HLM DESIGN, INC.
1998 STOCK OPTION PLAN
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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, $.01 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.
3. STOCK AVAILABLE FOR OPTIONS. There shall be available for options
under the Plan a total of 138,000 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
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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 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 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.
(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.
(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
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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 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.
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(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 thereupon become exercisable in full 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.
(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
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(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 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.
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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 shall 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.
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