SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HLM DESIGN, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[HLM LOGO APPEARS HERE]
121 West Trade Street, Suite 2950
Charlotte, North Carolina 28202
August 18, 1999
DEAR STOCKHOLDER:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held at 10:00 a.m. on Wednesday, September 22, 1999, at the Marriott City
Center, 100 West Trade Street, Charlotte, North Carolina. We look forward to
greeting personally those stockholders who are able to attend. If you plan to
attend, we ask that you sign and return the self-addressed, postage prepaid
portion of the enclosed card, and please bring with you to the meeting the
remaining portion of the card.
The accompanying formal Notice of Meeting and Proxy Statement describe the
matters on which action will be taken at the meeting.
Whether or not you attend in person, IT IS IMPORTANT that your shares be
represented and voted at the meeting. I urge you to sign, date and return the
enclosed proxy at your earliest convenience.
On Behalf of the Board of Directors,
Sincerely,
/s/ Joseph M. Harris
JOSEPH M. HARRIS
CHAIRMAN AND PRESIDENT
<PAGE>
[HLM LOGO APPEARS HERE]
-----------------
NOTICE OF MEETING
-----------------
Charlotte, NC
August 18, 1999
The Annual Meeting of Stockholders of HLM Design, Inc. (the "Company")
will be held at the Marriott City Center, 100 West Trade Street, Charlotte,
North Carolina, on Wednesday, September 22, 1999 at 10:00 a.m. for the
following purposes as described in the accompanying Proxy Statement:
1. To elect five (5) directors for the classified terms indicated in the
Proxy Statement.
2. To consider and vote upon a proposal to ratify the selection by the
Board of Directors of Deloitte & Touche LLP as the principal independent
auditors of the Company for the fiscal year ending April 28, 2000.
3. To transact such other business as may properly come before the meeting.
Only holders of record of the Company's common stock at the close of
business on August 13, 1999 will be entitled to notice of, and to vote at, such
meeting.
Whether or not you plan to attend the meeting, you are urged to promptly
complete, sign, date and return the enclosed proxy in the envelope provided.
Returning your proxy as described above does not deprive you of your right to
attend the meeting and to vote your shares in person.
/s/ Karen A. Kaplan
KAREN A. KAPLAN
SECRETARY
<PAGE>
[HLM LOGO APPEARS HERE]
--------------------
PROXY STATEMENT
--------------------
August 18, 1999
GENERAL
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of HLM Design, Inc., a Delaware corporation
(the "Company"), for use at its Annual Meeting of Stockholders to be held on
Wednesday, September 22, 1999 at 10:00 a.m. at the Marriott City Center, 100
West Trade Street, Charlotte, North Carolina (the "Annual Meeting"). Proxies in
the form enclosed will be voted at the Annual Meeting (including adjournments)
if properly executed, returned to the Company prior to the meeting, and not
revoked. Stockholders who execute proxies may revoke them at any time before
they are exercised by delivering a written notice to Karen A. Kaplan, the
Secretary of the Company, either at the Annual Meeting or prior to the meeting
date at the Company's executive offices at 121 West Trade Street, Suite 2950,
Charlotte, North Carolina 28202, by executing and delivering a later-dated
proxy, or by attending the meeting and voting in person.
STOCKHOLDER VOTING
Only holders of record of the Company's common stock, par value $.001 per
share (the "Common Stock"), as of the close of business on August 13, 1999 (the
"Record Date") will be entitled to notice of, and to vote at, the Annual
Meeting. This Proxy Statement will be mailed to each such stockholder on or
about August 20, 1999.
As of the close of business on the Record Date, there were issued and
outstanding and entitled to be voted at the Annual Meeting, 2,084,531 shares of
Common Stock. At the meeting, holders of Common Stock will have one vote per
share and a quorum, consisting of a majority of the outstanding shares of
Common Stock as of the Record Date, will be required for the transaction of
business by stockholders. A quorum being present, directors will be elected by
the affirmative vote of a plurality of the votes cast by shares entitled to
vote thereon and the other action proposed in the accompanying notice will
become effective by majority vote. Votes withheld from nominees for director,
abstentions and broker non-votes will be counted for purposes of determining
whether a quorum has been reached but will not be counted in determining the
number of shares voted "for" any director-nominee or "for" any proposal.
Marking a proxy for abstention on any proposal, other than the election of
directors, will have the same effect as a vote "against" the proposal.
Proxies in the accompanying form, properly executed and duly returned and
not revoked, will be voted at the Annual Meeting (including adjournments).
Where stockholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. If no specifications are made, proxies
will be voted (i) in favor of the Company's five (5) nominees to the Board of
Directors for the classified terms indicated herein, and (ii) in favor of the
selection of Deloitte & Touche LLP as the principal independent auditors of the
Company and its affiliates and subsidiaries for the fiscal year ending April
28, 2000. If any other matter or business is brought before the meeting, the
proxy holders may vote the proxies at their discretion.
EQUITY SECURITY OWNERSHIP
The following table sets forth, as of August 13, 1999, the beneficial
ownership of Common Stock by: (i) each stockholder known by the Company to own
more than 5% of the outstanding shares, (ii) each director and nominee to the
Board of Directors of the Company, (iii) each executive officer of the Company
included in the Summary Compensation Table on page 5 hereof, and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
noted, the persons named in the table below have sole voting and investment
power with respect to all shares shown as beneficially owned by them, subject
to community property and other similar laws where applicable.
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME BENEFICIAL OWNERSHIP(1) COMMON STOCK
- -------------------------------------------- ------------------------- ---------------
<S> <C> <C>
Joseph M. Harris (2) ....................... 367,142 17.1%
Vernon B. Brannon (2) ...................... 367,141 17.1%
Clay R. Caroland III (3) ................... 15,991 *
D. Shannon LeRoy (4) ....................... -- --
L. Fred Pounds (5) ......................... 20,000 *
James E. Finley (6) ........................ 4,000 *
All current directors and executive officers
as a group (five persons) ................ 770,274 34.8%
</TABLE>
- ---------
* Less than one (1) percent.
(1) The Common Stock listed as beneficially owned by the following individuals
includes shares of Common Stock which such individuals have the right to
acquire through the exercise of currently exercisable stock options: (i)
Messrs. Harris and Brannon (57,954 shares each), (ii) Mr. Pounds (10,000
shares), and (iii) all current directors and executive officers as a group
(125,908 shares). Each of the above mentioned options were granted by the
Company pursuant to the HLM Design, Inc. 1998 Stock Option Plan (the "1998
Stock Option Plan"). For additional information, see "Executive
Compensation -- Stock Options."
(2) The address of each such person is care of the Company at 121 West Trade
Street, Suite 2950, Charlotte, North Carolina 28202.
(3) Mr. Caroland's shares include 5,000 shares held of record in the name of his
minor children under the Uniform Gift to Minors Act. Mr. Caroland disclaims
beneficial ownership of such shares.
(4) Although he serves as president of the general partner of Equitas, L.P.
("Equitas"), Mr. LeRoy disclaims beneficial ownership of the 73,300 shares
of Common Stock (3.5%) held by Equitas.
(5) Mr. Pounds' shares include 10,000 shares held of record by a revocable trust
of which Mr. Pounds has retained voting and investment power.
(6) Mr. Finley has been nominated as a director, subject to stockholder approval
at the Annual Meeting. He does not currently and has not previously held any
position with the Company.
ELECTION OF DIRECTORS
DIRECTOR NOMINEES
It is intended that proxies in the accompanying form will be voted at the
Annual Meeting for the election to the Board of Directors of the following
nominees for the terms indicated:
YEAR OF ANNUAL MEETING
OF STOCKHOLDERS THAT
NAME TERM EXPIRES
- ---------------------------------- -----------------------
D. Shannon LeRoy .......... 2000
James E. Finley ........... 2001
L. Fred Pounds ............ 2001
Vernon B. Brannon ......... 2002
Joseph M. Harris .......... 2002
Messrs. LeRoy, Pounds, Brannon and Harris currently serve as directors of
the Company and each of them has been nominated and has consented to serve for
the terms indicated, if elected. Mr. Caroland, currently a member of the Board,
is not standing for re-election at the Annual Meeting. As of the Annual
Meeting, his directorship will terminate. Mr. James E. Finley has been
nominated and has consented to serve for the term indicated, if elected,
filling the vacancy created by Mr. Caroland's departure. Each nominee, if
elected, shall serve until the annual meeting of stockholders indicated above
and until his successor shall be elected and shall qualify, except as otherwise
provided in the Company's Amended and Restated Certificate of Incorporation and
Bylaws, each as currently in effect. If for any reason any nominee named above
is not a candidate when the election occurs, it is intended that proxies in the
accompanying form will be voted for the election of the other nominees named
above and may be voted for any substitute nominee or, in lieu thereof, the
Board of Directors
2
<PAGE>
may reduce the number of directors, subject to the provisions of the Company's
Amended and Restated Certificate of Incorporation and Bylaws. A holder of
Common Stock voting by proxy may withhold votes as to any director-nominee by
writing the name of such nominee in the space provided or otherwise following
the instructions on the proxy card.
The name, age, present principal occupation or employment, and the
material occupations, positions, offices, or employments for at least the past
five years, of each director and executive officer of the Company are set forth
below. Unless otherwise indicated, each such person has held the occupation
listed opposite his name for at least the past five years.
<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION OR
NAME AGE EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------------- ----- ------------------------------------------------------------------
<S> <C> <C>
Joseph M. Harris, AIA, RIBA 54 Mr. Harris has been President, Chairman of the Board, and a
Director of the Company since its organization in 1997. He has
been President and Chief Executive Officer of HLM Design of
Northamerica, Inc. (formerly Hansen Lind Meyer Inc.
("HLMNA"), one of the Company's Affiliated Managed Firms
(as defined below) for the past four years. Prior to joining
HLMNA in 1994, he served as President of Heery Architects
and Engineers, Inc. and as 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.
Vernon B. Brannon .......... 55 Mr. Brannon has been Senior Vice President, Chief Financial
Officer, and a Director of the Company since its organization in
1997. He has been Senior Vice President and Chief Financial
Officer of HLMNA for the past four years. Prior to joining
HLMNA in 1994, 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.
James E. Finley ............ 57 Mr. Finley currently manages his personal portfolio of real
estate and securities. In 1988 he was one of the founders of
Commercial Bank of the South and Bank of Charleston, where
he was a director until 1996 when the banks were sold to
Anchor BancShares. He joined Balcor Company in 1973 where
he served at various times as Vice President, Executive Vice
President, Senior Executive Vice President, Chief Operating
Officer and Vice Chairman. He led Balcor Company for two
years after it was sold to Shearson/American Express. At that
same time, he served on Shearson/Lehman's Board of
Directors.
D. Shannon LeRoy ........... 43 Mr. LeRoy has been a Director of the Company since 1997. He
currently serves as President of Tennessee Business
Investments, Inc., the general partner of Equitas, 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.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION OR
NAME AGE EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------ ----- ---------------------------------------------------------------
<S> <C> <C>
L. Fred Pounds ......... 51 Mr. Pounds has been a Director of the Company since 1998. He
is one of the founders of U.S. Oncology, Inc. ("USON") and
has served as Chief Financial Officer and Treasurer of USON, a
national cancer management company, since January 1993.
From 1990 until joining USON, Mr. Pounds was the principal
of Pounds & Associates, a health care consulting company.
From January 1987 to May 1990, Mr. Pounds was President
and Chief Operating Officer of Avanti Health Systems, Inc., a
managed care and physician practice management company.
From September 1969 to January 1987, Mr. Pounds was
employed by Price Waterhouse LLP in various positions,
including partner in charge of the Southwest Area Health Care
Group.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
There are two standing committees of the Board of Directors of the
Company, the Audit Committee and the Compensation Committee. The Audit
Committee currently consists of Messrs. Caroland and LeRoy. The Compensation
Committee is comprised of Messrs. Caroland and Pounds. Set forth below is a
summary of the principal functions of each committee and the number of meetings
held by each committee and by the Board of Directors during fiscal year 1999.
AUDIT COMMITTEE. The Audit Committee, which held one (1) meeting in fiscal
year 1999, recommends the appointment of the Company's independent auditors,
reviews the planned scope of the annual audit, reviews the conclusions of the
auditors and reports the findings and recommendations thereof to the Board,
reviews with the Company's auditors the adequacy of the Company's system of
internal controls and procedures and the role of management in connection
therewith, reviews transactions between the Company and its officers, directors
and principal stockholders, and performs such other functions and exercises
such other powers as the Board from time to time may determine.
COMPENSATION COMMITTEE. The Compensation Committee approves and
administers certain compensation and employee benefit plans of the Company,
oversees and advises the Board regarding the compensation of Company officers,
determines the compensation of other key personnel of the Company, reviews and
makes recommendations to the Board concerning compensation practices, policies,
procedures and retirement benefit plans and programs for the employees of the
Company and oversees the activities of plan administrators and trustees and
other fiduciaries under the Company's various employee benefit plans. It also
administers the Company's 1998 Stock Option Plan and such other similar plans
as may from time to time be adopted by the Company, reviews and makes
recommendations to the Board regarding compensation practices, policies and
procedures for members of the Board and performs such other functions and
exercises such other powers as the Board from time to time may determine. In
fiscal year 1999, the committee held one (1) meeting.
The Company currently has no standing nominating committee.
During fiscal year 1999, there were two (2) meetings of the Board of
Directors of the Company. During fiscal year 1999, each director of the Company
attended at least 75% of the meetings of the Board of Directors of the Company
(and, as applicable, committees thereof).
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not employees of the Company are
presently compensated for their services at an annual rate of $10,000 and at an
additional per meeting stipend of $2,000. The Company also reimburses 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. See "Executive
Compensation -- Compensation Committee Interlocks and Insider Participants" for
information concerning consulting fees paid to a director during fiscal 1999
under a special director assignment.
SELECTION OF INDEPENDENT PUBLIC AUDITORS
The Board of Directors has selected the firm of Deloitte & Touche LLP as
the principal independent public auditors of the Company for the fiscal year
ending April 28, 2000. Deloitte & Touche LLP has acted in such capacity for the
Company since its organization in 1997. This selection is submitted for
approval by the stockholders at the Annual Meeting.
4
<PAGE>
Representatives of Deloitte & Touche LLP will attend the Annual Meeting.
They will have an opportunity to make a statement, if they so desire, and to
respond to appropriate questions.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY. Under the oversight and direction of the
Company's Compensation Committee (the "Committee"), which is made up solely of
independent, outside directors, the Company has developed and implemented a
compensation program for its executive officers that is intended to attract and
retain top quality leadership talent while ensuring senior leaders' interests
are sufficiently aligned with the interests of stockholders.
1999 EXECUTIVE OFFICER COMPENSATION. The Company's 1999 executive officer
compensation program had the following components: (1) BASE SALARY established
as set forth in the Employment Agreements (see further discussion of Employment
Agreements below); (2) YEAR-END BONUS, earned during fiscal year 1998 and paid
in the first quarter of fiscal year 1999, to reward excellent performance; and
(3) STOCK OPTIONS, granted in June 1998 (during the first quarter of fiscal
1999), under the Company's 1998 Stock Option Plan. See the Summary Compensation
Table below for more specific information concerning such compensation,
including stock options.
Additionally, the Company's executive officers are eligible to participate
in the Company's 401(k) plan as well as various other benefit plans intended to
provide a safety net of coverage against various events, such as death,
disability and retirement, as well as certain other perquisites and personal
benefits.
CHIEF EXECUTIVE OFFICER COMPENSATION. In the form of base salary, bonus
payments, stock options and other payments, Mr. Harris received in fiscal 1999
the compensation reflected and described in the Summary Compensation Table set
forth below. The determination of such compensation to Mr. Harris followed
generally the philosophy described above for all Company executive officers and
was based upon the Company's consideration of certain factors such as the
Company's successful initial public offering of its Common Stock; improved
Company performance; and competitive compensation rates in the industry for
experience and responsibility similar to that of Mr. Harris. Each item of
compensation paid in fiscal 1999 was based upon Mr. Harris' Employment
Agreement as described elsewhere herein.
COMPENSATION COMMITTEE
Clay R. Caroland III
L. Fred Pounds
COMPENSATION OF EXECUTIVE OFFICERS
Set forth below is information for fiscal years 1999, 1998 and 1997 with
respect to compensation for services to the Company or its managed firms of the
Company's executive officers, including its Chief Executive Officer. No other
person served as an executive officer of the Company during the year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION AWARDS
------------------------------------------------- --------------------
OTHER NUMBER OF SHARES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) COMPENSATION($)(3) OPTIONS(4) COMPENSATION($)(5)
- --------------------------- ------ -------------- ------------- -------------------- -------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Harris 1999 $300,000 $18,000 $12,000 57,954 --
Chairman, President and 1998 300,000 -0- -0- -0- --
Director 1997 230,878 50,000 -0- -0-
Vernon B. Brannon 1999 250,000 18,000 14,029 57,954
Senior Vice President, 1998 250,000 -0- -0- -0- --
Chief Financial Officer 1997 178,847 50,000 -0- -0- --
and Director
</TABLE>
5
<PAGE>
- ---------
(1) For additional information, see " -- Employment Agreements." Does not
include the dollar value of perquisites and other personal benefits.
(2) The amounts shown for fiscal year 1999 are cash bonuses paid in the first
quarter of the specified year.
(3) See " -- Employment Agreements" regarding an automobile allowance for
Messrs. Harris and Brannon included herein.
(4) Stock options were granted to the Company's executive officers in June
1998. See " -- Stock Options" and " -- Employment Agreements" for
additional information concerning such grants.
(5) The aggregate amount of perquisites and other personal benefits received
did not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus reported for such executive officer.
STOCK OPTIONS
The following table sets forth information regarding all options to
acquire shares of Common Stock granted to the named executive officers during
the fiscal year ended April 30, 1999.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
% OF
TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED OF STOCK PRICE
UNDERLYING TO EXERCISE APPRECIATION FOR OPTION
OPTIONS EMPLOYEES OR BASE TERM
GRANTED IN FISCAL PRICE EXPIRATION -----------------------------------------
NAME (#)(1) 1999 ($/SH) DATE(2) 0% 5% 10%
- ------------------- ------------ ----------- --------- --------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph M. Harris 40,568 35% $ 5.50 June 12, 2008 $20,284 $173,362 $408,214
17,386 15% 6.60 June 12, 2008 -- 55,172 155,821
Vernon B. Brannon 40,568 35% 5.50 June 12, 2008 20,284 173,362 408,214
17,386 15% 6.60 June 12, 2008 -- 55,172 155,821
</TABLE>
- ---------
(1) All such options listed for named executive officers were granted under the
1998 Stock Option Plan and are currently exercisable.
(2) All options listed expire ten years from the date of the grant.
The following table sets forth information with respect to the fiscal 1999
year-end values of unexercised options (all of which were granted by the
Company pursuant to the 1998 Stock Option Plan) held by the named executive
officers at fiscal year end.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL AT FISCAL YEAR END
YEAR END(#) ($)
------------------------ ---------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- --------------------------- ------------------------ ---------------------
<S> <C> <C>
Joseph M. Harris .......... 57,954/-- --
Vernon B. Brannon ......... 57,954/-- --
</TABLE>
No options held by the foregoing named executive officers were exercised
in fiscal year 1999.
EMPLOYMENT AGREEMENTS
The Company 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
6
<PAGE>
base salaries of Messrs. Harris and Brannon for fiscal 1999 were $300,000 and
$250,000, respectively and are $300,000 and $250,000, respectively, for fiscal
2000. Messrs. Harris and Brannon also receive a monthly automobile allowance of
$1,000 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,
through May 19, 2001 and will automatically be renewed for successive periods
of one year. Additionally, Messrs. Harris and Brannon each received, during
fiscal 1999, a grant of options pursuant to the 1998 Stock Option Plan for
57,954 shares of Common Stock, exercisable, in the case of incentive stock
options (17,386 shares), at $6.60, and in the case of nonstatutory stock
options (40,568 shares), at $5.50 per share. See " -- Stock Options" above for
additional information.
The Employment Agreements contain similar noncompetition provisions. These
provisions prohibit, during the term of the Employment Agreements, (i) the
disclosure or use of confidential Company information, and (ii) 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 are clients or prospective clients of the
Company. The provisions referred to in (ii) above shall also apply for a period
of three years (with a corresponding severance arrangement tied to the
foregoing base salaries upon a termination or non-renewal without cause)
following the expiration or termination of an Employment Agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPANTS
Clay R. Caroland and L. Fred Pounds served as members of the Compensation
Committee of the Board of Directors during the fiscal year ended April 30,
1999. Mr. Caroland received a total of $40,000 in consulting fees and related
expenses from the Company during fiscal 1999 under a special director
assignment for certain financial, public relations and strategic planning
services. None of the members of the Committee were officers or employees of
the Company or had any relationship directly or indirectly with the Company
otherwise requiring disclosure under Securities and Exchange Commission ("SEC")
regulations.
STOCKHOLDER RETURN PERFORMANCE GRAPH
The Common Stock was registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), effective, June 12,
1998, and began trading on the NASDAQ SmallCap Market on that date. Set forth
below is a line graph and table comparing the cumulative total stockholder
return on the Common Stock against the cumulative total return of the Russell
2000 Index and a user-defined peer group (the "Peer Group") index (the "Peer
Group Index") from June 12, 1998 to and through April 30, 1999. The graph and
table assume that $100 was invested on June 12, 1998 in each of the Company's
Common Stock, the Russell 2000 Index and the Peer Group Index, and that all
dividends were reinvested. The Peer Group consists of the following companies:
Aero Systems Engineering Inc., Michael Baker Corp., Compudyne Corp., EA
Engineering Science and Technology, Ecology and Environment, Inc., Emcon, Find
SVP Inc., Forrester Research Inc., Meta Group Inc., Physicians Specialty Corp.,
Randers Killan Group Inc., Reynolds Smith & Hills Inc., STV Group Inc., Team
Inc., Terence Inc., and TLC Cos. Inc.
7
<PAGE>
[GRAPH APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:]
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/99 4/99
------ ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS)
HLM DESIGN, INC. 100.00 88.00 72.00 93.00 84.00 74.00 80.00 74.00 64.00 60.00 66.00
PEER GROUP 100.00 95.00 87.00 102.00 90.00 91.00 110.00 101.00 94.00 80.00 79.00
RUSSELL 2000 INDEX 100.00 97.00 78.00 84.00 87.00 92.00 97.00 99.00 90.00 92.00 100.00
</TABLE>
EXECUTIVE OFFICERS
Messrs. Harris and Brannon are currently the Company's only executive
officers and were the Company's only executive officers throughout fiscal 1999.
For information concerning their ages, present principal occupations and
material occupations, positions, offices or employments for at least the past
five years, see "Election of Directors -- Director Nominees."
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent (10%) of the
Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the SEC. Additionally, SEC regulations require that
the Company identify any persons for whom one of the referenced reports was not
filed on a timely basis during the most recent fiscal year or prior fiscal
years. To the Company's knowledge, based solely on review of reports furnished
to it and representations that no other reports were required during and with
respect to the fiscal year ended April 30, 1999, all Section 16(a) filing
requirements applicable to its executive officers, directors and more than 10%
beneficial owners were complied with.
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CERTAIN TRANSACTIONS
Messrs. Harris and Brannon, executive officers and directors of the
Company, are also the principal stockholders and officers of HLMNA, HLM Design
of the Southeast, P.C., HLM Design of the Northwest, Architecture, Engineering
and Planning, P.C., HLM Design of the Midwest, Inc., HLM Design of the
Midatlantic, P.C., and HLM Design of the Northeast, Architecture, Engineering
and Planning, P.C. (the "Affiliated Managed Firms"). As officers of the
Affiliated Managed Firms, Messrs. Harris and Brannon caused such firms to enter
into Management and Services Agreements with the Company, and as stockholders
thereof, they entered into Stockholders' Agreements. The primary purpose of the
Stockholders' Agreements is to restrict the ability of stockholders of the
Affiliated Managed Firms to exercise the rights commonly associated with
ownership of common stock and to effectively provide stockholders thereof with
nominee stockholder status in order to facilitate the execution and operation
of the Management and Services Agreements.
For information concerning certain advances from Messrs. Harris and
Brannon to HLMNA, which advances in the amount of $27,000 were repaid by the
Company in fiscal year 1999, see Note 4 to the combined financial statements of
the Company included in the 1999 Annual Report to Stockholders that accompanies
this Proxy Statement.
HLMNA is the tenant under a triple net lease of certain warehouse space in
Charlotte, North Carolina entered into in December 1995 with a partnership of
which Messrs. Harris and Brannon (and family members) are the partners, as
landlord. Rental payments under such lease, which expires in 2005, are $3,500
per month.
Upon the consummation of the Company's initial public offering in June
1998, the Company repaid, among other outstanding indebtedness, a $2 million
loan from Equitas (Mr. LeRoy being the President of the general partner
thereof) and Pacific Capital, L.P., of which Messrs. Harris and Brannon were
guarantors. Such guarantees and other covenants and agreements were released as
a result of the repayment of this loan.
Future material transactions between the Company or any of the Affiliated
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 the
Company than those that can be obtained from unaffiliated third parties.
Additionally, any future material transactions between the Company and any of
the Company's officers, directors or controlling persons or any of their
affiliates (including Affiliated Managed Firms) will be approved by a majority
of the Company's directors and by a majority of its independent directors who
do not have an interest in the transactions. Terminations by the Company of
Management and Services Agreements with Affiliated Managed Firms would also
require such independent director approval.
For additional information concerning certain transactions, see "Executive
Compensation -- Compensation Committee Interlocks and Insider Participation."
OTHER MATTERS
EXPENSES OF SOLICITATION
The Company will pay the costs of solicitation of proxies, including the
cost of assembling and mailing this Proxy Statement and the material enclosed
herewith. In addition to the use of the mails, proxies may be solicited
personally, or by telephone or telegraph and by corporate officers and
employees of the Company without additional compensation. The Company intends
to request brokers and banks holding stock in their names or in the names of
nominees to solicit proxies from their customers who own such stock, where
applicable, and will reimburse them for their reasonable expenses of mailing
proxy materials to their customers.
DISCRETIONARY PROXY VOTING
In the event that any matters other than those referred to in the
accompanying notice should properly come before and be considered at the Annual
Meeting, it is intended that proxies in the accompanying form will be voted
thereon in accordance with the judgment of the person or persons voting such
proxies.
2000 ANNUAL MEETING STOCKHOLDER PROPOSALS
In order for stockholder proposals intended to be presented at the 2000
Annual Meeting of Stockholders to be eligible for inclusion in the Company's
proxy statement and the form of proxy for such meeting, they must be received
by the Company at its principal offices in Charlotte, North Carolina no later
than April 21, 2000. Regarding stockholder proposals intended to be presented
at the 2000 Annual Meeting of Stockholders, but not included in the Company's
proxy statement for such meeting, pursuant to the Company's Bylaws, written
notice of such proposals, to be timely, must be received by
9
<PAGE>
the Company no more than 90 days and no less than 60 days prior to the
anniversary date of the Annual Meeting. All such proposals for which timely
notice is not received in the manner described above may be ruled out of order
at the meeting resulting in the proposal's underlying business not being
eligible for transaction at the meeting.
FORM 10-K
A copy of the Company's 1999 Annual Report to Stockholders, including its
1999 Form 10-K as filed with the SEC, is available, without charge, upon
written request directed to Vernon B. Brannon at the corporate address.
10
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FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
P R O X Y HLM DESIGN, INC.
121 WEST TRADE STREET, SUITE 2950
CHARLOTTE, NORTH CAROLINA 28202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JOSEPH M. HARRIS and VERNON B. BRANNON as
Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the
shares of the Common Stock of HLM Design, Inc. held of record by the
undersigned on August 13, 1999, at the Annual Meeting of Stockholders to be
held on September 22, 1999 or any adjournment thereof.
<TABLE>
<CAPTION>
<S> <C>
1. ELECTION OF DIRECTORS
Nominees: D. Shannon LeRoy for a term expiring at the 2000 Annual Meeting of
Stockholders; James E. Finley and L. Fred Pounds for terms expiring at the
2001 Annual Meeting of Stockholders; and Joseph M. Harris and Vernon B.
Brannon for terms expiring at the 2002 Annual Meeting of Stockholders
(Mark only one of the following boxes.)
[ ] VOTE FOR all nominees listed above, except vote [ ] VOTE WITHHELD as to all nominees
withheld as to the following nominees (if any):
- ------------------------------------
2. SELECTION OF AUDITORS
To ratify the appointment of Deloitte & Touche LLP as the independent
auditors for the Company for the fiscal year ending April 28, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
</TABLE>
<PAGE>
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDER SIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign.
DATED: , 1999
-------------------
SIGNATURE:
---------------------
-------------------------------
SIGNATURE, IF HELD JOINTLY
WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE
NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
