SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE DEF 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the 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.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
(HLM LOGO APPEARS HERE)
HLM
Design
121 West Trade Street, Suite 2950
Charlotte, North Carolina 28202
August 15, 2000
DEAR STOCKHOLDER:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held at 9:00 a.m. on Thursday, September 14, 2000, 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)
HLM
Design
-----------------
NOTICE OF MEETING
-----------------
Charlotte, NC
August 15, 2000
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 Thursday, September 14, 2000 at 9:00 a.m. for the following
purposes as described in the accompanying Proxy Statement:
1. To elect one (1) director for the classified term indicated in the Proxy
Statement.
2. To consider and vote upon an amendment to the HLM Design, Inc. 1998
Stock Option Plan (the "Stock Option Plan") to increase the number of options
to purchase shares of common stock of the Company that may be granted pursuant
to the Stock Option Plan from 159,955 to 265,000.
3. To consider and vote upon an amendment to the HLM Design, Inc. Employee
Stock Purchase Plan (the "ESPP") to remove the provision in the ESPP that
prohibits the number of shares of common stock issuable under the ESPP and the
Stock Option Plan from exceeding in the aggregate ten percent (10%) of the
total number of shares of common stock of the Company outstanding.
4. 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 27, 2001.
5. 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 10, 2000 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)
HLM
Design
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PROXY STATEMENT
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August 15, 2000
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
Thursday, September 14, 2000 at 9:00 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 10, 2000 (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 15, 2000.
As of the close of business on the Record Date, there were issued and
outstanding and entitled to be voted at the Annual Meeting, 2,105,438 shares of
Common Stock. The presence at the Annual Meeting, in person or by proxy, of
shareholders holding in the aggregate a majority of the outstanding shares of
the Company's Common Stock entitled to vote shall constitute a quorum for the
transaction of business. Proxies indicating shareholder abstentions will, in
accordance with Delaware law, be counted as represented at the Annual Meeting
for purposes of determining whether there is a quorum present, but will not be
voted for or against any proposal to which the abstention relates. However, the
effect of an abstention on any proposal, other than the election of directors,
has the same effect as a vote against the proposal. Shares represented by
"broker non-votes" (i.e., shares held by brokers or nominees that are
represented at a meeting, but with respect to which the broker or nominee is
not empowered to vote on a particular proposal) will be counted for purposes of
determining whether there is a quorum, but will not be voted on such matter and
will not be counted for purposes of determining the number of votes cast on
such matter. 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 actions proposed in the accompanying notice will become
effective by majority vote.
Proxies in the accompanying form, properly executed and duly returned and
not revoked, will be counted 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 one (1) nominee to the Board of
Directors for the term indicated herein, (ii) in favor of the amendment (the
"Stock Option Plan Amendment") to the HLM Design, Inc. 1998 Stock Option Plan
(the "Stock Option Plan"), (iii) in favor of the amendment (the "ESPP
Amendment") to the HLM Design, Inc. Employee Stock Purchase Plan (the "ESPP")
and (iv) 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 27, 2001. If any other matter or business is brought
before the meeting, the proxy holders may vote the proxies at their discretion.
<PAGE>
Equity Security Ownership
The following table sets forth, as of August 10, 2000, 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 11 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.
<TABLE>
<CAPTION>
Amount and Nature of Percentage of
Name Beneficial Ownership(1) Common Stock
-------------------------------------------- ------------------------- --------------
<S> <C> <C>
Joseph M. Harris (2) ....................... 372,142 17.2%
Vernon B. Brannon (2) ...................... 367,141 17.0%
D. Shannon LeRoy (3) ....................... -- --
L. Fred Pounds (4) ......................... 20,000 *
James E. Finley (5) ........................ 4,000 *
All current directors and executive officers
as a group (five persons) ................ 763,283 34.2%
</TABLE>
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* 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 as
follows: (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 Stock Option Plan. For
additional information, see "Executive Compensation -- Stock Options."
(2) The address of each such person is in care of the Company at 121 West Trade
Street, Suite 2950, Charlotte, North Carolina 28202.
(3) 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.
(4) Mr. Pounds' shares include 10,000 shares held of record by a revocable
trust of which Mr. Pounds has retained voting and investment power.
(5) These shares are held by Mr. Finley's wife.
ELECTION OF DIRECTORS
Director Nominee
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
nominee for the term indicated:
<TABLE>
<CAPTION>
Year of Annual Meeting
of Stockholders that
Name Term Expires
--------------------------------- -----------------------
<S> <C>
D. Shannon LeRoy ......... 2003
</TABLE>
Mr. LeRoy currently serves as director of the Company and has been
nominated and has consented to serve for the term indicated, if elected. The
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 the
nominee named above is not a candidate when the election occurs, it is intended
that proxies in the accompanying form may be voted for any substitute nominee
or, in lieu thereof, the Board of Directors 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 the director-nominee by following the instructions on the proxy
card.
2
<PAGE>
Directors and Executive Officers
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 55 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 Managed Firms (as
defined below) for the past six 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 .......... 56 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 six 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 ............ 62 Mr. Finley has been a Director of the Company since 1999. He
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, 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 ........... 44 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, and of Cooker Restaurant Corporation.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Current Principal Occupation or
Name Age Employment and Five-Year Employment History
------------------------ ----- --------------------------------------------------------------
<S> <C> <C>
L. Fred Pounds ......... 52 Mr. Pounds has been a Director of the Company since 1998. He
has served as Chief Executive Officer and a Director of
Hostcentric, Inc., an internet website hosting concern, since
March 2000. He is one of the founders of U.S. Oncology, Inc.
("USON") and until March 2000 had 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. Finley, LeRoy and Pounds. The
Compensation Committee is comprised of Messrs. Finley 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 2000.
Audit Committee. The Audit Committee, which held one meeting in fiscal
year 2000, 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 Stock Option Plan, ESPP 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 2000 the committee held no meetings.
The Company currently has no standing nominating committee.
During fiscal year 2000, there were three meetings of the Board of
Directors of the Company. During fiscal year 2000, 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.
4
<PAGE>
PROPOSED AMENDMENT TO STOCK OPTION PLAN
The Board of Directors of the Company has approved an amendment to the
Stock Option Plan to increase the number of shares of Common Stock that may be
issued under the Stock Option Plan from 159,955 to 265,000, subject to
stockholder approval. This Stock Option Plan Amendment is being proposed to
allowed future grants to key employees, directors, consultants and other
individuals providing services to the Company (including through the Managed
Firms). No other amendments to the Stock Option Plan are proposed for
stockholder approval at this time.
The Stock Option Plan was originally adopted by the Board of Directors of
the Company on January 30, 1998 and approved by its shareholders on February 3,
1998. The Stock Option Plan is intended to provide an incentive to attract,
retain and reward key employees, directors, consultants and other individuals
providing services to the Company and to motivate these individuals to continue
to contribute to the success and future growth of the Company and its
subsidiaries.
At the time of the Company's initial public offering (the "IPO"), certain
state securities commissioners required the Company, with certain exceptions,
to limit the number of shares issued or reserved for issuance under options or
warrants to no more than ten percent (10%) of the total shares of Common Stock
outstanding. As a result, the Company limited the number of shares available
for issuance under the Stock Option Plan to 159,955 shares and established
certain related limitations under the ESPP as described below. The state
regulators' jurisdiction over the Company at the time of the IPO arose because
the Company's Common Stock was to be listed on the NASDAQ SmallCap Market
rather than on a national securities exchange. Effective January 14, 2000, the
Company's Common Stock began trading on the American Stock Exchange, a national
securities exchange. With the Company's Common Stock now listed on the
American Stock Exchange, the Company has determined, based in part on the
National Securities Markets Improvements Act of 1996, that the state limitations
no longer apply and thus the increase in the number of shares available for
issuance under the Stock Option Plan is now permissible, subject to stockholder
approval. See also "Proposed Amendment to ESPP."
Summary Description of the Stock Option Plan. The following is a summary
of the Stock Option Plan, as amended, and is qualified in its entirety by
reference to the Stock Option Plan, a copy of which has been submitted to the
Securities and Exchange Commission (the "SEC") with this Proxy Statement. The
Stock Option Plan is administered by the Compensation Committee which has the
authority to determine, among other things, the persons who are to receive
options, the number of shares of Common Stock to be subject to each option, the
option period, the option exercise price and the vesting schedule applicable to
the option. Subject to the terms of the Stock Option Plan, the Compensation
Committee has plenary authority in its discretion to interpret and construe the
Stock Option Plan, to establish rules and regulations, make determinations and
take administrative actions as it deems necessary or advisable for the
administration of the Stock Option Plan.
If the Stock Option Plan Amendment is approved by the stockholders, the
number of shares of Common Stock reserved for issuance under the Stock Option
Plan will be increased from 159,955 to 265,000. The number of shares of Common
Stock reserved for issuance under the Stock Option Plan is subject to
adjustment in the event of certain changes in the capital structure of the
Company due to a reorganization, stock spilt, stock dividend, merger or other
similar event.
Options may be granted under the Stock Option Plan to key employees,
officers, directors, consultants and other individuals providing services to
the Company or any of its subsidiaries. In selecting individuals for options
and determining the terms thereof, the Compensation Committee may consider any
factors it deems relevant, including present and potential contributions to the
success of the Company. The Compensation Committee can grant "incentive stock
options" ("ISOs") intended to qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and nonstatutory stock options ("NSOs")
under the Stock Option Plan; however, ISOs can be granted only to employees of
the Company or one of its "subsidiary corporations" within the meaning of
Section 424(f) of the Code.
NSOs to purchase a total of approximately 28,400 shares of Common Stock
were granted to approximately 22 plan participants in fiscal year 2000 under
the Stock Option Plan. No options to acquire shares of Common Stock were
granted to the executive officers or directors under the Stock Option Plan in
fiscal year 2000. At present, without giving effect to the Stock Option Plan
Amendment, options to purchase a total of approximately 154,308 shares are
currently outstanding. No options have been exercised to date. There will be
110,692 additional shares available for future grant if the Stock Option Plan
Amendment is approved. There has been no decision with respect to the number or
terms of options that may be granted hereafter or the number or identity of
future option holders under the Stock Option Plan.
The exercise price of options granted under the Stock Option Plan is
determined in the discretion of the Compensation Committee, subject to certain
restrictions, and is set forth in the applicable option agreement. The exercise
price per share of Common Stock covered by an NSO cannot be less than 85% of
the fair market value per share of Common Stock on the
5
<PAGE>
date of grant of the NSO. The exercise price per share of Common Stock covered
by an ISO cannot be less than the fair market value per share of Common Stock
on the date of grant of the ISO. Special rules apply to an ISO granted to an
individual who is considered to be a "10% Stockholder." A "10% Stockholder" is
someone who, on the date the ISO is granted, owns Common Stock (or who is
considered to own Common Stock through attribution from relatives or from
entities in which the individual has an ownership interest) possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any subsidiary. In the case of an ISO granted to a 10% Stockholder,
the exercise price per share of Common Stock cannot be less than 110% of the
fair market value per share of Common Stock on the date of grant of the ISO. If
permitted by the Compensation Committee, the exercise price can be satisfied
using another form of payment, such as shares of Common Stock owned by the
option holder with a fair market value on the date of exercise at least equal
to the aggregate purchase price.
The time period in which a stock option may be exercised will be set forth
in the applicable option agreement, but no option can be exercised more than
ten years from the date of grant, or in the case of an ISO granted to a 10%
Stockholder, more than five years from the date of grant. Options may be
subject to a vesting schedule and become exercisable in installments. However,
ISOs cannot become exercisable for the first time in any calendar year to the
extent that the fair market value of the Common Stock underlying the ISOs
(granted under the Stock Option Plan and any other stock option plans of the
Company) exceeds $100,000 (or such other limitation applicable under Section
422(d) of the Code), determined based on fair market value at the date of
option grant.
If an option holder's service for the Company and its subsidiaries
terminates for any reason except disability, death or with respect to NSOs
only, involuntary termination without cause, the option will terminate and can
no longer be exercised. If an option holder's service for the Company and its
subsidiaries ceases due to his or her disability, options (to the extent
vested) generally may be exercised during the twelve months following the date
of termination of service. In the event that an NSO holder is involuntarily
terminated without cause (as described in the Stock Option Plan), options (to
the extent vested) generally may be exercised during the three months following
termination. If the option holder dies while in service for the Company or one
of its subsidiaries (or during the three month or twelve month periods
following termination as described above), then options (to the extent vested)
generally may be exercised during the twelve month period following the option
holder's death by the person to whom the option holder's rights under the stock
option pass by will or the laws of descent and distribution. In no event can an
option be exercised after the expiration of its term (i.e., the option period
fixed by the Compensation Committee and set forth in the option agreement). For
purposes of ISOs, an option holder on military leave, sick leave or other bona
fide leave of absence approved by the Company will not be considered to have
terminated employment until the leave of absence exceeds ninety days. The
option holder's service will be deemed to have terminated for purposes of the
Stock Option Plan on the ninety-first day of such leave, unless the option
holder's right to return to service is guaranteed by statute or contract.
During the lifetime of an option holder, stock options generally can be
exercised only by the option holder and cannot be assigned or transferred,
except by will or the laws of descent and distribution. However, the
Compensation Committee can, in its discretion, grant NSOs that are transferable
to certain permitted recipients under limited circumstances and may impose such
restrictions on the transfer as it deems desirable.
Options granted under the Stock Option Plan may include the right to
acquire a "reload" stock option. In such a case, if an option holder pays all
or part of the exercise price of a stock option with shares of Common Stock he
or she held for at least six months, then, upon exercise of the stock option,
the option holder is granted a second stock option to purchase, at the fair
market value as of the date of exercise of the first stock option, the number
of whole shares used by the option holder in payment of the exercise price of
the first stock option. A reload stock option is not exercisable until one year
after the grant date of such stock option or the expiration date of the first
stock option.
In the event of certain changes in the capital structure of the Company
due to a recapitalization, stock split, stock dividend, merger, consolidation
or other similar event, appropriate adjustments will be made to the number and
kind of shares covered by outstanding stock options and the option price per
share for outstanding stock options. In connection with any merger or
consolidation in which the Company is not the surviving corporation, and which
results in the holders of the outstanding voting securities of the Company
owning less than a majority of the outstanding voting securities of the
surviving corporation, or any sale or transfer by the Company of all or
substantially all its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, of all or a majority of the
then-outstanding voting securities of the Company, all outstanding stock
options under the Stock Option Plan will become exercisable in full on and
after (i) 15 days 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.
6
<PAGE>
The Board of Directors may at any time amend or terminate the Stock Option
Plan, subject to the following: (i) no amendment or termination may, without
the consent of an option holder, adversely affect the rights of the holder
under any option then outstanding, and (ii) approval by the stockholders of the
Company is required for an amendment increasing the maximum number of shares of
Common Stock for which options may be granted under the Stock Option Plan or an
amendment of the requirements as to the class of employees eligible to receive
options.
On August 10, 2000, the closing price for a share of Common Stock as
reported on the American Stock Exchange was $4.00. No decision has been made as
to the number of additional stock options that may be awarded to the Company's
executive officers or other persons in fiscal year 2001 under the Stock Option
Plan. Set forth below is further information with respect to options granted
under the Stock Option Plan to date in fiscal year 2001.
New Plan Benefits
Stock Option Plan
<TABLE>
<CAPTION>
Name and Position Dollar Value Number of Units
--------------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Joseph M. Harris
Chairman, President and Director ............................ 0 0
Vernon B. Brannon
Senior Vice President, Chief Financial Officer and Director . 0 0
All current executive officers as a group ..................... 0 0
All current non-executive officer directors as a group ........ 0 0
All current non-executive officer employees as a group ........ 0 0
</TABLE>
Federal Income Tax Consequences. The following summary generally describes
the federal income tax consequences to option holders and the Company with
respect to the issuance and exercise of stock options under the Stock Option
Plan and is based on current laws and regulations. The summary is general in
nature and is not intended to cover all tax consequences that could apply to a
particular option holder or the Company.
The grant of ISOs has no federal income tax consequences to either the
stock option holder or the Company. While the exercise of ISOs generally has no
ordinary federal income tax consequences to the option holder, the excess of
the fair market value of the shares at the time of exercise over the aggregate
option exercise price will be an item of adjustment for the option holder for
purposes of the federal alternative minimum tax. The exercise of ISOs does not
result in federal income tax deductions for the Company.
If the option holder does not sell or otherwise dispose of the shares of
Common Stock acquired upon exercise of an ISO for at least two years after the
date the stock option was granted and one year after the date the option was
exercised, then the disposition of the shares will ordinarily result in capital
gains or losses equal to the difference between the aggregate option exercise
price and the amount realized upon the sale or other disposition. In this case,
the Company will not be entitled to a federal income tax deduction. However, if
the option holder sells or otherwise disposes of the shares of Common Stock
within two years of the date of grant or within one year of the date of
exercise (often referred to as a "disqualifying disposition"), then the option
holder will realize taxable ordinary income at that time in an amount equal to
the excess of the fair market value of the shares of Common Stock at the time
of exercise (or, if less, the amount realized upon the sale or other
disposition) over the aggregate option exercise price. The Company will be
entitled to a federal income tax deduction upon a disqualifying disposition
equal to the amount of ordinary income recognized by the option holder.
The grant of NSOs generally does not result in taxable income to the
option holder or a tax deduction to the Company. Upon exercise of an NSO, the
NSO holder will realize ordinary income at that time equal to the amount by
which the fair market value of the acquired shares of Common Stock on the date
of exercise exceeds the aggregate option exercise price. The Company will be
entitled to a corresponding federal income tax deduction equal to the amount
that the option holder recognizes as income. In the event of a subsequent
taxable disposition of the shares, the option holder will generally recognize
capital gain or loss based upon the difference between the option holder's tax
basis (option exercise price plus taxable income recognized) and the selling
price. The Company will not be entitled to a tax deduction for any additional
gain recognized by the option holder.
To the extent an option holder pays all or part of the option exercise
price of an NSO by tendering shares of Common Stock owned by the option holder,
the tax consequences described above apply with respect to any shares acquired
in excess of the number of shares tendered in payment, with such excess shares
being treated as having been acquired without consideration. For federal income
tax purposes, the number of newly acquired shares equal to the number of shares
surrendered
7
<PAGE>
in payment of the option exercise price will have the same tax basis and
holding period as the shares surrendered. The number of newly acquired shares
that exceeds the number of shares surrendered will have a tax basis equal to
the amount of ordinary income recognized on such exercise (which generally will
be their fair market value at exercise since the shares are treated as having
been acquired without consideration) and a holding period which generally
begins on the date of exercise.
PROPOSED AMENDMENT TO ESPP
The Board of Directors of the Company has approved an amendment of the
ESPP. The amendment removes the provision in the ESPP that prohibits the number
of shares of Common Stock issuable under the ESPP and the Stock Option Plan
from exceeding in the aggregate ten percent (10%) of the total number of shares
of Common Stock of the Company, subject to stockholder approval. This ESPP
Amendment is being proposed to allow future grants to employees. No other
amendments to the ESPP are proposed for stockholder approval.
The ESPP was originally adopted by the Board of Directors of the Company
on January 30, 1998 and approved by its shareholders on February 3, 1998. The
ESPP is intended to promote the interests of the Company by providing employees
of the Company and its participating subsidiaries the opportunity to acquire a
proprietary interest in the Company through the ownership of Common Stock.
Through the ESPP, the Company grants options which give eligible employees the
right to buy Common Stock at a discount from the fair market value at the time
of purchase.
The ESPP currently contains a provision limiting the number of shares
issued or reserved for issuance under the ESPP and the Stock Option Plan, taken
together, to no more than ten percent (10%) of the total shares of Common Stock
outstanding. This restriction was established at the time of the IPO due to
state regulators' requirements, which requirements were applicable to the
Company because the Common Stock was to be listed on the NASDAQ SmallCap
Market. With the Common Stock now listed on the American Stock Exchange,
the Company has determined, based in part on the National Securities Markets
Improvements Act of 1996, that this limitation may now be removed from the
ESPP, subject to stockholder approval. See also "Proposed Amendment to Stock
Option Plan."
Summary Description of the ESPP. The following is a summary of the ESPP,
as amended, and is qualified in its entirety by reference to the ESPP, a copy
of which has been submitted to the SEC with this Proxy Statement. The ESPP is
administered by the Compensation Committee which, subject to the terms of the
ESPP, has plenary authority in its discretion to interpret the ESPP and to
resolve questions regarding eligibility to participate, determine the terms,
conditions and restrictions under which options may be granted, determine the
manner and timing regarding the exercise of options and the purchase of Common
Stock under the ESPP, establish rules and regulations regarding the
administration of the ESPP, and take actions necessary to administer the ESPP.
If the ESPP Amendment is approved by the shareholders, the limitation that
prohibits the number of shares issued or issuable together under the ESPP and
the Stock Option Plan from exceeding in the aggregate ten percent (10%) of the
total number of shares of Common Stock of the Company outstanding will be
removed. The number of shares of Common Stock reserved for issuance under the
ESPP (which number is not affected by the ESPP Amendment) is 57,954 (including
shares that already have been purchased), subject to adjustment in the event of
certain changes in the capital stock of the Company due to a reorganization,
stock split, stock dividend, merger or other similar event.
Options generally are granted under the ESPP as of each January 1. All
eligible employees of the Company and its participating subsidiaries will be
given the opportunity to participate in the ESPP on each grant date. In order
to be eligible, an employee must be employed on a full-time or part-time basis
by the Company or a participating subsidiary, regularly scheduled to work more
than 20 hours per week and customarily employed more than five months in a
calendar year. Employees who own or hold options to purchase Common Stock (or
who would upon participation in the ESPP own or hold options to purchase Common
Stock) possessing five percent (5%) or more of the total combined voting power
or value of the Common Stock of the Company or any subsidiary are not eligible
to participate in the ESPP. For purposes of this 5% limitation, employees may
be considered to own or hold options to purchase Common Stock through
attribution from relatives or from entities in which the employees have an
ownership interest.
As of each grant date during the term of the ESPP, each eligible employee
electing to participate in the ESPP ("Participant") will be granted an option
to purchase that number of shares of Common Stock that equals: (a) the
Participant's base pay as of the grant date divided by 1,000 (with fractional
amounts of .50 or more rounded up to the next dollar and fractional amounts of
less than .50 disregarded), multiplied by (b) two (2). The exercise price per
share of Common Stock will equal the lesser of 85% of the fair market value per
share of Common Stock on the date of grant or 85% of such fair market value on
the date of exercise. In the event that there are securities or other
limitations that restrict the number of
8
<PAGE>
shares that can be issued under the ESPP, the number of shares that can be
purchased under an option is reduced on an equitable basis among all
Participants. Fair market value generally is the closing price per share of the
Common Stock on the American Stock Exchange on the last trading day prior to
the date of reference. No Participant may be granted an option which would
permit him or her to purchase stock under the ESPP and all other employee stock
purchase plans of the Company at a rate which exceeds $25,000 in fair market
value of such stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time.
In January 2000, eligible employees who elected to participate in the ESPP
were granted options to purchase in the aggregate 11,808 shares of Common
Stock. At present, options to acquire 9,273 shares have been exercised to date
in 2000, options to acquire 2,535 shares remain outstanding (subject to any
cancellations during the year) and options with respect to 36,826 additional
shares are authorized but unissued under the ESPP. On August 10, 2000, the
closing price of a share of Common Stock as reported on the American Stock
Exchange was $4.00.
A Participant may elect to designate a limited percentage of pay to be
deferred by after-tax payroll deduction as a contribution to the ESPP. If a
Participant has made contributions to the ESPP, his or her option will be
exercised automatically to purchase Common Stock on each exercise date during
the calendar year in which the option is granted. The exercise dates are the
last business day of March, June, September and December during the year. The
Participant's accumulated and unused contributions as of each exercise date
will be applied to purchase the maximum number of whole shares of Common Stock
that such contributions will permit at the applicable option price, limited to
the number of shares available for purchase under the option. Contributions
which are not enough to purchase a whole share of Common Stock will be carried
forward and applied on the next exercise date in that calendar year.
Options granted to Participants will expire on the last exercise date of
the calendar year in which granted. However, if a Participant withdraws from
the ESPP or terminates employment prior to such exercise date, the option may
expire earlier.
Once a Participant's employment terminates, the Participant may not make
any more contributions to the ESPP. If a Participant's employment terminates
for any reason other than cause, the Participant (or the Participant's estate
if termination of employment is caused by death) can request the return of
contributions not yet used to purchase Common Stock. Alternatively, the
Participant (or the Participant's estate if termination of employment is caused
by death) can elect to continue participation in the ESPP until the next
exercise date in the calendar year of termination of employment, so that any
unexpired option held by the Participant will be automatically exercised on
that exercise date to the extent the Participant's remaining contributions will
allow.
In the event of certain changes in the capital stock of the Company due to
a reorganization, stock split, stock dividend, merger or other similar event,
corresponding adjustments in the number and kind of shares covered by
outstanding options and the exercise price per share will be made. In
connection with any merger or consolidation in which the Company is not the
surviving corporation, and which results in the holders of the outstanding
voting securities of the Company owning less than a majority of the outstanding
voting securities of the surviving corporation, or any sale or transfer by the
Company of all or substantially all of its assets or any tender offer or
exchange offer for or the acquisition, directly or indirectly, of all or a
majority of the then-outstanding voting securities of the Company, all
outstanding options under the ESPP will become exercisable in full on or 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.
The Board of Directors may at any time amend, suspend or terminate the
ESPP, subject to the following: (i) no amendment, suspension or termination
may, without the consent of a Participant, adversely affect the rights of the
Participant under any option then outstanding; and (ii) approval by the
stockholders of the Company is required for an amendment increasing the maximum
number of shares of Common Stock for which options may be granted under the
ESPP or, to the extent required by Section 423 of the Code, an amendment
changing the class of employees eligible to receive options under the ESPP.
9
<PAGE>
Set forth below is information with respect to ESPP options granted to date
in fiscal year 2001.
New Plan Benefits
ESPP
<TABLE>
<CAPTION>
Name and Position Dollar Value Number of Units
--------------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Joseph M. Harris
Chairman, President and Director ............................ (1) (1)
Vernon B. Brannon
Senior Vice President, Chief Financial Officer and Director . (1) (1)
All current executive officers as a group ..................... (1) (1)
All current non-executive officer directors as a group ........ (2) (2)
All current non-executive officer employees as a group ........ 0 0
</TABLE>
---------
(1) As holders of more than 5% of the total voting power of the Company,
Messrs. Harris and Brannon are not eligible to participate in the ESPP.
(2) Non-executive officer directors of the Company are ineligible to
participate in the ESPP.
Federal Income Tax Consequences. The following summary generally describes
the federal income tax consequences to Participants and the Company of options
granted under the ESPP and is based on current laws and regulations. The
summary is general in nature and is not intended to cover all tax consequences
that could apply to a particular employee or the Company.
The ESPP is intended to meet the requirements of an "employee stock
purchase plan" under Section 423 of the Code. Accordingly, there are no federal
income tax consequences to the Participant or the Company upon the grant of an
option to purchase Common Stock under the ESPP. The Participant will not
recognize federal taxable income on the exercise of an option granted under the
ESPP, but instead will take a tax basis in the Common Stock received equal to
the option exercise price. The Company will not receive a tax deduction for
federal income tax purposes when an option is exercised under the ESPP.
If the Participant holds the shares of Common Stock acquired upon the
exercise of an option under the ESPP until a date that is both more than two
years from the grant date of the relevant option and more than one year from
the option exercise date (or dies while holding such shares), the Participant
will recognize ordinary income for federal income tax purposes at the time of
disposition of the shares of Common Stock (or at death) equal to the lesser of
(i) the excess of the fair market value of the shares when the option was
granted over the option exercise price and (ii) the excess of the fair market
value of the shares at the date of such disposition (or death) over the option
exercise price. For this purpose, the option exercise price is deemed to be 85%
of the fair market value of the shares of Common Stock on the date the relevant
option was granted (assuming the shares are purchased at a 15% discount). The
amount of ordinary income recognized will increase the Participant's basis in
the shares for federal income tax purposes, and any additional gain (or loss)
realized on the disposition of the shares of Common Stock will be taxed as
capital gain (or loss). In the case where the holding requirements are met, the
Company will not be entitled to a federal tax deduction with respect to any
income recognized by the Participant.
If the Participant disposes of the shares of Common Stock acquired upon
the exercise of an option under the ESPP within two years after the grant date
of the relevant option or within one year after the option exercise date, the
Participant will recognize ordinary income for federal income tax purposes at
the time of disposition equal to the amount by which the fair market value of
the shares of Common Stock on the option exercise date exceeds the option
exercise price, and an amount equal to such ordinary income generally is
deductible by the Company. The Participant's tax basis in the shares will be
the option exercise price plus the amount of taxable ordinary income recognized
(i.e., fair market value of the shares on the exercise date). Any gain in
excess of the Participant's tax basis in the shares of Common Stock will be
taxed as capital gain and is not deductible by the Company. Any loss recognized
on the disposition of the shares of Common Stock generally will be treated as a
capital loss.
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 27, 2001. 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.
10
<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, 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.
2000 Executive Officer Compensation. The Company's fiscal year 2000
executive officer compensation consisted of base salary established as set
forth in the Employment Agreements (see further discussion of Employment
Agreements below). No year-end bonuses were paid or stock options granted to
the executive officers for fiscal year 2000. See the Summary Compensation Table
below for more specific information concerning such compensation, including
stock options granted in a prior year.
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 and other
payments, Mr. Harris received in fiscal year 2000 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 the Company's executive officers generally and
was based upon the Company's consideration of certain factors such as 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 year 2000 was based upon Mr. Harris' Employment Agreement as
described elsewhere herein.
Compensation Committee
James E. Finley
L. Fred Pounds
Compensation of Executive Officers
Set forth below is information for fiscal years 2000, 1999 and 1998 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($)
--------------------------- ------ -------------- ------------- ----------------- -------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Harris 2000 $300,000 $ -- $12,000 -- --
Chairman, President and 1999 300,000 18,000 12,000 57,954 --
Director 1998 300,000 -- -- -- --
Vernon B. Brannon 2000 250,000 -- 12,000 -- --
Senior Vice President, 1999 250,000 18,000 14,029 57,954 --
Chief Financial Officer 1998 250,000 -- -- -- --
and Director
</TABLE>
11
<PAGE>
---------
(1) For additional information, see " -- Employment Agreements." Does not
include the dollar value of perquisites and other personal benefits.
(2) The amounts shown for fiscal year 1999 are cash bonuses paid in the first
quarter of the specified year.
(3) See " -- Employment Agreements" regarding an automobile allowance for
Messrs. Harris and Brannon included herein.
(4) Stock options were granted to the Company's executive officers in June
1998. See " -- Stock Options" and " -- Employment Agreements" for
additional information concerning such grants.
Stock Options
No options to acquire shares of Common Stock were granted to the named
executive officers during the fiscal year ended April 28, 2000.
The following table sets forth information with respect to the fiscal 2000
year-end values of unexercised options (all of which were granted by the
Company pursuant to the Stock Option Plan) held by the named executive officers
at fiscal year end.
Aggregated Option Exercises in Fiscal Year 2000 and
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal at Fiscal Year End
Year End(#) ($)
----------------------- ---------------------
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 2000.
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 base
salaries of Messrs. Harris and Brannon for fiscal year 2000 were $300,000 and
$250,000, respectively and are $300,000 and $250,000, respectively, for fiscal
year 2001. 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. Messrs. Harris and Brannon each received,
during fiscal 1999, a grant of options pursuant to the Stock Option Plan for
57,954 shares of Common Stock exercisable, in the case of ISOs (17,386 shares),
at $6.60, and in the case of NSOs (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 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 nonrenewal without cause) following the expiration or
termination of an Employment Agreement.
Compensation Committee Interlocks and Insider Participants
James E. Finley and L. Fred Pounds served as members of the Compensation
Committee of the Board of Directors during the fiscal year ended April 28,
2000. Neither member of the Committee was an officer or employee of the Company
or had any relationship directly or indirectly with the Company otherwise
requiring disclosure under SEC regulations.
12
<PAGE>
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. Effective January
14, 2000, the Common Stock began trading on the American Stock Exchange and
ceased trading on the NASDAQ SmallCap Market. 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 15, 1998 to and through April 28, 2000. The graph and table assume that
$100 was invested on June 15, 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., EA Engineering Science and Technology,
Ecology and Environment, Inc., Find SVP Inc., Forrester Research Inc., Meta
Group Inc., STV Group Inc., Team Inc., Tenera Inc., and TRC Cos. Inc.
COMPARISON OF CUMULATIVE TOTAL RETURN
(Performance Graph appears here. See table below for plot points.)
HLM Design, Inc. Customer Selected Stock List Russell 2000 Index
6/98 100.00 100.00 100.00
4/99 75.56 74.13 95.04
4/00 91.11 154.25 111.11
13
<PAGE>
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 28, 2000, all Section 16(a) filing
requirements applicable to its executive officers, directors and more than 10%
beneficial owners were complied with, except that (i) Mr. Finley inadvertently
filed late his Form 3 initial statement of beneficial ownership; and (ii) Mr.
Harris inadvertently reported late his December 9, 1999 acquisition of 100
shares of Common Stock and December 10, 1999 acquisition of 4,900 shares of
Common Stock on a Form 4 statement of changes of beneficial ownership filed
June 29, 2000.
CERTAIN TRANSACTIONS
During the year ended April 28, 2000, the Company paid $70,264 to Mr.
Harris and $70,264 to Mr. Brannon to extinguish obligations created prior to
the time of the IPO arising under nominee shareholder agreements to redeem
certain of their shareholder interests in HLMNA.
Messrs. Harris and Brannon, executive officers and directors of the
Company, are also the principal stockholders and officers of HLMNA, HLM Design
Architecture, Engineering and Planning, P.C. and HLM Design USA, Inc. (the
"Managed Firms"). As officers of the 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 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. The Managed
Firms have guaranteed the Company's obligations under its Revolving Credit,
Term Loan and Capital Expenditure Loan with IBJ Whitehall Business Credit
Corporation dated February 7, 2000. Messrs. Harris and Brannon have also
pledged their shares of the Managed Firms to secure such loan.
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 are the partners, as landlord. Rental payments
under such lease, which expires in 2005, are $3,500 per month.
Future material transactions between the Company or any of the Managed
Firms and any of the Company's officers, directors or controlling persons will
be made or entered into on terms that are no less favorable to the Company than
those than 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 (included
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 Managed Firms would also require such independent director approval.
For additional information, 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
14
<PAGE>
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.
2001 Annual Meeting Stockholder Proposals
In order for stockholder proposals intended to be presented at the 2001
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 17, 2001. Regarding stockholder proposals intended to be presented
at the 2001 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 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 2000 Annual Report to Stockholders, including its
2000 Form 10-K as filed with the SEC, is available, without charge, upon
written request directed to Vernon B. Brannon at the corporate address.
15
<PAGE>
******************************************************************************
APPENDIX A
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--------------------------------------------------------------------------------
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 10, 2000, at the Annual Meeting of Stockholders to be
held on September 14, 2000 or any adjournment thereof.
<TABLE>
<S> <C>
1. Election of Directors
Nominees: D. Shannon LeRoy for a term
expiring at the 2003 Annual Meeting of
Stockholders
(Mark only one of the following boxes.)
[ ] VOTE FOR the nominee listed above [ ] VOTE WITHHELD as to the nominee
2. Approval of Amendment of the HLM Design,
Inc. 1998 Stock Option Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of Amendment of the HLM Design,
Inc. Employee Stock Purchase Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of Appointment of Deloitte &
Touche LLP
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are
authorized to vote upon such other business as
may properly come before the meeting.
</TABLE>
<PAGE>
(arrow) FOLD AND DETACH HERE (arrow)
--------------------------------------------------------------------------------
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 1-4.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign.
Dated:------------------- , 2000
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.
<PAGE>
Appendix B
HLM DESIGN, INC.
1998 STOCK OPTION PLAN
(As Amended July 13, 2000)
1. Purposes of Plan. The purposes of the Plan, which shall be known as
the HLM Design, Inc. 1998 Stock Option Plan and is hereinafter referred to as
the "Plan", are (i) to provide incentives for key employees, directors,
consultants and other individuals providing services to HLM Design, Inc. (the
"Company") and its subsidiaries (within the meaning of Section 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), each of which is
referred to herein as a "Subsidiary") by encouraging their ownership of the
Common Stock, $.001 par value, of the Company (the "Stock") and (ii) to aid the
Company in retaining such key employees, directors, consultants and other
individuals upon whose efforts the Company's success and future growth depends,
and attracting other such employees, directors, consultants and other
individuals.
2. Administration. The Plan shall be administered by a committee of the
Board of Directors of the Company (the "Committee"). The Committee shall be
appointed from time to time by the Board of Directors of the Company (the "Board
of Directors") and shall consist of not fewer than two of its members. Each
Committee member shall be a "non-employee director" within the meaning of Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Act"). In the event that no such Committee exists or is appointed, the powers
to be exercised by the Committee hereunder shall be exercised by the Board of
Directors.
For purposes of administration, the Committee, subject to the terms of
the Plan, shall have plenary authority to establish such rules and procedures,
to make such determinations and interpretations, and to take such other
administrative actions, as it deems necessary or advisable. All determinations
and interpretations made by the Committee shall be final, conclusive and binding
on all persons, including those granted options hereunder ("Optionees") and
their legal representatives and beneficiaries.
Notwithstanding any other provisions of the Plan, the Committee may
impose such conditions on any options as may be required to satisfy the
requirements of Rule 16b-3 of the Act or Section 162(m) of the Code.
The Committee shall hold its meetings at such times and places as it
may determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members. Any
decision or determination reduced to writing and signed by all members shall be
as effective as if it had been made by a majority vote at a meeting duly called
and held. The Committee may appoint a secretary (who need not be a member of the
Committee). No member of the Committee shall be liable for any act or omission
with respect to such member's service on the Committee, if such member acts in
good faith and in a manner he or she reasonably believes to be in or not opposed
to the best interests of the Company.
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3. Stock Available for Options. There shall be available for options
under the Plan a total of 265,000 shares of Stock, subject to any adjustments
which may be made pursuant to Section 5(f) hereof. Shares of Stock used for
purposes of the Plan may be either authorized and unissued shares, or previously
issued shares held in the treasury of the Company, or both. Shares of Stock
covered by options which have terminated or expired prior to exercise or which
have been tendered as payment upon exercise of other options pursuant to Section
5(c) shall be available for further option grants hereunder.
4. Eligibility. Options under the Plan may be granted to key employees
of the Company or any Subsidiary, including officers or directors of the Company
or any Subsidiary, and to directors, consultants and other individuals providing
services to the Company or any Subsidiary. Options may be granted to eligible
employees whether or not they hold or have held options previously granted under
the Plan or otherwise granted or assumed by the Company. In selecting employees
for options, the Committee may take into consideration any factors it may deem
relevant, including its estimate of the employee's present and potential
contributions to the success of the Company and its Subsidiaries. Service as a
director, officer or consultant of or to the Company or any Subsidiary shall be
considered employment for purposes of the Plan (and the period of such service
shall be considered the period of employment for purposes of Section 5(d) of the
Plan); provided, however, that incentive stock options may be granted under the
Plan only to an individual who is an "employee" (as such term is used in Section
422 of the Code) of the Company or any Subsidiary.
5. Terms and Conditions of Options. The Committee shall, in its
discretion, prescribe the terms and conditions of the options to be granted
hereunder, which terms and conditions need not be the same in each case, subject
to the following:
(a) Option Price. The price at which each share of Stock
covered by an incentive stock option granted under the Plan may be
purchased shall not be less than the fair market value per share of
Stock on the date of grant of the option. In the case of any option
intended to be an incentive stock option granted to 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 (which individual shall hereinafter be referred to as a
"10% Stockholder"), the price at which each share of Stock covered by
the option may be purchased shall not be less than 110% of the fair
market value per share of Stock on the date of grant of the option. The
date of the grant of an option shall be the date specified by the
Committee in its grant of the option. The price at which each share of
Stock covered by an option granted under the Plan (but not as an
incentive stock option) may be purchased shall be the price determined
by the Committee, in its absolute discretion, to be suitable to attain
the purposes of this Plan. Notwithstanding the foregoing, the price at
which each share of Stock covered by an option that is not an incentive
stock option shall in no event be less than 85% of the fair market
value of the Stock on the date of grant of the option.
(b) Option Period. The period for exercise of an option shall
in no event be more than ten years from the date of grant, or in the
case of an option intended to be an incentive stock option granted to a
10% Stockholder, more than five years from the date of grant. Options
may, in the discretion of the Committee, be made exercisable in
installments during the option period. Any shares not purchased on any
applicable installment date may be purchased thereafter at any time
before the expiration of the option period.
2
<PAGE>
(c) Exercise of Options. In order to exercise an option, the
Optionee shall deliver to the Company written notice specifying the
number of shares of Stock to be purchased, together with cash or a
certified or bank cashier's check payable to the order of the Company
in the full amount of the purchase price therefor; provided that, for
the purpose of assisting an Optionee to exercise an option, the Company
may make loans to the Optionee or guarantee loans made by third parties
to the Optionee, on such terms and conditions as the Board of Directors
may authorize; and provided further that such purchase price may be
paid in shares of Stock, or in nonstatutory options granted under the
Plan (provided, however, that the purchase price of Stock acquired
under an incentive stock option may not be paid in options), in either
case owned by the Optionee and having a market value on the date of
exercise not less than the aggregate purchase price, or in any
combination of cash, Stock and such options. For purposes of this
Section 5(c), the market value per share of Stock shall be the last
sale price regular way on the date of reference, or, in case no sales
take place on such date, the average of the closing high bid and low
asked prices regular way, in either case on the principal national
securities exchange on which the Stock is listed or admitted to
trading, or if the Stock is not listed or admitted to trading on any
national securities exchange, the last sale price reported on the
National Market System of the National Association of Securities
Dealers Automated Quotation system ("NASDAQ") on such date, or the
average of the closing high bid and low asked prices of the Stock in
the over-the-counter market reported on NASDAQ on such date, as
furnished to the Committee by any New York Stock Exchange member
selected from time to time by the Committee for such purpose. If there
is no bid or asked price reported on any such date, the market value
shall be determined by the Committee in accordance with the regulations
promulgated under Section 2031 of the Code, or by any other appropriate
method selected by the Committee. For purposes of this Section 5(c),
the market value of an option granted under the Plan shall be the
market value of the underlying Stock, determined as aforesaid, less the
exercise price of the option. If the Optionee so requests, shares of
Stock purchased upon exercise of an option may be issued in the name
of the Optionee or another person. An Optionee shall have none of
the rights of a stockholder until the shares of Stock are issued to
him.
(d) Effect of Termination of Employment.
(i) An option may not be exercised after the Optionee
has ceased to be in the employ of the Company or any
Subsidiary for any reason other than the Optionee's death,
Disability or Involuntary Termination Without Cause. Any
cessation of employment, for purposes of incentive stock
options only, shall include any leave of absence in excess of
90 days unless the Optionee's reemployment rights are
guaranteed by law or by contract. "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. "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
3
<PAGE>
may consider such evidence as it considers desirable under the
circumstances, the determination of which shall be final and
binding upon all parties. "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.
(ii) During the three months after the date of the
Optionee's Involuntary Termination Without Cause, the Optionee
shall have the right to exercise the options granted under the
Plan, but only to the extent the options were exercisable on
the date of the cessation of the Optionee's employment.
(iii) During the twelve months after termination of
the Optionee's employment with the Company or any Subsidiary
as a result of the Optionee's Disability, the Optionee shall
have the right to exercise the options granted under the Plan,
but only to the extent the options were exercisable on the
date of the cessation of the Optionee's employment.
(iv) In the event of the death of the Optionee while
employed or, in the event of the death of the Optionee after
cessation of employment described in subparagraph (ii) or
(iii) above, but within the three-month or twelve-month period
described in subparagraph (ii) or (iii) above, the option
shall be exercisable until the expiration of twelve months
following the Optionee's death. During such extended 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 cessation of the Optionee's employment. The provisions
of the foregoing sentence shall apply to any outstanding
options which are incentive stock options to the extent
permitted by Section 422(d) of the Code and such outstanding
options in excess thereof shall, immediately upon the
occurrence of the event described in the preceding sentence,
be treated for all purposes of the Plan as nonstatutory stock
options and shall be immediately exercisable as such as
provided in the foregoing sentence.
In no event shall any option be exercisable beyond the
applicable exercise period provided in Section 5(b) of the Plan.
Nothing in the Plan or in any option granted pursuant to the Plan (in
the absence of an express provision to the contrary) shall confer on
any individual any right to continue in the employ of the Company or
any Subsidiary or interfere in any way with the right of the Company or
Subsidiary to terminate the individual's employment at any time.
(e) Nontransferability of Options. Except as otherwise set
forth herein, during the lifetime of an Optionee, options held by the
Optionee shall be exercisable only by the Optionee, and no option shall
be transferable other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, the Committee may, in its
absolute discretion, grant nonstatutory stock options that are
transferable, subject to applicable law and the terms and restrictions
imposed by the option agreement or otherwise by the Committee.
4
<PAGE>
(f) Adjustments for Change in Stock Subject to Plan. In the
event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, rights offering
or any other change in the corporate structure or shares of the
Company, corresponding adjustments automatically shall be made to the
number and kind of shares available for issuance under this Plan and
the number and kind of shares and option price thereof covered by
outstanding options under this Plan.
(g) Acceleration of Exercisability of Options Upon Occurrence
of Certain Events. In connection with any merger or consolidation in
which the Company is not the surviving corporation and which results in
the holders of the outstanding voting securities of the Company
(determined immediately prior to such merger or consolidation) owning
less than a majority of the outstanding voting securities of the
surviving corporation (determined immediately following such merger or
consolidation), or any sale or transfer by the Company of all or
substantially all of 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 the
Company, all outstanding options under the Plan shall become
exercisable in full, notwithstanding any other provision of the Plan or
of any outstanding options granted thereunder, on and after (i) the
fifteenth 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. The provisions of the foregoing sentence shall apply to any
outstanding options which are incentive stock options to the extent
permitted by Section 422(d) of the Code and such outstanding options in
excess thereof shall, immediately upon the occurrence of the event
described in clause (i) or (ii) of the foregoing sentence, be treated
for all purposes of the Plan as nonstatutory stock options and shall be
immediately exercisable as such as provided in the foregoing sentence.
Notwithstanding the foregoing, in no event shall any option be
exercisable beyond the applicable period of such option specified in
Sections 5(b) and 5(d).
(h) Registration, Listing and Qualification of Shares of
Stock. Each option shall be subject to the requirement that if at any
time the Board of Directors shall determine that the registration,
listing or qualification of shares of Stock covered thereby upon any
securities exchange or under any federal or state law, or the consent
or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of
such option or the purchase of shares of Stock thereunder, no such
option may be exercised unless and until such registration, listing,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board of Directors. The
Company may require that any person exercising an option shall make
such representations and agreements and furnish such information as it
deems appropriate to assure compliance with the foregoing or any other
applicable legal requirement.
(i) Other Terms and Conditions. The Committee may impose
such other terms and conditions, not inconsistent with the terms
hereof, on the grant or exercise of options, as it deems
advisable.
(j) Reload Options. If upon the exercise of an option granted
under the Plan (the "Original Option") the Optionee pays the purchase
price for the Original Option pursuant to Section 5(c) in whole or in
part in shares of Stock owned by the Optionee for at least six months,
the Company shall grant to the Optionee on the date of such exercise an
additional option under the Plan (the "Reload Option") to purchase that
number of shares of Stock equal to the number of shares of
5
<PAGE>
Stock so held for at least six months transferred to the Company in
payment of the purchase price in the exercise of the Original Option.
The price at which each share of Stock covered by the Reload Option may
be purchased shall be the market value per share of Stock (as specified
in Section 5(c)) on the date of exercise of the Original Option. The
Reload Option shall not be exercisable until one year after the date
the Reload Option is granted or after the expiration date of the
Original Option. Upon the payment of the purchase price for a Reload
Option granted hereunder in whole or in part in shares of Stock held
for more than six months pursuant to Section 5(c), the Optionee is
entitled to receive a further Reload Option in accordance with this
Section 5(j). Shares of Stock covered by a Reload Option shall not
reduce the number of shares of Stock available under the Plan pursuant
to Section 3.
6. Additional Provisions Applicable to Incentive Stock Options. The
Committee may, in its discretion, grant options under the Plan to eligible
employees which constitute "incentive stock options" within the meaning of
Section 422 of the Code, provided, however, that (a) the aggregate market value
of the Stock with respect to which incentive stock options are exercisable for
the first time by the Optionee during any calendar year shall not exceed the
limitation set forth in Section 422(d) of the Code and (b) Section 5(d)(ii)
hereof shall not apply to any incentive stock option.
7. Effectiveness of Plan. The Plan be effective when it is adopted and
approved by the Board of Directors, provided that the Plan is approved within
twelve months before or after such adoption by a majority of the votes cast
thereon by the stockholders of the Company at a meeting of stockholders duly
called and held for such purpose or by unanimous written consent of such
stockholders, and no option granted hereunder shall be exercisable prior to such
approval.
8. Amendment and Termination. The Board of Directors may at any time
amend the Plan or the term of any option outstanding under the Plan; provided,
however, that, except as contemplated in Section 5(f), the Board of Directors
shall not, without approval by a majority of the votes cast by the stockholders
of the Company at a meeting of stockholders at which a proposal to amend the
Plan is voted upon, (i) increase the maximum number of shares of Stock for which
options may be granted under the Plan, or (ii) except as otherwise provided in
the Plan, amend the requirements as to the class of employees eligible to
receive options. Unless the Plan shall theretofore have been terminated as
hereinafter provided, the Plan shall terminate, and no option shall be granted
hereunder, after ten years from the date the Plan is adopted by the Board of
Directors or approved by the stockholders as described in Section 7, whichever
first occurs; provided, however, that the Board of Directors may at any time
prior to that date terminate the Plan. No amendment or termination of the Plan
or any option outstanding under the Plan may, without the consent of an
Optionee, adversely affect the rights of such Optionee under any option held by
such Optionee.
9. Withholding. It shall be a condition to the obligation of the
Company to issue shares of Stock upon exercise of an option that the Optionee
(or any beneficiary or person entitled to act under Section 5(d) hereof) pay to
the Company, upon its demand, such amount as may be requested by the Company for
the purpose of satisfying any taxes. If the amount requested is not paid, the
Company may refuse to issue such shares of Stock.
10. Other Actions. Nothing contained in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including, but not by way of limitation, the right of the Company to grant or
assume options for proper corporate purposes other than under the Plan with
respect to any employee or other person, firm, corporation or association.
6
<PAGE>
Appendix C
HLM DESIGN, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED JULY 13, 2000)
<PAGE>
HLM DESIGN, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As Amended July 13, 2000)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I PURPOSE; DEFINITIONS; CONSTRUCTION...........................1
1.1 Purpose of Plan.......................................1
1.2 Definitions...........................................1
(a) "Account"....................................1
(b) "Base Pay"...................................1
(c) "Board of Directors".........................1
(d) "Business Day"...............................1
(e) "Cause"......................................1
(f) "Code".......................................1
(g) "Committee"..................................2
(h) "Company"....................................2
(i) "Company Stock"..............................2
(j) "Contributions"..............................2
(k) "Employee"...................................2
(l) "Employer"...................................2
(m) "Exercise Date"..............................2
(n) "Grant Date".................................2
(o) "Option".....................................2
(p) "Participant"................................2
(q) "Plan".......................................2
1.3 Construction..........................................3
ARTICLE II ADMINISTRATION...............................................3
2.1 Appointment and Procedures of Committee...............3
2.2 Authority of Committee................................3
ARTICLE III PARTICIPATION..............................................3
3.1 Eligibility to Participate............................3
3.2 Restrictions on Participation.........................4
3.3 Leave of Absence......................................5
ARTICLE IV CONTRIBUTIONS...............................................4
4.1 Payroll Deductions....................................4
4.2 Contributions to Accounts.............................4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
4.3 Leave of Absence.............................................................4
4.4 Withdrawal of Contributions from Plan........................................5
4.5 Termination of Employment....................................................5
ARTICLE V OPTIONS.............................................................................5
5.1 Company Stock Available for Options..........................................5
5.2 Granting of Options..........................................................5
5.3 Option Price.................................................................5
5.4 Option Period................................................................6
5.5 Exercise of Options..........................................................6
(a) Automatic Exercise..................................................6
(b) Nontransferability of Options.......................................6
(c) Effect of Termination of Employment.................................7
(i) Termination of Employment Related to Cause.................7
(ii) Termination of Employment Due to Death.....................7
(iii) Other Termination of Employment............................7
(d) Leave of Absence....................................................8
(e) Delivery of Stock...................................................8
(f) Acceleration of Exercisability of Options Upon Occurrence
of Certain Events...................................................8
(g) Registration, Listing and Qualification of Shares of Stock..........8
ARTICLE VI MISCELLANEOUS......................................................................9
6.1 Adjustments Upon Changes in Capitalization...................................8
6.2 Approval of Shareholders.....................................................8
6.3 Amendment, Suspension and Termination........................................9
6.4 Intent to Comply With Code Section 423.......................................9
6.5 Equal Rights and Privileges..................................................9
6.6 Use of Funds.................................................................9
6.7 Withholding.................................................................10
6.8 Effect of Plan..............................................................10
6.9 No Employment Rights........................................................10
6.10 Governing Law...............................................................10
6.11 Other Actions...............................................................10
</TABLE>
ii
<PAGE>
HLM DESIGN, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As Amended July 13, 2000)
ARTICLE I
PURPOSE; DEFINITIONS; CONSTRUCTION
1.1 Purpose of Plan. The purpose of the Plan, which shall be known as
the HLM Design, Inc. Employee Stock Purchase Plan (the "Plan"), is to provide
employees of HLM Design, Inc. (the "Company") and its participating subsidiaries
(which hereinafter shall be referred to collectively with the Company as the
"Employer") an opportunity to acquire a proprietary interest in the Company
through the purchase of the Common Stock, $.001 par value, of the Company. This
Plan is intended to qualify as an "employee stock purchase plan" within the
meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code").
1.2 Definitions. Throughout this Plan, the following terms shall
have the meanings indicated:
(a) "Account" shall mean a memorandum account maintained to
record each Participant's Contributions pending purchase of Company Stock.
(b) "Base Pay" shall mean the Participant's regular base
salary (excluding overtime pay, bonuses, shift premiums, commissions, fringe
benefits, other special payments and imputed income) determined without
reduction for Contributions made under this Plan or contributions to any Code
Section 401(k) or Section 125 Plan. The Committee may establish additional rules
for determining a Participant's Base Pay for purposes of this Plan.
(c) "Board of Directors" shall mean the Board of
Directors of the Company.
(d) "Business Day" shall mean any day other than a
Saturday, Sunday or holiday.
(e) "Cause" shall mean any act, action or series of acts or
actions or any omission, omissions or series of omissions which, in the opinion
of the Committee, result in, or which have the effect of resulting in, (i) the
commission of a crime by the Participant involving moral turpitude, which crime
has a material adverse impact on the Employer, (ii) gross negligence or willful
misconduct which is continuous and results in material damage to the Employer,
or (iii) the continuous, willful failure of the person in question to follow the
reasonable directives of the Employer.
(f) "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.
<PAGE>
(g) "Committee" shall mean the committee of directors of the
Company appointed by the Board of Directors in accordance with Section 2.1 to
administer this Plan, or in the event that no such committee exists or is
appointed, "Committee" shall mean the Board of Directors.
(h) "Company" shall mean HLM Design, Inc., a company
organized and existing under the laws of the State of Delaware.
(i) "Company Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(j) "Contributions" shall mean the after-tax payroll
deductions contributed to the Plan by Participants pursuant to Article IV.
(k) "Effective Date" shall mean the date of the closing of the
Company's initial public offering.
(l) "Employee" shall mean any person who (i) is employed on a
full-time or part-time basis, (ii) is regularly scheduled to work more than
twenty hours per week, and (iii) is customarily employed more than five months
in any calendar year. Independent contractors and outside directors shall not be
included in the definition of Employee for purposes of this Plan.
(m) "Employer" shall mean the Company and any of its present
or future subsidiaries (within the meaning of Section 424(f) of the Code) which
the Committee may designate from time to time as participating Employers under
this Plan.
(n) "Exercise Date" shall mean the last Business Day of March,
June, September and December on which the principal trading market for Company
Stock is open for trading, plus any other interim dates during the year which
the Committee designates as Exercise Dates.
(o) "Grant Date" shall mean (i) the date initial grants are
made pursuant to this Plan, which date shall be as soon as administratively
practicable following the Effective Date; and (ii) on or about each January 1
thereafter.
(p) "Option" shall mean an option to purchase shares of
Company Stock granted by the Committee to a Participant pursuant to this Plan.
(q) "Participant" shall mean an Employee participating in
this Plan in accordance with Article III.
(r) "Plan" shall mean this HLM Design, Inc. Employee Stock
Purchase Plan, as amended from time to time.
2
<PAGE>
1.3 Construction. The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender, unless the context clearly
indicates to the contrary. The words "hereof," "herein," "hereunder" and other
similar compounds of the word "here" shall mean and refer to the entire Plan and
not to any particular provision or Section.
ARTICLE II
ADMINISTRATION
2.1 Appointment and Procedures of Committee. The Plan shall be
administered by the Committee as appointed from time to time by the Board of
Directors. The Committee shall consist of not fewer than two members of the
Board of Directors. Each Committee member shall be a "non-employee director"
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended. No member of the Board of Directors who serves on the
Committee shall be eligible to participate in the Plan. The Committee shall hold
its meetings at such times and places as it may determine. A majority of its
members shall constitute a quorum. All determinations of the Committee shall be
made by a majority of its members. Any decision or determination reduced to
writing and signed by all members shall be as effective as if it had been made
by a majority vote at a meeting duly called and held. The Committee may appoint
a secretary (who need not be a member of the Committee).
2.2 Authority of Committee. The Committee, subject to the terms of the
Plan, shall have plenary authority in its discretion to interpret and construe
the Plan (including, without limitation, any of its terms which are uncertain,
doubtful or disputed); to decide all questions of Employee eligibility
hereunder; to determine the amount, manner and timing of all Options and
purchases of Company Stock hereunder; to establish, amend and rescind rules and
regulations pertaining to the administration of the Plan; and to make
determinations and interpretations and take such other administrative actions as
it deems necessary or advisable for the administration of this Plan. The express
grant in the Plan of any specific power to the Committee shall not be construed
as limiting any power or authority of the Committee. No member of the Committee
shall be liable for any act, determination or omission with respect to his
service on the Committee, if he acts in good faith and in a manner he reasonably
believes to be in or not opposed to the best interest of the Employer. All
expenses of administering this Plan shall be borne by the Employer.
ARTICLE III
PARTICIPATION
3.1 Eligibility to Participate. Subject to the restrictions of Section
3.2 below, any Employee employed on the Effective Date shall be eligible to
participate in this Plan as of the initial Grant Date under the Plan (provided
that the Employee is still employed on such Grant Date). Each other Employee
shall be eligible to participate in the Plan as of the Grant Date coincident
with or next following his date of employment with the Employer (provided that
the Employee is still employed on such Grant Date).
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3.2 Restrictions on Participation. Notwithstanding the foregoing
Section 3.1, no Employee shall be eligible to participate in the Plan if such
Employee owns or holds options to purchase (or upon participation in this Plan
would own or hold options to purchase) stock possessing an aggregate of 5% or
more of the total combined voting power or value of all classes of stock of the
Company or any Subsidiary (as determined in accordance with the rules of Section
424(d) of the Code relating to attribution of stock ownership).
3.3 Leave of Absence. For purposes of becoming a Participant in the
Plan, a person on a leave of absence shall be deemed to be an Employee for the
first ninety days of such leave of absence and such Employee's employment shall
be deemed to have terminated at the close of business on the ninetieth day of
such leave of absence unless such Employee shall have returned to regular
full-time or part-time employment prior to the close of business on such
ninetieth day (unless reemployment is guaranteed by statute or contract).
Termination by the Company of any Employee's leave of absence, other than
termination of such leave of absence on return to regular full-time or part-time
employment, shall terminate an Employee's employment for all purposes of the
Plan.
ARTICLE IV
CONTRIBUTIONS
4.1 Payroll Deductions. By written election, made and filed with the
Committee pursuant to the Committee's rules and procedures, a Participant may
elect to designate a whole percentage between one percent and ten percent (or
such higher or lower percentage as may be allowed by the Committee's rules and
procedures) of his Base Pay to be deferred by payroll deduction as a
Contribution to the Plan. Payroll deductions shall commence as soon as
administratively practicable following the filing of such written election with
the Committee. The Committee in its discretion may develop additional rules and
procedures regarding payroll deduction elections.
A Participant may change or revoke his payroll deduction amount by
filing, on such forms and in accordance with such rules and procedures as the
Committee in its discretion may prescribe, a revised written election with the
Committee. Such modification or revocation shall take effect as soon as
administratively practicable after the Committee's receipt of such revised
election. Notwithstanding the foregoing, a Participant may change his payroll
deduction election only once each calendar quarter, or as otherwise specifically
allowed by the Committee's rules and procedures. If payroll deductions are
discontinued, payroll deductions may not be resumed by the Participant until the
payroll period which begins on or after the next Exercise Date, or as otherwise
specifically allowed by the Committee's rules and procedures. Under no
circumstances may a Participant's payroll deduction election be made, modified
or revoked retroactively.
4.2 Contributions to Accounts. A memorandum Account shall be
established by the Committee for each Participant for the purpose of accounting
for Contributions. Contributions shall be credited to Accounts as soon as
administratively practicable following payroll withholding. Amounts credited to
Accounts will not accrue interest.
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4.3 Leave of Absence. If a Participant is on a leave of absence, such
Participant shall have the right to elect to (a) withdraw from the Plan and
receive a distribution of the balance in his Account pursuant to Section 4.4,
(b) discontinue Contributions to the Plan but remain a Participant in the Plan,
or (c) remain a Participant in the Plan during such leave of absence,
authorizing deductions to be made from payments by the Company to the
Participant during such leave of absence.
4.4 Withdrawal of Contributions from Plan. Prior to an Exercise Date, a
Participant may elect to withdraw the Contributions then credited to his Account
by filing written notice thereof with the Committee on such forms and in
accordance with such procedures as the Committee may prescribe. The
Participant's Contributions shall be distributed to him as soon as
administratively practicable after the Committee's receipt of his notice of
withdrawal and no further payroll deductions shall be made from his Base Pay.
4.5 Termination of Employment. Upon termination of a Participant's
employment for any reason, such Participant may no longer make Contributions to
the Plan or be granted Options under the Plan. A Participant's right, if any, to
exercise any unexpired Option he holds as of his termination of employment shall
be determined in accordance with Section 5.5(c).
ARTICLE V
OPTIONS
5.1 Company Stock Available for Options. There shall be available for
Options under the Plan an aggregate maximum of 57,954 shares of Company Stock,
subject to any adjustments which may be made pursuant to Section 6.1 of the Plan
in connection with changes in capitalization of the Company. Shares of Company
Stock used for purposes of the Plan may be either authorized and unissued
shares, or previously issued shares held in the treasury of the Company, or
both. Shares of Company Stock covered by Options which have expired prior to
exercise shall be available for further Options granted hereunder.
5.2 Granting of Options. The Plan shall be implemented by annual
offerings of approximately twelve months duration (except for the initial
offering or as otherwise provided in Section 5.4). As of each Grant Date, each
eligible Participant shall be deemed to have been granted an Option to purchase
that number of shares of Company Stock that equals: (i) the Participant's Base
Pay as of the Grant Date divided by 1000, with fractional amounts of .50 or more
rounded up to the next dollar and fractional amounts of less than .50
disregarded, multiplied by (ii) two. Notwithstanding the foregoing, no
Participant may be granted an Option which permits his rights to purchase stock
under this Plan and all other employee stock purchase plans of the Company or
Employer to accrue at a rate which exceeds $25,000 of the fair market value of
such stock (determined at the time such Option is granted) for each calendar
year in which such Option is outstanding at any time.
5.3 Option Price. The purchase price at which shares of Company
Stock may be acquired pursuant to the exercise of all or any portion of an
Option granted under this Plan shall be eighty-five
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percent of the lesser of (i) the fair market value per share of the Company
Stock on the applicable Grant Date, and (ii) the fair market value per share of
the Company Stock on the applicable Exercise Date. For purposes of this Section
5.3, the fair market value per share of Company Stock shall be the closing price
on the last Business Day prior to the date of reference, or in the event that no
sales take place on such date, the average of the closing high bid and low asked
prices, in either case on the principal national securities exchange on which
the Company Stock is listed or admitted to trading, or if the Company Stock is
not listed or admitted to trading on any national securities exchange, the last
sale price reported on the National Market System of the National Association of
Securities Dealers Automated Quotation system ("NASDAQ") on such date, or the
average of the closing high bid and low asked prices of the Company Stock in the
over-the-counter market reported on NASDAQ on such date, as furnished to the
Committee by any New York Stock Exchange member selected from time to time by
the Committee for such purposes. If there is no bid or asked price reported on
any such date, the market value shall be determined by the Committee in
accordance with the regulations promulgated under Section 2031 of the Code, or
by any other appropriate method selected by the Committee.
5.4 Option Period. Each Option granted to a Participant under the Plan
shall expire on the earliest of (a) the last Exercise Date of the calendar year
in which the Option was granted, (b) the Participant's (or, in the case of the
Participant's death, his estate's) voluntary withdrawal from the Plan following
termination of employment, and (c) the date of the Participant's termination of
employment related to Cause, or the Exercise Date immediately following the
Participant's termination of employment for any reason unrelated to Cause. In no
event will the duration of an Option period exceed twenty-seven months (or such
other applicable period permitted under Section 423(b)(7) of the Code) from the
date on which such Option is granted.
5.5 Exercise of Options.
(a) Automatic Exercise. Any Option granted to a Participant
shall be exercised automatically on each Exercise Date during the calendar year
of the Option's Grant Date in whole or in part such that the Participant's
accumulated Contributions as of such Exercise Date shall be applied to the
purchase of the maximum number of whole shares of Company Stock that his
Contributions will allow at the applicable Option price (determined in
accordance with Section 5.3), limited to the number of shares subject to such
Option. In the event that the number of shares of Company Stock that may be
purchased by all Participants in the Plan exceeds the number of shares then
available for issuance under the Plan, the Committee shall make a pro rata
allocation of the available shares in as uniform a manner as it determines to be
practicable and equitable. Any remaining Contributions in the Participant's
Account amounting to less than the Option price of a whole share of Company
Stock shall be carried forward and applied on the next Exercise Date; provided
that, Contributions remaining after the last Exercise Date of the calendar year
may be distributed to the Participant at his election.
(b) Nontransferability of Options. During a Participant's
lifetime, Options held by such Participant shall be exercisable only by that
Participant. No Option shall be transferable other than by will or by the laws
of descent and distribution.
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(c) Effect of Termination of Employment.
(i) Termination of Employment Related to Cause.
Upon termination of a Participant's employment related to Cause, the
Participant's participation in the Plan also shall terminate. Any unexpired
Option he holds will expire as of the date of his termination of employment.
Remaining contributions credited to his Account shall be distributed to the
Participant as soon as administratively practicable following termination of
employment.
(ii) Termination of Employment Due to Death. In
the event of the death of the Participant while employed, or during the period
following his termination of employment for any reason unrelated to Cause but
prior to the next Exercise Date, the Participant's estate shall have the right
to elect by written notice to the Committee prior to the earlier of the
expiration of sixty days commencing with the date of the Participant's death and
the Exercise Date next following the date of the Participant's death:
(A) To withdraw all of the Contributions
credited to the Participant's Account under the Plan, or
(B) To exercise any unexercised Option
held by the Participant as of the date of his death for the purchase of Company
Stock on the Exercise Date next following the date of the Participant's death in
accordance with Section 5.5(a) but only to the extent such Option was
exercisable on the date of the Participant's death, with any remaining
Contributions credited to the Participant's Account being distributed to the
Participant's estate as soon as administratively practicable after such Exercise
Date.
In the event that no such written election is timely and properly received by
the Committee, all Contributions credited to the Participant's Account shall be
distributed to the Participant's estate. In no event shall any Option be
exercisable beyond the applicable exercise period specified in Section 5.4 of
the Plan.
(iii) Other Termination of Employment. Upon
termination of a Participant's employment for any reason unrelated to Cause or
death, the Participant may at his election:
(A) Withdraw from the Plan pursuant to
Section 4.4 and request the return of the remaining Contributions then credited
to his Account, or
(B) Continue participation in the Plan
until the Exercise Date next following his date of termination of employment for
the limited purpose of allowing any unexpired Option he holds as of his
termination of employment to be exercised automatically in accordance with
Section 5.5(a) on the Exercise Date next following his termination of employment
but only to the extent such Option was exercisable on the date of the
Participant's termination of employment, with any remaining Contributions
credited to the Participant's Account being distributed to the Participant as
soon as administratively practicable after such Exercise Date.
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(d) Leave of Absence. A Participant on a leave of absence
shall, subject to the election made by such Participant pursuant to Section 4.3,
continue to be a Participant in the Plan so long as such Participant is on
continuous leave of absence. A Participant who has been on leave of absence for
more than ninety days and who therefore is not an Employee for purposes of the
Plan shall not be entitled to participate in any offering commencing on any
Grant Date following the ninetieth day of such leave of absence. Notwithstanding
the foregoing and any other provisions of the Plan, unless a Participant on a
leave of absence returns to eligible regular full-time or part-time employment
with the Employer at the earlier of (i) the termination of such leave of
absence, or (ii) the ninety-first day of such leave of absence, such
Participant's employment shall be deemed to have terminated for purposes of the
Plan on whichever of such dates first occurs (unless the Participant's right to
reemployment is guaranteed by statute or contract).
(e) Delivery of Stock. As soon as administratively practicable
after each Exercise Date, the Company or the Committee will deliver to each
Participant, as applicable, certificates evidencing shares of Company Stock
purchased under this Plan.
(f) Acceleration of Exercisability of Options Upon Occurrence
of Certain Events. In connection with any merger or consolidation in which the
Company is not the surviving corporation and which results in the holders of the
outstanding voting securities of the Company (determined immediately prior to
such merger or consolidation) owning less than a majority of the outstanding
voting securities of the surviving corporation (determined immediately following
such merger or consolidation), or any sale or transfer by the Company of all or
substantially all of 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 the Company, all outstanding
Options under the Plan shall become exercisable in full, notwithstanding any
other provision of the Plan or of any outstanding Options granted hereunder, on
and after (i) the fifteenth 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. Notwithstanding the
foregoing, in no event shall any Option be exercisable beyond the applicable
exercise period of such Option specified in Section 5.4.
(g) Registration, Listing and Qualification of Shares of
Stock. Each Option shall be subject to the requirement that if at any time the
Board of Directors shall determine that the registration, listing or
qualification of shares of Company Stock covered thereby upon any securities
exchange or under any federal or state law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the purchase of shares of
Company Stock thereunder, no such Option may be exercised unless and until such
registration, listing, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors. The Employer may require that any person exercising an Option shall
make such representations and agreements and furnish such information as it
deems appropriate to assure compliance with the foregoing or any other
applicable legal requirement.
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ARTICLE VI
MISCELLANEOUS
6.1 Adjustments Upon Changes in Capitalization. In the event of a
reorganization, stock split, stock dividend, combination of shares, merger,
consolidation, rights offering or any other change in the corporate structure of
shares of the Company, corresponding adjustments shall be made to the number and
kind of shares of Company Stock available for issuance under this Plan and the
number and kind of shares of Company Stock covered by outstanding Options under
this Plan. Any adjustments made pursuant to this Section 6.1 remain subject to
the limitations of Section 423 of the Code (including its $25,000 annual
limitation).
6.2 Approval of Shareholders. Within twelve months before or after the
Plan is adopted by the Board of Directors, this Plan must be approved by a
majority of the votes cast thereon by the stockholders of the Company at a
meeting of stockholders duly called and held for such purpose or by unanimous
written consent of such stockholders, and no Option granted hereunder shall be
exercisable prior to such approval.
6.3 Amendment, Suspension and Termination. The Board of Directors may
at any time amend, suspend or terminate this Plan; provided, however, that the
Board of Directors shall not increase the maximum number of shares of Company
Stock for which Options may be granted under the Plan, except as provided in
Section 6.1, without obtaining approval of the stockholders in the manner
described in Section 6.2. The Plan will continue until terminated by the Board
of Directors or until all of the shares of Company Stock reserved for issuance
under the Plan have been issued, whichever first occurs. No amendment,
suspension or termination of the Plan may, without the consent of the
Participants then holding Options to purchase Company Stock, adversely affect
the rights of such Participants under such Options.
6.4 Intent to Comply With Code Section 423. It is intended that this
Plan qualify as an "employee stock purchase plan" under Section 423 of the Code.
The provisions of this Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that Section of
the Code. In the event of an inconsistency between the Plan and Section 423 of
the Code, the Plan shall be interpreted in a manner which complies with the
requirements of Section 423 of the Code and the regulations thereunder, without
further act or amendment by the Company or the Board of Directors unless
otherwise required pursuant to Section 6.3 of this Plan.
6.5 Equal Rights and Privileges. All Participants granted Options under
this Plan shall have equal rights and privileges within the meaning of Section
423(b)(5) of the Code and the regulations thereunder.
6.6 Use of Funds. All Contributions received and held by the Employer
under this Plan may be used by the Employer for any corporate purpose and the
Employer shall not be obligated to segregate such Contributions.
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6.7 Withholding. It shall be a condition to the obligation of the
Company to issue shares of Company Stock upon exercise of an Option that the
Participant (or his estate pursuant to Section 5.5(c)(ii)) pay to the Company,
upon its demand, such amount as may be requested by the Company for the purpose
of satisfying taxes, including taxes owed by the Participant due to the
disposition of Company Stock by the Participant prior to the expiration of the
holding periods described in Section 423(a) of the Code.
6.8 Effect of Plan. This Plan shall be binding upon each Participant
and his successors, including, without limitation, such Participant's estate and
the executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.
6.9 No Employment Rights. Nothing in this Plan or in any Option granted
pursuant to the Plan shall be construed as a contract of employment between the
Employer and any employee, or as a right of any employee to continue in the
employ of the Employer, or as a limitation of the right of the Employer to
discharge any of its employees, with or without cause.
6.10 Governing Law. This Plan and all rights and obligations hereunder
shall be construed in accordance with and governed by the laws of the State of
North Carolina, except to the extent such laws are preempted by the laws of the
United States.
6.11 Other Actions. Nothing contained in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including, but not by way of limitation, the right of the Company to grant or
assume options for proper corporate purposes other than under the Plan with
respect to any employee or other person, firm, corporation or association.
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