriter of its liability therefor.

13. TERMINATION OF AGREEMENT. Unless earlier terminated by you, the
provisions of Sections 2, 3, 4, 6, 9 and 10 of this Agreement shall, except as
otherwise provided therein, terminate thirty full business days after the
effective date of the Registration Statement herein referred to, but may be
extended by you for an additional period or periods not exceeding thirty full
business days in the aggregate. You may, however, terminate this Agreement or
any provisions hereof at any time by written or telegraphic notice to us.

14. GENERAL POSITION OF THE REPRESENTATIVE. In taking action under this
Agreement, you shall act only as agent of the several Underwriters. Your
authority as Representative of the several Underwriters shall include the taking
of such action as you may deem advisable in respect of all matters pertaining to
any and all offers and sales of the Shares, including the right to make any
modifications which you consider necessary or desirable in the arrangements with
Dealers or others. You shall be under no liability for or in respect of the
value of the Shares or the validity or the form thereof, the Registration
Statement, the Prospectus, the Underwriting Agreement or other instruments
executed by the Company or others; or for or in respect of the issuance,
transfer or delivery of any of the Shares; or for the performance by the Company
or others of any agreement on its or their part; nor shall you as such
Representative or otherwise be liable under any of the provisions hereof or for
any matters connected herewith, except for want of good faith, and except for
any liability arising under the Securities Act of 1933; and no obligation not
expressly assumed by you as such Representative herein shall be implied from
this Agreement. In representing the Underwriters hereunder, you shall act as the
Representative of each of them respectively. Nothing herein contained shall
constitute the several Underwriters partners with you or with each other, or
render any Underwriter liable for the commitments of any other Underwriter,
except as otherwise provided in Section 12 hereof. The commitments and
liabilities of each of the several Underwriters are several in accordance with
their respective underwriting obligations and are not joint.

15. ACKNOWLEDGMENT OF REGISTRATION STATEMENT, ETC. We hereby confirm
that we have examined the Registration Statement (including all amendments
thereto) relating to the Shares as heretofore filed with the Securities and
Exchange Commission, that we are familiar with the amendment to the Registration
Statement and the final form of Prospectus proposed to be filed, that we are
willing to accept the responsibilities of an underwriter thereunder, and that we
are willing to proceed as therein contemplated. We further confirm that the
statements made under the heading "Underwriting" in such proposed final form of
Prospectus are correct and we authorize you so to advise the Company on our
behalf. We understand that the aforementioned documents are subject to further
change and that we will be supplied with copies of any amendment or amendments
to the Registration Statement and of any

-8-

<PAGE>

amended Prospectus promptly, if and when received by you, but the making of such
changes and amendments shall not release us or affect our obligations hereunder
or under the Underwriting Agreement.

16. INDEMNIFICATION. Each Underwriter, including you, agrees to
indemnify and hold harmless each other Underwriter and each person who controls
any other Underwriter within the meaning of Section 15 of the Securities Act of
1933, as amended, to the extent of their several commitment under the
Underwriting Agreement and upon the terms that such Underwriter agrees to
indemnify and hold harmless the Company as set forth in Section 6.02 of the
Underwriting Agreement. The agreement contained in this Section 16 shall survive
any termination of this Agreement Among Underwriters.

17. CAPITAL REQUIREMENTS. We confirm that our ratio of aggregate
indebtedness to net capital is such that we may, in accordance with and pursuant
to Rule 15c3-1, promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, agree to purchase the number of Shares we may
be obligated to purchase under any provision of the Underwriting Agreement or
this Agreement.

18. MISCELLANEOUS. We have transmitted herewith a completed
Underwriters' Questionnaire on the form thereof supplied by you. Any notice
hereunder from you to us or from us to you shall be deemed to have been duly
given if sent by registered mail, telegram, teletype, telex, telecopier, graphic
scan, or other written form of telecommunication to us at our address as set
forth in the Underwriting Agreement, or to Berthel Fisher & Company Financial
Services, Inc. at 100 Second Street S.E., Cedar Raids, Iowa 5240, and to
Westport Resources Investment Services, Inc. at 315 Post Road West, Westport,
Connecticut 06880.

We understand that you are each members in good standing of the NASD.
We hereby confirm that we are a member in good standing of the NASD who agrees
to comply with all applicable rules of the NASD, including without limitation,
the NASD's Interpretation with Respect to Free-Riding and Withholding and
Section 24 of Article III of the NASD's Rules of Fair Practice or, if we are not
such a member, we are a foreign dealer not eligible for membership in the NASD
(a) who hereby agree to make no sales within the United States, its territories
or its possessions (except that we may participate in Group Sales under Section
3 above) or to persons who are citizens thereof or residents therein, and, in
making sales to comply with the above-mentioned interpretations in Sections 8,
24 and 36 of the above-mentioned Article III, as if we were an NASD member and
Section 25 of such Article III as it applies to a non-member broker or dealer in
a foreign country, and (b) who in connection with sales and offers to sell Stock
made by us outside the United States, (i) we either furnish to each person to
whom any such sale or offer is made a copy of the then current Preliminary
Prospectus or the Prospectus (as then amended or supplemented if the Company
shall have furnished amendments or supplements thereto), as the case maybe, or
inform such person that such Preliminary Prospectus or Prospectus will be
available upon request, and (ii) will furnish to each person to whom any such
sale or offer is made such prospectus, advertisement or other offering document
containing information relating to the Stock or the Company as may be required
under the law of the jurisdiction in which such sale or offer is made. Any
prospectus, advertisement or other offering document furnished by us

-9-

<PAGE>

to any person in accordance with clause (b)(ii) of the preceding sentence and
any such additional material as we may furnish to any person (i) shall comply in
all respects with the law of the jurisdiction in which it is so furnished; (ii)
shall be prepared and so furnished at our sole risk and expense; and (iii) shall
not contain information relating to the Stock or the Company which is
inconsistent in any respect with the information contained in the then current
Preliminary Prospectus or in the Prospectus (as then amended or supplemented if
the Company shall have furnished any amendments or supplements thereto), as the
case may be.

This instrument may be signed by the Underwriters in various
counterparts which together shall constitute one and the same agreement among
all the Underwriters and shall become effective upon execution. In no event,
however, shall we have any liability under this Agreement if the Underwriting
Agreement is not executed.

Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.

Very truly yours,

BERTHEL FISHER & COMPANY FINANCIAL
SERVICES, INC., as Attorney-in-Fact
for the several Underwriters named
in Schedule I to the Underwriting
Agreement

By: __________________________________
Thomas J. Berthel, President

Confirmed as of the date first above written.

BERTHEL FISHER & COMPANY FINANCIAL
SERVICES, INC., as Representative

By: __________________________________
Thomas J. Berthel, President

WESTPORT RESOURCES INVESTMENT
SERVICES, INC., as Representative

By: __________________________________

-10-

<PAGE>

John Lane, Vice President

-11-

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby irrevocably
constitutes and appoints BERTHEL FISHER & COMPANY FINANCIAL SERVICES, INC. and
WESTPORT RESOURCES INVESTMENT SERVICES, INC., and each or either of them, the
true and lawful agents and attorneys-in-fact of the undersigned with the power
and authority to execute and deliver an Agreement Among Underwriters (which
Agreement Among Underwriters grants to the Representatives of the Underwriters
as named therein the authority to execute the Underwriting Agreement) and to
otherwise act as agents and attorneys-in-fact of the undersigned with respect to
all matters arising in connection with the undersigned's acting as one of the
Underwriters of a proposed offering of:

_____________* SHARES (APPROX.)

THE HLM DESIGN, INC.

COMMON SHARES

(par value $.01 per share)

with full power and authority to execute and deliver for and on behalf of the
undersigned all agreements, consents and documents in connection therewith as
said agents and attorneys-in-fact, or any of them, may deem advisable. The
undersigned hereby gives to said agents and attorneys-in-fact the power and
authority to appoint a substitute or substitutes to act hereunder with the same
power and authority as said agents and attorneys-in-fact, or any of them, would
have if personally acting. The undersigned hereby ratifies and confirms all that
said agents and attorneys-in-fact, or any of them, or any substitute or
substitutes, may do by virtue hereof.

Duly executed at ____________________________ this _____ day of
_____________, 1998.

_____________________________________
(Firm Name)

By___________________________________
Title:_______________________________

-12-

<PAGE>

CORPORATE ACKNOWLEDGMENT

STATE OF _________________ )
) ss:
COUNTY OF _________________ )

On this _____ day of __________, 199____, before me, the
undersigned, a Notary Public in and for the State of Iowa, personally appeared
_______________________________ to me known to be the identical person named in
and who executed the foregoing instrument, and acknowledged that such person, as
the ____________________________________ of __________________________, executed
the same as the voluntary act and deed of such corporation.

________________________________
Notary Public

PARTNERSHIP ACKNOWLEDGMENT

STATE OF _________________ )
) ss:
COUNTY OF _________________ )

________________________________
Notary Public

-13-

<PAGE>

SIGNING PROCEDURE:

As a convenience to the Underwriters, we have instituted the following
procedures:

1. All prospective Underwriters are requested to execute this Power of
Attorney authorizing BERTHEL FISHER & COMPANY FINANCIAL SERVICES, INC. and
WESTPORT RESOURCES INVESTMENT SERVICES, INC., and each or either of them, to
sign the Agreement Among Underwriters on their behalf. Prospective underwriters
are encouraged to read the Agreement Among Underwriters and related agreements
carefully before returning the Power of Attorney to us as it authorizes the
execution of the Agreement Among Underwriters and the Underwriting Agreement on
your behalf.

2. Prior to the anticipated signing of the Underwriting Agreement and
public offering, we will notify you by telegram, teletype, telex, telecopier,
graphic scan or other written form of telecommunication of your finalized
underwriting obligation and the number of shares to be retained by you for sale.

3. Unless BERTHEL FISHER & COMPANY FINANCIAL SERVICES, INC. receives
written notice from you by telegram, teletype, telex, telecopier, graphic scan
or other written form of telecommunication from you (whether or not you received
the notice referred to in Item 2) revoking this Power of Attorney prior to the
time specified in our notice referred to in Item 2, the Agreement Among
Underwriters will be signed on your behalf pursuant to this Power of Attorney.

4. We will in due course send you an executed copy (which may have
facsimile or conformed signatures) of the Agreement Among Underwriters.

<PAGE>

HLM DESIGN, INC.

UNDERWRITERS' QUESTIONNAIRE

INSTRUCTIONS: Execute four copies and promptly forward three to

Berthel Fisher & Company Financial Services, Inc.
Attn: Michael H. Reynoldson
100 Second Street S.E.
Cedar Rapids, Iowa 52401

Dear Sirs:

The following information is supplied in connection with the proposed
offering of ___________* Common Shares, par value $.01 per share (hereinafter,
together with up to _____* additional shares subject to an option to cover
over-allotments, called the "Stock"), of HLM Design, Inc. (hereinafter called
the "Company"). The undersigned, a prospective Underwriter, authorizes you to
deliver a copy of this questionnaire or information included herein to the
Company for use by the Company in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock.

1. Our name, exactly as it should appear in the Prospectus, and our
address are as follows:

2. (Check one) We are a corporation ( ); partnership ( ); sole
proprietorship ( ).

3. Except as indicated below (a) neither we nor any of our directors,
officers or partners have a "material" (as defined in the Rules and Regulations
under the Securities Act of 1933) relationship with the Company or any of its
officers or directors; (b) during the last three years, neither we nor any of
our officers, directors or partners have been an officer or director of the
Company or an "associate" (as defined in such Rules and Regulations) of any of
the officers or directors of the Company or of any person who, to our knowledge,
now owns of record or beneficially more than 10% of any class of voting
securities of the Company; (c) neither we nor any of our directors, officers or
partners, separately or as a group, now owns of record or beneficially more than
1% of any class of voting securities of the Company; (d) other than as may be
stated in the Agreement Among Underwriters, the Underwriting Agreement, the
Selected Dealer Agreement or in the Registration Statement, we do not know of
any arrangements to limit or restrict the sale of the Stock for the period of
distribution, to stabilize the market for the Stock, for withholding
commissions, or otherwise to hold each prospective Underwriter or dealer
responsible for the distribution of his participation in the Stock, or for any
discounts or commissions to be allowed or paid to dealers; (e) other than as set
forth in the Preliminary Prospectus we have no knowledge that more than 5% of
any class of voting securities of the Company is or is to be held subject to any
voting trust or any similar agreement; (f) our proposed commitment to purchase
the Stock will not result in a violation of the financial responsibility
requirements of Rule 15c3-1 under

<PAGE>

the Securities Exchange Act of 1934; (g) none of us, any of our directors,
officers, partners or "persons associated with" us (as defined in the Bylaws of
the National Association of Securities Dealers, Inc. ("NASD"), or, to our
knowledge, any "related person" (defined by the NASD to include counsel,
financial consultants and advisors, finders, members of the selling or
distribution groups and any other persons associated with or related to any of
the foregoing), or any other broker-dealer (i) within the last 18 months has
purchased in private transactions, or intend before, at or within six months
after the commencement of the public offering to purchase in private
transactions, any securities of the Company or any parent or subsidiary thereof
or (ii) within the last 12 months had any dealings with the Company, or any
parent, subsidiary or controlling stockholder thereof (other than relating to
the proposed Purchase Agreement, Agreement Among Underwriters and Selected
Dealer Agreement), as to which documents or information are required to be filed
with the NASD pursuant to its Statement of Policy Concerning Venture Capital and
Other Investments or its Interpretation with Respect to Review of Corporate
Financing, dated March 10, 1970, as amended; (h) we do not intend to confirm
sales of Shares to any accounts over which we exercise discretionary authority.

(State exceptions, if any, or state "No Exceptions.")

4. Set forth below or attached separately is a list of the states under
the laws of which we are registered as a dealer in securities:

5. Except as indicated below, we have not within the past 12 months
prepared or had prepared for us any investment research reports or memoranda
relating to the Company, engineering, management or similar report or memorandum
relating to broad aspects of the business, operations or products of the
Company, and no report or memorandum has been prepared for external use by us in
connection with the proposed offering.

(State "No Exceptions" or list and enclose three copies
of each report or memorandum and describe distribution.)

The undersigned understands that a court has held that it would be
against the public policy manifested by the federal securities laws to permit an
underwriter which has been found to have actual knowledge of false or misleading
statements or omissions contained in a

-2-

<PAGE>

prospectus or an offering circular, to enforce against the issuer of the
indemnity provisions customarily contained in an underwriting agreement. In this
connection, the undersigned represents that it has no actual knowledge of false
and misleading statements in or omissions from the Registration Statement and
that, in accordance with the next paragraph, it will advise you if it becomes
aware of any such statements or omissions.

The foregoing information is correctly stated to the best of our
knowledge, information and belief. We will notify you immediately in the event
of any development before the effective date of the Registration Statement which
makes untrue or incomplete any of the above statements as of such effective
date. You are to consider that there has not been any such development unless
advised to the contrary. We further agree to furnish any such additional
information as you or the Company may reasonably request.

In the event that the Securities and Exchange Commission makes a
cursory or a summary review of the Registration Statement pursuant to Securities
Act Release No. 5231, we authorize you to furnish to the Commission on our
behalf the letter required by the Release acknowledging our awareness that such
cursory or summary review has been made and of our statutory responsibilities
under the Securities Act of 1933.

We agree to deliver all Preliminary Prospectuses and final Prospectuses
required for compliance with the provisions of Rule 15c2-8 under the Securities
Exchange Act of 1934.

We will keep an accurate record of the names and addresses of all
persons to whom we give copies of any Preliminary Prospectus, and, when
furnished with copies of any amended Preliminary Prospectus, we will, upon your
request, promptly forward copies thereof to each such person and keep a record
of such forwarding. We will keep an accurate record of indications of interest
and/or offers to buy received and will deliver a copy of the final form of
Prospectus to each person who purchases any of the Stock.

Very truly yours,

For Corporate Signature

_____________________________________________
(Name of Corporation)

By __________________________________________
(Signature and Title of Authorized Officer)

For Partnership Signature

_____________________________________________

-3-

<PAGE>

_____________________________________________

(Partnership Name)

By __________________________________________

(Partner)

For Sole Proprietorship Signature

_____________________________________________

Dated this ______ day of ____________, 1998.

-4-

<PAGE>

Date:________________________________

RE: Offering of HLM Design, Inc. Common Stock

Your underwriting obligation has been finalized at _________________________
shares.

Your initial retention will be ___________________ shares.

Offering expected ______________________, 1998.

We will execute the Agreement Among Underwriters and Underwriting Agreement on
your behalf pursuant to your Power of Attorney unless we have received notice
revoking same from you by telegram, teletype, telex, telecopier, graphic scan or
similar means of written communication prior to 9:00 a.m. Central Standard Time,
December _____________________*, 1998.

-5-

Exhibit A to 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HLM DESIGN, INC.

ARTICLE I

Name

The name of the corporation is HLM Design, Inc. (the "Corporation").

ARTICLE II

Registered Office and Agent

The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of the Corporation's registered agent at such address is The
Corporation Trust Company.

ARTICLE III

Purpose

The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

ARTICLE IV

Capital Stock

Section 4.01. Authorized Capital Stock. The aggregate number of shares
of capital stock which the Corporation shall have authority to issue is Ten
Million (10,000,000) shares divided into the following classes:

(a) Nine Million (9,000,000) shares of Common Stock with a par
value of one cent ($0.01) per share (the "Common Stock"); and

(b) One Million (1,000,000) shares of Preferred Stock with a
par value of ten cents ($0.10) per share (the "Preferred Stock").

<PAGE>

Section 4.02. Voting. Except as may otherwise be required by law, this
Restated and Amended Certificate of Incorporation or, in the case of Preferred
Stock, the provision of such resolution as may be adopted by the Board of
Directors pursuant to Section 4.04 of this Article IV, each holder of Preferred
Stock and each holder of Common Stock shall have one (1) vote for each share of
Preferred Stock and each share of Common Stock standing in such holder's name on
the stock transfer records of the Corporation with respect to each matter
submitted to a vote of the stockholders.

Section 4.03. Dividends and Distributions on Common Stock.

(a) Subject to the preferential rights, if any, of the holders
of Preferred Stock, the holders of Common Stock shall be entitled to receive
such dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefor.

(b) After distribution in full of the preferential amount, if
any, to be distributed to the holders of Preferred Stock in the event of
voluntary or involuntary liquidation (either partially or completely),
distribution or sale of assets, dissolution or winding up of the Corporation,
the holders of the Common Stock shall be entitled to receive all the remaining
assets of the Corporation, tangible and intangible, of whatever kind available
for distributions to stockholders, ratably in proportion to the number of shares
of Common Stock held by each.

Section 4.04. Preferred Stock.

The Preferred Stock may be issued from time to time in one or
more series, each series to have distinctive designations. The powers,
preferences and rights of each such series of Preferred Stock and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series of Preferred Stock at any time outstanding.
The Board of Directors is hereby expressly granted the authority to cause the
Preferred Stock to be issued in one or more series and, with respect to each
such series, to fix by resolutions, the following characteristics prior to the
issuance thereof:

(a) The designation of the series, which may be by
distinguishing number, letter or title;

(b) The number of shares of the series, which number the Board
of Directors may (except as otherwise provided in the creation of the series)
increase or decrease (but not below the number of shares thereof then
outstanding);

(c) The voting rights of the shares of the series, which
rights may be full or limited, or which shares may be without voting power;

(d) The dividend rights of the shares of the series, if any,
including without limitation the dividend rates, the dividend payment dates,
whether dividends will be cumulative, any conditions for payment and any payment
preferences in relation to the dividends payable on any other class or classes
or series of stock of the Corporation;

<PAGE>

(e) The redemption rights, if any, and the price or prices for
the shares of the series;

(f) Sinking funds requirements, if any, for the purchase or
redemption of shares of the series;

(g) Rights upon liquidation, dissolution or winding up of the
Corporation or upon the distribution of the assets of the Corporation;

(h) Whether the shares of the series shall be convertible into
shares of any other class or classes or into shares of any other series of the
same or of any other class or classes of stock, and if so, the conversion price,
any adjustments thereof and all other terms and conditions upon which such
conversion may be made; and

(i) Such other powers, preferences, rights, qualifications,
limitations or restrictions as the Board of Directors shall determine;

all as shall be stated in the resolution or resolutions of the Board of
Directors providing for the issuance of such series of Preferred Stock.

The relative powers, preferences and rights of each series of
Preferred Stock in relation to the powers, preferences and rights of each other
series of Preferred Stock shall, in each case, be as fixed from time to time by
the Board of Directors in the resolution or resolutions adopted pursuant to the
authority granted in this Section 4.04, and the consent, by class or series vote
or otherwise, of the holders of Preferred Stock of such of the series of
Preferred Stock as are from time to time outstanding shall not be required for
the issuance by the Corporation, acting at the direction of the Board of
Directors, of any other series of Preferred Stock, regardless of whether the
powers, preferences and rights of such other series shall be fixed by the Board
of Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them, unless and to the extent that
the Board of Directors may provide in such resolution or resolutions adopted
with respect to any series of Preferred Stock that the consent of the holders of
a majority (or such other proportions as shall be therein fixed) of the
outstanding shares of such series voting thereon shall be required for the
issuance of any or all other series of Preferred Stock.

The shares of any series of Preferred Stock that (i) have been
redeemed by the Corporation in accordance with the express terms thereof, (ii)
are purchased in satisfaction of any sinking fund requirements provided for
shares of such series, or (iii) are converted in accordance with the express
terms thereof, in each case shall be cancelled and not reissued. Any shares of
Preferred Stock otherwise acquired by the Corporation shall resume the status of
authorized and unissued shares of Preferred Stock without series designation.

Section 4.05. No Preemptive Rights. No holder of shares of any class of
stock of the Corporation shall, as such holder, have any preemptive right to
purchase shares of any class of stock of the Corporation or shares or other
securities convertible into or exchangeable for or carrying rights or options to
purchase shares of any class of stock of the Corporation, whether such class of
stock, shares or other securities are now or hereafter authorized, which at any
time may be proposed

<PAGE>

to be issued by the Corporation or subjected to rights or options to purchase
granted by the Corporation.

Section 4.06. Cumulative Voting. Cumulative voting of shares is
prohibited.

ARTICLE V

Amendment of Bylaws

In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the Bylaws of the Corporation by a majority vote at any regular or
special meeting of the Board of Directors or by written consent, subject to the
power of the stockholders of the Corporation to amend or repeal any Bylaw
whether adopted by the Board of Directors or the stockholders.

ARTICLE VI

Limitation of Liability

No director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except that the foregoing provision shall not
eliminate or limit the liability of a director (i) for any breach of such
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which such director derived an
improper personal benefit. If the Delaware General Corporation Law hereafter is
amended to authorize the further elimination or limitation on personal liability
of directors, then the liability of a director of the Corporation, in addition
to the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law.

ARTICLE VII

Amendment of Certificate of Incorporation

Any of the provisions of this Amended and Restated Certificate of
Incorporation may, from time to time, be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws
and, subject to the provisions of Section 4.02 hereof, all rights at any time
conferred upon the stockholders of the Corporation by this Amended and Restated
Certificate of Incorporation are granted subject to the provisions of this
Article VII.

<PAGE>

ARTICLE VIII

Board of Directors

Section 8.01. Elections. Elections of directors need not be by written
ballot unless and except to the extent that the Bylaws of the Corporation shall
so require.

Section 8.02. Vacancies. Subject to any rights of the holders of
Preferred Stock, vacancies occurring in the Board of Directors, including any
vacancy resulting from any increase in the authorized number of directors,
removal, resignation or death, may only be filled by the affirmative vote of a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next election of the class for which such directors have been chosen, and until
their successors are duly elected and qualified, or until their successors are
duly elected and qualified, or until their earlier resignation or removal. In
the event of any increase or decrease in the number of directors, the additional
or eliminated directorships shall be classified or chosen so that all classes of
directors shall remain or become as nearly equal in number as possible.

<PAGE>

CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HLM DESIGN, INC.

Pursuant to Sections 242 and 228 of the
General Corporation Law of the
State of Delaware

****************************
HLM DESIGN, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation") DOES HEREBY CERTIFY:

FIRST: That Section 4.01(a) of the Amended and Restated Certificate of
Incorporation of the Corporation is amended in its entirety to read as follows:

(a) Nine Million (9,000,000) shares of Common Stock with a par value of
one-tenth of one cent ($0.005) per share (the "Common Stock"); and

SECOND: That the foregoing amendment has been duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware and by the written consent of the majority of stockholders
of the Corporation in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, HLM Design, Inc. has caused its corporate seal to
be hereunto affixed and this amendment to its Amended and Restated Certificate
of Incorporation to be signed by Vernon B. Brannon, its Senior Vice President,
and attested by Jean Irwin, its Secretary, this 3rd day of February, 1998.

HLM DESIGN, INC.

By: /s/ Vernon B. Brannon
--------------------------
Vernon B. Brannon
Senior Vice President
[CORPORATE SEAL]

ATTEST:

By: /s/ Jean Irwin
--------------------------
Jean Irwin, Secretary

<PAGE>

CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HLM DESIGN, INC.

Pursuant to Sections 242 and 228 of the
General Corporation Law of the
State of Delaware

****************************

HLM DESIGN, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation") DOES HEREBY CERTIFY:

FIRST: That Section 4.01(a) of the Amended and Restated Certificate of
Incorporation of the Corporation is amended in its entirety to read as follows:

(a) Nine Million (9,000,000) shares of Common Stock with a par value of
one-tenth of one cent ($0.001) per share (the "Common Stock"); and

HLM DESIGN, INC.

By: /s/ Vernon B. Brannon
--------------------------
Vernon B. Brannon
Senior Vice President
[CORPORATE SEAL]

ATTEST:

By: /s/ Jean Irwin
--------------------------
Jean Irwin, Secretary

COMMON STOCK COMMON STOCK

[HLM DESIGN LOGO GOES HERE]

INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE

THIS CERTIFICATE TRANSFERABLE IN
CHARLOTTE, NORTH CAROLINA CUSIP 404217 10 1
OR NEW YORK, NEW YORK SEE REVERSE FOR CERTAIN DEFINITIONS

HLM DESIGN, INC.

This Certifies that

is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS A COMMON STOCK,
PAR VALUE $0.001 PER SHARE OF

HLM DESIGN, INC. transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed.

This Certificate is not valid unless countersigned by the Transfer Agent
and registered by the Registrar.

<TABLE>
<S> <C> <C>
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

Dated: [HLM DESIGN SEAL
GOES HERE]
/s/ Vernon B. Brannon /s/ Joseph M. Harris
Senior Vice President, Chief Financial Officer President and Chairman
and Treasurer

</TABLE>

[SIGNATURE LANGUAGE HORIZONTALLY TURNED 90 DEGREES TO THE RIGHT, CENTER EDGE OF
THE CERTIFICATE AND COPY READS AS SUCH:]

COUNTERSIGNED AND REGISTERED:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
(Charlotte, North Carolina) TRANSFER AGENT
AND REGISTRAR

AUTHORIZED SIGNATURE

<PAGE>

HLM DESIGN, INC.

HLM Design, Inc. will furnish to each stockholder a statement of the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions or such preferences and rights upon request
therefor.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM- as tenants in common
TEN ENT- as tenants by the entireties
JT TEN- as joint tenants with
right of survivorship and not as tenants in common

UNIF TRANS MIN ACT-___________Custodian________________
(Cust) (Minor)

under Uniform Transfers to Minors
Act ____________________________________________________
(State)

Additional abbreviations may also be used though not in the above list.

For Value received, __________________________________________hereby sell,
assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------------

- -----------------------------------------

- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE

- -------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- ------------------------------------------------------------------------ Shares

of the Class A Common Stock represented by the within Certificate, and
do hereby irrevocably constitute and appoint __________________________________

_________________________________________________________________, Attorney, to

transfer the said shares on the books of the within named Corporation with full
power of substitution.

Dated, _______________________________

X __________________________________________

X___________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.

SIGNATURE(S) GUARANTEED:_______________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION, (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

KEEP THIS CERTIFICATE IN A SAFE PLACE, IF IT IS LOST, STOLEN, OR DESTROYED, THE
CORPORATION MAY REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF
A REPLACEMENT CERTIFICATE.

Exhibit 4.2

This Warrant has been sold pursuant to an exemption from registration under the
Securities Act of 1933 and state securities statues requiring the purchaser to
hold such Warrant for investment. The Warrant may not be resold or otherwise
transferred unless the Warrant has been registered under said Act and state
securities statutes or the holder of the Warrant obtains an opinion of counsel
reasonably satisfactory to HLM DESIGN, INC. that such transfer is exempt from
such registration.

WARRANT

HLM DESIGN, INC.
(hereinafter referred to as the "Company")

Right to purchase __________________________* (______*)
shares (the "Warrant Shares") of Common Stock of the Company
(the "Common Stock") at a price per share of $__________ [120%
of Offering Price], exercisable in whole or in part at any
time during the term set forth herein.

THIS CERTIFIES THAT, for value received,__________________________ [the
Underwriter] (hereinafter the "Holder"), its successors and assigns, is entitled
to purchase and receive the aforementioned number of shares of the common stock
of the Company at the time of exercise upon payment of the aforementioned price
per share or an aggregate price of ______________________* Dollars
($___________*).

The obligations of the Company and the rights of the Holder pursuant to
this Warrant are subject to the following terms and conditions:

I. DEFINITIONS

A. "Holder" means _____________________________ and its heirs,
successors and assigns. If there is more than one Holder at
any time, each such Holder shall be entitled to the rights and
privileges granted hereunder.

B. "Company" means HLM DESIGN, INC. and its successors and
assigns.

C. "Registration," "register" and like words mean compliance with
all of the laws, rules, regulations and provisions of
agreements and corporate documents pertaining to lawful and
unconditional transfer of the securities by way of a public
offering or distribution, including Regulation A, when
applicable.

D. "Security" means this Warrant, shares of stock of all classes,
types and services, and all rights, however evidenced or
contained, convertible or exercisable or exchangeable into
such shares.

E. "Agreement" means the Underwriting Agreement dated May _____,
1998 entered into by the Company and Holder.

<PAGE>

II. TERM

This Warrant shall expire upon the earlier of (i) the fifth (5th)
anniversary date hereof, or (iii) thirty (30) days after the Holder has received
written notice of the consolidation or merger of the Company to or with any
corporation or corporations (other than a merger with another corporation in
which the holders of Common Stock receive stock in the surviving corporation as
the sole form of consideration), the sale or transfer by the Company of all or
substantially all of its assets for cash, the acquisition by person or "group"
(as such term is defined pursuant to Rule 13d-3 pursuant to the Securities
Exchange Act of 1934, as amended) of all of the then outstanding shares of
Common Stock (the "Expiration Date").

III. EXERCISE PRICE

The exercise price for each share of Common Stock shall be
$____________ per share.

IV. EXERCISE

A. This Warrant shall become exercisable one (1) year after the
date hereof. This Warrant may be exercised in whole or in part
at any time or times on or before the Expiration Date.

B. This Warrant and the rights of the Holder hereunder shall be
exercised by delivery (for notation in the case of partial
exercise, or surrender in the case of total exercise) of this
Warrant and of a signed subscription agreement in form
attached hereto as Exhibit A specifying the portion of this
Warrant exercised, and by payment to the Company by certified
check or bank draft of the exercise price for such shares.

C. The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but
unissued stock for the purpose of issuance of the Warrant
Shares upon exercise of this Warrant, such number of its duly
authorized shares of Common Stock as shall from time to time
be sufficient to effect the exercise thereof in whole.

V. THERE IS NO SECTION V.

VI. TRANSFER

A. This Warrant shall be registered on the books of the Company,
which shall be kept at its principal office for that purpose
and shall be transferable in whole or in part only on said
books by the registered Holder hereof in person or by duly
authorized attorney.

B. This Warrant may be transferred, in whole or in part, only (i)
pursuant to operation of law, (ii) to persons who are both
officers and shareholders of the Holder; or (iii) to employees
of the Holder.

VII. THERE IS NO SECTION VII.

VIII. CONSIDERATION

This Warrant is referred to in the Agreement. The Company acknowledges
that the consideration for the issuance of this Warrant was the execution and
performance of the Agreement and other good and valuable consideration.

<PAGE>

IX. INFORMATION

The Holder shall be entitled to receive all notices, communications and
information mailed, delivered or made available to shareholders of the Company.
The address for the Holder is 100 Second Street S.E., Cedar Rapids, IA 52401.

IX. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina.

IX. MISCELLANEOUS

The subject headings contained in this Warrant are for convenience only
and shall not control or affect in any way the meaning or interpretation of the
provisions of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered and its seal placed hereon by its duly authorized officer
at Cedar Rapids, Iowa, this day of May, 1998.

HLM DESIGN, INC.

By:___________________________
____________, _____________

<PAGE>

EXHIBIT A TO WARRANT

FORM OF SUBSCRIPTION PURSUANT TO WARRANT

The undersigned, holder or assignee of such holder of the foregoing
Warrant of HLM DESIGN, INC., hereby (i) subscribes for ________________________
(______________) shares of stock which the undersigned is entitled to purchase
under the terms of the Warrant, and (ii) directs that the stock issuable upon
exercise of the Warrant be issued and delivered to the following named
person(s), payment of the exercise price to be made on delivery as follows:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

DATED:_____________________________

____________________________________________
(Name)

____________________________________________
(Address)

Signature ____________________________________________

EXHIBIT 5.1

(Parker, Poe, Adams & Bernstein L.L.P. Letterhead)

__________, 1998

Board of Directors
HLM Design, Inc.
121 West Trade Street, Suite 2950
Charlotte, North Carolina

Dear Sirs:

We are acting as counsel to HLM Design, Inc., a Delaware corporation
(the "Company"), in connection with the preparation, execution, filing and
processing, with the Securities and Exchange Commission (the "Commission"),
pursuant to the Securities Act of 1933, as amended (the "Act"), of a
Registration Statement (No. 333- 40617) on Form S-1 (as amended through the date
hereof, the "Registration Statement") and the issuance and sale of the Shares
referred to below. This opinion is furnished to you for filing with the
Commission pursuant to Item 601(b)(5) of Regulation S-K promulgated under the
Act.

The Registration Statement covers the issuance and sale of up to
1,380,000 shares (the "Shares") of Common Stock, par value $.001 per share (the
"Common Stock"), consisting of 1,200,000 shares to be offered by the Company,
and up to 180,000 shares that the several underwriters to be party to the
Underwriting Agreement referred to below (the "Underwriters") will have an
option to purchase from the Company solely to cover over-allotments. The Shares
are proposed to be sold pursuant to an Underwriting Agreement among the Company,
Berthel Fisher & Co. Financial Services, Inc., Westport Resources, Inc., and
Marion Bass Securities Corporation, as representatives of the Underwriters, a
form of which Underwriting Agreement is filed as Exhibit 1.1 to the Registration
Statement (the "Underwriting Agreement").

In our representation of the Company, we have examined the Registration
Statement, the Underwriting Agreement, the Company's Amended and Restated
Certificate of Incorporation and Bylaws, each as amended to date, all applicable
actions of the Company's Board of Directors recorded in the Company's minute
book, the form of certificate evidencing the Shares and such other documents as
we have considered necessary for purposes of rendering the opinions expressed
below.

<PAGE>

Board of Directors
HLM Design, Inc.
________________, 1998
Page 2

Based upon the foregoing, we are of the following opinion:

1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.

2. The completion, execution, attestation, issuance and delivery
against payment by the Company of the Shares pursuant to the
terms of the Underwriting Agreement have been duly authorized
by all necessary corporate action on behalf of the Company.

3. When (a) the Underwriting Agreement in definitive form shall
have been duly completed by including therein the purchase
price of the Shares and related terms, (b) the Underwriting
Agreement as so completed shall have been duly executed and
delivered by or on behalf of the Underwriters and by or on
behalf of the Company, and (c) the Shares shall have been duly
completed, executed, attested, issued, delivered and paid for
in accordance with the terms of the Underwriting Agreement,
then the Shares will be validly issued, fully paid and
nonassessable.

The opinions expressed herein are limited to the laws of the State of
North Carolina, the General Corporation Law of the State of Delaware and the
Act.

We hereby consent to the use of this opinion letter as Exhibit 5.1 to
the Registration Statement and to the use of our name under the heading "Legal
Matters" in related prospectuses. In giving this consent, we do not admit that
we are in the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Commission promulgated thereunder.

Very truly yours,

Parker, Poe, Adams & Bernstein L.L.P.

(Intentionally Left Blank)

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

To the Board of Directors and Stockholders

We consent to the use in this Amendment No. 3 to the Registration Statement
relating to the shares of Common Stock of HLM Design, Inc. on Form S-1 of our
report dated (i) November 11, 1997 (January 30, 1998, February 13, 1998 and
February 27, 1998 as to the last paragraph in Note 1) on the financial
statements of HLM Design, Inc. as of April 25, 1997 and for the period ended
April 25, 1997, (ii) our report dated October 31, 1997 on the financial
statements of Hansen Lind Meyer, Inc. as of April 26, 1996 and April 25, 1997
and for each of the three years in the period ended April 25, 1997 appearing in
the Prospectus, which is a part of this Amendment No. 3 to the Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.

DELOITTE & TOUCHE LLP

Charlotte, North Carolina
April 10, 1998