SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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14a-6(e)(2))
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Surrey, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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SURREY, INC.
13110 Trails End Road
Leander, Texas 78641
--------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
--------------------------
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 Thursday, April 30, 1998 at
10:00 a.m., at Lago Vista Clubs and Resort, 1918 American Drive, Lago Vista,
Texas 78645 for the following purposes:
1. To elect directors to serve for the ensuing year or until
their earlier resignation or removal.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for the fiscal year 1998.
3. 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 13, 1998
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
/s/ Mark J. van der Hagen
Mark J. van der Hagen
Vice President-Finance and Chief Financial Officer
April 1, 1998
SURREY, INC.
13110 Trails End Road
Leander, Texas 78641
PROXY STATEMENT
For Annual Meeting of shareholders
to be held April 30, 1998
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 Thursday, April 30, 1998 at 10:00 a.m., at Lago Vista Clubs and
Resort, 1918 American Drive, Lago Vista, Texas 78645, 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 April 1, 1998.
RECORD DATE
Only shareholders of record at the close of business on March 13, 1998,
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 13, 1998, 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 and
(ii) FOR the ratification of the appointment of Ernst & Young LLP as independent
auditors for the fiscal year 1998.
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 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.
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 65 Chairman of the Board and CEO 1981
Martin J. van der Hagen 35 President and Director 1997
Mary van der Hagen 57 Secretary and Director 1981
Bruce A. Masucci 37 Director 1997
G. Thomas MacIntosh 59 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.
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 Chairman of the Board in September 1997 and CEO
in August 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 joining Surrey,
John van der Hagen was President of the Company 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, and 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 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.
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 April 1997, Ms. van der Hagen was employed on
a part-time basis by the Company. She resigned from such employment
with the Company in April 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 and serves on the
Board of Governors 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.
Directors of the Company hold office until the next annual meeting of
shareholders or until their successors have been duly elected and qualified.
ACTIONS AND COMMITTEES OF THE BOARD OF DIRECTORS
In 1997, the Board of Directors met or took action by unanimous written
consent nine times. 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
1998. Neither committee met in 1997. All of the Directors attended at least 75%
of the total number of meetings of the Board of Directors during their tenure.
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. The Company's two
non-employee directors, 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.
COMPENSATION OF DIRECTORS
Directors currently do not receive any cash compensation for their
services, but nonemployee Directors are entitled to reimbursement for
transportation to and from meetings of the
Board of Directors. The Company may pay cash compensation to nonemployee
directors in the future. All Directors are eligible to participate in the
Company's stock option plans described below. Nonemployee Directors received an
automatic initial grant of options to purchase 6,000 shares on December 3, 1997,
which will vest over a three-year period. In addition, the nonemployee Directors
will receive an annual automatic grant of options to purchase 2,000 shares
beginning with their fourth year of service.
EXECUTIVE OFFICERS AND KEY EMPLOYEES WHO ARE NOT DIRECTORS
MARK J. VAN DER HAGEN, 41, 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 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.
JOSEPH L. BUSICK, 50, joined Surrey in July 1997. As Sales and
Marketing Director, his primary responsibilities are to oversee and
direct sales and marketing to the Company's retail customers. Before
joining Surrey, Mr. Busick held the position of Vice President -
Director of Sales and Marketing at CBI Laboratories, Inc., a $30
million personal care manufacturer, from June 1994 to June 1997. Prior
to CBI, he was co-owner/President of J. Busick & Col/Cashe'
International Inc., an apparel importer and marketing company selling
to the mass-chain retail stores. Mr. Busick received a B.S. degree in
marketing from the University of North Texas and graduate hours towards
an M.B.A. in marketing from Case Western University.
DAVID L. WILLS, 40, has been Plant Manager for the Company
since 1985. His primary responsibility is 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.
JON M. HYSICK, 38, has been Operations Manager for the Company
since 1993. His primary responsibilities are scheduling purchasing of
raw materials, scheduling production and cost control. He served as
purchasing supervisor prior to his promotion to Operations Manager. He
was assistant manger of loans and collections for Commercial Credit
Corporation in Austin, Texas from 1988 until he joined Surrey in 1992.
Mr. Hysick attended the University of Texas.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation for the fiscal year ended December 31, 1997 and the prior three
years earned by or paid to the current Chief Executive Officer, the former Chief
Executive Officer and the only other executive officer who was serving at the
end of the most fiscal year whose annual salary and bonus exceeded $100,000 (the
"Named Executive Officers").
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Annual Compensation Long-Term Compensation
------------------------------------------ --------------------------
Restricted Securities
Name and Principal Fiscal Other Annual Stock Underlying All Other
Principal Year Salary($) Bonus($) Compensation ($)(1) Award(s)($) Options/SARs(#) Compensation ($)
- ---------------------------------------------------------------------------------------------------------------------------------
John B. van der Hagen, 1997 $125,000 $25,000 $17,000 --- 50,000 ---
Chairman and CEO(2)
------------------------------------------------------------------------------------------------------
1996 $125,000 --- $17,000 --- --- ---
------------------------------------------------------------------------------------------------------
1995 $125,000 $10,000 $17,220 --- --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
James K. Olson (3) 1997 $125,000 --- --- --- --- ---
------------------------------------------------------------------------------------------------------
1996 $125,000 --- $12,780 --- --- ---
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1995 $125,000 $10,000 $16,800 --- --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
Martin van der Hagen 1997 $83,000 $25,000 $6,000 --- 75,000 ---
------------------------------------------------------------------------------------------------------
1996 $73,000 --- $6,000 --- --- ---
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1995 $63,000 --- $6,000 --- --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
- --------------------------
(1) Represents automobile allowance for such years.
(2) Elected CEO in August 1997; served as President of the Company from
1981 to August 1997.
(3) Resigned as CEO and director in August 1997, served as a consultant to
the Company until December 1997. See "Certain Relationships and Related
Transactions."
STOCK OPTIONS
The following table provides certain information with respect to stock
options granted under the Company's 1997 Long-Term Incentive Plan in fiscal 1997
to the Named Executive Officers.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
- -------------------------------------------------------------------------------------------------------------------
Percent of Total
Number of Securities Option/SARs
Underlying Options/SARs Granted to Employees Exercise of Base
Name Granted (#) in Last Fiscal Year Price ($/sh) Expiration Date
- -------------------------------------------------------------------------------------------------------------------
John B. van der Hagen, 50,000 (1) 17.4% $4.40 December 3, 2002
Chairman and CEO
- -------------------------------------------------------------------------------------------------------------------
James K. Olson --- --- --- ---
- -------------------------------------------------------------------------------------------------------------------
Martin van der Hagen 75,000 (2) 26.1% $4.00 December 3, 2007
- -------------------------------------------------------------------------------------------------------------------
- ------------------------
(1) The grant date of the options was December 3, 1997. The options granted
to John van der Hagen become exercisable 25% on each anniversary of the
grant date for each of the four years immediately succeeding the grant
date.
(2) The grant date of the options was December 3, 1997. The options granted
to Martin van der Hagen become exercisable 20% on each anniversary of
the grant date for each of the five years immediately succeeding the
grant date.
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. Each such agreement provides for an increase in such officer's
minimum annual base salary, as follows: (a) for 1998, such base salary will be
increased to $150,000, provided the Company's gross sales for such year are at
least $12 million; and (b) for 1999, such base salary will be increased to
$175,000, provided the Company's gross sales for such year are at least $15
million. In addition, each such officer is entitled to receive an annual bonus
for each of 1998 and 1999 not to exceed $20,000, unless the Company exceeds the
following income goals: if the Company's after tax income exceeds $1,000,000 for
calendar year 1998, each such officer may receive an annual bonus in excess of
$20,000; and if the Company's after tax income exceeds $1,300,000 for calendar
year 1999, each such officer may receive an annual bonus in excess 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, and to a
bonus in accordance with Company policy in effect from time to time, if any. 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.
1997 LONG-TERM INCENTIVE PLAN
In September 1997, the Board of Directors and shareholder of the
Company adopted the 1997 Long-Term Incentive Plan (the "Plan") to provide for
the granting of stock options and other incentive awards to key employees and
employee directors of the Company. The Company has reserved 350,000 shares of
its Common Stock for issuance under the Plan.
The 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"). The Plan is currently administered by the entire
Board acting as the Committee. Employees of the Company, including directors who
are current employees, are eligible to 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 Plan. The Committee has the discretion to select eligible employees 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 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.
Stock options for the purchase of 287,500 shares of Common Stock were
granted to 17 employees effective as of December 3, 1997 (the "Grant Date").
Except as described below, the exercise price of these options is $4.00 per
share, and each of these Options becomes exercisable in five equal installments
commencing on the first anniversary of the Grant Date. 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 these Options 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 Grant Date.
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.
The Directors' Plan is administered by the Company's Board of Directors
as a whole. Non-employee directors receive automatic, nondiscretionary awards
upon initial election to the Board of 6,000 options to purchase Common Stock
("Options") pursuant to the Directors' Plan, vesting over a three year period.
In addition, upon election to a fourth and each subsequent term, each
non-employee director receives an automatic annual grant thereafter of options
to purchase 2,000 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 non-employee directors effective as of December 3, 1997
(the "Grant Date"), and vest over a three-year period. The exercise price of the
initial options is $4.00 per share. 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 Grant Date. See also "Principal shareholders."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 13, 1998, 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)(2) Owned Class(5)
---------------------- ----- --------
John B. van der Hagen(3) 885,727(4) 35.8%
Martin J. van der Hagen(3) 200,000 8.1%
Mary van der Hagen(3) 885,727(4) 35.8%
Bruce A. Masucci(3) --0-- --0--
Golden Mile Sales
Associates, Inc.
225 Worcester Road
Framingham, MA 01701
G. Thomas MacIntosh(3) --0-- --0--
Mackall, Crounse & Moore, PLC
1400 AT&T Tower
901 Marquette Avenue
Minneapolis, MN 55402
All directors and executive officers
as a group (6 persons)(3) 1,118,727(6) 45.2%
- -----------------------
(1) Unless otherwise noted, the business address of each person listed
above is at the Company, 13110 Trails End, Leander, Texas 78641.
(2) One of the Named Executive Officers, James K. Olson, currently owns no
shares of Common Stock and resigned as an officer and director in
August, 1997. See "Certain Relationships and Related Transactions."
(3) Options to purchase shares under the Company's stock option plans have
been granted as follows, effective as of December 3, 1997: John van der
Hagen, 50,000 options; Martin van der Hagen, 75,000 options; Mary van
der Hagen, 6,000 options; Mr. Masucci, 6,000 options; Mr. MacIntosh
6,000 options; and all executive officers and directors as a group,
193,000 options. No such options will be exercisable prior to one year
from the effective date of grant and are therefore not included in the
above table.
(4) Includes 884,727 shares and 1,000 Warrants to purchase Common Stock
which are currently exercisable owned as joint tenants by John van der
Hagen and Mary van der Hagen.
(5) Applicable ownership is based on 2,472,727 shares outstanding as of
March 13, 1998, together with outstanding Warrants, where applicable,
for such holder. The Company has outstanding Warrants to purchase
675,000 shares of Common Stock, all of which are currently exercisable
at $4.40 per share.
(6) Includes 1,116,727 shares and 2,000 Warrants that are currently
exercisable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCK PURCHASE AGREEMENT AND CONSULTING AGREEMENT WITH JAMES K. OLSON
On August 15, 1997, the Company purchased from one of its founders, and
former chief executive officer and director, James K. Olson, 1,122,727 shares of
Common Stock from Mr. Olson, representing 50% of the outstanding shares at that
time, for $1,250,000. The purchase price for such shares, which was determined
by negotiations between the Company and Mr. Olson and was not based on cash flow
or earning per share, was paid by the Company with a non-interest bearing
promissory note ("Purchase Note"). The principal of the Purchase Note was paid
in December 1997 out of the net proceeds of the Company's initial public
offering.
In connection with the purchase of Mr. Olson's shares, both Mr. Olson
and his wife resigned as directors of the Company; Mr. Olson resigned as chief
executive officer; the Company paid in December 1997 all principal and interest
owed pursuant to a note ("Promissory Note") due to Mr. Olson, in the outstanding
amount of $99,828.53, out of the net proceeds of the Company's initial public
offering; the Company and John van der Hagen, current CEO of the Company, agreed
to indemnify Mr. and Mrs. Olson against certain liabilities, including any such
liabilities incurred by Mr. and Mrs. Olson in connection with guaranteeing
approximately $1,600,000 of the Company's bank loans and approximately $150,000
of the capital lease obligations of the Company.
In addition, Mr. Olson, who had served as chief executive officer and
chief financial officer of the Company since 1981, entered into a consulting
agreement with the Company, pursuant to which Mr. Olson provided advice with
respect to financial and administrative affairs of the Company. For such
services, the Company paid Mr. Olson, during the term of the agreement, an
annual fee of $125,000 payable bi-weekly, as well as certain out-of-pocket
expenses for business entertaining and travel, car insurance and maintenance,
and dues and subscription to business publications. The consulting agreement
terminated in December 1997 upon the payment in full of the Purchase Note and
the Promissory Note.
PAYMENT OF PROMISSORY NOTE TO OFFICER
In December 1997, the Company paid to John van der Hagen all amounts of
principal and interest owed to Mr. van der Hagen pursuant to a promissory note
in the aggregate amount of $99,828.53. The promissory note, dated March 11,
1986, was in the original principal amount of $100,000 with an interest rate of
12%.
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. In making
this disclosure, the Company has relied solely 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
RATIFICATION AND APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP as
independent public auditors to audit the books, records and accounts of the
Company for the fiscal year ending December 31, 1998.
Representatives of Ernst & Young 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 ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On December 2, 1996, the Company's Board of Directors approved the
engagement of the independent certified public accounting firm of Ernst & Young
LLP to audit the financial statements of the Company. Accordingly, the
engagement of James M. Betty, Certified Public Accountants as of the Company's
independent auditors was discontinued, and James M. Betty, Certified Public
Accountants did not issue any reports upon which the Company has relied in
either of the two most recent fiscal years.
There were no disagreements between the Company and Ernst & Young LLP on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope and procedures which, if not resolved to the
satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make
reference to the matter in their report. In addition, there were no
disagreements between the Company and its former accountant James M. Betty,
Certified Public Accountants on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope and procedures
which, if not resolved to the satisfaction of James M. Betty, Certified Public
Accountants, would have caused James M. Betty, Certified Public Accountants to
make reference to the matter in their report.
PROPOSALS OF SHAREHOLDERS
Any proposal of a shareholder of the Company intended to be presented
at the Annual Meeting of shareholders in 1999 must be received at the Company's
office on or before December 2, 1998 in order to be considered for inclusion in
the Company's Proxy Statement and form of proxy relating to that meeting.
FINANCIAL INFORMATION;
ANNUAL REPORT ON FORM 10-KSB
The Company's 1997 Annual Report to Shareholders, including but not
limited to the balance sheets as of December 31, 1997 and December 31, 1996 and
the related consolidated statements of operations, shareholders' equity and cash
flows for the two years ended December 31, 1997, accompanies these materials. A
copy of the 1997 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 1997 Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission. 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
/s/ Mark J. van der Hagen
Mark J. van der Hagen
Vice President-Finance and Chief Financial Officer
April 1, 1998
SURREY, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 30, 1998
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 13, 1998 at the Annual Meeting of Shareholders to be held on
April 30, 1998, or at any adjournment thereof, upon the following matters:
1. Election of the following 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.)
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2. Ratification of appointment of Ernst & Young LLP as independent auditors for
fiscal year 1998.
[ ] 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)
(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 THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting
of Shareholders of Surrey, Inc., and the proxy statement furnished therewith
dated April 1, 1998.
Date , 1998
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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.