SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant[X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Citadel Holding Corporation
(Name of Registrant as Specified In Its Charter)
Dillon Investors, L.P.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
[ ] 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:
________________________________________________
DILLON INVESTORS, L.P.
__________
CONSENT SOLICITATION STATEMENT
___________
Solicitation of Consents to Remove and Replace Directors,
and Amend By-Laws, of
CITADEL HOLDING CORPORATION
To the Stockholders of Citadel Holding Corporation:
INTRODUCTION
This Consent Solicitation Statement is being furnished to the
holders of common stock, par value $.01 per share (the "Shares"),
of Citadel Holding Corporation, a Delaware corporation (the
"Company"), by Dillon Investors, L.P., a Delaware limited
partnership ("Dillon"), in connection with the solicitation by
Dillon of written consents (the "Consent Solicitation") to its
proposals (the "Dillon Resolutions") to (i) remove all the
incumbent directors of the Company, (ii) elect to the Board of
Directors of the Company (the "Board") the nominees of Dillon named
herein (the "Dillon Nominees") and (iii) amend the Company's By-
Laws in the manner provided herein to restrict the indemnification
of (or the advancement of expenses to) its officers, directors,
employees and agents, all without a stockholders' meeting, as
permitted by Delaware law. Such proposed corporate actions may be
adopted by the consent of the holders of a majority of the Shares
outstanding on the Consent Record Date (which, pursuant to Delaware
law, has been established as November 7, 1994 and is hereinafter
defined under "CONSENT PROCEDURE").
According to the preliminary copies of the Notice of Annual
Meeting of Stockholders and Proxy Statement (the "Company
Preliminary Proxy Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") on [^]
November 23, 1994, the Company's Annual Meeting of Stockholders
(the "Annual Meeting") is scheduled to be held on December 12, 1994
at such time and place as specified in the Company's Notice of Annual
Meeting of Stockholders and Proxy Statement. Dillon urges you to
ignore the request of the Company's management for your proxy in
connection with the Annual Meeting. [^] If proxies and votes
present at the Annual Meeting or any adjournment thereof are not
sufficient in number to establish a quorum equal to a majority of
the outstanding stock entitled to vote at such meeting, no action
could be taken by the stockholders present, in person or by proxy,
constituting less than a quorum other than to adjourn the Annual
Meeting from time to time until a quorum is obtained. Dillon urges
you to mark, sign, date and return the enclosed GOLD consent card.
This Consent Solicitation Statement and the enclosed GOLD
consent card are first being furnished on or about November __,
1994 to the holders of record of outstanding Shares on the Consent
Record Date.
Because a consent to corporate action is effective only if
expressed by holders of record of a majority of the total number
of Shares outstanding, the failure to execute a GOLD consent card
has the same effect as withholding consent for the Dillon
Resolutions discussed herein and may result in the continuation of
the existing Board and the operation of the Company in a way which,
Dillon believes, is contrary to maximizing stockholder value.
Roderick H. Dillon, Jr. [^], together with Dillon, Roderick
H. Dillon, Jr. - IRA and Roderick H. Dillon, Jr. Foundation
(collectively, the "Dillon Entities"), have already consented to
adoption of the Dillon Resolutions with respect to all 659,000
Shares which they beneficially own. [^] Based on [^] 6,669,924
Shares reported as outstanding as of November [^] 7, 1994 in the
certified stockholder list dated November 7, 1994 delivered to
Dillon's representative by the Company pursuant to Roderick H.
Dillon, Jr.'s demand under Delaware law, the Dillon Entities held
approximately 9.88% of the outstanding Shares as of the Consent Record
Date. On November 10, 1994, the Company issued to its controlling
stockholder, Craig Corporation ("Craig"), 1,329,114 shares of its
3% Cumulative Voting Convertible Preferred Stock (the "New
Preferred Stock"). Dillon is contesting such issuance as improper
(see "BACKGROUND OF THE CONSENT SOLICITATION"). The New Preferred
Stock, which is convertible into Shares at any time, votes jointly
with the Shares on most matters, including the election of
directors, on a share-for-share basis. Since the New Preferred
Stock was issued subsequent to the November 7, 1994 Consent Record
Date, it is not eligible to consent in the Consent Solicitation and
is not considered outstanding for the purpose of determining the number
of consents required to adopt the Dillon Resolutions.
THE ABILITY OF DILLON TO OBTAIN CONSENTS FOR THE REMOVAL OF THE
CURRENT BOARD OF DIRECTORS AND THE ELECTION OF THE DILLON NOMINEES
IS DEPENDENT UPON THE RECEIPT OF ADVICE FROM THE OFFICE OF THRIFT
SUPERVISION (THE "OTS") WITH RESPECT TO THE APPLICABILITY OF THE
OTS CONTROL REGULATIONS TO THE SOLICITATION OF CONSENTS FOR THE
REMOVAL AND ELECTION OF DIRECTORS. SEE "REGULATORY APPROVALS."
DILLON URGES YOU TO MARK, SIGN, DATE AND RETURN TO DILLON,
CARE OF GARLAND ASSOCIATES, INC., THE ENCLOSED GOLD CONSENT CARD
TO "CONSENT" TO THE REMOVAL OF THE ENTIRE BOARD OF THE COMPANY, THE
ELECTION OF THE DILLON NOMINEES TO THE BOARD OF THE COMPANY AND THE
AMENDMENT OF THE COMPANY'S BY-LAWS.
BACKGROUND OF THE CONSENT SOLICITATION
The Dillon Entities purchased their 659,000 Shares from March
17, 1993 through March 16, 1994 at prices ranging from $20.22 per
Share to $4.54 per Share. On September 7, 1994, the [^] reported
[^] low for the Shares on the American Stock Exchange ("AMEX") was
$3.50, the lowest price at which the Shares [^] had traded in the
past ten years. (On November 23, 1994, the Shares sunk to a new
low on the AMEX of $2.63). As a result of the weakness in the
market price of the Shares, and the results of the recapitalization
and restructuring involving the Company and its formerly wholly
owned subsidiary, Fidelity Federal Bank, a Federal Savings Bank
("Fidelity"), which were materially less favorable to the Company
than had been anticipated (see "REASONS TO REPLACE THE PRESENT
BOARD WITH DILLON'S NOMINEES"), the Dillon Entities began to
consider seeking a greater voice in the Company's affairs.
By letter dated October 13, 1994, Dillon asked the Board to
promptly call a 1994 annual meeting of stockholders (which,
pursuant to the Company's By-Laws, should have been held in May
1994) and to respond publicly to inquiries concerning the current
business strategy of the Company and the best course of action to
maximize stockholder value. Other than scheduling the Annual
Meeting for December 12, 1994, with a record date of November 4,
1994, the Board did not respond to Dillon's letter. In that
letter, Dillon stated its opinion that a dissolution and
liquidation of the Company's assets would seem to be the best
strategy to maximize the value of the Shares to stockholders.
Dillon does not believe that such value is maximized through the
current operation of the Company as a real estate company, as
evidenced by the recent market prices for the Shares.
On October 21, 1994, the Company sold 74,300 Shares to Craig
[^], which resulted in Craig's owning more than 10% of the
outstanding Shares. Craig's Chairman, James Cotter, and President,
S. Craig Tompkins, serve as the Company's Chairman and Vice
Chairman, respectively. The agreed upon purchase price was the
lesser of the average trading price for the Shares on (a) the three
trading days preceding October 21, 1994 or (b) the five trading
days following October 21, 1994. The actual price paid by Craig
for such additional Shares was $3.85 per Share.(Footnote 1)
_______________
(Footnote 1) Craig had previously received approval from the OTS
to purchase more than 10% but less than 25% of the outstanding
Shares. However, such approval would have expired on October 23,
1994 if Craig's ownership of Shares did not exceed 10% on such
date. The issuance of the 74,300 Shares to Craig on October 21,
1994 enabled Craig to buy additional Shares without any further
regulatory delay, so long as its holdings did not exceed 25% of the
outstanding Shares. Craig had stated in Amendment No. 13 to its
Schedule 13D filed with the Commission on October 26, 1994 that it
would have been unwilling to file an agreement with the OTS to
avoid the regulatory delay because such an agreement "would have
substantially limited Craig's ability to exercise an influence over
the business and affairs of" the Company.
_______________
On November 4, 1994, Dillon filed an amendment to its Schedule
13D stating its intention to solicit proxies to elect a slate of
nominees to the Board. Also on November 4, the Company announced
that the record date for the stockholders entitled to vote at the
Annual Meeting had been changed from November 4, 1994 to November
11, 1994.
On November 7, 1994, Dillon commenced litigation (the
"Delaware Litigation") in the Court of Chancery of the State of
Delaware in and for New Castle County against the Company, its
present directors James J. Cotter, Steve Wesson, Peter W. Geiger,
S. Craig Tompkins and Alfred Villasenor, Jr. (the "Individual
Defendants") and Craig alleging that the attempt by the Company's
Board to change the record date for the Annual Meeting was not for
a proper corporate or business purpose of the Company but to enable
the Individual Defendants to perpetuate themselves in office by
improperly manipulating the corporate machinery of the Company so
as to permit them to issue additional Shares to Craig or other
"friendly hands" prior to the new record date and, in addition,
alleging that the Company's issuance in October of the 74,300
Shares to Craig was done for inadequate consideration and not for
a proper business purpose of the Company but rather to enable the
Individual Defendants to maintain themselves in office and to
affect adversely and to impede the voting rights of Dillon and the
other stockholders of the Company at the Annual Meeting. The
complaint sought an order declaring that such 74,300 Shares were
improperly issued and enjoining Craig from voting such Shares at
the Annual Meeting, determining that any Shares issued by the
Company after November 4, 1994 shall not be voted or counted
towards a quorum at the Annual Meeting, and preliminarily and
permanently enjoining the Individual Defendants and the Company
from issuing any Shares prior to the Annual Meeting. Also on
November 7, Roderick H. Dillon, Jr. delivered a consent to the
Company, together with a letter announcing Dillon's intention to
engage in the Consent Solicitation.
On November 8, 1994, the Company announced that the record
date for purposes of the Annual Meeting was November 14, 1994, and
that the prior announcement "erroneously reported the record date
of the meeting." On November 11, 1994, the Company issued a press
release indicating that it had sold to Craig 1,329,114 shares of
[^] New Preferred Stock [^] on November 10, 1994 at a price of
$3.95 per share by exchanging such shares for $5.2 million of debt
owed by the Company to Craig. The New Preferred Stock votes
jointly with the Shares on most matters, including the election of
directors, on a share-for-share basis and is convertible into
Shares at any time, at the option of the holder, at a conversion
ratio based upon the market price of the Shares (up to a maximum
price of $5.00). The New Preferred Stock is redeemable at a
premium at the option of the Company after November 10, 1997.
Holders of the New Preferred Stock have the right to require the
Company to purchase their shares at a premium under certain
circumstances, including a change of control (which would include
failure of the existing directors or any persons elected or
nominated by the existing directors to constitute a majority of the
Board).
On November 14, 1994, Dillon amended its complaint filed in
the Delaware Litigation to seek rescission of the sale of the New
Preferred Stock and to preliminarily and permanently enjoin the
voting of such stock at the Annual Meeting or otherwise. Such
amended complaint alleges that such issuance of New Preferred Stock
was in violation of the Board's fiduciary duties, as such stock was
issued for inadequate consideration and not for a proper business
or corporate purpose of the Company. The shares of New Preferred
Stock were issued at a share price below the closing sales price
for the Shares on the AMEX on such date, notwithstanding the fact
that such New Preferred Stock has superior liquidation, dividend
and redemption rights to the Shares, voting rights equal to the
Shares and is convertible into Shares. Dillon believes that the
New Preferred Stock was issued to Craig solely for the purposes of
improperly increasing Craig's voting power, diluting the voting
power of the Company's existing stockholders other than Craig and
entrenching the Company's management. On November 9, 1994, prior
to the Company's issuance of the New Preferred Stock to Craig, the
Court scheduled a trial beginning January 4, 1995, after
determining that a prompt trial after the Annual Meeting, together
with a status quo order preserving the parties in the position they
were from the time of the Annual Meeting through conclusion of the
trial, would afford sufficient relief. The Court did, however,
indicate that it would entertain a new request for injunctive
relief should significant events occur. Dillon has not
definitively determined whether to request relief from the Court
prior to the Annual Meeting, although Dillon will continue to
monitor the situation. If the Dillon Nominees are elected by vote
at the Annual Meeting or pursuant to written consent, it is
Dillon's intention to continue to prosecute the Delaware Litigation
to invalidate the issuance of the New Preferred Stock. If elected,
the Dillon Nominees will consider having the Company seek to
invalidate the issuance of the New Preferred Stock pursuant to
active participation in the Delaware Litigation or otherwise.
On November 16, 1994, the Company commenced litigation in
California seeking to forbid Dillon, among others, from soliciting
proxies or voting its own Shares at the Annual Meeting.(Footnote
2) Also on November 16, the Company filed an answer and
counterclaim in the Delaware Litigation seeking an order declaring
invalid any removal of the Board either prior to or after the
Annual Meeting, declaring that the consent procedure cannot be used
to amend the Company's By-Laws in the manner proposed by Dillon in
the Consent Solicitation and declaring that any such amendment is
void even if approved by the Company's stockholders. The
California Litigation Defendants intend to vigorously defend
against the claims in the California Litigation, and Dillon intends
to vigorously defend against the counterclaim in the Delaware
Litigation.
_______________
(Footnote 2) The action, commenced in the United States District
Court for the Central District of California (the "California
Litigation"), against the Dillon Entities and the Dillon Nominees
(collectively, the "California Litigation Defendants") alleges that
the California Litigation Defendants have violated Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder by
failing to disclose certain information in their Schedule 13D and
the amendments thereto. The Company's complaint seeks an order
forbidding the California Litigation Defendants from, among other
things, soliciting any proxies or consents related to the Shares
until the California Litigation Defendants have disclosed the
material information allegedly omitted from, and corrected the
information allegedly misstated in, their Schedule 13D and the
amendments thereto, voting any Shares pursuant to any proxy or
consent which may be granted pursuant to the Proxy Solicitation or
acquiring or attempting to acquire any further Shares, in either
case prior to the date ten days following public dissemination of
the corrective disclosures.
_______________
Dillon believes that you, the true owners of the Company,
should have the right to decide for yourselves how the Company
should be operated. As a result, Dillon believes the Consent
Solicitation is necessary in order to permit the stockholders of
the Company prior to such improper issuance of New Preferred Stock
to Craig to exercise their franchise without the dilution in their
voting power caused by such issuance. In the Consent Solicitation,
Dillon is seeking your consent to (i) remove all the incumbent
directors of the Company, (ii) elect to the Board the Dillon
Nominees (described below) and (iii) amend the Company's By-Laws
in the manner provided herein to restrict the indemnification of
(or the advancement of expenses to) its officers, directors,
employees and agents. See "THE DILLON RESOLUTIONS."
The Distribution, the Real Estate Sales and the Dissolution
If elected, the Dillon Nominees intend to propose, subject to
their fiduciary duties, that the Company (i) effect a pro rata
distribution of the shares of Fidelity currently held by the
Company to the stockholders of the Company (the "Distribution")
as soon as practicable after March 31, 1995, (ii) effect an orderly
sale of the Company's real estate assets at the best available
price (the "Real Estate Sales") and (iii) thereafter promptly
dissolve and liquidate the Company (the "Dissolution"). None of
the Dillon Entities or their affiliates would participate in any
transaction with the Company regarding a sale or liquidation of any
of the Company's assets, other than pursuant to their pro rata
interest as stockholders.
Proxy Solicitation and Consent Solicitation
As a means to facilitate the consummation of the Distribution,
the Real Estate Sales and the Dissolution, Dillon is soliciting
proxies from stockholders of the Company (the "Proxy Solicitation")
to elect the Dillon Nominees to the Board at the Annual Meeting
scheduled to be held December 12, 1994. On November __, 1994, Dillon
previously furnished holders of record on November 14, 1994 with
a proxy statement relating to such Proxy Solicitation which, in
addition to soliciting votes for election of the Dillon Nominees,
solicits votes against adoption of an amendment to the Company's
Restated Certificate of Incorporation which would double the number
of authorized Shares from 10,000,000 to 20,000,000. Dillon's proxy
statement with respect to the Proxy Solicitation also indicates
that proxies given to Dillon will not be voted for the election of
directors unless and until Dillon has received advice from the OTS
confirming that the OTS Control Regulations will not preclude
Dillon from holding proxies to vote for directors or Dillon is
otherwise able to hold such proxies without violating such
Regulations. See "REGULATORY APPROVALS." Such proxies also confer
discretionary authority to Dillon, permitting it to vote such
proxies to adjourn the Annual Meeting from time to time or to
withhold such proxies to defeat a quorum. If necessary, it is
Dillon's intention to use such authority to adjourn or otherwise
delay the Annual Meeting or any adjournment thereof until it is
permitted by the OTS Control Regulations to vote such proxies for
more than one-third of the Company's Board of Directors. Dillon's
choice of alternative will depend upon which alternative Dillon
believes most likely to achieve its objective of delaying a vote
on the election of directors until it is permitted to vote its
proxies in such election, and will take into account the known facts
and circumstances at such time, including the number of valid,
unrevoked proxies it then believes it holds and its view of management's
holdings. In the event Dillon were to abandon its attempts to elect the
Dillon Nominees, either because Dillon determined it could not ultimately
satisfy the OTS Control Regulations or otherwise, it would be
Dillon's intention to cease any further attempt to adjourn or
otherwise delay the Annual Meeting and, at such Annual Meeting,
would be unable to vote any proxies for the election of directors
and would vote any proxies it held against the proposal to increase
the Company's authorized number of Shares, unless the stockholder
otherwise directs.
Dillon believes that the Consent Solicitation is also
necessary to facilitate the consummation of the Distribution, the
Real Estate Sales and the Dissolution, [^] because the [^] record
[^] date for [^] the Consent Solicitation [^] is before the
issuance of the New Preferred Stock to Craig and before the reset
record date for the Annual Meeting. The earlier record date for
the Consent Solicitation of November 7, 1994, rather than the
Company's proposed November 14, 1994 record date for the Proxy
Solicitation, allows only the record holders of Shares (as the only
voting securities[^] prior to the issuance of the New Preferred
Stock), to vote their Shares with respect to how the Company should
be operated.
Assuming Dillon is successful in the Proxy Solicitation and
the Consent Solicitation is still pending, it is Dillon's current
intention not to pursue the completion of the Consent Solicitation
or the amendment of the Company's By-Laws in the manner provided
herein.
DILLON URGES YOU TO MARK, SIGN, DATE AND RETURN TO DILLON,
CARE OF GARLAND ASSOCIATES, INC., THE ENCLOSED GOLD CONSENT CARD
TO "CONSENT" TO THE REMOVAL OF THE ENTIRE BOARD OF THE COMPANY, THE
ELECTION OF THE DILLON NOMINEES TO THE BOARD OF THE COMPANY AND THE
AMENDMENT OF THE COMPANY'S BY-LAWS.
REASONS TO REPLACE THE PRESENT BOARD WITH DILLON'S NOMINEES
Poor Operating Performance
The Company has incurred significant operating losses during
recent years, primarily as a result of the poor performance of
Fidelity. The Company reported a net loss of $92.0 million ($13.95
per Share) for the second quarter of 1994, and a loss of $106.8
million ($16.19 per Share) for the six months ended June 30, 1994,
as reported in the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1994 (the "Form 10-Q"). As a result of such
losses, the Company commenced a series of steps to internally
reorganize in order to, among other things, strengthen Fidelity's
operations. The Company ultimately entered into a restructuring
and recapitalization transaction (the "Restructuring and
Recapitalization"), major aspects of which were consummated on
August 4, 1994.
Pursuant to the Restructuring and Recapitalization, Fidelity
transferred certain of its real estate assets to a newly-formed
subsidiary of the Company, and made a public offering which
resulted in the reduction of the Company's equity interest in
Fidelity from 100% to approximately 16.18%. The Board announced
that, following the Restructuring and Recapitalization, the Company
would become a real estate company and focus on the servicing and
enhancement of its real estate portfolio.
Unfortunately, as noted by the Company in the Form 10-Q, the
results of the Restructuring and Recapitalization were materially
less favorable to the Company than had previously been anticipated.
In light of such results, by letter dated October 13, 1994, Dillon
asked the Board to respond publicly to inquiries concerning the
current business strategy of the Company, the action required to
effect a pro rata distribution to the stockholders of the Company
of the shares of Fidelity currently held by the Company, whether
a dissolution of the Company and liquidation of its assets would
be the best strategy to maximize stockholder value, and why, in
light of the consummation of the Restructuring and
Recapitalization, the Company is still registered with the OTS as
a savings and loan holding company.
The Board did not respond to Dillon's inquiries and appears
unwilling to consider proposals to operate the Company in any
manner other than as a real estate company. The Board's only
action to date has been to reset the record date for the Annual
Meeting and, prior to such new date, issue securities having over
1.3 million votes to Craig for what Dillon believes was inadequate
consideration, so that Craig would be able to vote such securities
at the Annual Meeting for the existing directors, including Craig's
own Chairman, who also serves as the Company's Chairman, and
Craig's President.
Dillon is concerned that the Board may dispose of the shares
of Fidelity held by the Company and may use the proceeds of such
disposition in furtherance of its stated plans to develop the
Company as a real estate company. Likewise, Dillon is concerned
that the Board, which is seeking stockholder approval at the Annual
Meeting to double the number of authorized Shares, will issue
additional Shares and use the proceeds of such issuances in
furtherance of such plans. Such issuances could also be utilized
to further increase the stock ownership of management and persons
friendly to management in order to provide them an even greater
voice in pursuing such plans.
Interested-Party Transactions
Dillon is also concerned that the current Board will continue
a pattern of interested-party transactions with its controlling
stockholder, Craig, and Craig's officers who also serve on the
Company's Board.
In August 1994, the Company entered into an $8.2 million line
of credit agreement with Craig (the "Craig Line of Credit") which
has a one year maturity (subject to an option to extend for a
period of six months). The Craig Line of Credit, among other
things, paid Craig a $205,000 up front "commitment fee," up to
$100,000 for "expenses" and interest at three percentage points
over the prime rate for a fully secured loan. $5.2 million of the
$6.2 million outstanding loan under the Craig Line of Credit was
then replaced only three months later by the issuance to Craig of
the New Preferred Stock, and Craig's commitment to extend any
further loans under the Craig Line of Credit was terminated. The
exchange of debt for New Preferred Stock took place at a price
below the current market price for the Shares, notwithstanding the
fact that the New Preferred Stock votes jointly with the Shares on
most matters, is convertible into Shares and has superior
liquidation, dividend and redemption rights to the Shares. In the
event of a change of control (including failure of the existing
directors or their nominees to constitute a majority of the Board),
such New Preferred Stock also gives Craig the right to cause the
Company to repurchase the New Preferred Stock for a price equal to
its $5.2 million issuance cost plus accrued dividends of 3% per
annum plus a premium equal to approximately $39,000 per month from
the date of issuance to the date of repurchase. Depending upon
whether the issuance of the New Preferred Stock is invalidated
pursuant to the Delaware Litigation or otherwise (see "BACKGROUND
OF THE CONSENT SOLICITATION"), election of the Dillon Nominees
would either permit Craig to accelerate its original $6.2 million
loan to the Company or accelerate the remaining $950,000 loan and
require the Company to repurchase the New Preferred Stock.
Although Dillon has not approached any financing sources with
respect to the Company's obtaining funds to enable it to meet such
obligations, Dillon believes that refinancing secured by such
assets would be available (see "DILLON'S STRATEGY FOR THE COMPANY -
Potential Adverse Consequences"). There can be no assurance on
this point, however.
In addition, Dillon notes that the Company Preliminary Proxy
Statement indicates that the annual fees paid to the Company's
Chairman, James Cotter, who is also the Chairman of Craig, were
more than doubled to $100,000 in December 1993, retroactive to
October 1991. Following such retroactive increase and payment, in
August 1994 the Board reduced future payments to Mr. Cotter to
$45,000 per year. The Company's Vice Chairman, S. Craig Tompkins,
who is the President of Craig, receives a fee of at least $35,000
per year from the Company.
Dillon's investment of over $3.8 million in the Company was
intended to be an investment in a savings and loan with real estate
assets, not [^] in a real estate company. Dillon further believes
that most other stockholders did not intend to invest in a real
estate company. Dillon now seeks your [^] votes in support of an
alternative slate of nominees. Dillon believes that you, the true
owners of the Company, should have the right to decide for
yourselves how the Company should be operated. Our nominees are
committed to maximizing [^] value for ALL stockholders by
establishing the stockholders' direct investment in Fidelity,
selling the real estate assets of the Company and dissolving the
Company and liquidating any remaining assets, as described below.
None of the Dillon Entities or their affiliates would participate
in any transaction with the Company regarding a sale or liquidation
of any of the Company's assets, other than pursuant to their pro
rata interest as stockholders.
YOU CAN TAKE SOME IMMEDIATE STEPS TO HELP OBTAIN THE MAXIMUM
VALUE FOR YOUR SHARES BY MARKING, SIGNING, DATING AND RETURNING
YOUR GOLD CONSENT CARD FOR THE REMOVAL OF THE INCUMBENT DIRECTORS
OF THE COMPANY, THE ELECTION OF THE DILLON NOMINEES TO THE BOARD
AND THE AMENDMENT OF THE COMPANY'S BY-LAWS.
DILLON'S STRATEGY FOR THE COMPANY
The Distribution
In connection with the Restructuring and Recapitalization, the
Company's equity interest in Fidelity was reclassified into
4,202,243 shares of Fidelity's non-voting Class B Common Stock (the
"Fidelity Class B Stock"), representing approximately 16.18% of the
outstanding shares of Fidelity.
Dillon believes that, to maximize [^] value for all
stockholders and establish the stockholders' direct investment in
Fidelity, the Board should effect a pro rata distribution of the
shares of Fidelity currently held by the Company to the
stockholders of the Company (the "Distribution") as soon as
practicable after March 31, 1995. Dillon believes that the value
of such shares of Fidelity are being discounted by the market due
to the operation of the Company as a real estate company, wherein
such shares are mixed with the Company's real estate assets. While
there is not an active market for Fidelity shares, which are
currently unregistered, Dillon has been informed by J.P. Morgan
Securities Inc., the principal market maker for the Fidelity voting
Class A Common Stock (the "Fidelity Class A Stock") (into which the
Fidelity Class B Stock is automatically convertible upon transfer
by the Company to an unaffiliated party) that since the offering
of Fidelity common stock at $5.25 per share pursuant to the
Restructuring and Recapitalization, the Fidelity Class A Stock has
traded between $4.88 and $5.75 per share. These prices would be
equal to approximately $3.07 to $3.62 per Share (on a primary
basis, not including as outstanding Shares issuable upon conversion
of the New Preferred Stock issued to Craig). Dillon therefore
believes that the shares of Fidelity would be more valuable to the
stockholders of the Company if held by them directly, as opposed
to being held by the Company.
If elected, the Dillon Nominees intend to fix a record date
for the Distribution as soon as practicable after March 31, 1995
and distribute to each holder of Shares on such record date, on a
pro rata basis, shares of Fidelity. As a result of the
Distribution, stockholders of the Company would hold shares in both
the Company and Fidelity.
All stockholders of the Company would likely receive shares
of Fidelity Class A Stock as a result of the Distribution.
Currently, the Company holds shares of Fidelity Class B Stock.
However, the terms of the Fidelity Class B Stock provide that such
shares will automatically be converted into shares of Fidelity
Class A Stock when they are received by any person who is not [^]
a holder of at least 5% or more of Fidelity's outstanding common
stock or a member of a "group" under Section 13(d) of the Exchange
Act which holds at least 5% or more of Fidelity's outstanding
common stock (collectively, a "Fidelity 5% Holder"). In addition,
the terms of the Fidelity Class B Stock provide that all shares of
Fidelity Class B Stock will automatically be converted into shares
of Fidelity Class A Stock at such time as all shares of Fidelity
Class B Stock represent less than 10% of the outstanding common
stock of Fidelity on a fully diluted basis. Since the Fidelity
Class B Stock currently represents approximately 16.18% of the
outstanding fully diluted common stock of Fidelity and since,
according to the Company Preliminary Proxy Statement and Fidelity's
offering materials in the Restructuring and Recapitalization, less
than 25% of the Company's stockholders [^] could be considered
Fidelity 5% Holders, the Distribution would likely cause all
stockholders of the Company[^] to receive Fidelity Class A Stock.
The preferences and privileges of the Fidelity Class A Stock and
the Fidelity Class B Stock are the same except with respect to
voting rights and conversion rights.
The exact timing and details of the Distribution will depend
on a variety of factors and legal requirements, including
determination by the Dillon Nominees that the Fidelity shares
received in the Distribution by the Company's stockholders (other
than affiliates, if any, of Fidelity) will be freely transferable.
This may require registration of the Fidelity shares pursuant to
existing registration rights for such shares, which rights are not
exercisable by the Company until March 31, 1995[^] (the date on
which Fidelity's Report on Form 10-K for the fiscal year ended
December 31, 1994 is due). If for any reason Fidelity were not to
honor such registration rights in accordance with their terms, the
Distribution could be delayed until such registration is effected.
In addition, the Company has indicated that Fidelity shares
currently are required to trade in minimum blocks of 100,000
shares. Such restriction will expire upon the filing of Fidelity's
Annual Report on Form 10-K for the year ended December 31, 1994,
which is due no later than March 31, 1995.
Notwithstanding their present belief that the Distribution
would maximize stockholder value, in the event that the Dillon
Nominees, following their election and after careful review of then
available information, were to determine, pursuant to the exercise
of their fiduciary duties, that stockholder values would be
maximized by other alternatives, such as a block or other sale of
the Fidelity shares and distribution of the net proceeds to the
Company's stockholders, the Dillon Nominees would pursue such
alternatives.
Real Estate Sales
As set forth above, Dillon's investment of over $3.8 million
in the Company was not made for the purpose of investing in a real
estate company. Dillon also believes that most of the Company's
other stockholders did not intend to invest in a real estate
company. Based upon statements made by the Company in the Form 10-
Q, Dillon believes that the Company's real estate assets (including
assets on which the Company holds purchase options) have a market
value in excess of their purchase price or option exercise
price.(Footnote 3) Therefore, Dillon believes that, to maximize
stockholder value, the Board should effect an orderly sale of the
real estate assets of the Company at the best available price (the
"Real Estate Sales"). The timing of the Real Estate Sales will be
determined after consideration of all relevant factors, including
detailed information then available regarding the status of the
properties and the condition of the relevant property markets at
that time, in order to maximize proceeds to the Company and its
stockholders. See "THE DILLON RESOLUTIONS - Proposal 2: Election
of The Dillon Nominees - The Dillon Nominees," for information with
respect to the extensive real estate experience of the Dillon
Nominees.
_______________
(Footnote 3) The Form 10-Q states that with "active management
and certain capital expenditures, the Company's owned properties
"if sold on an individual basis, could be worth more than [the
Company] purchased them for in [connection with the Restructuring
and Recapitalization], but there can be no assurance on this
point." In addition, the Form 10-Q states that the value of the
options could be "up to $3 million above the exercise price of [the
options], before costs the Company would incur in connection with
the exercise, which may be significant." The terms of the options
indicate that they are transferable prior to exercise.
_______________
The Dissolution
Following the consummation of the Distribution and the Real
Estate Sales, the Dillon Nominees intend to dissolve and liquidate
the Company as promptly as practicable (the "Dissolution").
Dillon's recommendation to effect the Dissolution is based on its
determination that no reasonable business alternatives will exist
for the Company following the Distribution and the Real Estate
Sales. Therefore, Dillon believes that, at such time, the
Dissolution is the most appropriate course of action.
In the Dissolution, the Company will take all necessary steps
to dissolve pursuant to the provisions of the DGCL, including the
filing of a Certificate of Dissolution with the Delaware Secretary
of State. Upon such a filing, the Company will cease business
operations. The Company's corporate existence will continue
thereafter, but solely for the purpose of liquidating any remaining
assets, winding up its business affairs, paying its liabilities and
distributing any cash remaining to stockholders.
The exact timing and details of the Distribution, the Real
Estate Sales and the Dissolution will depend on a variety of
factors and legal requirements. Dillon and the Dillon Nominees can
give no assurance that the Distribution, the Real Estate Sales and
the Dissolution will each be consummated or as to the timing of
such events if they are consummated. Although the Dillon Nominees
currently intend to propose the Distribution, the Real Estate Sales
and the Dissolution generally on the terms described above, it is
possible that, as a result of substantial delays in the ability of
the Dillon Nominees to effect such transactions, information
hereafter obtained by the Dillon Nominees, changes in general
economic or market conditions or in the business of the Company or
other presently unforeseen factors, the Distribution, the Real
Estate Sales and the Dissolution may not be so proposed, or may be
delayed or abandoned (whether before or after stockholder
authorization or consent). Although it has no current intention
to do so, the Dillon Nominees expressly reserve the right to
propose the Distribution, the Real Estate Sales and the Dissolution
on terms other than described above, if they, in the exercise of
their fiduciary duties, believe such action to be appropriate.
Valuation
While Mr. Dillon has from time to time publicly expressed his
views as to potential ranges of values for the Shares, neither
Dillon nor any of the Dillon Entities has conducted any formal
valuation or liquidation analyses with respect to the Company or
its properties, and neither Dillon nor any of the Dillon Entities
is able to accurately determine or predict the value of the amounts
which would be received by the Company's stockholders pursuant to
the Distribution, the Real Estate Sales and the Dissolution.
Potential Adverse Consequences
Dillon is not aware of any adverse consequences to the Company
with respect to its proposed strategy other than with respect to
triggering change of control provisions installed by Craig in the
Craig Line of Credit and the New Preferred Stock.(Footnote 4)
Dillon does not believe the other adverse consequences discussed
in the Company Preliminary Proxy Statement are applicable or would
foreclose such strategy. Specifically, Dillon has stated that any
distribution of Fidelity shares to stockholders would only be of
freely transferable shares and would occur after March 1995 when
registration rights would be available and the current restriction
on market trading in 100,000 share blocks would have terminated.
Dillon also has indicated that the Dillon Nominees intend to
exercise their fiduciary duties in maximizing stockholder values
and would consider alternatives to the Distribution such as a block
sale of the Fidelity shares and a distribution of the proceeds if
this were to be in the best interest of all stockholders. The
Dillon Nominees further intend to conduct an orderly sale of the
Company's real estate properties in order to maximize the sales
proceeds to the Company. Dillon believes the Company can realize
the value of the real estate options held by the Company through
the sale of such options, which are all transferable prior to
exercise. Finally, in formulating its proposed strategy, Dillon
considered the Company's disclosed liabilities, including its
liability of up to $3.9 million to Fidelity, and any plan of
dissolution recommended by the Dillon Nominees would, as required
by Delaware law, take into account all liabilities of the Company.
_______________
(Footnote 4) The election of the Dillon Nominees would, depending
upon whether the issuance of the New Preferred Stock is
invalidated, pursuant to the Delaware Litigation or otherwise (see
"BACKGROUND OF THE CONSENT SOLICITATION"), either permit Craig to
accelerate its original $6.2 million loan to the Company or to
accelerate the remaining $950,000 loan and require the Company to
repurchase the New Preferred Stock at a premium, for a total cost
to the Company of $6.2 million plus accrued dividends of 3% per
annum plus a premium of approximately $39,000 per month, pro rated,
from the date of issuance to the date of redemption of the New
Preferred Stock. Although Dillon has not approached any financing
sources with respect to the Company's obtaining funds to enable it
to meet such obligations, Dillon believes that financing, secured
by such assets, would be available, based upon the fact that Craig
was willing to supply the Craig Line of Credit and the Company's
statements with respect to its real estate assets in the Form 10-
Q (see "DILLON'S STRATEGY FOR THE COMPANY - Real Estate Sales"),
although there can be no assurance on this point. To Dillon's
knowledge, the Company has only one employment agreement
outstanding, a two-year contract with its President, Steve Wesson,
for $225,000 per year expiring in August 1996, and such contract
does not terminate upon a change of control of the Company. Dillon
is not aware of any other costs which would be occasioned by a
change of control of the Company.
_______________
Stockholder Vote
Pursuant to Section 271 and Section 275 of the Delaware
General Corporation Law (the "DGCL"), respectively, the approval
of stockholders owning a majority of the outstanding stock of the
corporation entitled to vote thereon is required to effect a sale
of substantially all of the assets, or a dissolution, of such
corporation. [^] The Dissolution will require a vote pursuant to
Section 275 of the DGCL. Whether the Distribution and/or the Real
Estate Sales will require stockholder approval may depend upon the
order and timing of such transactions which, as stated above, will
be determined by the Dillon Nominees, if elected, consistent with
their fiduciary duties. The Dillon Nominees intend to seek any
such approvals necessary in order to carry out [^] such
transactions, but will not submit any such transactions to a
stockholder vote unless then required under Delaware law. If any
vote is taken, Dillon and its affiliates intend to vote any Shares
owned by them in favor of such actions.
Federal Income Tax Consequences
Dillon does not have sufficient financial information to
determine the exact federal income tax consequences of its planned
strategy upon the Company and its stockholders. In general, Dillon
believes that the Distribution and the Real Estate Sales will be
taxable events to the Company causing the Company to recognize
gains or losses on its holdings of Fidelity shares and real estate
assets upon their distribution or sale, respectively. Dillon
believes that the Company has net operating losses available which
may be carried forward to offset gains in this respect. In
addition, Dillon believes that the distribution to a stockholder
of Fidelity shares at any time and the distribution to a
stockholder of cash upon complete liquidation of the Company will
each be treated as a return of such stockholder's basis in the
Shares to the extent of such stockholder's basis, and a capital
gain to the extent that such distribution exceeds the stockholder's
basis, in the Shares.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO TAX CONSEQUENCES, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
REGULATORY APPROVALS
Because the Company is registered with the OTS as a savings
and loan holding company [^], questions exist as to the
applicability to the Proxy Solicitation and the Consent
Solicitation, insofar as they relate to the election of more than
one-third of the Board, of the OTS regulations set forth in Part
574 of Title 12 of the Code of Federal Regulations governing
acquisitions of control of savings associations and savings and
loan holding companies (the "OTS Control Regulations"). [^] By
letter dated November 3, 1994 (the "OTS Letter"), Dillon has sought
interpretive advice from the OTS regarding the applicability of the
OTS Control Regulations to the Proxy Solicitation and the Consent
Solicitation. The OTS Letter also requests a determination from
the OTS that, if the OTS concludes that the OTS Control Regulations
apply to the Company by virtue of its holding company registration
status and without regard to whether or not the Company has control
of a savings association, the OTS will refrain from initiating or
recommending enforcement action against the Dillon Entities if [^]
Dillon [^] acquires and exercises proxies or [^] obtains a written
consent of stockholders [^] enabling [^] Dillon [^] to elect [^]
more than one-third of the Board without first filing a change of
control notice or rebuttal of control submission pursuant to the
OTS Control Regulations.
[^] Although the OTS has indicated that it will respond
promptly to Dillon's November 3, 1994 letter, there can be no
assurance whether a favorable response will be received prior to
the Annual Meeting or prior to the expiration of the Consent
Solicitation [^] period on January 6, 1995. If the OTS advises
Dillon that the Proxy Solicitation [^] and the Consent Solicitation
are governed by the OTS Control Regulations, or if Dillon
determines that it would otherwise be more expeditious than waiting
for a response to its November 3 letter, it is Dillon's present
intention then to file with the OTS a [^] rebuttal of control
submission or a change of control notice.
A rebuttal of control submission [^] by Dillon would set forth
the facts and circumstances which support Dillon's contention that
no actual control relationship would exist, within the meaning of
the OTS Control Regulations and applicable federal law, if Dillon
acquired proxies or consents enabling it to elect the Dillon
Nominees. Within 20 days of its receipt of a rebuttal submission,
the OTS may accept or reject the submission or request additional
information. If additional information is requested, the OTS must
notify Dillon within 15 days of its receipt of such additional
information whether the rebuttal submission is deemed to be
sufficient. Once the submission is deemed sufficient, the Consent
Solicitation could begin.
In lieu of a rebuttal submission or in the event that a
rebuttal submission is not deemed sufficient by the OTS, Dillon may
file a change of control notice [^] with the OTS. The period for
determining the completeness of a change of control filing is 30
days. During such 30 day period, the OTS may request additional
information. If additional information is provided, the OTS must
notify Dillon within 15 days of the receipt of such additional
information as to the sufficiency of the notice. Once the notice
is deemed sufficient, the OTS must accept or reject the notice
within 60 days, subject to extension for up to 30 days and further
extension for two additional periods of 45 days each.
Actions Prior to OTS Clearance
Dillon's GOLD consent card by its terms is not effective with
respect to the removal of the current Board of Directors or the election
of directors unless and until Dillon has received advice from the OTS
confirming that the OTS Control Regulations will not preclude
Dillon from obtaining consents to remove the current Board of
Directors and to elect new directors, or Dillon is otherwise able
to obtain such consents without violating such Regulations. The GOLD
consent card by its terms is effective with respect to Proposal 3
(amending the Company's By-Laws) unless the stockholder otherwise
directs. In the event Dillon were to abandon its attempts to remove
the current Board of Directors and elect the Dillon Nominees, either
because Dillon determined it could not ultimately satisfy the OTS
Control Regulations or otherwise, it would be Dillon's intention to
cease any further attempt to take such actions and would deliver to
the Company any consents it held in favor of Proposal 3. Until Dillon
were to deliver to the Company a sufficient number of consents to
remove the current Board of Directors and to elect the Dillon
Nominees, the Company's current Board of Directors will continue
to serve. While Dillon cannot predict the length of the potential
delay, if required, caused by Dillon's actions to comply with the
OTS Control Regulations, Dillon expects that any such delay would
be approximately 90 days. Dillon has been advised by the OTS and
Delaware counsel that the above-described course of action is
permissible pursuant to the OTS Control Regulations and under
Delaware law, respectively.
The Consent Solicitation period expires on January 6, 1995.
At such time, in the event that Dillon has not received advice from
the OTS confirming that the OTS Control Regulations will not
preclude Dillon from obtaining consents to remove the current Board
of Directors and to elect the Dillon Nominees, or Dillon is
otherwise able to obtain such consents without violating such
Regulations, Dillon will either have to establish a new record date
for the Consent Solicitation or abandon the Consent Solicitation.
Dillon will make such determination at such time, in its
discretion, based on the facts and circumstances then known to
Dillon.
Dillon will publicly announce the OTS responses to the OTS Letter
as promptly as practicable upon receipt thereof by making a release to the
Dow Jones News Service. Stockholders can obtain information as to the
current status of OTS clearance by calling the following toll-free
number: 1-800-455-6034.
THE DILLON RESOLUTIONS
Proposal 1: Removal of the Incumbent Directors of the Company
In order to facilitate a change in the Company's management
at the earliest practicable time, Dillon proposes that the
incumbent members of the Board, currently consisting of James J.
Cotter, Steve Wesson, Peter W. Geiger, S. Craig Tompkins and Alfred
Villasenor, Jr., be removed from office and be replaced by the
Dillon Nominees. Accordingly, Dillon recommends that you consent
to the removal of all incumbent directors of the Board, including
any person elected or appointed to the Board to fill any vacancies
created by resignation or incapacity, or newly-created positions
on the Board. The resolution proposed by Dillon for adoption by
consent of the Company's stockholders with respect to the removal
of the incumbent directors of the Company is set forth below
("Resolution Number One") and is referred to in the GOLD consent
card which accompanies this Consent Solicitation Statement.
Resolution Number One submitted for stockholder consideration
is as follows:
"RESOLVED, that the entire Board of Directors
of Citadel Holding Corporation, consisting of
James J. Cotter, Steve Wesson, Peter W.
Geiger, S. Craig Tompkins and Alfred
Villasenor, Jr. (collectively, the
"Directors"), or any person or persons elected
or nominated by any or all of the Directors to
fill any position on the Board, including any
vacancy created by the resignation or
incapacity of any of said persons, by any
increase in the number of directors, or
otherwise, is hereby removed, and the office
of each member of the Board of Directors is
hereby declared vacant."
DILLON RECOMMENDS THAT YOU "CONSENT" TO THE REMOVAL OF THE
ENTIRE BOARD OF DIRECTORS OF THE COMPANY.
Proposal 2: Election of the Dillon Nominees
In addition, Dillon recommends that you consent to the
election of Roderick H. Dillon, Jr., Bradley C. Shoup, Ralph V.
Whitworth, Jordan M. Spiegel and Timothy M. Kelley (collectively,
the "Dillon Nominees"), to fill the vacancies created by the
removal of the incumbent directors. The resolution proposed by
Dillon for adoption by consent of the Company's stockholders with
respect to the election of the Dillon Nominees is set forth below
("Resolution Number Two") and is referred to in the GOLD consent
card which accompanies this Consent Solicitation Statement.
Resolution Number Two submitted for stockholder consideration
is as follows:
"RESOLVED, that the following persons are
hereby elected as directors of Citadel Holding
Corporation to fill the vacancies on the Board
of Directors, to serve until their respective
successors are duly elected and qualified:
Roderick H. Dillon, Jr., Bradley C. Shoup, Ralph V.
Whitworth, Jordan M. Spiegel and Timothy M. Kelley."
The Dillon Nominees
Each of the Dillon Nominees has consented to serve as a
director of the Company, if elected through either the Consent
Solicitation or the Proxy Solicitation. Of the five Dillon
Nominees, one (Mr. Dillon) is employed by or otherwise affiliated
with Dillon, and the remaining four are neither employed by nor
affiliated with Dillon. None of the Dillon Nominees is affiliated
with or has or has had any business relationship with the Company,
other than as a stockholder.
The Dillon Nominees are listed below and have furnished to
Dillon the following information concerning their principal
occupations, business addresses and certain other matters. All
Dillon Nominees are citizens of the United States.
Roderick H. Dillon, Jr., 38, has served as Chief Investment
Officer of Dillon Capital Management Limited Partnership, an
investment advisory and management firm which manages over $50
million in assets, since July 1993. In such capacity, Mr. Dillon
actively manages investments in over 50 public companies, including
over five companies in the thrift industry. From June 1986 through
June 1993, Mr. Dillon was Vice President of Loomis, Sayles & Co.,
Inc., an investment advisory firm. In such capacity, Mr. Dillon
managed approximately $300 million in separate equity portfolios
and co-managed the Loomis Sayles Small Cap Fund. Investments
managed by Mr. Dillon included those in numerous financial
institutions such as Coast Savings, Westcorp and First Republic.
Mr. Dillon's business address is Suite 1410, 21 East State Street,
Columbus, Ohio 43215-4228.
Bradley C. Shoup, 36, is a [^] Partner in Batchelder &
Partners, Inc., a financial advisory firm, and has held such
position [^] since 1988. In such capacity, Mr. Shoup has served
as a financial advisor to various public companies. From 1987
until 1988, Mr. Shoup was an independent corporate finance
consultant engaged in the venture capital and energy industries.
Mr. Shoup was a Financial Analyst with Mesa Petroleum Co. from 1984
until 1986, responsible for identifying and evaluating investment
opportunities. Mr. Shoup's business address is 4180 La Jolla
Village Drive, Suite 560, La Jolla, California 92037.
Timothy M. Kelley, 36, is Secretary, Treasurer and General
Counsel of Donald W. Kelley & Associates, Inc., a real estate
consulting and development firm, and has held such position [^]
since 1984. In such capacity, Mr. Kelley is actively engaged in
real estate development, investment, acquisition and financing
activities, as the firm and affiliated entities own more than 4,300
apartment units. Mr. Kelley also serves as Vice President,
Secretary and a director of an affiliated company, Oakwood
Management Company, which manages over 80 apartment projects
consisting of more than 8,800 apartment units. Mr. Kelley's
business address is 250 E. Broad Street, 11th Floor, Columbus, Ohio
43215.
Ralph V. Whitworth, 39, has served as President of Whitworth
& Associates, a corporate consulting firm, since 1988. From 1986
until 1993, Mr. Whitworth was President of United Shareholders
Association, a prominent shareholder rights group. In such
capacity, Mr. Whitworth served as chief strategist, spokesman and
negotiator for, among other things, negotiations which resulted in
agreements with 46 public companies to improve corporate governance
and shareholder rights. From 1989 until 1992, Mr. Whitworth served
as President of Development at United Thermal Corporation which
owns the district heating systems for the cities of Baltimore,
Philadelphia, Boston and St. Louis. Mr. Whitworth also served on
United Thermal's Board of Directors until December 1993 when the
company was merged with Trigen Energy Corporation. Mr. Whitworth
currently serves on the Boards of Directors of Catalyst Vidalia
Corporation, the developer and manager of a 200 megawatt
hydroelectric facility on the Mississippi River, and CD Radio,
Inc., a satellite radio company. Mr. Whitworth's business address
is 801 Pennsylvania Avenue, N.W., Suite 747, Washington, D.C.
20004.
Jordan M. Spiegel, 32, is Executive Vice President of A. B.
Laffer, V. A. Canto & Associates, an economic consulting firm, and
has held such position [^] since 1987. In such capacity, Mr.
Spiegel manages the firm's corporate finance advisory business
through its wholly owned subsidiary Laffer Advisors Incorporated,
and currently serves as a financial advisor to over 20 different
companies. Prior to 1987, Mr. Spiegel was an equity securities
analyst with Crowell, Weedon & Co., the largest private regional
brokerage house in Southern California, specializing in, among
other things, real estate investment trusts. Mr. Spiegel's
business address is Regents Square One, 4275 Executive Square,
Suite 330, La Jolla, California 92037.
Dillon has agreed to indemnify each of the Dillon Nominees
against all liabilities, including liabilities under the federal
securities laws, in connection with the Proxy Solicitation, the
Consent Solicitation and such person's involvement in the operation
of the Company, including the Distribution, the Real Estate Sales
and the Dissolution, and to reimburse such Dillon Nominee for his
out-of-pocket expenses.
The ability of Dillon to obtain consents for the removal of the
current Board of Directors and the election of the Dillon Nominees
is dependent upon the receipt of advice from the OTS with respect
to the applicability of the OTS Control Regulations to the
solicitation of consents for the removal and election of directors.
See "REGULATORY APPROVALS." Therefore, the GOLD consent card
provides that it is not effective with respect to the removal of the
current Board of Directors or the election of the Dillon Nominees
unless and until Dillon has received advice from the OTS confirming
that the OTS Control Regulations will not preclude Dillon from
obtaining consents to remove the current Board of Directors or to
elect directors, or Dillon is otherwise able to hold such consents
without violating such Regulations. Unless such condition is met
prior to January 6, 1995, the GOLD consent cards will not be effective
with respect to the removal or election of directors.
DILLON RECOMMENDS THAT YOU "CONSENT" TO THE ELECTION OF THE
DILLON NOMINEES TO THE BOARD OF DIRECTORS OF THE COMPANY.
Proposal 3: Amendment of the Company's By-Laws
In order to ensure that the incumbent directors of the Company
are acting to maximize stockholder value in accordance with the
wishes of the Company's unaffiliated stockholders and that the
Company's resources are not depleted absent stockholder approval,
Dillon proposes that the Company's By-Laws be amended to restrict
the indemnification of (or the advancement of expenses to) the
Company's officers, directors, employees and agents without the
prior approval of the holders of a majority of the outstanding
Shares. In addition, Dillon proposes that the Company's By-Laws
provide that such amendment may not be further amended without the
approval of either the holders of a majority of the outstanding
Shares or a majority of the Board of Directors of the Company who
are not "Continuing Directors." Continuing Directors are defined
for purposes of such amendment as (i) each member of the Board on
November 4, 1994 and (ii) any member of the Board who was nominated
for election or elected to such Board of Directors with the
affirmative vote of the majority of the Continuing Directors who
were members of such Board at the time of such nomination or
election. Such amendment is designed to inhibit the incumbent
officers, directors, employees and agents from engaging in
defensive strategies which may preclude the Company's stockholders
from considering the Dillon Resolutions on their merits or dilute
the voting power of such stockholders with respect thereto. Dillon
believes that any such improper defensive strategy should be at the
cost and peril of the incumbent officers, directors, employees and
agents and not of the Company and you, its owners. Accordingly,
Dillon recommends that you consent to the amendment of the
Company's By-Laws in the manner provided herein. The resolution
proposed by Dillon for adoption by consent of the Company's
stockholders with respect to the amendment of the Company's By-
Laws is set forth below ("Resolution Number Three," and together
with Resolution Number One and Resolution Number Two, collectively
the "Dillon Resolutions") and is referred to in the GOLD consent
card which accompanies this Consent Solicitation Statement. As set
forth above, the Company has filed a counterclaim in the Delaware
Litigation seeking to invalidate such proposed amendment to the
Company's By-Laws and objecting to, among other things, the
retroactive application of such an amendment. While Dillon intends
to vigorously defend against such counterclaim, there can be no
assurance as to the ultimate outcome thereof.
Resolution Number Three submitted for stockholder
consideration is as follows:
"RESOLVED, that the By-Laws of Citadel Holding
Corporation be amended to provide that as of
November 4, 1994 the By-Laws shall not permit
indemnification of (or allow advancement of
expenses to) its officers, directors,
employees and agents without the prior
approval of the holders of a majority of the
Common Stock outstanding. This amendment to
the By-Laws may not be further amended without
the approval of either the holders of a
majority of the Common Stock outstanding or a
majority of the Board of Directors of the
Corporation who are not "Continuing
Directors." Continuing Directors shall be
defined as (i) each member of the Board of
Directors of Citadel Holding Corporation on
November 4, 1994 and (ii) any member of the
Board of Directors of Citadel Holding
Corporation who was nominated for election or
elected to such Board of Directors with the
affirmative vote of the majority of the
Continuing Directors who were members of such
Board at the time of such nomination or
election."
DILLON RECOMMENDS THAT YOU "CONSENT" TO THE AMENDMENT OF THE
COMPANY'S BY-LAWS.
CONSENT PROCEDURE
Delaware Law and Corporate Authorization
Section 228 of the DGCL states that, unless otherwise provided
in the certificate of incorporation, any action which may be taken
at any annual or special meeting of stockholders of a corporation
may be taken without a meeting, without prior notice and without
a vote, if consents in writing setting forth the action so taken
are signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, and those consents are
delivered to such corporation by delivery to its registered agent
in Delaware, its principal place of business or an officer or agent
of such corporation having custody of the book in which proceedings
of meetings of stockholders thereof are recorded. The Restated
Certificate of Incorporation of the Company does not limit the
applicability of Section 228. Accordingly, pursuant to Section 11
of Article II of the Company's By-Laws, the incumbent directors of
the Company may be removed and the Dillon Nominees elected in their
stead by the consent in writing to such actions, signed and
delivered as set forth in Section 228 of the DGCL, of the holders
of a majority of the outstanding Shares as of the Consent Record
Date.
Pursuant to the DGCL, consents to corporate action are valid
for a maximum of sixty (60) days after the date of the earliest
dated consent delivered to the Company in the manner provided in
Section 228 of the DGCL. It is, therefore, important that you
mark, sign and date the GOLD consent card and return it in the
postage-prepaid envelope provided as soon as possible. To be
effective, the GOLD consent card must bear the date of signature
of the stockholder who signs such GOLD consent card. Under
Delaware law, only stockholders of record on the Consent Record
Date (as defined below) are eligible to give their consent to the
Dillon Resolutions. Persons owning Shares "beneficially" (i.e.,
deriving the economic benefits of ownership thereto or having the
power to vote or dispose of Shares), but not "of record" (i.e.,
those holders whose names are recorded on the stock transfer
records of the Company), such as persons whose ownership of Shares
is through a broker, bank or other financial institution, should
contact such broker, bank or financial institution and instruct
such person or entity to execute the GOLD consent card on their
behalf or have such broker, bank or financial institution's nominee
(for example, a central security depository) execute and mail such
GOLD consent card.
Consent Record Date
To the knowledge of Dillon, the Board has not set a record
date for this Consent Solicitation. Pursuant to the DGCL, if a
record date related to such a consent solicitation has not been set
by the Company, the record date for determining the stockholders
entitled to consent to corporate action in writing, without a
meeting, will be the first date on which a signed, written consent
setting forth the action taken or proposed to be taken is delivered
to a corporation by delivery to its registered office in Delaware,
its principal place of business, or an agent or officer of such
corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. On November 7, 1994,
Roderick H. Dillon, Jr. delivered his written consent to the
Company, dated such date, consenting to the removal of the current
members of the Board, the election of the Dillon Nominees and the
amendment of the Company's By-Laws, thus establishing the statutory
consent record date (the "Consent Record Date"). Therefore, the
enclosed GOLD consent card may be executed only by stockholders of
record on November 7, 1994. Each record holder of Shares on the
Consent Record Date is entitled to execute a consent representing
such Shares. The Company's Restated Certificate of Incorporation
does not provide for cumulative voting.
Duration of Consent
Pursuant to Section 228 of the DGCL, the written consent of
stockholders will not be effective to remove the incumbent
directors, elect the Dillon Nominees and amend the Company's By-
Laws unless valid, unrevoked GOLD consent cards executed by the
holders of a majority of the outstanding Shares on the Consent
Record Date are delivered to the Company on or before January 6,
1995 (sixty (60) days from the date of the earliest dated consent
delivered to the Company).
The proposed actions may be taken at any time on or prior to
January 6, 1995, upon proper delivery to the Company of unrevoked
GOLD consent cards representing a majority of the outstanding
Shares on the Consent Record Date. Such delivery may take place
at Dillon's election, based upon circumstances then existing,
either prior or subsequent to the Annual Meeting. If such delivery
occurs prior to the Annual Meeting, the Dillon Nominees will serve
until their successors, if any, are elected and qualified at the
Annual Meeting which is scheduled to be held on December 12, 1994,
provided a quorum can be established. If such delivery occurs
subsequent to the Annual Meeting, the Dillon Nominees will serve
until their successors, if any, are elected and qualified at the
next annual meeting which has not been scheduled but which the
Company's By-Laws specify should be held on the third Thursday
in May 1995. If the actions consented to become effective, prompt
notice of the corporate action taken by written consent will be given,
as required under Delaware law, to the stockholders who have not
consented.
Consent Required
The unrevoked, signed GOLD consent cards of the record
holders, as of the Consent Record Date, of a majority of the
outstanding Shares are necessary for the adoption of each of the
Dillon Resolutions. Each record holder of Shares on the Consent
Record Date is entitled to execute a GOLD consent card representing
the Shares held by the record holder on such date.
As disclosed in the Company Preliminary Proxy Statement, as
of November 4, 1994, there were 6,669,924 Shares outstanding and
eligible to consent. Dillon is not aware of any change in the
number of outstanding Shares between such date and the Consent
Record Date.
The enclosed GOLD consent card provides a means for a
stockholder to consent[^] or withhold consent [^] with respect to
each of the Dillon Resolutions, subject to the right of each
stockholder to withhold his or her consent to the election of any
of the Dillon Nominees or the removal of any of the current
directors. A stockholder in favor of the Dillon Resolutions should
mark the "FOR" boxes on the enclosed GOLD consent card, date and
sign the GOLD consent card and mail it to Dillon's consent
solicitation agent (Garland Associates, Inc.) in the enclosed,
postage-prepaid envelope. A stockholder consenting to the proposed
actions may withhold his or her consent to the election of any
particular Dillon Nominee or to the removal of any particular
director by writing the name(s) of each [^] such person(s), to the
election or removal of whom the stockholder does not consent, in
the applicable "EXCEPTION" space provided on the enclosed GOLD
consent card. If a consent card is executed but no indication is
made as to what action is to be taken with respect to any Dillon
Resolution, it will be deemed to constitute a "CONSENT" to such
Dillon Resolution.
NO MATTER HOW MANY SHARES YOU OWN, YOUR CONSENT IS VERY
IMPORTANT. PLEASE MARK, SIGN AND DATE THE GOLD CONSENT CARD AND
PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
IF THE COMPANY CHOOSES TO OPPOSE DILLON'S CONSENT SOLICITATION
AND IF, IN SUCH INSTANCE, YOU SIGN A CONSENT REVOCATION CARD SENT
TO YOU BY THE BOARD, YOU MAY OVERRIDE THAT REVOCATION BY MARKING,
SIGNING, DATING AND RETURNING A SUBSEQUENTLY DATED AND SIGNED GOLD
CONSENT CARD.
EXECUTION OF A GOLD CONSENT CARD WILL NOT CONSTITUTE A VOTE
IN FAVOR OF THE DILLON NOMINEES AT THE ANNUAL MEETING. TO VOTE FOR
THE ELECTION OF THE DILLON NOMINEES AND AGAINST THE COMPANY'S
PROPOSAL TO AUTHORIZE ADDITIONAL SHARES OF COMMON STOCK AT THE
ANNUAL MEETING, YOU MUST ALSO EXECUTE A GREEN PROXY CARD IN
ACCORDANCE WITH THE DILLON PROXY STATEMENT PREVIOUSLY FURNISHED TO
YOU.
Revocation of Consent
Section 228 of the DGCL provides that a consent executed and
delivered by a stockholder may subsequently be revoked by written
notice of revocation to a corporation or to the stockholder or
stockholders soliciting consents (in this case, Dillon) or
soliciting revocations in opposition to action by consent, or to
the solicitor or other agent soliciting consents (in this case,
Garland Associates, Inc.) or soliciting revocations in opposition
to action by consent. A revocation may be in any written form
validly signed by the record holder as long as it clearly states
that such holder's consent previously given is no longer effective.
To prevent confusion, the notice of revocation must be dated. To
be effective, a stockholder's written notice of revocation of his
or her previously executed and delivered consent must be delivered
prior to the time that the signed unrevoked GOLD consent cards
representing consent to the Dillon Resolutions by the holders of
a majority of the outstanding Shares on the Consent Record Date
have been delivered to the Company as set forth above. The
revocation may be delivered to either Dillon, care of Garland
Associates, Inc. at its address set forth on the back cover page
of this Consent Solicitation Statement, or any other address
provided by the Company, sent care of the Company's Secretary.
Dillon requests that, if a revocation is delivered to the Company,
a photostatic or other legible copy of the revocation also be
delivered to Dillon, care of Garland Associates, Inc. at its
address set forth on the back cover page of this Consent
Solicitation Statement. In this manner, Dillon will be aware of
all revocations and can more accurately determine if and when the
Dillon Resolutions described herein have received the required
approval.
A proxy given to the Company in connection with the Annual
Meeting will not revoke a GOLD consent card given to Dillon.
However, Dillon asks each stockholder to ignore the proxy
solicitations of the Company in connection with the Annual Meeting
and furnish to Dillon the enclosed GOLD consent card approving each
of the Dillon Resolutions.
If a stockholder signs, dates and delivers a GOLD consent card
to Dillon and thereafter, on one or more occasions, signs, dates[^]
and delivers a later-dated GOLD consent card, the latest-dated GOLD
consent card is controlling as to the instructions indicated
therein and supersedes such stockholder's prior consent or
consents as embodied in any previously submitted GOLD consent
cards; provided, however, that any such later-dated GOLD consent
card will be inoperative and of no effect if it is delivered after
January 6, 1995 (when the Consent Solicitation period expires) or
such earlier date as GOLD consent cards representing consents to
the Dillon Resolutions by the holders of a majority of the
outstanding Shares on the Consent Record Date are delivered to the
Company. See "Duration of Consent" above.
CONSENT SOLICITATION EXPENSES AND PROCEDURES
The entire expense of preparing, assembling, printing and
mailing this Consent Solicitation Statement and the accompanying
form of consent, and the cost of soliciting consents, will be borne
by Dillon. Dillon intends to seek reimbursement from the Company
for these expenses if the Dillon Nominees are elected to the Board,
and such reimbursement will not be submitted to a vote of the
stockholders of the Company, since Dillon will benefit only to the
extent that all stockholders benefit from its efforts .
In addition to the use of the mails, consents may be solicited
by the Dillon Nominees and certain employees or affiliates of
Dillon by telephone, telegram, personal solicitation, and live or
prerecorded audio or video presentations, for which no compensation
will be paid to such individuals. Banks, brokerage houses and
other custodians, nominees and fiduciaries will be requested to
forward the solicitation material to the customers for whom they
hold Shares, and Dillon will reimburse them for their reasonable
out-of-pocket expenses.
Dillon has retained Garland Associates, Inc. for advisory,
information agent and consent solicitation services, for which
Garland Associates, Inc. will be paid a fee of $4,000, and will be
reimbursed for its expense charges, which are anticipated to be
approximately $2,500. Dillon has also agreed to indemnify Garland
Associates, Inc. against certain liabilities and expenses in
connection with its engagement, including certain liabilities under
the federal securities laws. Garland Associates, Inc. will solicit
consents from individuals, brokers, bank nominees and other
institutional holders. Approximately five persons will be utilized
by Garland Associates, Inc. in its solicitation efforts, which may
be made by telephone, telegram, facsimile and in person.
Dillon estimates that total expenditures relating to the
solicitation will be approximately $__________ (of which
$__________ is estimated to be incurred with respect to litigation
filed by the Company), including fees payable to Garland
Associates, Inc. directly attributable to the Consent Solicitation.
To date, Dillon has spent approximately $__________ of such total
estimated expenditures.
SCHEDULE I
PARTICIPANTS IN THE CONSENT SOLICITATION
Set forth below is the name, business address and present
occupation or employment or business of the "participants" in the
Consent Solicitation, other than the Dillon Nominees. None of the
participants has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) during the past ten
years.
Participant Business Address Description of Business or
Present Principal Occupation
Dillon Investors, L.P. Suite 1410
21 East State Street
Columbus, OH 43215-4228
A limited partnership,
of which Roderick H.
Dillon, Jr. is the sole
general partner,
principally engaged in
the purchase and sale of
securities for its own
account.
Roderick H.
Dillon, Jr. - IRA Suite 1410
21 East State Street
Columbus, OH 43215-4228
An individual retirement
account, of which
Roderick H. Dillon, Jr.
is the sole beneficiary.
Roderick H. Dillon, Jr.
Foundation Suite 1410
21 East State Street
Columbus, OH 43215-4228
A charitable foundation,
of which Roderick H.
Dillon, Jr. is the sole
trustee.
Bradley C. Shoup - IRA Suite 560
4180 La Jolla
Village Drive
La Jolla, CA 92037
An individual retirement
account, of which
Bradley C. Shoup is the
sole beneficiary.
SCHEDULE II
BENEFICIAL OWNERSHIP OF
COMPANY SHARES BY PARTICIPANTS IN THE CONSENT SOLICITATION
On the date hereof, Dillon is the record holder of 647,000
Shares, and together with the other Dillon Entities beneficially
owns, directly or indirectly, an aggregate of 659,000 Shares,
including the Shares held of record by Dillon (representing in the
aggregate approximately 9.88% of the 6,669,924 Shares [^]
certified by the Company as outstanding on November 7,
1994).(Footnote 1) Mr. Shoup, through an IRA for which he is the
sole beneficiary, beneficially owns 2,000 Shares (representing
approximately .03% of the outstanding Shares). Messrs. Kelley,
Whitworth and Spiegel do not own any Shares. The Shares now owned
by each "participant" in the Consent Solicitation were purchased
in the transactions described in Schedule IV hereto.
_______________
(Footnote 1) The 659,000 Shares include (i) 647,000 Shares held
by Dillon, (ii) 5,000 Shares held by Roderick H. Dillon, Jr., (iii)
5,000 Shares held by Roderick H. Dillon Jr. - IRA, and (iv) 2,000
Shares held by Roderick H. Dillon, Jr. Foundation.
_______________
Except as otherwise set forth in this Schedule II, none of
Dillon, the Dillon Nominees or any associate of any of the
foregoing persons or any other person who may be deemed a
"participant" in the Consent Solicitation is the beneficial or
record owner of any Shares. Except as otherwise set forth in this
Schedule II or in Schedule IV, none of Dillon, the Dillon Nominees
or any associate of any of the foregoing persons or any other
person who may be deemed a "participant" in the Consent
Solicitation has purchased or sold any Shares within the past two
years, borrowed any funds for the purpose of acquiring or holding
any Shares, or is or was within the past year a party to any
contract, arrangement or understanding with any person with respect
to any Shares. There is not any currently proposed transaction to
which the Company or any of its subsidiaries was or is a party, in
which any of Dillon, the Dillon Nominees or any associate or
immediate family member of any of the foregoing persons or any
other person who may be deemed a "participant" in the Consent
Solicitation had or will have a direct or indirect material
interest. None of Dillon, the Dillon Nominees or any associate of
any of the foregoing persons or any other person who may be deemed
a "participant" in the Consent Solicitation has any arrangement or
understanding with any person with respect to any future employment
by the Company or its affiliates, or with respect to any future
transactions to which the Company or its affiliates will or may be
a party.
<PAGE>
SCHEDULE III
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AS A GROUP
The following table sets forth, based solely on the
Company Preliminary Proxy Statement, the security ownership of
certain persons, other than the participants in the Consent
Solicitation, who have advised the Company that as of November [^]
14, 1994, each "beneficially" owned more than 5% of the outstanding
Shares, and the beneficial ownership of Shares by all directors and
officers of the Company as a group as of November [^] 14, 1994,
which Dillon believes, but cannot confirm, represent the number of
Shares held by such persons on the November 7, 1994 Consent Record
Date.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percentage
Name and Address Ownership(fn1) [^] of Class
<S> <C> <C>
Craig Corporation 667,012(fn2) 10.0% of Shares
116 North Robertson Boulevard
Los Angeles, CA 90048
[^] Lawndale Capital Management, Inc., 420,100 6.3% of Shares
Andrew E. Shapiro, Diamond A Partners,
L.P., and Diamond A Investors, L.P.
One Sansome Street, Suite 3900
San Francisco, CA 94104
All directors and 667,012 10.0% of Shares
executive officers
as a group (5 persons) [^]
</TABLE>
Except as otherwise noted, the information concerning the
Company contained in this Consent Solicitation Statement has been
taken from or is based upon documents and records on file with the
Commission and other publicly available information. Although
Dillon does not have any knowledge that would indicate that any
statements contained herein based upon such documents and records
are untrue, Dillon does not take any responsibility for the
accuracy or completeness of the information contained in such
documents and records, or for any failure by the Company to
disclose events that may have occurred and may affect the
significance or accuracy of any such information but which are
unknown to Dillon.
_______________
(Footnote 1 ["fn1"]) Except as otherwise indicated, the persons
listed as beneficial owners of the Shares have the sole voting and
investment power with respect to such Shares.
(Footnote 2 ["fn2"]) Does not include the 1,329,114 shares of New
Preferred Stock issued by the Company to Craig on November 10,
1994, which shares are immediately convertible into Shares but are
not eligible to vote in the Consent Solicitation.
_______________
SCHEDULE IV
TRANSACTIONS IN SHARES OF CITADEL HOLDING CORPORATION
BY PARTICIPANTS IN THE SOLICITATION
Purchases since November ___, 1992 were made as shown below.
All transactions were effected in open market transactions and,
unless otherwise indicated, entered into by Dillon.
<TABLE>
<CAPTION>
Transaction Date Number of Shares Per Share Price(Fn1) Total Price
<C> <C> <C> <C>
03/17/93(fn2) 5,000 $20.22 $101,104
03/17/93(fn3) 1,000 20.22 20,224
05/04/93(fn4) 5,000 12.72 63,604
05/04/93(fn5) 1,000 12.72 12,724
01/27/94 27,500 6.27 172,299
01/28/94 75,000 7.05 528,775
02/04/94 10,000 6.43 64,275
02/04/94 75,000 6.55 491,275
02/04/94 8,000 6.55 52,425
02/07/94 7,500 6.31 47,350
02/08/94 7,500 6.19 46,412
02/09/94 10,000 6.30 63,025
02/09/94 200 6.43 1,285
02/15/94 700 6.34 4,435
02/16/94 5,800 6.44 37,348
02/22/94 20,800 6.38 132,789
02/23/94 10,000 6.55 65,525
02/24/94 11,200 6.18 69,185
02/25/94 15,000 6.18 92,650
03/02/94 1,200 5.95 7,135
03/04/94 28,000 6.05 169,425
03/08/94 30,000 5.80 174,025
03/14/94 55,100 5.00 275,729
03/16/94 248,500 4.54 1,128,215
04/22/94(fn6) 2,000 6.07 12,140
TOTALS: 661,000 $3,833,378
</TABLE>
_______________
(Footnotes)
1) Rounded to the nearest cent.
2) Purchased by Roderick H. Dillon, Jr. - IRA.
3) Purchased by Roderick H. Dillon, Jr. Foundation.
4) Purchased by Roderick H. Dillon, Jr.
5) Purchased by Roderick H. Dillon, Jr. Foundation.
6) Purchased by Bradley C. Shoup - IRA.
_______________
If your Shares are held in the name of a brokerage firm, bank
or bank nominee, only they can consent with respect to your Shares
and only upon your specific instructions. Accordingly, please
contact the persons responsible for your account and instruct them
to execute the GOLD consent card on your behalf.
WE URGE YOU TO CONSENT TO THE REMOVAL OF THE ENTIRE BOARD, THE
ELECTION OF THE DILLON NOMINEES AND THE AMENDMENT OF THE COMPANY'S
BY-LAWS BY MARKING, SIGNING, DATING AND MAILING THE ENCLOSED GOLD
CONSENT CARD. THE FAILURE TO DO SO MAY BE THE EQUIVALENT OF A VOTE
AGAINST MAXIMIZING STOCKHOLDER VALUE.
If you have any questions or require any additional information
concerning this Consent Solicitation Statement, please contact:
Garland Associates, Inc.
PROXY SOLICITORS
________
(212) 866-0095
PRELIMINARY COPY - NOVEMBER [^] 29, 1994
CONSENT IN LIEU OF MEETING
OF THE STOCKHOLDERS OF
CITADEL HOLDING CORPORATION
THIS CONSENT IS SOLICITED BY DILLON INVESTORS, L.P.
The following resolutions are approved and adopted by the
stockholders who have signed this Consent, or a counterpart hereof
(this Consent and all counterparts being hereby deemed to
constitute a single Consent), without a meeting, pursuant to
Section 228 of the Delaware General Corporation Law. The
resolutions set forth herein shall be effective when unrevoked
Consents, or counterparts thereof, have been executed and delivered
by or on behalf of the stockholders holding of record on November
7, 1994 a majority of the outstanding shares of Common Stock of
Citadel Holding Corporation, provided, however, that this Consent
shall not be effective with respect to Resolution Number One
(Removal of Citadel Holding Corporation's existing Board of
Directors) or Resolution Number Two (Election of a new Board of
Directors of Citadel Holding Corporation) unless and until Dillon
has received advice from the Office of Thrift Supervision (the
"OTS") confirming that the OTS Control Regulations will not
preclude Dillon from obtaining Consents to vote for the removal or
election of directors, or Dillon is otherwise able to obtain such
Consents without violating such Regulations. This Consent is
effective only through January 6, 1995.
RESOLUTION NUMBER ONE: Removal of Citadel Holding Corporation's
existing Board of Directors.
RESOLVED, that the entire Board of Directors of Citadel
Holding Corporation, consisting of James J. Cotter, Steve Wesson,
Peter W. Geiger, S. Craig Tompkins and Alfred Villasenor, Jr.
(collectively, the "Directors"), or any person or persons elected
or nominated by any or all of the Directors to fill any position
on the Board, including any vacancy created by the resignation or
incapacity of any of said persons, by any increase in the number
of directors, or otherwise, is hereby removed, and the office of
each member of the Board of Directors is hereby declared vacant.
FOR AGAINST
[^](INSTRUCTIONS: To remove all of the directors listed here, mark
the "FOR" box above; to withhold consent as to the removal of all
directors listed here, mark the "AGAINST" box above; and to
withhold consent as to the removal of any individual director
listed here, mark the "FOR" box above and write the director's name
in the space below):
RESOLUTION NUMBER TWO: Election of a new Board of Directors of
Citadel Holding Corporation.
RESOLVED, that the following persons are hereby elected
as directors of Citadel Holding Corporation to fill the vacancies
on the Board of Directors, to serve until their respective
successors are duly elected and qualified:
Roderick H. Dillon, Jr., Bradley C. Shoup, Ralph V.
Whitworth, Jordan M. Spiegel and Timothy M. Kelley.
FOR all nominees listed
above (except as marked
to the contrary below) AGAINST all nominees
listed above
[^](INSTRUCTIONS: To consent for the election of all nominees
listed here, mark the "FOR" box above; to withhold consent as to
the election of all nominees listed here, mark the "AGAINST" box
above; and to withhold consent as to the election of any individual
nominee listed here, mark the "FOR" box above and write the
nominee's name in the space below):
RESOLUTION NUMBER THREE: Amendment of By-Laws.
RESOLVED, that the By-Laws of Citadel Holding Corporation
be amended to provide that as of November 4, 1994 the By-Laws shall
not permit indemnification of (or allow advancement of expenses to)
its officers, directors, employees and agents without the prior
approval of the holders of a majority of the Common Stock
outstanding. This amendment to the By-Laws may not be further
amended without the approval of either the holders of a majority
of the Common Stock outstanding or a majority of the Board of
Directors of the Corporation who are not "Continuing Directors."
Continuing Directors shall be defined as (i) each member of the
Board of Directors of Citadel Holding Corporation on November 4,
1994 and (ii) any member of the Board of Directors of Citadel
Holding Corporation who was nominated for election or elected to
such Board of Directors with the affirmative vote of the majority
of the Continuing Directors who were members of such Board at the
time of such nomination or election.
FOR AGAINST [^]
Unless otherwise indicated, a validly executed and dated consent
will be deemed to constitute a "CONSENT" to the Resolutions,
namely, the removal of all incumbent directors of Citadel Holding
Corporation, the election of all the Dillon nominees and the
amendment of the By-Laws of Citadel Holding Corporation as
described above.
Dated: , 1994
(Signature)
Signature if jointly held
Title: ________________________
Please sign exactly as name appears
hereon. When Shares are held by joint
tenants, both should sign. When
signing as an attorney, executor,
administrator, trustee or guardian,
give full title as such. If a
corporation, sign in full corporate
name by president or other authorized
officer. If a partnership, sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID
ENVELOPE ENCLOSED.
- ------------------ COMPARISON OF FOOTNOTES ------------------
- -FOOTNOTE 1-
[^] Craig had previously received approval from the OTS to purchase
more than 10% but less than 25% of the outstanding Shares [^].
However, such approval would have expired on October 23, 1994 [^]
if Craig's ownership of Shares did not exceed 10% on such date.
The issuance of the 74,300 Shares to Craig on October 21, 1994
enabled Craig to buy additional Shares [^] without any further
regulatory delay, so long as its holdings did not exceed 25% of the
outstanding Shares. Craig had stated in Amendment No. 13 to its
Schedule 13D filed with the Commission on October 26, 1994 that it
would have been unwilling to file an agreement with the OTS to
avoid [^] the regulatory delay because such an agreement "would
have substantially limited Craig's ability to exercise an influence
over the business and affairs of" the Company.
- -FOOTNOTE 2-
The action, commenced in the United States District Court for the
Central District of California (the "California Litigation"),
against the Dillon Entities and the Dillon Nominees (collectively,
the "California Litigation Defendants") alleges that the California
Litigation Defendants have violated Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder by failing to disclose
certain information in their Schedule 13D and the amendments
thereto. The Company's complaint seeks an order forbidding the
California Litigation Defendants from, among other things,
soliciting any proxies or consents related to the Shares until the
California Litigation Defendants have disclosed the material
information allegedly omitted from, and corrected the information
allegedly misstated in, their Schedule 13D and the amendments
thereto, voting any Shares pursuant to any proxy or consent which
may be granted pursuant to the Proxy Solicitation or acquiring or
attempting to acquire any further Shares, in either case prior to
the date ten days following public dissemination of the corrective
disclosures.
- -FOOTNOTE [1] 3-
The Form 10-Q states that with "active management and certain
capital expenditures, the Company's owned properties "if sold on
an individual basis, could be worth more than [the Company]
purchased them for in [connection with the Restructuring and
Recapitalization], but there can be no assurance on this point."
In addition, the Form 10-Q states that the value of the options
could be "up to $3 million above the exercise price of [the
options], before costs the Company would incur in connection with
the exercise, which may be significant." The terms of the options
indicate that they are transferable prior to exercise.
- -FOOTNOTE [1] 4-
The election of the Dillon Nominees would, depending upon whether
the issuance of the New Preferred Stock is invalidated, pursuant
to the Delaware Litigation or otherwise (see "BACKGROUND OF THE
CONSENT SOLICITATION"), either permit Craig to accelerate its
original $6.2 million loan to the Company or to accelerate the
remaining $950,000 loan and require the Company to repurchase the
New Preferred Stock at a premium, for a total cost to the Company
of $6.2 million plus accrued dividends of 3% per annum plus a
premium of approximately $39,000 per month, pro rated, from the
date of issuance to the date of redemption of the New Preferred
Stock. Although Dillon has not approached any financing sources
with respect to the Company's obtaining funds to enable it to meet
such obligations, Dillon believes that financing, secured by such
assets, would be available, based upon the fact that Craig was
willing to supply the Craig Line of Credit and the Company's
statements with respect to its real estate assets in the Form
10-Q (see "DILLON'S STRATEGY FOR THE COMPANY -Real Estate Sales"),
although there can be no assurance on this point. To Dillon's
knowledge, the Company has only one employment agreement
outstanding, a two-year contract with its President, Steve Wesson,
for $225,000 per year expiring in August 1996, and such contract
does not terminate upon a change of control of the Company. Dillon
is not aware of any other costs which would be occasioned by a
change of control of the Company.
- -FOOTNOTE [2] 1-
The 659,000 Shares include (i) 647,000 Shares held by Dillon, (ii)
5,000 Shares held by Roderick H. Dillon, Jr., (iii) 5,000 Shares
held by Roderick H. Dillon Jr. - IRA, and (iv) 2,000 Shares held
by Roderick H. Dillon, Jr. Foundation.
- -FOOTNOTE 1-
Except as otherwise indicated, the persons listed as beneficial
owners of the Shares have the sole voting and investment power with
respect to such Shares.
- -FOOTNOTE 2-
Does not include the 1,329,114 shares of [^] New Preferred Stock
issued by the Company to Craig on November 10, 1994, which shares
are immediately convertible into Shares but are not eligible to
vote in the Consent Solicitation.
- -FOOTNOTE [3] 1-
Rounded to the nearest cent.
- -FOOTNOTE [4] 2-
Purchased by Roderick H. Dillon, Jr. - IRA.
- -FOOTNOTE [5] 3-
Purchased by Roderick H. Dillon, Jr. Foundation.
- -FOOTNOTE [6] 4-
Purchased by Roderick H. Dillon, Jr.
- -FOOTNOTE [6] 5-
Purchased by Roderick H. Dillon, Jr. Foundation.
- -FOOTNOTE 6-
Purchased by Bradley C. Shoup - IRA.
- ------------------ COMPARISON OF HEADERS ------------------
- -HEADER 1-
PRELIMINARY COPY - NOVEMBER [^] 29, 1994
- -HEADER 2-
Header Discontinued
- ------------------ COMPARISON OF FOOTERS ------------------
- -FOOTER 1-
#
- -FOOTER 2-
T:\CGARNER\DILLON\[^] CONSENT.10b
- -FOOTER 3-
#
- -FOOTER 4-
Footer Discontinued
