SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
HLM Design, Inc.
(Name of Issuer)
Common Stock, Par Value $.001 Per Share
(Title of Class of Securities)
404217 10 1
(CUSIP Number)
Gary C. Ivey, Esq.; Parker, Poe, Adams & Bernstein, L.L.P.;
2500 Charlotte Plaza, Charlotte, NC 28244;
Telephone (704) 372-9000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 12, 1997
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box |_|.
(Continued on following pages)
Page 1 of 7 Pages
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CUSIP NO. 404217 10 1 13D PAGE 2 OF 7 PAGES
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- ---------------------------------- ----------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Vernon B. Brannon
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|_|
(b)|X|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF; BK
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT
TO ITEM 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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NUMBER OF 7 SOLE VOTING POWER
SHARES 367,141. See Items 5 and 6.
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
----------------------------------------------------
8 SHARES VOTING POWER
-0-
----------------------------------------------------
9 SOLE DISPOSITIVE POWER 367,141. See Items 5
and 6.
----------------------------------------------------
10 SHARES DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
367,141.
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.2%.
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14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 7 Pages
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ITEM 1. SECURITY AND ISSUER.
This Schedule is filed with respect to the common stock, par
value $.001 per share (the "Common Stock"), of HLM Design,
Inc., a Delaware corporation (the "Company"). All information
herein gives effect to an effective 12.75-to-1 stock split
(effected in a series of transactions) of the Company's Common
Stock as described in the Company's Registration Statement on
Form S-1 (Registration No. 333-40617) on file with the
Securities and Exchange Commission (the "Registration
Statement"). The principal executive offices of the Company
are located at 121 West Trade Street, Suite 2950, Charlotte,
North Carolina 28202.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule is filed on behalf of a Vernon B. Brannon. Mr.
Brannon, a United States citizen, is Senior Vice President of
the Company, whose business address is 121 West Trade Street,
Suite 2950, Charlotte, North Carolina 28202.
During the last five years, Mr. Brannon has not been convicted
in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or been party to a civil proceeding of a
judicial or administrative body of competent jurisdiction that
resulted in a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The 367,141 shares of Common Stock reported by this Schedule
as beneficially owned by Mr. Brannon (the "Shares") include
261,375 shares acquired by Mr. Brannon as of March 20, 1997,
in connection with the original organization of the Company
for $1,000 in cash from Mr. Brannon's personal funds. Mr.
Brannon purchased an additional 47,812 shares as of March 2,
1998, from a former director in a privately negotiated
transaction for total consideration of $100,000. Such amount
was financed through a loan from a bank in the ordinary course
of its business. For information concerning the additional
57,954 shares reported herein (which are the subject of
options), see Items 5 and 6 below.
ITEM 4. PURPOSE OF TRANSACTION.
Mr. Brannon acquired the Shares in connection with the
original organization of the Company and in anticipation of
the Company's initial public offering of its Common Stock (the
"IPO"). Such IPO was effected pursuant to the Registration
Statement. His purpose in acquiring the Shares was to continue
to exercise influence and control over the Company. Except as
indicated below (and as contemplated in the Registration
Statement), Mr. Brannon has no present plans or proposals that
relate to or would result in:
Page 3 of 7 Pages
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(a) the acquisition by any person of additional securities of
the Company, or the disposition of securities of the Company;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company;
(c) a sale or transfer of a material amount of assets of the
Company;
(d) any change in the present Board of Directors or management
of the Company, including any plans or proposals to change the
number or term of directors or to fill any existing vacancies
on the board;
(e) any material change in the present capitalization or
dividend policy of the Company;
(f) any other material change in the Company's business or
corporate structure;
(g) changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person;
(h) causing a class of securities of the Company to be
delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of
a registered national securities association;
(i) a class of equity securities of the Company becoming
eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934, as amended;
or
(j) any action similar to any of those enumerated above.
The Company's Board of Directors currently consists of four
directors. The Company's bylaws provide for a Board consisting
of five to seven directors. As provided in the bylaws, such
vacancy shall be filled by action of the current directors.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
The 367,141 Shares constitute approximately 17.2% of the
Common Stock outstanding at the date of filing of this
Schedule. Of such amount, 57,954 Shares (2.7%) are shares Mr.
Brannon has a right to acquire upon exercise of currently
exercisable options. See Item 6.
Mr. Brannon has effected no transactions in the Common Stock
during the past 60 days.
Page 4 of 7 Pages
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Mr. Brannon has sole voting and dispositive power over the
Shares. But see Item 6 below.
ITEM 6. CONTRACTS, ARRANGEMENTS. UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
As indicated in Item 3, Mr. Brannon's purchase of a portion of
the Shares has been financed through a bank in the ordinary
course of the bank's business. Such bank financing includes a
standard stock pledge with respect to the Shares and standard
default and other provisions.
Mr. Brannon has signed a Security Holder Acknowledgment
directed to Berthel Fisher & Company Financial Services, Inc.,
Westport Resources Investment Services, Inc. and Marion Bass
Securities Corporation, as the representatives of the
underwriters of the Company's IPO. Pursuant to such Security
Holder Acknowledgment, Mr. Brannon has agreed not to offer or
sell any of the Shares for a period of twelve months from the
effective date of the Registration Statement. See Exhibit 1.
Mr. Brannon has also entered into a Security Escrow Agreement
with the Company dated as of June 18, 1998, with respect to
the Shares pursuant to which all Common Stock owned by him is
escrowed for a period of three years from the date of
acquisition thereof, subject to prior release if (i) the
market price of the Common Stock exceeds 175% of the initial
public offering price for at least 90 consecutive trading days
after at least one year from the date of effectiveness of this
Registration Statement, or (ii) the Company achieves certain
earnings results for two consecutive fiscal years.
Notwithstanding the foregoing, Mr. Brannon has further agreed
with the Company pursuant to a letter agreement dated June 12,
1998, that such Common Stock shall not be released from escrow
pursuant to (i) or (ii) above to the extent such release would
result in the recognition of compensation expense to the
Company in connection therewith. Such Security Escrow
Agreement also prohibits the transfer of the Shares prior to
their release from escrow except in certain limited
circumstances. Mr. Brannon retains voting rights with respect
to the Shares. Any dividends paid by the Company during the
escrow period shall also be subject to the escrow. See
Exhibits 2 and 3.
For a description of stock options granted to Mr. Brannon with
respect to 57,954 of the Shares, see Exhibits 4 through 7.
Page 5 of 7 Pages
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit No. Description
- ----------- -----------
1 Security Holder Acknowledgment dated June 12, 1998
2 Security Escrow Agreement dated June 18, 1998
3 Letter Agreement dated June 12, 1998
4 "Management--Stock Option Plan" excerpted from the Registration
Statement
5 Form of HLM Design, Inc. 1998 Stock Option Plan (incorporated
by referenced to Exhibit 10.23 to the Registration Statement)
6 Nonstatutory Stock Option Agreement and Grant Pursuant to HLM
Design, inc. 1998 Stock Option Plan
7 Statutory Incentive Stock Option Agreement and Grant Pursuant to
HLM Design, inc. 1998 Stock Option Plan
Page 6 of 7 Pages
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SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief,
we certify that the information set forth in this statement is true, complete
and correct.
Date: June 22, 1998
/s/ Vernon B. Brannon
----------------------
Vernon B. Brannon
Page 7 of 7 Pages
Exhibit 1
SECURITY HOLDER ACKNOWLEDGMENT
The undersigned, pursuant to Section 5.12 of the Underwriting Agreement between
HLM Design, Inc. (the "Company") and Berthel Fisher & Company Financial
Services, Inc. ("Berthel"), Westport Resources Investment Services, Inc.
("Westport") and Marion Bass Securities Corporation ("Marion Bass") (Westport
and Marion Bass together with Berthel, the "Managers"), of even date herewith,
being all of the officers, directors, or employees of the Company who
individually own 5% or more of shares of the Company (based on the number of
shares outstanding as of the date hereof) agree and acknowledge that they shall
not directly or indirectly offer or sell to the public, or privately, any
portion of the shares of common stock of the Company owned by such persons prior
to the date of the Underwriting Agreement or hereafter acquire by exercise of an
option, for a period of twelve months from the date of the Underwriting
Agreement without the prior written consent of Berthel. the undersigned
acknowledge that the delivery of this Acknowledgment is a condition of the
agreement of the Managers to enter into the Underwriting Agreement with the
Company, and that execution by the Managers of the Underwriting Agreement
confers upon the undersigned substantial benefits, and is consideration for the
execution by the undersigned of this Acknowledgment. If the Managers shall fail
to perform their obligations pursuant to Section 3 of the Underwriting
Agreement, as extended or waived in writing by the Company, the undersigned
shall have no further obligation hereunder following the Closing Date set forth
in the Underwriting Agreement.
/s/Joseph M. Harris June 12, 1998
- -------------------------- ---------------------------
Date
/s/Vernon B. Brannon June 12, 1998
- -------------------------- ---------------------------
Date
EXHIBIT 2
SECURITY ESCROW AGREEMENT
THIS ESCROW AGREEMENT made and entered into this 18th day of June,
1998, among the persons and parties who have signed this Agreement as security
holders (herein collectively referred to as the "Security Holders"), HLM Design,
Inc., a Delaware corporation (the "Issuer"), and First Union National Bank (the
"Escrow Agent");
WITNESSETH THAT:
A. Each of the Security Holders is the owner of the number of shares of
common stock, par value $.001 per share (the "Common Stock") of the Issuer or
possesses options to acquire shares of Common Stock of the Issuer listed
opposite his or its name on Exhibit A attached hereto.
B. The Issuer has applied to the state securities administrators of
certain states for registration of 1,200,000 shares of Common Stock for sale to
the residents of such states (the "Registration"). As a condition of such
Registration, certain administrators (the "Administrators") have required that
the Security Holders, the Escrow Agent and the Issuer enter into this Agreement
and agree to be bound by applicable rules and regulations of the Administrators
pertaining to such agreements.
C. Each of the Security Holders has deposited the securities listed
opposite his or its name and documents evidencing options to acquire the
securities on Exhibit A with the Escrow Agent, and the Escrow Agent hereby
acknowledges receipt thereof. Such securities are herein collectively referred
to as "Escrowed Stock" or "Shares".
NOW, THEREFORE, the persons and parties hereto agree as follows:
1. DEPOSIT OF CERTIFICATES. Simultaneously with the execution of this
Agreement, each Security Holder is depositing with the Escrow Agent, and the
Escrow Agent hereby acknowledges receipt of, the certificates and documents
representing the Escrowed Stock listed on Exhibit A. At the written request of
the Issuer, the Escrow Agent shall make available to the Issuer and any affected
Securities Holder, such documents as are necessary to exercise the foregoing
options to acquire Shares.
2. TERM. The term of this Agreement shall commence on the date that the
Registration is declared effective by the Administrators. The certificates or
documents evidencing the Shares are to be deposited with the Escrow Agent and
are to be held pursuant hereto, for a period of three years from the date of
acquisition of such Shares unless released earlier in accordance with the terms
of this Agreement.
<PAGE>
3. RELEASE OF SHARES. The Shares shall be released to Security Holders
prior to the end of the term provided in paragraph 2 above as follows:
a. One-hundred percent (100%) of the Shares shall be
released from escrow after the Issuer has had annual
net earnings per share as determined in accordance
with generally accepted accounting principles
(GAAP) equal to, or greater than, seven and one-half
percent (7.5%) of the per share public offering
price, after taxes and excluding extraordinary items,
for any two consecutive fiscal years after the dated
of effectiveness; or,
b. One-hundred percent (100%) of the Shares shall be
released from escrow after the Issuer's Shares have
traded in a reliable public market at a price of at
least one-hundred seventy-five percent (175%) of the
initial public offering price for at least ninety
(90) consecutive trading days after at least one year
from the date of effectiveness.
4. DOCUMENTATION TO ESCROW AGENT REGARDING RELEASE OF SHARES. A request
for termination of the escrow, based on the satisfaction of either paragraph
3.a. or 3.b. above, shall be forwarded to the Escrow Agent. A request for
termination of the escrow based upon paragraph 3.a shall be accompanied by an
earnings per share calculation audited and reported on by an independent
certified public accountant.
5. TERMINATION OR PARTIAL OFFERING. The foregoing notwithstanding, the
Shares will be released by the Escrow Agent if the public offering has been
terminated and no securities were sold pursuant thereto.
6. RESTRICTION ON TRANSFER. The Escrowed Stock may be transferred by
will, or pursuant to the laws of descent and distribution, or through
appropriate legal proceedings, but in all cases the Shares shall remain in
escrow and subject to the terms of this Agreement until released pursuant to
paragraph 2 or paragraph 3 above. Upon the death of the holder of any Escrowed
Stock, the Escrowed Stock of the deceased holder may be hypothecated, subject to
all of the terms of this Agreement, to the extent necessary to pay the expenses
of the estate. The Shares in escrow may be transferred by gift to family
members, provided that the Shares shall remain subject to the terms of this
Agreement. The Shares may not be pledged to secure a debt except as noted above,
and except that Joseph M. Harris and Vernon B. Brannon shall each be permitted
to maintain the pledge of 70,000 Shares currently provided to First Charter
National Bank to secure certain indebtedness.
7. VOTING POWER. The Escrowed Stock shall have all voting rights to
which the non-escrowed shares are entitled.
8. DIVIDENDS. Any dividends paid on the Shares shall be paid to the
Escrow Agent by checks of the Issuer made payable to the Escrow Agent with a
notation of this
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Agreement thereon, and any such dividends shall be held pursuant to the terms of
this Agreement. The Escrow Agent shall treat such dividends as assets of the
Issuer, available for distribution under the terms of paragraph 9 below, except
as provided herein. The Escrow Agent shall place the dividends in an interest
bearing account. The dividends and the interest earned thereon will be disbursed
in proportion to the number of Shares released from the escrow at the time the
Shares are released pursuant to paragraph 2 or paragraph 3 above, unless they
are applied to the payment of the fees of the Escrow Agent under paragraph 13
below.
9. STOCK DIVIDENDS OR SPLITS. Stock dividends on, and shares resulting
from stock splits of, the Escrowed Stock shall be delivered to the Escrow Agent
and shall be held pursuant to this Agreement as if they were original shares of
Escrowed Stock deposited hereunder. In the event of any stock dividend, stock
split or recapitalization of the Issuer, the price per share figures herein
shall be adjusted appropriately.
10. ADDITIONAL SHARES. Upon the exercise by any Security Holder of his
or its options to acquire additional shares of the Issuer pursuant to the
documents listed on Exhibit A, the additional shares received from the exercise
of such options shall forthwith be deposited in escrow with the Escrow Agent and
shall be subject to the terms and conditions of this Agreement.
11. DISSOLUTION PREFERENCE. The Security Holders agree that in the
event of dissolution, liquidation, merger, consolidation, sale of assets,
exchange, or any transaction or proceeding that results in the distribution of
the assets of the Issuer, the Security Holders hereby waive all their rights,
title and interests and participations in the assets of the Issuer until the
holders of all non-escrowed shares have been paid, or have had irrevocably set
aside for them, an amount equal to one hundred percent (100%) of the public
offering price per share, adjusted for stock splits and stock dividends.
Subsequently, the Shares shall be entitled to receive an amount per share equal
to one hundred percent (100%) of the amount per share paid to, or set aside for,
the non-escrowed shares. Thereafter, the Security Holders shall participate on a
pro rata basis with all shareholders. Mergers, consolidations, or
reorganizations may proceed on terms and conditions different than those stated
above if a majority of shares held by persons, other than promoters and Security
Holders, approve the terms and conditions by vote at a meeting held for such
purpose.
12. RELIANCE BY ESCROW AGENT. The Escrow Agent may conclusively rely
on, and shall be protected, when it acts in good faith upon, any statement,
certificate, notice, request, consent, order or other document which it believes
to be genuine and signed by the proper party. The Escrow Agent shall have no
duty or liability to verify any such statement, certificate, notice, request,
consent, order or other document and its sole responsibility shall be to act
only as expressly set forth in this Agreement. The Escrow Agent shall be under
no obligation to institute or defend any action, suit or proceeding in
connection with this Agreement unless it is indemnified to its satisfaction. The
Escrow Agent may consult counsel with respect to any question arising under this
Agreement and the Escrow Agent shall not be liable for any action
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<PAGE>
taken, or omitted, in good faith upon advice of counsel. In performing any of
its duties hereunder, the Escrow Agent shall not incur any liability to anyone
for any damages, losses or
expenses except for willful default or negligence, and it shall accordingly not
incur any such liability with respect to: (i) any action taken or omitted in
good faith upon advice of its counsel or counsel for the Issuer given with
respect to any questions relating to the duties and responsibility of the Escrow
Agent under this Agreement, or (ii) any action taken or omitted in reliance upon
any instrument, including written advice provided for herein, not only as to its
due execution and the validity and effectiveness of its provisions, but also as
to the truth and accuracy of any information contained therein, which the Escrow
Agent shall in good faith believe to be genuine, to have been signed or
presented by the proper person or persons, and to conform with the provisions of
this Agreement. All Shares and funds held pursuant to this Agreement shall
constitute trust property. The Escrow Agent shall not be liable for any interest
on the Shares.
13. COMPENSATION TO ESCROW AGENT. The Escrow Agent shall be entitled to
receive from the Issuer reasonable compensation for its services as set forth in
Exhibit B attached hereto. In the event that the Escrow Agent renders any
additional services not provided for herein, or if any controversy arises
hereunder, or if the Escrow Agent is made a party to, or intervenes in any
action, suit or proceeding pertaining to this Agreement, the Issuer shall
provide reasonable compensation for such additional services. Upon notice to the
Security Holders, the Escrow Agent may deduct its compensation from any cash
dividends or distributions held pursuant to paragraph 8 above.
14. QUALIFICATION AND INDEPENDENCE OF ESCROW AGENT. The Issuer
hereby represents that a complete list of its officers, directors and promoters
is attached hereto as Exhibit C. Based thereon, the Escrow Agent hereby
represents and warrants that it is not affiliated with the Issuer, any officer,
director or promoter of the Issuer or any Security Holder.
15. INDEMNIFICATION. The Issuer and the Security Holders agree to hold
the Escrow Agent harmless from, and indemnify the Escrow Agent for, any and all
costs of investigation or claims, costs, expenses, attorney fees or other
liabilities or disbursements arising out of any administrative investigation or
proceeding or any litigation, commenced or threatened, relating to this
Agreement, including without limitation, the implementation of this Agreement,
the distribution of the Shares or funds, the investment of funds, the
interpretation of this Agreement or similar matters, provided that the Escrow
Agent shall not be indemnified for any claims, costs, expenses or other
liability arising from its bad faith or negligence or that of its employees,
officers, directors or agents.
16. SCOPE. This agreement shall be binding upon, and inure to the
benefit of, the parties hereto, their heirs, successors and assigns.
17. TERMINATION. Except for the indemnification provisions of paragraph
15 above, which shall survive in any event, this Agreement shall terminate in
its entirety when all the
4
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Shares have been released as provided in paragraph 2 or paragraph 3 above.
5
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IN WITNESS WHEREOF, the Security Holders, the Issuer and the Escrow
Agent have entered into this Agreement as of the date first above written, in
multiple counterparts, each of which shall be considered an original.
SECURITY HOLDERS:
/s/ Joseph M. Harris
------------------------------------
Joseph M. Harris
/s/ Vernon B. Brannon
------------------------------------
Vernon B. Brannon
BERTHEL FISHER & COMPANY
LEASING, INC.
/s/ Nancy L. Lowenberg
------------------------------------
By: Nancy L. Lowenberg
Its: Vice President and
Chief Operating Officer
ISSUER:
HLM DESIGN, INC.
By: /s/ Vernon B. Brannon
--------------------------------
Its:
--------------------------------
ESCROW AGENT
FIRST UNION NATIONAL BANK
/s/ Terry Baker
------------------------------------
By: Terry Baker
--------------------------------
Its: Vice President
--------------------------------
6
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EXHIBIT A
Securities
Name of Holder Number of Shares Number of Options
- -------------- ---------------- -----------------
Joseph M. Harris 309,188 57,954
Vernon B. Brannon 309,187 57,954
Berthel Fisher & Company Leasing, Inc. 43,631
7
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EXHIBIT B
Escrow Agent Fees
8
<PAGE>
EXHIBIT C
Officers and Directors
Officers Directors
- -------- ---------
Joseph M. Harris Joseph M. Harris
Vernon B. Brannon Vernon B. Brannon
Karen Kaplan Clay R. Caroland III
D. Shannon LeRoy
9
Exhibit 3
June 12, 1998
HLM Design, Inc.
121 West Trade Street
Suite 2850
Charlotte, North Carolina 28202
Ladies and Gentlemen:
This will confirm the agreement and understanding of the undersigned that,
notwithstanding the provisions of Section 3 of that certain Security Escrow
Agreement dated the date hereof among the undersigned, HLM Design, Inc. and
First Union National Bank, as escrow agent (the "Agreement") the Shares (as
defined in the Agreement) shall not be released from escrow under the Agreement
pursuant to such Section 3 to the extent such release would result in the
recognition of compensation expense to the Company in connection therewith.
Very truly yours,
/s/ Joseph M. Harris
/s/ Vernon B. Brannon
BERTHEL FISHER & COMPANY LEASING, INC.
By /s/ Tom Berthel
--------------------------------------
Acknowledged and agreed, the
day and year first above written
HLM Design, Inc.
By /s/ Vernon B. Brannon
-------------------------------
Exhibit 4
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, subject to early termination upon the occurrence of
certain events, 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. However, the aggregate market value of
the Common Stock with respect to which ISOs are exercisable for the first time
by the holder during any calendar year may not exceed the limitation set forth
in Section 422(d) of the Code (currently $100,000). For this purpose, the market
value shall be determined as of the time the ISOs are granted.
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 discretion, subject to certain limitations, may grant transferable
options if such options are not ISOs. The exercise price of options that are
NSOs will be determined at the discretion of the Compensation Committee, but
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 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 may be paid in cash, in shares of Common Stock owned by the optionee, in
NSOs 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 HLM Design 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 and option price
thereof 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.
EXHIBIT 6
NONSTATUTORY STOCK OPTION AGREEMENT AND GRANT
PURSUANT TO
HLM DESIGN, INC. 1998 STOCK OPTION PLAN
This Nonstatutory Stock Option Agreement and Grant is entered into as
of the 12th day of June, 1998 between HLM Design, Inc., a Delaware
corporation (the "Company"), and Vernon B. Brannon (the "Optionee").
WHEREAS, the Company and its stockholders have approved the HLM Design,
Inc. 1998 Stock Option Plan (the "Plan") pursuant to which the Company may, from
time to time, make awards of Options (as defined below) and enter into
Nonstatutory Stock Option Agreements with, eligible employees of the Company or
of any Subsidiary (as defined below);
WHEREAS, pursuant to the Plan, the Company has determined to grant to
the Optionee an Option to purchase Common Stock (as defined below) of the
Company, which Option shall be subject to the terms and conditions of this
Nonstatutory Stock Option Agreement and Grant;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereby agree as
follows:
1. DEFINITIONS.
For purposes of this Nonstatutory Stock Option Agreement and Grant, the
following terms shall have the meanings indicated:
(a) "ACT" shall mean the Securities Act of 1933, as amended.
(b) "BOARD" shall mean the Board of Directors of the Company.
(c) "CAUSE" shall mean any act, action or series of acts or
actions or any omission, omissions, or series of omissions which result in, or
which have the effect of resulting in, (i) the commission of a crime by the
Optionee involving moral turpitude, which crime has a material adverse impact on
the Company or any Subsidiary, (ii) gross negligence or willful misconduct which
is continuous and results in material damage to the Company or any Subsidiary,
or (iii) the continuous, willful failure of the person in question to follow the
reasonable directives of the Board of Directors.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as
amended, any successor revenue laws of the United States and the rules and
regulations promulgated thereunder.
(e) "COMMITTEE" shall mean the committee of members of the
Board that is designated by the Board to administer the Plan. In the event that
no such Committee exists or is appointed, "COMMITTEE" shall mean the Board.
<PAGE>
(f) "COMMON STOCK" shall mean the Common Stock, par value
$.001 per share, of the Company.
(g) "DISABILITY" shall mean the inability or failure of a
person to perform those duties for the Company or any Subsidiary traditionally
assigned to and performed by such person because of the person's then-existing
physical or mental condition, impairment or incapacity. The fact of disability
shall be determined by the Committee, which may consider such evidence as it
considers desirable under the circumstances, the determination of which shall be
final and binding upon all parties.
(h) "EXERCISE DATE" shall mean the business day, during the
Option Period, upon which the Optionee delivers to the Company the written
notice and consideration contemplated by Section 5(c) of the Plan.
(i) "FAIR MARKET VALUE" shall mean, with respect to the Common
Stock on any day, its market value determined as provided in Section 5(c) of the
Plan.
(j) "IMMEDIATE FAMILY" shall mean the Optionee's spouse,
children, present or former stepchildren, grandchildren, present or former
stepgrandchildren, parents, present or former stepparents, grandparents,
siblings (including half brothers and sisters), in-laws and individuals whose
relationship with the Optionee arises due to legal adoption.
(k) "INVOLUNTARY TERMINATION WITHOUT CAUSE" shall mean either
(i) the dismissal of, or the request for the resignation of, a person, by court
order, order of any court-appointed liquidator or trustee of the Company, or the
order or request of any creditors' committee of the Company constituted under
the federal bankruptcy laws, provided that such order or request contains no
specific reference to Cause; or (ii) the dismissal of, or the request for the
resignation of, a person, by a duly constituted corporate officer of the Company
or any Subsidiary, or by the Board, for any reason other than for Cause.
(l) "OPTION" shall mean the option to purchase shares of
Common Stock granted to the Optionee pursuant to this Option Agreement.
(m) "OPTION AGREEMENT" shall mean this Nonstatutory Stock
Option Agreement and Grant between the Company and the Optionee by which the
Option is granted to the Optionee pursuant to the Plan.
(n) "OPTION PERIOD" shall mean the period commencing from the
date of this Option Agreement and ending at the close of business ten years from
the date of this Option Agreement or such earlier date as when this Option
Agreement may be terminated by its terms.
(o) "OPTION SHARES" shall mean the shares of Common Stock
purchased upon exercise of the Option.
(p) "OPTIONEE" shall mean the individual executing this Option
Agreement and, as applicable, the estate, personal representative, beneficiary
or Permitted Transferee to whom this Option may be transferred pursuant to this
Option Agreement by will, by the laws of descent and
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distribution, pursuant to a domestic relations order as defined in the Code, or
as otherwise permitted by paragraph 3(f) below.
(q) "PERMITTED TRANSFEREE" shall mean a member of the
Optionee's Immediate Family, a trust established solely for the benefit of one
or more members of the Optionee's Immediate Family or a partnership or limited
liability company of which the only individuals or entities who are or could be
partners or shareholders are members of the Optionee's Immediate Family and/or a
trust established solely for the benefit of one or more members of the
Optionee's Immediate Family.
(r) "PLAN" shall mean the HLM Design, Inc. 1998 Stock Option
Plan and any amendments thereto.
(s) "RETIREMENT" shall mean, with respect to the Optionee,
retirement from the Company and any Subsidiary in accordance with the Company's
and/or Subsidiary's retirement policy as may be in effect from time to time.
(t) "SUBSIDIARY" shall mean any subsidiary corporation of HLM
Design, Inc. as defined in Sections 424(f) and 424(g) of the Code.
(u) "TERMINATION" shall mean the cessation, for any reason, of
the employer-employee relationship between the Company and any Subsidiary and
the Optionee.
(v) "TOTAL OPTION PRICE" shall mean the consideration payable
to the Company by the Optionee upon exercise of the Option pursuant to Section
5(c) of the Plan.
2. GRANT OF OPTION. Effective upon the date hereof, and subject to the
terms and conditions set forth herein, the Company hereby grants to the Optionee
the Option to purchase from the Company, at an exercise price of $5.50 [but not
less than 85% of the initial public offering price] per share, up to but not
exceeding in the aggregate 40,568 shares of Common Stock.
3. EXERCISE OF OPTION. The Option granted in paragraph 2 above may be
exercised as follows:
(a) The Option shall be exercisable at any time and from time
to time during the Option Period. The Option shall terminate on the expiration
of the Option Period, if not earlier terminated; provided that, in the event of
the Optionee's Retirement, the Committee in its sole and absolute discretion may
accelerate the Exercise Date, which acceleration may, in the sole discretion of
the Committee, be subject to further terms and conditions mandated by the
Committee.
(b) No less than 100 shares of Common Stock may be purchased
on any Exercise Date unless the number of shares purchased at such time is the
total number of shares in respect of which the Option is then exercisable.
(c) If at any time and for any reason the Option covers a
fraction of a share, then, upon exercise of the Option, the Optionee shall
receive the Fair Market Value of such fractional share in cash.
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<PAGE>
(d) The Option shall be exercised by the Optionee in
accordance with the terms and conditions of Section 5(c) of the Plan.
(e) As soon as administratively practicable following the
Exercise Date, subject to the receipt of payment of the Total Option Price and
of any payment in cash of federal, state or local income tax withholding or
other employment tax that may be due upon the issuance of the Option Shares as
determined and computed by the Company pursuant to paragraph 6 below, the
Company shall issue to the Optionee the number of shares with respect to which
such Option shall be so exercised and shall deliver to the Optionee a
certificate or certificates therefor.
(f) The Option is not transferable by the Optionee otherwise
than (i) by will or the laws of descent and distribution; (ii) pursuant to a
domestic relations order as defined in the Code; or (iii) by transfer without
consideration to a Permitted Transferee, with the consent of and subject to the
rules, terms and conditions imposed by the Committee and provided that the
Committee is notified in advance in writing of any proposed transfer to a
Permitted Transferee and the Committee determines that the proposed transfer
complies with the requirements of the Plan and this Nonstatutory Stock Option
Agreement. No assignment or transfer of this Option, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise, except as described above, shall vest in the assignee or transferee
any interest or right herein whatsoever; but immediately upon any attempt to
assign or transfer this Option, except as expressly permitted herein, the same
shall terminate and be of no force or effect.
4. TERMINATION. The Option granted hereby shall terminate and be of no
force or effect upon and following the occurrence of any of the following
events:
(a) The expiration of the Option Period.
(b) The Termination of the Optionee's employment for any
reason other than the Optionee's death, Disability or Involuntary Termination
Without Cause.
(c) The expiration of three months after the date of the
Optionee's Involuntary Termination Without Cause. During such three-month
period, the Optionee shall have the right to exercise the Option hereby granted
in accordance with the terms of this Option Agreement, but only to the extent
the Option was exercisable on the date of the Termination of the Optionee's
employment.
(d) The expiration of twelve months after Termination of the
Optionee's employment with the Company and any Subsidiary as a result of the
Optionee's Disability. During such twelve-month period, the Optionee shall have
the right to exercise the Option hereby granted in accordance with the terms of
this Option Agreement, but only to the extent the Option was exercisable on the
date of the Termination of the Optionee's employment.
(e) In the event of the death of the Optionee while in the
employ of the Company or, in the event of the death of the Optionee after
Termination described in subparagraph (c) or (d), above, but within the
three-month or twelve-month period described in subparagraph (c) or (d), above,
upon the expiration of twelve months following the Optionee's death. During such
extended
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<PAGE>
period, the Option may be exercised by the person or persons to whom the
deceased Optionee's rights under the Option Agreement shall pass by will or by
the laws of descent and distribution, but only to the extent the Option was
exercisable on the date of the Termination of the Optionee's employment.
(f) To the extent set forth in paragraph 7 below, upon the
dissolution, liquidation, consolidation or merger of the Company, and, to the
extent set forth in subparagraph 3(f) above, upon an attempted assignment or
transfer of the Option otherwise than as expressly permitted herein.
Any determination made by the Committee with respect to any matter
referred to in this paragraph 4 shall be final and conclusive on all persons
affected thereby.
5. RIGHTS AS STOCKHOLDER. An Optionee shall have no rights as a
stockholder of the Company with respect to any shares underlying the Option
until the day of the issuance of a stock certificate to him or her for those
shares upon payment of the exercise price in accordance with the terms and
provisions hereof. Subject to paragraph 7 below, no adjustments shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued.
6. PAYMENT OF WITHHOLDING TAXES. Upon the Optionee's exercise of his or
her Option with respect to any of the Option Shares in accordance with the
provisions of paragraph 3 above, the Optionee shall pay to the Company upon
exercise of the Option the amount of any federal, state or local income tax
withholding or other employment tax that may be due upon such exercise. The
determination of the amount of any such federal, state or local income tax
withholding or other employment tax due in such event shall be made by the
Company and shall be binding upon the Optionee.
7. RECAPITALIZATION; REORGANIZATION. The shares underlying this Option
are shares of Common Stock as constituted on the date of this Option Agreement,
but if, during the Option Period and prior to the delivery by the Company of all
of the shares of Common Stock with respect to which this Option is granted, the
Company shall effect a subdivision or consolidation of shares or other capital
readjustment, the payment of a stock dividend or some other increase or decrease
in the number of shares of Common Stock outstanding, without receiving
compensation therefor in money, services or property, then, (a) in the event of
any increase in the number of such shares outstanding, the number of shares of
Common Stock then remaining subject to this Option shall be proportionately
increased (except that any fraction of a share resulting from any such
adjustment shall be excluded from the operation of this Option Agreement), and
the exercise price per share shall be proportionately reduced, and, (b) in the
event of a reduction in the number of such shares outstanding, the number of
shares of Common Stock then remaining subject to this Option shall be
proportionately reduced (except that any fractional share resulting from any
such adjustment shall be excluded from the operation of this Option Agreement),
and the exercise price per share shall be proportionately increased.
In the event of a merger of one or more corporations into the Company
with respect to which the Company shall be the surviving or resulting
corporation, the Optionee shall, at no additional cost, be entitled upon any
exercise of this Option to receive (subject to any required action by
shareholders), in lieu of the number of shares as to which this Option shall
then be so exercised, the
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<PAGE>
number and class of shares of stock or other securities to which the Optionee
would have been entitled pursuant to the terms of the agreement of merger if,
immediately prior to such merger, the Optionee had been the holder of record of
a number of shares of Common Stock of the Company equal to the number of shares
as to which such Option shall be so exercised; provided, however, that, anything
herein contained to the contrary notwithstanding, upon the occurrence of any
event described in Section 5(g) of the Plan, this Option shall be subject to
acceleration as provided in such Section 5(g).
In the event of a change in the Common Stock as presently constituted,
which change is limited to a change of all of the authorized shares with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.
The existence of this Option shall not affect in any way the right or
power of the Company or its shareholders to make or authorize any or all
adjustments, dividends, stock dividends, recapitalization, reorganizations or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
other stocks with preference ahead of or convertible into, or otherwise
affecting, the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
8. NO REGISTRATION RIGHTS. Anything in this Option Agreement to the
contrary notwithstanding, if, at any time specified herein for the issuance of
Option Shares, any law, regulation or requirements of any governmental authority
having jurisdiction in the premises shall require either the Company or the
Optionee, in the opinion of the Company's counsel, to take any action in
connection with the shares then to be issued, the issue of such shares shall be
deferred until such action shall have been taken. Nothing in this Option
Agreement shall be construed to obligate the Company at any time to file or
maintain the effectiveness of a registration statement under the Act, or under
the securities laws of any state or other jurisdiction, or to take or cause to
be taken any action which may be necessary in order to provide an exemption from
the registration requirements of the Act under Rule 144 or any other exemption
with respect to the Option Shares or otherwise for resale or other transfer by
the Optionee (or by the executor or administrator of such Optionee's estate or a
person who is a Permitted Transferee or who acquired the Option or any Option
Shares or other rights by bequest or inheritance or by reason of the death of
the Optionee) as a result of the exercise of an Option granted pursuant to this
Option Agreement.
9. RESOLUTION OF DISPUTES. Any dispute or disagreement that arises
under, or as a result of, or pursuant to, this Option Agreement shall be
determined by the Committee in its absolute and uncontrolled discretion, and any
such determination or other determination by the Committee under or pursuant to
this Option Agreement, and any interpretation by the Committee of the terms of
this Option Agreement, shall be final, binding and conclusive on all parties
affected thereby.
10. COMPLIANCE WITH THE ACT. Notwithstanding any provision herein or in
the Plan to the contrary, the Company shall be under no obligation to issue any
shares of Common Stock to the Optionee upon exercise of the Option granted
hereby unless and until the Company has determined that such issuance is either
exempt from registration, or is registered, under the Act and is either
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<PAGE>
exempt from registration and qualification, or is registered or qualified, as
applicable, under all applicable state securities or "blue sky" laws.
11. MISCELLANEOUS.
(a) BINDING ON SUCCESSORS AND REPRESENTATIVES. This Option
Agreement shall be binding not only upon the parties, but also upon their heirs,
executors, administrators, personal representatives, successors and assigns
(including any transferee of a party to this Agreement); and the parties agree,
for themselves and their successors, assigns and representatives, to execute any
instrument which may be necessary legally to effect the terms and conditions of
this Option Agreement.
(b) ENTIRE AGREEMENT. This Option Agreement, together with the
Plan, constitutes the entire agreement of the parties with respect to the Option
and supersedes any previous agreement, whether written or oral, with respect
thereto. This Option Agreement has been entered into in compliance with the
terms of the Plan; wherever a conflict may arise between the terms of this
Option Agreement and the terms of the Plan, the terms of the Plan shall control.
(c) AMENDMENT. Neither this Option Agreement nor any of the
terms and conditions herein set forth may be altered or amended orally, and any
such alteration or amendment shall be effective only when reduced to writing and
signed by each of the parties or their respective successors and assigns.
(d) CONSTRUCTION OF TERMS. Any reference herein to the
singular or plural shall be construed as plural or singular whenever the context
requires.
(e) NOTICES. All notices, requests and amendments under this
Option Agreement shall be in writing, and notices shall be deemed to have been
given when personally delivered or sent prepaid registered mail:
(i) if to the Company, at the following address:
HLM Design, Inc.
121 West Trade Street, Suite 2950
Charlotte, North Carolina 28202
Attention: Chief Financial Officer
or at such other address as the Company shall designate by notice.
(ii) if to the Optionee, to the Optionee's
address appearing in the Company's
employment records, or at such other address
as the Optionee shall designate by notice.
(f) GOVERNING LAW. This Option Agreement shall be governed by,
and construed in accordance with, the laws of the State of North Carolina
(excluding the principles of conflict of laws thereof).
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(g) SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Option Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provisions were omitted.
(h) NOT AN INCENTIVE STOCK OPTION. The Option granted
hereunder is not intended to be an "Incentive Stock Option" under Section 422 of
the Code.
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the day and year first written above.
HLM DESIGN, INC.
By: /s/ Joseph M. Harris
------------------------------------------
Title: President
--------------------------------------
OPTIONEE: VERNON B. BRANNON
/s/ Vernon B. Brannon (SEAL)
---------------------------------------
8
EXHIBIT 7
STATUTORY INCENTIVE STOCK OPTION AGREEMENT AND GRANT
PURSUANT TO
HLM DESIGN, INC. 1998 STOCK OPTION PLAN
This Statutory Incentive Stock Option Agreement and Grant is entered
into as of the 12th day of June, 1998 between HLM Design, Inc., a
Delaware corporation (the "Company"), and Vernon B. Brannon (the "Optionee").
WHEREAS, the Company and its stockholders have approved the HLM Design,
Inc. 1998 Stock Option Plan (the "Plan") pursuant to which the Company may, from
time to time, make awards of Options (as defined below) and enter into Statutory
Incentive Stock Option Agreements with eligible employees of the Company or of
any Subsidiary (as defined below);
WHEREAS, pursuant to the Plan, the Company has determined to grant to
the Optionee an Option to purchase Common Stock (as defined below) of the
Company, which Option shall be subject to the terms and conditions of this
Statutory Incentive Stock Option Agreement and Grant;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereby agree as
follows:
1. DEFINITIONS.
For purposes of this Statutory Incentive Stock Option Agreement and
Grant, the following terms shall have the meanings indicated:
(a) "ACT" shall mean the Securities Act of 1933, as amended.
(b) "BOARD" shall mean the Board of Directors of the Company.
(c) "CAUSE" shall mean any act, action or series of acts or
actions or any omission, omissions, or series of omissions which result in, or
which have the effect of resulting in, (i) the commission of a crime by the
Optionee involving moral turpitude, which crime has a material adverse impact on
the Company or any Subsidiary, (ii) gross negligence or willful misconduct which
is continuous and results in material damage to the Company or any Subsidiary,
or (iii) the continuous, willful failure of the person in question to follow the
reasonable directives of the Board of Directors.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as
amended, any successor revenue laws of the United States and the rules and
regulations promulgated thereunder.
(e) "COMMITTEE" shall mean the committee of members of the
Board that is designated by the Board to administer the Plan. In the event that
no such Committee exists or is appointed, "COMMITTEE" shall mean the Board.
<PAGE>
(f) "COMMON STOCK" shall mean the Common Stock, par value
$.001 per share, of the Company.
(g) "DISABILITY" shall mean the inability or failure of a
person to perform those duties for the Company or any Subsidiary traditionally
assigned to and performed by such person because of the person's then-existing
physical or mental condition, impairment or incapacity. The fact of disability
shall be determined by the Committee, which may consider such evidence as it
considers desirable under the circumstances, the determination of which shall be
final and binding upon all parties.
(h) "EXERCISE DATE" shall mean the business day, during the
Option Period, upon which the Optionee delivers to the Company the written
notice and consideration contemplated by Section 5(c) of the Plan.
(i) "FAIR MARKET VALUE" shall mean, with respect to the Common
Stock on any day, its market value determined as provided in Section 5(c) of the
Plan.
(j) "INVOLUNTARY TERMINATION WITHOUT CAUSE" shall mean either
(i) the dismissal of, or the request for the resignation of, a person, by court
order, order of any court-appointed liquidator or trustee of the Company, or the
order or request of any creditors' committee of the Company constituted under
the federal bankruptcy laws, provided that such order or request contains no
specific reference to Cause; or (ii) the dismissal of, or the request for the
resignation of, a person, by a duly constituted corporate officer of the Company
or any Subsidiary, or by the Board, for any reason other than for Cause.
(k) "OPTION" shall mean the option to purchase shares of
Common Stock granted to the Optionee pursuant to this Option Agreement.
(l) "OPTION AGREEMENT" shall mean this Statutory Incentive
Stock Option Agreement and Grant between the Company and the Optionee by which
the Option is granted to the Optionee pursuant to the Plan.
(m) "OPTION PERIOD" shall mean the period commencing from the
date of this Option Agreement and ending at the close of business ten years from
the date of this Option Agreement (or five years from the date of this Option
Agreement in the case of an Optionee who is a Ten Percent Stockholder) or such
earlier date as when this Option Agreement may be terminated by its terms.
(n) "OPTION SHARES" shall mean the shares of Common Stock
purchased upon exercise of the Option.
(o) "OPTIONEE" shall mean the individual executing this Option
Agreement and, as applicable, the estate, personal representative or beneficiary
to whom this Option may be transferred pursuant to this Option Agreement by will
or by the laws of descent and distribution.
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(p) "PLAN" shall mean the HLM Design, Inc. 1998 Stock Option
Plan and any amendments thereto.
(q) "RETIREMENT" shall mean, with respect to the Optionee,
retirement from the Company and any Subsidiary in accordance with the Company's
and/or Subsidiary's retirement policy as may be in effect from time to time.
(r) "SUBSIDIARY" shall mean any subsidiary corporation of HLM
Design, Inc. as defined in Sections 424(f) and 424(g) of the Code.
(s) "TEN PERCENT STOCKHOLDER" shall mean an individual owning,
directly or by attribution as provided in Section 424(d) of the Code, on the
date of grant, stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any Subsidiary.
(t) "TERMINATION" shall mean the cessation, for any reason, of
the employer-employee relationship between the Company and any Subsidiary and
the Optionee.
(u) "TOTAL OPTION PRICE" shall mean the consideration payable
to the Company by the Optionee upon exercise of the Option pursuant to Section
5(c) of the Plan.
2. GRANT OF OPTION. Effective upon the date of the commencement of the
Company's initial public offering and subject to the terms and conditions set
forth herein, the Company hereby grants to the Optionee the Option to purchase
from the Company, at an exercise price per share equal to the price at which
Common Stock is offered to the public in the Company's initial public offering
(or, in the case of an Optionee who is a Ten Percent Stockholder, at an exercise
price per share equal to 110% of the price at which Common Stock is offered to
the public in the Company's initial public offering), up to but not exceeding in
the aggregate 17,386 shares of Common Stock.
3. EXERCISE OF OPTION. The Option granted in paragraph 2 above may be
exercised as follows:
(a) The Option shall be exercisable at any time and from time
to time during the Option Period; provided however, that in the first calendar
year of the Option Period, the Option shall become exercisable only to the
extent of that number of shares of Common Stock having an aggregate fair market
value of $100,000 based on the per share value of the Common Stock at the time
of the effectiveness of the grant of the Option (this per share value being
equal to the price at which the Common Stock is offered to the public in the
Company's initial public offering). In each subsequent calendar year of the
Option Period, the Option shall become exercisable to the extent of an
additional number of shares of Common Stock having an aggregate fair market
value of $100,000 determined as provided in the preceding sentence. The Option
shall terminate on the expiration of the Option Period, if not earlier
terminated; provided that, in the event of the Optionee's Retirement, the
Committee in its sole and absolute discretion may accelerate the Exercise Date,
which acceleration may, in the sole discretion of the Committee, be subject to
further terms and conditions mandated by the Committee.
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(b) No less than 100 shares of Common Stock may be purchased
on any Exercise Date unless the number of shares purchased at such time is the
total number of shares in respect of which the Option is then exercisable.
(c) If at any time and for any reason the Option covers a
fraction of a share, then, upon exercise of the Option, the Optionee shall
receive the Fair Market Value of such fractional share in cash.
(d) The Option shall be exercised by the Optionee in
accordance with the terms and conditions of Section 5(c) of the Plan.
(e) As soon as administratively practicable following the
Exercise Date, subject to the receipt of payment of the Total Option Price and
of any payment in cash of federal, state or local income tax withholding or
other employment tax that may be due upon the issuance of the Option Shares as
determined and computed by the Company pursuant to paragraph 6 below, the
Company shall issue to the Optionee the number of shares with respect to which
such Option shall be so exercised and shall deliver to the Optionee a
certificate or certificates therefor.
(f) The Option is not transferable by the Optionee otherwise
than by will or the laws of descent and distribution. No assignment or transfer
of this Option, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise, except by will or the laws of
descent and distribution, shall vest in the assignee or transferee any interest
or right herein whatsoever; but immediately upon any attempt to assign or
transfer this Option, except as expressly permitted herein, the same shall
terminate and be of no force or effect.
(g) The Optionee agrees to maintain the status of the entire
Option as an "incentive stock option" as defined under Section 422 of the Code.
4. TERMINATION. The Option granted hereby shall terminate and be of no
force or effect upon and following the occurrence of any of the following
events:
(a) The expiration of the Option Period.
(b) The Termination of the Optionee's employment for any
reason other than the Optionee's death, Disability or Involuntary Termination
Without Cause.
(c) The expiration of three months after the date of the
Optionee's Involuntary Termination Without Cause. During such three-month
period, the Optionee shall have the right to exercise the Option hereby granted
in accordance with the terms of this Option Agreement, but only to the extent
the Option was exercisable on the date of the Termination of the Optionee's
employment.
(d) The expiration of twelve months after Termination of the
Optionee's employment with the Company and any Subsidiary as a result of the
Optionee's Disability. During such twelve-month period, the Optionee shall have
the right to exercise the Option hereby granted in accordance with the terms of
this Option Agreement, but only to the extent the Option was exercisable on the
date of the Termination of the Optionee's employment.
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(e) To the extent permitted for incentive stock options under
Section 422 of the Code, in the event of the death of the Optionee while in the
employ of the Company or any Subsidiary or, in the event of the death of the
Optionee after Termination described in subparagraph (c) or (d), above, but
within the three-month or twelve-month period described in subparagraph (c) or
(d), above, upon the expiration of twelve months following the Optionee's death.
During such extended period, the Option may be exercised subject to Section
5(d)(iv) of the Plan by the person or persons to whom the deceased Optionee's
rights under the Option Agreement shall pass by will or by the laws of descent
and distribution, but only to the extent the Option was exercisable on the date
of the Termination of the Optionee's employment.
(f) To the extent set forth in paragraph 7 below, upon the
dissolution, liquidation, consolidation or merger of the Company, and, to the
extent set forth in subparagraph 3(f), above, upon an attempted assignment or
transfer of the Option otherwise than as expressly permitted herein.
Any determination made by the Committee with respect to any matter
referred to in this paragraph 4 shall be final and conclusive on all persons
affected thereby.
5. RIGHTS AS STOCKHOLDER. An Optionee shall have no rights as a
stockholder of the Company with respect to any shares underlying the Option
until the day of the issuance of a stock certificate to him or her for those
shares upon payment of the exercise price in accordance with the terms and
provisions hereof. Subject to paragraph 7 below, no adjustments shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued.
6. PAYMENT OF WITHHOLDING TAXES. Upon the Optionee's exercise of his or
her Option with respect to any of the Option Shares in accordance with the
provisions of paragraph 3 above, the Optionee shall pay to the Company upon
exercise of the Option the amount of any federal, state or local income tax
withholding or other employment tax that may be due upon such exercise. The
determination of the amount of any such federal, state or local income tax
withholding or other employment tax due in such event shall be made by the
Company and shall be binding upon the Optionee.
7. RECAPITALIZATION; REORGANIZATION. The shares underlying this Option
are shares of Common Stock as constituted on the date of this Option Agreement,
but if, during the Option Period and prior to the delivery by the Company of all
of the shares of Common Stock with respect to which this Option is granted, the
Company shall effect a subdivision or consolidation of shares or other capital
readjustment, the payment of a stock dividend or some other increase or decrease
in the number of shares of Common Stock outstanding, without receiving
compensation therefor in money, services or property, then, (a) in the event of
any increase in the number of such shares outstanding, the number of shares of
Common Stock then remaining subject to this Option shall be proportionately
increased (except that any fraction of a share resulting from any such
adjustment shall be excluded from the operation of this Option Agreement), and
the exercise price per share shall be proportionately reduced, and, (b) in the
event of a reduction in the number of such shares outstanding, the number of
shares of Common Stock then remaining subject to this Option shall be
proportionately reduced (except that any fractional share resulting from any
such adjustment shall
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be excluded from the operation of this Option Agreement), and the exercise price
per share shall be proportionately increased.
In the event of a merger of one or more corporations into the Company
with respect to which the Company shall be the surviving or resulting
corporation, the Optionee shall, at no additional cost, be entitled upon any
exercise of this Option to receive (subject to any required action by
shareholders), in lieu of the number of shares as to which this Option shall
then be so exercised, the number and class of shares of stock or other
securities to which the Optionee would have been entitled pursuant to the terms
of the agreement of merger if, immediately prior to such merger, the Optionee
had been the holder of record of a number of shares of Common Stock of the
Company equal to the number of shares as to which such Option shall be so
exercised; provided, however, that, anything herein contained to the contrary
notwithstanding, upon the occurrence of any event described in Section 5(g) of
the Plan, this Option shall be subject to acceleration as provided in such
Section 5(g).
In the event of a change in the Common Stock as presently constituted,
which change is limited to a change of all of the authorized shares with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.
The existence of this Option shall not affect in any way the right or
power of the Company or its shareholders to make or authorize any or all
adjustments, dividends, stock dividends, recapitalization, reorganizations or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
other stocks with preference ahead of or convertible into, or otherwise
affecting, the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
8. NO REGISTRATION RIGHTS. Anything in this Option Agreement to the
contrary notwithstanding, if, at any time specified herein for the issuance of
Option Shares, any law, regulation or requirements of any governmental authority
having jurisdiction in the premises shall require either the Company or the
Optionee, in the opinion of the Company's counsel, to take any action in
connection with the shares then to be issued, the issue of such shares shall be
deferred until such action shall have been taken. Nothing in this Option
Agreement shall be construed to obligate the Company at any time to file or
maintain the effectiveness of a registration statement under the Act, or under
the securities laws of any state or other jurisdiction, or to take or cause to
be taken any action which may be necessary in order to provide an exemption from
the registration requirements of the Act under Rule 144 or any other exemption
with respect to the Option Shares or otherwise for resale or other transfer by
the Optionee (or by the executor or administrator of such Optionee's estate or a
person who acquired the Option or any Option Shares or other rights by bequest
or inheritance or by reason of the death of the Optionee) as a result of the
exercise of an Option granted pursuant to this Option Agreement.
9. RESOLUTION OF DISPUTES. Any dispute or disagreement that arises
under, or as a result of, or pursuant to, this Option Agreement shall be
determined by the Committee in its absolute and uncontrolled discretion, and any
such determination or other determination by the Committee under
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or pursuant to this Option Agreement, and any interpretation by the Committee of
the terms of this Option Agreement, shall be final, binding and conclusive on
all parties affected thereby.
10. COMPLIANCE WITH THE ACT. Notwithstanding any provision herein or in
the Plan to the contrary, the Company shall be under no obligation to issue any
shares of Common Stock to the Optionee upon exercise of the Option granted
hereby unless and until the Company has determined that such issuance is either
exempt from registration, or is registered, under the Act and is either exempt
from registration and qualification, or is registered or qualified, as
applicable, under all applicable state securities or "blue sky" laws.
11. MISCELLANEOUS.
(a) BINDING ON SUCCESSORS AND REPRESENTATIVES. This Option
Agreement shall be binding not only upon the parties, but also upon their heirs,
executors, administrators, personal representatives, successors and assigns
(including any transferee of a party to this Agreement); and the parties agree,
for themselves and their successors, assigns and representatives, to execute any
instrument which may be necessary legally to effect the terms and conditions of
this Option Agreement.
(b) ENTIRE AGREEMENT. This Option Agreement, together with the
Plan, constitutes the entire agreement of the parties with respect to the Option
and supersedes any previous agreement, whether written or oral, with respect
thereto. This Option Agreement has been entered into in compliance with the
terms of the Plan; wherever a conflict may arise between the terms of this
Option Agreement and the terms of the Plan, the terms of the Plan shall control.
(c) AMENDMENT. Neither this Option Agreement nor any of the
terms and conditions herein set forth may be altered or amended orally, and any
such alteration or amendment shall be effective only when reduced to writing and
signed by each of the parties or their respective successors and assigns.
(d) CONSTRUCTION OF TERMS. Any reference herein to the
singular or plural shall be construed as plural or singular whenever the context
requires.
(e) NOTICES. All notices, requests and amendments under this
Option Agreement shall be in writing, and notices shall be deemed to have been
given when personally delivered or sent prepaid registered mail:
(i) if to the Company, at the following address:
HLM Design, Inc.
121 West Trade Street, Suite 2950
Charlotte, North Carolina 28202
Attention: Chief Financial Officer
or at such other address as the Company shall designate by notice.
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(ii) if to the Optionee, to the Optionee's
address appearing in the Company's
employment records, or at such other address
as the Optionee shall designate by notice.
(f) GOVERNING LAW. This Option Agreement shall be governed by,
and construed in accordance with, the laws of the State of North Carolina
(excluding the principles of conflict of laws thereof).
(g) SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Option Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provisions were omitted.
(h) AN INCENTIVE STOCK OPTION. The Option granted hereunder is
intended to be an "Incentive Stock Option" under Section 422 of the Code.
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the day and year first written above.
HLM DESIGN, INC.
By: /s/ Joseph M. Harris
-----------------------------------------
Title: President
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OPTIONEE: VERNON B. BRANNON
/s/ Vernon B. Brannon (SEAL)
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