<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 ____________________________________________ on Tuesday, July 8,
1997, beginning at 10:00a.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
May __, 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
<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. 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.
<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.
<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 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.
<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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
-------------------------- ---------------------------------------
Other
Annual Restricted
Name and Principal Year ended Compen- Stock
Position December 31 Salary Bonus sation 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 --
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
<PAGE>
to each of Samuel H. Lasko and Jonathan D. Lasko warrants to purchase
375,000 shares of the Company's common stock at $1.1875 per share
exercisable immediately and expiring August 31, 2000. See "Employment
Contracts."
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
The following table sets forth options exercised by the Company's chief
executive officer and the Company's two other most highly compensated executive
officers during fiscal 1996, and the number and value of all unexercised options
at year end. The value of "in-the-money" options refers to options having an
exercise price which is less than the market price of the Company's stock at
fiscal year-end. On that date, none of the Company's executive officers held
exercisable options which were "in-the-money".
<TABLE>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
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.
<PAGE>
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".
Employment Contracts and Termination of Employment and Change-in-Control
- ------------------------------------------------------------------------
Arrangements
- ------------
The Company has 5-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
$175,000.
Ten-Year Option/SAR Repricings
------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Length of
Number of Market Original
Securities Price Exercise Option Term
Underlying of Stock at Price at Remaining
Options/ Time of Time of at
SARs Repricing or Repricing or New Date of
Repriced or Amendment Amendment Exercise Repricing or
Name Date Amended (#) ($) ($) Price ($) Amendment
- ---- ---- ----------- ------------ ------------ --------- -----------
2/17/97 750,000* $1.4375 $3.75 $1.1875 3.5 years
Samuel H. Lasko,
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
<PAGE>
Company's common stock at $1.1875 per share exercisable immediately and expiring
August 31, 2000. See "Employment Contracts."
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 1,000,000 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.
<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.
<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.
<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.
<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: _________________, 1997 _________________________________________
Jonathan S. Lasko, Secretary
<PAGE>
APPENDIX A
<PAGE>
TERRACE HOLDINGS, INC.
1997 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Terrace Holdings, Inc. 1997 Stock Option Plan (the
"Plan") is to enable Terrace Holdings, Inc. (the "Company") and its subsidiaries
to attract and retain the services of directors, officers and other key
employees with managerial, professional or supervisory responsibilities and to
motivate such persons to use their best efforts on behalf of the Company.
2. GENERAL PROVISIONS
2.1 Definitions
As used in the Plan:
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, including any and all
amendments thereto.
(c) "Committee" means the Compensation Committee appointed by the Board of
Directors from time to time.
(d) "Common Stock" means the Company's Common Stock, $.001 par value.
(e) "Fair Market Value" means, with respect to a specific date, the last
reported sale price of the Common Stock in the NASDAQ SmallCap Market on
the date such Fair Market Value is being determined, and, in the absence of
any sale on such day, the Fair Market Value as determined in good faith by
the Committee on the basis of such quotations and other considerations as
the Committee deems appropriate.
(f) "Participant" means a person to whom a Stock Option has been granted
under the Plan.
(g) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended from time to time, or any successor rule.
<PAGE>
(h) "Stock Option" means an option granted under the Plan.
(l) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the
time of the granting of the Stock Option, each of the corporations
other than the last corporation in the unbroken chain owns 50% or more
of the total voting power of all classes of stock in one of the other
corporations in such chain.
2.2 Administration of the Plan
(a) The Committee shall have the full power, subject to and within the
limits of the Plan, to: (i) interpret and administer the Plan, and
Stock Options granted under it; (ii) make and interpret rules and
regulations for the administration of the Plan and to make changes in
and revoke such rules and regulations (and in the exercise of this
power, shall generally determine all questions of policy and
expediency that may arise and may correct any defect, omission, or
inconsistency in the Plan or any agreement evidencing the grant of any
Stock Option in a manner and to the extent it shall deem necessary to
make the Plan fully effective); (iii) determine those persons to whom
Stock Options shall be granted and the number of Stock Options to be
granted to any person; (iv) determine the terms of Stock Options
granted under the Plan, consistent with the provision of the Plans;
and (v) generally, exercise such powers and perform such acts in
connection with the Plan as are deemed necessary or expedient to
promote the best interests of the Company. The interpretation and
construction by the Committee of any provision of the Plan or of any
Stock Option shall be final, binding and conclusive.
(b) No member of the Committee shall be liable for any action taken or
omitted to be taken or for any determination made by him or her in
good faith with respect to the Plan, and the Company shall indemnify
and hold harmless each member of the Committee against any cost or
expense (including counsel fees) or liability (including any sum paid
in settlement of a claim with the approval of the Committee) arising
out of any act or omission in connection with the administration or
interpretation of the Plan, unless arising out of such person's own
fraud or bad faith.
2.3 Effective Date
The Plan shall become effective upon its adoption by the Board of
Directors, and Stock Options may be granted upon such adoption and from time to
time thereafter, subject, however, to approval of the Plan by affirmative vote
of the holders of a majority of the shares of the Common Stock present in person
or by proxy and entitled to vote at an annual meeting of the shareholders of the
Company or at a special meeting of the shareholders of the Company expressly
called for such purposes, or any adjournments thereof, within 12 months after
the
2
<PAGE>
adoption of the Plan by the Board of Directors. If the Plan is not approved at
such annual or special meeting or at any adjournments thereof, this Plan and all
Stock Options previously granted thereunder shall become null and void.
2.4 Duration
If approved by the shareholders of the Company, as provided in Section 2.3,
unless sooner terminated by the Board of Directors, the Plan shall remain in
effect for a period of ten (10) years following its adoption by the Board of
Directors.
2.5 Shares Subject to the Plan
The maximum number of shares of Common Stock which may be subject to Stock
Options granted under the Plan shall be 1,000,000. The Stock Options shall be
subject to adjustment in accordance with Section 4.1, as appropriate, and shares
to be issued upon exercise of Stock Options may be either authorized and
unissued shares of Common Stock or authorized and issued shares of Common Stock
purchased or acquired by the Company for any purpose. If a Stock Option or
portion thereof shall expire or is terminated, cancelled 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.
2.6 Amendments
The Plan may be suspended, terminated or reinstated, in whole or in part,
at any time by the Board of Directors. The Board of Directors may from time to
time make such amendments to the Plan as it may deem advisable, provided,
however, that, without the approval of the Company's shareholders, no amendment
shall be made which:
(a) Increases the maximum number of shares of Common Stock which may be
subject to Stock Options granted under the Plan (other than as
provided in Section 4.1, as appropriate); or
(b) Extends the term of the Plan; or
(c) Otherwise materially increases the benefits accruing to Participants
under the Plan; or
(d) Materially modifies the requirements as to eligibility for
participation in the Plan; or
(e) Will cause Stock Options granted under the Plan to fail to meet the
requirements of Rule 16b-3.
3
<PAGE>
Except as otherwise provided herein, termination or amendment of the Plan shall
not, without the consent of a Participant, affect such Participant's rights
under any Stock Options previously granted to such Participant.
2.7 Participants and Grants
Stock Options may be granted by the Committee 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 director, officer or
employee has the capacity to make a substantial contribution to the success of
the Company. The Committee may grant Stock Options to purchase such number of
shares of Common Stock (subject to the limitations of Sections 2.5 and 3.9) as
the Committee may, in its sole discretion, determine. In granting Stock Options
under the Plan, the Committee, on an individual basis, may vary the number of
Stock Options as between Participants and may grant Stock Options to a
Participant in such amounts as the Committee may determine in its sole
discretion.
3. STOCK OPTIONS
3.1 General
All Stock Options granted under the Plan shall be evidenced by written
agreements executed by the Company and the Participant to whom granted, which
agreement shall state the number of shares of Common Stock which may be
purchased upon the exercise thereof and shall contain such investment
representations and other terms and conditions as the Committee may from time to
time determine.
3.2 Price
Subject to the provisions of Section 3.6(d) and 4.1, the purchase price per
share of Common Stock subject to a Stock Option shall, in no case, be less than
one hundred percent (100%) of the Fair Market Value of a share of Common Stock
on the date the Stock Option is granted.
3.3 Period
The duration or term of each Stock Option granted under the Plan shall be
for such period as the Committee shall determine but in no event more than ten
(10) years from the date of grant thereof.
4
<PAGE>
3.4 Exercise
Subject to Section 4.4, Stock Options may be exercisable at such other time
or times as the Committee shall specify when granting the Stock Option. Once
exercisable, a Stock Option shall be exercisable, in whole or in part, by
delivery of a written notice of exercise to the Secretary of the Company at the
principal office of the Company specifying the number of shares of Common Stock
as to which the Stock Option is then being exercised together with payment of
the full purchase price for the shares being purchased upon such exercise. Until
the shares of Common Stock as to which a Stock Option is exercised are issued,
the Participant shall have none of the rights of a shareholder of the Company
with respect to such shares.
3.5 Payment
The purchase price for shares of Common Stock as to which a Stock Option
has been exercised and any amount required to be withheld, as contemplated by
Section 4.3, may be paid:
(a) In United States dollars in cash, or by check, bank draft or money
order payable in United States dollars to the order of the Company; or
(b) By the delivery by the Participant to the Company of whole shares of
Common Stock having an aggregate Fair Market Value on the date of
payment equal to the aggregate of the purchase price of Common Stock
as to which the Stock Option is then being exercised or by the
withholding of whole shares of Common Stock having such Fair Market
Value upon the exercise of such Stock Option; or
(c) By a combination of both (a) and (b) above.
The Committee may, in its discretion, impose limitations, conditions and
prohibitions on the use by a Participant of shares of Common Stock to pay the
purchase price payable by such Participant upon the exercise of a Stock Option.
3.6 Termination of Employment or Other Relationship
(a) In the case of Stock Options granted to an Employee of the Company,
then in the event a Participant's employment by, or relationship with,
the Company shall terminate for any reason other than those reasons
specified in Sections 3.7(b), (c), (d) or (e) hereof while such
Participant holds Stock Options granted under the Plan, then all
rights of any kind under any outstanding Option held by such
Participant which shall not have previously lapsed or terminated shall
expire immediately.
(b) If a Participant's employment by, or relationship with, the Company or
its Subsidiaries shall terminate as a result of such Participant's
total disability, each
5
<PAGE>
Stock Option held by such Participant (which has not previously lapsed
or terminated) shall be exercisable by such Participant for a period
of six months after termination but only to the extent the Option is
otherwise exercisable during that period. For purposes of the
foregoing sentence, "total disability" shall mean permanent mental or
physical disability as determined by the Committee.
(c) In the event of the death of a Participant, each Stock Option held by
such Participant (which has not previously lapsed or terminated) shall
be exercisable by the executor or administrator of the Participant's
estate or by the person or persons to whom the deceased Participant's
rights thereunder shall have passed by will or by the laws of descent
or distribution, for a period of six (6) months after such
Participant's death but only to the extent the Option is otherwise
exercisable during that period.
(d) In the case of a Participant who is an employee of the Company, if a
Participant's employment by the Company shall terminate by reason of
such Participant's retirement in accordance with Company policies,
each Stock Option held by such Participant at the date of termination
(which has not previously lapsed or terminated) shall be exercisable
for a period of three (3) months after termination, but only to the
extent the Option is otherwise exercisable during that period.
(e) In the event the Company terminates the employment of a Participant
who at the time of such termination was an officer of the Company and
had been continuously employed by the Company during the two (2) year
period immediately preceding such termination, for any reason except
"good cause" (hereafter defined) and except upon such Participant's
death, total disability or retirement in accordance with Company
policies, each Stock Option held by such Participant (which has not
previously lapsed or terminated and which has been held by such
Participant for more than six (6) months prior to such termination)
shall be exercisable for a period of three (3) months after such
termination, but only to the extent the Option is otherwise
exercisable during that period. A termination for "good cause" shall
be deemed to have occurred only if the Participant in question (i) is
terminated by written notice for dishonesty, because of his conviction
of a felony, or because of his violation of any material provision of
any employment or other agreement, written or oral, with the Company
or any of its Subsidiaries, or (ii) shall voluntarily resign or
terminate his employment with the Company or any of its Subsidiaries
under or followed by such circumstances as would constitute a breach
of any material provision of any employment or other agreement between
him and the Company or any of its Subsidiaries, or (iii) shall have
committed an act of dishonesty not discovered by the Company or any of
its Subsidiaries prior to the cessation of his employment with the
Company or any of its Subsidiaries, but which would have results in
his discharge if discovered prior to such date, or (iv) shall, either
before or after cessation of his employment with the Company or any
6
<PAGE>
of its Subsidiaries, without the written consent of the Company or any
of its Subsidiaries, use (except for the benefit of the Company or any
of its Subsidiaries) or disclose to any other person any confidential
information relating to the continuation of proposed continuation of
the business or any trade secrets of the Company of any of its
Subsidiaries obtained as a result of or in connection with such
employment.
3.7 Effect of Leaves of Absence
It shall not be considered a termination of employment when a
Participant is on military or sick leave or such other type leave of absence
which is considered as continuing intact the employment relationship of the
Participant with the Company or any of its Subsidiaries. In case of such leave
of absence, the employment relationship shall be deemed to have continued until
the later of (i) the date when such leave shall have lasted ninety (90) days in
duration, or (ii) the date as of which the Participant's right to employment
shall have no longer been guaranteed either by statute or contract.
3.8 Limitation on Number of Options Granted to Employees
The maximum number of shares for which options may be granted to an
employee of the Company during any calendar year shall not exceed 250,000.
4. MISCELLANEOUS PROVISIONS
4.1 Adjustments Upon Changes in Capitalization
In the event of changes to the outstanding shares of Common Stock of the
Company through reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend, stock consolidation or
otherwise, or in the event of a sale of all or substantially all of the assets
of the Company, an appropriate and proportionate adjustment shall be made in the
number and kind of shares as to which Stock Options may be granted. A
corresponding adjustment changing the number or kind of shares and/or the
purchase price per share of unexercised Stock Options or portions thereof which
shall have been granted prior to any such change shall likewise be made.
Notwithstanding the foregoing, in the case of a reorganization, merger or
consolidation, or sale of all or substantially all of the assets of the Company,
in lieu of adjustments as aforesaid, the Committee may in its discretion
accelerate the date after which a Stock Option may or may not be exercised or
the stated expiration date thereof. Adjustments or changes under this Section
shall be made by the Committee, whose determination as to what adjustments or
changes shall be made, and the extent thereof, shall be final, binding and
conclusive.
4.2 Non-Transferability
7
<PAGE>
No Stock Option shall be transferable except by will or the laws of descent
and distribution, nor shall any Stock Option be exercisable during the
Participant's lifetime by any person other than the Participant or his guardian
or legal representative.
4.3 Withholding
The Company's obligations under this Plan shall be subject to applicable
federal, state and local tax withholding requirements. Federal, state and local
withholding tax due at the time of a grant or upon the exercise of any Stock
Option may, in the discretion of the Committee, be paid in shares of Common
Stock already owned by the Participant or through the withholding of shares
otherwise issuable to such Participant, upon such terms and conditions as the
Committee shall determine. If the Participant shall fail to pay, or make
arrangements satisfactory to the Committee for the payment, to the Company of
all such federal, state and local taxes required to be withheld by the Company,
then the Company shall, to the extent permitted by law, have the right to deduct
from any payment of any kind otherwise due to such Participant an amount equal
to any federal, state or local taxes of any kind required to be withheld by the
Company.
4.4 Compliance with Law and Approval of Regulatory Bodies
No Stock Option shall be exercisable and no shares will be delivered under
the Plan except in compliance with all applicable federal and state laws and
regulations including, without limitation, compliance with all federal and state
securities laws and withholding tax requirements and with the rules of the
NASDAQ SmallCap Market and of all other domestic stock exchanges on which the
Common Stock may be listed. Any share certificate issued to evidence shares for
which a Stock Option is exercised may bear legends and statements the Committee
shall deem advisable to assure compliance with federal and state laws and
regulations. No Stock Option shall be exercisable and no shares will be
delivered under the Plan, until the Company has obtained consent or approval
from regulatory bodies, federal or state, having jurisdiction over such matters
as the Committee may deem advisable. In the case of the exercise of a Stock
Option by a person or estate acquiring the right to exercise the Stock Option as
a result of the death of the Participant, the Committee may require reasonable
evidence as to the ownership of the Stock Option and may require consents and
releases of taxing authorities that it may deem advisable.
4.5 No Right to Employment
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, nor the granting of
any Stock Options hereunder, shall confer upon any Participant under the Plan
any right to continue in the employ of the Company or any Subsidiary, or shall
in any way affect the right and power of the Company or any Subsidiary to
terminate the employment of any Participant at any time with or without
assigning a reason therefore, to the same extent as might have been done if the
Plan had not been adopted.
4.6 Exclusion from Pension Computations
8
<PAGE>
By acceptance of a grant of a Stock Option under the Plan, the recipient
shall be deemed to agree that any income realized upon the receipt or exercise
thereof or upon the disposition of the shares received upon exercise will not be
taken into account as "base remuneration", "wages", "salary" or "compensation"
in determining the amount of any contribution to or payment or any other benefit
under any pension, retirement, incentive, profit-sharing or deferred
compensation plan of the Company or any Subsidiary.
4.7 Abandonment of Options
A Participant may at any time abandon a Stock Option prior to its
expiration date. The abandonment shall be evidenced in writing, in such form as
the Committee may from time to time prescribe. A Participant shall have no
further rights with respect to any Stock Option so abandoned.
4.8 Severability
If any of the terms or provisions of the Plan conflict with the
requirements of Rule 16b-3, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of Rule 16b-3.
4.9 Interpretation of the Plan
Headings are given to the Sections of the Plan solely as a convenience to
facilitate reference. Such headings, numbering and paragraphing shall not in any
case be deemed in any way material or relevant to the construction of the Plan
or any provision hereof. The use of the masculine gender shall also include
within its meaning the feminine. The use of the singular shall also include
within its meaning the plural and vice versa.
4.10 Use of Proceeds
Funds received by the Company upon the exercise of Stock Options shall be
used for the general corporate purposes of the Company.
4.11 Construction of Plan
The place of administration of the Plan shall be in the State of Florida,
and the validity, construction, interpretation, administration and effect of the
Plan and of its rules and regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the State of Florida.
9
<PAGE>
REVOCABLE PROXY
---------------
TERRACE HOLDINGS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints(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 ____________________, 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.
<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 $.0001 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.
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