SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE
ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
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14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Surrey, Inc.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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<PAGE>
SURREY, INC.
13110 Trails End Road
Leander, Texas 78641
--------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 2, 2000
--------------------------
TO THE SHAREHOLDERS OF SURREY, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of the
shareholders of Surrey, Inc., a Texas corporation, will be held on Tuesday,
May 2, 2000 at 9:00 a.m., at River Place Country Club, 4207 River Place Blvd.,
Austin, Texas, 78730 for the following purposes:
1. To elect five (5) directors to serve for the ensuing year or
until their earlier resignation or removal.
2. To approve and adopt the 2000 Long-Term Incentive Plan, as set
forth in the enclosed Proxy Statement.
3. To approve and adopt the Amendment to the 1997 Non-Employee
Directors' Stock Option Plan, as set forth in the enclosed
Proxy Statement.
4. To ratify the appointment of Grant Thornton, LLP as
independent auditors for the fiscal year 2000.
5. To transact such other business as may properly come before
the Annual Meeting or any adjournments or postponements
thereof.
Only shareholders of record at the close of business on March
17, 2000 are entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
EACH OF YOU IS INVITED AND URGED TO ATTEND THE ANNUAL MEETING
IN PERSON IF POSSIBLE. WHETHER OR NOT YOU ARE ABLE TO ATTEND IN PERSON, YOU ARE
REQUESTED TO DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE
ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors
Mark J. van der Hagen
Vice President-Finance and Chief Financial
Officer
March 27, 2000
<PAGE>
SURREY, INC.
13110 Trails End Road
Leander, Texas 78641
PROXY STATEMENT
For Annual Meeting of shareholders
to be held May 2, 2000
SOLICITATION OF PROXIES
GENERAL
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Surrey, Inc. (the "Company") for use at the Annual Meeting of
shareholders on Tuesday, May 2, 2000 at 9:00 a.m., at the River Place Country
Club, 4207 River Place Blvd., Austin, Texas, 78730, and any adjournment or
postponement thereof. The approximate date on which this Proxy Statement and
form of proxy will first be sent or given to shareholders is March 31, 2000.
RECORD DATE
Only shareholders of record at the close of business on March 17
2000, are entitled to notice of and to vote at the Annual Meeting or any
adjournments or postponements thereof. Each share so held entitles the holder to
one vote upon each matter to be voted upon. On March 27, 1999, the Company had
outstanding 2,472,727 shares of common stock. A quorum, consisting of a majority
of the outstanding shares of the common stock entitled to vote at the Annual
Meeting, must be present in person or represented by proxy before action may be
taken at the Annual Meeting.
REVOCABILITY OR PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving the proxy at any time before it is voted. Proxies may be revoked
by (a) giving written notice of such revocation to the secretary of the Company
at the Company's principal executive office located at 13110 Trails End Road,
Leander, Texas 78641, (b) giving another written proxy bearing a later date, or
(c) attending the Annual Meeting and voting in person (although attendance at
the Annual Meeting will not in and of itself constitute a revocation of a
proxy).
VOTING AND SOLICITATION
All shares represented by proxies which have been properly executed
and filed with the secretary of the Company prior to or at the meeting will be
voted at the meeting. Where a specification is made by the shareholder as
provided in the form of proxy, the shares will be voted in accordance with such
specification. If no specification is made, the shares will be voted (i) FOR the
election of all of the nominees for director named in this Proxy Statement; (ii)
FOR approval and adoption of the 2000 Long-Term Incentive Plan; (iii) FOR the
approval and adoption of the
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Amendment to the 1997 Non-Employee Directors' Stock Option Plan; and (iv) FOR
the ratification of the appointment of Grant Thornton, LLP as independent
auditors for the fiscal year 2000.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Inspectors of Election appointed for the meeting and will also
determine if a quorum is present. If an executed proxy card is returned and the
shareholder has abstained from voting on any matter, the shares represented by
such proxy will be considered present at the meeting for purposes of determining
a quorum and for purposes of calculating the vote, but will not be considered to
have been voted in favor of such matter. If an executed proxy is returned by a
broker holding shares in street name which indicates that the broker does not
have discretionary authority as to certain shares to vote on one or more
matters, such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be represented at the
meeting for purposes of calculating the vote with respect to such matter.
The expense of the solicitation of proxies for this Annual Meeting,
including the cost of mailing, has been or will be borne by the Company.
Arrangements will be made with brokerage houses and other custodian nominees and
fiduciaries to send proxies and proxy materials to their principals and the
Company will reimburse them for their expense in so doing. In addition to
solicitation by mail, proxies may be solicited by telephone, telegraph or
personally by certain of the Company's directors, officers and regular
employees, without additional compensation.
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
The property, affairs and business of the Company are managed under
the direction of the Board of Directors. A board of five (5) directors is to be
elected at the meeting. Unless otherwise instructed, the proxy holders will vote
the proxies received by them for management's five (5) nominees named below, all
of whom are presently directors of the Company. The term of office for each
person elected as a director will continue until the next Annual Meeting of the
shareholders and until a successor shall have been elected and qualified, or
until such director is removed or resigns. All of the nominees named below are
presently directors of the Company and have served continuously since the year
indicated. All nominees have indicated a willingness to serve if elected.
All shares represented by proxies which have been properly executed
and returned will be voted for the election of all of the nominees named below,
unless other instructions are indicated thereon. In the event any one or more of
such nominees should for any reason be unable to serve as a director, it is
intended that the enclosed proxy will be voted for such person or persons as may
be selected in accordance with the best judgment of the proxy holders named
therein.
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NOMINEES
The names of the nominees, all of whom are currently serving as
directors of the Company, and certain information about them are set forth
below:
NOMINEE AGE POSITION DIRECTOR SINCE
----------------------- --- ----------------------------- --------------
John B. van der Hagen 67 Chairman of the Board and CEO 1981
Martin J. van der Hagen 37 President and Director 1997
Mary van der Hagen 59 Secretary and Director 1981
Bruce A. Masucci 39 Director 1997
G. Thomas MacIntosh 61 Director 1997
VOTE REQUIRED
If a quorum is present and voting, directors are elected by a
majority of the votes cast for the election of directors at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES NAMED ABOVE.
INFORMATION CONCERNING
DIRECTORS AND NOMINEES
DIRECTORS AND NOMINEES
The following discussion sets forth certain information for at least
the last five years with respect to the directors and nominees of the Company.
The Company knows of no arrangements or understandings between a director or
nominee and any other person pursuant to which he has been selected as a
director or nominee. Directors of the Company hold office until the next annual
meeting of shareholders or until their successors have been duly elected and
qualified.
JOHN B. VAN DER HAGEN is a co-founder of Surrey and has served as a
Director since 1981. He served as President of the Company from 1988 until
being named CEO in August 1997 Chairman of the Board in September 1997.
From 1981 to 1988 he served as Vice-President of the Company. As Chief
Executive Officer, he is responsible for overall Company operations. He
has been actively involved in and has had primary responsibility for,
marketing and product development since becoming President of the Company
in 1988. Prior to founding Surrey, John van der Hagen was President and
founder of Alpine Oil Company. He attended St. Thomas University in St.
Paul, Minnesota. John van der Hagen is the father of Martin van der Hagen
and Mark van der Hagen. Mary van der Hagen is his wife.
MARTIN J. VAN DER HAGEN was elected as a Director and President of
Surrey in September 1997. Prior to that time he served as Executive Vice
President of the Company. He has been responsible for manufacturing
operations, marketing and product development since becoming Vice
President in 1988. He joined the Company in 1985 after attending the
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University of Texas and receiving a Bachelor of Arts degree in finance.
Martin van der Hagen is the son of John and Mary van der Hagen. Mark van
der Hagen is his brother.
MARY VAN DER HAGEN was elected to the Board of Directors of Surrey in
1981. She has served as Secretary of the Company from 1981 to the present.
From 1981 to May 1997, Ms. van der Hagen was employed on a part-time basis
by the Company. She resigned from such employment with the Company in May
1997, but continues to serve as a Director and as Secretary. Mary van der
Hagen is the wife of John van der Hagen and mother of Martin and Mark van
der Hagen.
BRUCE A. MASUCCI was elected to the Board of Directors of Surrey in
September 1997. Mr. Masucci is currently President of Golden Mile Sales
Association, Inc. in Framingham, Massachusetts, a position he has held
since 1982. Golden Mile is a manufacturers representative, concentrating
in the New England states, which currently represents Surrey in that
geographic area. Golden Mile has represented the Company for approximately
nine years, and receives compensation from Surrey in the form of
sales-based commissions in an amount customarily received by other
manufacturers representatives who do business with the Company.
G. THOMAS MACINTOSH was elected to the Board of Directors of Surrey in
September 1997. Mr. MacIntosh is a member of the Minneapolis law firm of
Mackall, Crounse & Moore, PLC ("MCM"). He practices in general corporate
and business law with an emphasis in franchising and distribution law.
Prior to joining MCM in October 1993, Mr. MacIntosh was a partner in the
Minneapolis law firm of O'Connor & Hannan. He is a graduate of the
University of Minnesota Law School. MCM serves as counsel to the Company.
ACTIONS AND COMMITTEES OF THE BOARD OF DIRECTORS
In 1999, the Board of Directors met once. The Board of Directors has
two current standing committees, the Audit Committee and the Compensation
Committee. The Audit Committee was formed in September 1997 and the Compensation
Committee was formed in March 1999. In 1999, each committee met once. All of the
directors attended the one meeting of the Board of Directors, and the meeting of
each committee on which they sat, that was held during 1999.
AUDIT COMMITTEE. The Audit Committee of the Board of Directors is
responsible for relations with the Company's independent auditors, for review of
internal auditing functions and controls and for review of financial reporting
policies to assure full disclosure of financial conditions. Two of the Company's
directors who are not employed by the Company, Mr. Masucci and Mr. MacIntosh,
serve on the Audit Committee with Mr. Martin van der Hagen.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors has the power to review, evaluate, monitor and determine compensation
of employees of the Company including without limitation salaries and bonuses.
The members of the Compensation Committee are Mr. Martin van der Hagen, Mr.
Masucci and Mr. MacIntosh.
The Board currently has no nominating or other standing committees
and has no current plans to establish additional committees.
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COMPENSATION OF DIRECTORS
Nonemployee directors receive $1,500 for each meeting that they
attend and are entitled to reimbursement for lodging and transportation to and
from meetings of the Board of Directors. Directors who are employees do not
receive any additional cash compensation for their services.
All directors are eligible to participate in the Company's stock
option plans described below. On December 3, 1997, nonemployee directors
received an automatic initial grant of options to purchase 6,000 shares at $4.00
per share, which vest over a three-year period. At the current time, options to
purchase 4,000 shares of such initial grant have vested and the remaining 2,000
options will vest on December 3, 2000. In addition, in April 1999, the Board
adopted an Amendment to the Non-Employee Directors' Stock Option Plan, which
Amendment is being presented to the shareholders at the Annual Meeting for
approval and adoption. A copy of the Amendment is attached as Exhibit B to this
Proxy Statement. (See also Proposal Three.) The Amendment granted to each
nonemployee director an additional grant of options to purchase 9,000 shares at
$1.82 per share. At the current time, 6,000 options from the April 1999 grant
have vested and the remaining 3,000 options will vest December 3, 2000. Each
individual that becomes a non-employee director in the future will receive a
grant of options to purchase 15,000 shares which will vest over three years.
In addition to the automatic initial grant, nonemployee directors
receive under the Directors' Plan an annual automatic grant of options to
purchase 5,000 shares beginning with their fourth year of service. The annual
grants vest immediately. Employee directors may be granted options under the
Long-Term Incentive Plans described below, at the discretion of the Board of
Directors.
Mary van der Hagen, a non-employee director, is also provided an
annual automobile allowance of approximately $17,000.
EXECUTIVE OFFICERS AND KEY EMPLOYEES WHO ARE NOT DIRECTORS
MARK J. VAN DER HAGEN, 43, was elected Vice President of Finance and
Treasurer in September 1997. Prior to that time he served as Vice
President. His primary responsibility is overseeing Company finances. He
also has held positions in retail sales and marketing since joining the
Company in 1991. Prior to joining Surrey, he was a Manager of Account
Services for First Bank Systems (now U.S. Bank) in St. Paul, Minnesota
from 1988 to 1991, and a Senior Financial Analyst for The Federal Reserve
Bank in Minneapolis from 1980 to 1988. Mark van der Hagen attended the
Carlson School of Management at the University of Minnesota and received a
Bachelor of Science in Business. Mark van der Hagen is the son of John and
Mary van der Hagen. Martin van der Hagen is his brother.
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DAVID L. WILLS, 42, has been Plant Manager for the Company since 1985.
His primary responsibilities include plant operations, including
production, processing and purchasing. He served as a production assistant
prior to being promoted to Plant Manager. Mr. Wills supervised production
for a midwestern agricultural processing plant before joining Surrey, Inc.
in 1981. Mr. Wills attended Western Washington University.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation for the fiscal year ended December 31, 1999 and the prior three
years earned by or paid to the current Chief Executive Officer and the only
other executive officer whose annual compensation exceeded $100,000 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
--------------------------------------- ------------------------
Securities
Other Annual Restricted Underlying All Other
Name and Principal Fiscal Compensation Stock Options/ Compensation
Position Year Salary ($) Bonus ($) ($)(1) Award(s)($) SARs(#) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John B. van der Hagen, 1999 $175,000(2) $25,000(3) $17,000 --- --- ---
Chairman and CEO -----------------------------------------------------------------------------------------
1998 $125,000(2) --- $17,000 --- --- ---
-----------------------------------------------------------------------------------------
1997 $125,000 $25,000 $17,000 --- 50,000 ---
- -------------------------------------------------------------------------------------------------------------------
Martin van der Hagen, 1999 $175,000(2) $25,000(3) $6,000 --- --- ---
President -----------------------------------------------------------------------------------------
1998 $125,000(2) --- $6,000 --- --- ---
-----------------------------------------------------------------------------------------
1997 $83,000 $25,000 $6,000 --- 75,000 ---
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-----------------------
(1) Represents automobile allowance for such years.
(2) In addition to the amounts shown in the table for 1998, each officer
received $25,000 in 1998 as an advance on 1999 salary. That amount
is included in the amounts shown in the table for 1999.
(3) A bonus of $25,000 was received by each officer in May 2000.
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EMPLOYMENT AGREEMENTS WITH CEO AND PRESIDENT
The Company entered into an employment agreement with each of John
van der Hagen, CEO, and Martin van der Hagen, President, in December 1997 in
connection with the Company's initial public offering. Each such agreement
provided for a minimum annual base salary as follows: (a) for the year ended
December 31, 1998, such base salary was $150,000, provided the Company's gross
sales for such year were at least $12 million; and (b) for the year ended
December 31, 1999, such base salary was increased to $175,000, provided the
Company's gross sales for such year were at least $15 million. The Company did
not meet its 1998 gross sales target. As a result, $25,000 paid to each of the
CEO and President in 1998 was taken as an advance on their respective 1999
salaries.
In addition, each such officer is also entitled to a bonus in
accordance with Company policy in effect from time to time, if any. In 1999,
under the employment agreements, each such officer was entitled to receive a
bonus not to exceed $20,000, unless the Company's after tax income exceeds
$1,300,000, in which case such officer may receive an additional bonus of
$20,000. Each such officer is also entitled to an annual automobile allowance,
to participate in the Company's stock option and other benefit plans. A $25,000
bonus for was paid to each officer in March 2000.
The Company has no written employment agreement with either John van
der Hagen or Martin van der Hagen with respect to their 2000 base salary or any
bonus for year 2000. The Company has agreed to pay a base salary of $175,000 to
each such officer in 2000. In addition, in March 2000, the Company paid a bonus
of $25,000 to each of John and Martin van der Hagen. Under the Company's current
bank loan, any bonus paid to an executive officer must received written consent
of the lender. The Company has requested consent from the lender, Chase Bank.
The Company does not have employment agreements with any of its
other key personnel. However, as part of its effort to expand its marketing and
sales force, the Company may enter into employment agreements with employees
hired in the future.
LONG-TERM INCENTIVE PLANS
In September 1997, the Board of Directors and shareholder of the
Company adopted the 1997 Long-Term Incentive Plan (the "1997 Plan"), to provide
for the granting of stock options and other incentive awards to key employees
and employee directors of the Company and reserved 350,000 shares of common
stock for issuance under the 1997 Plan. As of March 27, 2000, the Company had
granted options to purchase an aggregate of 317,500 shares under the 1997 Plan,
242,000 of which were outstanding.
In March 2000, the Board of Directors adopted the 2000 Long-Term
Incentive Plan (the "2000 Plan"), to provide for the granting of stock options
and other incentive awards to any employee of the Company or its Affiliates.
(Affiliates is defined as a parent or subsidiary of the Company.) In addition,
any director of the Company or any individual who is rendering services to the
Company or an Affiliate at the request of the Board of Directors or the
President shall be eligible to receive a grant of nonqualified awards. The
Company reserved 1,000,000 shares of its common stock for issuance under the
2000 Plan. As of March 27, 2000, no options had been granted under the 2000
Plan.
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At the Annual Meeting the shareholders are being asked to adopt and
approve the 2000 Plan, a copy of which is attached to this Proxy Statement as
Exhibit A. (See Proposal Two.)
Either Plan may be administered by a committee of the Board of
Directors which consists of a majority of "nonemployee directors," as defined
under applicable securities laws, or the full Board acting as a committee
(collectively, "Committee"). Both Plans are currently administered by the entire
Board acting as the Committee. Eligible persons may receive awards of options to
purchase common stock ("Options"), stock appreciation rights ("Stock
Appreciation Rights" or "Rights"), restricted stock of the Company ("Restricted
Stock"), or performance awards ("Performance Awards"), or any combination
thereof, pursuant to the respective Plan. The Committee has the discretion to
select eligible individuals to whom awards will be granted and establish the
type, price, amount, size and terms of awards, subject in all cases to the
provisions of the respective Plan and the applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code"). Options, Rights, Restricted Stock
and Performance Awards are hereinafter referred to as "Awards."
Options may be incentive stock options qualified under Section 422
of the Code ("Incentive Stock Options"), options not so qualified ("Nonqualified
Stock Options") or a combination of both. The exercise price of an Incentive
Stock Option cannot be less than 100% of the fair market value of the common
stock on the date the option is granted; provided, however, that if the optionee
owns 10% or more of the voting rights of all of the Company's stock, the
exercise price of an Incentive Stock Option cannot be less than 110% of the fair
market value of the common stock on the date the option is granted and the term
cannot exceed five years. The Company will not issue any option or warrant with
an exercise price of less than 85% of the fair market value of the underlying
common stock on the date of grant.
The following stock options for the purchase of shares of Common
Stock are granted and outstanding to employees as of March 27, 2000: (i) under
the 1997 Plan, options to purchase 242,000 shares of common stock, at $4.00 per
share, had been granted and were outstanding to 12 employees, and (ii) under the
2000 Plan, no options had been granted.
Except as described below, each of the Options currently outstanding
becomes exercisable in five equal installments commencing on the first
anniversary of the date of grant. Options granted to John van der Hagen, as a
holder of greater than 10% of the voting shares, have an exercise price of 110%
of such price, vest over a four year period, and expire at the end of five
years. Each of the Options currently outstanding generally provides for
forfeiture of any nonvested portion upon termination of employment and
expiration of any nonexercised options three months after termination of
employment (or one year after the employee's death or disability), and expires
on the tenth anniversary of the date of grant.
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In September 1997, the Board of Directors and shareholder of the
Company adopted the 1997 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") to provide for the granting of stock options to directors of
the Company who are not employees. These Options do not qualify as incentive
stock options under Section 422 of the Code. The Company has reserved 100,000
shares of its common stock for issuance under the Directors' Plan.
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The Directors' Plan was amended (the "Amendment") by the Board of
Directors in April 1999. The Amendment, a copy of which is attached this to
Proxy Statement as Exhibit B, is being presented to the shareholders at the
Annual Meeting for adoption and approval. (See Proposal Three.)
The Directors' Plan is administered by the Company's Board of
Directors as a whole. The Directors' Plan, as amended, provides that nonemployee
directors receive, upon initial election to the Board, an automatic,
nondiscretionary grant of 15,000 options to purchase common stock, vesting over
a three year period. In addition, upon election to a fourth and each subsequent
term, each nonemployee director receives an automatic annual grant of options to
purchase 5,000 shares, which are immediately exercisable. Each option specifies
the expiration date, which may not exceed ten years from the date the option is
granted. The exercise price of an option cannot be less than 100% of the fair
market value of the common stock on the date the option is granted.
Stock options for the purchase of 6,000 shares of common stock were
granted to each of three nonemployee directors effective as of December 3, 1997,
to vest over a three-year period. Currently, options to purchase 4,000 shares of
common stock of each such grant have vested and the remaining 2,000 options vest
on December 3, 2000. The exercise price of the initial options is $4.00 per
share.
The Amendment granted, in addition to the 1997 grants, to each
nonemployee director an additional grant of options to purchase 9,000 shares at
$1.82 per share. At the current time, 6,000 options from the April 1999 grant
have vested and the remaining 3,000 options will vest December 3, 2000. As
stated above, each individual that becomes a non-employee director in the future
will receive a grant of options to purchase 15,000 shares which will vest over
three years.
Each of the options generally provides for forfeiture of any
nonvested portion if such holder ceases to be a director and expiration of any
nonexercised option three months after an optionee ceases to be a director (or
one year after the director's death), and expires on the tenth anniversary of
the date to grant.
In addition, the 2000 Plan which is being adopted by the
shareholders at the Annual Meeting (see Proposal Two) provides for the
discretionary grant of options to any director of the Company.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 17, 2000, certain
information with respect to the beneficial ownership of the common stock (i) by
each person who is known by the Company to beneficially own more than five
percent (5%) of the outstanding common stock, (ii) by each of the Company's
Named Executive Officers and each director and nominee, and (iii) by all current
executive officers, directors and nominees as a group. Unless otherwise noted,
each person or group identified has sole voting and investment power with
respect to the shares shown.
Shares Percent
Beneficially of
Name and Address(1) Owned Class(7)
------------------- ------------ --------
John B. van der Hagen 920,727(2) 36.7%
Martin J. van der Hagen 237,500(3) 9.5%
Mary van der Hagen 920,727(2) 36.7%
Bruce A. Masucci
Golden Mile Sales
Associates, Inc.
225 Worcester Road
Framingham, MA 01701 11,000(4) *
G. Thomas MacIntosh
Mackall, Crounse & Moore, PLC
1400 AT&T Tower
901 Marquette Avenue
Minneapolis, MN 55402 10,000(5) *
All directors and executive officers
as a group (6 persons) 1,234,227(6) 47.9%
* Less than 1%.
----------------------
(1) Unless otherwise noted, the business address of each person listed above
is at the Company, 13110 Trails End, Leander, Texas 78641.
(2) Includes 884,727 shares, 1,000 Warrants to purchase Common Stock, and
35,000 options which are currently exercisable and owned as joint tenants
by John and Mary van der Hagen. Of these 35,000 options, 29,000 are
exercisable at $4.00 per share and 6,000 at $1.82 per share. Excludes
27,000 options at $4.00 per share and 3,000 options are $1.82 which are
not currently exercisable.
(3) Includes 207,500 shares and 30,000 options which are currently exercisable
at $4.00 per share. Excludes 45,000 options at $4.00 per share which are
not currently exercisable.
(4) Includes 1,000 shares and 10,000 options which are currently exercisable,
4,000 at $4.00 per share and 6,000 at $1.82 per share. Excludes 5,000
options which are not currently exercisable.
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(5) Represents 10,000 options which are currently exercisable, 4,000 at $4.00
per share and 6,000 at $1.82 per share. Excludes 5,000 options which are
not currently exercisable.
(6) Includes1,128,227 shares, 1,000 Warrants that are currently exercisable
and 105,000 options that are currently exercisable. Excludes 115,000
options that are not currently exercisable.
(7) Applicable ownership is based on 2,472,727 shares outstanding as of March
17, 2000, together with exercisable options and Warrants for such holder.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GUARANTEE BY OFFICER
John van der Hagen, Chief Executive Officer and a Director of the
Company, has personally guaranteed payments by the Company under its lease line
of credit with Key Corporation Capital Inc. and certain other of the Company's
capital leases, as described in the Company's Annual Report. Payments under the
Key Corporation Capital lease line are approximately $24,000 per month.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors, its executive officers and any persons
holding more than 10% of outstanding common stock are required to file reports
concerning their initial ownership of common stock and any subsequent changes in
that ownership. The Company believes that the filing requirements for the last
fiscal year were satisfied; however, Mark van der Hagen did not timely file a
Form 5 with respect to 1999 but the filing has now been made. In making this
disclosure, the Company has relied on the written representations of its
directors, executive officers and beneficial owners of more than 10% of Common
Stock and copies of the reports that they have filed with the Securities and
Exchange Commission.
PROPOSAL TWO
ADOPTION AND APPROVAL OF THE
2000 LONG-TERM INCENTIVE PLAN FOR EMPLOYEES
BACKGROUND
In 1997, the Board of Directors and the shareholder of the Company
adopted the 1997 Long-Term Incentive Plan (the "1997 Plan") to provide for the
granting of stock options and other incentive awards to key employees and
employee directors of the Company. The Company reserved 350,000 shares of its
Common Stock for issuance under the 1997 Plan.
As of March 27, 2000, stock options for the purchase of 317,500 shares
of Common Stock had been granted, of which 242,500 were outstanding to 12
employees and employee directors of the Company, as set forth on the table
entitled "Security Ownership of Certain Beneficial Owners and Management"
herein. The exercise price of each such option, $4.00, was set in connection
with the Company's IPO as the market value of the Common Stock at the time of
issuance.
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On March 6, 2000, the Board of Directors adopted, subject to approval
by the shareholders of the Company, the Surrey, Inc. 2000 Long-Term Incentive
Plan (the "2000 Plan"). The Company has reserved for issuance pursuant to the
terms of the 2000 Plan 1,000,000 shares of its Common Stock.
A COPY OF THE 2000 PLAN IS ATTACHED TO THIS PROXY STATEMENT AS EXHIBIT
A.
The 2000 Plan is slightly broader than the 1997 in that it provides for
the grant of incentive stock options and other awards to any employee of the
Company or its Affiliates (which is defined as a parent or subsidiary
corporation with respect to the Company), as well as to any director of the
Company or any individual who is rendering services to the Company or an
Affiliate at the request of the Board of Directors or the President. Only
employees, however, may received incentive awards.
The 2000 Plan, and any grants thereunder made after March 6, 2000 and
prior to approval by the shareholders, are contingent upon such approval and
will be null and void if not so approved. As of March 27, 2000, no options had
been granted under the 2000 Plan.
The 2000 Plan is administered by a committee (the "Committee"), which
shall consist of the Company's Board of Directors or not less than two members
of the Board, each of whom is a "nonemployee director" within the meaning of
Rule 16b-3(a)(3) under the Securities Exchange Act of 1934. Currently, the
entire Board of Directors acts as the Committee.
Eligible individuals may receive awards of options to purchase common
stock ("Options"), stock appreciation rights ("Stock Appreciation Rights" or
"Rights"), restricted stock of the Company ("Restricted Stock"), or performance
awards ("Performance Awards"), or any combination thereof, pursuant to the 2000
Plan. The Committee has the discretion to select eligible individuals to whom
awards will be granted and establish the type, price, amount, size and terms of
awards, subject in all cases to the provisions of the 2000 Plan and the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). Options, Rights, Restricted Stock and Performance Awards are
hereinafter referred to as "Awards."
Options may be incentive stock options qualified under Section 422
of the Code ("Incentive Stock Options"), options not so qualified ("Nonqualified
Stock Options") or a combination of both. The exercise price of an Incentive
Stock Option cannot be less than 100% of the fair market value of the common
stock a the time the option is granted; provided, however, that if the optionee
owns 10% or more of the voting rights of all of the Company's stock, the
exercise price of an Incentive Stock Option cannot be less than 110% of the fair
market value of the common stock on the date the option is granted and the term
cannot exceed five years. The Company has agreed not to issue any option or
warrant with an exercise price of less than 85% of the fair market value of the
underlying common stock on the date of grant.
Each option becomes exercisable at the time and on the conditions
established by the Committee, and expires no later than the tenth anniversary of
the date of grant.
The Board of Directors believes that in order to continue to provide
appropriate incentives to current employees and to be able to compete in
attracting qualified employees and consultants in the future, it is in the best
interests of the Company to ratify and approve the 2000 Plan. Consequently, the
Board recommends a vote in favor of the 2000 Plan.
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Upon approval of the 2000 Plan, the Company intends to register the
shares of Common Stock subject to both the 1997 Plan and the 2000 Plan on Form
S-8 with the Securities and Exchange Commission.
VOTE REQUIRED
The affirmative vote of not less than a majority of the common stock
represented either in person or by proxy and entitled to vote at the meeting
will be required to adopt and approve the 2000 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION AND
APPROVAL OF THE 2000 LONG-TERM INCENTIVE PLAN.
PROPOSAL THREE
ADOPTION AND APPROVAL OF AMENDMENT TO 1997 NON-EMPLOYEE
DIRECTORS' STOCK OPTION PLAN
In April 1999, the Board of Directors adopted an amendment (the
"Amendment") to the Non-Employee Directors' Stock Option Plan ("Directors
Plan"), which is being presented to the shareholders at the Annual Meeting for
approval and adoption.
A COPY OF THE AMENDMENT TO THE DIRECTORS PLAN IS ATTACHED TO
THIS PROXY STATEMENT AS EXHIBIT B.
Prior to the Amendment, each nonemployee was to receive an initial
automatic grant of options to purchase 6,000 shares of common stock, which would
vest over three years, and an automatic annual grant of 2,000 options upon their
election to a fourth and each subsequent term. The Amendment increased the
automatic initial grant to 15,000 options, vesting over three years, with an
annual automatic grant in the fourth and each subsequent year of 5,000 options,
which vest immediately.
In addition, the Amendment provided a one time grant to the
nonemployee director members of the current Board to increase their option
holdings to the 15,000 now being provided by the Directors Plan.. The Amendment
granted to each nonemployee director, in addition to the 1997 grant, options to
purchase 9,000 shares at $1.82 per share, which vest 3,000 in April 1999, 3,000
in December 1999 and 3,000 on December 3, 2000. After giving effect to the
Amendment, each current nonemployee director, each of who has served
continuously since December 1997, has 15,000 options to purchase common stock,
10,000 of which are vested (4,000 at $4.00 per share and 6,000 at $1.82 per
share) and an additional 5,000 of which will vest on December 3, 2000 (2,000 at
$4.00 per share and 3,000 at $1.82 per share). Each such director will also
receive an annual grant of 5,000 options beginning with their reelection in
2001. Each individual that becomes a nonemployee director in the future will
receive a grant of options to purchase 15,000 shares which will vest over three
years.
The Board of Directors determined, after discussion, that its grant
of options to nonemployee directors should be increased to a minimum of 5,000
options per year of service as part of
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a plan to attract and retain qualified nonemployee Board members. Consequently,
the Board recommends a vote to approve the Amendment.
VOTE REQUIRED
The affirmative vote of not less than a majority of the common stock
represented either in person or by proxy and entitled to vote at the meeting
will be required to adopt and approve the Amendment to the Directors Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION AND
APPROVAL OF THE AMENDMENT TO THE 1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN.
PROPOSAL FOUR
RATIFICATION AND APPOINTMENT OF INDEPENDENT AUDITORS
During 1999, the Board of Directors retained the firm of Grant
Thornton, LLP as independent public auditors to audit the books, records and
accounts of the Company for the fiscal year ended December 31, 1999. The Board
has also appointed such firm to audit the accounts of the Company for the fiscal
year ending December 31, 2000.
Representatives of Grant Thornton, LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions by shareholders.
VOTE REQUIRED
The affirmative vote of not less than a majority of the common stock
represented either in person or by proxy and entitled to vote at the meeting
will be required to ratify the appointment of the independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON, LLP AS INDEPENDENT AUDITORS FOR FISCAL YEAR 2000.
PROPOSALS OF SHAREHOLDERS
Pursuant to Rule 14a-8 of the Securities and Exchange
Commission ("SEC"), any shareholder wishing to have a proposal considered for
inclusion in the Company's proxy solicitation material for the 2001 Annual
Meeting of Shareholders must set forth such proposal in writing and file it with
the Secretary of the Company no later than November 27, 2000. Pursuant to SEC
Rule 14a-4(c)(1), any shareholder wishing to have a proposal considered at the
2001 Annual Meeting of Shareholders, but not submitted for inclusion in the
Company's proxy solicitation material, must set forth such proposal in writing
and file it with the Secretary of the Company no later than February 14, 2001
and failure to notify the Company by such date would allow the Company's
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proxies to use their discretionary voting authority when the proposal is raised
at the Annual meeting (to vote for or against the proposal) without any
discussion of the matter in the proxy materials.
FINANCIAL INFORMATION;
ANNUAL REPORT ON FORM 10-KSB
The Company's 2000 Annual Report to Shareholders, including but not
limited to the balance sheets as of December 31, 1999 and December 31, 1998 and
the related consolidated statements of operations, shareholders' equity and cash
flows for the two years ended December 31, 1999, accompanies these materials. A
copy of the 2000 Annual Report to Shareholders may be obtained without charge
upon request. In addition, the Company will provide without charge to any
shareholder solicited hereby, upon written request of such shareholder, a copy
of its 2000 Annual Report on Form 10-KSB filed with the SEC. Requests should be
directed to the Chief Financial Officer, Surrey, Inc., 13110 Trails End Road,
Leander, Texas 78641.
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors knows of
no other matters which may come before the Annual Meeting. However, if any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed proxy form to vote such proxies received by the Company in
accordance with their judgment on such matters.
By Order of the Board of Directors
Mark J. van der Hagen
Vice President-Finance and Chief Financial
Officer
March 27, 2000
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EXHIBIT A
SURREY, INC.
2000 LONG-TERM INCENTIVE PLAN
The purpose of the SURREY, INC. 2000 LONG-TERM INCENTIVE PLAN (the
"Plan") is to promote the growth and profitability of SURREY, INC. (the
"Company") and its affiliates by providing its employees, directors, and others
with an incentive to achieve long-term corporate objectives, to attract and
retain executives of outstanding competence, and to provide its executives with
an equity interest in the Company.
1. Stock Subject to Plan.
a. Aggregate Limit. An aggregate of 1,000,000 shares (the "Shares")
of the common stock, no par value, of the Company ("Company Stock") may be
subject to awards granted under the Plan. Such Shares may be authorized but
unissued Company Stock or authorized and issued Company Stock that has been
acquired by the Company. Except to the extent otherwise provided in paragraph
6.b., Shares that are forfeited, and Shares that are subject to an award which
expires or is canceled, shall be available for reissuance under the Plan.
b. Individual Limit. Not more than 100,000 Shares may be subject to
awards granted to any individual during any calendar year. If an award granted
to an individual is canceled, the canceled award will continue to be counted
against the maximum number of shares for which awards may be granted to that
individual. If, after grant, the exercise price of a stock option is reduced,
the reduction shall be treated as a cancellation of the option and the grant of
a new option for purposes of this paragraph.
2. Administration.
a. Committee. The Plan shall be administered by a committee (the
"Committee") consisting of the Board of Directors of the Company (the "Board"),
or of not less than two members of the Board each of whom is a "nonemployee
director" within the meaning of Rule 16b-3(a)(3) under the Securities Exchange
Act of 1934 (the "Exchange Act"). To the extent feasible, at any time when the
Company is registered under Section 12 of the Exchange Act, each member of the
Committee shall be an "outside director" within the meaning of Section
162(m)(4)(C)(i) of the Internal Revenue Code of 1986 (the "Code") and
regulations thereunder.
b. Powers and Duties. The Committee shall have sole discretion and
authority to:
i. adopt rules and regulations governing the administration
of the Plan;
ii. select eligible individuals to whom awards will be
granted;
iii. determine the type, price, amount, size, and terms of
awards;
iv. determine when awards will be granted;
v. determine whether restrictions will be placed on Shares
purchased pursuant to an option or issued pursuant to an
award;
and make all other determinations necessary or advisable for the administration
of the Plan. The Committee's determinations need not be uniform, and may be made
by it selectively among persons who are eligible to receive awards, whether or
not such persons are similarly situated. All interpretations, decisions, or
determinations made by the Committee shall be final and conclusive.
3. Eligibility. Any employee of the Company or its Affiliates shall be
eligible to receive awards under the Plan. In addition, any director of the
Company, and any individual (other than a director of the Company) who is not an
employee of the Company or an Affiliate and who is rendering services to the
Company or an Affiliate at the request of the Board of Directors or the
President of the Company, shall be eligible to receive awards of nonqualified
stock options, stock appreciation rights, restricted stock, or performance
awards under the Plan. An "Affiliate" is any corporation that is a "parent
corporation" or a
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"subsidiary corporation" with respect to the Company, as determined under
Sections 424(e) and (f) of the Code.
4. Awards. The Committee may make awards in the form of stock options,
stock appreciation rights, restricted stock, performance awards, or any
combination thereof.
5. Stock Options. A stock option shall entitle the optionee, upon
exercise, to purchase Shares at a specified price during a specified period.
Stock options may be "Incentive Stock Options" within the meaning of Section 422
of the Code, options which do not qualify as Incentive Stock Options
("Nonqualified Options"), or a combination of Incentive Stock Options and
Nonqualified Options. Stock options shall be subject to the following
requirements:
a. Type of Option. Each option shall be identified as an Incentive
Stock Option or a Nonqualified Option. If a combination of Incentive Stock
Options and Nonqualified Options are granted in a single award, the
agreement evidencing the award shall specify the extent to which the
options are Incentive Stock Options and the extent to which they are
Nonqualified Options.
b. Term. No option shall be exercisable more than ten years after
the date it is granted.
c. Payment. The purchase price of Shares subject to an option shall
be payable in full when the option is exercised. Payment may be made in
cash, in shares of Common Stock having a fair market value on the date of
exercise which is equal to the option price, by directing the Company to
withhold from the Shares that would otherwise be issued upon exercise a
number of Shares having a fair market value on the date of exercise which
is equal to the exercise price, or by any combination of the foregoing,
subject to such terms and conditions as the Committee deems necessary or
appropriate. The Committee, in its discretion, may also establish, or
cooperate with an optionee who participates in, a cashless exercise
program of a broker or other agent, under which: (i) all or part of the
Shares received upon exercise of an option are sold through the broker or
other agent; or (ii) the broker or other agent makes a loan to such
optionee.
d. Incentive Stock Options. An Incentive Stock Option shall be
subject to the following additional requirements:
i. The purchase price of Shares subject to the option shall
not be less than the fair market value of the Shares at the time the
option is granted, as determined in good faith by the Committee.
ii. The fair market value (determined at the time the option
is granted) of all Shares with respect to which Incentive Stock
Options first become exercisable during any calendar year, under
this Plan or any other plan of the Company or an Affiliate, shall
not exceed $100,000.
iii. If the optionee owns 10% or more of the total combined
voting power of all classes of stock of the Company or an Affiliate
at the time the option is granted, the purchase price of Shares
subject to the option shall not be less than 110% of their fair
market value on the date the option is granted, and the option may
not be exercised more than five years after the date it is granted.
The rules of Section 424(d) of the Code shall apply in determining
the stock ownership of any optionee.
iv. The option shall not be transferable except to the extent
permitted by the agreement evidencing the option. An Incentive Stock
Option agreement may only permit the option to be transferred by
will or the laws of descent and distribution, and an Incentive Stock
Option may not be exercised during the optionee's lifetime by anyone
other than the optionee.
Subject to the foregoing, options may be made exercisable in one or more
installments, upon the happening of certain events, or upon such other terms and
conditions as the Committee shall determine.
6. Stock Appreciation Rights. A stock appreciation right shall entitle the
holder, upon exercise,
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to receive a payment equal to the amount by which the fair market value of one
Share on the date the right is exercised exceeds the "base amount" established
by the Committee on the date the right is granted. Stock appreciation rights
shall be subject to the following requirements:
a. Type of Right. Stock appreciation rights may be granted in tandem
with an option or as "freestanding" rights.
b. Tandem Rights. Stock appreciation rights granted in tandem with
an option shall become nonexercisable upon exercise of the option, and an
option granted in tandem with stock appreciation rights shall become
nonexercisable upon the exercise of the rights. Shares subject to an
option which becomes nonexercisable by virtue of the exercise of a tandem
right shall not be available for subsequent awards under the Plan.
c. Term. No stock appreciation right shall be exercisable more than
ten years after the date it is granted.
d. Payment. The amount payable upon the exercise of a stock
appreciation right may be paid in cash, in shares of Company Stock having
a fair market value which is not more than the amount payable on the date
of exercise, or in a combination of cash and such shares, as the Committee
shall determine.
e. Rights Not Transferable. A stock appreciation right shall not be
transferable except to the extent permitted by the agreement evidencing
the right.
f. Rights In Tandem With ISOs. Stock appreciation rights granted in
tandem with an Incentive Stock Option shall be subject to the following
additional requirements:
i. The base amount of the rights shall not be less than the
purchase price of the Shares subject to the option.
ii. The rights may be exercised only when the fair market
value of the Shares subject to the rights exceeds the purchase price
of the Shares subject to the option.
iii. The rights may be exercised only when, and to the extent,
the option may be exercised.
iv. The rights may be transferred only when the option may be
transferred.
v. The amount payable upon exercise of the rights shall not
exceed the difference between the fair market value of the Shares
subject to the right and the purchase price of the Shares subject to
the option.
Subject to the foregoing, stock appreciation rights may be made exercisable in
one or more installments, upon the happening of certain events, or upon such
other terms and conditions as the Committee shall determine.
7. Restricted Stock. Restricted stock awards shall entitle the holder to
receive Shares subject to forfeiture if specified conditions are not satisfied
at the end of a restricted period. Restricted stock awards shall be subject to
the following requirements:
a. Restricted Period. The Committee shall establish a restricted
period during which the holder will not be permitted to sell, transfer,
pledge, encumber, or assign the Shares subject to the award. Within these
limits, the Committee may provide for the lapse of restrictions in
installments, upon the occurrence of certain events, or upon such other
terms and conditions as the Committee deems appropriate. Any attempt by a
holder to dispose of restricted Shares in a manner contrary to the
applicable restrictions shall be void, and of no force or effect.
b. Rights During Restricted Period. Except to the extent otherwise
provided herein or under the terms of a restricted stock agreement, the
holder of restricted Shares shall have all of the rights of a stockholder
in the Company with respect to the restricted Shares, including the right
to vote the Shares and to receive dividends and other distributions.
However, all stock dividends, stock rights, and stock issued upon
split-ups or reclassifications of Shares shall be subject to the same
restrictions as the Shares with respect to which they are issued, and may
be held in custody as provided below until the restrictions have lapsed.
c. Forfeitures. Except to the extent otherwise provided in a
restricted stock agreement,
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restricted Shares shall be forfeited to the Company, and all rights of the
holder with respect to such Shares shall terminate, if the holder shall
cease to be an employee of the Company and its Affiliates or if any
condition established by the Committee for the release of any restriction
shall not have occurred prior to the end of the restricted period.
d. Custody. The Committee may provide that certificates evidencing
restricted Shares shall be held in custody by a bank or other institution,
or by the Company or an Affiliate, until the restrictions have lapsed. The
Committee may also require the holder of restricted Shares to deliver a
stock power to the Company, endorsed in blank, relating to the restricted
Shares.
e. Certificates. A recipient of restricted Shares shall be issued a
certificate or certificates evidencing such Shares. Such certificates
shall be registered in the name of the recipient, and shall bear a legend
which shall be in substantially the following form:
"The transferability of this certificate and the shares represented
hereby are subject to the terms and conditions (including
forfeiture) of the Surrey, Inc. 2000 Long-Term Incentive Plan and a
Restricted Stock Agreement entered into between the registered owner
and Surrey, Inc. Copies of such Plan and Agreement are on file in
the offices of Surrey, Inc., 1311 Trails End Road, Leander, Texas
78641."
8. Performance Awards. Performance awards shall entitle the recipient to
receive future payments of cash or distributions of Shares upon the achievement
of long-term performance goals. Performance awards shall be subject to the
following requirements:
a. Performance Period. The Committee shall establish a performance
period of not more than five years.
b. Amount of Awards. The Committee shall establish a value for each
performance award, which may be expressed in terms of specified dollar
amounts or a specified number of Shares. Such value may be fixed or
variable in accordance with criteria specified by the Committee at the
time of the award.
c. Performance Objectives. The Committee shall establish performance
objectives to be achieved during the performance period, determining the
extent to which an employee will be entitled to distributions with respect
to the award.
d. Performance Measures. Performance objectives may relate to
corporate, subsidiary, unit, or individual performance, or any combination
thereof, and may be established in terms of growth in gross or net
earnings, earnings per share, ratio of earnings to equity or assets, Share
value, or such other measures as the Committee shall determine. Multiple
objectives may be used which have the same or different weighting, and the
objectives may relate to absolute performance or to relative performance
measured against other companies, subsidiaries, units, or individuals.
e. Adjustments. Prior to the end of a performance period, the
Committee may adjust previously established performance objectives to
reflect major unforeseen events such as changes in applicable laws,
regulations, or accounting practices; mergers, acquisitions, or
divestitures; or other unusual or non-recurring events.
f. Distributions with Respect To Awards. Following the end of a
performance period, the Committee shall determine the extent to which the
performance objectives for such period have been achieved and the amounts,
if any, that are payable with respect to performance awards for that
period. Such amounts may be paid in cash or in Shares (based on their fair
market value at the time of the payment), or in any combination of cash
and Shares, as the Committee shall determine. Payments may be made in a
lump sum or in installments, and shall be subject to such vesting,
deferral, or other terms and conditions as the Committee may determine.
g. Nontransferability. A performance award shall not be assignable
or transferable except to the extent permitted by the agreement evidencing
the award.
9. Agreements. Each award shall be evidenced by an agreement setting forth
the terms and
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conditions upon which it is granted. Multiple awards may be evidenced by a
single agreement. Subject to the limitations set forth in the Plan, the
Committee may, with the consent of the person to whom an award has been granted,
amend an agreement to modify the terms or conditions of any award.
10. Adjustments. If there is a change in the outstanding Shares of Company
Stock by reason of a stock dividend or split, recapitalization,
reclassification, combination, or exchange of Shares, or by reason of a similar
corporate change, the Committee may adjust the number of Shares subject to an
award, the option price or value of an award, the maximum number of Shares
subject to this Plan, or the maximum number of Shares subject to an award, as
may be appropriate to reflect the nature of the change. Any such adjustments
shall be conclusive and binding for all purposes of this Plan.
11. Merger, Consolidation, Etc. Subject to the provisions of the agreement
evidencing an award, if the Company becomes a party to a corporate merger,
consolidation, major acquisition of property for stock, spinoff, reorganization,
or liquidation, the Board may make any arrangement it deems advisable with
respect to outstanding awards, in the number of Shares subject to this Plan, and
in the number of Shares subject to awards to any individual. Such an arrangement
may include, but shall not be limited to, the substitution of new awards for
awards then outstanding, the assumption of any award, and the termination of any
award. Any such arrangements shall be conclusive and binding for all purposes of
this Plan.
12. Indemnification. Each member of the Committee and the Board shall be
indemnified by the Company against any loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by him as a result of any claim,
action, suit, or proceeding in which he may be involved by reason of any action
taken or omitted under this Plan; provided, such person gives the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which any person may be entitled under the Company's articles of incorporation
or bylaws, as a matter of law, or otherwise.
13. Rights as Stockholder. Except to the extent otherwise specifically
provided herein, the recipient of an award shall have no rights as a stockholder
with respect to Shares sold or issued pursuant to the Plan until certificates
for such Shares have been issued to such person.
14. General Restrictions. Each award granted pursuant to the Plan shall be
subject to the requirement that if, in the opinion of the Committee:
a. the listing, registration, or qualification of any Shares related
thereto upon any securities exchange or under any state or federal law;
b. the consent or approval of any regulatory body; or
c. an agreement by the recipient with respect to the disposition of
any such Shares;
is necessary or desirable as a condition of the issuance or sale of such Shares,
such award shall not be consummated unless and until such listing, registration,
qualification, consent, approval, or agreement is effected or obtained in form
satisfactory to the Committee.
15. Employment Rights. Nothing in this Plan, or in any agreement entered
into under the Plan, shall confer upon any employee the right to continue in the
employ of the Company or its Affiliates, or affect the right of the Company or
any Affiliate to terminate an employee's employment at any time, with or without
cause. In addition, nothing in this Plan, or in any agreement entered into under
the Plan, shall confer upon any individual who is rendering services to the
Company or an Affiliate other than as an employee the right to continue to
render such services, or affect the right of the Company or any Affiliate to
terminate such services at any time, with or without cause.
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16. Withholding. If the Company proposes or is required to issue Shares
pursuant to the Plan, it may require the recipient to remit to it, or withhold
from such award or from the recipient's other compensation, an amount sufficient
to satisfy any tax withholding requirements prior to the delivery of
certificates for the Shares.
17. Amendments. The Board may at any time, and from time to time, amend
the Plan in any respect, except that no amendment:
a. increasing the number of Shares available for issuance or sale
pursuant to the Plan (other than as permitted by paragraphs 10 and 11); or
b. changing the classification of individuals eligible to
participate in the Plan or the definition of an Affiliate; shall be made
without stockholder approval.
18. Contingent Awards. Any award granted under the Plan prior to the date
on which the Plan is approved by the Company's stockholders shall be contingent
upon such approval. If stockholder approval is not received within 12 months
after the date on which this Plan is adopted by the Board, such award shall be
void and of no force or effect.
19. Stockholder Approval. The approval of the Plan or any amendment by the
Company's stockholders must comply with all applicable provisions of the
Company's charter, bylaws, and applicable state law prescribing the method and
degree of stockholder approval required for granting awards of the type provided
under the Plan. Absent any such prescribed method and degree of stockholder
approval, the Plan or such amendment must be approved by a simple majority vote
of stockholders voting, either in person or by proxy, at a duly held
stockholders' meeting.
20. Duration. No awards shall be granted under the Plan after the earlier
of: (a) the date the Plan is terminated by the Board; or (b) the tenth
anniversary of the date the Plan was first approved by the Board.
21. Compliance with Section 16(b). In the case of individuals who are
subject to Section 16 of the Exchange Act, the Company intends that the Plan and
any award granted under the Plan satisfy the applicable requirements of Rule
16b-3. If a provision of the Plan or any award would otherwise conflict with
such intent, that provision, to the extent possible, shall be interpreted so as
to avoid the conflict. To the extent of any remaining irreconcilable conflict
with such intent, the provision shall be deemed void as applied to individuals
who are subject to Section 16 of the Exchange Act.
22. Effective Date of Plan. The Plan was initially adopted by the Board of
Directors on March 6, 2000.
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<PAGE>
EXHIBIT B
AMENDMENT NO. 1
TO
SURREY, INC.
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Reference is hereby made to that certain 1997 Non-Employee
Directors' Stock Option Plan ("Plan") of Surrey, Inc., adopted by the Board of
Directors and approved by the shareholders of the Company and effective
September 9, 1997.
I. Section 3 of the Plan is amended to be and read in its entirety as
follows:
"3. Eligibility. Subject to the limitations of paragraph 1:
a. Initial Grants. Each individual who is a Non-Employee Director
on April 13, 1999 [the date on which this amendment to the
Plan is adopted by the Board] shall be granted, in addition to
the option to purchase 6,000 Shares currently outstanding and
granted in 1997, a stock option under the Plan to purchase
9,000 Shares effective on April 13, 1999. Each individual who
first becomes a Non-Employee Director after April 13, 1999
shall receive a stock option under the Plan to purchase 15,000
Shares. Each such option granted under the Plan shall entitle
the optionee, upon exercise, to purchase Shares upon the terms
and conditions set forth in paragraph 4.
b. Annual Grants. Each Non-Employee Director who is re-elected by
the shareholders to a fourth or subsequent term as a director,
shall receive additional options under the Plan upon such
re-election. Each such additional option shall entitle the
optionee, upon exercise, to purchase 5,000 Shares.
Notwithstanding the foregoing, if the number of Shares
available for issuance pursuant to paragraph 1 on any date is
less than the aggregate number of Shares for which options are
to be granted on such date, then the number of Shares for
which options are granted to each director on such date shall
be reduced, pro rata, until the aggregate number of Shares for
which options are to be granted equals the number of Shares
then available for issuance."
II. Section 4(a) of the Plan is amended to be and read in its entirety as
follows:
"a. Grant Dates.
(1) Initial Grants. The initial options, each to purchase 6,000
Shares, granted under paragraph 3.a. to an individual who was
a Non-Employee Director on the date on which the Plan was
adopted by
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<PAGE>
the Board, were granted as of December 3, 1997, the date on
which the Registration Statement on Form SB-2 became effective
with the Securities and Exchange Commission with respect to
the initial public offering of the Common Stock of the
Company. An option granted under paragraph 3.a. to an
individual who was a Non-Employee Director on April 13, 1999
[the date on which this amendment to the Plan was adopted by
the Board] shall be granted as of April 13, 1999. An option
granted under paragraph 3.a. to an individual who first
becomes a Non-Employee Director after April 13, 1999 shall be
granted as of the date on which the individual first becomes a
Non-Employee Director. Each such date is referred to as a
"Grant Date.
(2) Annual Grants. An option granted under paragraph 3.b. shall be
automatically granted upon the re-election of such
Non-Employee Director to the Board by the shareholders of the
Company. Each such date is referred to as a "Grant Date."
III. Section 4(c)(1) of the Plan is amended to be and read in its entirety as
follows:
"c. Exercise Periods.
(1) Initial Grants. Except as provided in the following sentence,
an option granted pursuant to paragraph 3.a. shall become
exercisable with respect to one-third of the Shares subject to
the option on the first anniversary of the Grant Date, and
with respect to an additional one-third of the Shares subject
to the option on each of the next two anniversaries of the
Grant Date. Notwithstanding the prior sentence, the initial
grant to purchase 9,000 Shares made on April 13, 1999 to each
Non-Employee Director on such date shall become exercisable
immediately with respect to one-third of the Shares subject to
the option, and shall become exercisable with respect to an
additional one-third of the Shares subject to the option on
each of December 3, 1999 and December 3, 2000."
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<PAGE>
SURREY, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
For Annual Meeting of Shareholders
May 2, 2000
The undersigned, revoking all prior proxies, hereby appoints John B. van der
Hagen and Martin van der Hagen, or either of them, as Proxy or Proxies, with
full power of substitution and revocation, to vote all shares of stock of
Surrey, Inc. standing of record in the name of the undersigned at the close of
business on March 17, 2000 at the Annual Meeting of Shareholders to be held on
May 2, 2000, or at any adjournment thereof, upon the following matters:
1. Election of the following five (5) nominees as directors: John B. van der
Hagen, Martin van der Hagen, Mary van der Hagen, Bruce Masucci and G.
Thomas MacIntosh.
(FOR ALL (WITHHELD FOR FOR ALL NOMINEES EXCEPT THE FOLLOWING:
NOMINEES) ALL NOMINEES) (MARK NO BOX AND WRITE THE NAME(S) OF THE
NOMINEE(S) WITHHELD IN THE SPACE PROVIDED
[ ] [ ] BELOW.)
- --------------------------------------------------------------------------------
2. Approval and adoption of the 2000 Long-Term Incentive Plan,
as set forth in the Proxy Statement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
3. Approval and adoption of the Amendment to the 1997 Non-Employee Directors'
Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
4. Ratification of appointment of Grant Thornton, LLP as independent auditors
for fiscal year 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment
thereof.
(Please sign and date on reverse side)
- --------------------------------------------------------------------------------
<PAGE>
(continued from other side)
Please mark, date, sign and mail this proxy promptly in the enclosed envelope.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF ALL DIRECTORS AND FOR PROPOSALS 2, 3, AND 4.
The Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4.
The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting
of Shareholders of Surrey, Inc. and the proxy statement furnished therewith
dated March 27, 2000.
Dated: ______________________, 2000.
____________________________________
____________________________________
Signature
Please sign your name exactly as it appears
to the left. In the case of shares owned in
joint tenancy or as tenants in common, all
should sign. Fiduciaries should indicate
their title and authority.
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