UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
AMENDMENT NO. 4
Filed by the Registrant [x] Filed by a Party other than Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
The Deltona Corporation
- ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[x] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
Common Stock, $1.00 Par Value
2) Aggregate number of securities to which transaction applies:
4,044,277
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):
$200,000.00*
* The price per unit is the product of the pre-reverse split price of
$0.40 per share to be paid for fractional shares and the reverse split
ratio of 500,000 ($0.40 x 500,000 = $200,000.00).
4) Proposed maximum aggregate value of transaction:
$1,617,711
5) Total fee paid:
$323.54
[ ] 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:
PRELIMINARY
THE DELTONA CORPORATION
8014 S.W. 135TH STREET ROAD
OCALA, FL 34470
(352) 307-8100
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ________________, 200__
As a shareholder of The Deltona Corporation (the "Company"), you are hereby
given notice of and invited to attend in person or by proxy the Special Meeting
of Shareholders of the Company to be held at the Woodland Pavilion, 312 Marion
Oaks Boulevard, Marion Oaks, Florida 34473 on _________, 200__, at 9:30 AM,
local time, for the following purposes:
1. To consider and act upon a Reverse Stock Split of the Company's
Company's common stock that would result in the shareholders receiving
one share of our common stock for every 500,000 shares of our common
stock that they currently own. The Reverse Stock Split and related
cash purchase by the Company of fractional shares at a rate of $.40
per share resulting from the reverse stock split is proposed to take
the Company private.
2. To consider and act upon an amendment to the Company's Articles of
Incorporation to reduce the Company's authorized common stock from
15,000,000 shares to 30 authorized shares, which is in proportion to
the Reverse Stock Split.
3. To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
The Board of Directors has fixed the close of business on _____________, 200__,
as the record date (the "Record Date") for the determination of shareholders
entitled to notice of and to vote at such meeting and any adjournment thereof.
Only shareholders at the close of business on the Record Date are entitled to
notice of and to vote at such meeting. The transfer books will not be closed.
You are cordially invited to attend the meeting. HOWEVER, WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING, MANAGEMENT DESIRES TO HAVE THE MAXIMUM
REPRESENTATION AT THE MEETING AND RESPECTFULLY REQUESTS THAT YOU DATE, EXECUTE
AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED STAMPED ENVELOPE FOR WHICH
NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. A proxy may be
revoked by a shareholder by notifying the Secretary of the Company in writing at
any time prior to its use, by executing and delivering a subsequent proxy or by
personally appearing at the Annual Meeting and casting your vote, each as
specified in the enclosed proxy statement.
By order of the Board of Directors
/s/ Sharon J. Hummerhielm
Executive Vice President and
Corporate Secretary
Ocala, Florida
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE ENCLOSED
PROXY CARD IN THE ENVELOPE PROVIDED.
PRELIMINARY
PROXY STATEMENT
THE DELTONA CORPORATION
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _____________, 200__
TO OUR SHAREHOLDERS:
This Proxy Statement is furnished to the shareholders of The Deltona Corporation
(the "Company") for use at a Special Meeting of Shareholders on ____________,
200__, or at any adjournment or adjournments thereof, for the purposes set forth
in the accompanying Notice of Special Meeting of Shareholders. The enclosed
proxy is solicited on behalf of the Board of Directors of the Company and can be
revoked at any time prior to the voting of the proxy (as provided herein).
Unless a contrary choice is indicated, all duly executed proxies received by the
Company will be voted as follows:
1. FOR the approval of a Reverse Stock Split of the Company's common stock that
would result in the shareholders receiving one share of our common stock for
every 500,000 shares of our common stock that they currently own. The Reverse
Stock Split and related cash purchase by the Company of fractional shares
resulting from the reverse stock split is proposed to take the Company private.
2. FOR the approval of an amendment to the Company's Articles of Incorporation
to reduce the Company's authorized common stock from 15,000,000 shares to 30
authorized shares which is in proportion to the Reverse Stock Split.
In the event the Reverse Stock Split is approved, fractional shares will be
purchased from holders at a rate of $.40 per share of existing stock. Two
shareholders, Yasawa Holdings, N.V., a Netherlands Antilles corporation, and
Selex International, B.V., a Netherlands corporation, both of which are
controlled by Antony Gram, an officer and director of the Company, will cause
the shares owned or controlled by them, 9,919,041 shares or 73.23% of the
outstanding shares, to be voted in favor of the reverse stock split and for the
proposed amendment to the Company's Articles of Incorporation. As a result,
approval of these matters is assured. Antony Gram is Chairman of the Board of
Directors, President and CEO of the Company. Following completion of the reverse
stock split, Yasawa Holdings, N.V. and Selex International, B.V., will together
own 100% of the Company's outstanding shares. The Company, Mr. Antony Gram,
Yasawa Holdings, N.V., Selex International, B.V., and Wilbury International,
N.V. ("Filing Persons") have filed a Schedule 13e-3 in connection with the
proposed reverse stock split and the proposed Amendment to the Articles of
Incorporation.
The record of shareholders entitled to vote at the Special Meeting was taken at
the close of business on ______________, 20__(the "Record Date"). A list of all
stockholders of record as of __________________20__, the record date for the
Special Meeting, will be available from _____ through ________ for any
stockholder to examine at our Miami office, 999 Brickell Avenue, Suite 700,
Miami, Florida 33131, and at our headquarters in Ocala at 8014 SW 135th Street
Road, Ocala, Florida 34473. The approximate date on which this Proxy Statement
and the enclosed proxy are first being sent to shareholders is ___________,
200__. The principal executive offices of the Company are located at 8014 S.W.
135th Street Road, Ocala, Florida.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE PROPOSED TRANSACTIONS, PASSED ON
THE MERITS OF THE PROPOSED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE DISCLOSURE IN THE DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT OR RELATED SCHEDULE 13E-3,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
1
SUMMARY TERM SHEET
This summary highlights selected information from this Proxy Statement and may
not contain all of the information that is important to you. To better
understand the terms and conditions of the Reverse Stock Split, as well as the
consequent Amendment to our Articles of Incorporation, you should carefully read
Page 4 this entire document, its attachments and the other documents to which we
refer.
WHAT ARE THE PRINCIPAL PURPOSES OF THE PROPOSED REVERSE STOCK SPLIT AND THE
PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION?
o Allowing the Company to "go private" and thereby relieving it of
the expense of SEC compliance.
o Allowing the Company to react more quickly to corporate
opportunities.
o Allowing unaffiliated shareholders to liquidate their
shareholdings.
WHAT WILL I RECEIVE IF THE REVERSE STOCK SPLIT IS APPROVED?
If the Reverse Stock Split is approved by the shareholders and implemented:
o Shareholders owning fewer than 500,000 shares will receive $.40
for each share presently held by them. Following the Proposed
Reverse Stock Split, two shareholders, Yasawa and Selex which are
controlled by Antony Gram and which own more than 500,000 shares
each, will remain. Antony Gram, as well as all of the officers
and directors who own or control the voting of the Company shares
intends to vote in favor of the reverse stock split, assuring its
adoption.
o The procedure for this exchange is described below under the
caption "Exchange of Certificates and Payment of Fractional
Shares".
o No new certificates representing fractional shares will be
issued. Instead, fractional shares will be purchased from holders
at a rate of $.40 per share. This transaction will not
involve commissions or other transaction fees that would be
charged if you sold shares on the open market. We estimate that
up to an aggregate of approximately $1,617,711 will be paid
to approximately 1,763 of our shareholders for their
resulting fractional shares.
o The payment of cash in lieu of fractional shares is described
below under the caption "PROPOSAL ONE--Exchange of Certificates
and Payment of Fractional Shares".
HOW WILL THE ARTICLES OF INCORPORATION BE AMENDED?
o Our Articles of Incorporation will be amended to reduce the
number of authorized shares of our common stock in the same
500,000 for one ratio, from 15,000,000 shares to 30 authorized
shares, which is in proportion to the Reverse Stock Split.
o The reduction in the number of authorized common shares is
described below under the caption "PROPOSAL ONE--Reverse Stock
Split and Proposed Amendment to the Company's Articles of
Incorporation".
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WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE REVERSE STOCK SPLIT AND THE
REDUCTION OF AUTHORIZED SHARES?
O Advantages. All but the majority of shares controlled by Antony
Gram will be purchased at $.40 per share allowing investors to
liquidate their investments. The reduction in the number of
shareholders will allow the Company to deregister as a public
company.
O Disadvantages. Most existing shareholders will no longer own
shares in the Company. Though shareholders have never received
dividends since the Company's incorporation, unaffiliated
shareholders will not receive dividends or participate in any
future success of the Company. The $.40 per share to be paid to
unaffiliated shareholders may not represent the fair value of
their shares. No special committee of independent directors was
appointed to consider and approve the terms of the reverse stock
split, nor were the terms of the reverse stock split negotiated
on an arms-length basis. Unaffiliated shareholders will pay taxes
on any gain realized over their basis in their shares.
WHAT CONFLICTS OF INTEREST EXIST?
O Antony Gram is the beneficial owner of a majority of the
outstanding shares of the Company and is the President, CEO and
Chairman of the Board of Directors of the Company. A majority of
the members of the Board are relatives of Antony Gram or are
employees of entities controlled by Antony Gram. As such, he is
able to dictate the Company's actions. Selex and Yasawa and
Antony Gram through his ownership in each will be the sole
beneficial holders of the remaining shares of the Company. While
no special committee of independent directors was appointed to
consider and approve the terms of the proposed reverse stock
split and Amendment to the Company's Articles of Incorporation,
the Company's two independent unaffiliated Directors did consider
alternatives and the fairness of the proposed reverse stock split
and recommended it to the Board.
WHAT DOES "GOING PRIVATE" MEAN?
o There will then be two record shareholders remaining, less than
300 shareholders of record of our common stock, and registration
of our common stock under the Securities Exchange Act of 1934, as
amended, will be terminated, resulting in the delisting for our
common stock from the OTC Bulletin Board.
o Going private is described below under the caption "PROPOSAL
ONE--Reverse Stock Split and Proposed Amendment to the Company's
Articles of Incorporation".
o If the Reverse Stock Split is approved, we would not have to
provide our shareholders with information that we currently
provide, such as annual, quarterly and other reports required to
be filed by us with the Securities and Exchange Commission (the
"SEC").
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o Our common stock will no longer be quoted on the OTC Bulletin
Board, and there may be no public market for the new common
stock.
o The delisting of our common stock is described below under the
caption "Reverse Stock Split and Proposed Amendment to the
Company's Articles of Incorporation."
ARE THE REVERSE STOCK SPLIT AND REDUCTION OF AUTHORIZED SHARES FAIR TO
SHAREHOLDERS WHOSE INTERESTS IN DELTONA WILL BE PURCHASED?
o The independent, unaffiliated Directors, the Audit Committee and
Board of Directors believe the reverse split and purchase of
fractional shares at $.40 per share is fair to shareholders
unaffiliated with Antony Gram.
o The independent, unaffiliated Directors, the Audit Committee and
Board of Directors have reviewed the opinions of Miller Advisory
Group that the reverse stock split is fair to
unaffiliated shareholders.
DO I HAVE APPRAISAL OR DISSENTER'S RIGHTS?
o Under Delaware law, the law governing the Reverse Stock Split,
you do not have the right to demand the appraised value of your
shares (dissenter's rights) if you vote against the proposed
transaction. Your rights are described under " Appraisal Rights
and Dissenter's Rights."
WHAT ARE THE TAX IMPLICATIONS OF THE REVERSE STOCK SPLIT?
o Shareholders who receive cash in lieu of fractional shares of New
Common Stock will be treated as receiving cash as payment in
exchange for their fractional shares of New Common Stock, and
they will recognize a capital gain or loss in an amount equal to
the difference between the amount of cash received and the
adjusted basis of the fractional shares surrendered for cash.
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SPECIAL FACTORS
PURPOSES, ALTERNATIVES, REASONS AND EFFECTS OF THE PROPOSED REVERSE STOCK SPLIT
AND REDUCTION OF AUTHORIZED SHARES
Purposes. The 500,000 for one Reverse Stock Split, purchase of fractional shares
and reduction of the number of authorized shares have been unanimously approved
by our Board of Directors and are proposed to take us private by reducing the
number of shareholders of record to two, which is less than 300, thereby: (i)
relieving us of the costs of filing public documents; (ii) react more quickly to
corporate opportunities; and (iii) permitting unaffiliated shareholders to
liquidate their shares.
The Board of Directors and the Filing Persons believe that because of the
Company's losses over several years, the Existing Common Stock has remained very
thinly traded and has provided little liquidity for the Company's shareholders,
particularly those shareholders with larger equity positions in the Company. In
addition, because of the low trading volume and illiquidity of the Existing
Common Stock, the Company has not been able to utilize the shares as a source of
financing for its capital needs. For these reasons the Company has not been able
to realize the principal benefits of public ownership and the Company's
management expects no change in the situation regarding the Existing Common
Stock for the foreseeable future.
The Board of Directors and the Filing Persons believe that the Company would be
unable to obtain necessary funding for its operations from outside sources. As a
result, shareholders presently bear a substantial risk that the Company would be
unable to operate if the funding provided by Mr. Antony Gram were not available.
As a private company with two shareholders, the Company would have the ability
to react more quickly to corporate opportunities requiring shareholder
approvals, such as potential mergers or sales of the Company's assets. Neither
the Company nor any of the continuing shareholders are presently aware of any
such corporate opportunities.
The Board of Directors and the Filing Persons also believe that there are
considerable costs and detriments to the Company in remaining a public reporting
company. As part of its registration under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Company incurs direct and indirect costs
associated with compliance with the filing and reporting requirements imposed on
public companies. Examples of direct costs savings from termination of
registration of common shares include lower printing and mailing costs; less
complicated disclosure due to the company's private status; reduction in direct
expenses such as word processing, EDGARizing, telephone and telefax charges
associated with Securities and Exchange Commission filings; and elimination of
the charges of brokers and transfer agents in forwarding materials to beneficial
owners. The Company also believes that there will be a reduction in audit fees.
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The Company also incurs substantial indirect costs as a result of executive time
expended to prepare and review such Exchange Act filings. Ceasing registration
of the common stock will reduce or eliminate these costs.
Based on its experience in prior years, the Company's direct costs, which
include a portion of the fees and expenses of independent auditors, printing,
mailing and SEC filing fees are estimated at approximately $105,200 annually.
These expenses are made up of Director's fees ($55,200); transfer agent's fees
($10,000); printing and mailing ($10,000); legal and accounting ($20,000); and
miscellaneous other expenses ($10,000). This amount, however, is just an
estimate, and the actual savings to be realized may be higher or lower than such
estimate. In addition, the SEC, pursuant to the Sarbanes-Oxley Act of 2002 and
other initiatives, is adopting expanded rules and regulations. The additional
costs to appropriately respond to such expanded rules and regulations are not
readily determinable at this time. It is expected that any savings will not be
realized until the fiscal year ending December 31,2004. However, the Company
cannot guarantee that the benefits of going private will be accomplished as
rapidly as currently expected, or at all.
If the Reverse Stock Split is approved and implemented, the number of
shareholders of record of the Company's common shares will be reduced to two.
The Company intends to terminate the registration of the common stock under the
Exchange Act pursuant to Section 12(g)(4) of the Exchange Act. The decision by
the Company to terminate Exchange Act registration upon implementation of the
Reverse Stock Split does not require shareholder approval and will not be voted
on at the Special Meeting. The Company's duty to file periodic reports with the
SEC, such as quarterly and annual reports, will end once the Company's
securities are no longer registered under the Exchange Act, and the Company's
common stock will no longer be quoted on the OTC Bulletin Board, where it
currently is quoted.
The Company's Existing Common Stock was traded on the New York and Pacific Stock
Exchanges under the symbol DLT until April 6, 1994, when the Company's stock was
formally suspended from trading. The stock was subsequently delisted from both
exchanges. Since August 31, 1994, the Company's existing common stock was traded
on a limited basis in the over-the-counter markets.
The 1994 delisting of the Existing Common Stock resulted in progressively less
trading activity in the Company's Existing Common Stock, less liquidity for its
shareholders and diminished opportunities for future equity financing of the
Company's capital requirements. While a relisting of the Existing Common Stock
on the NASDAQ SmallCap Market System or the NASDAQ National Market System would
be desirable, such a relisting with either market system would require the
Company's compliance with much more stringent market price and market value
criteria that the Company currently does not meet.
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The Company's management does not expect the Existing Common Stock to meet the
relisting criteria of either market system in the foreseeable future.
Upon the approval of the reverse stock split, the Company will have two
beneficial stockholders and there will be no market for the Company's shares.
In consideration of the aforementioned reasons, based on the recommendations of
two independent directors, the Company's Board of Directors on December 13,
2001, approved, subject to approval by the Company's shareholders, a proposal to
effect the Reverse Stock Split and the Amendment. On March 7, 2003, at a special
meeting of the Board of Directors, the Board and the two independent directors
re-affirmed their December 13, 2001, recommendation.
Alternatives. The Board of Directors considered several alternatives to the
proposed reverse stock split and related amendment to the Articles of
Incorporation reducing the number of authorized shares (the "related
amendment"). The Board considered a reverse split ratio which would have allowed
the Company to become a private company having fewer than 300 shareholder but
retaining more than two shareholders. The Board rejected this alternative as
being unfair to the remaining larger unaffiliated shareholders who would then no
longer have even a limited market in which to sell their shares, thereby
effectively denying such shareholders the value of their shares until such time
as the Company were to pay dividends or the assets of the Company were sold. The
Board also considered the alternative that the Company make a tender offer for
its shares. The Board rejected this alternative. While a tender offer which was
contingent upon acceptance of less than 100% of the unaffiliated shareholders
could allow shareholders who wished to remain shareholders of a non-public
company, this alternative was rejected because it also could result in
shareholders' retaining their interests in the Company through inaction rather
than choice or could fail to achieve its purpose if fewer than the minimum
required number of shareholders accepted the tender. As a result, any tender
offer would have been made contingent upon 100% acceptance by unaffiliated
shareholders. Thus, such a tender offer would achieve the same result as a
reverse stock split without presenting any advantages over a reverse stock
split, but also presenting the disadvantage that the Board's goal of reducing
the number of unaffiliated shareholders below 300 affiliated shareholders would
be defeated in the event less than 100% of the unaffiliated shareholders
accepted the tender.
The reverse stock split and related amendment are structured in such a way that
following the approval of the reverse stock split and related amendment only the
two largest shareholders of the Company will remain, Yasawa Holdings, N.V.
("Yasawa")and Selex International, B.V. ("Selex"). Yasawa and Selex are
controlled by Antony Gram, thus resulting in two (2) beneficial owners following
the reverse stock split. The Company presently requires an annual capital
infusion of approximately $4,000,000. The Company's public status has not aided
the Company in funding its continuing capital requirements. Such funds have been
provided most recently by Swan Development, a company owned and controlled by
Antony Gram. The market for the Company's stock has been relatively inactive
with long periods transpiring in which no Company stock is traded. The Company's
public status has minimal benefit to the Company and its shareholders and incurs
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an annual expense of approximately $ 105,200, which does not take into account
the many hours and days that officers, directors and other employees spend in
assuring compliance with SEC regulations. In addition, the SEC, pursuant to the
Sarbanes-Oxley Act of 2002 and other initiatives, is adopting expanded rules and
regulations. The additional costs to appropriately respond to such expanded
rules and regulations are not readily determinable at this time.
The need for continuing capital infusion appears to be ongoing. The Company has
incurred operating losses from 1990 to 2000. While the Company recorded an
operating profit for 2001, the Company nevertheless required a capital infusion
of approximately $4,100,000. The Company incurred an operating loss in 2002 and
required an additional capital infusion of $3,300,000 in 2002. The profit
recorded for 2001 had no effect on the Board's decision to propose the reverse
stock split and Amendment to the Articles of Incorporation. While the Company
showed a modest operating profit in 2001, its cash flow requirements of over
$4,000,000 were only met as a result of loans made to the Company through
affiliates of Antony Gram. Moreover, a portion of the profit was attributable to
the recalculation and reduction of debt reserves. The Company experienced a loss
of $1,593,000 in 2002. The Company was required to borrow approximately $3.3
million from affiliates of Antony Gram.
Interests of Certain Persons. Antony Gram is the beneficial owner of a majority
of the outstanding shares of the Company and is the President, CEO and Chairman
of the Board of Directors of the Company. As such, he is able to dictate the
Company's actions. Antony Gram, through his holdings in Yasawa and Selex, will
be the sole beneficial holder of the remaining shares of the Company.
Reasons and Effects. At the Board of Directors' May 8, 2001 meeting, management
expressed its view that the Company and its shareholders are deriving little, if
any, benefit from the Company's being a public company. The Company is presently
incurring considerable costs in time and money to maintain this status.
The request that the Board investigate and then initiate a transaction to go
private was initiated by George W. Fischer and Thomas B. McNeill, both of whom
are independent, nonaffiliated directors. Neither of them will own shares
following the completion of the proposed reverse stock split. Both Mr. Fischer
and Mr. McNeill were concerned that the continued viability of the Company was
dependent on the funding provided by entities controlled by Mr. Gram and that in
the event that funding was not available, the Company would be unable to raise
funds through outside sources. Mr. Fischer has overseen the structuring and
negotiating of the terms of the reverse stock split on behalf of the Company.
The purchase price of $.40 per share to be paid for fractional shares was
reached through discussions of the Board, including Mr. Antony Gram and Mr.
Fischer.
8
The Board considered the advantages and disadvantages of being a private company
and unanimously directed management to conduct a preliminary cost and
feasibility study of going private, including a determination of the rights of
dissenting shareholders.
The proposed reverse stock split would present potential disadvantages to
unaffiliated shareholders. Unaffiliated shareholders will not receive dividends
or participate in any future success of the Company. The $.40 per share to be
paid to unaffiliated shareholders may not represent the fair value of their
shares. A special committee of independent directors was not appointed to
consider and approve the terms of the reverse stock split, nor were the terms of
the reverse stock split negotiated on an arms-length basis. Unaffiliated
shareholders will pay taxes on any gain realized over their basis in their
shares.
The Board of Directors and the Filing Persons believe that the disadvantages to
unaffiliated shareholders are outweighed by the benefits to the unaffiliated
shareholders. No dividends have ever been paid by the Company and are unlikely
to be paid in the foreseeable future. The Board of Directors and the Filing
Persons believe the structure of the proposed the reverse split is appropriate
for the following reasons. The Company may or may not operate at a loss for the
foreseeable future. The Board of Directors and the Filing Persons undertook the
proposed reverse split at this time because there was little benefit to the
Company's shareholders from ownership of shares in a public company (largely as
the result of the financial condition of the Company) and the financial
condition of the Company was not expected to change. In view of the fact that
the Company's stock is thinly traded, the Board and the Filing Persons believe
that the unaffiliated shareholders are more likely to receive a greater economic
benefit as a result of the redemption of their share ownership through the
reverse stock split than by maintaining the Company's present status.
The proposed reverse stock split will also provide advantages to the
shareholders remaining after the reverse stock split, Yasawa Holdings and Selex
International. The continuing shareholders alone will realize the benefits from
the reduced costs (and the strategic opportunities) of the Company's being
private, but will be assume the entire risk of unprofitable operations and the
need to fund operations.
The Company management also met with outside legal counsel to discuss a Reverse
Stock Split as well as other options for taking the Company private. After
discussion with legal counsel and other advisors as to the options available,
management determined that a Reverse Stock Split was the most feasible in the
Company's current situation. By direction of the Board of Directors, management
engaged legal counsel and a financial advisor to assist the Company in pursuing
the proposed Reverse Stock Split.
9
The Company's two independent non-affiliated Directors, considered the possible
alternatives and the proposed terms of the reverse stock split and recommended
that the Board of Directors propose such a transaction to the shareholders.
At the Board of Directors' December 13, 2001, meeting, management reported that
taking the Company private could be accomplished through the process of going
private through a Reverse Stock Split, with cash being paid for fractional
shares that result. Management reported that a 500,000:1 Reverse Stock Split to
take the number of shareholders of record below 300 had been evaluated, and that
in management's opinion the 500,000:1 ratio was preferable in order to avoid
discriminating against larger unaffiliated shareholders. The Board discussed the
fairness of the Reverse Stock Split to the shareholders who will receive New
Common Stock. Because of the cost savings associated with no longer being a
public company and the perceived greater prospects going forward for expanded
strategic alternatives, the Board concluded that a reverse stock split would be
fair to such shareholders. The Board considered that during the preceding
thirty-six month period, the Company had not received any bona fide offers from
any person for (i) the merger or consolidation of the Company into or with any
person, (ii) the sale or other transfer of all or any substantial part of the
assets of the Company, or (iii) securities of the Company which would enable the
holder thereof to exercise control of the Company. The Company during this
period did not solicit any third party offers to merge or acquire the Company,
nor did it authorize any member of the Board of Directors or unaffiliated party
to do so.
In consideration of management's evaluation and the recommendation of the Audit
Committee's two independent, non-affiliated Directors, the Board authorized a
500,000:1 Reverse Stock Split, subject to the approval of the Company's
shareholders. The Board considered the fairness opinions of the Miller Advisory
Group wherein a price of $200,000.00 per share on a post-split basis ($.40 per
share on a pre-split basis) to be paid for fractional shares resulting from a
500,000:1 Reverse Stock Split was determined to be fair to those shareholders
receiving such payment for fractional shares.
The Board reviewed the duties of the Board of Directors under Delaware law in
evaluating a reverse stock split and discussed the preparation of documents to
be filed with the SEC in this regard. Also at this meeting, after the completion
of the presentations and discussions, the Board approved a 500,000:1 Reverse
Stock Split with $0.40 per pre-split share being paid for all Fractional Shares
resulting, and all corporate actions necessary in connection with these
undertakings, was approved unanimously to be placed for a vote before the
Company's shareholders special meeting of Shareholders.
10
The Company and its Board of Directors, Antony Gram, George W. Fischer, Rudy
Gram, Thomas B. McNeill and Christel DeWilde, are proposing the Reverse Stock
Split at this time because:
o The Company incurred an operating loss for the years 1998, 1999
2000 and 2002; and
o The cost of remaining a public company continues to grow while no
corresponding benefit to the Company and its shareholders is
expected in the foreseeable future.
o The market for the Company's shares is extremely limited.
o This will enable unaffiliated shareholders to redeem their
shares at $.40 per share on a pre-split basis.
Failure to approve the Reverse Stock Split would require a continuation of
incurring the substantial costs of being a public company without a
corresponding benefit. The Company had 13,544,277 shares of common stock issued
on the Record Date. If the Proposed Reverse Stock Split and the Proposed
Amendment to the Articles of Incorporation are approved and implemented, each
share of Existing Common Stock will automatically be reclassified into 0.000002
of a fully paid and non-assessable share of New Common Stock without any further
action on the part of the shareholders. Assuming no change in the number of
outstanding shares from the Record Date if the Reverse Stock Split is approved,
the currently outstanding shares of Existing Common Stock will be converted into
shares of New Common Stock. The Company estimates that approximately 1,758
shareholders will hold fractional shares after the Reverse Stock Split, which
fractional shares will be purchased at a total cost of approximately $1,617,711
or $0.40 per share for each of the 4,044,277 pre-split shares.
Adoption of the reverse stock split and related amendment are assured in view of
Mr. Antony Gram's statement that he intends to cause shares controlled by him to
be voted in favor of both proposals. The effect of the reverse stock split and
related amendment will be to purchase the shares of all shareholders not
affiliated with Mr. Antony Gram for a price of $.40 per share on a pre-split
basis.
11
CERTAIN EFFECTS OF REVERSE STOCK SPLIT PROPOSAL ON THE COMPANY'S SHAREHOLDERS
Interests of Certain Persons
1. Rights, Preferences and Limitations. There are no differences between
the respective rights, preferences or limitations of the Existing Common Stock
and the New Common Stock. If the Reverse Stock Split is approved and
implemented, the percentage interests held by all but two current shareholders
will be reduced to zero with the interests of the continuing shareholders being
significantly increased, with Yasawa Holdings owning approximately 73.68% of
outstanding shares (14 shares) and Selex International owning approximately
26.32% of outstanding shares (5 shares). There will be no differences with
respect to dividend, voting, liquidation or other rights associated with the
Company's common stock before or after the Reverse Stock Split.
If the Reverse Stock Split is approved, the Company's Articles of Incorporation
will be amended to change the authorized common stock from the currently
authorized 15,000,000 shares to 30 authorized shares. The Company will then have
19 shares issued and outstanding and 11 shares authorized but unissued.
No commitments, plans, understandings or agreements have been made by the Board
of Directors or the officers of the Company for use of the authorized but
unissued stock.
If the Board of Directors issues additional shares of New Common Stock in the
future, the then current shareholders may suffer dilution of their present
interests in the Company, to the extent such future issuances do not involve the
then current shareholders of the Company.
2. Financial Effect. The Reverse Stock Split and expenses related to the
transaction will not have a material effect on the Company's Balance Sheet,
Income Statement or Cash Flow.
The Reverse Stock Split will require a restatement of the Company's earnings per
share and book value.
The total number of fractional shares to be purchased is estimated to be
approximately 4,044,277 at a cost of approximately $1,617,711. The cost of the
Reverse Stock Split transaction will come from the Company's available cash
balances and from a loan to be made by Swan Development Corporation, an entity
controlled by Mr. Antony Gram, pursuant to the Company's existing Additional
Advance Promissory Note with Swan, as are the Company's other current loans. The
loan will be repaid by the Company monthly by the transfer of contracts
receivables at 90% of face value, with recourse.
12
The total expenses incurred or expected to be incurred in connection with the
proposed reverse stock split and Amendment of the Articles of Incorporation is
$119,323 being comprised of $25,000 in legal fees, $10,000 in accounting fees,
$323 in filing fees, $44,000 for Fairness Opinion fees, costs and expenses,
$15,000 in transfer agent fees, $10,000 in printing and mailing costs, and
$15,000 in miscellaneous expenses and disbursements.
3. Effect on Market for Shares. The Company estimates that the number of
shares of New Common Stock outstanding after the Reverse Stock Split, if
effected, will be 19 shares in the hands of two shareholders. As a result, there
will be no market for the Company's shares.
The Company has no current plans to issue additional shares of stock, but the
Company reserves the right to do so at any time and from time to time at such
prices and on such terms as the Board determines to be in the best interests of
the Company and its then shareholders. Persons who continue as shareholders
following implementation of the Reverse Stock Split proposal will not have any
preemptive or other preferential rights to purchase any of the Company's stock
that may be issued by the Company in the future, unless such rights are
currently specifically granted to such shareholder.
4. Termination of Exchange Act Registration of New Common Stock. The
Reverse Stock Split proposal will affect the public registration of the New
Common Stock with the SEC under the Exchange Act, as the Company intends to
terminate this registration as soon as practicable after approval of the Reverse
Stock Split proposal by the shareholders. The Company may terminate registration
under the Exchange Act if the New Common Stock is no longer held by 300 or more
shareholders of record. Termination of registration of the New Common Stock
under the Exchange Act would substantially reduce the information required to be
prepared, mailed and furnished by the Company to its shareholder and to the SEC
and would make certain provisions of the Exchange Act, such as proxy statement
disclosure in connection with shareholder meetings and the related requirement
of an annual report to shareholders, no longer applicable to the Company.
With respect to the executive officers and directors of the Company, in the
event of the intended termination of registration of the New Common Stock under
the Exchange Act: (a) executive officers, directors and other affiliates would
no longer be subject to many of the reporting requirements and restrictions of
the Exchange Act, including without limitation the reporting and short-swing
profit provisions of Section 16 thereof. Upon termination of Exchange Act
registration, the Company will continue to be subject to the general anti-fraud
provisions of federal and applicable state securities laws.
13
FAIRNESS OF THE PROPOSED REVERSE STOCK SPLIT
The Board of Directors of the Company and the Filing Persons believe that the
proposed reverse split and related amendment to the Articles of Incorporation is
fair to the unaffiliated shareholders of the Company and is fair to and in the
best interest of the Company. They are supported in their views by the expert
opinions of Miller Advisory Group, attached as an exhibit hereto. All officers
and directors of the Company, including Mr. Antony Gram, Mr. Rudy Gram, Mr.
George W. Fischer, Ms. Hummerhielm and Mr. McNeill intend to vote in favor of
the proposed reverse stock split and Amendment to the Articles of Incorporation
and each have made a recommendation in support of both proposals as being in the
best interests of the Company and its unaffiliated shareholders.
Procedural Fairness. The proposed reverse split and related amendment to the
Articles of Incorporation have not been structured so that approval of a least a
majority of unaffiliated shareholders is required. A majority of directors who
are not employees of the Company have not retained an unaffiliated
representative to act solely on behalf of unaffiliated shareholders for purposes
of negotiating the terms of the proposed reverse split or of preparing a report
concerning the fairness of the transaction. The proposed reverse split was
unanimously approved by the independent, non-affiliated directors of the
Company, excluding Antony Gram, his son, Rudy Gram, and his financial advisor,
Christel DeWilde. The Board of Directors and the Filing Persons believe that the
proposed reverse stock split and related Amendment to the Articles of
Incorporation is procedurally fair because the recommendation of the Board has
been unanimous and the shares of the unaffiliated Board members, Mr. Fischer and
Mr. McNeill, will be eliminated by the proposed reverse stock split. No
determination has been made as to whether Mr. Fischer or Mr. McNeill will
continue to serve as directors following the proposed reverse stock split.
Other Offers. Except as described below, the Company has not received any firm
offers during the past two years to merge or consolidate the Company with or
into another company or vice versa, to sell or transfer all or any substantial
part of the assets of the Company, or to sell sufficient securities that would
enable the holder to exercise control of the subject company.
The Company did have initial discussions with a potential buyers of the
Company's Sunny Hills Development in 2000 and 2001, but was unable to reach an
agreement regarding all material terms. On May 18, 2000, and on June 2, 2000,
Sunny Hills Partners, L.C. offered to purchase 12,700 acres of Sunny Hills
Development for $5,000,000 cash or $8,255,000 with Seller financing. The offer
was rejected by the Board of Directors on May 31, 2000. On June 2, 2000, Sunny
Hills Partners increased its offer to $10,000,000 cash or $11,600,000 with
Seller financing. This offer was rejected by the Board on June 14, 2000. On
September 21, 2000, Sunny Hills Partners offered to purchase 12,700 acres for
14
$10,500,000 in cash. This offer was accepted by the Board on September 22, 2000,
subject to several conditions, including the Buyer's agreeing to pay documentary
stamps and title insurance expenses. The purchase was not completed because
Sunny Hills Partners was unable to obtain financing. On October 3, 2000 Southern
Pine Plantations of Florida offered to purchase approximately 12,457 acres in
Sunny Hills for $4,982,000 in cash. The Board rejected the offer on October 13,
2000. On July 6, 2001, Lou Schwartz, Esq., acting on behalf of an undisclosed
client, provided a non-binding letter of interest to purchase all remaining
Sunny Hills lots for $9,000,000 in cash with a 90-day inspection period with
closing in six months based on a $250,000 binder. The offer was rejected by the
Board. On December 18, 2001, Morningside Development Group, LLC, acting through
Lou Schwartz, Esq., offered a memorandum of understanding for an exclusive
option to purchase all remaining inventory and property in Sunny Hills with an
option term extending through January 31, 2022, with a price per lot of $900
initially, escalating to $1,100 in 2007, $1,300 in 2012, and $1,500 in 2017. The
Board rejected the proposal.
Value. The Board and the Filing Persons did not discern any factors that weighed
against the fairness of the Proposed Stock Split. The belief of the Company and
of the Filing Persons that the proposed reverse split and related amendment to
the Articles of Incorporation is fair and that the consideration offered to
unaffiliated security holders constitutes fair value is based on consideration
of a number of factors, including the following:
Liquidation Value. In considering the fairness of the Proposed Reverse Stock
Split, the liquidation value of the Company was given little weight by the Board
of Directors and the filing Persons because of the Company's large debt, and
because of the cost of development of the land, and because of the absence of
potential buyers for the Company's unimproved land.
As of December 31, 2002, 2001 and 2000, the Company's total liabilities exceeded
the book value of its total assets by $9,832,000, $8,317,000 and $8,839,000,
respectively. The Company's total liabilities as of March 31, 2003, were
$22,042,000; while the book value of its assets was $12,553,000. Liquidation at
book value as of March 31, 2003, would have resulted in a negative net
liquidation value of ($9,489,000). For financial reporting purposes, land
inventory is carried at cost, which is not in excess of fair value, taking into
consideration the costs to complete and sell.
The Company has not acquired an independent third party appraisal for its real
property inventory. For purposes of this evaluation process and for use in the
preparation of financial statements, as of March 31, 2003, management of the
Company calculated for all assets an estimated selling price. Management
utilized those amounts to estimate fair value of the Company's remaining
15
properties at March 31, 2003, net of estimated disposition costs. Values were
developed for the estimated net realizable value for the assets based upon
management's experience and beliefs. The estimation process involved in the
determination of net realizable value is inherently uncertain since it requires
estimates as to future events and market conditions. Such estimation process
assumes the ability to complete development and dispose of real estate
properties in the ordinary course of business based on management's plans and
intentions. Economic, market, environmental and political conditions may affect
management's developme nt and marketing plans. In addition, the implementation
of such development and marketing plans could be affected by the availability of
future financing for development and construction activities. Accordingly, the
ultimate values of the Company's real estate properties are dependent upon
future economic and market conditions, the availability of financing, and may
require the resolution of political, environmental and other related issues that
have not yet been identified.
Subject to these limitations, management of the company believes that as of
March 31, 2003, the aggregate net realizable value of all of its assets in the
normal course of business was approximately $26,300,000. This net realizable
value, if achieved, then after settlement of all obligations, would result in a
net value of approximately $4,250,000, or $0.31 per share. However, these
management determined fair values can be achieved through the continued orderly
development of the sites and after obtaining substantial additional capital. The
additional required development costs, time, and the illiquidity of the
undeveloped land contribute to management's belief that the value of all of the
Company's real estate in its present condition would be insufficient to give the
Company a positive liquidation value.
As of December 31, 2002, the real property labeled "Inventories" in the
Company's financial statements represents the following: "Unimproved" land is
primarily comprised of land which may not be resold because it is either
undevelopable, or is common area, or is recreational area. Land in various
stages of development includes the majority of the Sunny Hills development
(12,537 unimproved lots) and a portion of the Marion Oaks subdivision (1,967
unimproved lots). These lots are unimproved, requiring roads, drainage and the
like. Before lots can be sold on the retail market, they must develop with roads
and drainage. The value of the real property is shown at cost. Historically, the
additional, substantial average cost to develop these lots has been
approximately $3,500 per lot. On this basis, the cost to develop the 12,537
unimproved lots in the Sunny Hills development would be estimated at
approximately $43,879,000 and to develop the 1,967 unimproved lots in the Marion
Oaks subdivision would be esti mated at approximately $6,884,000. "Fully
improved" land reflects these development costs. As of December 31, 2002, the
Sunny Hills development had 700 improved lots and the Marion Oaks subdivision
had 1,246 improved lots. The Company also owns a negligible number of lots in
other locations.
16
Stated otherwise, the value of all of the Company's real estate in its present
condition is insufficient to give the Company a positive Liquidation value.
Going Concern Value of the Company. In considering the fairness of the Proposed
Reverse Stock Split, the Board of Directors and the Filing Persons gave little
weight to the going concern value of the Company in light of the financial
requirements presented by the Company's negative cash flow, substantial
borrowing needs and the development cost of its real property. The Company's
statements of consolidated cash flows as of December 31, 2000, and December 31,
2001, reflect that the Company lacks sufficient cash flow to pay its operating
obligations as they come due. Based on the December 31, 2001 Statements of
Consolidated Cash Flows, any purchaser of the Company as a going concern would
be required to inject approximately $4,000,000 per year to maintain the business
in its present state.
Historic and Current Market Price in the Company's Stock. The Board and the
Filing Persons gave the greatest consideration to the current and historic
market value of the Company's common stock, the value of which has averaged well
under $.40 per share over the last 60 months. The market value of the Company's
stock on December 31, 2001, was $0.35 per share, as of July 22, 2002, was $0.30
per share and as of May 1, 2003, was $0.312 per share. The historic market value
of the Existing Common Stock ranged between a high of $0.687 and a low of $0.062
for the period January 1997 to March 2003. The trading volume of the Company's
common shares has been relatively thin. The total number of shares traded in
2002 was 991,400; 2001 was 505,100; 714,300 for 2000; 757,500 for 1999; and
662,800 for 1998. Over this period, there were weeks in which no shares of the
stock were traded. For example, during the month of October 2001, only 500
shares were traded. A significant amount of the stock purchases were made by
Rudy Gram. From September 1996 to August 2001, Mr. Gram purchased 324,378 shares
at prices ranging from $.22 per share to $.40 per share and which averaged $.30
per share. Without those purchases, the Board and the Filing Persons believe the
market value of the Company's stock most likely would have been far less,
because there would have been significantly less demand for the Company's stock.
REPORTS, APPRAISALS AND NEGOTIATIONS
On September 5, 2001, the Board of Directors retained Miller Advisory Group
("Miller") to act as its financial advisor and to render an opinion with respect
to fairness, from a financial point of view to the company shareholders of the
proposed purchase price for fractional shares ("Opinion"). In requesting
Miller's fairness opinion, the Board of Directors did not give any special
instructions to Miller or impose any limitations upon the scope of the
investigations that Miller deemed necessary to enable it to deliver its Opinion.
17
The Company received an Opinion from an outside expert, Miller, relating to the
fairness of the consideration to be offered to unaffiliated shareholders dated
March 5, 2002. Miller's opinion was updated on April 7, 2003, taking into
account the information contained in the Company's annual report on Form 10-K
filed March 14, 2003 and updated information regarding the market price of the
Company's shares. The Opinions stated that the purchase price of $.40 per share
for fractional shares of the Company's common stock was fair from a financial
point of view to the unaffiliated shareholders of the Company. Miller was
selected by the Board of Directors because Miller had previously provided
financial services to the Company in 1997 concerning the transaction in which
stockholders, other than Selex and Yasawa, voted to approve a debt restructuring
that gave Selex and Yasawa its 73.23% share ownership, which it presently has.
The Board of Directors considered Miller to be qualified to render an Opinion
with regard to the fairness of the proposed reverse split by virtue of Ronald L.
Miller's background. The Company has not had any material relationship in the
past two years with Miller or with Ronald L. Miller other than the engagement to
render the Opinions with regard to the proposed reverse split and no other
relationship is contemplated. The Board of Directors determined the amount of
consideration to be paid and requested Miller's Opinion as to whether the
proposed stock split and resulting purchase of fractional shares would be fair
to the unaffiliated shareholders of the Company. Miller was first engaged to
render the Opinion September 5, 2001, and has been compensated for such Opinions
in the amount of $44,000 plus accountable expenses not to exceed $2,500.
Miller's Opinions and the letter in support of its March 5, 2002 Opinion
accompany this Proxy Statement. Miller's March 5, 2002 Opinion was based on
interviews with Sharon J. Hummerhielm, Executive Vice President and Corporate
Secretary and John R. Battle, Treasurer until June 7, 2002, as well as a review
of the Company's Proxy Statements and Annual Meeting Notices for the years 2000
and 2001, Forms 10-K for the year ending December 31, 1999, and the year ending
December 31, 2000, and Forms 10-Q for quarters ending March 31, 2001, June 30,
2001, and September 30, 2001. Additionally, Miller reviewed historical charts of
the Company's stock performance and activity, a list of stock purchases by Rudy
Gram for the period of September 30, 1996 to June 6, 2001 and insider trading
reports. Miller's conclusion was that the transaction was fair. In reaching this
conclusion, Miller gave little weight to the going concern value of the Company
in view of the fact that it was operating at a cash flow deficit of
approximately $4 million per year. Rather than using revaluation formula, Miller
reviewed the general and financial condition of the Company. Among other things,
Miller Advisory was provided and considered: (1) a Depreciation Expense Report
dated December 31, 2000, which described the basis and depreciation adjustment
for the Company's equipment showing a value of depreciated equipment at
$1,367,994.20 and reflecting equipment depreciated to approximately $1,310,405
at the end of 2000; (2) the Consolidating Trial Balance Report dated October 31,
2001, which reflected a loss for the period ended December 31, 2001, of
approximately $43,000, total assets of $15,196,480.39 as of September 30, 2001,
and total liabilities before stockholders' equity of $24,056,201.49; (3)
Financial Sales Reports as of June 30, 2001 reflecting total assets of
18
$15,261,072 and total liabilities of $15,246,998.32 after taking into account
total shareholders' equity of $8,725,795.69; and (4) a n article in the St.
Petersburg Times dated July 25, 2001 entitled "County Tops in Homeownership -
Census Figures Show the County Has State's Highest Rate of Ownership, but
Finding a Rental Unit Remains a Challenge." Conversely, both the stock activity
reports and the interviews with management factored more directly in the March
5, 2002, Opinions. After reviewing the total stock activity, the insider trading
reports and the history of Rudy Gram's stock purchases, Miller concluded that
without Mr. Gram's activity, the stock would be trading in the range of
$.20/share. The interviews with management revealed a recent history of limited
interest received by Deltona in acquiring the total company or major portions of
its inventory. These discussions also confirmed the lack of alternative debt
financing other than by Swan, Selex and Yasawa Holdings. Management interviews
confirmed that the Company's negative cash flow required a strong and willing
partner.
Deltona's statements of consolidated cash flows as of December 31, 2000 and
December 31, 2001 reflected that Deltona lacks sufficient cash flow to pay its
operating obligations as they come due. Based on the December 31, 2001
Statements of Consolidated Cash Flows, any purchaser of Deltona as a going
concern would be required to inject approximately $4,000,000 per year to
maintain the business in its present state. In light of the financial
requirements presented by Deltona's negative cash flow, the development cost of
its inventoried real property and the lack of any lender other than the Gram
affiliates showing a willingness to fund the Company's needs, little weight was
given to the going concern value of Deltona.
Miller gave no weight to the liquidation value of the Company in view of the
Company's heavy debt and the scarcity of potential buyers for the property owned
by the Company and the cost of developing the land owned by the Company. Miller
believed that the nature and amount of the offers made to purchase Sunny Hills
lots indicated that after satisfying the Company's liabilities, the liquidation
of the Company's assets would net little or no value to the Company. It was
Miller Advisory's understanding that the real property labeled "Land and Land
Improvements" in Deltona's financial statements represents the following:
"Unimproved" land is primarily comprised of land which may not be resold because
it is either undevelopable or is common or recreational area. Land in various
stages of development includes the majority of the Sunny Hills development
(12,537 undeveloped lots) and a portion of the Marion Oaks subdivision (1,967
undeveloped lots). These lots are generally undeveloped, requiring roads,
drainage and the like. Before lots can be sold on the retail market, they must
developed with roads and drainage. The value of the real property is shown at
cost. The cost to develop these lots has been recognized by Deltona historically
as $3,500 per lot. On this basis, the cost to develop the 12,530 undeveloped
lots in the Sunny Hills development would be $ $43,880,000 and to develop the
1,967 undeveloped lots in the Marion Oaks subdivision would be $6,885,000.
19
"Fully improved" land reflects these development costs. The Sunny Hills
development has 700developed lots and the Marion Oaks subdivision has 1,246
developed lots. Deltona also owns a negligible number of lots in other
locations.
Miller gave greatest consideration to the current and historic market value of
the Company's common stock, the value of which has averaged well under $.40 per
share for the last 60 months. In the opinion of Miller Advisory, some of the
standard valuation methodology had little or no bearing in this matter. Thus,
Miller Advisory believed that valuation as a multiple of earnings or as a
multiple of sales or as a multiple of book value was more academic than
pragmatic in this case. The Fairness Opinion was based primarily by what a
willing buyer would pay a willing seller. The universe of willing buyers as
reported by Deltona's Management was virtually non-existent. The weakness of the
stock market since peaking in early 2000, the uncertainty in the world following
the events of September 11th, the increased scrutiny of Federal and State
regulatory agencies regarding land sale companies and the long-term holding
period required to absorb Deltona's land inventory concentrated in less
populated northern Florida, combined to limit potential interest in Deltona -
certainly with regard to the total company and even to an individual investor
level purchasing shares of stock.
A copy of the Opinions are attached as Exhibit 1 and should be read in its
entirety by the Company's shareholders.
The independent, non-affiliated Directors, the Audit Committee, the Board of
Directors and the Filing Persons concur with Miller's analysis and conclusions
that the proposed reverse stock split was fair to the unaffiliated shareholders.
FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements. Additional written or
oral forward-looking statements may be made by us from time to time in filings
with the SEC or otherwise. The words "believe," "expect," "anticipate,"
"estimate," "project," and similar expressions identify forward-looking
statements, which speak only as of the date the statement was made.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Further events and actual
results could differ materially than those set forth in, contemplated by, or
underlying the forward-looking statements. Statements in this Proxy Statement
describe factors that could contribute to or cause such differences.
We caution you not to place undo reliance on any forward-looking statements made
by, or on behalf of, the Company in this Proxy Statement or in any of our
filings with the SEC or otherwise. Additional information with respect to
factors that may cause the results to differ materially from those contemplated
by forward-looking statements is included in our current and subsequent filings
with the SEC. See "Available Information."
20
GENERAL INFORMATION
VOTING PROCEDURES AND REVOCABILITY OF PROXIES
The only shareholders entitled to vote at the Special Meeting are the holders of
record at the close of business on the Record Date. On the Record Date there
were 13,544,277 outstanding shares of Existing Common Stock. Each outstanding
share of Existing Common Stock is entitled to one vote on each matter to come
before the Special Meeting.
The accompanying proxy card is designed to permit each shareholder of record on
the Record Date to vote on the proposals described in this Proxy Statement. The
proxy card provides space for a shareholder to: (a) vote for or against any
proposal to be considered at the Special Meeting; or (b) abstain from voting on
any proposal if the shareholder chooses to do so. The Reverse Stock Split and
the Amendment to the Company's Articles of Incorporation require the affirmative
vote of holders of a majority of the outstanding shares of Existing Common Stock
as of the Record Date, the affirmative vote or 6,772,141 shares or one vote more
than 50% of the 13,544,277 shares of common stock outstanding.
The holders of a majority of the outstanding shares of Existing Common Stock
present, in person or by proxy, and entitled to vote at the Special Meeting will
constitute a quorum for the transaction of business at the Special Meeting. If a
quorum should not be present, the Special Meeting may be adjourned from time to
time until a quorum is obtained. Abstentions and broker nonvotes are considered
for purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions and broker nonvotes will have the effect of
a vote against the Reverse Stock Split and the related Amendment to the
Company's Articles of Incorporation. Shareholders are urged to sign the
accompanying form of proxy and return it promptly.
When a signed proxy card is returned with choices specified with respect to
voting matters, the shares represented are voted by proxies designated on the
proxy card in accordance with the shareholder's instructions. The designated
proxy for the shareholders is Sharon Hummerhielm. A shareholder desiring to name
another person as his or her proxy may do so by crossing out the names of the
designated proxies and inserting the name of such other person to act as his or
her proxy. In that case, it will be necessary for the shareholder to sign the
proxy card and deliver it to the person named as his or her proxy and for the
person so named to be present and vote at the Special Meeting. Proxy cards so
marked should not be mailed to the Company.
If a signed proxy card is returned and the shareholder has made no
specifications with respect to voting matters, the shares will be voted in favor
of all the proposals described in this Proxy Statement and, at the discretion of
the designated proxies, on any other matter that may properly come before the
Special Meeting or any adjournment. The Company does not know of any business
that will be presented for consideration at the Special Meeting other than the
Reverse Stock Split and related Amendment. However, if any other business should
come before the Special Meeting, it is the intention of the designated proxies
to vote on any such business in accordance with the recommendation of
management.
21
Any shareholder of the Company has the unconditional right to revoke his or her
proxy at any time prior to the voting thereof by (i) notifying the Secretary of
the Company in writing at the Company's principal executive office, (ii)
executing and delivering a subsequent proxy or (iii) personally appearing at the
the Special Meeting and casting a contrary vote. However, no revocation shall be
effective unless and until notice of such revocation has been received by the
Company at or prior to the Special Meeting.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock was traded on the New York and Pacific Stock
Exchanges under the ticker symbol DLT. On April 6, 1994, both the New York and
Pacific Stock Exchanges suspended the Company's Common Stock from trading and
instituted procedures to delist the Company's Common Stock. On June 16, 1994,
the Company's Common Stock was formally removed from listing and registration on
the New York Stock Exchange. As of August 31, 1994, the Company's Common Stock
was traded on a limited basis in the over-the-counter markets (on the bulletin
board) under the symbol DLTA. The low and high bid quotation at which the stock
was traded for the last completed eight calendar quarters is as follows:
Period Low High
1st Quarter 2000 $0.19 $0.21
2nd Quarter 2000 $0.15 $0.25
3rd Quarter 2000 $0.18 $0.63
4th Quarter 2000 $0.14 $0.53
1st Quarter 2001 $0.16 $0.56
2nd Quarter 2001 $0.25 $0.45
3rd Quarter 2001 $0.25 $0.46
4th Quarter 2001 $0.25 $0.37
1st Quarter 2002 $0.25 $0.36
2nd Quarter 2002 $0.29 $0.34
3rd Quarter 2002 $0.30 $0.35
4th Quarter 2002 $0.31 $0.38
1st Quarter 2003 $0.31 $0.335
2nd Quarter 2003 $0.32 $0.32
The Company has never paid cash dividends on its Common Stock. The Company's
loan agreements contain certain restrictions which currently prohibit the
Company from paying dividends on its Common Stock. The Board of Directors
believes the cost savings associated with no longer being a public company will
be approximately $95,000 a year. In addition, the SEC, pursuant to the
Sarbanes-Oxley Act of 2002 and other initiatives, is adopting expanded rules and
regulations. The additional costs to appropriately respond to such expanded
rules and regulations are not readily determinable at this time.
22
A Reverse Stock Split of 500,000 for 1 is estimated to reduce the number of
shareholders of record to two, based on March, 2003 records. See "Fairness of
the Reverse Stock Split Proposal" below for a discussion of the determination of
a fair price for fractional shares.
EXCHANGE OF CERTIFICATES AND PAYMENT OF FRACTIONAL SHARES
If the shareholders approve the Reverse Stock Split and the Amendment to the
Articles of Incorporation, the Company will file the Amendment with the
Secretary of State of the State of Delaware. The Reverse Stock Split will become
effective on the date the Certificate of Amendment is issued by the Secretary of
State of the State of Delaware (the "Effective Date").
Within 30 days of the Effective Date, each holder of an outstanding certificate
theretofore representing Existing Common Stock will receive from American Stock
Transfer & Trust Company as the Company's transfer agent (the "Exchange Agent")
instructions for the surrender of such certificate to the Exchange Agent. The
instructions will include a Letter of Transmittal to be
completed and returned to the Exchange Agent with such certificate. Within 30
days after the surrender to the Exchange Agent of any certificate which
represented shares of Existing Common Stock, together with a duly executed
Letter of Transmittal and any other documents the Exchange Agent may specify,
the Exchange Agent shall deliver to the person in whose name such certificates
have been issued, (i) certificates registered in the name of such person
representing the number of full shares of New Common Stock into which the shares
of Existing Common Stock represented by the surrendered certificate shall have
been reclassified, and/or (ii) cash for fractional shares. Until surrendered as
contemplated by the preceding sentence, each certificate which represented
shares of Existing Common Stock shall be deemed at and after the Effective Date
to represent the number of full shares of New Common Stock contemplated by the
preceding sentence or to represent fractional shares to be purchased by the
Company as explained below.
For the purpose of determining ownership of Existing Common Stock at the
Effective Date, shares will be considered to be held by the person in whose name
those shares are registered in the stock records of the Company, regardless of
the beneficial ownership of those shares. No service charges, brokerage
commissions or transfer taxes shall be payable by any holder of any certificate
which prior to the approval of the Reverse Stock Split represented any shares of
Existing Common Stock, except that if any certificates for New Common Stock are
to be issued in a name other than that in which the certificates for shares of
Existing Common Stock surrendered are registered, it shall be a condition of
such issuance that (i) the person requesting such issuance pay to the Company
any transfer taxes payable by reason thereof (or prior transfer of such
surrendered certificate, if any) or establish to the satisfaction of the Company
that such taxes have been paid or are not payable, and (ii) such surrendered
certificate shall be properly endorsed and otherwise be in proper form for
transfer.
23
No certificates or scrip representing fractional shares of New Common Stock
shall be issued in connection with the Reverse Stock Split. Instead,
shareholders holding a number of shares of Existing Common Stock not evenly
divisible by five hundred thousand, and shareholders holding less than five
hundred thousand shares of Existing Common Stock, within 30 days of surrender of
their old certificates, will receive cash in lieu of fractional shares of New
Common Stock. Surrendering shareholders will not receive interest on their cash
payments. The price payable by the Company for fractional shares will be
determined by multiplying the fraction of a share of New Common Stock by
$200,000.00 (which is the equivalent of multiplying the numbered shares of
Existing Common Stock by $0.40).
Approval of the Reverse Stock Split will require approval by a majority of the
shares of Existing Common Stock that were outstanding on the Record Date.
Accordingly, the Reverse Stock Split will be approved if at least 6,772,141
shares of Existing Common Stock, or one vote more than 50% of the 13,544,277
outstanding shares of existing Common Stock are voted in favor of the Reverse
Stock Split.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION SUMMARIZING ALL MATERIAL FEDERAL TAX CONSEQUENCES IS
BASED ON CURRENT LAW. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX EFFECTS OF THE REVERSE STOCK SPLIT IN
LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
The receipt of New Common Stock solely in exchange for Existing Common Stock
will not result in recognition of gain or loss to the shareholder. The adjusted
tax basis of the shareholder's New Common Stock will be the same as the
shareholder's adjusted tax basis in the Existing Common Stock. The holding
period of New Common Stock received solely in exchange for Existing Common Stock
will include the shareholder's holding in the Existing Common Stock. No gain or
loss will be recognized by the Company upon the Reverse Stock Split.
Shareholders who receive cash in lieu of fractional shares of New Common Stock
will be treated as receiving cash as payment in exchange for their fractional
shares of New Common Stock, and they will recognize capital gain or loss in an
amount equal to the difference between the amount of cash received and the
adjusted basis of the fractional shares surrendered for cash.
The proposed reverse stock split and related Amendment to the Articles of
Amendment will have no federal income tax consequences for the Company.
24
APPRAISAL RIGHTS AND DISSENTER'S RIGHTS
No appraisal or dissenters' rights are available under Delaware law to
shareholders who dissent from the Reverse Split. There may exist other rights or
actions under Delaware Law or federal or state securities laws for shareholders
who can demonstrate that they have been damaged by the Reverse Split. Such
causes of action are generally based on alleged breaches of directors' fiduciary
responsibility or the adequacy of corporate disclosure.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
REVERSE STOCK SPLIT AND THE RELATED AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION.
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 Yasawa (52.41%), Selex (20.82%) and Antony Gram, through his
holdings in Selex and Yasawa (73.23%).
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 is the Chairman of the Board of Directors,
Chief Executive Officer and President of the Company. As the largest shareholder
of Wilbury, holding a majority equity interest in that corporation, Mr. Gram 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 7,098,975 shares of the Common Stock of the Company, and Selex
is the direct owner of 2,820,066 shares of the Common Stock of the Company, Mr.
Gram is deemed to be the beneficial owner of an aggregate of 9,919,041 shares of
Common Stock of the Company (73.23%).
25
The following table sets forth information, as of February 14, 2003,concerning
the beneficial ownership by all directors and nominees, by "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.
Amount and Nature Percent
of Beneficial Ownership of Class
Current Directors:
George W. Fischer.................... 35,000 - Direct *
Antony Gram .................... 9,919,041 - Indirect 73.23%
Rudy Gram.................... 324,378 - Direct 2.39%
Thomas B. McNeill ...... 200 - Direct *
Christel DeWilde................. 0 *
Current Executive Officers:
Antony Gram.............................. 9,919,041 - Indirect 73.23%
Sharon J. Hummerhielm..... .. 200 - Direct *
Robert O. Moore 0
All executive officers and directors as a group,
consisting of 7 persons (including those
listed above)................... 10,278,819 75.89%
Shareholders owning in excess of 5% of the outstanding shares:
Yasawa Holdings, N.V. 7,098,975 52.41%
Selex International, B.V. 2,820,066 20.82%
* Represents holdings of less than 1%.
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 Yasawa (52.41%), Selex (20.82%) and Antony Gram, through his holdings in
Selex and Yasawa (73.23%).
26
Mr. Rudy Gram, a member of the Board of Directors is the son of Mr. Antony Gram.
Mr. Antony Gram 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
73.23% of the Company's Common Stock since he is the beneficial owner of Yasawa
Holdings, N.V. ("Yasawa") (which holds 52.41% of the Common Stock of the Company
as of October 10, 2002), 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 International B.V.
("Selex) (which holds 20.82% of the Common Stock of the Company as of October
10, 2002).
Mr. Rudy Gram, a member of the Committee, a member of the Board of Directors and
a candidate for re-election to the Board of Directors, is the son of Mr. Antony
Gram. See "Ownership of Voting Securities of the Company."
From June 19, 1992 through March 1999, the Company had entered into loan
agreements with Selex International B.V., a Netherlands corporation ("Selex"),
Yasawa Holdings, N.V., a Netherlands Antilles Corporation ("Yasawa"), Swan
Development Corporation ("Swan") and related parties. Since December, 1992, the
Company has been dependent on loans and advances from Selex, Yasawa, Swan and
their affiliates in order to meet its working capital requirements. Scafholding
agreed to purchase contracts receivable at 65% of face value, with recourse, to
meet the Company's ongoing capital requirements.
During 1998, Scafholding purchased approximately $1,396,000 in contracts
receivable from the Company.
As of December 31, 2002, the Company's outstanding debt to Yasawa was $3,000,000
secured by a first lien on the Company's receivables and a mortgage on all of
the Company's properties. The terms of repayment of the Yasawa loan provide for
$100,000 of monthly payments of principal in cash or contracts receivable at
100% of face value, with recourse. Interest accrues at 6% for 2000, at the prime
rate adjusted semi-annually to the then current rate ranging from 9.5% to 4.75%
for 2001 and 2002 and 4.25% effective January 1, 2003. The Company satisfied its
principal obligation to Scafholding as of December 31, 1999. Yasawa and
Scafholding have not required the Company to make interest payments since
September 1, 1998. As of December 31, 2002, the total amount of interest accrued
on the Yasawa and Scafholding obligations is approximately $1,629,000, which is
included in accrued interest.
During 2002, Swan loaned the Company an additional $3,849,000 so that it was
able to meet its working capital requirements. The Company's debt to Swan as of
December 31, 2002, of $8,282,000 is secured by a second lien on the Company's
receivables. Swan has agreed to accept contracts receivable at 90% of face
value, with recourse, in payment of the Company's obligation to Swan. The
Company recognizes a loss on the transfer of contracts at less than face value.
The amount of each monthly payment will be dependent upon the amount of
contracts receivable in the Company's portfolio, excluding contracts receivable
held as collateral for prior receivable sales. Each month, the Company is
required to transfer to Swan , as debt repayment, all current contracts
receivable in the Company's portfolio in excess of $500,000. Swan does not
charge interest for the first six months after an advance; thereafter, the
interest was 6% for 2000, at the prime rate adjusted semi-annually to the then
current rate ranging from 9.5% t o 4.75% for 2001 and 2002 and 4.25% effective
January 1, 2003. As of December 31, 2002, the accrued and unpaid interest on the
Swan notes of approximately $837,000 is included in accrued interest.
27
The Company recognized interest expense and a contribution to additional paid in
capital for preferential cost of funds advanced by Swan and other affiliated
companies. The first six months of each loan advance from Swan that is
non-interest bearing, the Company recognizes interest at the prime rate, the
Company's incremental borrowing rate. The Company recorded interest expense and
a capital contribution in the amount of approximately $78,000 and $170,000, for
2002 and 2001, respectively. For 2000 the company recognized an additional
interest expense and capital contribution of $408,000 on all outstanding debt
balances to Yasawa, Scafholding and Swan at 8%, the Company's incremental
borrowing rate and the amount accrued under the terms of the respective notes.
During 1998, the Company transferred 14 lots and 4 tracts of land to Swan. In
return, Swan built an office complex on part of the land for use by the Company
for a period of 54 months, renewable thereafter. The Company valued the land
transferred at approximately $440,000 and recorded the net present value of the
use of the office complex of approximately $375,000 as prepaid rent. The
difference between the net present value of the rent and the cost of the land
was recorded as deferred profit and is recognized over the lease term.
In January 2000, the Company purchased 16 lots and homes under construction from
Scafholding for approximately $862,000. This amount represents Scafholding's lot
cost and payments to date to the home builder. This transaction was 100%
financed by Swan under its existing note payable arrangement.
During 2001, the Company entered into a joint venture agreement (the "Venture")
with Scafholding, for the purchase of property tax certificates, application of
tax deeds, administration and the acquisition and sale of land. The Company
provides administrative, managerial, sales and marketing services to the
Venture. The Company is reimbursed by the Venture for all commissions and
marketing costs plus an administrative fee of 10% of all sales consummated.
Scafholding provides financing to the Venture and has loaned the Venture
approximately $1,554,000 as of December 31, 2002. Interest on the outstanding
debt accrues at the fixed rate of 7.75%. Net income is to be distributed equally
between the Company and Scafholding. The Company records its investment in the
Venture on the equity method as control of the Venture rests with Scafholding as
specified in the joint venture agreement.
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, 2002, all
Section 16(a) filing requirements were satisfied.
28
PERSONS MAKING THE SOLICITATION
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company and the Filing Persons. The cost of soliciting proxies in the
accompanying form will be borne by the Company. In addition to the use of mail,
officers of the Company may solicit proxies by telephone or telegraph. Upon
request, the Company will reimburse brokers, dealers, banks and trustees or
their nominees, for reasonable expenses incurred by them in forwarding proxy
material to beneficial owners of shares of Existing Common Stock.
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.
FINANCIAL INFORMATION AND INCORPORATION BY REFERENCE
The Company's Annual Report to Stockholders on Form 10-K for the year ended
December 31, 2002 (including the audited financial statements appearing therein)
and the Company's Form 10-Q for the quarter ended March 31, 2003(including the
unaudited financial statement appearing therein) (File No. 002-27157) are
incorporated
herein by reference and accompany this proxy statement. They are also available
for review from the Edgar filings obtained through the SEC's Internet Website
(http://www.sec.gov).
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the next Annual Meeting
(2003) were required to have been received by The Deltona Corporation, 8014 SW
135th Street Road, Ocala, FL 34473, no later than December 31, 2002, in order to
have been considered for inclusion in the Company's 2003 Annual Meeting Proxy
Statement. No such requests were received.
Proposals of stockholders intended to be presented at the 2004 Annual Meeting
should be received by The Deltona Corporation, 8014 SW 135th Street Road, Ocala,
FL 34473 no later than December 31, 2003, in order to be considered in the
Company's 2004 Annual Meeting Proxy Statement.
29
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange Act of
1934, as amended, and in accordance therewith files reports, proxy statements
and other information with the SEC. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC
20549. Copies of such materials can also be obtained at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, DC 20549. In addition, such reports, proxy
statements and other information are available from the Edgar filings obtained
through the SEC's Internet Website (http://www.sec.gov).
By order of the Board of Directors
/s/ Sharon J. Hummerhielm
Executive Vice President and
Corporate Secretary
_________________, 2003
Exhibit 1
Miller Advisory Corp. Opinion
[Miller Advisory Corp. Letterhead]
March 5, 2002
Board of Directors
The Deltona Corporation
999 Brickell Avenue, Suite 700
Miami, FL 33131
Members of the Board of Directors:
You have advised Miller Advisory Corp. ("Miller Advisory") that the Board of
Directors of The Deltona Corporation ("Deltona") has authorized a 1-for-500,000
reverse split of its outstanding common shares, in which fractional shares would
be purchased by Deltona at a rate of $.40 per pre-split share. As a result of
the Reverse Stock Split and Purchase of Fractional Shares (the "Transaction"),
the shares of all but two shareholders would be purchased by Deltona.
You have asked Miller Advisory to express an opinion as to whether or not the
transaction involving Deltona and shareholders of Deltona owning fewer than
500,000 common shares ("Shareholders") is fair from a financial point of view,
solely in their capacity as Shareholders.
In the preparation of this opinion, Miller Advisory has reviewed certain
publicly available financial and non-financial information as well as certain
financial and non-financial information not publicly available relating to
Deltona in general and the Transaction in particular, all of which was supplied
by Deltona. Miller Advisory has assumed this information to be accurate and does
not bear any responsibility for its accuracy. Miller Advisory has not audited,
nor has it been asked to audit, any of the Deltona financial information. Miller
Advisory has discussed with management of Deltona current operations and future
prospects of the Company. In addition, Miller Advisory has, where appropriate,
considered information in published sources believed to be reliable, but of
which it does not guarantee the accuracy. It has also reviewed a trading history
of Deltona shares.
The opinion expressed herein is provided solely for your benefit in connection
with the proposed Transaction.
Based upon and subject to, but not limited to, its review of the above, its
experience, and other factors deemed relevant in its sole discretion, Miller
Advisory's opinion is that as of this date the proposed Transaction is fair from
a financial point of view to the Shareholders solely in their capacity as
shareholders of Deltona.
Yours truly,
MILLER ADVISORY CORP.
Ronald L. Miller, President
[Miller Advisory Corp. Letterhead]
March 5, 2002
Board of Directors
The Deltona Corporation
999 Brickell Avenue, Suite 700
Miami, FL 33131
Members of the Board of Directors:
In support for the Fairness Opinion of this date regarding the proposed Reverse
Stock Split and Purchase of Fractional Shares (the "Transaction") involving The
Deltona Corporation ("Deltona") and shareholders of Deltona owning fewer than
500,000 common shares ("Shareholders"), Miller Advisory Corp. ("Miller") has
interviewed the following senior management of Deltona:
Sharon J. Hummerhielm, Executive Vice President and Corporate Secretary
John R. Battle, Treasurer
and reviewed the following:
A. Reports filed with the Securities and Exchange Commission
1. Form 10-Q for Quarter Ending March 31, 2001
2. Form 10-Q for Quarter Ending June 30, 2001
3. Form 10-Q for Quarter Ending September 30, 2001
4. Form 10-K for year Ending December 31, 2000
5. Form 10-K for year Ending December 31, 1999
6. 2001 Proxy Statement and Annual Meeting Notice
7. 2000 Proxy Statement and Annual Meeting Notice
B. Drafts of Reports to be filed with the Securities and Exchange
Commission
1. Preliminary Proxy Statement for the special Meeting of
Shareholders
C. Historical Charts of Deltona Corporation Stock Performance
and Activity
1. One year ending December 10, 2001
ii. Two years ending December 10, 2001
iii. Three years ending December 10, 2001
iv Four years ending December 10, 2001
v. Five years ending December 10, 2001
D. Insider and Form 144 Filings - Deltona Corp. (DLTA)
August 22, 2000 - August 7, 2001
E. A list of Deltona Corp. Stock Purchases by Rudy Gram
September 30, 1996 - June 6, 2001
F. Consolidating Trial Balance Report
Ten months ending October 31, 2001
G. The Deltona Corporation Financial and Sales Reports
for December 2001 - June 2001
H. The Deltona Corporation Depreciation Expense Report -
December 31, 2000
I. Articles appearing in newspapers, and magazines:
1. St. Petersburg Times, July 25, 2001
In considering the fairness of the transaction with regard to the Shareholders,
Miller Advisory considered several factors, including the following:
A. Liquidation Value. The
problematic nature of Deltona's liquidation value is reflected in
preliminary offers made to Deltona to purchase the remaining
acreage of the Sunny Hills development. It is Miller Advisory's
understanding that the real property labeled "Land and Land
Improvements" in Deltona's financial statements represents the
following: "Unimproved" land is primarily comprised of land which
may not be resold because it is either undevelopable or is common
or recreational area. Land in various stages of development
includes the majority of the Sunny Hills development (12,536
undeveloped lots) and a portion of the Marion Oaks subdivision
(2,071 undeveloped lots). These lots are generally undeveloped,
requiring roads, drainage and the like. Before lots can be sold
on the retail market, they must developed with roads and
drainage. The value of the real property is shown at cost. The
cost to develop these lots has been recognized by Deltona
historically as $3,500 per lot. On this basis, the cost to
develop the 12,536 undeveloped lots in the Sunny Hills
development would be $43,876,000 and to develop the 2,071
undeveloped lots in the Marion Oaks subdivision would be
$7,248,500. "Fully improved" land reflects these development
costs. The Sunny Hills development has 685 developed lots and the
Marion Oaks subdivision has 1,024 developed lots. Deltona also
owns a negligible number of lots in other locations.
It is our further understanding that the highest offer received
for all of the remaining Sunny Hills lots was $10,500,000, a
price acceptable to the Board of Directors, but the parties were
unable to reach agreement regarding payment and other terms.
Miller Advisory notes that a sale of the Sunny Hills asset for
$10,500,000 would probably not have created a positive net worth
of Deltona.
Deltona's total debt exceeded its total assets by $8,318,000 as
of December 31, 2000. While land inventory is reflected at cost,
rather than fair market value, the value of all real estate in
its present state and its effect on the overall liquidation value
of Deltona is not clear especially in light of the scarcity of
potential buyers and the costs to prepare for such an
alternative. Thus, Miller Advisory has not given any weight to
liquidation value of Deltona.
B. Offers to Purchase Deltona. Miller Advisory is advised that
Deltona has not received any firm offer to purchase substantially
all assets of Deltona or to merge Deltona during the last five
years.
C. Going Concern Value of Deltona. Deltona's statements of
consolidated cash flows as of December 31, 2000, and December 31,
2001, reflect that Deltona lacks sufficient cash flow to pay its
operating obligations as they come due. Based on the December 31,
2001 Statements of Consolidated Cash Flows, any purchaser of
Deltona as a going concern would be required to inject
approximately $4,000,000 per year to maintain the business in its
present state. In light of the financial requirements presented
by Deltona's negative cash flow, and the development cost of its
inventoried real property and the lack of any lender other than
the Gram affiliates showing a willingness to fund the Company's
needs, little weight was given to the going concern value of
Deltona.
D. Historic and Current Market Price in Deltona's Stock. In view of
the above factors, Miller Advisory gave greatest consideration to
the current and historic market value of Deltona's common stock,
the value of which has averaged less than well under the $.40 per
share over the last 60 months. It is also noted that the trading
volume of Deltona's common shares was relatively thin. The total
number of shares traded in 2001 was only 505,100 for the entire
year; 714,300 for 2000; 757,500 for 1999; and 662,800 for 1998.
Over this period, there are were weeks in which no shares of the
stock were traded at all. A significant amount of the stock
purchases were made by Rudy Gram. Without those purchases, the
stock price most likely would have been far less.
I am available to augment or to clarify any of the above information, to answer
any questions, or to generally assist the Board.
Yours truly,
MILLER ADVISORY CORP.
Ronald L. Miller, President
[Miller Advisory Corp. Letterhead]
April 7, 2003
Board of Directors
The Deltona Corporation
999 Brickell Avenue, Suite 700
Miami, FL 33131
Members of the Board of Directors:
You have advised Miller Advisory Corp. ("Miller Advisory") that the Board of
Directors of The Deltona Corporation ("Deltona") has authorized a 1-for-500,000
reverse split of its outstanding common shares, in which fractional shares would
be purchased by Deltona at a rate of $.40 per pre-split share. As a result of
the Reverse Stock Split and Purchase of Fractional Shares (the "Transaction"),
the shares of all but two shareholders would be purchased by Deltona.
You have asked Miller Advisory to express an opinion as to whether or not the
Transaction involving Deltona and shareholders of Deltona owning fewer than
500,000 common shares ("Shareholders") is fair to the Shareholders from a
financial point of view, solely in their capacity as Shareholders.
In the preparation of this opinion, Miller Advisory has reviewed Deltona's Form
10-K for the year ending December 31, 2002, filed with the Securities and
Exchange Commission. Miller Advisory has assumed this information to be accurate
and does not bear any responsibility for its accuracy. Miller Advisory has not
audited, nor has it been asked to audit, any of the Deltona financial
information. Miller Advisory has discussed with management of Deltona current
operations and future prospects of the Company. It has also reviewed the recent
trading history of Deltona shares, with special focus on Insider Trades.
The opinion expressed herein is provided for your benefit and for the benefit of
the Shareholders in connection with the proposed Transaction.
Based upon and subject to, but not limited to, its review of the above, its
experience, and other factors deemed relevant in its sole discretion, Miller
Advisory's opinion is that as of this date the proposed Transaction is fair from
a financial point of view to the Shareholders solely in their capacity as
shareholders of Deltona.
Yours truly,
MILLER ADVISORY CORP.
Ronald L. Miller, President
This letter was revised to remove the word "solely" from the 4th paragraph.
/s/ Ronald L. Miller July 8, 2003
------------------------ ------------------
Ronald L. Miller, President Date
PROXY
THE DELTONA CORPORATION
Proxy solicited by the Board of Directors,
SELEX INTERNATIONAL, B.V., YASAWA HOLDINGS, N.V.,
ANTONY GRAM, AND WILBURY INTERNATIONAL, N.V.
for the special meeting of stockholders
to be held _________, 2003
The undersigned hereby appoints Antony Gram as attorney and proxy of the
undersigned, with full power of substitution and resubstitution, to vote all of
the shares of common stock of The Deltona Corporation (the "Company") which the
undersigned may be entitled to vote at the special meeting of stockholders to be
held at the Woodland Pavilion, 312 Marion Oaks Boulevard, Marion Oaks, Florida
34473 on _________, 200__, at 9:30 AM, local time.
Unless a contrary direction is indicated, this proxy will be voted for Proposal
1, and for proposal 2, as are more specifically described in the proxy
statement. If specific instructions are indicated, this proxy will be voted in
accordance therewith.
You may revoke this proxy at any time prior to the vote at the annual
meeting.
Please complete, date, and sign this proxy and return it in the
accompanying envelope.
The board of directors recommends a vote for Proposal 1, and a vote for
Proposal 2, both as set forth below.
Proposal 1
1. To consider a Reverse Stock Split of the Company's Company's common
stock that would result in the shareholders receiving one share of our
common stock for every 500,000 shares of our common stock that they
currently own. The Reverse Stock Split and related cash purchase by the
Company of fractional shares at a rate of $.40 per share resulting from
the reverse stock split is proposed to take the Company private.
For Against Abstain
[ ] [ ] [ ]
Proposal 2
2. To consider an amendment to the Company's Articles of Incorporation to
reduce the Company's authorized common stock from 15,000,000 shares to
30 authorized shares, which is in proportion to the Reverse Stock
Split.
For Against Abstain
[ ] [ ] [ ]
3. To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
Please sign exactly as name Signature-----------------Date -------2003
appears on this proxy.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title.
If more than one trustee,
all should sign. All joint Signature:---------------Date---------2003
owners must sign.
[ ] MARK HERE FOR CHANGE [ ] MARK HERE IF YOU
OF ADDRESS AND NOTE PLAN TO ATTEND
CHANGE ON OTHER SIDE THE ANNUAL MEETING