UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
HMG/COURTLAND PROPERTIES, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
2701 South Bayshore Drive
Coconut Grove, Florida 33133
------------------------------
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 7, 1998
------------------------------
July 14, 1998
TO THE SHAREHOLDERS:
The annual meeting of shareholders of HMG/Courtland Properties, Inc. (the
"Company") will be held at 10:30 A.M., on August 7, 1998 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 the renewal of the 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 June 30, 1998.
Enclosed is a copy of the Company's Annual Report for the fiscal year ended
December 31, 1997.
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 July 14, 1998. 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 June 30, 1998 are
entitled to notice of and to vote at the meeting. On that date, there were
1,100,235 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 June 30, 1998, Transco Realty Trust
("Transco"), 2701 South Bayshore Drive, Coconut Grove, Florida 33133, was the
beneficial owner of 477,300 Shares, or 43% of the outstanding Shares. As of June
30, 1998, Barry S. Halperin, 441 South Federal Highway, Deerfield Beach, Florida
33441, was the beneficial owner of 66,900 Shares, or 6% 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
566,830 shares, or 52% 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, except Lawrence I. Rothstein who was
appointed as a director by the Board of Directors in April 1998. Gustav Eysell
passed away on January 28, 1998 after having served as a director for over 26
years.
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.
1
<PAGE>
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.
<TABLE>
<CAPTION>
Shares Held as of June 30, 1998(1)
Principal Occupation or Shares Owned Additional Shares in
Name, Age, Year First Employment During the by the which the Nominee
Became a Director or Past Five Years Other Nominee or has, or Participates in,
Officer of the Company than with the Company Members of the Voting or Total Shares and
and Other Information His Family(1) Investment Power(2) Percent of Class
- ----------------------------- ----------------------------- ------------------ ------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Maurice Wiener Chairman of the Board 35,100(4) 541,830(3) 576,930(3),(4)
56-1974 and Chief Executive 49%
Chairman of the Board Officer of the Advisor;
of Directors, President Executive Trustee,
and Chief Executive Transco Realty Trust;
Officer Director, T.G.I.F. Texas,
Inc.; Trustee, Heitman
Real Estate Fund;
Chairman of the Board
and Chief Executive
Officer of CGI
Lawrence I. Rothstein Director, President, 25,000(4) 541,830(3) 566,830
45-1983 Treasurer and Secretary 48%
Director, Senior Vice- of Advisor; Trustee and
President, Treasurer Vice-President of
and Secretary Transco; Director,
President, and Secretary
of CGI
Walter G. Arader President, Arader, Herzig 12,800(4) 0 12,800(4)
78-1977 and Associates, Inc. 1%
Director (financial and
management consultants);
Director, The Pep Boys -
Manny, Moe & Jack;
Director, Unitel Video,
Inc.; Former Secretary of
Commerce,
Commonwealth of
Pennsylvania
John B. Bailey Real estate consultant; 7,100(4) 0 7,100
71-1971 Retired CEO, Landauer *
Director Associates, Inc. (real
estate consultants)
(1977-1988)
Harvey Comita President and Director of 5,000(4) 477,300(5) 482,300
68-1992 Pan-Optics, Inc. (1971- 41%
Director 1991); Director of Mediq,
Incorporated (1981-
1991); Trustee, Transco
Realty Trust
2
<PAGE>
Principal Occupation or Shares Owned Additional Shares in
Name, Age, Year First Employment During the by the which the Nominee
Became a Director or Past Five Years Other Nominee or has, or Participates in,
Officer of the Company than with the Company Members of the Voting or Total Shares and
and Other Information His Family(1) Investment Power(2) Percent of Class
- ----------------------------- ----------------------------- ------------------ ------------------------- ---------------------
All 7 Directors and 95,000(4) 541,830(3) 636,830
Executive Officers as a 54%
Group
- ---------------------------
<FN>
* Less than one percent
(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).
Several of the Directors of the Company are directors, trustees, officers
or shareholders of Transco, CGI and T.G.I.F. Of those Shares owned by
Transco, 24,350 have been pledged to a brokerage firm pursuant to a margin
agreement.
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. 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. Rothstein, 15,000; 5,000 each to Mr. Arader, Mr.
Bailey, and Mr. Comita; and a total of 10,000 to two officers who are not
directors. Reference is made to "Compensation of Directors and Executive
Officers and Other Transactions" for further information about the 1990
Stock Option Plan.
(5) This number represents the number of shares held by Transco, of which Mr.
Comita is a Trustee.
</FN>
</TABLE>
Meetings of the Board of Directors
The Board of Directors held three meetings during 1997. 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.
3
<PAGE>
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. Comita and Arader were appointed to the Audit Committee by the
Board of Directors effective April 4, 1997 replacing Messrs. Gray and Fieber.
See "Certain Transactions" for further information regarding the removal of
Messrs. Gray and Fieber from the Audit Committee. 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 1997.
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 1997.
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 1997, 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 1997, the Stock Option Committee, under the 1990
Stock Option Plan, did not grant any options.
<TABLE>
<CAPTION>
December 31, 1997 Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options as of
Options as of December 31, 1997 December 31, 1997 (1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------------- ----------------------------------------- ----------------------------------
<S> <C> <C>
Maurice Wiener 30,000/0 $0/0
Chief Executive Officer
Lawrence I. Rothstein 15,000/0 $0/0
Senior Vice President
Walter G. Arader 5,000/0 $0/0
Director
John B. Bailey 5,000/0 $0/0
Director
Harvey Comita 5,000/0 $5,625/0
Director
<FN>
(1) This value is based on the December 31, 1997 closing price for the
Company's Shares on the American Stock Exchange of $4 7/8, or $4.8750, per
Share.
</FN>
</TABLE>
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
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<PAGE>
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, 1997.
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 publicly-held 43% shareholder of the Company. Mr. Wiener is
the executive trustee and an officer of Transco and holds approximately 25% of
Transco's stock. Mr. Rothstein serves as a trustee and an officer of Transco.
Mr. Comita serves as a trustee of Transco.
Courtland Group, Inc. ("CGI").
Mr. Wiener is a director and officer of CGI, which owns 21% of Transco's
stock and owns approximately 5% of the Company's common stock. Mr. Wiener is
Chairman of the Board and a 40% shareholder of CGI. Mr. Rothstein serves as
Director and President of CGI. CGI served as the advisor of the Company during
the year ended December 31, 1997.
HMG Advisory Corp. (the "Advisor").
Effective January 1, 1998, the Advisor became the new advisor of the
Company. The Advisor is principally owned by Maurice Wiener, its Chairman and
CEO and a Director. Mr. Rothstein serves as President, Treasurer, Secretary and
a Director of the Advisor.
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 a wholly-owned subsidiary of
Transco.
CII and its wholly-owned subsidiary own 100% of Grove Isle Club, Inc.,
Grove Isle Yacht Club Associates and Grove Isle Marina, Inc. CII also owns 15%
of Grove Isle Associates, Ltd., and the other 85% is owned by the Company.
On May 31, 1997, CII sold a 45% partnership interest in GIA, Ltd. to the
Company for approximately $4.6 million. This transaction was between
consolidated subsidiaries and accordingly had no impact on the consolidated
financial statements of the Company.
HMG-Fieber Associates ("Fieber").
The Company also owns a 65% interest in Fieber and the other 35% is owned
by NAF Associates ("NAF"). The partners in NAF include the following related
parties: Norman A. Fieber, a former director of the Company (33.62%), Norman A.
Fieber's son, James A. Fieber, (1.08%), Norman A. Fieber's brother, Stanley S.
Fieber, M.D. (7.59%), and Martine Avenue Associates (Martine), a New York
general partnership in which Mr. Gray, a former officer and director of the
Company, and Mr. Gray's sister are the partners (13.02%). The Company discovered
in May 1998 that Martine was liquidated and dissolved in 1996.
5
<PAGE>
The following discussion describes all material transactions, receivables and
payables involving related parties. All of the transactions described below were
on terms as favorable to the Company as comparable transactions with
unaffiliated third parties.
The Advisor.
The day-to-day operations of the Company are handled by the Advisor.
Reference is made to "Approval of Advisory Agreement" below for further
information about the duties and remuneration of the Advisor.
CGI.
As of December 31, 1997 and 1996, CGI owed the Company $205,000 and
$417,000, respectively. Such sums bear interest at the prime rate plus 1% and
are due on demand.
Transco.
As of December 31, 1997, the Company has a note and accrued interest
receivable from Transco of $450,000 compared to $425,000 as of December 31,
1996. This note bears interest at the prime rate and is due on demand.
CII - T.G.I.F. Texas, Inc.
CII owns approximately 49% of the outstanding shares of T.G.I.F. Texas,
Inc. ("T.G.I.F."). Mr. Wiener is a director and officer of T.G.I.F and owns,
directly and indirectly, approximately 18% of the outstanding shares of T.G.I.F.
As of December 31, 1997, T.G.I.F. has amounts due from Mr. Weiner in the amount
of approximately $170,000. These amounts are due on demand and bear interest at
the prime rate. Also, T.G.I.F. owns 10,000 shares of the Company at $5 per share
which was the market value at the time of purchase. The Advisor receives a
management fee of $18,000 per year from T.G.I.F.
As of December 31, 1997 and 1996, CII owed approximately of $3.1 million
and $2.5 million, respectively to T.G.I.F. All advances between CII and T.G.I.F.
are due on demand and bear interest at the prime rate plus 1%.
CII- Grove Isle.
In 1986, CII acquired from the Company the rights to develop the marina at
Grove Isle for a promissory note of $620,000 payable in 10 years at an annual
interest rate equal to the prime rate. The principal matures on January 2, 2001.
Interest payments are due each January 2. Because the Company consolidates CII,
the note payable and related interest income are eliminated in consolidation.
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
$450,000 in principal and interest as of December 31, 1997 compared to a balance
of $425,000 as of December 31, 1996. 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 from SBA bearing interest at the prime rate
plus 1% with an outstanding balance as of December 31, 1997 of approximately
$935,000, in principal and accrued interest, compared to a balance of $877,000,
in principal and accrued interest, as of December 31, 1996. No payments were
made in 1997 and 1996, and accrued and unpaid interest was not capitalized.
Because the Company consolidates SBA, the note payable and related interest
income are eliminated in consolidation.
HMG-Fieber Wallingford Associates.
In April of 1986, James A. Fieber, Trustee, acting for The Fieber Group
purchased from the Company a two-thirds interest in a store located in
Wallingford, Connecticut leased to Grossman's, Inc., a chain of home
6
<PAGE>
improvement stores, for $233,000 based on the appraised value of the store, less
existing indebtedness. Subsequently, on July 1, 1986, the Company purchased from
Transco its 8-1/3% interest in the Wallingford store and concurrently entered
into an agreement with The Fieber Group creating the joint venture titled
HMG-Fieber Wallingford Associates, owned two-thirds by James A. Fieber, Trustee,
acting for The Fieber Group, and one-third by the Company. Partners in The
Fieber Group included the following related parties: Norman A. Fieber, a former
director of the Company, James Fieber (Norman A. Fieber's son) and Martine
Avenue Associates, a New York general partnership in which Mr. Gray, a former
officer and director of the Company, and Mr. Gray's sister are the partners.
HMG-Fieber Associates ("Fieber").
On June 30, 1986, the Company purchased from Transco its 25% interest in
certain retail stores 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 stores were leased to Grossman's, Inc. 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 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
titled HMG-Fieber Associates. 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. NAF is a Connecticut general partnership,
the partners of which include the following related parties: Norman A. Fieber, a
former director of the Company (33.62%), James A. Fieber, Norman A. Fieber's son
(1.08%), Stanley S. Fieber, M.D., Norman A. Fieber's brother (7.59%), and
Martine Avenue Associates, a New York general partnership in which Mr. Gray, a
former officer and director the Company, and Mr. Gray's sister are the partners
(13.02%).
Inquiry and Litigation Relating to HMG-Fieber Wallingford Associates and
HMG-Fieber Associates.
The Company has made certain claims and taken certain other actions against
Lee Gray, a former officer and Director of the Company, Norman A. Fieber, a
former Director of the Company, and certain related parties. The Company's
claims and actions arose from the failure of Messrs. Gray and Fieber to disclose
Mr. Gray's and Mr. Gray's sister's interest in the Company's HMG-Fieber
Wallingford Associates and HMG- Fieber Associates joint ventures (the "Joint
Ventures") and the inquiry into Messrs. Gray's and Fieber's failure to disclose
Mr. Gray's and Mr. Gray's sister's interest in HMG-Fieber Associates by a
Special Committee appointed by the Board of Directors (the "Inquiry"). The
Company is currently party, as both plaintiff and defendant, to litigation in
two jurisdictions stemming from the Inquiry and the actions taken by the Company
and Courtland Group, Inc., a Delaware corporation ("CGI"), subsequent to the
Inquiry. A summary of the Inquiry and the resulting litigation follows.
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 and his sister's
interest, through Martine Avenue Associates ("Martine"), a partnership of Mr.
Gray and his sister, in NAF Associates ("NAF"), the Company's 35% joint venture
partner in HMG-Fieber Associates ("Fieber"), as well as Mr. Norman A. Fieber's
failure to disclose Mr. Gray's and Mr. Gray's sister's interest in NAF. Mr.
Gray's interest in NAF first came to the attention of the Company in October of
1996. James A. Fieber, Norman A. Fieber's son, and Stanley Fieber, Norman A.
Fieber's brother, are also partners in NAF. During the course of the Inquiry, it
was discovered that Mr. Gray and his sister also had an interest in a group of
investors organized by Mr. Fieber ("The Fieber Group"), the Company's 66-2/3%
joint venture partner in HMG-Fieber Wallingford Associates, which venture
operated from 1986 to 1992.
As a result of the Inquiry, it was determined that in 1986, Mr. Gray and
his sister, through Martine, acquired a 13.02% interest in NAF and a 20%
interest in The Fieber Group, but did not then or at any time since disclose
those interests to the Board of Directors of the Company. Norman A. Fieber, a
partner in both
7
<PAGE>
NAF and The Fieber Group, also failed to disclose to the Company Mr. Gray's and
Mr. Gray's sister's interests in NAF and The Fieber Group.
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 the Advisor by
failing to disclose his and his sister's interest in NAF and The Fieber Group,
and that Mr. Norman A. Fieber breached his fiduciary duty to the Company and
assisted Gray by failing to disclose Mr. Gray's and Mr. Gray's sister's interest
in NAF and The Fieber Group.
In March 1997, 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. Norman A. 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 Director of CGI.
In April 1997, Mr. Gray was removed as President and Treasurer of the
Company and as a member of the Audit Committee and as President and a Director
of CGI. Mr. Gray refused to resign as a director of the Company. In April 1997,
Norman A. Fieber was removed as a member of the Audit Committee of the Company
but refused to resign as a director of the Company. Mr. Gray and Mr. Norman A.
Fieber were not reelected as directors of the Company at the 1997 Annual Meeting
of Shareholders.
HMG Courtland Properties, Inc. v. Lee Gray et al.
On July 2, 1997, the Company filed suit in the Court of Chancery of the
State of Delaware in and for New Castle County against Lee Gray (individually
and as a partner in Martine Avenue Associates); Norman A. Fieber (individually
and as a partner in NAF Associates); Betsy Gray Saffell (Lee Gray's sister)
(individually and as a partner in Martine Avenue Associates); Martine Avenue
Associates, a New York general partnership in which Mr. Gray and Mrs. Saffell
are the general partners ("Martine"); NAF Associates, a Connecticut general
partnership in which Mr. Fieber and Martine are general partners and the
Company's joint venture partner in HMG-Fieber Associates ("NAF"); and The Jim
Fieber Trust, a trust for The Fieber Group (beneficiaries include Mr. Fieber and
Martine) and the Company's joint venture partner in HMG-Fieber Wallingford
Associates (the "Trust"). James A. Fieber, son of Norman A. Fieber, serves as a
trustee of the Trust.
The Company's lawsuit is based on the facts underlying the Board of
Directors' conclusion, based upon the report of the Special Committee following
the Inquiry and in consultation with counsel, that Mr. Gray breached his
fiduciary duties to the Company and by failing to disclose his and his sister's
interest in the Joint Ventures, and that Mr. Fieber breached his fiduciary duty
to the Company and assisted Mr. Gray by failing to disclose Mr. Gray's and Mr.
Gray's sister's interest in the Joint Ventures. The Company's suit makes the
following claims: (i) breach of fiduciary duty against Mr. Gray' (ii) breach of
fiduciary duty against Mr. Fieber; (iii) aiding the abetting against Mr. Fieber,
Mrs. Saffell, Martine, NAF and the Trust; (iv) usurpation of a corporate
opportunity against all defendants; (v) common law fraud against Messrs. Gray
and Fieber; and (vi) conspiracy against all defendants. Relief being sought by
the Company includes: (i) damages; (ii) imposition of constructive trust for the
benefit of the Company over, and an accounting of, the defendant's interests in
the Joint Ventures; (iii) a recision of the transactions which created the Joint
Ventures; and (iv) a disgorgement of all interests and profits derived by all
the defendants from the Joint Ventures. The lawsuit is currently in discovery.
The Company believes strongly that its claims are meritorious and intends to
vigorously pursue all legal remedies against all defendants.
8
<PAGE>
Lee Gray v. HMG/Courtland Properties, Inc. et al.
On May 22, 1997, Lee Gray, a former director and officer and a shareholder
of the Company and a former officer and director and a shareholder of CGI, which
served as the Company's advisor pursuant to an advisory agreement which expired
December 31, 1997, filed suit in the Circuit Court of the 11th Judicial Circuit
in and for Dade County, Florida against the following defendants: (i) the
Company; (ii) all of the directors and certain of the officers of the Company
and of CGI; (iii) CGI; and (iv) HMG Advisory Corp., a Delaware corporation that
began service as the Company's advisor on January 1, 1998 pursuant to the
advisory agreement approved by the shareholders at the Company's Annual Meeting
held on June 27, 1997 (the "Advisor").
In his lawsuit, Mr. Gray, individually and derivatively as a shareholder of
CGI, alleges, among other things, that his removal as an officer of the Company,
his failure to nominated for reelection as Director of the Company, his
subsequent removal as an officer and director of CGI and the Board of Directors'
decision not to renew the Company's former advisory agreement with CGI, were the
product of a conspiracy involving certain officers and Directors of the Company
and of CGI who wanted to force Mr. Gray out of the Company and CGI, and to
terminate the Company's advisory agreement with CGI, for their own financial
gain. Mr. Gray has also alleged that he was libeled in the discussion of the
Inquiry and the results thereof in certain documents, including documents filed
with the Securities and Exchange Commission. Mr. Gray is seeking money damages
in excess of $15,000, punitive damages, and temporary and permanent injunctive
relief on the following grounds: (i) breach of fiduciary duty against the
directors and certain of the officers of the Company; (ii) libel against the
Company and the directors and certain of the officers of the Company; (iii)
breach of fiduciary duty against the officers and directors of CGI; and (iv)
tortious interference with an advantageous business relationship against
defendants Advisor and the officers and directors of CGI.
On July 10, 1997, the Company filed a motion to dismiss the portion of the
lawsuit directed against it and its directors. The motion to dismiss was granted
November 18, 1997. On December 1, 1997, Mr. Gray filed an amended complaint that
seeks to reinstate the libel claim against the Company. The Company has moved to
stay proceedings in this case pending the outcome of the Company's Delaware
action. The motion is currently subjudice. The Company and its officers and
directors believe strongly that they have meritorious defenses to, and intend to
vigorously defend against, the claims made by Mr. Gray.
CGI filed a motion to dismiss the tortious interference claims directed
against it as described in (iv) above which was granted. The Advisor filed a
motion to dismiss the portion of the lawsuit directed against it which was
granted. The Advisor is no longer a party to the litigation.
Norman A. Fieber v. HMG/Courtland Properties, Inc. et al.
On July 8, 1997, Norman A. Fieber, NAF Associates and James A. Fieber,
Trustee (collectively, the "Fieber Plaintiffs") filed a separate lawsuit against
the Company in the Superior Court of the State of Connecticut,
Fairfield/Bridgeport Judicial District. In their lawsuit, the Fieber Plaintiffs
are seeking a declaratory judgment absolving them of any liability to the
Company on essentially all of the issues and claims being considered in the
Company's lawsuit in Delaware discussed above.
On August 27, 1997, the Company moved to dismiss, or in the alternative,
stay this action on the grounds that the declaratory judgment action was
inappropriate given the pendency of the Company's prior pending lawsuit in
Delaware. This motion was never decided. On June 16, 1998, the Fieber Plaintiffs
filed a notice of withdrawal of their claims and the matter is now terminated.
9
<PAGE>
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
January 1, 1998 and expiring December 31, 1998. The Advisory Agreement was
approved by a majority of the shareholders of the Company at the 1997 Annual
Meeting of Shareholders on June 27, 1997. The Advisory Agreement is
substantially the same as the former advisory agreement but with a 25% reduction
in the regular compensation paid to the Advisor.
The Advisor is majority owned by Mr. Wiener with the remaining shares owned
by certain officers, including Mr. Rothstein. The officers and directors of the
Advisor are as follows: Maurice Wiener, Chairman of the Board and Chief
Executive officer; Lawrence I. Rothstein, President, Treasurer, Secretary and
Director; Carlos Camarotti, Vice President - Finance and Assistant Secretary;
and Bernard Lerner, Vice President. On April 3, 1998, the Board of Directors
approved the renewal of the Advisory Agreement. Under the terms of the Advisory
Agreement, the renewal must be approved by the holders of a majority of the
Shares. If the holders of a majority of the Shares approve the renewal of the
Advisory Agreement, the Advisory Agreement will be renewed for a one year term
commencing on January 1, 1999 through December 31, 1999.
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 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; 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,
10
<PAGE>
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, the Advisor is entitled to 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. In 1995, 1996 and 1997, CGI's annual regular compensation amounted to
$875,000, $875,000 and $875,000, respectively.
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.
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 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
11
<PAGE>
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 $30,000, in 1997 and 1996, 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, 1997:
Form of Compensation Amount
1996 1997
Regular Compensation ....................... $ 875,000 $ 875,000
20% of Unrefunded Commitment Fees .......... -0- -0-
Incentive .................................. 192,000 386,000
Management Fees ............................ 30,000 30,000
---------- ----------
Total ...................................... $1,097,000 $1,291,000
========== ==========
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.
Names and Offices
with the Advisor Principal Occupation
Maurice Wiener........................See "Election of Directors."
Chairman of the Board of
Directors and Chief
Executive Officer
Lawrence I. Rothstein.................Senior Vice President, Treasurer,
President, Treasurer, Secretary Secretary and Director of the Company;
and Director Vice President, Treasurer, Secretary and
Trustee of Transco.
Bernard Lerner........................Vice President of the Company.
Vice President
Carlos Camarotti......................Vice President and Assistant Secretary of
Vice President-Finance and the Company.
Assistant Secretary
12
<PAGE>
The Directors recommend that the shareholders approve the 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
Agreement.
INDEPENDENT ACCOUNTANTS
The Company has engaged BDO Seidman, LLP ("BDO"), its independent
accountant for the fiscal year ended December 31, 1997, as its independent
accountant for the fiscal year ending December 31, 1998.
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 1999 annual meeting of shareholders,
such proposals must be received by the Company no later than January 23, 1999.
----------------------
A copy of the Annual Report on Form 10-KSB for the year ended December 31,
1997, 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
13
<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 entitled 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, August 7,
1998 at 10:30 a.m. and at any adjournment or adjournments thereof.
(Continued and to be signed on reverse side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
HMG/COURTLAND PROPERTIES, INC.
August 7, 1998
| Please Detach and Mail in the Envelope Provided |
V V
A[X] Please mark your
votes as in this
example.
1. Election of FOR WITHHELD 2. Proposal to approve renewal of
Directors [__] [__] the Advisory Agreement between
Nominees: M. Wiener the Company and HMG Advisory
L. Rothstein Corp. FOR AGAINST ABSTAIN
W. Arader [__] [__] [__]
J. Bailey
H. Comita 3. In their discretion, upon such
FOR, except vote withheld from the following other matters as may properly
nominee(s): 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.)
