<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TERRACE HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
TERRACE HOLDINGS, INC.
2699 Stirling Road, Suite C-405
Fort Lauderdale, Florida 33312
(954) 894-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD ON JULY 8, 1997
___________________________________________
10:00 a.m.
To Our Shareholders:
The 1997 annual meeting of the shareholders of Terrace Holdings, Inc. will
be held at The Club at Emerald Hills, 4100 North Hills Drive, Hollywood, Florida
33021, on Tuesday, July 8, 1997, beginning at 10:00 a.m., Eastern Daylight
Savings Time, for the following purposes:
1. To elect seven (7) directors to hold office during the year following
the annual meeting or until their successors are elected and qualified
(Item No. 1 on proxy card);
2. To ratify the appointment of Moore Stephens, P.C. as independent
auditors of the Company for the year ending December 31, 1997 (Item No.
2 on proxy card);
3. To ratify the adoption of the 1997 Stock Option Plan of the Company
(Item No. 3 on proxy card);
4. To amend the Certificate of Incorporation to increase the Company's
authorized shares of common stock to 25,000,000, par value $.001 per
share, and to authorize the creation of 10,000,000 shares of preferred
stock (Item No. 4 on proxy card);
5. To transact such other business as may properly come before the meeting
or any postponements or adjournments thereof.
The close of business on May 15, 1997, has been fixed as the record date
for determining the shareholders entitled to receive notice of and to vote at
the annual meeting or any postponement or adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
June 16, 1997 /s/ Jonathan S. Lasko
---------------------------------
Jonathan S. Lasko, Secretary
YOUR VOTE IS IMPORTANT
It is important that as many shares as possible be represented
at the annual meeting. Please date, sign, and promptly return
the proxy in the enclosed envelope. Your proxy may be revoked
by you at any time before it has been voted.
<PAGE>
TERRACE HOLDINGS, INC.
2699 Stirling Road, Suite C-405
Fort Lauderdale, Florida 33312
PROXY STATEMENT
Information Concerning the Solicitation
- ---------------------------------------
This statement is furnished in connection with the solicitation of proxies
to be used at the Annual Shareholders Meeting (the "Annual Meeting") of Terrace
Holdings, Inc. (the "Company"), a Delaware corporation, to be held on Tuesday,
July 8, 1997. These proxy materials are being mailed to shareholders of record
at the close of business on May 15, 1997.
The solicitation of proxies on the enclosed form of proxy is made on behalf
of the Board of Directors of the Company.
The cost of preparing, assembling and mailing the proxy materials and of
reimbursing brokers, nominees and fiduciaries for the out-of-pocket and clerical
expenses of transmitting copies of the proxy materials to the beneficial owners
of shares held of record by such persons will be borne by the Company. The
Company does not intend to solicit proxies otherwise than by use of the mail,
but certain officers, directors and employees of the Company, without additional
compensation, may use their personal efforts, by telephone or otherwise, to
solicit proxies.
Quorum and Voting
- -----------------
Only shareholders of record at the close of business on May 15, 1997, are
entitled to vote at the Annual Meeting. On that day, there were 4,306,400
shares of Common Stock issued and outstanding. Each share has one vote. A
simple majority of the outstanding shares is required to be present in person or
by proxy at the meeting for there to be a quorum for purposes of proceeding with
the Annual Meeting. A simple majority of the shares present in person or by
proxy at the Annual Meeting, at which a quorum is present, is required to elect
directors. Abstentions and withheld votes have the effect of votes against
these matters. Broker non-votes (shares held of record by a broker for which a
proxy is not given) will not be counted for purposes of determining a quorum,
and, accordingly, will not be counted for purposes of determining the vote on
any matter considered at the meeting.
A shareholder signing and returning a proxy on the enclosed form has the
power to revoke it at any time before the shares subject to it are voted, by
notifying the Secretary of the Company in writing. If a shareholder specifies
how the proxy is to be voted with respect to any of the proposals for which a
choice is provided, the proxy will be voted in accordance with such
specifications. If a shareholder fails to so specify with respect to such
proposals, the proxy will be voted "FOR" the nominees for directors contained in
these proxy materials, "FOR" the appointment of Moore Stephens, P.C. as the
Company's auditors, "FOR" the adoption of the 1997 Stock Option Plan, and "FOR"
an amendment to the Certificate of Incorporation to increase the number of the
Company's authorized shares of common stock from 10,000,000 to 25,000,000, and
to authorize 10,000,000 shares of preferred stock.
Stock Ownership of Directors, Executive Officers and Others
- -----------------------------------------------------------
The following table provides information concerning the beneficial
ownership of Common Stock and Warrants to purchase Common Stock of the Company
exercisable as of February 17, 1997, at a price of $1.1875 and expiring August
31, 2000, by each director and nominee for director, certain executive officers,
and by all directors and officers of the Company as a group as of May 1, 1997.
In addition, the table provides information
2
<PAGE>
concerning the beneficial owners known to the Company to hold more than five
percent of the outstanding common stock of the Company as of May 1, 1997.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership/(1)/ Percent of Class/(1)(2)/
- ------------------------ ------------------------- -------------------------
<S> <C> <C>
Milton Namiot 89,262/(3)/ 2.07%
Dr. Samuel H. Lasko 758,750/(4)/ 17.62%
Jonathan S. Lasko 755,000/(5)/ 17.53%
Richard Power 240,820.7/(6)/ 5.59%
Steven Shulman 282,820.7/(7)/ 6.57%
Bruce S. Phillips 70,000/(8)/ 1.62%
Bernard Rubin, M.D. 20,000/(9)/ .46%
All Directors and Executive Officers as Group
(6 persons) 1,283,320/(10)/ 29.80%/(10)/
</TABLE>
/(1)/ In each case, with respect to Common Stock the beneficial owner has
sole voting and investment power except that shares held by Dr. Samuel
H. Lasko are held in joint tenancy with his wife Arlene Lasko and the
shares held by Jonathan S. Lasko are held in joint tenancy with his
wife Ellen J. Lasko. The Warrants to purchase Common Stock have no
voting rights.
/(2)/ The calculation of percent of class for each individual is based upon
the number of shares of Common Stock outstanding as of May 1, 1997,
and common stock purchase warrants.
/(3)/ Includes 69,262 shares of Common Stock and Warrants to purchase 20,000
shares of Common Stock.
/(4)/ Includes 380,000 shares of Common Stock and Warrants to purchase
375,000 shares of Common Stock. Also includes 3,750 shares held for
the benefit of Dr. Lasko's minor child.
/(5)/ Includes 380,000 shares of Common Stock and Warrants to purchase
375,000 shares of Common Stock.
/(6)/ Includes 204,154 shares of Common Stock and Warrants to purchase
31,666.7 shares of Common Stock.
/(7)/ Includes 246,154 shares of Common Stock and Warrants to purchase
36,666.7 shares of Common Stock.
/(8)/ Represents Warrants to purchase 70,000 shares of Common Stock.
/(9)/ Represents Warrants to purchase 20,000 shares of Common Stock.
/(10)/ The Amount and Nature of Beneficial Ownership and the calculation of
percent of class for the directors and executive officers as a group
is based only upon the number of shares of Common Stock outstanding as
of May 1, 1997, and does not include the Warrants.
3
<PAGE>
Proposal One - Election of Directors
---------------------
Seven directors will be elected at the Annual Meeting to serve for
terms of one year expiring on the date of the Annual Meeting in 1998, or until
their successors have been elected and qualified. If a nominee is unable to
serve, which the Board of Directors has no reason to expect, the persons
appointed in the accompanying proxy intend to vote for the balance of those
named and, if they deem it advisable, for a substitute nominee.
Information Concerning Nominees
- -------------------------------
The following is information concerning the nominees for election as
directors of the Company. Five of such persons are presently directors of the
Company. At the meeting of the Company's Board of Directors held February 20,
1997, two of the nominees were appointed directors as a result of its Asset
Acquisition Agreement, ("Agreement") consummated on February 17, 1997, whereby
the Company acquired all of the assets and related liabilities of DownEast
Frozen Desserts, LLC ("DownEast"), a Delaware limited liability company
unaffiliated with the Registrant, which manufactures and markets frozen desserts
under the name Deering Ice Cream with its principal offices located in Portland,
Maine. Under the Agreement, the Company's new wholly-owned subsidiary, Deering
Ice Cream, Inc. ("Deering"), acquired such assets and related liabilities to
continue the business of manufacturing and marketing frozen desserts. (the
"DownEast Transaction").
At the time of the DownEast Transaction, Samuel H. Lasko and Jonathan
S. Lasko (collectively the "Laskos"), each executed an Option Agreement under
which the Company granted to the Laskos, or their designees, the option to
purchase the businesses, assets or capital stock of The Lasko Family Kosher
Tours, Inc., The Lasko Companies, Inc., and A&E Management, Inc., all wholly-
owned subsidiaries of the Company. Absent the occurrence of certain events,
such as the termination of either of the Laskos employment with the Company, the
option cannot be exercised until April 1, 1998, and expires February 17, 2001.
Under the option, the purchase price of the subsidiary or subsidiaries to be
acquired is the "fair market value" at the time the option is exercised. The
fair market value is to be determined by an independent investment banking or
other firm of similar expertise in appraising and evaluating such a transaction.
This purchase price is also subject to the recommendation and approval of a
committee of disinterested directors of the Company appointed for such purpose.
If the option is exercised, before any such transaction is consummated, the
transaction will be submitted to the Company's shareholders for their approval.
MILTON NAMIOT age 56, since consummation of the DownEast Transaction,
has served as Chief Executive Officer of the Company. From February, 1996, he
was Manager of DownEast. From 1989 through 1995, he was president and chief
executive officer of Brigham's, Inc., Arlington, Mass, a manufacturer and
marketer of "upscale" ice cream and yogurt in the Northeast United States and
operator of approximately 50 family style restaurants. From 1986 to 1989, he was
an independent consultant to a number of food companies. From 1983 to 1986, Mr.
Namiot was a senior vice president, consumer products and business development
at Gulf & Western Industries, Inc. Prior thereto, he held a number of executive
positions in food and related products companies. Mr. Namiot holds an A. B. in
chemistry from Brandeis University, an M.S. in chemistry from Boston University
and an M.S. in Management from the Massachusetts Institute of Technology.
DR. SAMUEL H. LASKO, age 52, has been President, Treasurer and a
director of the Company since its inception in October, 1988, and was Chairman
of the Board of Directors and Chief Executive Officer, as well, from August,
1995 until February 17, 1997. Dr. Lasko has also been president of A&E
Management Corp. since October 27, 1993, and The Lasko Companies, Inc. since May
11, 1995. From 1990 to 1994, Dr. Lasko was also the owner and director of Just
for Kids Academy in Fort Lauderdale, Florida, a private child care and school
facility. From 1983 to 1985, Dr. Lasko owned and operated Abbott School of
Miami Beach, an educational institution specializing in the care and education
of Jewish children. From 1985 to 1989, Dr. Lasko served as the Headmaster of
the Beth Shalom Academy in Hollywood, Florida, a Jewish elementary day school.
Dr. Lasko holds a B.A. from Yeshiva University and received his Ed.D. in 1984
from the University of Maryland. Dr. Lasko is the father of Jonathan S. Lasko,
a director, the Secretary, Executive Vice President and the Chief Operating
Officer of the Company. He is also the brother-in-law of Bruce S. Phillips, a
director of the Company.
4
<PAGE>
JONATHAN S. LASKO, age 26, has been a director of the Company since
September, 1994, and its Executive Vice-President since May, 1993. He has also
been the Company's Chief Operating Officer and Secretary since August, 1995. Mr.
Lasko has also been vice-president of A&E Management Corp. since October 27,
1993, and The Lasko Companies, Inc. since May 11, 1995. Mr. Lasko began in the
food service industry in 1985, working for a corporate event planning firm,
Parties by Neil, in Miami, Florida. Mr. Lasko attended Yeshiva University, New
York, New York, in 1988 and 1989, and Bernard Baruch College of City University
of New York, New York in 1990 and 1991. From November, 1989 until October, 1991,
Mr. Lasko worked part-time for Ram Caterers, a kosher caterer in the New York
City metropolitan area, as a manager and salesman. In addition, from January,
1990 until October, 1993, when he became a full-time employee of the Company,
Mr. Lasko was a part-time employee of the Company and managed its food and
beverage operations for its Passover holiday vacation. Mr. Lasko is the son of
Dr. Samuel H. Lasko, a director, the President and Treasurer of the Company, and
the nephew of Bruce S. Phillips, a director of the Company.
BRUCE S. PHILLIPS, age 54, has been a director of the Company since
August, 1995. He is a graduate of City College of New York. From April, 1988
until August, 1994, Mr. Phillips was president and director of Frem Corp., a
plasticware manufacturer. Since August, 1994, Mr. Phillips has owned PFS
Venture Group, a business management and financial consulting firm. Mr.
Phillips is the brother-in-law of Dr. Samuel H. Lasko, and the uncle of Jonathan
S. Lasko.
STEVEN SHULMAN, age 58, has been an active independent investment
banker since 1984. He has served as a director of a number of public and
private companies and is currently a director of Beacon Properties Corporation,
a New York Stock Exchange listed corporation. Mr. Shulman holds an M.S. in
Industrial Management from the Stevens Institute of Technology, where he
currently serves as Vice Chairman of its Board. As a result of the DownEast
Transaction described above, Mr. Shulman was appointed a director of the Company
and elected the Chairman of the Board of Directors.
RICHARD POWER, age 48, has been the President of Carlisle Plastics,
Inc., a division of Tyco International Ltd., a New York Stock Exchange listed
corporation, since January, 1997. He served as a consultant to Tyco from 1995
through 1996, Vice President and Chief Financial officer of Abex Inc. a New York
Stock Exchange listed corporation between 1994 and 1995, and was the Managing
Director of a private investment company from 1992 through 1994. Mr. Power
holds a B.S. and an M.B.A. from Boston College. As a result of the DownEast
Transaction described above, Mr. Power was appointed a director of the Company.
BERNARD RUBIN, M.D., age 49, was a director of the Company from
August, 1995, until he voluntarily resigned in February, 1997. For the past
approximately 17 years, Dr. Rubin has been a practicing cardiologist in
Baltimore, Maryland, where, for the past six years he has been the President of
Baltimore Heart Associates, an 18-member cardiology group. Dr. Rubin has served
as President of the Medical Staff and is currently Chief of Cardiology and
Medical Director of the Critical Care Unit at Northwest Hospital Center in
Baltimore. He holds undergraduate degrees from Yeshiva University and a medical
degree from New York Medical College, both in New York. Dr. Rubin is a Fellow
in the American College of Cardiology.
Significant Employees
- ---------------------
JOSEPH DANE, age 50, since consummation of the DownEast Transaction,
has served as Controller of the Company. From December, 1996, he was Corporate
Controller DownEast. He served as a senior business consultant to American
Management Services, Inc. from 1995 through 1996. For 25 years prior thereto,
Mr. Dane held several financial and operating positions for General Mills, Inc.,
and Monet Jewelers, a subsidiary of General Mills. Inc. until 1981. He holds an
A.A. in computer science from Illinois Central College and a B.A. from
Metropolitan State University in Minneapolis, Minnesota.
Committees of the Board of Directors
- ------------------------------------
The Company's Board of Directors has standing Audit and Compensation
Committees which were appointed at a meeting of the Board of Directors on
February 20, 1997.
5
<PAGE>
The Audit Committee is composed of Jonathan S. Lasko, Bruce Phillips, and
Richard Power. The Audit Committee reviews and makes recommendations to the
Company about its financial reporting requirements and acts as a liaison between
the Company and its independent auditors. Having only recently been established,
the Audit Committee has not yet met during 1997.
The Compensation Committee is composed of Steven Shulman, Bruce Phillips,
and Richard Power. The Compensation Committee reviews and makes recommendations
to the Board of Directors concerning the compensation of officers and key
employees of the Company and administers the Company's Stock Option Plan. Having
only recently been established, the Compensation Committee has not yet met
during 1997.
The Board of Directors met three times during 1996. Each director other
than Mr. Zimmerman, who attended two meetings, attended all meetings of the
Board of Directors.
Executive Compensation
The following table sets forth all compensation paid or distributions made
during the fiscal years ended December 31, 1996, 1995 and 1994, by the Company
or any of its subsidiaries to the Chief Executive Officer of the Company and to
each of its most highly compensated executive officers, other than the Chief
Executive Officer, whose compensation exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation Awards
--------------------- ---------------------------------------
Other Restricted
Name and Principal Year ended Annual Stock
Position December 31 Salary Bonus Compensation Award(s) Options
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Samuel H. Lasko 1994 $13,600/(1)/ $0 $274,365/(2)/ $0 --
Chief Executive Officer 1995 $31,403 $0 $169,081/(3)/ $0 750,000/(7)/
and President 1996 $95,000 $0 $ 9,517/(4)(5)/ $0
Jonathan S. Lasko 1994 $21,600 $0 $ 40,409/(6)/ $0 --
Executive Vice President 1995 $24,592 $0 $169,081/(3)/ $0 750,000/(7)/
and Secretary 1996 $70,000 $0 $ 7,255/(4)/ $0
</TABLE>
/(1)/ Paid by A&E Management Corp. ("A&E").
/(2)/ Represents "S" corporation distributions in the nature of dividends of
$233,957 and $40,409.
/(3)/ Represents combined "S" corporation distributions in the nature of
dividends through December 5, 1995, when the Company first offered and
sold its securities to the public.
/(4)/ Represents amounts paid for lease of automobile and automobile insurance.
/(5)/ Does not include repayments of loans from A&E Management, Inc., the Lasko
Companies, Inc. and the Company.
/(6)/ Represents "S" corporation distributions in the nature of dividends.
/(7)/ At the time of the DownEast Transaction, each of Samuel Lasko and
Jonathan Lasko surrendered their respective right to performance options,
contained in their respective Employment Agreements and, in lieu thereof,
the Company issued to each of Samuel H. Lasko and Jonathan D. Lasko
warrants to purchase 375,000 shares of the Company's common stock at
$1.1875 per share exercisable immediately and expiring August 31, 2000.
See "Employment Contracts."
6
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
The following table sets forth options exercised by the Company's
chief executive officer and the Company's two other most highly compensated
executive officers during fiscal 1996, and the number and value of all
unexercised options at year end. The value of "in-the-money" options refers
to options having an exercise price which is less than the market price of
the Company's stock at fiscal year-end. On that date, none of the Company's
executive officers held exercisable options which were "in-the-money".
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Milton Namiot /(1)/ --- --- --- ---
Samuel H. Lasko --- --- 0/750,000 /(2)/ $0/0
Jonathan S. Lasko --- --- 0/750,000 /(2)/ $0/0
</TABLE>
- ---------------------------------------
/(1)/ Mr. Namiot was not an officer of the Company in 1996. He was elected
an officer on February 17, 1997, following the DownEast Transaction.
/(2)/ Represents options (based on performance by the Company) contained in
the Laskos' employment agreements. Effective February 17, 1997, each
of Messrs. Samuel and Jonathan Lasko voluntarily surrendered their
respective right to these options and, in lieu thereof, the Company
issued to each of Samuel H. Lasko and Jonathan D. Lasko warrants to
purchase 375,000 shares of the Company's common stock at $1.1875 per
share exercisable immediately and expiring August 31, 2000. See
"Employment Contracts."
Compensation of Directors and Executive Officers
------------------------------------------------
Directors are elected on an annual basis. All directors of the
Company hold office until the next annual meeting of the shareholders
or until their successors are elected and qualified. At present, the
Company's by-laws provide for not less than one director nor more than
seven. Presently there are five directors. The Company's by-laws
permit the Board of Directors to fill any vacancy and such director
may serve until the next annual meeting of shareholders or until his
successor is elected and qualified. Officers are elected to serve,
subject to the discretion of the Board of Directors, until their
successors are appointed.
Directors are reimbursed for expenses actually incurred in
connection with attending meetings of the Board of Directors and
commencing in fiscal 1996, non-employee directors were paid $750 for
each directors' meeting attended. The Company anticipates that the
Board of Directors will meet at least four times a year.
On February 20, 1997, the Board issued Warrants to purchase 20,000
shares of Common Stock to each of Bruce S. Phillips and Dr. Bernard Rubin in
recognition of their past service as directors. See "Stock Ownership of
Directors, Executive Officers and Others".
7
<PAGE>
Employment Contracts and Termination of Employment and Change-in-Control
- ------------------------------------------------------------------------
Arrangements
- ------------
The Company has five-year employment agreements, ending August 31,
2000, with each of Dr. Samuel H. Lasko and Jonathan S. Lasko.
Under his employment agreement, Dr. Samuel H. Lasko receives an annual
base salary of $95,000 for the first two years, $125,000 for the third year,
$150,000 for the fourth year and $175,000 for the fifth year of his employment.
Under his employment agreement, Jonathan S. Lasko receives an annual base salary
of $70,000 for the first two years, $95,000 for the third year, $115,000 for the
fourth year and $125,000 for the fifth year of his employment. These agreements
are currently in their second year.
By amendments dated February 17, 1997, to their respective employment
agreements, Dr. Lasko and Jonathan Lasko voluntarily surrendered their one-time
performance based options under their respective employment agreements to
purchase up to an aggregate of 750,000 shares of common stock, and in lieu
thereof, the Company issued to each of Samuel Lasko and Jonathan Lasko, warrants
to purchase 375,000 shares of its common stock at an exercise price of $1.1875
per share. The employment agreements also entitle the individuals to the use of
an automobile and to employee benefit plans, such as group life, health ,
hospitalization and life insurance. Under each of these employment agreements,
employment terminates upon death or total disability of the employee and may be
terminated by the Company for "cause," which is defined, among other things, as
the willful failure to perform duties, embezzlement, conviction of a felony, or
breach of the employee's covenant not to compete or maintain confidential
certain information. The Company maintains a $1 million life insurance policy
on the life of Jonathan Lasko.
In connection with the DownEast Transaction, the Company entered into
a 3-year employment agreement, effective February 17, 1997, and ending August
31, 2000, with Milton Namiot, whereby Mr. Namiot will serve as the President and
Chief Executive Officer of Deering and Chief Executive Officer of the Company.
Under his employment agreement, Mr. Namiot receives an annual base salary of
$175,000.
Ten-Year Option/SAR Repricings
------------------------------
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price Exercise Option Term
Underlying of Stock at Price at Remaining
Options/ Time of Time of at
SARs Repricing or Repricing or New Date of
Repriced or Amendment Amendment Exercise Repricing or
Name Date Amended (#) ($) ($) Price ($) Amendment
- ---- ---- ----------- ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Samuel H. Lasko, 2/17/97 750,000* $1.4375 $3.75 $1.1875 3.5 years
President
Jonathan S. Lasko, 2/17/97 750,000* $1.4375 $3.75 $1.1875 3.5 years
Executive Vice President,
Chief Operating Officer
</TABLE>
* At the time of the DownEast Transaction, each of Samuel Lasko and Jonathan
Lasko surrendered their respective right to these performance options,
contained in their respective Employment Agreements and, in lieu thereof,
the Company issued to each of Samuel H. Lasko and Jonathan D. Lasko
warrants to purchase 375,000 shares of the Company's common stock at
$1.1875 per share exercisable immediately and expiring August 31, 2000. See
"Employment Contracts."
8
<PAGE>
Proposal Two - Selection of Auditors
---------------------
The Board of Directors have selected and approved Moore Stephens, P.C. as
the principal independent auditor to audit the financial statements of the
Company for 1997, subject to ratification by the shareholders. It is expected
that a representative of the firm of Moore Stephens, P.C. will be present at the
annual meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE FOR "FOR" SUCH
RATIFICATION.
Proposal Three - 1997 Stock Option Plan
----------------------
General
- -------
In the opinion of the Board of Directors, the Company and its shareholders
will benefit substantially from having certain officers and key employees
acquire shares of the Company's Common Stock pursuant to options granted under
the Company's 1997 Stock Option Plan. Such options, in the opinion of the Board,
will foster greater corporate efficiency, and will create a commonality of
purpose between the Company's officers, key employees, and shareholders with
respect to the Company's strategies for profitable growth and share-value
appreciation. In the opinion of the Board, the Company's ability to provide
additional stock options to its officers and other key employees in the future
will benefit the Company's long-term financial performance. In addition, the
Board believes the interests of the Company would be served if options could be
granted to consultants, advisors and other individuals who can contribute to the
success of the Company's business. Accordingly, the Board of Directors believed
it in the Company's best interest to adopt a new stock option plan, which, if
ratified by the shareholders, will authorize the Company to award stock options
to its officers and other key employees and permit the Company to offer options
pursuant to the Plan to certain consultants and advisors.
The Plan and Participants
- -------------------------
On February 20, 1997, the Board of Directors adopted, subject to
shareholder approval, the 1997 Stock Option Plan (the "Plan") which enables the
Company to grant options for shares of its Common Stock. The Plan authorizes the
grant of options to purchase up to an aggregate of 1,250,000 shares of the
Company's Common Stock, to (i) officers and other full-time salaried employees
of the Company and its subsidiaries with managerial, professional or supervisory
responsibilities, and (ii) consultants and advisors who render bona fide
services to the Company and its subsidiaries, in each case, where the Committee
determines that such officer, employee, consultant or advisor has the capacity
to make a substantial contribution to the success of the Company. The number of
individuals who currently would be eligible to receive options pursuant to the
Plan is approximately seven. As used herein with respect to the Plan, references
to the Company include subsidiaries of the Company.
The purposes of the Plan are to enable the Company to attract and retain
persons of ability as officers and other key employees with managerial,
professional or supervisory responsibilities, to retain able consultants and
advisors, and to motivate such persons to use their best efforts on behalf of
the Company by providing them with an equity participation in the Company. The
full text of the Plan is set forth in Appendix A hereto, and the following
description is qualified in its entirety by reference to Appendix A.
The Plan will be administered by the Compensation Committee, which was
appointed by the Company's Board of Directors on February 20, 1997, and consists
of three members of the Board of Directors, two of whom are "disinterested"
persons within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934. Under the terms of the Plan, the Committee will have the authority to
determine, subject to the terms and conditions of the Plan, the persons to whom
options are granted, the number of options granted to each optionee, and the
terms and conditions of each option, including its duration.
9
<PAGE>
The Plan can be amended, suspended, reinstated or terminated by the Board
of Directors; provided, however, that without approval of the Company's
shareholders, no amendment shall be made which (i) increases the maximum number
of shares of Common stock which may be subject to stock options granted under
the Plan, except for specified adjustment provisions, (ii) extends the term of
the Plan, (iii) materially increases the benefits accruing to optionees under
the Plan, (iv) materially modifies the requirements as to eligibility for
participation ion the Plan, or (v) will cause stock options granted under the
Plan to fail to meet the requirements of Rule 16b-3. Unless previously
terminated or extended by the Board of Directors, the Plan will terminate on
February 20, 2007.
Option Terms and Grants
- -----------------------
Stock options may be granted to purchase Common Stock under the Plan at not
less than the fair market value of the shares as of the date of grant. The
maximum number of shares for which options may be issued to an employee of the
Company during any calendar year may not exceed 250,000. Other than the
limitations set forth above, there is no limitation on the number of stock
options which may be granted to any optionee pursuant to the Plan.
Stock options may be granted for a term of up to ten years.
The Plan provides that if a stock option or portion thereof expires or is
terminated, canceled or surrendered for any reason without being exercised in
full, the unpurchased shares of Common Stock which were subject to such stock
option or portion thereof shall be available for future grants of stock options
under the Plan.
Pursuant to the terms of the Plan, the option price for all options must be
paid in cash, by check, bank draft or money order payable in United States
dollars to the order of the Company, with Common Stock of the Company owned by
the optionee and having a fair market value on the date of exercise equal to the
aggregate exercise price of the shares to be so purchased, or a combination
thereof.
Options granted pursuant to the Plan will not be assignable or transferable
except by will or the laws of intestate succession. Options acquired pursuant to
the Plan may be exercised by the optionee (or the optionee's legal
representative) only while the optionee is employed by the Company, or within
six months after termination of employment due to a permanent disability, or
within three months after termination of employment due to retirement. The
executor or administrator of a deceased optionee's estate or the person or
persons to whom the deceased optionee's rights thereunder have passed by will or
by the laws of descent or distribution shall be entitled to exercise the option
within the sixth months after the decedent's death. Options expire immediately
in the event an optionee is terminated with or without cause or resigns;
provided, however, in the event the Company terminates the employment of an
optionee who at the time of such termination was an officer of the Company and
had been continuously employed by the Company during the two year period
immediately preceding such termination, for any reason except "good cause" (as
defined in the Plan), each stock option held by such optionee (which had not
then previously lapsed or terminated and which had been held by such optionee
for more than six months prior to such termination) shall be exercisable for a
period of three months after such termination to the extent otherwise
exercisable during that period. All of the aforementioned exercise periods set
forth in this paragraph are subject to the further limitation that an option
shall not, in any case, be exercisable beyond its stated expiration date.
The purchase price and the number and kind of shares that may be purchased
upon exercise of options granted pursuant to the Plan, and the number of shares
which may be granted pursuant to the Plan, are subject to adjustment in certain
events, including stock splits, recapitalizations, mergers, and reorganizations.
If any portion of an option terminates or lapses without being exercised, the
shares which were subject to the unexercised portion will continue to be subject
to the Plan, and new options may be granted in respect of such shares in
accordance with the terms and conditions of the Plan.
10
<PAGE>
New Plan Benefits
- -----------------
The following table represents the benefits or amounts that will be
received by or allocated to each of the following under the Plan being acted
upon:
<TABLE>
<CAPTION>
TERRACE HOLDINGS, INC.
1997 STOCK OPTION PLAN
- ----------------------------------------------------------------------------
Name and Position Dollar Value ($)/(1)/ Number of Shares
- ----------------------------------------------------------------------------
<S> <C> <C>
Milton Namiot, CEO $ 296,875 250,000 /(2)/
- ----------------------------------------------------------------------------
Samuel H. Lasko, $148,437.50 125,000 /(2)/
President and Treasurer
- ----------------------------------------------------------------------------
Jonathan S. Lasko, $148,437.50 125,000 /(2)/
Executive Vice President and COO
- ----------------------------------------------------------------------------
Steven Shulman, $ 154,375 130,000 /(3)/
Chairman of the Board
- ----------------------------------------------------------------------------
Bruce S. Phillips, Director $ 23,750 20,000 /(4)/
- ----------------------------------------------------------------------------
Richard Power, Director $ 23,750 20,000 /(4)/
- ----------------------------------------------------------------------------
Joseph Dane, $ 29,687.50 25,000 /(2)/
Corporate Controller
- ----------------------------------------------------------------------------
Other Employees (3 persons) $ 71,250 60,000 /(2)/
- ----------------------------------------------------------------------------
Executive Group (3 persons) $ 593,750 500,000
- ----------------------------------------------------------------------------
Non-Executive Director Group $ 201,875 170,000
(3 persons)
- ----------------------------------------------------------------------------
Non-Executive Employee Group $100,937.50 85,000
- ----------------------------------------------------------------------------
</TABLE>
/(1)/ Based on an exercise price of $1.1875, which was the market price at the
time these options were recommended by the Compensation Committee and
approved by the Board of Directors, subject to shareholder approval at the
Company's Annual Meeting.
/(2)/ These options granted to the Company's employee directors and significant
employees vest over three years from the date they were approved, February
20, 1997.
/(3)/ Of Mr. Shulman's 130,000 options, 100,000 were granted to him in his
capacity as a director of the Company and vest over three years from
February 20, 1997. The remaining 30,000 options were granted to him in his
capacity as the Chairman of the Board of Directors and vest immediately.
/(4)/ These options granted to the Company's non-employee directors vest
immediately.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN.
11
<PAGE>
Proposal Four - Increase of Number of Authorized Shares of Common Stock
-------------------------------------------------------
The Company's Board of Directors has authorized amendment of the Company's
Certificate of Incorporation, the form and substance of which is described
below, (the "Amendment") that would increase the Company's authorized common
stock to 25,000,000 shares of common stock, par value $.001 per share, (Common
Stock), and would authorize 10,000,000 shares of preferred stock, $.001 par
value ("Preferred Stock"). Currently, The Company's current authorized Common
Stock consists of 10,000,000 shares of Common Stock, par value $.001 per share.
On May 1, 1997, 4,306,400 shares of Common Stock were outstanding.
The purpose of the additional Common Stock and new Preferred Stock is to
afford the Board of Directors greater flexibility to issue such stock, (i) upon
exercise of options issued pursuant to the terms of the 1997 Stock Option Plan
described above, (ii) for possible future financing and acquisition
transactions, (iii) for Common Stock dividends or splits, or (iv) any other
proper corporate purposes.
The additional 15,000,000 shares of Common Stock, authorized by the
Amendment would become part of the existing class of Common Stock possessing, if
and when issued, the same rights and privileges as the current shares of
outstanding Common Stock.
The 10,000,000 shares of Preferred Stock, $.001 par value, may be issued in
one or more series at such time or times and for such consideration as shall be
authorized from time to time by the Board of Directors. The Board of Directors
will be authorized to fix the designation of each series of Preferred Stock and
the relative rights, preferences, limitations, qualifications, powers or
restrictions thereof, including the number of shares comprising each series, the
dividend rates, redemption rights, rights upon voluntary or involuntary
liquidation, provisions with respect to a retirement or sinking fund, conversion
rights, voting rights, if any, preemptive rights, other preferences,
qualifications, limitations, restrictions and the special or relative rights of
each series not inconsistent with the provisions of the Certificate of
Incorporation.
The proposed amendment would amend the Company's Certificate of
Incorporation to read as follows:
"FOURTH: That Article FOURTH of the Company's Certificate of
Incorporation be deleted in its entirety and substituted by the following:
FOURTH: The total number of shares which the Company is authorized to
issue is 35,000,000 shares which are to be divided into two classes as
follows:
25,000,000 shares of Common Stock, par value $.001 per share; and
10,000,000, shares of Preferred Stock, par value $.001 per share.
The Preferred Stock may be issued from time to time with such
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, qualifications, limitations or
restrictions thereof as shall be stated and expressed in the resolution or
resolutions providing for the issuance of such Preferred Stock adopted by
the Board of Directors pursuant to the authority in this paragraph given."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO INCREASE
THE COMPANY'S AUTHORIZED SHARES OF COMMON STOCK AND ESTABLISH PREFERRED STOCK.
12
<PAGE>
Shareholder Proposals for the 1998 Proxy Statement
--------------------------------------------------
Proposals by shareholders for inclusion in the Company's Proxy Statement
and form of proxy relating to the 1998 Annual Meeting of Stockholders, which is
tentatively scheduled to be held in May, 1998, should be addressed to the
Secretary, Terrace Holdings, Inc., 2699 Stirling Road, Suite C-405, Fort
Lauderdale, Florida 33312, and must be received as such address no later than
January 1, 1998. Upon receipt of any such proposal, the Company will determine
whether or not to include such proposal in the Proxy Statement and proxy in
accordance with applicable law. It is suggested that such proposal be forwarded
by certified mail, return receipt requested.
Other Matters to Be Acted Upon at the Meeting
---------------------------------------------
The management of the Company knows of no other matters to be presented at
the meeting. Should any other matter requiring a vote of the shareholders arise
at the meeting, the persons named in the proxy will vote the proxies in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Dated: June 16, 1997 /s/ Jonathan S. Lasko
-------------------------------
Jonathan S. Lasko, Secretary
13
<PAGE>
REVOCABLE PROXY
---------------
TERRACE HOLDINGS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Milton Namiot and Samuel H. Lasko, or
either of them, with full power of substitution, as proxies of the undersigned,
with all the powers that the undersigned would possess if personally present to
cast all votes that the undersigned would be entitled to vote at the annual
meeting of shareholders of Terrace Holdings, Inc. (the "Company") to be held on
Tuesday, July 8, 1997, at The Club at Emerald Hills, 4100 North Hills Drive,
Hollywood, Florida 33021, at 10:00 a.m., Eastern Daylight Savings Time, and any
and all adjournments and postponements thereof (the "Annual Meeting"), including
(without limiting the generality of the foregoing) to vote and act as follows on
the reverse side.
This Proxy will be voted at the Annual Meeting or any adjournments or
postponements thereof as specified. IF NO SPECIFICATIONS ARE MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS NAMED ON THE
REVERSE SIDE. This proxy hereby revokes all prior proxies given with respect to
the shares of the undersigned.
(Continued and to be signed on other side)
. FOLD AND DETACH HERE .
Terrace Holdings, Inc.
Annual Meeting of Shareholders
July 8, 1997, 10:00 a.m.
The Club at Emerald Hills
4100 North Hills Drive
Hollywood, Florida 33021
<PAGE>
1. Election of Directors: The election of the following nominees to the Board
of Directors unless otherwise indicated:
FOR WITHHOLD Milton Namiot Richard Power
all nominees AUTHORITY Dr. Samuel H. Lasko Bruce S. Phillips
listed for all nominees Jonathan S. Lasko Bernard Rubin, M.D.
Steven Shulman
[_] [_] IN THE EVENT THE UNDERSIGNED WISHES TO WITHHOLD
AUTHORITY TO VOTE FOR ANY PARTICULAR NOMINEE OR
NOMINEES LISTED ABOVE, PLEASE SO INDICATE BY
CLEARLY AND NEATLY LINING THROUGH OR STRIKING
OUT THE NAME OF ANY SUCH NOMINEE OR NOMINEES.
2. To ratify the appointment of Moore Stephens, P.C. as
independent auditors of the Company for the year ending December 31, 1997;
FOR ___ AGAINST ___ ABSTAIN ___
3. To ratify the adoption of the 1997 Stock Option Plan of the Company;
FOR ___ AGAINST ___ ABSTAIN ___
4. To amend the Certificate of Incorporation to increase the Company's
authorized shares of common stock to 25,000,000, par value $.001 per share,
and to authorize the creation of 10,000,000 shares of preferred stock;
FOR ___ AGAINST ___ ABSTAIN ___
5. To transact such other business as may properly come before the meeting or
any postponements or adjournments thereof.
Please Complete, sign and mail this
proxy promptly in the enclosed
envelope. No postage is required for
mailing in United States.
Dated:________________________, 1997
No. of Shares _________ ____________________________________
Signature
____________________________________
Signature
IMPORTANT: Please date this proxy
and sign exactly as your name
appears on this proxy. If shares are
held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give title as such.
If a corporation, please sign in
full corporate name by president or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
. FOLD AND DETACH HERE .
Admission Ticket
ANNUAL MEETING
OF
Terrace Holdings, Inc.
Tuesday, July 8, 1997
10:00 a.m.
The Club at Emerald Hills
4100 North Hills Drive
Hollywood, Florida 33021
