THE DELTONA CORPORATION
--------
NOTICE OF ANNUAL MEETING
November 4, 1997
--------
September 30, 1997
To the Stockholders:
THIS IS NOTICE of the Annual Meeting of Stockholders of THE DELTONA CORPORATION.
The meeting will be held at The Biltmore Hotel, 1200 Anastasia Avenue, Coral
Gables, Florida, on November 4, 1997, at 9:30 o'clock in the morning, Eastern
Standard Time. The purposes of the meeting are as follows:
1. To elect directors to serve until the next Annual Meeting of Stockholders
and until their respective successors are elected and qualified.
2. To consider a proposal to appoint Deloitte & Touche as the Company's
auditors for the fiscal year ending December 31, 1997, subject to the
discretion of the Board of Directors.
3. To approve the Company's agreement in principle with its lenders
(Selex, Yasawa and related parties), which would:
a. convert $6,809,338 of the Company's debt obligation to the lenders
into 6,809,338 shares of common stock thereby reducing debt and
increasing the lenders' equity in the Company;
b. convey all the Company's remaining land inventory and obligations in
St. Augustine Shores Subdivision to the lenders in exchange for
satisfaction of $5,529,501 of outstanding debt;
c. provide for the lenders, or their designee, to purchase $7,500,000 in
contracts receivable from the company at 75% of face value; and
d. restructure the Company's remaining debt, approximately $11 million,
after the above transactions are complete.
4. To transact any other business that is properly brought before the
meeting, or any adjournment of the meeting.
The transfer books will not be closed. Our 1996 Form 10K (Annual Report),
including audited financial statements as of December 31, 1996, accompanies this
Notice of Meeting and the attached Proxy Statement. Our Form 10Q for the period
ending June 30, 1997 is available upon request. A list of all stockholders of
record as of October 2, 1997, the record date for the Annual Meeting, will be
available from October 21, 1997 through November 3, 1997 for any stockholder to
examine at our main office, 999 Brickell Avenue, Suite 700, Miami, Florida,
33131.
By Order of the Board of Directors,
SHARON J. HUMMERHIELM
Vice President and Corporate Secretary
PLEASE FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
<PAGE>
THE DELTONA CORPORATION
999 Brickell Avenue, Suite 700
Miami, Florida 33131
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PROXY STATEMENT
-------------------
The Proxy is solicited on behalf of the Board of Directors of The
Deltona Corporation (the "Company"). The Proxy will be used at the Annual
Meeting of Stockholders to be held at The Biltmore Hotel, 1200 Anastasia Avenue,
Coral Gables, Florida on November 4, 1997 at 9:30 in the morning, local time,
and any adjournment or adjournments thereof. The Proxy Statement and
accompanying Proxy will be first sent to stockholders of the Company on or about
October 3, 1997.
The Company has one class of voting securities consisting of 15,000,000
shares of Common Stock of the par value of $1 per share. On July 31, 1997, the
Company had outstanding 6,734,939 shares of Common Stock (excluding 12,228
shares held in treasury). Each share of Common Stock is entitled to one vote and
the holders of a majority of the issued and outstanding shares of Common Stock
present in person or by proxy constitutes a quorum. Only holders of Common Stock
of record at the close of business on October 9, 1997 shall be entitled to
notice of and to vote at the Meeting. The vote of a plurality of the shares
represented, in person or by proxy, at the Meeting is required to elect the six
nominees for director and for the appointment of the independent public
accountants. With regard to stockholder approval for the agreement reached
between the Company and its lenders (Selex, Yasawa and related parties), the
3,109,703 shares of common stock beneficially owned by Antony Gram will be voted
in the same proportion as other shareholder votes. In order to approve, there
must be an affirmative vote of the holders of a majority of the shares
represented, in person or by proxy, at the Meeting.
The automated system administered by the Company's transfer agent
tabulates the votes. Abstentions and broker non-votes are each included in the
determination of the number of shares present and voting at the Meeting or any
adjournment thereof. Each is tabulated separately; however, neither abstentions
nor broker non-votes are counted for purposes of determining whether a proposal
has been approved.
Each Proxy executed and returned by a stockholder will be voted as
directed, and may be revoked at any time before it is voted by (a) filing a
written revocation with the Office of the Corporate Secretary, at 999 Brickell
Avenue, Suite 700, Miami, Florida 33131; (b) executing a later-dated Proxy; or
(c) voting in person by ballot at the Meeting.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS OF THE COMPANY
The entire Board of Directors is elected annually to hold office until the
next Annual Meeting of Stockholders and until their respective successors are
duly elected and qualified. The present Board of Directors is: Antony Gram
(Chairman of the Board), Neil E. Bahr, Earle D. Cortright, Jr., George W.
Fischer, Rudy Gram and Thomas B. McNeill.
Each of the current six directors has been nominated for re-election at the
1997 Annual Meeting. The accompanying form of Proxy will be voted "FOR" the
election of all nominees if no direction to the contrary is given. The Board of
Directors has no reason to believe that any nominee will decline or be unable to
serve as a director. If any nominee should, however, become unavailable for
election for any reason, the accompanying Proxy will be voted for such other
person as the Board of Directors may select or, alternatively, the Board of
Directors may reduce the number of directors to be elected at the Meeting.
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<PAGE>
The names of the nominees and certain information as of July 31, 1997 with
respect to each of them is set forth below. Unless otherwise indicated, each
nominee has held the position shown, or has been associated with the named
employer in the executive capacity shown, for more than the past five years.
<TABLE>
<CAPTION>
YEAR FIRST
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION ELECTED DIRECTOR
- -------------- ---------------------------------------------------------- ----------------
<S> <C> <C>
Neil E. Bahr, 71 Vice Chairman of the Board of Directors of the Company 1983(e)
(a), (b), (e) since June 19, 1992. Although otherwise retired, Mr. Bahr
served as President of Deltona Land & Investment Corp.
("DL&IC"), a subsidiary of the Company, from
September, 1974 through December, 1985.
Earle D. Cortright, Jr., 56 President and Chief Operating Officer of The Deltona 1995
(a), (d) Corporation since April 1990.
George W. Fischer, 56 Mr. Fischer is retired. From March 1980 through 1992
(b),(c) December 1995 he was President of CPS Industries, Inc., a
privately held company primarily engaged in
owning and operating a chain of beauty
salons in the Philadelphia, Pennsylvania
area. From 1975 through 1995 he also served
as President of H.E.C. Fischer, Inc., a
closely held real estate company.
Antony Gram, 55 Chairman of the Board of Directors and Chief Executive 1992
(a), (c), (d), (f) Officer of the Company since July 13, 1994. From
June 19, 1992 through April 6, 1994, Mr.
Gram served as a Vice Chairman of the Board
of Directors of the Company. For more than
the past five years, Mr. Gram has served as
Managing Director of Gramyco, a scaffolding
company, based in Belgium.
Rudy Gram, 33 Vice President, Swan Development Corporation, based in 1995
(c), (f) St. Augustine, Florida
Thomas B. McNeill, 62 Partner, Mayer, Brown & Platt; Chicago, Illinois. The law 1975
(b),(d) firm of Mayer, Brown & Platt was retained by the Company
to perform legal services on the Company's behalf during
1992 through the present.
<FN>
- -------------------
(a) Member, Executive Committee.
(b) Member, Audit Committee.
(c) Member, Executive Compensation Committee.
(d) Member, Nominating Committee.
(e) Mr. Bahr also served as a director of the Company from
December, 1964 until September, 1974 when he resigned to
devote all of his time to his duties as President of DL&IC.
(f) Rudy Gram is the son of Antony Gram.
</FN>
</TABLE>
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
Messrs. Bahr, Fischer, McNeill and Rudy Gram receive a fee of $1,000 per
month for services as a Director of the Company and are reimbursed for travel
and related costs incurred with respect to committee and board meetings. Messrs.
Antony Gram and Cortright do not receive a monthly Director's fee; however, they
are reimbursed for travel and related costs incurred with respect to committee
and board meetings and other Company business activities.
2
<PAGE>
The Board of Directors has several standing committees: an Executive
Committee, an Audit Committee, an Executive Compensation Committee and a
Nominating Committee.
The Executive Committee, of which Antony Gram is Chairman, exercises
certain powers of the Board of Directors during the intervals between meetings
of the Board and met once during 1996.
The Audit Committee, of which Mr. McNeill is Chairman, confers with the
independent auditors of the Company and otherwise reviews the adequacy of
internal controls, reviews the scope and results of the audit, assesses the
accounting principles followed by the Company, and recommends the selection of
the independent auditors. For the past two years, the audit committee has been
involved, on behalf of the board of directors, in discussions with the Company's
lenders. There were four meetings of the Audit Committee during 1996.
The Executive Compensation Committee is chaired by Mr. Fischer, who serves
on no similar committee of any other company. While the other members of the
Committee, Messrs. Antony Gram and Rudy Gram, may serve together as directors of
other companies, none serves as a member of any other compensation committee.
The Committee reviews the methods and means by which management is compensated,
studies and recommends new methods of compensation, and reviews the standards of
compensation for management. In addition, the Executive Compensation Committee
administers the Annual Executive Bonus Plan. No member of the Committee is
eligible to participate in any of the Company's compensation and benefit plans.
See "Compensation Committee Report." The Executive Compensation Committee held
one meeting during 1996.
The Nominating Committee, of which Mr. McNeill is Chairman, recommends to
the Board of Directors nominees to fill additional directorships that may be
created and to fill vacancies that may exist on the Board of Directors. There
was one meeting of the Nominating Committee during 1996 held as part of a Board
of Directors meeting. The Nominating Committee will consider nominees
recommended by stockholders. Recommendations by stockholders should be submitted
to the Secretary of the Company and should identify the nominee by name and
provide detailed background information. Recommendations received by December
31, 1997 will be considered by the Nominating Committee for nomination at the
1998 Annual Meeting.
During 1996, the Board of Directors held three meetings. Each director
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and the total number of meetings held by all committees on
which he served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee (the "Committee") is comprised of Mr.
Fischer, Chairman, and Messrs. Antony Gram and Rudy Gram.
Mr. Antony Gram, a member of the Committee, has served as Chairman of the
Board and Chief Executive Officer of the Company, and thus, as an executive
officer of the Company, since July 13, 1994. Additionally, Mr. Antony Gram is
deemed to be the beneficial owner of 46.17% of the Company's Common Stock since
he is the beneficial owner of Yasawa Holdings, N.V. ("Yasawa") (which holds 4.3%
of the Common Stock of the Company as of August 31, 1997), as well as the holder
of a majority equity interest in Wilbury International N.V., a Netherlands
Antilles corporation ("Wilbury"), which owns all of the issued and outstanding
stock of Selex (which holds 41.9% of the Common Stock of the Company as of
August 31, 1997). See "Ownership of Voting Securities of the Company".
Mr. Rudy Gram, a member of the Committee, was appointed November 30, 1995
and was elected to serve a one year term at the 1996 Annual Meeting. Mr. Rudy
Gram is the son of Mr. Antony Gram. See "Ownership of Voting Securities of the
Company."
On June 19, 1992, Selex loaned the Company the sum of $3,000,000 pursuant
to the First Selex Loan. The First Selex Loan is collateralized by a first
mortgage on certain of the Company's unsold, undeveloped property in its St.
Augustine Shores, Florida community. The Loan matured on June 15, 1996, with the
entire unpaid balance now due and payable and bearing interest at the rate of
10% per annum. As part of the Selex transaction, Selex was granted an option,
approved by
3
<PAGE>
the holders of a majority of the outstanding shares of the Company's Common
Stock at the Company's 1992 Annual Meeting, which, as modified, enabled Selex to
convert the First Selex Loan, or any portion thereof, into a maximum of 600,000
shares of the Company's Common Stock at a per share conversion price equal to
the greater of (i) $1.25 or (ii) 95% of the market price of the Company's Common
Stock at the time of conversion, but in no event greater than $4.50 per share
(the "Option"). On February 17, 1994, Selex exercised the Option, in full, at a
conversion price of $1.90 per share, such that $1,140,000 in principal was
repaid under the First Selex Loan through such conversion. As of July 31, 1997,
the Company was in default of the First Selex Loan.
One million dollars of the proceeds from the First Selex Loan was used by
the Company to acquire certain commercial and multi-family properties at the
Company's St. Augustine Shores community at their net appraised value, from
Marcel Muyres and certain entities affiliated with Mr. Muyres and Cornelis
Zwaans. Namely, (i) $416,000 was used to acquire 48 undeveloped condominium
units (twelve 4 unit building sites) and 4 completed (and rented) condominium
units from Conquistador Development Corporation ("Conquistador"), in which
Messrs. Zwaans and Muyres serve as directors, as well as President and
Secretary/Treasurer, respectively; (ii) $485,000 was used to acquire 4
commercial lots from Swan, in which Messrs. Zwaans and Muyres also served as
directors, as well as President and Secretary, respectively; and (iii)
approximately $99,000 was used to reacquire, from Mr. Muyres, all of his rights,
title and interest in that certain contracts with the Company for the purchase
of a commercial tract in St. Augustine Shores, Florida. None of the commercial
and multi-family property acquired by the Company from Mr. Muyres and certain
entities affiliated with Messrs. Zwaans and Muyres collateralizes the First
Selex Loan. In March, 1994, Conquistador exercised its right to repurchase
certain multi-family property from the Company (which right had been granted in
connection with the June, 1992 Selex transaction) at a price of $312,000, of
which $260,000 was paid in cash to the Company and $52,000 was applied to reduce
interest due to Selex under the Second Selex Loan (the "First Conquistador
Acquisition").
On December 2, 1992, the Company entered into various agreements relating
to certain of its assets and the restructuring of its debt with Yasawa, which is
beneficially owned by Mr. Antony Gram. The consummation of these agreements,
which are further described below, was conditioned upon the acquisition by Mr.
Gram of the Company's outstanding bank loan.
On December 4, 1992, Mr. Gram entered into an agreement with the banks,
pursuant to which he acquired the bank loan of approximately $25,150,000
(including interest and fees) for a price of $10,750,000. In conjunction with
such transaction, the banks transferred to Mr. Gram the warrants which they held
that entitled the holder to purchase an aggregate of 277,387 shares of the
Company's Common Stock at an exercise price of $1.00 per share. Immediately
after the acquisition of the bank loan, Mr. Gram transferred all of his interest
in the bank loan, including the warrants, to Yasawa.
On December 11, 1992, the Company consummated the December 2, 1992
agreements with Yasawa. Under these agreements, Yasawa, its affiliates and the
Company agreed as follows: (i) the Company sold certain property at its Citrus
Springs community to an affiliate of Yasawa in exchange for approximately
$6,500,000 of debt reduction credit; (ii) an affiliate of Yasawa and the Company
entered into a joint venture agreement with respect to the Citrus Springs
property, providing for the Company to market such property and receive an
administration fee from the venture (in March, 1994, the Company and the
affiliate agreed to terminate the venture); (iii) the Company sold certain
contracts receivable at face value to an affiliate of Yasawa for debt reduction
credit of approximately $10,800,000; (iv) the Company sold the Marco Shores
Country Club and Golf Course to an affiliate of Yasawa for an aggregate sales
price of $5,500,000, with the affiliate assuming an existing first mortgage of
approximately $1,100,000 and the Company receiving debt reduction credit of
$2,400,000, such that the Company obtained cash proceeds from this transaction
of $2,000,000, which amount was used for working capital; (v) an affiliate of
Yasawa agreed to lease the Marco Shores Country Club and Golf Course to the
Company for a period of approximately one year; (vi) an affiliate of Yasawa and
the Company agreed to amend the terms of the warrants to increase the number of
shares issuable upon their exercise from 277,387 shares to 289,637 shares and to
adjust the exercise price to an aggregate of approximately $314,000; (vii)
Yasawa exercised the warrants in exchange for debt reduction credit of
approximately $314,000; (viii) Yasawa released certain collateral held for the
bank loan; (ix) an affiliate of Yasawa agreed to make an additional loan of up
to $1,500,000 to the Company, thus providing the Company with a future line of
credit (all of which was drawn and outstanding as of July 31, 1997); and (x)
Yasawa agreed to restructure the payment terms of the remaining $5,106,000 of
the bank loan as a loan from Yasawa (the "Yasawa Loan").
The Yasawa Loan bears interest at the rate of 11% per annum, with payment
of interest deferred until December 31, 1993, when only accrued interest became
payable. Commencing January 31, 1994, principal and interest
4
<PAGE>
became payable monthly, with all unpaid principal and accrued interest being due
and payable on December 31, 1997. As of July 31, 1997, $6,670,300 in principal
and accrued interest was in default under the Yasawa Loan.
On April 30, 1993 Selex loaned the Company an additional $1,000,000
collateralized by a first mortgage on certain of the Company's property in its
Marion Oaks, Florida community (the "Second Selex Loan"). Interest under the
Second Selex Loan was 11% per annum, deferred until December 31, 1993, and
principal was to be repaid at $3,000 per lot for lots requiring release from the
mortgage, with the entire unpaid principal balance and interest accruing from
January 1, 1994 to April 30, 1994 due and payable on April 30, 1994. Although
Selex had certain conversion rights under the Second Selex Loan in the event the
Company sold any Common Stock or Preferred Stock prior to payment in full of all
amounts due to Selex under the Second Selex Loan, such rights were voided. The
Second Selex Loan was satisfied on May 22, 1995 through the closing of the
Second Conquistador Acquisition, discussed below.
From July 9, 1993 through December 31, 1993, Selex loaned the Company an
additional $4,400,000 collateralized by a second mortgage on certain of the
Company's property on which Selex and/or Yasawa hold a first mortgage pursuant
to a Loan Agreement dated July 14, 1993 and amendments thereto (the "Third Selex
Loan"). The Third Selex Loan bears interest at 11% per annum, with interest
deferred until December 31, 1993. Principal is to be repaid at $3,000 per lot
for lots requiring release from the mortgage, with the entire unpaid principal
balance and interest accruing from January 1, 1994 to April 30, 1994 due and
payable on April 30, 1994. The Second Conquistador Acquisition, discussed below,
closed on May 22, 1995, provided a reduction of the debt due and payable under
the Third Selex Loan. As of August 31, 1997, the remaining balance of $4,351,400
in principal and accrued interest remained unpaid and in default.
In February, 1994, Yasawa loaned the Company an additional amount of
approximately $514,900 at an interest rate of 8% per annum (the "Second Yasawa
Loan"). Since May, 1994, additional amounts were advanced to the Company under
the Second Yasawa Loan to enable the Company to pay certain essential expenses,
including payment of certain real estate taxes, and effectuate settlements with
the Company's principal creditors. As of July 31, 1997, an aggregate amount of
$6,149,500 had been advanced to the Company under the Second Yasawa Loan and the
balance of $7,173,000 in principal and accrued interest remains unpaid.
On May 22, 1995, the Company closed a transaction with Conquistador (the
"Second Conquistador Acquisition") for the sale of an administration building
and a multi-family site in the Company's St. Augustine Shores community as well
as the remaining lot inventory in the Company's FeatherNest community at Marion
Oaks in consideration for the satisfaction of $2,599,300 of principal and
accrued interest on the Second and Third Selex Loans. In a separate transaction
which also closed on the same date, the Company sold to Conquistador (the "Third
Conquistador Acquisition") four single family residential lots in the St.
Augustine Shores community for $100,000 in cash. These transactions were
accounted for in accordance with generally accepted accounting principals for
these types of related party transactions. Accordingly, the resulting gain of
$1,900,000 was treated as a contribution of capital and recorded directly to
capital surplus.
As previously stated, Messrs. Muyres and Zwaans also served as directors
and executive officers of M&M First Coast Realty ("M&M"). The Company had leased
certain office space to M&M at its St. Augustine Shores community pursuant to a
Lease Agreement dated August 10, 1990. A payment of approximately $21,300 in
delinquent rental payments was made on May 22, 1995 upon the closing of the
Second Conquistador Acquisition, which included the sale of the St. Augustine
Administration Building.
At December 31, 1995, $4,200,000 of accrued interest due to Selex, Yasawa
and their affiliates was reclassified as non-interest bearing principal. Through
July 31, 1997, $1,140,000 in principal was repaid under the First Selex Loan
through the exercise of the above described Option, the Second Selex Loan was
repaid in full, $1,380,900 in principal was repaid under the Third Selex Loan,
and $135,900 in principal and $346,000 in accrued interest was repaid under the
Yasawa loan. As of July 31, 1997, the Company had loans outstanding from Selex,
Yasawa and their affiliates in the aggregate amount of approximately
$25,358,800, including interest, all of which are in default, including
approximately $9,221,400, which is owed to Selex, including accrued and unpaid
interest of approximately $1,027,100 (10% per annum on the First Selex Loan, 11%
per annum on the Third Selex Loan and 12% per annum on the Empire Note assigned
to Selex); approximately $13,843,400, which is owed to Yasawa, including accrued
and unpaid interest of approximately $1,536,700 (11% per annum on the Yasawa
Loan and 8% per annum on the Second Yasawa Loan); and approximately $2,294,000,
which is owed to an affiliate of Yasawa, including accrued and unpaid interest
of approximately $289,000 (12% per annum). The loans from Selex, Yasawa and
their affiliates are secured by substantially all of the assets of the Company.
5
<PAGE>
On March 10, 1994, the Company was advised that Selex filed an Amendment to
its Schedule 13D filed with the Commission. In the Amendment, Selex reported
that it, together with Yasawa and their affiliates, were uncertain as to whether
they would provide any further funds to the Company. The Amendment further
stated that Selex, Yasawa and their affiliates were seeking third parties to
provide financing for the Company and that as part of any such transaction, they
would be willing to sell or restructure all or a portion of their loans and
Common Stock in the Company.
The Company has stated in previous filings with the Commission and
elsewhere herein that the obtainment of additional funds to implement its
marketing program and achieve the objectives of its business plan is essential
to enable the Company to maintain operations and continue as a going concern.
Since December, 1992, the Company has been dependent on loans and advances from
Selex, Yasawa and their affiliates in order to implement its marketing program
and assist in meeting its working capital requirements. As previously stated,
during the last nine months of 1993, Selex, Yasawa and their affiliates loaned
the Company an aggregate of $4,400,000 pursuant to Third Selex Loan. Funds
advanced under the Third Selex Loan enabled the Company to commence
implementation of the majority of its marketing program in the third quarter of
1993. The full benefits of the program were not realized in 1993 and the Company
was unable to secure financing in 1994 to meet its working capital requirements
and continue its marketing program. Commencing in 1994, Yasawa advanced
additional funds (the "Second Yasawa Loan") totaling $6,149,500 as of July 31,
1997, to meet the Company's minimum working capital requirements, to pay a
portion of delinquent real estate taxes, to pay settlements with certain trade
creditors and to settle certain litigation.
EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth the executive officers of the Company as of July
31, 1997, their ages and their principal occupations during the past five years.
Each has been appointed to serve in the capacities indicated until their
successors are appointed and qualified, subject to their earlier resignation or
removal by the Board of Directors.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND AGE DURING THE PAST FIVE YEARS
- --------------------------------- ------------------------------
<S> <C>
Antony Gram, 55............................ Chairman of the Board of Directors and Chief Executive
Officer of the Company since July 13, 1994. From June 19, 1992
through April 6, 1994, Mr. Gram served as Vice Chairman of the
Board of Directors of the Company. For more than the past five
years, Mr. Gram has served as Managing Director of Gramyco, a
scaffolding company based in Belgium.
Earle D. Cortright, Jr., 56................ Mr. Cortright, who joined the Company in 1966, has been President and Chief
Operating Officer since April, 1990. Prior thereto, he served as Executive Vice
President and Chief Operating Officer (January, 1988-April, 1990), as Executive Vice
President and Chief Financial Officer (March, 1986-December, 1987) and as Senior
Vice President and Chief Financial Officer (November, 1979-February, 1986).
David M. Harden, 45........................ Mr. Harden, who joined the Company in 1978, has been Senior Vice President -
Marketing Administration since November, 1992. Prior thereto, he served as Vice
President-Real Estate Services (January, 1990 - November, 1992), as Assistant Vice
President-Real Estate Services (January, 1989-December, 1989) and as Director of
Real Estate Services.
Sharon J. Hummerhielm, 47.................. Mrs. Hummerhielm, who joined the Company in March, 1975, has been Vice
President-Administration and Corporate Secretary since May 1995. Prior thereto, she
served as Vice President- Administration from (January 1993 through May 22, 1995);
Vice President - Regulatory and Customer Affairs (January, 1987 - December, 1992);
and previously as Director of Administrative Services and Director of Regulatory
Affairs.
6
<PAGE>
PRINCIPAL OCCUPATION
NAME AND AGE DURING THE PAST FIVE YEARS
- ------------------------------------- -----------------------------
<S> <C>
Donald O. McNelley, 53................ Mr. McNelley, has been Treasurer of the Company since May 23, 1995. He originally
joined the Company in 1971 and was Senior Vice President and Chief Financial
Officer from January 1988 - August 1990. He temporarily left the Company's employ
in August 1990 to become Senior Vice President of James Cable Partners LP
("James"). He left James in August 1991 and was self employed until he rejoined the
Company in May 1994.
</TABLE>
EXECUTIVE COMPENSATION
Due to the Company's liquidity situation, Antony Gram has served as
Chairman of the Board and Chief Executive Officer of the Company since July 13,
1994 without compensation. The Commission's rules on executive compensation
disclosure require, however, that the Summary Compensation Table which appears
below, depict the compensation for the past three years of the Company's chief
executive officer and its four most highly compensated executive officers whose
annual salary and bonuses exceed $100,000. During the fiscal year ended December
31, 1996, one executive officer of the Company was paid an annual salary and
bonus in excess of $100,000. Accordingly, the table set forth below, discloses
the annual compensation paid to Mr. Antony Gram, Chairman of the Board and Chief
Executive Officer, and Mr. Earle Cortright, President and Chief Operating
Officer for the three years ended December 31, 1996.
<TABLE>
<CAPTION>
Summary Compensation Table
- ---------------------------
Annual Long Term
Compensation Compensation
-------------------------------------------------------------------------------------------
Awards Payouts
------------------------- ----------------
Name and Fiscal Salary Bonus Other Annual SARs/Restricted Stock LTIP All Other
Principal Position Year ($) ($)(a) Compensation Stock Awards Options Payouts Compensation
(b) (#)(c) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Antony Gram, 1996 -- -- -- -- -- -- --
Chairman of the 1995 -- -- -- -- -- -- --
Board & Chief 1994 -- -- -- -- -- -- --
Executive Officer
(7/13/94 to
present)
E.D.Cortright,Jr. 1996 $200,000 -- -- -- -- -- --
President & Chief 1995 $200,000 $100,000(d) -- -- -- -- --
Operating Officer 1994 $209,615 (d) -- -- -- -- $100,000 (d)
<FN>
- -------
(a) The amounts disclosed in this column represent, in the case of Mr.
Cortright, $100,000 which was paid to him in 1995 pursuant to the
special bonus provided for in his employment contract. See "Employment
Contracts." Although the Company maintains an Annual Executive Bonus
Plan (the "Bonus Plan"), in which all executive officers of the Company
are eligible to participate, due to the Company's financial position
and its liquidity situation, no bonus awards have been made under the
Bonus Plan to any executive officer of the Company since 1990.
(b) In accordance with the rules of the Commission, amounts relating
to 1994 or 1995, if any, and amounts totaling less than the lower
of $50,000 or 10% of the total annual salary and bonus have been
omitted.
(c) The Company has a 1987 Stock Incentive Plan (the "Stock Plan") which
combines the features of a stock option plan and a performance unit
plan. Due to the Company's financial condition, no awards have been
paid under the Stock Plan except for those initial awards which were
earned at the end of 1989. There are no options outstanding under the
Stock Plan as of December 31, 1996.
(d) This amount reflects the last two installments of Mr. Cortright's
special bonus remaining to be paid at the end of 1994, which were
paid in 1995. See "Employment Contracts."
</FN>
</TABLE>
7
<PAGE>
EMPLOYMENT CONTRACTS
In June, 1992, the Company obtained $8,000,000 additional financing through
a $13,500,000 sale of certain of the Company's contracts receivable. The
agreement with respect to such sale requires that the Company maintain, in
effect, certain employment agreements with Mr. Cortright and certain other
executive officers of the Company.
Pursuant to the requirements of such agreement, Mr. Cortright entered into
a five-year employment agreement which continued through June 19, 1997. Such
agreement is subject to automatic renewal for successive one-year periods unless
notice of intent not to renew is given by the Company 60 days prior to the end
of the applicable contract term. The agreement provides for Mr. Cortright to be
paid his current annual salary of $200,000 (subject to such increases as may be
mutually agreed upon) and for the furnishing of certain benefits, such as
payment of an automobile allowance. The agreement contains "non compete"
provisions which preclude Mr. Cortright from engaging, in any manner, or from
being employed, in any capacity, in any business which could be deemed to be
competitive with the Company in Florida, New York, New Jersey and Ohio during
the five year term of his agreement, if his employment is terminated or
constructively terminated by the Company or if he resigns his employment from
the Company. Because of such non-compete provisions and to compensate Mr.
Cortright for his exceptional services in conjunction with the completion of the
restructuring of the Company's bank debt and the securing of financing for the
Company through the above-mentioned contracts receivable sale and the Selex
Loan, Mr. Cortright's agreement also provides for the payment of a $200,000
bonus, $50,000 of which was paid upon the signing of his agreement and the
completion of the foregoing transactions, $50,000 of which was paid in June,
1993, $50,000 of which was due in June, 1994 and paid in 1995 and $50,000 due
and paid in 1995 (the "Special Bonus"). Additionally and as a consequence of
such non-compete provisions, Mr Cortright's employment agreement provides that
if his employment is terminated or constructively terminated by the Company,
without cause (defined as gross misconduct), during its initial term or any
renewal term, he is entitled to receive a lump sum payment at termination equal
to any salary remaining to be paid him for the contract term (but, in no event,
less than for an additional two years); in addition, he is entitled to payment
of an automobile allowance and certain insurance benefits for such period. For
purposes of Mr. Cortright's agreement, "constructive termination" includes,
among other things: (i) the assignment of duties inconsistent with Mr.
Cortright's status as President and Chief Operating Officer or a substantial
alteration in his responsibilities if such assignment and/or alteration is not
acceptable to him, (ii) relocation of the Company's principal place of business
to a location other than Orlando, Florida (unless such other location is
mutually agreed upon), (iii) failure of the Company to maintain compensation
plans in which Mr. Cortright participates or to continue providing certain other
existing employee benefits, or (iv) any disability commencing after a "change in
control" which is continuous for six months. Mr. Cortright's agreement with the
Company further provides that if his employment is terminated due to death or
medical disability (as distinguished from a disability following a change in
control), payment of salary to him or his beneficiary shall continue for two
years following termination. Under this agreement and the benefit plans
described in the Compensation Committee Report, a "change in control" is (a) an
acquisition of 35% of the voting securities of the Company if the Board of
Directors determines that a change in control has occurred or is likely to
occur; or (b) a change in the majority of the Board of Directors of the Company
which is not recommended or approved by the incumbent Board. On June 11, 1992,
the Board determined that the acquisition by Selex of more than 35% of the
Company's Common Stock from Empire, accompanied by its control of the Board,
would constitute a change in control of the Company.
Two other executive officers, Mr. Harden and Mrs. Hummerhielm, are employed
pursuant to employment agreements which provide that if their employment is
terminated due to death, payment of salary to their beneficiary continues for
six months and, if employment is otherwise terminated by the Company without
cause (defined as gross misconduct), they are entitled to receive one year's
salary, payable in twenty-four equal semi-monthly installments.
COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY
It is the goal of the Company and this Committee to align all compensation,
including executive compensation, with business objectives and both individual
and corporate performance, while simultaneously attracting and retaining
employees who contribute to the long-term success of the Company. The Company
attempts, within its resources, to pay competitively and for performance and
management initiative, while striving for fairness in the administration of its
compensation program.
8
<PAGE>
EXECUTIVE COMPENSATION PROGRAM
It has long been the policy of the Company to encourage and enable
employees upon whom it principally depends to acquire a personal proprietary
interest in the Company. In prior years, the total executive compensation
program of the Company consisted of both cash and equity based compensation and
was comprised of three key elements: salary, an annual bonus and a long term
incentive plan that provides for both incentive awards and stock options. With
the exception of one stock option granted in 1993, no awards were made under the
1987 Stock Incentive Plan (the "Stock Plan") other than the initial awards which
were fully earned at the end of 1989. On December 31, 1996, the Stock Plan
terminated pursuant to its terms. Although the Annual Executive Bonus Plan (the
"Bonus Plan") is still in effect, due to the financial performance of the
Company during the past seven years, and the fact that the Company has undergone
two changes in control since January 1, 1990, no awards were made under the
Bonus Plan since 1990.
Salary
------
Salaries paid to executive officers (other than the Chief Executive Officer
and the President) are based upon the recommendations of the President, derived
from his subjective assessment of the nature of the position, competitive
salaries and the contribution, experience and Company tenure of the executive
officer. The President reviews all salary recommendations with the Committee,
which is responsible for approving or disapproving such recommendations.
Salaries paid to the Chief Executive Officer (if any) and the President are
determined by the Committee, subject to ratification by the Board of Directors
and are based upon the Committee's subjective evaluation of their contribution
to the Company, their performance and salaries paid to competitors to their
chief executive officer and chief operating officer. Prior to January 1, 1990,
the President's assessment and the Committee's subsequent approval or
disapproval also took into consideration data from comparable industry salary
surveys, such as that prepared by Stephens and Associates. From 1990 through the
present, the only salary increases which were granted occurred in June 1992 (at
which time Mr. Cortright, and three other executive officers of the Company were
granted salary increases ,granted in connection with the efforts of these
officers in securing over $10,000,000 in new financing for the Company and
resolving various regulatory matters with the State of Florida) and in May 1995,
at which time Mr. Harden, Mrs. Hummerhielm and Mr. McNelley were granted salary
increases.
Annual Incentive Program
------------------------
Although business exigencies and the Company's liquidity situation have
required the Company to temporarily suspend the granting of awards under the
Bonus Plan, and to award bonuses only in certain limited instances where the
bonus directly relates to the accomplishment of certain specified corporate and
financial objectives, it is the intention of the Committee that an executive's
annual compensation consist of a base salary and an annual bonus under the Bonus
Plan. All executive officers of the Company (except those who are otherwise
entitled to receive additional compensation) and all managerial employees who
meet certain eligibility criteria determined by their level of responsibility,
are eligible to participate in the Bonus Plan. The Bonus Plan provides for
executives to earn bonuses of up to 150% of the base bonus for which they are
eligible (which generally ranges from 10% to 75% of annual salary, depending
upon their position and anticipated contribution to the Company), with the
maximum bonus payable to the president being limited to 100% of his annual
salary. Such bonuses are earned based upon the success of the Company, or of the
subsidiary or division for which the individual is responsible, in achieving its
debt-to-equity and/or net income goals. Typically, under the Bonus Plan, awards
are determined in advance of a fiscal year, at which time the net income and/or
debt-to-equity goals for the year are also established. Thereafter, at the
conclusion of the year, the awards are adjusted up or down and paid, based upon
the achievements of the specified objectives and individual job performance. The
Bonus Plan provides for the determination and payment of bonuses thereunder in
the event of the termination of employment of a participant following a change
of control of the Company. No bonuses were awarded, earned by, or paid to, any
executive officer of the Company under the Bonus Plan during or in respect to
1996.
In 1992, Mr. Cortright was instrumental in securing over $10,000,000 in new
financing for the Company through the sale of contracts receivable and the Selex
transaction, as well as for resolving certain regulatory matters with the State
of Florida. His contribution was recognized by the award of a $200,000 bonus (an
amount equal to one year's salary). To avoid straining the Company's liquidity
situation, it was determined that his employment agreement would provide for
that bonus to be paid in four annual installments. The installment due in June
1994 was not paid until 1995. The final scheduled 1995 installment, was paid in
1995. See "Employment Contracts". No bonus was paid in 1996.
9
<PAGE>
Long Term Incentive Program
---------------------------
Additional long-term cash and equity incentives were provided through the
Stock Plan, which terminated, pursuant to its terms, on December 31, 1996. Under
the Stock Plan, incentive shares were awarded to those executive officers and
other key employees who, in the opinion of the Committee, were in positions
which enabled them to make significant contributions to the long-term
performance and growth of the Company. The extent to which incentive share
awards were earned was determined at the end of the three-year award cycle,
based upon the achievement of a net income goal set forth in the three-year
business plan adopted by the Board of Directors of the Company prior to or
during the first year of the cycle.
Chief Executive Officer Compensation
------------------------------------
Since July 13, 1994, Antony Gram has served as Chairman of the Board and
Chief Executive Officer of the Company. As Chairman and Chief Executive Officer,
Mr. Gram has been given the responsibility of resolving the financial and legal
difficulties facing the Company and developing an alternative business plan to
enable the Company to continue as a going concern. During the process of
resolving such difficulties and developing such plan, Mr. Gram has agreed to
serve without compensation, with the understanding that all ordinary, necessary
and reasonable expenses incurred by him in the performance of his duties,
including travel and temporary living expenses, will be reimbursed by the
Company and with the further understanding that the Committee and the Board will
thereafter consider establishing an appropriate salary to be paid him for his
services.
Compliance With Internal Revenue Code Section 162(m)
----------------------------------------------------
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1,000,000
paid to the corporation's Chief Executive Officer and four other mostly highly
compensated executives officers. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. The
compensation currently paid to the Company's Chief Executive Officer and highly
compensated executive officers does not approach the $1,000,000 threshold, and
the Company does not anticipate approaching such threshold in the foreseeable
future. Nevertheless, the Company intends to take the necessary action to comply
with the Code limitations.
Future Compensation Trends
--------------------------
The Committee anticipates undertaking a review of all compensation programs
and policies of the Company, and making appropriate modifications and revisions,
in conjunction with the development of an alternative business plan for the
Company.
Executive Compensation Committee
George W. Fischer, Chairman
Antony Gram
Rudy Gram
10
<PAGE>
OWNERSHIP OF VOTING SECURITIES OF THE COMPANY
Based upon information furnished to the Company or contained in filings
made with the Commission, the Company believes that the only persons who
beneficially own more than five percent (5%) of the shares of the Common Stock
of the Company are Selex (41.9%) and, Antony Gram, through his holdings in Selex
and Yasawa (46.17%).
All of the issued and outstanding stock of Selex, Gerrit van den Veenstraat
70, Amsterdam, The Netherlands, is owned by Wilbury a majority of which is, in
turn, owned by Antony Gram. Antony Gram, Chairman of the Board of Directors and
Chief Executive Officer of the Company, as the largest shareholder of Wilbury,
holding a majority equity interest in that corporation, is treated as the
beneficial owner of all of the Company's Common Stock held by Selex. In
addition, Mr. Gram beneficially owns Yasawa. Since Yasawa is the direct owner of
289,637 shares of the Common Stock of the Company, Mr. Gram is deemed to be the
beneficial owner of an aggregate of 3,109,703 shares of Common Stock of the
Company (46.17%). Please refer to the section entitled "Proposal To Authorize
Agreement With Selex, Yasawa And Their Affiliates" for additional information.
The following table sets forth information, as of July 31, 1997, concerning
the beneficial ownership by all directors and nominees, by each of the executive
officers named in the Summary Compensation Table beginning on Page 9 (the
"Summary Compensation Table") and by all directors and executive officers as a
group. The number of shares beneficially owned by each director or executive
officer is determined under the rules of the Commission, and the information is
not necessarily indicative of beneficial ownership for any other purpose.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNERSHIP(A) OF CLASS
-------------------------- -------------
<S> <C> <C>
Directors:
Neil E. Bahr.............................. 4,121 - Direct *
Earle D. Cortright, Jr.................... 18,706 - Direct *
George W. Fischer ........................ 35,000 - Direct *
Antony Gram............................... 3,109,703 - Indirect 46.17%
Rudy Gram................................. 0
Thomas B. McNeill ........................ 200 - Direct *
Executive Officers named in Summary
Compensation Table:
Earle D. Cortright, Jr.................... 18,706 - Direct *
Antony Gram............................... 3,109,703 - Indirect 46.17%
All executive officers and directors as a group,
consisting of 9 persons (including those
listed above).................................... 3,167,930 47.04%
<FN>
- ------------
* Represents holdings of less than 1%.
(a) Except for Antony Gram, who beneficially owns 46.17% of the
Common Stock of the Company, no current director, nominee or
executive officer beneficially owns more than 1% of the
Company's outstanding shares.
</FN>
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Securities Exchange Act of 1934 requires the Company's directors, its
executive officers and any persons holding more than ten percent of the
Company's Common Stock to report their initial ownership of the Company's Common
Stock and any subsequent changes in that ownership to the Commission. Under the
Section 16(a) rules, the Company is required to disclose in this Proxy Statement
any failure to file such required reports by their prescribed due dates.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements were satisfied.
11
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with the cumulative total return of companies on the Media General
Financial Services Composite Index and the Media General Peer Group (real estate
subdividers and developers) Index.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG
THE DELTONA CORPORATION, MG COMPOSITE INDEX AND MG GROUP INDEX
[GRAPHIC OMITTED]
ASSUMES $100 INVESTED ON JANUARY 1, 1992; DIVIDEND REINVESTED FISCAL
YEAR ENDING DECEMBER 31, 1996; THE COMPANY'S STOCK CEASED
TRADING 4/6/94 ON NEW YORK AND PACIFIC STOCK EXCHANGES.
APPOINTMENT OF AUDITORS
The Board of Directors recommends that the stockholders appoint Deloitte &
Touche as auditors of the financial statements of the Company for the fiscal
year ending December 31, 1997, subject to the discretion of the Board. If the
stockholders do not vote for such appointment, the Board of Directors will
reconsider the appointment of such auditors. If Deloitte & Touche are unable to
serve, or the Board, in its discretion, determines that it is in the best
interest of the Company that such accountants do not serve as auditors of the
financial statements of the Company, the Board shall appoint other auditors to
replace Deloitte & Touche. One of the predecessor firms of Deloitte & Touche,
Deloitte Haskins & Sells, had been the auditors for the Company since 1966.
Representatives of Deloitte & Touche will attend the meeting and will be
given the opportunity to make a statement at the meeting if they desire to do
so. Such representatives will be available during appropriate portions of the
meeting to respond orally to appropriate questions.
12
<PAGE>
TO APPROVE THE COMPANY'S NEW AGREEMENT WITH
ITS LENDERS, SELEX, YASAWA AND THEIR AFFILIATES
BACKGROUND OF CIRCUMSTANCES LEADING TO THE AGREEMENT
The Company began experiencing severe liquidity problems in 1990, which
were subsequently aggravated by the nationwide decline in real estate sales and
worldwide economic uncertainties. In December, 1992, the Company's bank debt was
acquired by Mr. Gram and assigned to Yasawa. Through the sale of certain assets
to Yasawa and its affiliates, including certain contracts receivable, and the
exercise of the warrants by Yasawa, the Company was able to substantially reduce
such remaining debt.
Since 1986, the Company has directed its marketing efforts to rebuilding
retail land sales in an attempt to obtain a more stable income stream and
achieve a balanced growth of retail land sales and bulk land sales. Retail land
sales typically have a higher gross profit margin than bulk land sales and the
contracts receivable generated from retail land sales provide a continuing
source of income. However, retail land sales also have traditionally produced
negative cash flow through the point of sale. This is because the marketing and
selling expenses have generally been paid prior to or shortly after the point of
sale, while the land is generally paid for in installments over extended terms.
The Company's ability to rebuild retail land sales has been substantially
dependent on its ability to sell or otherwise finance contracts receivable
and/or secure other financing sources to meet its cash requirements.
To alleviate the negative cash flow impact arising from retail land sales
while attempting to rebuild its sales volume, the Company implemented several
new marketing programs which, among other things, adjusted the method of
commission payments and required larger down payments. However, the nationwide
economic recession, which was especially pronounced in the real estate industry,
adverse publicity surrounding the industry which existed in 1990, the resulting,
more stringent regulatory climate, and worldwide economic uncertainties have
severely depressed retail land sales beginning in mid-1990 and continuing
thereafter, resulting in a continuing liquidity crisis.
In an attempt to offset the negative cash flow effects of installment land
sales, the Company is attempting to direct its marketing efforts to housing, in
which a house and lot are sold together. The success of this direction will be
dependent upon the Company's dealer recruiting program and the availability of
funds for a national advertising and promotion program.
Severe liquidity problems led the Company to cease development work late in
the third quarter of 1990, which did not resume until the third quarter of 1992.
From September 29, 1990 through the fourth quarter of 1991, when the Company
ceased selling undeveloped lots, sales of undeveloped lots were accounted for
using the deposit method. Under this method, all payments were recorded as a
customer deposit liability. In addition, because of the increasing trend in
delinquencies during 1990, since the beginning of 1991, the Company has not
recognized any sale until 20% of the contract sales price has been received. As
a result, the reporting and recognition of revenues and profits on a portion of
the Company's retail land sales contracts is being delayed. See Note 1 to
Consolidated Financial Statements.
The continued economic recession and the increasing adverse effects of such
recession on the Florida real estate industry not only resulted in the Company's
sales remaining at depressed levels, but caused greater contract cancellations
in 1991, particularly in the second half of the year, than were anticipated.
Such cancellations required the Company to record an additional provision to its
allowance for uncollectible sales of approximately $12,200,000 in the 1991 third
quarter, impacting net income by approximately $8,900,000.
On March 10, 1994, the Company was advised that Selex filed an Amendment to
its Schedule 13D with the Commission. In the Amendment, Selex reported that it,
together with Yasawa and their affiliates, were uncertain as to whether they
would provide any further funds to the Company. The Amendment further stated
that Selex, Yasawa and their affiliates were seeking third parties to provide
financing for the Company and that as part of any such transaction, they would
be willing to sell or restructure all or a portion of their loans and Common
Stock in the Company.
The Company has stated in previous filings with the Commission and
elsewhere herein that the obtainment of additional funds to implement its
marketing program and achieve the objectives of its business plan is essential
to enable
13
<PAGE>
the Company to maintain operations and continue as a going concern. Since
December, 1992, the Company has been dependent on loans and advances from Selex,
Yasawa and their affiliates in order to implement its marketing programs, to
meet the Company's minimum working capital requirements, to pay a portion of
delinquent real estate taxes, to pay settlements with certain trade creditors
and to settle certain litigation.
As a consequence of its liquidity position, the Company has defaulted on
certain obligations, including its escrow obligations to the Division pursuant
to the Company's 1992 Consent Order and its obligation to make required interest
payments under loans from Selex, Yasawa and their affiliates. Furthermore, the
Company has not paid delinquent real estate taxes which aggregate approximately
$2,982,000 as of July 31, 1997; non-payment of these delinquent taxes may
adversely affect the financial condition of the Company.
The Company has been unable to secure the financing needed to meet its
working capital requirements and has continued to rely on Selex, Yasawa and
their affiliates for minimum working capital requirements.
On and off for approximately two years, the Company's Audit Commitee, which
is comprised of three independent, non-affiliated directors, has had discussions
with the Company's lenders to try to reduce and restructure the debt, which led
to negotiations in August 1997 and culminated in the agreement of August 19,
1997 (the "Agreement").
THE AGREEMENT TO SATISFY A SUBSTANTIAL PORTION OF THE COMPANY'S DEBT
On August 19, 1997, the Board of Directors of the Company announced it had
reached an Agreement, in principle, with its lenders (Selex, Yasawa and their
affiliates) to reduce its $25.3 million debt obligation. The $25.3 million
represents the total amount of principal and interest outstanding as of July 31,
1997. The Agreement, approved by the Board of Directors and the lenders, is
subject to approval by the stockholders and the Division of Florida Land Sales,
Condominiums and Mobile Homes (the "Division). The Division must approve the
Agreement since the Company is a Registrant with that agency, a portion of the
property involved in the proposal is located in a registered subdivision and the
Division presently has a first lien on the contracts receivable contemplated for
sale. During preliminary discussions with the Division, they approved the
Agreement in principle.
The Agreement would result in a reduction in the Company's outstanding debt
obligation through the conveyance of all remaining land inventory and
obligations in the Company's St. Augustine Shores Subdivision and the issuance
of approximately 6.8 million shares of Common Stock at $1.00 per share (par
value). Additionally, the Agreement provides for the lenders to purchase $7.5
million in contracts receivable from the Company to generate working capital and
further reduce the debt obligation. If the Company succeeds in obtaining
shareholder approval and the final approval of the Division, the Company's
remaining debt obligation would be reduced to approximately $11 million payable
on restructured terms. Additionally, the lenders have agreed that should the
stockholders and the Division approve the proposal, the outstanding debt as of
July 31, 1997 will not accrue interest until the debt is restructured.
Specifically:
1. Selex, Yasawa and their affiliates would convert $6,809,338 of
the Company's outstanding debt into 6,809,338 shares of Common
Stock to be issued by the Company at a per share conversion
price of One Dollar ($1.00), which is equal to par value. As a
consequence, Mr. Antony Gram's beneficial ownership would
increase from 3,109,703 shares (46.17% of the outstanding
shares of Common Stock of the Company as of July 31, 1997) to
9,919,041 shares (73.23% of the outstanding shares of Common
Stock of the Company once the transaction is consummated).
2. Selex, Yasawa and their affiliates would reduce the Company's
outstanding debt by $5,529,501 in exchange for a conveyance of
all of the Company's remaining land inventory and obligations
in its St. Augustine Shores Subdivision to their affiliate,
Swan Development Corporation ("Swan"). The price, based upon
appraised value, was adjusted to take into account the
development obligations on sold lots to be assumed by Swan,
subject to Division approval.
3. Selex, Yasawa and their affiliates would purchase
approximately $7.5 million in contracts receivable from the
Company at seventy-five percent (75%) of face value with
recourse for non-performing contracts. This would generate
approximately $5.6 million, $1,982,457 of which would be used
to reduce outstanding debt. The balance would be used by the
Company to pay a portion of the delinquent
14
<PAGE>
real estate taxes, to implement its marketing programs and to
meet the Company's minimum working capital requirements.
4. The remaining debt obligation to Selex, Yasawa and their
affiliates, assuming consummation of the above transactions
would be approximately $11 million . The terms of repayment of
this debt would be $110,375 in principal payable monthly in
cash or with contracts receivable at 100% of face value, plus
interest payable monthly on the declining balance at the rate
of 9.6% per annum in cash or with contracts receivable at 65%
of face value.
5. In the future, if the Company elects to do so, Selex, Yasawa
and their affiliates have agreed to purchase future contracts
receivable at 65% of face value, with recourse, to meet the
Company ongoing capital requirements.
The Agreement outlined above is subject to the approval of the
stockholders. The 3,109,703 shares of Common Stock beneficially owned by Antony
Gram will be voted in the same proportion as other shareholder votes. In order
for the Agreement to be approved, holders of a majority of the outstanding
shares of Common Stock, voting in person or by proxy at the Meeting must approve
the transaction. If such approval is not obtained, the outstanding debt of
approximately $25.3 million of Selex, Yasawa and their affiliates will remain in
default and interest will continue to accrue.
Antony Gram , Chairman of the Board and Chief Operating Officer of the
Company, has a substantial interest in the Agreement. All of the issued and
outstanding stock of Selex is owned by Wilbury, a majority of which is, in turn,
owned by Antony Gram. Antony Gram, as the largest shareholder of Wilbury,
holding a majority equity interest in that corporation, is treated as the
beneficial owner of all of the Company's Common Stock held by Selex. In
addition, Mr. Gram beneficially owns Yasawa. Since Yasawa is the direct owner of
289,637 shares of the Common Stock of the Company, and Selex is the direct owner
of 2,820,066 shares of Common Stock of the Company, Mr. Gram is deemed to be the
beneficial owner of the aggregate total of 3,109,703 shares of Common Stock of
the Company (46.17%) as of July 31, 1997. Should the Agreement described above
be approved by the holders of a majority of the outstanding shares of Common
Stock voting at the meeting, Antony Gram would be deemed to be the beneficial
owner of 9,919,041 shares of Common Stock of the Company (73.23%). Holders of
the Company's Common Stock should be aware that the approval of the Agreement
will have a dilutive effect on their holdings since the percentage of Common
Stock owned by Selex, Yasawa and related parties will increase from 46.17% to
73.23%, based upon the number of shares of Common Stock outstanding as of July
31, 1997.
Selex, Yasawa and their affiliates has advised the Company that they may
acquire additional shares of Common Stock solely for their own account and that
they will not dispose of the shares in violation of the registration
requirements of the Securities Act of 1933, as amended. The Company has no
present plans to undertake the registration of the shares to be issued.
The Audit Committee of the Board of Directors of the Company has obtained
an opinion from Miller Advisory Corp., independent financial consultants, as to
whether or not the proposed agreement was fair to the Company and its
stockholders, from a financial point of view. To reach its opinion, Miller
Advisory Corp., conducted an in depth study of the Company's operations. Their
compensation for such opinion was not conditioned upon approval of the
Agreement. After conducting such investigation, Miller Advisory Corp. stated
that in their opinion, the Agreement was fair to the Company and its
stockholders, from a financial point of view, solely in their capacity as
stockholders.
The Board of Directors recommends a vote "FOR" approval of the Agreement.
15
<PAGE>
Item 13. PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet of the Company
as of June 30, 1997 and the unaudited pro forma consolidated statement of
operations for the six months ended June 30, 1997 and for the year ended
December 31, 1996 have been prepared to reflect the effect on the Company's
financial condition and results of operations from the Agreement to satisfy a
portion of the Company's debt.
The unaudited pro forma consolidated balance sheet has been prepared as if
the Agreement occurred on June 30, 1997 and the unaudited pro forma consolidated
statements of operations have been prepared as if the Agreement occurred on the
first day of the periods presented. The unaudited pro forma financial statements
have been prepared in accordance with the accounting policies outlined in the
historical financial statements.
The following pro forma consolidated financial information should be read
in conjunction with the Company's consolidated financial statements and notes
thereto, Management's Discussion and Analysis of Financial Condition and Results
of Operations included in the Company's Annual Report on Form 10K and on Form
10Q for the period ending June 30, 1997 and other information included elsewhere
in this document. The unaudited pro forma consolidated financial information do
not necessarily reflect what the results of operations and financial position
would have been had the Agreement occurred as assumed in preparing the unaudited
pro forma financial statements, nor do they necessarily reflect the future
results or financial position of the Company.
<TABLE>
<CAPTION>
THE DELTONA CORPORATION AND SUBSIDIARIES
----------------------------------------
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
----------------------------------------------
AS OF JUNE 30, 1997
-------------------
(in thousands)
Historical Pro Forma Pro Forma
Adjustments
----------- -------------- -------------
<S> <C> <C> <C>
ASSETS
- ------
Cash and temporary cash investments,
including escrow deposits of $600.......... $ 672 $ 1,426 (1) $ 2,097
--------- --------- ----------
Contracts receivable for land sales - net... 8,006 (5,250) (1) 2,756
--------- --------- ----------
Mortgages and other receivables - net....... 315 - 315
--------- --------- ----------
Inventories:
Land and land improvements................. 9,953 (1,953) (2) 8,000
Other...................................... 99 - 99
--------- --------- ----------
Total inventories.................. 10,051 (1,953) 8,099
--------- --------- ----------
Property, plant, and equipment at cost - net 393 - 393
--------- --------- ----------
Prepaid expenses and other.................. 273 - 273
--------- --------- ----------
Total.............................. $ 19,711 $ (5,777) $ 13,934
========= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
- -------------------------------------------------
Mortgages and similar debt:
Mortgage notes payable..................... $ 18,707 $ (7,964)(1)(2)(3) $ 10,743
Other loans ............................... 3,661 (3,661)(3) -
--------- --------- ----------
Total mortgages and similar debt......... 22,368 (11,626) 10,743
--------- --------- ----------
Accounts payable, accrued expenses,
customers' deposits........................ 8,877 (3,488)(1)(2)(3) $ 5,389
--------- --------- ----------
Deferred revenue............................ 6,946 (1,901)(2) 5,045
--------- --------- ----------
Total liabilities........................ 38,191 (17,014) 21,177
--------- --------- ----------
Stockholders' equity (deficiency):
Common stock, $1 par value - authorized
15,000,000 shares......................... 6,735 6,809 (3) 13,544
Capital surplus............................ 44,715 4,428 (1)(2) 49,143
Retained earnings.......................... (69,930) - (69,930)
--------- --------- ----------
Total stockholders' equity (deficiency).. (18,480) 11,237 (7,243)
--------- --------- ----------
Total..................... $ 19,711 $ (5,777) $ 13,934
========= ========= ==========
</TABLE>
See accompanying notes to pro forma consolidated financial information.
16
<PAGE>
<TABLE>
<CAPTION>
THE DELTONA CORPORATION AND SUBSIDIARIES
----------------------------------------
UNAUDITED PRO FORMA STATEMENTS OF CONSOLIDATED OPERATIONS
---------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------
(in thousands, except per share data)
Historical Pro Forma Pro Forma
Adjustments
----------- -------------- -------------
<S> <C> <C> <C>
REVENUES:
Net land sales....................... $ 2,091 $ - $ 2,091
Sales - house and apartments......... 562 - 562
Recognized improvement
revenue/ prior period
sales............................... 761 - 761
Interest income...................... 679 (515) (1) 164
Sales - other than real estate....... 270 - 270
--------- --------- ---------
TOTAL............................ 4,363 (515) 3,848
--------- --------- ---------
COSTS AND EXPENSES:
Cost of sales and
improvements........................ $ 1,265 $ - $ 1,265
Selling, general and
administrative and other
expenses............................ 2,783 (247)(1)(2) 2,563
Interest expense..................... 918 (403)(1)(2)(3) 515
--------- --------- ---------
TOTAL............................ 4,966 (650) 4,316
--------- --------- ---------
Loss from operations ................. $ (603) $ 135 $ (468)
========= ========= =========
Net Income............................ $ (603) $ 135 $ (468)
========= ========= =========
Earning per share:
From operations...................... $ (.09) (4) $ (.03)
--------- ---------
Net Income (Loss)..................... $ (.09) $ (.03)
========= =========
Number of common and common
equivalent shares.................... 6,735 (4) 13,544
========= =========
</TABLE>
See accompanying notes to pro forma consolidated financial information.
17
<PAGE>
<TABLE>
<CAPTION>
THE DELTONA CORPORATION AND SUBSIDIARIES
----------------------------------------
UNAUDITED PRO FORMA STATEMENTS OF CONSOLIDATED OPERATIONS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
(in thousands, except per share data)
Historical Pro Forma Pro Forma
Adjustments
----------- -------------- -------------
<S> <C> <C> <C>
REVENUES:
Net land sales....................... $ 4,296 $ - $ 4,296
Sales - house and apartments......... 1,202 - 1,202
Recognized improvement
revenue/ prior period
sales............................... 1,008 - 1,008
Interest income...................... 1,464 (1,047)(1) 417
Sales - other than real estate....... 680 - 680
--------- --------- ---------
TOTAL............................ 8,650 (1,047) 7,603
COSTS AND EXPENSES:
Cost of sales and
improvements........................ $ 2,673 $ - $ 2,673
Selling, general and
administrative and other
expenses............................ 5,423 (493)(1)(2) 4,930
Interest expense..................... 1,781 (780)(1)(2)(3) 1,001
--------- --------- ---------
TOTAL............................ 9,877 (1,273) 8,604
--------- --------- ---------
Loss from operations before
extraordinary item........... $ (1,227) $ 226 $ (1,001)
Extraordinary Item:
Gain on settlement related to the
Marco refund obligation............ $ 331 $ - $ 331
--------- --------- ---------
Net Income............................ $ (896) $ 226 $ (670)
======== ========= =========
Earning per share:
From operations...................... $ (.18) (4) $ (.07)
-------- ---------
From extraordinary item.............. $ .05 $ .02
-------- ---------
Net Income (Loss)..................... $ (.13) $ (.05)
======== =========
Number of common and common
equivalent shares.................... 6,729 (4) 13,539
======== =========
See accompanying notes to pro forma consolidated financial information.
<FN>
- ----------------
The Deltona Corporation
Notes To Pro Forma Consolidated Financial Information
(1) Represents the entries to reflect the sale of receivables from the
Company to its lenders and the repayment of a portion of its debt and a
portion of its delinquent real estate taxes.
(2) Represents the entries to reflect the conveyance of the Company's
remaining land inventory at its St. Augustine Shores subdivision in
exchange for certain debt reduction.
(3) Represents the conversion of a portion of the Company's debt to Common
Stock and the restructuring of the remaining debt into new debt.
(4) Earnings per share have been calculated using the average number of
common shares and common equivalent shares outstanding since the
lenders will receive 6,809,338 of newly issued common stock.
18
</FN>
</TABLE>
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, the only business which the
management expects to be presented at the meeting is that set forth above. If
any other matters are properly brought before the meeting, or any adjournments
thereof, it is the intention of the persons named in the accompanying form of
Proxy to vote the Proxy on such matters in accordance with their judgment.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone or
telegraph by officers, directors and certain employees of the Company who will
not be specially compensated for such solicitation.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the next Annual
Meeting should be received by the Office of the Corporate Secretary, The Deltona
Corporation, 999 Brickell Avenue, Suite 700, Miami, Florida 33131, no later than
December 31, 1997, in order to be considered for inclusion in the Company's 1998
Annual Meeting proxy statement.
By Order of the Board of Directors
/S/ SHARON J. HUMMERHIELM
SHARON J. HUMMERHIELM
September 30, 1997 Vice President and Corporate Secretary
PLEASE MARK, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
19
