UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
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14a-101)
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CONSOLIDATED-TOMOKA
LAND CO.
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(Name
of Registrant as Specified in Its Charter)
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WINTERGREEN
FUND, INC.
WINTERGREEN
PARTNERS FUND, LP
WINTERGREEN
PARTNERS OFFSHORE MASTER FUND, LTD.
RENAISSANCE
GLOBAL MARKETS FUND
WINTERGREEN
ADVISERS, LLC
WINTERGREEN
GP, LLC
DAVID
J. WINTERS
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(Name
of Persons(s) Filing Proxy Statement, if Other Than the
Registrant)
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________________________________________________________________________________________________________________
April 22, 2009
Dear
Fellow Consolidated-Tomoka Land Company Shareholder:
Wintergreen
Advisers, LLC (“Wintergreen”) is seeking your support on our enclosed green
proxy card to elect three highly qualified, independent candidates to the Board
of Directors (the “Board”) of Consolidated-Tomoka Land Co. (“CTO”), and to
improve corporate governance of CTO by voting “for” the three additional
shareholder proposals we have put forth in our proxy statement.
Wintergreen
has been an investor in CTO since February 2006, and we are currently the
company’s largest shareholder with 25.9% of the shares
outstanding. Wintergreen generally enjoys healthy shareholder-board
relations and Wintergreen has
never made a shareholder proposal in connection with any other company’s
governance process, nor engaged in a proxy contest with the management of any
other company.
Wintergreen
does not seek control of CTO or its Board.
We have
tried to meet and work with the current Board and management to discuss our
objections to their business plan, but have found these meetings to be
frustratingly unproductive. As a result, we made a demand to inspect CTO’s
corporate records pursuant to Section 607.1602, Florida Statutes to determine
whether CTO’s affairs were being properly administered by its corporate officers
and to determine the value of CTO’s stock. As of this date, the
company has not fully complied with our repeated document requests, and we have
been forced to file a lawsuit to compel the company to comply with both Florida
law and its own By-Laws. CTO may point out that the Board has offered to meet
with us further, but we believe that until we receive company documents, which
we have repeatedly requested be produced and to which we believe we are legally
entitled, further meetings with the company would be futile.
For over
three years we have attempted to have a constructive dialogue with CTO regarding
the company’s assets and long-term business plan. During that time, we have repeatedly
encountered a Board that seems to be disconnected from shareholders and appears,
in our opinion, far more interested in entrenching and enriching its members
than building value for shareholders. It is time for change at
CTO.
SUPPORT NEW NOMINEES FOR
CTO’S BOARD
THAT ARE TRULY INDEPENDENT
FROM CTO’S MANAGEMENT
Wintergreen’s
interests are directly aligned with those of all other CTO shareholders. Our
objective is to maximize the long-term value of CTO by ensuring that the
company’s assets are prudently overseen by management and supervised by an
independent Board of directors. We do not seek
control of CTO or its Board. We believe our independent director
candidates provide investors with the opportunity to implement much needed
change at CTO.
Our
Independent Nominees Have the Experience Necessary to Improve the Performance of
CTO and Therefore the Value of its Shares
Wintergreen
has nominated Dianne M. Neal, Francis G. O’Connor, and Allen C. Harper as
candidates for election to CTO’s Board. We believe that these three
candidates, who are all completely independent from both Wintergreen and CTO,
are each uniquely qualified to serve as CTO directors.
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Ms.
Neal has recently served as Chief Financial Officer of Reynolds American,
an S&P 500 company, she is experienced in communicating with the
investor community, and currently serves on the board of directors of a
multi-billion dollar public company, Metavante
Technologies.
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Mr.
O’Connor established his own consulting firm to assist bank clients with
their systems and risk management in 2005. Prior to that he worked for JP
Morgan Chase Bank and the Federal Reserve Bank of New York. As
a result, he possesses a broad range of financial and risk management
skills.
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Mr.
Harper is CEO of American Heritage Railways, has served on the boards of
numerous Florida rail and highway authorities, and was a director of
Florida East Coast Industries, Inc. for 12 years. He has
extensive experience as both a developer and broker of commercial real
estate in Florida and elsewhere.
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CTO also
added to its slate of nominees, Mr. John J. Allen and Mr. Jeffrey B. Fuqua, two
nominees initially proposed by Wintergreen.
As CTO
and its Board are tested by these current tough economic times, Wintergreen
believes that in addition to the nominees proposed by Wintergreen and added to
CTO’s slate, the combined experience of the three candidates named above will
serve the company and all its shareholders well.
Is
The Current Board Truly Independent?
The
current Board of CTO is comprised of nine members who have extensive overlapping
business connections and personal interests that we believe prevent the members
from properly executing their fiduciary duties. Several current Board
members have overlapping directorships with local organizations and have close
past and present business relationships outside of CTO. It appears to
us that these close business and personal relationships cast doubt upon their
practical independence.
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CTO
Board member William Voges, who is up for election this year, is President
and CEO of the Root Organization, a real estate development company and
owner of office buildings in Daytona Beach and surrounding areas, with business interests in
direct competition with CTO with respect to developing
properties.
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Voges
is also an officer and director of Silver Holly Development LLC, which
purchased property from CTO in 2004 for over $1 million. CTO
disclosed this transaction in its 2005 proxy, but failed to disclose that
Voges had a significant interest in the transaction as he was also Vice
President, Director and a Resident Agent of Tri-Square Realty, to which
CTO paid a $42,000 commission in connection with this
transaction.
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CTO
lent one of Voges’ companies $1.2 million in connection with a real estate
transaction. To our knowledge, this transaction was not
reviewed by independent auditors or even an independent committee of the
Board.
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In
another case of what we believe is the “I’ll scratch your back if you
scratch mine” mentality of this Board, Brown & Brown Insurance -- a
business of which CTO Board member John Adams served as Executive Vice
President until 2006 -- has rented space for some time in a building
indirectly owned by Mr. Voges.
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CTO
purchased insurance from Brown & Brown, Inc. at a time when Adams was
both an Executive Vice President of Brown & Brown and a CTO Board
member, without publicly disclosing this relationship or whether this
insurance contract went out for a competitive
bid.
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CTO
Board member John Adams served on the board of American Pioneer Savings
Bank, a failed Savings & Loans bank, of which CTO Chairman/CEO Bill
McMunn was President and CEO of a real estate
subsidiary.
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It
was reported that American Pioneer Savings Bank failed due to high levels
of delinquent loans and bad bets on real estate and was taken over by the
Resolution Trust Corporation (“RTC”); it was eventually purchased at
auction by another bank led by former CTO Board members Bob Allen and
Byron Hodnett.
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CTO
Board member Bill Davison was, until 2007, Chairman and CEO of SunTrust
Bank, East Central Florida. This bank provided business loans
to CTO, personal loans to CTO’s Chairman and CEO, Bill McMunn and to his
family members. The bank also purchased land from and later resold land to
CTO, and appointed McMunn to serve on its Advisory
Board.
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CTO
Board member William Olivari serves as Chairman of the Halifax Hospital
charitable foundation Board at a time when CTO is involved in an ongoing
dispute with Halifax over land the company sold to Halifax Hospital for
$15.5 million. Halifax has refused to construct hospital and healthcare
buildings, which were supposed to be completed years ago.
Nevertheless, CTO has neglected to invoke its repurchase rights on the
valuable Halifax lands. The future of this expansive plot of
Halifax-owned land will have a significant impact on the future value of
CTO’s surrounding landholdings.
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Unfortunately,
examples of CTO Board members with overlapping interests that call their
practical independence into question such as the examples enumerated above are
prevalent across CTO’s Board. We believe these circumstances present real
conflicts between the individual financial interests of the members of the
current Board and their fiduciary responsibility.
In
addition, we believe the
autonomy of the Board is further compromised as a result of the powers delegated
to the Executive Committee. Directors Voges and
Adams, along with Chairman/CEO McMunn, comprise CTO’s Executive Committee. As a
result of McMunn’s participation in the Executive Committee, it cannot purport
to be an independent committee. Nevertheless, the Executive Committee is authorized
to enter into large land sales and income property transactions without the
approval of the full Board. We believe that the remaining Board
members have abdicated their fiduciary duty to McMunn, Adams, and Voges by
giving the Executive Committee the authority to approve such significant
transactions.
Wintergreen seeks the election of
independent directors whose loyalties will lie with the company and its
shareholders, not with management or each other. Objective
representation of long-term shareholder interests by individuals with relevant,
diverse backgrounds and expertise is in the best interest of all CTO
shareholders. The three candidates proposed by Wintergreen would act
as truly independent and objective overseers of CTO management and of the
corporate assets which belong to CTO’s true owners, the shareholders. We believe shareholder interests are
best served by directors who do not have conflicting
obligations.
We urge you to
vote “FOR” for the election of the Wintergreen nominees, each of whom will
provide outside shareholders with an independent voice in the Board
room.
THE MEMBERS OF THE CURRENT
CTO BOARD ACT MORE LIKE MEMBERS OF A PRIVILEGED CLUB THAN A TRULY INDEPENDENT
BOARD
The
members of the Board of CTO have a fiduciary duty to the company and its
shareholders. We believe this duty should require that the Board consider the
interests of the company and its shareholders above its own. Instead,
the Board has engaged in the actions enumerated below:
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The
Company’s February 3, 2009 Form 8-K filing details its revised annual
executive bonus criteria (the “Criteria”). For purposes of
determining bonus eligibility and potential bonus pool amounts, the
revised Criteria will now include a one-time per project equivalency
calculation that will represent the hypothetical after tax net income,
which would have been recognized on the land portion of any land lease,
build-to-suit lease, or self-development project in that year had the
property been sold to a third party. Under the Criteria,
executives may receive pro forma compensation for entering into certain
transactions that may ultimately be unprofitable for the company, and
there does not appear to be any clawback mechanism with respect to bonuses
previously awarded to executive officers and management. The stated
purpose of the Criteria is to reward short-term performance. However, we
believe that an executive compensation plan or any criteria underlying
such a plan should be devised to reward executives and managers’
contributions to the long-term growth and financial stability of the
company. Additionally, the Criteria does not provide for a
reduction in the company’s future earnings used to determine potential
bonus pool amounts and bonus awards to take into account any earnings
previously recognized pursuant to the Criteria on a pro forma basis as
described above, which creates the potential for double counting earnings
in the future. We believe that compensation
plans based on hypothetical earnings do not serve to align management and
shareholder interests, nor increase long-term shareholder
value.
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In
addition, under the Criteria, the maximum annual bonus benefit that can be
awarded is capped at between 40% and 100% of an officer’s salary, except
for the CEO position (held by Chairman McMunn), which has the possibility
of receiving an annual bonus of 200% of his
salary.
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The
Board went a step further and made the Criteria retroactive to fiscal
year 2008. As a result, executives could potentially receive larger
bonuses because of two self developed “flex office/warehouse” projects
which now sit apparently empty and unleased. While executives
may benefit in the form of cash bonuses, shareholders are left to suffer
the consequences of spending nearly $5 million on projects which may never
prove profitable.
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McMunn
has also been awarded over $3.5 million in the form of salary, bonuses and
options exercised since 2005, while shareholders watched the value of
their shares decline precipitously.
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The
Board annually approves the issuance of free stock options and free “Stock
Appreciation Rights” to Chairman/CEO McMunn and other executives; these
Stock Appreciation Rights are designed to cover the executives’ personal
tax bills on their free stock options, further subjecting
shareholders to the costs of such grants. Since the current
compensation plan in place was approved, Chairman/CEO McMunn has been
granted 156,000 free Stock Appreciation Rights to cover his personal tax
bill for the 156,000 free share options he has been
granted.
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Less
than a year ago, CTO’s Board made the following statement in response to a
letter from Wintergreen nominating additional
directors:
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“we have
operated as a Board consisting of nine directors for over a
decade. During that time, we have come to appreciate that each
director of a nine-member Board has more opportunity to participate in Board
activities than those serving on boards with a larger number of
directors,”
Nevertheless,
the Board recently unilaterally decided to amend its By-Laws to expand the Board
size to 11 in an apparent attempt to dilute the influence of outside,
shareholder-nominated independent director candidates.
We
believe (i) the separation of the offices of chairperson and CEO, (ii) the
de-classification of the Board, and (iii) fixing the number of directors
comprising the Board, will enhance the Board’s performance of its fiduciary duty
to the company and its shareholders by (a) providing efficient oversight over
management and the CEO in particular, and (b) giving the shareholders’ a
valuable voice with respect to governance issues, especially in light of the
lack of meaningful share ownership by the Board.
Separation
of the Offices of Chairman and CEO
Currently,
the Company’s CEO William H. McMunn serves as the Chairman of the Board. Yet,
the Board has several core responsibilities that involve overseeing the CEO,
including monitoring CEO performance, and compensating the CEO. Of
the seven real estate and development companies CTO lists in its 2009 proxy as
comparable in size and operations, five have separate individuals serving as
Chairperson and CEO. This negates CTO’s argument that a combined Chairman/CEO
position is necessary because of the type of business the company is involved
in.
Jim Jordan, a former CTO Board member
who was originally nominated by Wintergreen, raised the question of whether or
not the current Board was appropriately carrying out its duties with respect to
CEO oversight. Mr. Jordan resigned from the CTO Board at least
in part because of his negative view of the conduct of the Board and of the
Nominating and Corporate Governance Committees. At the time of his
resignation in March 2008, Mr. Jordan stated “it is a mistake to combine the
titles of Chairman and Chief Executive Officer, which goes against now generally
accepted best practice in corporate governance.” Statements such as these
by a resigning director should cause concern for thoughtful
investors about whether the Board is functioning properly and in the best
interests of all shareholders.
A recent
Wall Street Journal article (“Chairman-CEO Split Gains
Allies,” B4, March 30, 2009) points out that more and more independent
directors and corporate leaders are in favor of separating the roles of Chairman
and CEO. In addition, a study released last month by The Corporate
Library, an independent corporate governance research and analysis firm, found
companies with a joint Chairman/CEO position are more likely to have “troubling
governance characteristics” than companies which split the two
roles. We hope you will agree that the corporate governance issues
described in this letter serve to demonstrate the findings described
above.
We urge you to
vote “FOR” Wintergreen’s proposal to adopt a resolution requesting that the
Board implement a policy that the positions of chairperson of the Board and
Chief Executive Officer should be separated.
De-Classification
of the Board and Fixing the Number of Directors Constituting the
Board
We have
urged the current Board to address what we perceive to be inappropriate
practices that transfer value from shareholders to management and the
Board. Unfortunately, the Board’s reaction has been to further
entrench its current members. The Board has maintained a classified structure,
which reduces accountability of the Board to shareholders, and serves to
entrench current directors, even if they are performing poorly.
The
majority of S&P 500 companies have declassified Boards, and multiple
independent studies have found a positive link between firm value and practices
favoring shareholders, such as annual election of
directors. Shareholders of CTO deserve no less than full
representation.
CTO Board
members and management own approximately 3% of the outstanding shares of the
company. In addition, the majority of these shares were obtained by
Chairman/CEO Bill McMunn via share grants and stock appreciation rights approved
by the current Board. In this regard, Chairman/CEO McMunn has
received 76,000 share options and stock appreciation rights since 2005, at no
cost to him, all the while, other shareholders that bought their stock on the
open market suffered through a 60% loss in the value of their shares. It is
difficult to argue that interests of McMunn or the other members of the current
Board are aligned with those of the shareholders when in addition to the
circumstances described above with respect to conflicts related to overlapping
director relationships and CEO oversight, (i) McMunn continues to
receive multi-million dollar compensation while the share value of the Company
has declined, and (ii) the Board is so poorly represented in respect of share
ownership, and the majority of the shares actually owned by the Board were
acquired without consideration. As a result of the misalignment described
herein, it is more important
than ever that the Board be unable to dilute the voice of shareholders by
keeping the Board classified and increasing or decreasing the number of
directors constituting the Board at its leisure and in its interest, at the
expense of the shareholders.
We urge you to
vote “FOR” Wintergreen’s proposals to (i) adopt a resolution requesting that the
Board take the steps necessary to amend the Articles of Incorporation and
By-Laws of the Company to de-classify the terms of the Board and require that
all directors stand for election annually, and (ii) to adopt a resolution
requesting that the Board take the steps necessary to amend the Articles of
Incorporation and By-Laws of the Company to provide that the Board shall consist
of no more than eleven (11) directors.
PROTECT
YOUR INVESTMENT BY VOTING FOR TRULY INDEPENDENT BOARD NOMINEES AND FOR THE OTHER
WINTERGREEN SHAREHOLDER PROPOSALS DESCRIBED HEREIN
In
conclusion, we believe that for too long, the corporate governance issues we
believe plague the Board have interfered with the efficient management of the
company. We believe the company has been poorly managed – from a
business strategy that calls for the accelerated liquidation of the company’s
crown jewel of 11,000 acres of undeveloped land in Daytona Beach, and the
purchase of commodity retail income properties at unappealingly low rates of
return, with no pricing power and minimal inflation protection in their fixed
rents, to the management of a golf course which has lost over $1 million per
year every year for the past eight years (losing a total of over $11 million in
shareholder money over that period) with no apparent plan for turning it around
or for disposing of it. All of this has taken place with little
apparent oversight from the Board. Concurrently, CTO executives have been richly
rewarded for mediocre performance, with Chairman/CEO McMunn accumulating more
than $3.5 million in salary, bonuses and exercised stock options and Stock
Appreciation Rights over the past four years. In addition, Board
members have engaged in transactions with the company and each other with what
appears to be little to no independent review, consideration or
oversight. Shareholders have paid the price for
these decisions – CTO’s stock is down roughly 60% over the past three and a half
years.
The
shareholders of CTO own a valuable asset that we believe can never be duplicated
– 11,000 acres of pristine, undeveloped Florida real estate, 8,000 of which are
contiguous. We believe the company is in desperate need of a Board of
directors which is capable of developing a long-term plan for this land to
maximize its value for the benefit of its owners – CTO’s
shareholders. The three truly independent director candidates
proposed by Wintergreen will work with management to make the most of the
company’s assets for the benefit of all shareholders, and to bring the company’s
corporate governance standards into the 21st
century. CTO’s true owners deserve no less.
It is obvious to us that significant steps need to be taken to
maximize value for CTO’s shareholders. We believe (i) the Board’s
combination of the positions of Chairman and CEO, (ii) the current classified
Board structure, and (iii) the recent self-interested amendment of the company’s
By-Laws by the Board to increase the number of directors constituting the Board
have misaligned the interests of the Board from those of
shareholders. It is time for shareholders to
exercise their influence by voting “FOR” all of Wintergreen’s
proposals.
We
believe the proposals listed in our proxy are the first step to the corporate
governance reform the company sorely needs. Please vote for these
proposals and our director nominees by returning the enclosed GREEN proxy
card.
Thank you
for your support.
David J. Winters
www.shareholdersforctochange.com
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To
elect Wintergreen’s independent nominees and vote for
improving
CTO’s
corporate governance, we urge all shareholders to sign, date,
and
return the GREEN
proxy card whether or not you have already returned
a
white proxy card sent to you by the Company.
Wintergreen
urges all shareholders not to sign or return
any
white proxy card sent by the company.
Instead,
we request that you sign, date, and return the GREEN
proxy card.
You
may vote by mail or if you own your shares through a bank or a broker, you
may vote
by
telephone or internet.
If
you have already returned the white proxy card, you can effectively
revoke
it by signing, dating, and returning the GREEN
proxy card.
Only
your most recently-dated proxy card will be counted.
If
you have any questions or need assistance in voting the GREEN
proxy
card
please contact our proxy solicitor, Okapi Partners, at the toll-free
number
or email address listed below.
 Call
Toll-Free: 1-877-259-6290
Or
Email:
wintergreeninfo@okapipartners.com
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