1
EXHIBIT 1.7
MODEL PROMOTIONAL SHARES LOCK-IN AGREEMENT
I. This Promotional Shares Lock-In Agreement ("Agreement"), which
was entered into on the _____ day of November, 1997, by and between
SURREY, INC. ("Issuer"), whose principal place of business is located in
Leander, Texas, and John B. van der Hagen ("Security Holder") witnesses
that:
A. The Issuer has filed an application with the Securities
Administrator of the States of Arizona, Connecticut, Illinois,
Iowa, Massachusetts, Michigan, Nevada, North Carolina, Oregon,
Pennsylvania, Rhode Island, South Carolina, Texas, Utah, Virginia,
Washington and Wisconsin ("Administrators") to register certain of
its Equity Securities for sale to public investors who are
residents of those states ("Registration");
B. The Security Holder is the owner of the shares of common
stock or similar securities and/or possesses convertible
securities, warrants, options or rights which may be converted
into, or exercised to purchase shares of common stock or similar
securities of Issuer.
C. As a condition to Registration, the Issuer and Security
Holder ("Signatories") agree to be bound by the terms of this
Agreement.
II. THEREFORE, other than as described in the Issuer's Prospectus
with respect to its bank loan, the Security Holder agrees not to sell,
pledge, hypothecate, assign, grant any option for the sale of
(collectively, a "transaction"), or otherwise transfer or dispose of,
whether or not for consideration, directly or indirectly, PROMOTIONAL
SHARES as defined in the North American Securities Administrators
Association ("NASAA") Statement of Policy on Promotional Shares and all
certificates representing stock dividends, stock splits,
recapitalizations, and the like, that are granted to, or received by, the
Security Holder while the PROMOTIONAL SHARES are subject to this
Agreement ("Restricted Securities"):
A number of shares of Common Stock equal to 1,068,076 owned
beneficially by the Security Holder shall not be subject to any of the
above transactions by the Security Holder prior to the first anniversary
of the Effective Date (as defined below). Thereafter, the Security
Holder may effect such transactions, provided that no more than two and
one-half percent (2-1/2%) of such shares (or 26,701) may be subject to
any such transaction per quarter during the second year after the
Effective Date. The lock-in shall terminate on the second anniversary of
the Effective Date.
III. THEREFORE, the Signatories agree and will cause the following:
A. In the event of a dissolution, liquidation, merger, consolidation,
reorganization, sale or exchange of the Issuer's assets or
securities (including by way of tender offer), or any other
transaction or proceeding with a person who is not a Promoter,
which
2
results in the distribution of the Issuer's assets or
securities ("Distribution"), while this Agreement remains in
effect that:
1. All holders of the Issuer's EQUITY SECURITIES will
initially share on a pro rata, per share basis in the
Distribution, in proportion to the amount of cash or other
consideration that they paid per share for their EQUITY
SECURITIES (provided that the Administrator has accepted the
value of the other consideration), until the shareholders who
purchased the Issuer's EQUITY SECURITIES pursuant to the
public offering ("Public Shareholders") have received, or
have had irrevocably set aside for them, an amount that is
equal to one hundred percent (100%) of the public offering's
price per share times the number of shares of EQUITY
SECURITIES that they purchased pursuant to the public
offering and which they still hold at the time of the
Distribution, adjusted for stock splits, stock dividends
recapitalizations and the like; and
2. All holders of the Issuer's EQUITY SECURITIES shall
thereafter participate on an equal, per share basis times the
number of shares of EQUITY SECURITIES they hold at the time
of the Distribution, adjusted for stock splits, stock
dividends, recapitalizations and the like.
3. The Distribution may proceed on lesser terms and
conditions than the terms and conditions stated in paragraphs
1 and 2 above if a majority of the EQUITY SECURITIES that are
not held by Security Holders, officers, directors, or
Promoters of the Issuer, or their associates or affiliates
vote, or consent by consent procedure, to approve the lesser
terms and conditions.
B. In the event of a dissolution, liquidation, merger,
consolidation, reorganization, sale or exchange of the Issuer's
assets or securities (including by way of tender offer), or any
other transaction or proceeding with a person who is a Promoter,
which results in a Distribution while this Agreement remains in
effect, the Restricted Securities shall remain subject to the terms
of this Agreement.
C. Restricted Securities may be transferred by will, the laws
of descent and distribution, the operation of law, or by order of
any court of competent jurisdiction and proper venue.
D. Restricted Securities of a deceased Security Holder may be
hypothecated to pay the expenses of the deceased Security Holder's
estate. The hypothecated Restricted Securities shall remain subject
to the terms of this Agreement. Restricted Securities may not be
pledged to secure any other debt.
-2-
3
E. Restricted Securities may be transferred by gift to the Security
Holder's family members, provided that the Restricted Securities shall remain
subject to the terms of this Agreement.
F. With the exception of paragraph A.3 above, the Restricted
Securities shall have the same voting rights as similar EQUITY
SECURITIES not subject to the Agreement.
G. A notice shall be placed on the face of each stock
certificate of the Restricted Securities covered by the terms of the
Agreement stating that the transfer of the stock evidenced by the
certificate is restricted in accordance with the conditions set
forth on the reverse side of the certificate; and
H. A typed legend shall be placed on the reverse side of each
stock certificate of the Restricted Securities representing stock
covered by the Agreement which states that the sale or transfer of
the shares evidenced by the certificate is subject to certain
restrictions until two years after the Effective Date of the
Issuer's initial public offering pursuant to an agreement between
the Security Holder (whether beneficial or of record) and the
Issuer, which agreement is on file with the Issuer and the stock
transfer agent from which a copy is available upon request and
without charge.
I. The term of this Agreement shall begin on the date that
the Registration is declared effective by the Administrators
("Effective Date") and shall terminate:
1. The second anniversary of the Effective Date; or
2. On the date the Registration has been terminated if no
securities were sold pursuant thereto; or
3. If the Registration has been terminated, the date that
checks representing all of the gross proceeds that were derived
therefrom and addressed to the public investors have been
placed in the U.S. Postal Service with first class postage
affixed; or
4. On the date the securities subject to this Agreement become
"Covered Securities," as defined under the National Securities
Markets Improvement Act of 1996.
J. This Agreement to be modified only with the written approval of the
Administrators.
-3-
4
IV. THEREFORE, the Issuer will cause the following:
A. A manually signed copy of the Agreement signed by the Signatories to
be filed with the Administrators prior to the Effective Date;
B. Copies of the Agreement and a statement of the per share
initial public offering price to be provided to the Issuer's stock
transfer agent;
C. Appropriate stock transfer orders to be placed with the
Issuer's stock transfer agent against the sale or transfer of the
shares covered by the Agreement prior to its expiration, except as may
otherwise be provided in this Agreement;
D. The above stock restriction legends to be placed on the
periodic statement sent to the registered owner if the securities
subject to this Agreement are uncertificated securities.
Pursuant to the requirements of this Agreement, the Signatories have entered
into this Agreement, which may be written in multiple counterparts and each of
which shall be considered an original. The Signatories have signed the
Agreement in the capacities, and on the dates, indicated.
IN WITNESS WHEREOF, the Signatories have executed this Agreement.
SURREY, INC.
By
------------------------------------------
Martin J. van der Hagen, President
- --------------------------------------------
Signature
John B. van der Hagen
- --------------------------------------------
Printed Name of Security Holder
Chief Executive Officer
- --------------------------------------------
Title, if applicable
-4-