HMG/COURTLAND PROPERTIES, INC.
2701 South Bayshore Drive
Coconut Grove, Florida 33133
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NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 27, 1997
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May 23, 1997
TO THE SHAREHOLDERS:
The annual meeting of shareholders of HMG/Courtland Properties, Inc. (the
"Company") will be held at 11:30 A.M., on June 27, 1997 at the Grove Isle Club
and Resort, 4 Grove Isle Drive, Coconut Grove, Florida for the following
purposes:
1. To elect a Board of Directors;
2. To act upon the approval of a new advisory agreement between the
Company and HMG Advisory Corp.; and
3. To transact such other business as may properly come before the
meeting.
The record date for determining shareholders entitled to notice of and to
vote at the annual meeting is May 16, 1997.
Enclosed is a copy of the Company's Annual Report for the fiscal year ended
December 31, 1996.
It is important, whether or not you plan to attend the meeting in person,
that you fill in, sign and date the accompanying proxy and return it promptly in
the postage prepaid envelope which is enclosed for your convenience. The signing
and mailing of the proxy will not affect your right to vote your shares in
person if you attend the meeting and desire to do so.
By Order of the Board of Directors
Lawrence I. Rothstein
Secretary
<PAGE>
PROXY STATEMENT
of
HMG/COURTLAND PROPERTIES, INC.
The accompanying proxy is solicited by the Board of Directors for use at
the annual meeting of shareholders and is being mailed with this Proxy Statement
to all shareholders on May 23, 1997. If a proxy card is properly signed and is
not revoked by the shareholder, the shares of common stock of the Company (the
"Shares") represented thereby will be voted at the meeting in accordance with
the instructions, if any, of the shareholder. If no instructions are given, they
will be voted for the election of Directors nominated by the Board of Directors
and for approval of the new advisory agreement (the "Advisory Agreement")
between the Company and HMG Advisory Corp. (the "Advisor"). Any shareholder may
revoke his proxy at any time before it is voted by giving written notice of
revocation to the Secretary of the Company.
Holders of Shares of record at the close of business on May 16, 1997 are
entitled to notice of and to vote at the meeting. On that date, there were
1,166,835 Shares outstanding. Each Share is entitled to one vote on all business
of the meeting. The holders of a majority of the outstanding Shares, present in
person or represented by proxy, will constitute a quorum at the meeting.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions are
counted in tabulations of the votes cast on proposals presented to stockholders,
whereas broker non-votes are not counted for purposes of determining whether a
proposal has been approved. As of May 16, 1997, Transco Realty Trust
("Transco"), 2701 South Bayshore Drive, Coconut Grove, Florida 33133, was the
beneficial owner of 477,300 Shares, or 41% of the outstanding Shares. As of May
16, 1997, Maurice A. Halperin and Barry S. Halperin, 2500 N. Military Trail,
Suite 225, Boca Raton, Florida 33431-6342, were the beneficial owners of 133,500
Shares, or 11% of the outstanding Shares. Beneficial ownership is based on sole
voting and investment power.
The Company has been advised by its officers and nominees for Directors,
and their affiliated shareholders, Transco and Courtland Group, Inc. ("CGI"),
that they intend to vote for the election of each of the nominees and for the
approval of the Advisory Agreement. Such shareholders own in the aggregate
568,230 shares, or 49% of the outstanding Shares. As a result, each of the
nominees is expected to be elected as a Director and the Advisory Agreement is
expected to be approved. As noted below, certain Directors of the Company are
affiliated with principal shareholders of the Company and are principal
shareholders, directors and officers of the Advisor. See "Election of Directors"
below for information concerning holders who may be deemed to own beneficially
more than 5% of the outstanding shares.
ELECTION OF DIRECTORS
The entire Board of Directors will be elected at the annual meeting of
shareholders to serve until the next annual meeting of shareholders and until
the election and qualification of their successors. In the event any nominee
should not continue to be available for election, proxies may be voted for the
election of a substitute nominee or the Board of Directors may elect to reduce
the number of Directors. The Board of Directors has no reason to anticipate that
any nominee will not be available for election. All of the nominees have been
elected previously by the shareholders.
An affirmative vote by the holders of a majority of the Shares present in
person or by proxy at the Annual Meeting of Shareholders is required for the
election of each Director.
Set forth in the table below is certain information about each current
Director, each nominee for Director and the Shares held by all Directors and
executive officers as a group. Messrs. Lee Gray and Norman A. Fieber have not
been nominated for reelection as directors and the Board of Directors has fixed
the number of Directors at five. For further information regarding the decision
of the Board of Directors not to nominate Messrs. Gray and Fieber for reelection
as Directors of the Company, see "Certain Relationships and Related Transactions
- - Inquiry Relating to HMG-Fieber Wallingford Associates and HMG-Fieber
Associates" below.
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<PAGE>
<TABLE>
<CAPTION>
Shares Held as of May 16, 1997(1)
Name, Age, Year Principal Occupation or Shares Owned Additional Shares in Total Shares and
First Became a Employment During the by the which the Nominee Percent of Class
Director or Officer Past Five Years Other than Nominee or has, or Participates
of the Company with the Company and Members of in, the Voting or
Other Information His Family Investment Power(2)
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<S> <C> <C> <C> <C>
Maurice Wiener Chairman of the Board 35,100(4) 541,830(3) 576,930(3),(4)
55-1974 and Chief Executive 49%
Chairman of Officer of the Advisor;
the Board of Executive Trustee,
Directors, President Transco Realty Trust;
and Chief Executive Director, T.G.I.F. Texas,
Officer Inc.; Trustee, Heitman
Real Estate Fund
Walter G. Arader President, Arader, Herzig 12,800(4) 0 12,800(4)
77-1977 and Associates, Inc. 1%
Director (financial and management
consultants); Director, The
Pep Boys - Manny, Moe
& Jack; Director, Unitel
Video, Inc.; Former Secre-
tary of Commerce,
Commonwealth of
Pennsylvania
John B. Bailey Real estate consultant; 7,100(4) 0 7,100(4)
70-1971 Retired CEO, Landauer *
Director Associates, Inc. (real
estate consultants)
(1977-1988)
Harvey Comita President and Director of 5,000(4) 0 5,000(4)
67-1992 Pan-Optics, Inc. (1971- *
Director 1991); Director of Mediq,
Incorporated (1981-1991);
Trustee, Transco Realty
Trust
Gustav S. Eyssell Real estate consultant; 6,400(4) 54,530 60,930(4)
95-1971 Director of the Advisor 5%
Director
Lee Gray President and Director, 58,000(4) 0 58,000
67-1974 Chartcraft, Inc. 5%
Director
Norman A. Fieber Principal in The Fieber 5,700(4) 0 5,700
67-1985 Group; Principal, HMG- *
Director Fieber Associates; Partner,
Stonegate Development
Group
All 10 Directors and 155,100(4) 541,830(3) 696,930(4)
Executive Officers as 60%
a Group
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* Less than one percent
</TABLE>
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<PAGE>
(1) Unless otherwise indicated, beneficial ownership is based on sole voting
and investment power with respect to the Shares.
(2) Shares listed in this column represent Shares held by entities with which
the Directors or officers are associated. The Directors, officers and
members of their families have no ownership rights in the Shares listed in
this column. See note 3 below.
(3) This number includes the number of Shares held by Transco (477,300 Shares),
CGI (54,530 Shares) and T.G.I.F. Texas, Inc. ("TGIF") (10,000 Shares). Of
those Shares owned by Transco, 24,350 have been pledged to a brokerage firm
pursuant to a margin agreement. Several of the Directors of the Company are
directors, trustees, officers or shareholders of certain of those firms.
Mr. Wiener is the executive trustee of Transco and holds 24% of its stock.
Mr. Wiener is also director and officer of CGI which owns 21% of Transco's
stock. Mr. Wiener is Chairman of the Board, Chief Executive Officer and a
40% shareholder and Mr. Eyssell is a director and 14% shareholder of CGI.
Mr. Wiener is a director and 18% shareholder of TGIF. Mr. Wiener is the
cousin of Bernard Lerner, Vice President of the Company and Vice President
of the Advisor.
For information concerning relationships of certain directors and officers
of the Company to the Advisor, see "Approval of Advisory Agreement."
As a result of these relationships, the persons named above may be deemed
to share investment power and voting power of Shares held by each firm with
which they are associated in conjunction with a number of other persons,
including in several cases persons who are neither directors nor officers
of the Company.
(4) This number includes options granted under the 1990 Stock Option Plan, none
of which have been exercised. These options have been granted to Mr.
Wiener, 30,000; Mr. Gray, 25,000; 5,000 each to Mr. Arader, Mr. Bailey, Mr.
Eyssell, Mr. Fieber and Mr. Comita; and a total of 25,000 to three officers
who are not directors. The options granted to Mr. Gray (25,000) and Mr.
Fieber (5,000) will expire upon completion of their terms as Directors at
the Company's 1997 annual meeting of shareholders. Reference is made to
"Compensation of Directors and Executive Officers" for further information
about the 1990 Stock Option Plan.
Meetings of the Board of Directors
The Board of Directors held three meetings during 1996. During this period
all of the Directors of the Company attended at least 75% of the total number of
meetings of the Board and any Committee of which they were a member.
Committees of the Board of Directors
The Board of Directors has an Audit Committee and a Stock Option
Committee. The Company does not have a Compensation Committee or a Nominating
Committee.
Messrs. Fieber and Gray served as members of the Audit Committee during
1996. The primary responsibilities of the Audit Committee are to review the
annual financial statements of the Company and to examine and consider such
other matters in relation to the internal and external audit of the Company's
accounts and in relation to the financial affairs of the Company and its
accounts as the Committee may, in its discretion, determine to be desirable. The
Audit Committee met three times during 1996.
Messrs. Gray and Fieber were removed as a members of the Audit Committee
effective April 4, 1997. Messrs. Comita and Arader were appointed to the Audit
Committee by the Board of Directors effective April 4, 1997. See "Certain
Relationships and Related Transactions - Inquiry Relating to HMG-Fieber
Wallingford Associates adn HMG-Fieber Associates" for further information
regarding the removal of Messrs. Gray and Fieber from the Audit Committee.
Messrs. Arader and Bailey serve as members of the Stock Option Committee.
The Committee is authorized to grant options to officers and key employees of
the Company. The Stock Option Committee met once during 1996.
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<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive officers receive no cash compensation from the Company in their
capacity as executive officers. Executive officers are eligible to receive stock
options pursuant to the 1990 Stock Option Plan. During 1996, no options were
granted to executive officers.
Compensation of Directors. Each Director receives an annual fee of
$5,000, plus expenses and $500 for each meeting attended of the Board of
Directors.
Grant of Options. During 1996, the Stock Option Committee, under the 1990
Stock Option Plan, did not grant any options.
<TABLE>
<CAPTION>
December 31, 1996 Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options as of
Options as of December 31, 1996 December 31, 1996 (1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maurice Wiener 30,000/0 $0/0
Chief Executive Officer
</TABLE>
(1) This value is based on the December 31, 1996 closing price for the
Company's Shares on the American Stock Exchange of $4 11/16, or $4.6875,
per Share.
Expiration of Options. Pursuant to the terms of the 1990 Stock Option
Plan, the options granted to Mr. Lee Gray (25,000) and Mr. Norman A. Fieber
(5,000) will expire upon completion of their terms as Directors at the Company's
1997 annual meeting of shareholders.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934, as amended, requires the Company's
Directors and executive officers to file with the Securities and Exchange
Commission initial reports of beneficial ownership and reports of change in
beneficial ownership of the Company's Shares. Such officers and Directors are
required by SEC regulations to furnish to the Company copies of all Section
16(a) reports that they file. 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, all executive officers and
Directors of the Company complied with the Section 16(a) filing requirements for
the fiscal year ended December 31, 1996, except that Mr. Arader, a Director of
the Company, reported one transaction late in a Form 5 filing.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion describes the organizational structure of the Company's
subsidiaries and affiliates.
Transco Realty Trust ("Transco").
Transco is a 41% shareholder of the Company. Mr. Wiener is the executive
trustee and a 24% shareholder of Transco. Mr. Gray is a former trustee
and treasurer and a 24% shareholder of Transco.
Courtland Group, Inc. ("CGI").
Mr. Wiener is Chairman of the Board, Chief Executive Officer and 40%
shareholder of CGI, which owns 21% of Transco's stock and approximately
4% of the Company's Shares. Mr. Gray is a former officer and director and
an approximately 40% shareholder of CGI. Mr. Eyssell is a director and
approximately 14% shareholder of CGI.
Courtland Investments, Inc. ("CII").
The Company owns a 95% non-voting interest in CII. The other 5% (which
represents 100% of the voting stock) is owned by Masscap Investment
Company, Inc. ("MICI"), a wholly-owned subsidiary of Transco.
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<PAGE>
HMG-Fieber Associates ("Fieber").
The Company owns a 65% interest in Fieber, the other 35% of which is
owned by NAF Associates, a Connecticut general partnership. The partners
in NAF include the following related parties who hold the indicated
partnership interests in NAF: Mr. Fieber, a Director of the Company
(33.62%); James A. Fieber, Mr. Fieber's son (1.08%); Stanley S. Fieber,
M.D., Mr. Fieber's brother (7.59%); and Martine Avenue Associates
("Martine"), a New York general partnership in which Mr. Gray, a former
officer and current Director the Company, and Mr. Gray's sister are the
partners (13.02%).
HMG Advisory Corp. (the "Advisor").
Mr. Wiener is Chairman of the Board and Chief Executive Officer of the
Advisor. Mr. Rothstein is President, Treasurer, Secretary and a director
of the Advisor. Mr. Eyssell is a director of the Advisor. The Advisor
will be majority owned by Messrs. Wiener and Eyssell with the remaining
shares owned by certain officers of the Company.
The following discussion describes all material transactions, receivables and
payables involving related parties. All of the transactions below were on terms
as favorable to the Company as comparable transactions with unaffiliated third
parties.
Transco - South Bayshore Associates ("SBA").
SBA is a joint venture in which Transco and the Company hold interests of
25% and 75%, respectively. The major asset of SBA is a demand note from Transco,
bearing interest at the prime rate, with an outstanding balance of approximately
$433,000 in principal and interest as of April 30, 1997 compared to balances of
$425,000 and $420,000 as of December 31, 1996 and 1995, respectively. Beginning
in the first quarter of 1992, Transco started paying a minimum of $5,000 per
quarter on account of the note.
The Company holds a demand note (which is eliminated in consolidation)
from SBA bearing interest at the prime rate plus 1% with an outstanding balance
as of April 30, 1997 of approximately $896,000, in principal and accrued
interest, and outstanding balances as of December 31, 1996 and 1995 of
approximately $877,000 and $848,000, respectively, in principal and accrued
interest. No payments were made in 1995 and 1996, and accrued and unpaid
interest was not capitalized.
Transco - HMG Investment Corp.
The Company has advances and debentures receivable from HMG Investment
Corp., a wholly-owned subsidiary of Transco, which amount to approximately
$236,000 and $318,000, bearing interest at 8% and at the prime rate plus 2%,
respectively, and which are due on demand. As of January 2, 1990, the Company
began recognizing interest income on these notes as payments are received. No
payments were received in 1995 and 1996 and accrued and unpaid interest is not
being capitalized.
Courtland Group, Inc. ("CGI").
CGI currently handles the day-to-day operations of the Company pursuant
to an advisory agreement, the term of which expires December 31, 1997 and which
is not being renewed. As of April 30, 1997, the Company owed $486,000 to CGI,
compared to $417,000 due from CGI as of December 31, 1996 and 194,000 owed to
CGI as of December 31, 1995. Such sums bear interest at the prime rate plus 1%
and are due on demand. For further information about the remuneration paid to
CGI by the Company, and about the approval of the Advisory Agreement with the
Advisor, see "Approval of Advisory Agreement" below.
Courtland Investments, Inc. ("CII") - T.G.I.F. Texas, Inc. ("TGIF").
CII has investments in companies whose primary purpose is to make equity
investments in growth-oriented enterprises. CII owns approximately 49% of the
outstanding shares of TGIF, a publicly-held Texas corporation engaged in the
business of net leasing properties in the southeastern and southwestern United
States. Mr. Wiener is a director and officer of TGIF and owns, directly and
indirectly, approximately 18% of the outstanding common stock of TGIF. In the
fourth quarter of 1996, TGIF purchased 10,000 Shares of the Company at $5 per
Share, which was the market value at the time.
As of April 30, 1997, CII owed TGIF of $2,419,000, including accrued
interest, as compared to $2,455,000 and $579,000 as of December 31, 1996 and
December 31, 1995, respectively. These loans are due on demand and bear interest
at the prime rate plus 1%. Interest is payable annually in January. CII expects
to repay these loans with proceeds from distributions from its investments.
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<PAGE>
CII - Jack Baker 5th Avenue, Inc. ("Jack Baker").
In 1992, CII and certain Directors and officers of the Company acquired a
27% interest in Jack Baker and its affiliates. In 1993, that 27% interest was
increased to 85% in which CII has a 59% interest and certain Directors and
officers of the Company have a 41% interest. Jack Baker was a manufacturers'
representative which discontinued operations in 1996. CII's investments in and
loans to Jack Baker, with a net carrying value of approximately $46,000,
including accrued and unpaid interest, were written off as of December 31, 1996.
HMG-Fieber Wallingford Associates ("Wallingford").
In April of 1986, James A. Fieber, Trustee, acting for certain
beneficiaries (the "Jim Fieber Trust"), purchased from the Company a two-thirds
interest in a retail property located in Wallingford, Connecticut leased to
Grossman's, Inc. for $233,000 based on the appraised value of the retail
property, less existing indebtedness. Subsequently, on July 1, 1986, the Company
purchased from Transco its 8 1/3% interest in the Wallingford property and
concurrently entered into an agreement with James A. Fieber, Trustee, acting for
the Jim Fieber Trust, creating the joint venture HMG-Fieber Wallingford
Associates ("Wallingford"), owned two-thirds by James A. Fieber, Trustee, acting
for the Jim Fieber Trust, and one-third by the Company. Beneficiaries of the Jim
Fieber Trust included the following related parties: Norman A. Fieber, a
Director of the Company; James Fieber (Norman A. Fieber's son); and Martine
Avenue Associates ("Martine"), a New York general partnership in which Mr. Gray,
a former officer and current Director of the Company, and Mr. Gray's sister are
the partners and which held a 20% beneficial interest in the Jim Fieber Trust.
HMG-Fieber Associates ("Fieber").
On June 30, 1986, the Company purchased from Transco its 25% interest in
certain retail properties located in Connecticut, Maine, Massachusetts, New
Hampshire, New York, Pennsylvania, Rhode Island and Vermont and owned by South
Bayshore Associates, a joint venture owned 75% by the Company and 25% by
Transco. These properties were leased to Grossman's, Inc., a chain of home
improvement stores, under net leases, most of which provided for minimum and
percentage rent payments. The purchase price paid the Company was $1,500,000
plus the assumption of liabilities of $660,355. Concurrently, the Company sold
to NAF Associates, a Connecticut general partnership ("NAF"), a 35% interest in
the Grossman's stores for a price of approximately $2,100,000 plus the
assumption of liabilities of $924,497, and entered into an agreement with NAF
creating the joint venture HMG- Fieber Associates ("Fieber"). The purchase price
of Transco's 25% interest and of NAF's 35% interest were based on the appraised
value of the Grossman's stores, less existing indebtedness. The partners in NAF
include the following related parties who hold the indicated partnership
interests in NAF: Mr. Fieber, a Director of the Company (33.62%); James A.
Fieber, Mr. Fieber's son (1.08%); Stanley S. Fieber, M.D., Mr. Fieber's brother
(7.59%); and Martine, in which Mr. Gray and Mr. Gray's sister are the partners
(13.02%).
Fieber currently owns 13 retail stores which are leased to Grossman's,
Inc., a chain of home improvements stores, under net leases, most of which
provide for minimum and percentage rental payments. As of December 31, 1996, the
percentage of leases expiring in 1997, 1998, 1999 and after 1999 was 33%, 20%,
47% and 0%, respectively. Approximately half of these leases contain renewal
options of at least five years. In 1995, Fieber sold three stores recognizing a
total gain to the venture of approximately $810,000. In 1996, Fieber sold five
stores recognizing a total gain to the venture of approximately $2,567,000. As
of April 30, 1997, Fieber has sold two stores recognizing a total gain to the
venture of $1,008,000.
Inquiry Relating to HMG-Fieber Wallingford Associates and HMG-Fieber Associates.
On November 15, 1996, the Board of Directors appointed a Special
Committee of the Board to review Mr. Lee Gray's failure to disclose his
interest, through Martine, in NAF, the Company's 35% joint venture partner in
Fieber, as well as Mr. Norman A. Fieber's failure to disclose Mr. Gray's
interest in NAF. Mr. Gray's interest in NAF first came to the attention of the
Company in October of 1996. During the course of the inquiry, it was discovered
that Mr. Gray also had a beneficial interest in the Jim Fieber Trust, through
James A. Fieber, Trustee, the Company's 66 2/3% joint venture partner in
Wallingford, which venture operated from 1986 to 1992, and that James A. Fieber,
Mr. Fieber's son, and Stanley S. Fieber, M.D., Mr. Fieber's brother, were also
partners in NAF.
As a result of the inquiry, it was determined that in 1986, Mr. Gray,
through Martine, acquired a 13.02% interest in NAF and a 20% beneficial interest
in the Jim Fieber Trust, but did not then or at any time since disclose those
interests to the Board of Directors of the Company. Mr. Fieber, a partner in NAF
and a beneficial interest holder in the Jim Fieber Trust, also failed to
disclose Mr. Gray's interests in NAF and the Jim Fieber Trust.
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<PAGE>
A special meeting of the Board of Directors was held on March 21, 1997,
at which the Board considered the report of the Special Committee. Based on the
Special Committee's report and in consultation with counsel, the Board concluded
that Mr. Gray breached his fiduciary duty to the Company and to CGI by failing
to disclose his interest in NAF and Wallingford, and that Mr. Fieber breached
his fiduciary duty to the Company and assisted Mr. Gray by failing to disclose
Mr. Gray's interest in NAF and Wallingford. Based on information available to
the Company to date, it appears that, through December 31, 1996, Mr. Gray
derived a benefit of approximately $936,926 from Fieber and approximately
$193,670 from Wallingford.
The Board requested the resignation of Mr. Gray as President, Treasurer,
Director and as a member of the Audit Committee; requested the resignation of
Mr. Fieber as a Director and member of the Audit Committee; and requested that
the Board of Directors of CGI consider requesting the resignation of Mr. Gray as
President, Treasurer and a director of CGI.
Lee Gray has been removed as President and Treasurer of the Company, as a
member of the Audit Committee and as President and a director of CGI. Mr. Gray
has refused to resign as a Director of the Company. Norman A. Fieber has been
removed as a member of the Audit Committee of the Company and has refused to
resign as a Director of the Company. The Board has determined that Mr. Gray and
Mr. Fieber will not be renominated for election as Directors of the Company at
the 1997 Annual Meeting of Shareholders.
The Board also authorized, and the Company has made, the following
claims: against Mr. Gray, Martine, NAF and Mr. Fieber for the total amount of
the benefit received by Martine and Mr. Gray from NAF, in the approximate amount
of $936,926; against Mr. Gray, Martine, Mr. Fieber and James A. Fieber, Trustee,
for the total amount of the benefit received by Martine and Mr. Gray from
Wallingford, in the approximate amount of $193,670; and against Mr. Gray,
Martine, NAF, Mr. Fieber and James A. Fieber, Trustee, for reimbursement of all
expenses incurred by the Company in investigating and pursuing this matter to
resolution. The Board also directed that Mr. Gray, Martine, Mr. Fieber and NAF
surrender to the Company the entire interest in NAF held by Martine.
APPROVAL OF ADVISORY AGREEMENT
The New Advisory Agreement. At the 1996 annual meeting of shareholders,
the advisory agreement between the Company and Courtland Group, Inc. ("CGI") was
renewed for a one year term expiring on December 31, 1997. On April 4, 1997, the
Board of Directors approved a new advisory agreement (the "Advisory Agreement")
between the Company and HMG Advisory Corp. (the "Advisor") for a term commencing
following the expiration of the current advisory agreement with CGI. Under the
terms of the Advisory Agreement, it must be approved by the holders of a
majority of the Shares. If the holders of a majority of the Shares approve the
Advisory Agreement, the Advisory Agreement will be effective during the term
commencing on January 1, 1998 through December 31, 1998.
The following description of the Advisory Agreement contains a summary of
its material terms.
General Provisions. The Advisory Agreement is not assignable without the
consent of the unaffiliated Directors of the Company and the Advisor. The
Advisory Agreement provides that officers, directors, employees and agents of
the Advisor or of its affiliates may serve as Directors, officers or agents of
the Company.
Duties of Advisor. The Advisor in performing its duties under the
Advisory Agreement is at all times subject to the supervision of the Directors
of the Company and has only such authority as the Directors delegate to it as
their agent. The Advisor counsels and presents to the Company investments
consistent with the objectives of the Company and performs such research and
investigation as the Directors may request in connection with the policy
decisions as to the type and nature of investments to be made by the Company.
Such functions include evaluation of the desirability of acquisition, retention
and disposition of specific Company assets. The Advisor also is responsible for
the day-to-day investment operations of the Company and conducts relations with
mortgage loan brokers, originators and servicers, and determines whether
investments offered to the Company meet the requirements of the Company. The
Advisor provides executive and administrative personnel, office space and
services required in rendering such services to the Company. To the extent
required to perform its duties under the Advisory Agreement, the Advisor may
deposit into and disburse from bank accounts opened in its own name any money on
behalf of the Company under such terms and conditions as the Company may
approve.
Allocation of Expenses. Under the Advisory Agreement, the Advisor pays:
all salary and employment expenses of its own personnel and of the officers and
employees of the Company who are affiliates of the Advisor;
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<PAGE>
all of the administrative, rent and other office expenses (except those relating
to a separate office, if any, maintained by the Company) relating to its
services as Advisor; and travel (to the extent not paid by any party other than
the Company or the Advisor) and advertising expenses incurred in seeking
investments for the Company.
The Company is required to pay all expenses of the Company not assumed by
the Advisor, including, without limitation, the following: (a) the cost of
borrowed money; (b) taxes on income, real property and all other taxes
applicable to the Company; (c) legal, accounting, underwriting, brokerage,
transfer agent's, registrar's, indenture trustee's, listing, registration and
other fees, printing, engraving, and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, registration and stock
exchange listing of the Company's securities; (d) fees and expenses of advisors
and independent contractors, consultants, managers and other agents employed
directly by the Company; (e) expenses connected with the acquisition,
disposition or ownership of mortgages or real property or other investment
assets, including, to the extent not paid by any party other than the Company or
the Advisor, but not limited to, costs of foreclosure, costs of appraisal, legal
fees and other expenses for professional services, maintenance, repairs and
improvement of property, and brokerage and sales commissions, and expenses of
maintaining and managing real property equity interests; (f) the expenses of
organizing or terminating the Company; (g) all insurance costs (including the
cost of Directors' liability insurance) incurred in connection with the
protection of the Company's property as required by the Directors; (h) expenses
connected with payment of dividends or interest or distributions in cash or any
other form made or caused to be made by the Directors to holders of securities
of the Company, including a dividend reinvestment plan, if any; (i) all expenses
connected with communications to holders of securities of the Company and the
other bookkeeping and clerical work necessary in maintaining relations with
holders of securities, including the cost of printing and mailing checks,
certificates for securities and proxy solicitation materials and reports to
holders of the Company's securities; (j) to the extent not paid by borrowers
from the Company, the expenses of administering, processing and servicing
mortgage, development, construction and other loans; (k) the cost of any
accounting, statistical, or bookkeeping equipment necessary for the maintenance
of the books and records of the Company; (l) general legal, accounting and
auditing fees and expenses; (m) salaries and other employment expenses of the
personnel employed by the Company who are not affiliates of the Advisor, fees
and expenses incurred by the Directors, officers and employees in attending
Directors' meetings, and fees and travel and other expenses incurred by the
Directors and officers and employees of the Company who are not affiliates of
the Advisor.
Expenses relating to the grant of options to all officers and employees
of the Company under a plan approved by the shareholders of the Company are
borne by the Company.
Remuneration of the Advisor. For services rendered under the current
advisory agreement, CGI is entitled to receive as regular compensation a monthly
fee equal to the sum of (a) $72,917 (equivalent to $875,000 per year) and (b)
20% of the amount of any unrefunded commitment fees received by the Company with
respect to mortgage loans and other commitments which the Company was not
required to fund and which expired within the next preceding calendar month. In
1994, 1995 and 1996, CGI's annual regular compensation amounted to $875,000,
$875,000 and $875,000, respectively.
Under the Advisory Agreement, the Advisor will receive as regular
compensation a monthly fee equal to the sum of (a) $55,000 (equivalent to
$660,000 per year) and (b) 20% of the amount of any unrefunded commitment fees
received by the Company with respect to mortgage loans and other commitments
which the Company was not required to fund and which expired within the next
preceding calendar month.
The Advisory Agreement also provides that the Advisor shall receive
incentive compensation for each fiscal year of the Company equal to the sum of
(a) 10% of the realized capital gains (net of accumulated net realized capital
losses) and extraordinary non-recurring items of income of the Company for such
year, and (b) 10% of the amount, if any, by which Net Profits of the Company
exceed 8% per annum of the Average Net Worth of the Company. "Net Profits" is
defined as the gross earned income of the Company for such period (exclusive of
gains and losses from the disposition of assets), minus all expenses other than
non-cash charges for depreciation, depletion and amortization and the incentive
compensation payable to the Advisor, and minus all amounts expended for mortgage
amortization on long-term mortgage indebtedness, excluding extraordinary and
balloon payments. "Average Net Worth" is defined as the average of the amount in
the shareholders' equity accounts on the books of the Company, plus the
accumulated non-cash reserves for depreciation, depletion and amortization shown
on the books of the Company, determined at the close of the last day of each
month for the computation period.
- 8 -
<PAGE>
If and to the extent that the Company requests the Advisor, or any of its
directors, officers, or employees, to render services for the Company, other
than those required to be rendered by the Advisor under the Advisory Agreement,
such additional services are to be compensated separately on terms to be agreed
upon between such party and the Company from time to time, which terms must be
fair and reasonable and at least as favorable to the Company as similar
arrangements for comparable transactions of which the Company is aware with
organizations unaffiliated with the Advisor. CGI received fees of $30,000 and
$44,000, in 1996 and 1995, respectively, for managing certain of the Company's
affiliates.
Set forth below is the aggregate compensation paid to CGI during the two
fiscal years ended December 31, 1996:
<TABLE>
<CAPTION>
Form of Compensation Amount
-------------------- ------
1995 1996
---- ----
<S> <C> <C>
Regular compensation..................................................... $875,000 $875,000
20% of Unrefunded Commitment Fees........................................ $-0- $-0-
Incentive................................................................ $188,000 $191,746
Management Fees.......................................................... $44,000 $30,000
Total.................................................................... $1,107,000 $1,096,746
</TABLE>
Brokerage Fees Paid the Advisor. Under the Advisory Agreement, the
Advisor and its affiliates are prohibited from receiving from the Company any
brokerage or similar fees for the placement of mortgages or other investments
with the Company. However, the Advisor and its affiliates can receive normal
brokerage commissions from borrowers in connection with transactions involving
the Company, provided that such commissions are fully disclosed to all Directors
of the Company and the Directors approve of the transaction and that such
commissions (which to the extent paid by the borrower and retained by the
Advisor or its affiliates may reduce the yield to the Company) are fair and
reasonable and in accord with the prevailing rates in the locality in which the
transaction is consummated for the type of transaction involved. The Advisor and
its affiliates may, subject to the same terms and conditions, receive normal
brokerage commissions from sellers, buyers, lessees and other parties with whom
the Company engages in transactions.
Management of the Advisor
Set forth below are the names, offices with the Advisor and principal
occupations of the current executive officers and directors of the Advisor.
<TABLE>
<CAPTION>
Names and Offices
with the Advisor Principal Occupation
<S> <C>
Maurice Wiener............................................See "Election of Directors."
Chairman of the Board of
Directors and Chief
Executive Officer
Lawrence I. Rothstein.....................................Senior Vice President, Treasurer and Secretary of
President, Treasurer, Secretary the Company; Vice President, Treasurer, Secretary
and Director and Trustee of Transco.
Gustav S. Eyssell.........................................See "Election of Directors."
Director
Bernard Lerner............................................Vice President of the Company.
Vice President
Carlos Camarotti..........................................Vice President and Assistant Secretary of the
Vice President-Finance and.........................Company.
Assistant Secretary
</TABLE>
The Directors recommend that the shareholders approve the Advisory
Agreement. An affirmative vote by the holders of a majority of the Shares
present in person or by proxy at the Annual Meeting of Shareholders is required
for approval of the Advisory Agreement.
- 9 -
<PAGE>
INDEPENDENT ACCOUNTANTS
The Company has engaged BDO Seidman, LLP ("BDO"), its independent
accountant for the fiscal year ended December 31, 1996, as its independent
accountant for the fiscal year ending December 31, 1997.
Representatives of BDO are not expected to be present at the meeting.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition
to the use of the mails, proxies may be solicited by Directors, officers and
employees of the Company personally, by telephone or by telegraph.
OTHER BUSINESS
The Board of Directors is not aware of any business other than those
items referred to above to be presented for action at the meeting. However,
should any other matters requiring a vote of the shareholders arise, the agents
named in the accompanying proxy will vote in accordance with their own best
judgment.
In order for proposals of shareholders to be considered for inclusion in
the proxy materials for presentation at the 1998 annual meeting of shareholders,
such proposals must be received by the Company no later than January 23, 1998.
----------------------
A copy of the Annual Report on Form 10-KSB for the year ended December
31, 1996, including financial statements and schedules thereto, filed with the
Securities and Exchange Commission, may be obtained by shareholders without
charge upon written request to: Secretary, HMG/Courtland Properties, Inc., 2701
South Bayshore Drive, Coconut Grove, Florida 33133.
----------------------
YOU CAN SAVE YOUR COMPANY ADDITIONAL EXPENSE BY SIGNING
AND RETURNING YOUR PROXY AS PROMPTLY AS POSSIBLE
- 10 -
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
Proxy
Solicited on Behalf of the Board of Directors
The undersigned shareholder of HMG/COURTLAND PROPERTIES, INC. ("Company")
hereby appoints MAURICE WIENER as attorney and proxy to vote as designated on
the reverse all shares of Common Stock which the undersigned is entitles to vote
at the Annual Meeting of Shareholders of the Company to be held at Grove Isle
Club and Resort, 4 Grove Isle Drive, Coconut Grove, Florida on Friday, June 27,
1997 at 11:30 a.m. and at any adjournment or adjournments thereof.
(Continued and to be signed on reverse side)
1. Election of Directors. 2. Proposal to approve the
Advisory Agreement between the
Nominees: M. Wiener, W. Arader, J. Bailey, Company and HMG Advisory Corp.
H. Comita, G. Eyssell. FOR [ ]
AGAINST [ ]
FOR [ ] ABSTAIN [ ]
WITHHELD [ ]
For, except vote withheld from the following
nominee(s): _____________________________ 3. In their discretion, upon
such other matters as may
properly come before the meeting
or any adjournment thereof, all
in accordance with the Company's
Proxy Statement, receipt of
which is hereby acknowledged.
This proxy when properly executed will be voted in accordance with the above
instructions. In the absence of such specifications this proxy will be voted FOR
Proposals 1 and 2.
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.
SIGNATURE(S)___________________________________________ DATE __________
(Please sign exactly as your name appears hereon. Persons signing as executors,
trustees, guardians, etc., please so indicate when signing.)
