<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.2)
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[X] Preliminary proxy statement
[_] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Citadel Holding Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Citadel Holding Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rule 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
14-6(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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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CITADEL HOLDING CORPORATION
Dear Shareholder:
As you know, your Company has recently completed a difficult period in its
history. Faced with many problems, including a weak California economy, your
Board of Directors succeeded in recapitalizing its thrift subsidiary -- Fidelity
Federal Bank -- and restructuring Citadel. Unfortunately, a dissident
shareholder has arrived on the scene - Roderick Dillon - and this shareholder is
now attempting to assert an agenda that, while possibly beneficial to Dillon,
will be detrimental to your Company and to most of you reading this letter. The
nominees proposed by Dillon are young and inexperienced and have admitted in
sworn depositions to knowing nothing about your Company or the "merits" of
Dillon's proposal, except what they have been fed by Dillon. Your Board urges
you to reject Dillon's self-serving efforts, and to allow your management to
continue focusing on maximizing values for all shareholders.
Please disregard any proxy and/or consent materials sent by Dillon. You are
urged to please promptly sign, date and mail the enclosed BLUE management proxy
card.
In reaching your determination how to vote, your Board believes that you
should consider, among other things, the following:
DILLON'S PROPOSAL - AN ILL-ADVISED, ILL-TIMED LIQUIDATION
Dillon proposes to oust your Board of Directors and insert his own hand-
picked, uninformed nominees with the stated aim of liquidating your Company.
What Dillon doesn't tell you is that his proposed liquidation will not benefit
all Citadel shareholders. Instead, Dillon's proposal is self-serving and is
designed to specifically benefit Dillon's privately capitalized hedge fund. You
be the judge of Dillon's fire-sale proposal:
<TABLE>
<CAPTION>
DILLON'S PROPOSAL FACT
- ----------------- ----
<S> <C>
Citadel dividends to stockholders its . Restricted Trading: Currently, Fidelity shares
common shares of Fidelity. ------------------
cannot be traded in blocks of less than
100,000 shares. Almost all shareholders
would be prohibited from selling Fidelity
shares, except Dillon Investors.
. Limited Market: Fidelity shares are not listed
--------------
on any exchange and there is only a very limited
institutional market for Fidelity shares. All of
Fidelity's stock is currently held by less than
20 institutions. Even after the current minimum
transfer restrictions on Fidelity shares terminates,
it will be very difficult for non-institutional
investors to trade in this market on an even footing
with entities like Dillon's hedge fund.
. Loss of Block Position: In your management's
----------------------
view, a block in Citadel's hands retains the
potential to attract a better price from a large
investor.
</TABLE>
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<TABLE>
<CAPTION>
DILLON'S PROPOSAL FACT
- ----------------- ----
<S> <C>
Citadel sells all its real estate assets. . For several months, your management has been pursuing
the sale of properties that do not offer significant
potential for future growth.
. Immediate liquidation would require your Company to
sell under distressed circumstances and before values
have stabilized.
. If it becomes prudent to sell additional real estate in
the future when the values have improved and
operations stabilized, your management is in the best
position to maximize value. Neither Dillon nor any of
his nominees have any experience in operating, marketing
or selling California or Arizona commercial real estate.
Citadel liquidates. . The Dillon nominees have no plan for dealing with Citadel's
debts and contingent liabilities, such as Citadel's $4.0
million contingent liability to Fidelity. Indeed, all of
Dillon's nominees have admitted that they were not even aware
that Citadel had these contingent liabilities.
. The Dillon nominees have no plan for providing the financing
necessary to timely exercise certain valuable options held
by your Company. Dillon has valued these options at $3 million.
Material elements of these options are subject to potentially
adverse adjustments, if Citadel has not acquired these properties
before February 4, 1995.
. The Dillon nominees have given no assurances as to the timing
of any distribution to shareholders.
. Dillon's nominees have stated under oath that they have not considered
the impact of liquidation on investors other than Dillon; that they
have not made any independent determination as to the prudence of such
a course of action; and that they have no pre-existing experience running
or liquidating a public company.
</TABLE>
Now that Dillon's plan has been exposed, and the Dillon nominees have been
forced to defend their assumptions and deal with the realities they would still
confront as outlined above, the Dillon nominees have begun to qualify their
convictions in sworn testimony. Indeed, they have suggested that they may not
implement any of Dillon's proposals!
Your Board of Directors is committed to maximizing shareholder value. After
careful consideration, we strongly believe that a liquidation of your Company is
not in the best interests of shareholders at this time.
PLAN OF RECOVERY
----------------
Recognizing that a business plan of recovery was needed to save your
Company, your Board has now successfully recapitalized Fidelity and
restructured Citadel. However, our plan of recovery is still in process.
Shortly after completing the restructuring and recapitalization, Citadel
believed an addition equity infusion was needed. As a result, the Board began
exploring the possibility of obtaining such an equity infusion from Craig
Corporation. As you know, James J. Cotter is chairman of the Board of Citadel
and Craig Corporation.
To ensure an arms-length transaction, a special committee of independent
directors was formed to negotiate the terms of such on equity infusion. On
November 10, 1994, we successfully completed such a transaction and Citadel
issued 1,329,114 shares of 3% Cumulative Convertible Voting Preferred Stock to
Craig at a price of $3.95 per share. The Preferred Stock was used to retire
$5.25 million of indebtedness to Craig, initially provided by Craig to enable
your company to acquire its current real estate portfolio. If Craig had not
provided these funds, your Company would have lost the ability to acquire assets
recently valued by Dillon at approximately $8.5 million above their purchase
price. The conversion of the debt to equity has improved Citadel's cash flow by
converting floating rate debt with a current interest rate of 11.5% into a fixed
cumulative dividend of 3%. This transaction substantially improved your
Company's balance sheet, and reduced i ts negative cash flow by more than
$600,000 per annum.
2
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The Special Committee received a written opinion from Wedbush Morgan
Securities that the issuance of the preferred shares is fair, from a financial
point of view, to shareholders. This fairness opinion took into account,
among other things, potential valuations for Fidelity far higher than any price
at which Fidelity shares have traded since its restructuring.
Far from enriching themselves at shareholder expense, your Directors have
willingly sacrificed their personal interests for the best interests of your
Company and its shareholders. Long before Dillon began to talk about
representation on your Board, your Directors slashed their own compensation by
more than 50% and reduced Company overhead by foregoing officers and directors
liability insurance.
We believe carefully reviewing all alternatives and efficiently managing
your properties is needed; not a rush to liquidation.
Currently, we are actively investigating strategies for the disposition of
your Company's interest in Fidelity. We are also pursuing plans to exercise
options to acquire the additional buildings from Fidelity at what we believe are
below market prices. Because of the term of these options, we believe it
important that these options be exercised and that the properties be acquired
before the end of January.
WHAT YOU SHOULD KNOW ABOUT THE DILLON GROUP
-------------------------------------------
The Dillon Nominees Are Uninformed about Citadel. Dillon's slate is
purportedly committed to a liquidation of Citadel that we believe will be
tantamount to a fire-sale. However, when questioned in recent depositions as to
the level of due diligence and analysis that these Nominees had done in reaching
their conclusion, we were advised that:
<TABLE>
<S> <C>
The Dillon Nominees Are . No Dillon nominee has conducted any
Inexperienced. independent review of your Company.
. The one Dillon nominee with real
estate experience has not reviewed
any of the Company's properties.
. Several Dillon nominees admitted
that they had not considered the
impact of liquidation on small
shareholders.
. No Dillon nominee has thought about
how to run Citadel, if it is not
liquidated.
. No independent consultants or
investment bankers have advised the
nominees.
. The Dillon nominees purport to be
generally unfamiliar with the
compensation paid to Citadel
directors and the absence of
directors and officers liability
insurance.
Again, when questioned under oath, we were advised by the Dillon Nominees that:
. No Dillon nominee has any
experience in the operation or
management of a financial
institution such as Fidelity.
. The Dillon nominees have little
experience as directors of a
public company.
</TABLE>
Dillon Offers No Assurances That He Will Even Vote The Proxies He Solicits
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In The Upcoming Election Of Directors.
- -------------------------------------
In his proxy materials, Dillon is soliciting only a conditional proxy with
respect to the election of directors. As he has not obtained the regulatory
waivers or approvals he seeks with respect to his proposal to replace your
entire Board with his own nominees, he is offering you no assurances that any
vote entrusted to him on this matter will in fact be cast.
Dillon's Actions Are Inconsistent With His Stated Views As To The Value Of
--------------------------------------------------------------------------
Your Company In Liquidation.
- ---------------------------
Despite recent statements to the press by the Dillon Group as to their view
of the value of Citadel - stated by Roderick Dillon to be as high as $9.00 per
share in liquidation - Dillon has privately advised Citadel that he would not
pay over $4.00 for Citadel stock and that he would be a seller at prices far
below $9.00. As recently as late October, 1994, Dillon was touting Citadel
shares in the press as between $5 and $9 per share.
Ask yourselves a very simple question: If Citadel Stock currently sells for
$3.50 per share, and Dillon believes it is worth $5 to $9 per share, why hasn't
Dillon bought any Citadel stock since March?
When Dillon was offered an opportunity to purchase Fidelity stock in the
restructuring at $5.25 per share, he declined. When he was asked whether he
would be willing, like your Company's other major stockholder - Craig
Corporation - to lend money to your Company to assist your Company in meeting
its funding needs, he likewise declined.
Dillon's Views As To Value Are Not Shared By All. Dillon has estimated the
------------------------------------------------
volume of Fidelity shares to be as high as 7.00 per share. However Fidelity
shares, which are currently owned exclusively by large and subordinated
institutional investors, currently trades at less than $5.00 per share.
In summary
. Liquidation now would not be in the best interests of
shareholders.
. If liquidation should, in the future, prove to be the best
alternative, your management is better positioned to conduct such a
liquidation.
. The Dillon nominees have not demonstrated any independence or
willingness to critically analyse Dillon's liquidation proposal, and
have little experience in the management of a publicly traded company.
. The actions taken by your Board have been carefully considered and
intended to benefit all shareholders.
Is Dillon concerned about all shareholders or is he looking out for himself
and his hedge fund? We believe Dillon's intentions are self-serving.
3
<PAGE>
Your Board of Directors strongly opposes Dillon and is committed
to vigorously fighting any attempt by Dillon to take control of your Company.
In what we believe are your own best interest, we urge you to support your
Board of Directors which is committed to maximizing long term values for all
---
Citadel shareholders. Please take the time to mark, sign, date and mail the
enclosed BLUE Management proxy card in the enclosed postage-paid return
envelope.
We thank you for your continued support and will keep you informed of any
developments.
On behalf of your Board of Directors,
Sincerely,
STEVE WESSON
PRESIDENT
IMPORTANT: If your Citadel shares are held in the name of a brokerage firm
or nominee, only they can execute a proxy on your behalf. To ensure that your
shares are voted, we urge you to telephone the individual responsible for your
account today and direct him or her to execute a proxy on your behalf.
PLEASE MARK, SIGN, DATE AND RETURN
THE ENCLOSED BLUE PROXY CARD TODAY.
4
<PAGE>
PRELIMINARY COPY NOVEMBER __, 1994
CITADEL HOLDING CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 12, 1994
To the Stockholders:
The 1994 Annual Meeting of Stockholders (the "Annual Meeting") of Citadel
Holding Corporation, a Delaware corporation ("Citadel"), will be held at the
Four Seasons Hotel, 300 South Doheny Drive, Beverly Hills, California on
December 12, 1994, at 10:00 a.m. local time, subject to adjournment or
postponement by the Board of Directors, for the following purposes:
1. To elect five directors to the Board of Directors of Citadel (the
"Board of Directors") to serve until the 1995 annual meeting of stockholders;
2. To act upon a proposal to amend Citadel's Certificate of Incorporation
(the "Certificate of Incorporation") to increase the number of authorized shares
of Common Stock from 10,000,000 to 20,000,000 shares;
3. To authorize the Board of Directors, in its discretion, to adjourn the
Annual Meeting to a later date; and
4. To transact such other business as may properly come before the Annual
Meeting.
Only holders of record of the voting stock of Citadel on November 14, 1994
will be entitled to notice of, and to vote at, the Annual Meeting and any
adjournment or postponement thereof. Prior to the voting thereof, a proxy may
be revoked by the person executing such proxy by (i) filing with the Corporate
Secretary of Citadel, prior to the commencement of the Annual Meeting, either a
written notice of revocation or a duly executed proxy bearing a later date or
(ii) by voting in person at the Annual Meeting. Citadel shall make available
for examination at its principal executive offices located at 600 North Brand
Boulevard, Glendale, California 91203, at least ten days prior to the date of
the Annual Meeting, a list of the stockholders entitled to vote at the Annual
Meeting.
By order of the Board of Directors,
S. CRAIG TOMPKINS
Corporate Secretary
Glendale, California
November __, 1994
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE MARK, SIGN AND DATE THE ENCLOSED BLUE PROXY CARD AND
MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
PRELIMINARY COPY NOVEMBER __, 1994
CITADEL HOLDING CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 12, 1994
GENERAL INFORMATION
This proxy statement (the "Proxy Statement") is furnished in connection
with the solicitation by the Board of Directors (the "Board" or the "Board of
Directors") of Citadel Holding Corporation, a Delaware corporation ("Citadel"
and, collectively with its subsidiaries, the "Company"), of proxies for use at
the 1994 Annual Meeting of Stockholders of Citadel (the "Annual Meeting")
scheduled to be held at the time and place for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. Shares represented by
properly executed proxies received by Citadel will be voted at the Annual
Meeting in the manner specified therein or, if no instructions are marked on the
enclosed proxy card, FOR each of the nominees for director as identified on such
card and FOR each of the other proposals on such card. Although management does
not know of any other matter to be acted upon at the Annual Meeting, shares
represented by valid proxies will be voted by the persons named on the
accompanying proxy card in accordance with their respective best judgments with
respect to any other matters that may properly come before the Annual Meeting.
Execution of a proxy will not in any way affect a stockholder's right to
attend the Annual Meeting and vote in person, and any person giving a proxy has
the right to revoke it at any time before it is exercised by (i) filing with the
Corporate Secretary of Citadel, prior to the commencement of the Annual Meeting,
a duly executed instrument dated subsequent to such proxy revoking the same or a
duly executed proxy bearing a later date or (ii) attending the Annual Meeting
and voting in person.
The mailing address of the principal executive offices of Citadel is 600
North Brand Boulevard, Glendale, California 91203, and its telephone number is
(818) 551-7450. The approximate date on which this Proxy Statement and the
enclosed proxy card are first being sent to stockholders is November __, 1994.
On August 4, 1994, Citadel completed a restructuring and recapitalization
transaction (the "Restructuring and Recapitalization Transaction"), as a result
of which its interest in Fidelity Federal Bank, FSB ("Fidelity") was reduced
from 100% to approximately 16.2% and Fidelity was recapitalized with
approximately $109 million in new capital. Incident to the Restructuring and
Recapitalization Transaction, Citadel's Board of Directors was reduced from
eight to five directors. Citadel is a registered Savings and Loan Holding
Company. Solicitation of proxies may, under certain circumstances, be subject to
compliance with the change of control laws and regulations promulgated by the
Office of Thrift Supervision.
RECORD DATE AND VOTING
Only stockholders of record on November 14, 1994 (the "Record Date"), will
be entitled to notice of and to vote at the Annual Meeting. There were
outstanding on the Record Date 6,669,924 shares of Citadel common stock, par
value $.01 per share ("Common Stock") and 1,329,114 shares of Citadel 3%
Cumulative Voting Convertible Preferred Stock, par value $.01 per share (the
"Preferred Stock," and together with the Common Stock, the "Voting Stock"). Each
share of Voting Stock is entitled to one vote on each matter to be voted on at
the Annual Meeting.
The holders of the majority of the outstanding shares of Citadel voting
securities, whether present in person or represented by proxy, shall constitute
a quorum for the transaction of business at the Annual Meeting. Abstentions and
broker non-votes (shares held by a broker or nominee which are represented at
the Annual Meeting, but which have not been voted for a specific proposal) are
counted for purposes of determining the presence or absense of a quorum for the
transaction of business. Directors will be elected by a plurality of the votes
of the shares of Citadel voting securities present in person or represented by
1
<PAGE>
proxy at the Annual Meeting. As to Proposal 2 (as defined below, the Charter
Amendment), adoption requires the affirmative vote of a majority of the
outstanding shares of Common Stock and the affirmative vote of a majority of the
outstanding shares of Citadel voting securities. As to Proposal 3 (adjournment),
adoption requires the affirmative vote of a majority of the voting power present
in person or by proxy at the Annual Meeting.
With regard to Proposal 1 (election of directors), votes may either be cast
in favor of the nominees named herein or be withheld. Votes withheld will not
be counted towards a nominee's achievement of a plurality. With regard to
Proposal 2, abstentions and broker non-votes will have the effect of votes
against the proposal because it requires the affirmative vote of a majority of
all outstanding shares of Common Stock and Citadel voting securities. With
regard to Proposal 3, abstentions will have the effect of votes against the
proposal (but broker non-votes will not have such effect) because the proposal
requires the affirmative vote of a majority of the voting power present in
person or by proxy at the Annual Meeting.
PROXY CONTEST
On November 4, 1994, Dillon Investors, L.P. ("Dillon") and certain related
persons and entities (the "Dillon Group"), announced that they will solicit
proxies from the stockholders of Citadel for election at the Annual Meeting of a
slate of directors in opposition to the slate nominated by the Board of
Directors of Citadel. The Dillon slate consists of Roderick H. Dillon, Jr.,
Bradley C. Shoup, Timothy K. Kelley, Ralph V. Whitworth and Jordan M. Spiegel
(collectively, the "Dillon Nominees"). On November 8, 1994, Dillon filed
preliminary proxy materials with the Securities and Exchange Commission (the
"SEC") to solicit proxies for the election of the Dillon Nominees and to oppose
the proposed amendment to Citadel's Certificate of Incorporation to increase the
number of authorized shares of Common Stock. Dillon's preliminary proxy
materials state that if elected, it is the intention of the Dillon Nominees to
propose, subject to their fiduciary duties, that Citadel (i) effect a pro rata
distribution (the "Dillon Distribution") to Citadel's stockholders of the Class
B shares of Fidelity held by Citadel and (ii) thereafter promptly dissolve and
liquidate the remaining assets of Citadel (the "Dillon Liquidation").
YOUR BOARD OF DIRECTORS STRONGLY OPPOSES THIS EFFORT OF THE DILLON GROUP
AND URGES YOU TO REJECT THE DILLON NOMINEES.
- THE LIQUIDATION PROPOSED BY THE DILLON GROUP WOULD BE PARTICULARLY
DETRIMENTAL TO STOCKHOLDERS WHO ARE NOT BIG MONEY PLAYERS LIKE THE DILLON
GROUP. A DISTRIBUTION TO STOCKHOLDERS BY CITADEL OF ITS FIDELITY SHARES WOULD
NOT BE IN THE BEST INTERESTS OF THE TYPICAL CITADEL STOCKHOLDER AT THIS TIME
BECAUSE:
* IN A LIQUIDATION, IT IS UNLIKELY THAT STOCKHOLDERS WOULD RECEIVE
MORE THAN 2/3 OF A SHARE OF FIDELITY STOCK FOR EACH SHARE OF CITADEL STOCK
OWNED. AT THE PRESENT TIME, TRANSFERS OF FIDELITY SHARES IN BLOCKS OF LESS
THAN 100,000 SHARES ARE PROHIBITED BY FIDELITY'S CHARTER. SINCE THE AVERAGE
STOCKHOLDER OWNS FAR LESS THAN 150,000 CITADEL SHARES AND WOULD THEREFORE
RECEIVE LESS THAN 100,000 FIDELITY SHARES IN A LIQUIDATION, THE AVERAGE
STOCKHOLDER WOULD CURRENTLY BE PROHIBITED FROM SELLING THOSE SHARES. THE
DILLON GROUP WOULD RECEIVE OVER 100,000 FIDELITY SHARES.
* TODAY, FIDELITY STOCK IS UNLISTED AND HELD EXCLUSIVELY BY LARGE
INVESTORS. EVEN AFTER THE MINIMUM 100,000 SHARE TRANSFER REQUIREMENT FOR
FIDELITY SHARE TRANSFERS TERMINATE UPON THE FILING BY FIDELITY OF ITS
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDING DECEMBER 31, 1994,
NO ASSURANCE CAN BE GIVEN THAT FIDELITY SHARES WILL BE LISTED OR THAT
ANY EFFICIENT MARKET WILL DEVELOP. ACCORDINGLY, SMALL FIDELITY
SHAREHOLDERS MAY SELL AT MATERIAL DISCOUNTS TO THEIR TRUE VALUES. THE
FIDELITY STOCK KEPT IN A LARGER BLOCK IN CITADEL'S HANDS WOULD RETAIN THE
POTENTIAL TO ATTRACT A BETTER PRICE FROM ANOTHER LARGE INVESTOR WHO MIGHT
SEEK A SIGNIFICANT STAKE IN FIDELITY. LIQUIDATION WOULD DESTROY ANY VALUE
THAT THE COMPANY'S FIDELITY HOLDINGS WOULD HAVE AS A MAJOR BLOCK OF
FIDELITY COMMON STOCK.
* LIQUIDATION WOULD REQUIRE THE COMPANY TO SELL ITS REAL ESTATE
ASSETS AT WHAT MAY BE THE BOTTOM OF THE SOUTHERN CALIFORNIA REAL ESTATE
MARKET AND BEFORE VALUES HAVE STABILIZED. MANAGEMENT
2
<PAGE>
BELIEVES THAT PREMATURE LIQUIDATION OF ALL REAL ESTATE ASSETS COULD COST
THE COMPANY SEVERAL MILLION DOLLARS.
- NOTWITHSTANDING THE ASSERTIONS MADE BY THE DILLON GROUP IN RECENT
LITIGATION BROUGHT AGAINST THE BOARD THAT THE DIRECTORS ARE MOTIVATED BY
PERSONAL GREED AND A DESIRE TO ENTRENCH THEMSELVES IN MANAGEMENT, SEVERAL MONTHS
AGO, THE BOARD ON ITS OWN MOTION AND WITHOUT ANY PRODDING FROM ANY STOCKHOLDER,
SLASHED ITS OWN COMPENSATION BY MORE THAN 50%. FURTHERMORE, IN AN EFFORT TO
CONTROL COSTS, THE BOARD DETERMINED NOT TO RENEW THE COMPANY'S DIRECTORS AND
OFFICERS LIABILITY INSURANCE.
- THE DILLON NOMINEES ARE APPARENTLY COMMITTED TO A LIQUIDATION OF CITADEL.
THE DILLON GROUP AND THE DILLON NOMINEES ARE ALREADY COMMITTED TO A COURSE OF
ACTION THAT IMPLEMENTS THE WILL OF THEIR PROMOTER, RODERICK DILLON. THESE
INDIVIDUALS ARE ALL UNDER 40 AND HAVE LITTLE PRIOR EXPERIENCE AS AN
OFFICER OR DIRECTOR OF A PUBLIC COMPANY. MOST OF THESE INDIVIDUALS HAVE REPORTED
NO EXPERIENCE IN MANAGING OR SELLING REAL ESTATE.
- IN THEIR HASTY EFFORT TO TAKE OVER THE COMPANY, THE DILLON GROUP HAS
SOUGHT TO AVOID THE REGULATORY APPLICATIONS AND FILINGS REQUIRED BY THE
REGULATIONS OF THE OFFICE OF THRIFT SUPERVISION BY SEEKING WAIVERS. THUS,
NEITHER THE DILLON GROUP NOR ANY OF THE DILLON NOMINEES HAVE TAKEN THE TIME TO
APPLY FOR THE REQUISITE APPROVALS OF THE OFFICE OF THRIFT SUPERVISION. NO
ASSURANCES HAVE BEEN GIVEN BY THE DILLON GROUP THAT IT WILL EVER BE GRANTED SUCH
APPROVALS OR THE WAIVERS THAT IT APPARENTLY NOW SEEKS.
- DESPITE RECENT STATEMENTS TO THE PRESS BY THE DILLON GROUP AS TO ITS VIEW
OF THE VALUE OF CITADEL -- STATED BY RODERICK DILLON TO BE AS HIGH AS $9.00 PER
SHARE IN LIQUIDATION -- MR. DILLON HAS PRIVATELY ADVISED CITADEL THAT HE WOULD
NOT PAY OVER $4.00 FOR CITADEL STOCK AND THAT HE WOULD BE A SELLER AT PRICES FAR
BELOW $9.00. AS RECENTLY AS LATE OCTOBER, 1994, MR. DILLON WAS TOUTING CITADEL
SHARES IN THE PRESS AT BETWEEN $5 AND $9 PER SHARE, YET HE REFRAINS FROM OPEN
MARKET PURCHASES OF CITADEL SHARES AT AVAILABLE PRICES FAR BELOW $5 PER SHARE --
A NOTEWORTHY LACK OF CONFIDENCE IN HIS OWN VALUATION RANGE.
- WHEN MR. DILLON WAS OFFERED AN OPPORTUNITY TO PURCHASE FIDELITY STOCK IN
THE RESTRUCTURING AND RECAPITALIZATION TRANSACTION AT $5.25 PER SHARE, HE
DECLINED. WHEN HE WAS ASKED WHETHER HE WOULD BE WILLING, LIKE CITADEL'S OTHER
MAJOR STOCKHOLDER -- CRAIG CORPORATION -- TO LEND MONEY TO THE COMPANY TO ASSIST
IT IN MEETING ITS FUNDING NEEDS, HE LIKEWISE DECLINED.
LITIGATION
On November 7, 1994, Dillon commenced an action in the Court of Chancery of
the State of Delaware against Citadel, its directors and Craig Corporation
("Craig") alleging that (i) the 74,300 shares of Citadel common stock issued to
Craig on October 21, 1994 were invalidly issued; (ii) the directors improperly
changed the record date for the Annual Meeting to permit them to issue
additional shares to Craig or others prior to the new record date; and (iii)
Citadel intended to issue additional shares to Craig or others for the same
purposes described above. The relief sought by Dillon is a declaration that
neither the shares of Common Stock issued on October 21, 1994 nor any other
shares issued after November 4, 1994 may be voted at the Annual Meeting, and an
injunction against issuance of further shares.
On November 9, 1994, Dillon applied to the Court of Chancery for a temporary
restraining order seeking to enjoin Citadel from issuing additional shares
pending further proceedings. After a hearing, the Court denied the application
on the ground that Dillon had failed to make an adequate record justifying the
relief sought without prejudice to renewal of an application for preliminary
relief if additional shares of Citadel are issued. The Court has set January 4,
1995 as the trial date for this action. On November 14, 1994, Dillon amended its
complaint to seek recission of the sale of the Preferred Shares and to enjoin
the voting of such shares at the Annual Meeting. The amended complaint alleges,
among other things that the issuance of the Preferred Shares was in violation of
the Board's fiduciary duty as such stock was issued for inadequate consideration
and not for a proper purpose.
On November 16, 1994, Citadel answered the amended complaint, denying all
allegations of wrongdoing alleged by Dillon. Citadel and its directors
believe this case is without merit and intend to vigorously defend themselves.
As discussed below, the Board of Directors believe that the issuances of shares
to Craig are in the best interests of Citadel and its stockholders.
Notwithstanding assertions made by the Dillon Group in their lawsuit that the
Board of Directors is motivated by self interest and a desire to entrench
themselves, several months ago your Board on its own motion reduced director
compensation by more than 50%, and, in accordance with its efforts to reduce
corporate overhead, determined not to renew their own directors and officers
liability insurance. On November 16, 1994, Citadel filed a counterclaim based
upon the following events. On November 7, 1994, which was after the directors
had fixed November 14, 1994 as the record date for determining the stockholders
entitled to vote at the Annual Meeting, Dillon delivered to Citadel a
stockholder consent in an effort to fix an earlier date, November 7, 1994, as
the record date for determining the stockholders to participate in a consent
solicitation by Dillon to take the following action without a stockholder
meeting: (i) remove the directors of Citadel, (ii) install Dillon's slate of
directors, and (iii) retroactively, as of November 4, 1994, eliminate
indemnification by Citadel of its officers, directors and employees except where
such indemnification has been given prior approval by a majority of Citadel
stockholders. Citadel's counterclaim asks the Delaware Court of Chancery, now
that November 14, 1994 record date for the Annual Meeting has passed, to declare
that Delaware law would not permit the removal of Citadel's directors through
Dillon's consent procedure prior to the Annual Meeting unless the votes of those
entitled to vote at the Annual Meeting are considered. Citadel also asks the
Court to declare that under Delaware law stockholders of record as of November
7, 1994 may not after the Annual Meeting remove directors that are elected at
the Annual Meeting by stockholders of a later record date. The counterclaim also
asks the Court to declare that Dillon's proposed amendment purporting to
eliminate retroactively the rights of Citadel's officers, directors and
employees to indemnification is valid.
On November 16, 1994, Citadel filed a lawsuit in the United States District
Court for the Central District of California, against the Dillon Group and the
Dillon Nominees seeking injunctive relief against each defendant
3
<PAGE>
pursuant to Section 13(d) of the Securities Exchange Act of 1934 on the ground
defendants have failed to disclose and have misrepresented various material
facts required to be disclosed in filing with the SEC under Section 13(d). Among
other things, the complaint alleges that the Dillon Group and the Dillon
Nominees have violated federal law by failing to disclose contracts,
arrangements and understandings among them and with others with respect to
Citadel stock and failing to disclose the adverse consequences to Citadel and
its stockholders resulting from the defendants obtaining control of Citadel and
liquidating its assets and the adverse consequences to Citadel and its
stockholders of the defendants failing to obtain the approval of the Office of
Thrift Supervision ("OTS") for their actions.
ISSUANCE OF COMMON STOCK
On October 21, 1994, Citadel, after approval by a special committee of
independent directors, issued 74,300 shares of its Common Stock, to Craig at a
purchase price of $3.85 per share. The transaction provided capital to Citadel
and increased Craig's equity stake in Citadel to just above 10%. Because Citadel
has remained a registered thrift holding company following the restructuring and
recapitalization of Fidelity, acquisition of more than 10% of Citadel's equity
can require the approval of the OTS. Craig advised Citadel that it previously
received such OTS approval, and that such approval would expire on October 23,
1994 unless Craig's equity interest increased above 10% prior to its expiration.
This transaction preserved Craig as a potential source of future equity
financing without new OTS approval. S. Craig Tompkins is the President and a
director of Craig and James J. Cotter is the Chairman of the Board and a
principal stockholder of Craig.
ISSUANCE OF PREFERRED STOCK
Commencing shortly after the Restructuring and Recapitalization
Transaction, Citadel began to explore with Craig the possibility of Craig making
an additional equity infusion in Citadel for working capital purposes. Citadel
formed a special committee (the "Special Committee") of the independent
directors of the Board (which included all of the directors other than Messrs.
Cotter and Tompkins) to negotiate the terms of such an equity infusion. On
November 10, 1994, Citadel issued 1,329,114 shares (the "Preferred Shares") of
3% Cumulative Voting Convertible Preferred Stock to Craig at a price of $3.95
per share. Payment was made in the form of cancellation of $5,250,000 of
indebtedness to Craig under a short-term line of credit (the "Craig Facility")
that was provided by Craig to Citadel Realty, Inc. ("CRI"), a wholly-owned
subsidiary of Citadel, to help finance the acquisition by CRI of Citadel's
current real estate holdings from Fidelity at the time of the Restructuring and
Recapitalization Transaction. Citadel believes that at such time no other
sources of funds to acquire these properties were available on reasonable terms
and that if Craig had not provided such financing, the potential value of these
properties would have been lost to Citadel and its stockholders. The Craig
Facility is guaranteed by Citadel, which guarantee is secured by a pledge of all
of the stock of CRI. The Craig Facility is due and payable in full on August 5,
1995, subject to CRI's right, if it satisfies certain conditions and pays an
extension fee, to extend the line for an additional six months to February 5,
1996. Approximately $1,000,000 remains outstanding under the Craig Facility.
The members of the Special Committee determined that, without the issuance
of the Preferred Shares, Citadel would likely be forced to liquidate its assets,
including its shares of Fidelity, under a "distress sale" circumstance to pay
the indebtedness under the Craig Facility, thereby reducing prospects for
maximizing the value of Citadel's assets. The Special Committee was especially
concerned that the lack of a liquid market for Fidelity stock might impede
Citadel's ability to maximize its value in a forced disposition to meet
Citadel's obligations under the Craig Facility. The Special Committee was also
concerned that it might be unable to identify any alternative sources of equity
or receive sufficient proceeds from a sale of the Fidelity shares to pay the
Craig Facility as the maturity date drew nearer, particularly if there was a
further deterioration in Fidelity's financial condition. The conversion of the
debt to equity has improved Citadel's cash flow by converting floating rate debt
bearing an interest rate of prime plus 3% into a fixed cumulative dividend of 3%
(which is not a liability on Citadel's balance sheet), and has expanded
Citadel's equity base while reducing Citadel's leverage.
The Special Committee received the written opinion of Wedbush Morgan
Securities ("Wedbush"), dated November 10, 1994, that, based upon and subject to
the matters set forth therein, the consideration received by Citadel for the
issuance of the Preferred Shares is fair, from a financial point of view, to the
public stockholders of Citadel. In rendering its opinion Wedbush, among other
things, compared the financial and stock market information for Citadel with
similar information for certain other companies whose securities are publicly
traded and considered the likelihood that Citadel could sell the Preferred
Shares or a similar security to another purchaser on better terms. Wedbush is an
investment banking firm and a member of the New York Stock Exchange and other
principal stock exchanges in the United States, and is regularly engaged as part
of its business in the valuation of businesses and
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<PAGE>
securities for corporate, estate tax and other purposes in connection with
mergers and acquisitions, private placements and negotiated underwritings. A
copy of the Wedbush opinion has been filed as an exhibit to Citadel's Current
Report on Form 8-K (the "Preferred Stock 8-K") filed with the SEC on November
14, 1994. In retaining Wedbush, the Special Committee noted, among other things,
the absence of any prior representation by Wedbush of Craig.
Holders of the Preferred Shares have the right to convert such shares into
Common Stock at any time, subject to certain redemption provisions, at a
conversion ratio of one Preferred Share for a fraction of a share of Common
Stock, the numerator of which is the sum of the purchase price paid per
Preferred Share (the "Stated Value") plus any accrued but unpaid per share
dividends, and the denominator of which is the average of the closing prices per
share of the Common Stock for each of the 60 business days immediately preceding
the date of conversion (subject to a maximum denominator of $5). In addition, if
Citadel completes a rights offering of Common Stock to its stockholders prior to
October 31, 1995, and if the gross proceeds thereof (other than from Craig and
its affiliates) equal or exceed $2.5 million, then any remaining Preferred
Shares having an aggregate Stated Value plus accrued dividends equal to such
gross proceeds shall automatically convert into Common Stock at the rights
offering price.
Citadel has the option to redeem Preferred Shares at any time after
November 10, 1997 at a per share price equal to the sum of the Stated Value plus
accrued but unpaid dividends per share plus a premium calculated as simple
interest on the Stated Value from the date of issuance of the Preferred Shares
at a decreasing rate that begins at 9% if the redemption occurs prior to the
fourth anniversary of the date of issuance of the Preferred Shares and decreases
by one percent for each succeeding year (the "Redemption Price"). Holders of
Preferred Shares have the right to require Citadel to purchase their shares at
the Redemption Price under certain circumstances, including a "Change in
Control." A Change in Control is defined as the occurrence of either of the
following events: (i) any person, entity or "group" (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the rules thereunder) other than Craig, and its successors and affiliates,
acquires beneficial ownership of over 35% of the outstanding voting securities
of the Company; or (ii) the directors of the Company as of October 10, 1994 (the
"Current Directors"), and any future directors ("Continuing Directors") of the
Company who have been elected or nominated by a majority of the Current
Directors or the Continuing Directors, cease to constitute a majority of the
Board of Directors. (The terms of the Craig Facility also provide Craig with
the right to accelerate the indebtedness due thereunder upon the occurrence
described under clause (ii) of the Change in Control definition.) The Preferred
Shares are transferable subject to compliance with applicable federal and state
securities laws.
The Preferred Shares vote jointly (not as a separate class) with the Common
Stock on most matters, including the election of directors, with each Preferred
Share entitled to one vote. Holders of the Preferred Shares will have the
opportunity to purchase part of any new issuance of voting securities of Citadel
to preserve their respective percentage voting interests. If a court of
competent jurisdiction issues any ruling, judgment, injunction, decree or order
that prohibits Craig from voting the Preferred Shares at any meeting of Citadel
stockholders or pursuant to any written consent of Citadel stockholders, in
which vote or consent the Preferred Shares would otherwise be entitled to
participate, or invalidates any such vote or consent of such Preferred Shares,
then Craig will have the right to rescind its purchase of the Preferred Shares.
Upon such rescission, (i) the Preferred Shares will be canceled and (ii) the
$5,250,000 of indebtedness under the Craig Facility which had been canceled,
plus any interest thereon, will be reinstated. The Certificate of Designations
for the Preferred Shares, establishing the voting powers, preferences and
relative rights of the Preferred Shares, and the definitive Preferred Stock
Purchase Agreement between Citadel and Craig have been included as exhibits to
the Preferred Stock 8-K.
REGULATORY ISSUES
Under applicable change of control regulations of the OTS, the change in
control of a savings and loan holding company or a savings association may only
be effectuated with, in essence, the prior approval of the OTS. These change of
control regulations apply to proxy and consent solicitations for the election of
directors. To Citadel's knowledge, the Dillon Group has not obtained any
approval in connection with its current proxy and consent solicitations.
Proxies or consents that would enable the holder thereof to elect one-third
or more of the board of directors of a savings and loan holding company may not
be acquired in the context of a proxy or consent solicitation contest without
the prior approval of the OTS or rebuttal of certain presumptions of control. If
the Dillon Group were to be successful in its solicitation efforts, its nominees
would comprise the entire Citadel Board of Directors. This position would, in
the view of Citadel, give the Dillon Group the practical ability to have a
material and ongoing influence over the business and affairs of Citadel.
The Dillon Group has stated in filings with the SEC that it is seeking
interpretative advice and advice regarding enforcement of the OTS' regulations
governing acquisitions of control of savings and loan holding companies (the
"OTS Control Regulations"). According to Dillon's proxy materials, Dillon is
requesting a determination by the OTS that, if the OTS concludes that the
Control Regulations apply to the Company by virtue of its holding company
registration and without regard to whether the Company has control of Fidelity,
the OTS will refrain from initiating or recommending enforcement action against
Dillon if it acquires proxies or otherwise obtains votes from stockholders of
Citadel enabling it to elect the Dillon Nominees without first filing a change
of control or rebuttal of control submission pursuant to the OTS Control
Regulations. Dillon has indicated in its proxy materials that if it does not
receive the OTS' response in a sufficient amount of time prior to the Annual
Meeting or any adjournment thereof, proxies received by Dillon will not, by
their terms, be voted for the election of directors, but will be voted against
the Citadel Charter Amendment and the Citadel proposal seeking to grant
discretion to the current Board to adjourn the Annual Meeting, unless otherwise
directed, or Dillon may vote its proxies to adjourn the Annual Meeting, or
determine not to present its proxies at the Annual Meeting in order to defeat a
quorum if it believes such action to be desirable in furtherance of its
objectives. Citadel believes that Dillon's conditioning the effectiveness of the
proxies it receives regarding the election of directors upon the receipt of
favorable OTS advice is an attempt to make an end run around the OTS change of
control regulations and the requirement that the OTS approve in advance any
solicitation of proxies enabling an acquiror to elect one-third or more of a
savings and loan holding company's board of directors. Citadel notes that in the
event that Dillon does not receive the advice it has requested from the OTS, it
will not vote proxies it receives in the election of Citadel directors, and it
might not vote such proxies at all. Such action would disenfranchise Citadel
stockholders who give their proxies to Dillon.
In addition, Dillon has stated that, in the event it does not receive the
OTS advice it seeks, it is its intention to then file with the OTS a rebuttal of
control or a change of control submission and, upon approval thereof, to pursue
the Consent Solicitation. Dillon makes statements in its proxy materials to the
effect that a rebuttal of control submission would be processed by the OTS
within 35 days of filing. Such statements give the mistaken impression that
filing a rebuttal submission is an option for Dillon that has real potential and
that such submission could be filed immediately and approved 35 days later. In
fact, any such filing, if attempted, could not be in the standard OTS form and
thus would require specific direction from the OTS as to its content. This
process would certainly take longer than the standard processing time and would
very likely not result in a submission the OTS would approve. Rebuttal
submissions are to demonstrate that parties would not be in control. Citadel
does not believe it would be possible for the Dillon Group to rebut control
given its intention to replace the entire Citadel Board with the Dillon
Nominees.
Dillon further states in its proxy materials that in lieu of a rebuttal
submission, or in the event that a rebuttal submission is not deemed sufficient
by the OTS, it may make a change of control filing with the OTS. The Dillon
proxy materials then set forth various time periods as applicable to a change of
control filing. Such statements, however, fail to fully disclose the timing
issues associated with a change of control submission or the impact thereof on
the timing of the Consent Solicitation. For example, a 20-day public comment
period is required with respect to a change of control filing and may be
extended for up to an additional 20 days. Thus, even if the Dillon Group made a
change of control filing immediately, assuming extension of the public comment
period for 20 days, the period for the OTS to make only its initial
determination, i.e., that the submission is in form sufficient for its review,
----
would not expire until after the 60-day solicitation period for the Consent
Solicitation.
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Citadel continues to believes that it is the consistent and historic
position of the OTS that the OTS must scrutinize and approve in advance any
proxy or consent solicitation, such as that of the Dillon Group, that seeks to
take control of the board of directors of a savings and loan holding company. In
light of the above, it is unclear to Citadel how the Dillon Group can proceed
with or effectuate its proxy and consent solicitations without the prior
approval of the OTS and how such approvals, even if granted, could be obtained
in time to make either the proxy solicitation or the consent solicitation viable
options for Citadel stockholders.
PROPOSAL 1: ELECTION OF DIRECTORS
At the Annual Meeting, stockholders of Citadel will be asked to vote on the
election of five directors. The five nominees receiving the highest number of
votes at the Annual Meeting will be elected directors of Citadel. To fill these
five board positions, the enclosed proxy, unless indicated to the contrary, will
be voted FOR the nominees listed below (the "Board Nominees") and on the
enclosed proxy card. All directors elected at the Annual Meeting will be elected
to one-year terms and will serve until the 1995 annual meeting of stockholders
and until their successors have been duly elected and qualified.
Set forth below are the names of the persons nominated by the Board of
Directors for election as directors at the Annual Meeting. Your proxy, unless
otherwise indicated, will be voted FOR Messrs. Cotter, Wesson, Geiger, Tompkins
and Villasenor. For a description of each nominee's principal occupation and
business experience during the last 5 years and present directorships, please
see "Directors," below.
<TABLE>
<CAPTION>
FIRST
BECAME
NAME AGE CURRENT OCCUPATION DIRECTOR
---- --- ------------------ --------
<S> <C> <C> <C>
James J. Cotter 55 Chairman of the Board of Citadel, Chairman of the Board of 1986
Craig Corporation, and Chairman of the Board of Reading
Company.
Steve Wesson 37 President and Chief Executive Officer of Citadel 1994
S. Craig Tompkins 43 Secretary/Treasurer and Principal Accounting Officer of 1993
Citadel, Vice Chairman of the Board of Citadel, President and
Director of Craig Corporation, President and Director of
Reading Company, and Director of G&L Realty Corp.
Peter W. Geiger 68 Financial and marketing consultant, and retired Vice 1990
President and Senior Account Officer of Bank of America
Alfred Villasenor, Jr. 63 President of Unisure Insurance Services, Inc., and Director 1987
of Gateway Investment, Inc., a wholly owned subsidiary of
Fidelity
</TABLE>
Set forth below is certain information concerning the principal occupation
and business experience of each of the individuals named above during the past
five years.
Mr. Cotter was first elected to the Board in 1986, and resigned in 1988. He
was re-elected to the Board in June 1991, named Acting Chairman of the Board of
Directors of Citadel and Fidelity in October 1991, and named Chairman of the
Board of Citadel on June 5, 1992. Mr. Cotter has been Chairman of the Board of
Craig Corporation ("Craig") (retail grocery and real estate management) since
1988 and a director of that company since 1985. He is also the Executive Vice
President and a director of The Decurion Corporation (motion picture
exhibition). Mr. Cotter began his association with The Decurion Corporation in
1969. Mr. Cotter has been the Chief Executive Officer and a director of
Townhouse Cinemas Corporation since 1987. Mr. Cotter is the General Partner of
James J. Cotter, Ltd., a limited partner in Hecco Ventures I, a California
Limited Partnership and a general partner in Hecco Ventures II, a California
General Partnership (Hecco I and Hecco II are involved in investment
activities), and has been a director of Stater Bros., Inc. (retail grocery)
since 1987. Mr. Cotter has served as a director of Reading Company
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<PAGE>
(entertainment and real estate) since 1990 and as the Chairman of the Board of
that company since 1991. Craig owns approximately 47% of Reading Company and 50%
of Stater Bros., Inc. Mr. Cotter is also the owner and until October 1992 was
the President and a director of Cecelia Packing (citrus grower and packer).
Mr. Wesson was appointed as President and Chief Executive Officer of the
Company on August 5, 1994. Mr. Wesson was initially retained to develop a plan
for the disposition by Fidelity and the retention by Citadel of the
approximately $500 million in gross book value of the assets ultimately sold to
third parties in the Restructuring and Recapitalization Transaction. From 1989
until he joined the Company in 1993, Mr. Wesson served as CEO of Burton Property
Trust Inc., the U.S. real estate subsidiary of The Burton Group PLC. In this
position he was responsible for the restructuring and eventual disposal of the
company's assets in the U.S. Mr. Wesson succeeds Richard M. Greenwood, who
resigned from his positions with Citadel and continues as the President and
Chief Executive Officer of Fidelity.
Mr. Geiger is presently a financial and marketing consultant. He retired as
Vice President and Senior Account Officer of Bank of America where he served
from 1959 to 1990. His responsibilities at Bank of America included the
development, structuring, analysis and negotiation of large corporate financings
for major media and entertainment companies.
Mr. Tompkins was a partner of Gibson Dunn & Crutcher until March 1993 when
he resigned to become President of each of Craig and Reading Company. Mr.
Tompkins has served as a Director of each of Craig and Reading Company since
February 1993. Mr. Tompkins was elected to the Board of Directors of G&L Realty
Corp., a New York Stock Exchange listed Real Estate Investment Trust, in
December of 1993, and was elected Vice Chairman of the Board of Citadel in July
of 1994.
Mr. Villasenor is the President and the owner of Unisure Insurance
Services, Incorporated, a corporation which has specialized in life, business
life and group health insurance for over 30 years. Mr. Villasenor served on the
Board of Directors of ELAR, a reinsurance company from 1990 to 1991. Mr.
Villasenor has served as a director of Gateway Investments, Inc., since June 22,
1993.
Citadel has been advised by each nominee named in this Proxy Statement
that he is willing to be named as such herein and is willing to serve as a
director if elected. However, if any of the nominees should be unable to serve
as a director, the enclosed proxy will be voted in favor of the remainder of
those nominees not opposed by the stockholder on such proxy and may be voted for
a substitute nominee selected by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES LISTED
ABOVE AND REJECT THE DILLON NOMINEES.
WHO ARE THE DILLON NOMINEES?
The Dillon preliminary proxy materials note that only one of the
Dillon Nominees has any prior experience as an officer or director of a public
corporation and disclose no experience by any of Dillon Nominees with
liquidating a public company. The Dillon Nominees are all between the ages of 32
and 39. The Board of Directors is also concerned about prior ties between the
Dillon Nominees and T. Boone Pickens, a well known corporate raider who has been
involved with prior greenmail attempts. Mr. Shoup, a partner in Batchelder &
Partners, Inc., was a former employee of Mr. Pickens' Mesa Petroleum. David
Batchelder was previously President of Mesa Petroleum. Mr. Whitworth was
previously an employee of Mesa Limited Partnership and the President of United
Shareholders Association. United Shareholders Association was founded by Mr.
Pickens, who eventually appointed Mr. Whitworth chief of operations.
WHO ARE THE CITADEL NOMINEES?
The Citadel Board of Directors consists of individuals with substantial
business experience who are familiar with Fidelity and its problems. Dillon's
preliminary proxy materials note that Dillon has made an investment of over $3.8
million in Citadel. The Citadel Board of Directors includes individuals
associated with stockholders who have invested over $24 million
in Citadel and hold approximately 25% of the Voting Stock.
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<PAGE>
ADVERSE CONSEQUENCES OF A CHANGE IN CONTROL
A change in control of Citadel that would result from the election of the
Dillon Nominees would have certain adverse consequences to Citadel that the
Board of Directors does not believe have been addressed by Dillon. Among other
things, such a change in control would allow Craig to sell the Preferred Shares
back to Citadel and to accelerate the remaining indebtedness under the Craig
Facility, resulting in a $6.2 million obligation for Citadel. If the Preferred
Share issuance were rescinded, the Craig Facility would be reinstated as a $6.2
million obligation of Citadel, which would accelerate upon a change in control.
At the present time Citadel has less than $4 million in liquid assets. The
Dillon preliminary proxy materials state that if the Dillon Nominees are
elected, Dillon intends to seek to recoup its proxy costs from Citadel. These
costs may be substantial given the litigation and regulatory issues relating to
the proxy contest as well as Dillon's undertaking to indemnify the Dillon
Nominees.
IMMEDIATE LIQUIDATION IS NOT IN THE BEST INTERESTS OF THE CITADEL STOCKHOLDERS
Management of Citadel is continuing to evaluate the assets, liabilities
and opportunities available to Citadel in order to maximize value for all
stockholders of Citadel. The Board of Directors believe that this process
involves disposing of its Fidelity shares at the appropriate time so as to
achieve the best available price, and to stabilize the value of its real estate
portfolio. The Board of Directors believes that for a variety of reasons the
Dillon Distribution and the Dillon Liquidation are not in the best interests of
the stockholders of Citadel at this time.
Stockholders would Receive Illiquid Stock. There is currently only a very
-----------------------------------------
limited market for the Fidelity shares and the stockholders of Citadel would
therefore have relatively illiquid stock. In addition, upon a transfer of any
shares of Fidelity Class B shares by Citadel (which would include a transfer of
such shares to the stockholders of Citadel in the Dillon Distribution) to any
person that is not an affiliate of Citadel, such transferred shares will
automatically be converted into Class A Shares. Until the filing by Fidelity of
its Form 10-K for the fiscal year ending December 31, 1994, which is not
expected to occur until late March 1995, the shares of Class A Common Stock may
be transferred only in blocks of 100,000 or more. Therefore, only the large
Citadel stockholders, such as Dillon, will be permitted to transfer Fidelity
shares at all until such date. In addition, there is no commitment or obligation
on the part of Fidelity to list its securities on any exchange or otherwise
promote a public market for its stock. Citadel believes that a current
distribution of the Fidelity shares would benefit only a large stockholder like
Dillon, who may be able to sell its Fidelity shares in the absence of a public
market. No assurance can be given the typical Citadel stockholders that they
will be able to have the liquidity to avoid the material discounts that are
often incurred in trying to dispose of illiquid securities. While Citadel and
its successors and assigns have the right to require Fidelity, after the filing
of its annual report on Form 10-K for the year ending December 31, 1994, to
register the Fidelity shares for public sale under the regulations of the OTS
(unless such shares have converted to Class A Common Stock of Fidelity and are
already freely transferable without such registration), no assurance can be
given that such registration will render such securities liquid.
Possible Loss of Block Value. Citadel believes the Fidelity shares may be
----------------------------
more valuable if transferred as a block. The Dillon Distribution would result in
a loss of any potential premium that is often associated with a large block of
shares.
Adverse Impact on Maximization of Real Estate Values. Citadel does not
----------------------------------------------------
believe it is an opportune time to dispose of certain of its real estate assets.
Citadel believes that through intensive property management it will be able to
improve the operating results of certain of its properties, which should allow a
better price to be achieved if it later determines to sell such properties. A
liquidation would require Citadel to sell its real estate assets at what the
Company believes may be the bottom of the Southern California real estate market
and before values have stabilized. As the Restructuring and Recapitalization
Transaction was completed only a little more than three months ago, management
of Citadel has only been provided with a limited period of time to date in which
to address these assets.
Absence of Stated Plan for Realization of Value in Option Properties. As
--------------------------------------------------------------------
part of the Restructuring and Recapitalization, Citadel acquired by way of
dividend one year options (the "Options") to acquire two office buildings (the
"Option Properties") used in the operations of Fidelity (including its
headquarters buildings) for an aggregate exercise price of $9.3 million.
Portions of the Option Properties would be
8
<PAGE>
leased back by Fidelity upon an exercise of such options. Citadel believes that
Dillon has not addressed how Citadel might realize the potential value of the
Options and the Option Properties, particularly in light of the fact that a
change in control resulting from the election of the Dillon Nominees would
trigger certain Citadel obligations and the fact that the Dillon Distribution
would result in a loss to Citadel of the value of the Fidelity shares.
In particular, the Board notes that Dillon has not suggested any plan for
providing the financing required to exercise the options in a timely manner. If
the options are exercised after February 4, 1995, the rental prices paid by
Fidelity under the leases would be adjusted from prices previously negotiated by
Citadel to prices that are adjusted according to market rates and that are
subject to OTS approval.
Absence of Stated Plan for Dealing with Contingent Liabilities. The Board
--------------------------------------------------------------
of Directors believes further information and analysis is required of Citadel's
contingent liabilities prior to any decision should be made with respect to a
dissolution of Citadel. During July 1994, as part of the Restructuring and
Recapitalization, Fidelity entered into agreements with third party purchasers
for the sale of primarily problem assets and made certain representations and
warranties relating to the assets transferred. For a period of time after the
sale, the third party purchasers of the assets have the right to require
Fidelity, at Fidelity's election, to repurchase the assets as to which
representations and warranties are discovered to be untrue or to cure such
breach. Citadel is obligated to reimburse Fidelity in an amount not to exceed
$4,000,000 for certain losses incurred by Fidelity in either repurchasing such
assets in the event of a breach of certain of the representations and warranties
or in curing such breaches. The third party purchasers have made claims against
Fidelity in the amount of approximately $3,900,000. Fidelity is currently
contesting these claims.
At some point in time, it may be appropriate to liquidate Citadel and the
Board of Directors has not ruled out this possibility. However, the Board of
Directors believes at this time stockholder value will be maximized by disposing
of the Fidelity shares at such time and in such manner as a maximum price can be
achieved and stabilizing the value of its real estate portfolio.
PROPOSAL 2: AUTHORIZATION OF ADDITIONAL SHARES OF COMMON STOCK
The Certificate of Incorporation currently authorizes 10,000,000 shares of
Common Stock, of which 6,669,924 were outstanding as of the date hereof. In
addition, based on the price of the shares of Citadel Common Stock as of
November 10, 1994, the Preferred Shares are convertible into an additional
1,279,552 shares of Common Stock. In order to have the flexibility to raise
equity capital in the future, the Board of Directors believes it is appropriate
to amend (the "Charter Amendment") the Certificate of Incorporation to increase
the number of authorized common shares. While Citadel does not have specific
plans to issue additional shares of Common Stock at the present time, it has
given consideration to a number of ways to raise capital in the future including
pursuant to a public or private placement of shares of Common Stock or in
connection with a rights offering. Among the issues considered by the Special
Committee in reviewing the recent issuance of Preferred Shares to Craig, was
Craig's willingness to automatically have its Preferred Shares convert into
Common Stock in connection with a rights offering meeting certain criteria. Such
automatic conversion would be at the rights offering price. The members of the
Special Committee felt that this automatic conversion feature would preserve for
stockholders the ability, by participating in a rights offering, to mitigate the
dilution to book value per share that might result from the conversion of
Preferred Shares into Common Stock (depending upon the conversion price).
Approval of the Charter Amendment will give the Board the flexibility to move
forward with a rights offering of sufficient magnitude to allow stockholders to
increase their position in Citadel to the same levels as they were at prior to
the issuance of the Preferred Shares and to force a conversion by Craig into
Common Stock at the same price as the rights offering. The Charter Amendment
will require the affirmative vote of the majority of the outstanding shares of
Common Stock and a majority of the outstanding shares of Voting Stock. No
further action by Citadel's stockholders is required for issuance of the
additional shares of Common Stock except to the extent required by AMEX rules.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
COMMON STOCK.
9
<PAGE>
PROPOSAL 3: ADJOURNMENT
Due to the uncertainty regarding the outcome of the litigation relating to
the Annual Meeting, events relating to the proxy contest and Dillon's consent
solicitation, or otherwise, the Board of Directors may determine to adjourn the
Annual Meeting (i) in the event a quorum is not present; (ii) in the event
insufficient votes are cast to approve the proposals offered herein or to elect
the Board Nominees; (iii) in the event a shareholder consent solicitation is
then threatened or underway; (iv) in the event the status of pending litigation
or orders or judgments emanating therefrom militates such an adjournment; or (v)
in the event the Board believes a change in control would violate federal
law. The Board of Directors requests your proxy to adjourn the Annual Meeting in
its discretion to a later date. Any such adjournment or adjournments will
require the affirmative vote of a majority of the voting power present in person
or by proxy at the session of the meeting to be adjourned.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AUTHORIZING THE BOARD OF
DIRECTORS TO ADJOURN THE ANNUAL MEETING IN ITS DISCRETION.
DILLON CONSENT SOLICITATION
On November 7, 1994, Mr. Dillon delivered to Citadel a Stockholder Consent
in Lieu of Meeting (the "Dillon Consent") executed on behalf of Mr. Dillon in
which Mr. Dillon consented to (i) the removal of the current directors of
Citadel and their replacement by the Dillon Nominees and (ii) the amendment of
Citadel's By-Laws to provide that as of November 4, 1994 the By-Laws shall not
permit indemnification of (or the advancement of expenses to) Citadel's
officers, directors, employees and agents without the prior approval of the
holders of a majority of the outstanding Common Stock (the "By-Law Proposal").
The Dillon Consent provides that such amendment to Citadel's 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 Citadel who
are not "Continuing Directors." Continuing Directors are defined for purposes of
the Dillon Consent as (i) each member of the Board of Directors of Citadel on
November 4, 1994 and (ii) any member of the Board of Directors of Citadel 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. On November 7, 1994,
Citadel was notified by representatives of Dillon that it is Dillon's current
intention not to proceed with the solicitation of consents (the "Dillon
Consents") until after the conclusion of the Annual Meeting provided that
Citadel (i) has not previously issued any shares other than as have already been
publicly disclosed prior to November 7, 1994, (ii) does not issue any additional
shares prior to the Annual Meeting and (iii) holds and completes the Annual
Meeting on December 12, 1994.
On November 15, 1994, Dillon filed preliminary proxy materials with the
SEC to solicit consents from Citadel stockholders. The Dillon Consent
purports to set a record date of November 7, 1994 (the "Dillon Record Date") for
the determination of stockholders of Citadel entitled to execute consents, a
date earlier than the November 14, 1994 record date for solicitation of proxies
for the Annual Meeting. Citadel opposes this attempt by the Dillon Group to make
an end run around the normal corporate democracy process by having stockholders
from an earlier date attempt to unseat by written consent a board of directors
elected by stockholders as of a later date at the Annual Meeting. In other
words, Dillon's consent solicitation seeks to disenfranchise from the election
process any persons who acquired Voting Stock after November 7, 1994 and on or
before November 14, 1994.
In addition, the Board of Directors is opposed to the By-Law Proposal
contained in the Consent and, based on the advice of counsel, believes that it
would be illegal and invalid even if approved by stockholders. Citadel's By-Laws
currently provide that Citadel shall indemnify its directors to the full extent
permitted by the Delaware General Corporation Law. Citadel believes this is a
customary by-law provision for a public company incorporated in Delaware, and is
necessary in order to be able to attract and retain qualified directors.
Furthermore, Citadel believes that the Dillon By-Law Proposal is contrary to
Section 145(c) of the Delaware General Corporation Law (which generally provides
that to the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, he
shall be indemnified against expenses actually and reasonably incurred by him in
connection therewith), is contrary to the Certificate of Incorporation (which
generally provides that the Board of Directors can amend the By-laws) to the
extent it purports to provide that only non-Continuing Directors or stockholders
can amend such By-law provision, and is unenforceable to the extent it purports
to be retroactive to November 4, 1994. In addition, in accordance with standard
practice for public companies, for many years Citadel has had indemnity
agreements with its officers and directors whereby Citadel has agreed to
indemnify such persons
10
<PAGE>
against covered claims in accordance with the terms thereof. The obligations of
Citadel under such indemnity agreements would not be affected by the By-Law
Proposal.
Finally, the Board of Directors objects to the fact that the Dillon Group
has drafted the By-Law Proposal in such a fashion that the Dillon Nominees (but
not the current Board of Directors) would be able to amend the By-Laws to extend
greater indemnification rights to themselves by repealing the By-Law Proposal if
they are elected as directors. In light of the foregoing, Citadel believes that
the By-Law Proposal, particularly when combined with the Dillon Group lawsuit
against the Citadel directors, is a brazen attempt to try to intimidate the
Board of Directors with the threat of personal liability for opposing the Dillon
Group. It should be noted that, in order to reduce Citadel's overhead, the
current Board of Directors determined upon the completion of the Restructuring
and Recapitalization Transaction to forego the benefits of directors and
officers liability insurance. Although this cancellation leaves the directors
and officers without insurance coverage for their Citadel duties, the directors
and officers remain covered by indemnity agreements. See "____________."
The information in the above section is based on the preliminary proxy
materials filed by Dillon with the SEC.
THE CONSENT PROCEDURE
Assuming Dillon is permitted to conduct a consent solicitation with an
earlier record date than the record date previously established by the Board of
Directors for the Annual Meeting, Dillon, in order to succeed in its attempts to
remove the present directors of Citadel, to elect the Dillon Nominees to the
Board and to amend the By-Laws of Citadel, must obtain valid unrevoked consents
from the holders of record of a majority of the 6,669,924 shares of Common Stock
outstanding on the Dillon Record Date. Furthermore, such consents must be
delivered to Citadel within 60 days of the earliest dated consent delivered to
Citadel. However, as discussed above, Citadel does not believe that Dillon's use
of an earlier record date for the purposes of replacing the director is
permissible and that the By-Law Proposal is invalid. See "Litigation."
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF CITADEL URGES
YOU NOT TO SIGN ANY CONSENT CARDS SENT TO YOU BY DILLON.
---
SOLICITATION OF PROXIES
The cost of preparing, assembling and mailing the Notice of Annual Meeting
of Stockholders, this Proxy Statement and the enclosed proxy card will be paid
by Citadel. Following the mailing of this Proxy Statement, directors, officers
and regular employees of Citadel may solicit proxies by mail, telephone,
telegraph or personal interview. Such persons will receive no additional
compensation for such services. Brokerage houses and other nominees, fiduciaries
and custodians nominally holding shares of Common Stock of record will be
requested to forward proxy soliciting material to the beneficial owners of such
shares, and will be reimbursed by Citadel for their reasonable charges and
expenses in connection therewith.
In addition, Citadel has retained D.F. King & Co., Inc. ("D.F. King") to
assist in the solicitation of proxies. D.F. King may solicit proxies by mail,
telephone, telegraph and personal solicitation, and will request brokerage
houses and other nominees, fiduciaries and custodians nominally holding shares
of Voting Stock of record to forward proxy soliciting material to the beneficial
owners of such shares. Citadel has expended approximately $____________ to date
in connection with its solicitation of proxies. Citadel estimates the total
amount to be spent on its solicitation of proxies will be $____________.
Included in these costs are legal, accounting, printing and proxy solicitation
expenses. D.F. King will employ approximately 20 people in its solicitation
efforts.
RESTRUCTURING AND RECAPITALIZATION TRANSACTION
As part of the Restructuring and Recapitalization Transaction, Citadel's
board of directors was reduced from eight to five directors, with Messrs.
Richard M. Greenwood, Donald R. Boulanger, Mel Goldsmith and Zelbie Trogden
resigning. Mr. Wesson, the new President and Chief Executive Officer of Citadel,
was elected to the Board to fill one vacancy, and Mr. S. Craig Tompkins was
elected Vice Chairman. Messrs. Greenwood and Goldsmith continue as directors of
Fidelity.
11
<PAGE>
Also incident to the Restructuring and Recapitalization Transaction, all
officers of Citadel other than Ms. Heidi Wulfe (Senior Vice President,
Controller and Chief Accounting Officer) resigned and were replaced by Mr.
Wesson. Ms. Wulfe continued as an officer of Citadel only through the completion
of the Company's report on form 10Q for the quarter ended June 30, 1994 (the
"June 10Q"), and upon the filing of the June 10Q, Ms. Wulfe resigned to continue
her position as the Senior Vice President, Controller and Chief Accounting
Officer of Fidelity. To the extent that contracts existed between these
individuals and Citadel, such contracts were terminated as of the effectiveness
of the Restructuring and Recapitalization Transaction, and Citadel has no
further obligations thereunder.
Since all of the Company's health, medical, bonus and retirement plans
were maintained by Fidelity and not by Citadel, the obligations of Citadel under
such plans also terminated effective as of the effectiveness of the
Restructuring and Recapitalization Transaction. Accordingly, as of the date of
this Proxy Statement, Citadel has no health, medical, bonus or retirement plans.
(It is anticipated, however, that Citadel will provide health and medical
insurance benefits to its employees, and that it will reimburse employees for
the cost of their COBRA premiums pending determination of the manner in which to
structure such an insurance program for Citadel.)
While this Proxy Statement includes information pertaining to the
compensation of executive officers and directors for the year ended December 31,
1993 as required by federal proxy disclosure regulations, this material is of
limited materiality, since the executive and board structure of Citadel and the
compensation paid to executive officers and directors has been significantly
reduced since the Restructuring and Recapitalization Transaction. By way of
example, Directors currently receive an annual retainer of $10,000 with no extra
compensation for attendance at monthly board meetings. Prior to the
Restructuring and Recapitalization Transaction, directors were paid a base
retainer of $23,000 plus $1,000 for attendance at board meetings.
The Restructuring and Recapitalization Transaction is described in detail
in the June 10Q and a report on Form 8-K filed October 21, 1994 (the "October 8-
K"), copies of which accompany these materials. Reference is made to the June
10Q and the October 8-K for a more detailed description of the Restructuring and
Recapitalization Transaction and all descriptions of the Restructuring and
Recapitalization Transaction are qualified by reference to such more detailed
information.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The following table sets forth certain information, except where otherwise
indicated, as of November __, 1994 with respect to the directors of Citadel. All
Citadel directors serve one-year terms and are elected at each annual
stockholders' meeting.
EXECUTIVE OFFICERS
The officers of Citadel currently include Steve Wesson and S. Craig
Tompkins. Following the Restructuring and Recapitalization Transaction, all
executive officers of Citadel except Ms. Wulfe resigned. Those officers who were
identified as executive officers of Citadel due to their status as executive
officers of Fidelity either continued with Fidelity or resigned following the
effectiveness of the Restructuring and Recapitalization Transaction. Ms. Wulfe
continued to serve as a Senior Vice President and as the Controller and Chief
Accounting Officer of Citadel, until her resignation from those positions
following the filing of the June 10Q on or about August 22, 1994. Ms. Wulfe, a
certified public accountant, joined Fidelity and Citadel in 1989 as Vice
President and Controller. In 1991 she was named Senior Vice President of
Fidelity and Citadel. From 1987 to 1989, she was Vice-President and Controller
at Antelope Valley Saving and Loan Association. From 1977 to 1987, she was
employed as an Audit Manager by Grant Thornton, Accountants and Management
Consultants.
12
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
Citadel has historically maintained standing Audit, Executive, Nominating
and Compensation and Stock Option Committees. Following the Restructuring and
Recapitalization Transaction, the Board of Directors determined to reduce its
standing committees to an Executive Committee (comprised of Messrs. Cotter
(Chairman), Wesson and Tompkins), Audit Committee (comprised of Messrs. Geiger
(Chairman) and Villasenor), and a Conflicts Committee (comprised of Messrs.
Villasenor (Chairman) and Geiger). The Conflicts Committee will consider and
make recommendations with respect to all matters as to which one or more other
directors may have conflicts of interest.
The Audit Committee held eight (8) meetings during 1993. The Audit
Committee's responsibilities are generally to assist the Board in fulfilling its
legal and fiduciary responsibilities relating to accounting, audit and reporting
policies and practices of Citadel, Fidelity and their subsidiaries. The Audit
Committee also, among other things, recommends to the Board the engagement of
the Company's independent accountants; monitors and reviews the quality and
activities of the Company's internal audit function and those of its independent
accountants; and, monitors the adequacy of the Company's operating and internal
controls as reported by management, the independent accountants and internal
auditors.
The Executive Committee held three (3) meetings during 1993, Subject to
the authority conferred on Citadel's other committees, the Executive Committee
is empowered to exercise all authority in lieu of the Board that may be
exercised by a committee of the Board pursuant to Delaware law.
The Nominating Committee held one (1) meeting during 1993.
The Compensation and Stock Option Committee held six (6) meetings during
1993.
MEETINGS OF THE BOARD OF DIRECTORS
During 1993, there were thirteen (13) meetings of the Board of Directors
of Citadel. All directors attended at least 75% of the meetings of the Board of
Directors, and all members of the committees of the Board attended at least 75%
of the meetings of those committees, in each case, after the election of such
individual to the Board or to such Committee.
EXECUTIVE COMPENSATION
The federal proxy disclosure regulations require Citadel to disclose
certain specific information with respect to executive compensation in this
Proxy Statement. As discussed above, much of this information is of limited
materiality due the changes which have occurred in conjunction with the
Restructuring and Recapitalization Transaction. At the end of the Executive
Compensation section, the Board of Directors has voluntarily disclosed
additional information with respect to its current compensation policies in
order to provide our stockholders with a more accurate and current disclosure.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation
earned during the year ended December 31, 1993 by Citadel's Chief Executive
Officer and the four other most highly compensated executive officers who were
serving as executive officers at December 31, 1993.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- ------------
SECURITIES
UNDERLYING
OTHER STOCK
ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTED COMPENSATION(2)
- --------------------------- ---- ------ ----- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Greenwood 1993 $376,846 $50,000 $39,359(3) 20,000 $ 0
President and Chief 1992 $209,173 0 25,986(3) 0 0
Executive Officer 1991 N/A N/A N/A N/A N/A
Walter H. Morris, Jr.(4) 1993 $178,500 $ 0 0 0 $ 0
Executive Vice President 1992 87,500 15,000 0 0 0
and Chief Lending Officer 1991 N/A N/A N/A N/A N/A
Andre S. W. Shih 1993 $134,847 $25,000 0 0 $ 0
Senior Vice President 1992 125,000 19,500 0 0 0
Treasurer and Acting Chief 1991 55,289 0 0 0 0
Financial Officer
Frederick N. Bailard(4) 1993 $132,692 $ 0 0 0 $1,171
Senior Vice President, Real 1992 45,673 5,000 0 0 0
Estate Asset Management 1991 N/A N/A N/A N/A N/A
Kirk S. Sellman(4) 1993 $137,308 $ 0 0 0 $4,269
Executive Vice President, 1992 125,000 15,000 0 0 3,351
Retail Banking 1991 115,500 5,563(5) 0 0 0
</TABLE>
- ---------------
(1) Excludes perquisites if the aggregate amount thereof is less than $50,000,
or 10% of salary plus bonus, if less.
(2) Consists of matching contributions under the 401(k) Plan in effect as of
December 31, 1993.
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<PAGE>
(3) When Mr. Greenwood was hired on June 3, 1992, Citadel and Fidelity agreed
to make him an interest free loan of $240,000 described below. The amount
shown includes interest on such loan in 1993 of $9,984, an automobile
allowance of $20,040, an excess group life insurance policy for which
Fidelity paid premium in the amount of $2,345 and other benefits.
(4) Mr. Morris resigned March 18, 1994. Mr. Bailard resigned February 2, 1994.
Mr. Sellman resigned January 3, 1994.
(5) Includes amounts earned under the Management Incentive Compensation Plan in
effect as of December 31, 1993 with respect to each year in question, even
if payment was made in the following year.
STOCK OPTIONS
On March 24, 1993, Citadel and Fidelity granted to Mr. Greenwood a stock
option to purchase 20,000 shares of Common Stock at a price of $21.90 per share.
Citadel granted no other stock options and no stock appreciation rights ("SARs")
to executives or employees in 1993. The following table sets forth the stock
options outstanding held by the named executives as of December 31, 1993. All
options are exercisable. No SARs are outstanding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-----------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR EXPIRATION 5% 10%
NAME GRANTED FISCAL YEAR BASE PRICE DATE $35.67/SHARE $56.80/SHARE
- ----------------------- ------------ ---------------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Greenwood 20,000 100% $21.90 2003 $713,400 $1,136,000
Walter H. Morris, Jr. 0 0 -- -- -- --
Andre S. W. Shih 0 0 -- -- -- --
Frederick N. Bailard 0 0 -- -- -- --
Kirk S. Sellman 0 0 -- -- -- --
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED OPTIONS/SARs AT FY-END(#) OPTIONS/SARs AT FY-END(#)
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------- --------------- ----------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Richard M. Greenwood N/A N/A 20,000/0 0(1)
Walter H. Morris, Jr. -- -- -- --
Andre S. W. Shih -- -- -- --
Frederick N. Bailard -- -- -- --
Kirk S. Sellman -- -- -- --
</TABLE>
(1) None of the options held by Mr. Greenwood are in-the-money.
RETIREMENT INCOME (DEFINED BENEFIT) PLAN
Citadel, prior to the Restructuring and Recapitalization Transaction,
maintained a Retirement Income Plan which was a qualified, non-contributory
defined benefit retirement plan. The Retirement Plan provided for monthly
retirement payments or an actuarially equivalent lump sum to or on behalf of
each covered employee or beneficiary upon retirement at age 65 or upon early
retirement (i.e. the attainment of age 55 and the completion of 10 years of
service) and, under certain circumstances, upon disability, death or other
termination of employment, based upon the employee's average monthly
compensation and the aggregate number of years of service.
The following table illustrates approximate annual benefits payable at
normal retirement age for various combinations of service and compensation:
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------
AVERAGE FINAL COMPENSATION 15 20 25 30 35
- -------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$ 50,000 11,302 15,069 18,836 22,603 26,370
100,000 24,427 32,569 40,711 48,853 56,995
150,000 37,552 50,069 62,586 75,103 87,620
200,000 37,552 50,069 62,586 75,103 87,620
250,000 37,552 50,069 62,586 75,103 87,620
300,000 37,552 50,069 62,586 75,103 87,620
350,000 37,552 50,069 62,586 75,103 87,620
400,000 37,552 50,069 62,586 75,103 87,620
</TABLE>
Compensation under the Retirement Income Plan included all regular pay,
excluding overtime, commissions and bonuses, limited by IRC
401(a)(17)compensation limit ($150,000 for 1994). The benefit amounts listed
above were computed on a 10-year certain and life basis, which is the normal
form under the plan.
The approximate years of credited service as of December 31, 1993 for each
of the named executive officers are as follows:
NAME SERVICE
-------------------------- -----------------
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<PAGE>
Richard M. Greenwood 1 year
Walter H. Morris, Jr. 1 year
Andre S. W. Shih 2 years
Kirk S. Sellman 3 years
Frederick N. Bailard 1 year
COMPENSATION OF DIRECTORS
For the fiscal year completed December 31, 1993, nonemployee directors were
paid fees in the amount of a $23,000 annual retainer plus $1,000 for each board
meeting and $850 for each committee meeting attended in person (or $300 in the
case of telephonic meetings). In addition, Mr. Villasenor was paid $850
quarterly for his attendance at the Fidelity CRA Committee meetings. Committee
chairmen who were not Citadel or Fidelity employees received an additional
$2,500 per year. For directors who fail to attend a meeting (unless excused for
illness), the attendance fee for the ensuing 12 meetings was reduced by $100 per
meeting. Failure to attend two or more meetings reduced the attendance fee by
$250 per meeting for the ensuing 12 meetings.
In December 1993, the Board increased Mr. Cotter's annual retainer to
$100,000 retroactive to October 1991. Mr. Cotter receives no meeting fees in
addition to the retainer and all annual retainers and meeting fees paid to Mr.
Cotter since October 1991 were netted from payments due retroactively. As of
December 1993, the net amount owed to Mr. Cotter under this new compensation
arrangement was $117,525. The first quarterly installment of the 1994 annual
retainer in the amount of $25,000 was paid on January 2, 1994.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
Mr. Greenwood, Citadel and Fidelity entered into a three-year employment
agreement as of June 3, 1992, his date of hire. The agreement provided for
compensation during the first twelve months at the rate of $365,000 per year,
increasing to $385,000 for the second twelve months and $415,000 for the third
twelve months. In the event of termination by Citadel and/or Fidelity other
than for "cause", or by Mr. Greenwood for "cause", Mr. Greenwood would be
entitled to receive, in addition to accrued benefits under any applicable
benefits plans, an amount equal to the sum of (i) the balance of the amount
which would have been paid to Mr. Greenwood had his employment continued through
the remainder of the twelve month period in which such termination occurred and
(ii) $365,000 if such termination occurs during the first twelvemonths, $385,000
if such termination occurs during the second twelve months, and $0 if such
termination occurs during the third twelve months of his employment. In the
event of an "Acquisition of Control" (as defined in the agreement) of Citadel by
any person other than Craig, Reading, Hecco Ventures I, Tucson Electric Power
Company or any one or more of their respective affiliates, Mr. Greenwood would
be entitled to receive additional severance compensation in the amount of
$500,000 during the first twelve months of his employment, reducing to $250,000
and $0 for the second and third twelve months of his employment, respectively.
This additional compensation was also payable in the event of termination
without "cause" by Mr. Greenwood, or failure of the parties to enter into a new
employment contract, following any such "Acquisition of Control." Mr. Greenwood
was also entitled to participate in health, pension and bonus programs in effect
as of December 31, 1993.
In March 1993, the Board of Directors approved entering into severance
agreements with Messrs. Sellman, Bailard and Morris under which Citadel and
Fidelity agreed to pay each of them a sum equal to one year's salary if they are
discharged or effectively discharged following a "change in control" involving
any person other than Craig, Reading, Hecco Ventures I, Tucson Electric Power
Company or one or more of their respective affiliates. The Board of Directors
approved entering into the same or similar agreements with approximately 16
other Citadel and Fidelity officers.
On June 27, 1990 the Board authorized Citadel to enter into indemnity
agreements with its then current as well as future directors and officers. Since
that time, Citadel's officers and directors have entered such agreements. Under
these agreements, Citadel agrees to indemnify its officers and directors against
all expenses, liabilities and losses incurred in connection with any threatened,
pending or completed action, suit or proceeding, whether civil or criminal,
administrative or investigative, to which any such officer or director is a
party or is threatened to be made a party, in any manner, based upon, arising
from, relating to or by reason of the fact that he is, was, shall be or shall
have been an officer or director, employee, agent or fiduciary of Citadel.
Each of the current Citadel Directors have entered into indemnity
agreements with Citadel. In November, 1994, Citadel corrected oversights with
respect to the indemnity agreements it had entered into with certain of its
directors and officers. First, Citadel and Mr. Wesson executed agreements to
cover Mr. Wesson's duties as a director and officer of Citadel and of Citadel
Realty, Inc. Mr. Wesson's prior agreement covered only his duties as a director
and officer of Doran Street Real Estate Corporation, a wholly-owned subsidiary
of Citadel and the predecessor to Citadel Realty, Inc. Second, Citadel and Mr.
Tompkins executed new agreements covering Mr. Tompkins' duties as a director and
officer of Citadel and of Citadel Realty, Inc. Mr. Tompkins had previously
executed an agreement covering his duties as an director and officer of Citadel,
but such agreement has not been located by either party.
CONSULTING AGREEMENT WITH MR. BRALY
On August 3, 1992, the Board of Directors caused the Company to engage Mr.
Braly as a consultant to study asset valuations and the possibilities of
disposing of problem assets. Mr. Braly and the Company have entered into a
15
<PAGE>
consulting agreement pursuant to which the Company has compensated Mr. Braly at
the rate of $4,000 per week. The agreement expired on March 31, 1993. The
Company paid Mr. Braly $97,000 for services rendered in 1992. On April 28, 1993,
Mr. Braly was elected Executive Vice President of Citadel.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of December 31, 1993, Mr. James J. Cotter, Mr. Mel Goldsmith and Mr.
Alfred Villasenor, Jr. were members of the Compensation Committees of Citadel.
As of December 31, 1993, none of the Compensation Committee members were
employees of Citadel. Mr. Greenwood served in an advisory capacity to the
Compensation Committees of Citadel.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Administration, Philosophy
As of December 31, 1993, the compensation program was administered by the
Compensation Committee of the Board of Directors. At such time, the Committee
was composed of two non-employee directors. The CEO served as an advisor to the
Committee. Following review and approval by the Compensation Committee, all
issues pertaining to employment-related contracts were submitted to the full
Board of Directors for approval.
As of December 31, 1993, it was the philosophy of the Committee and Citadel
to provide Citadel executives with total compensation (cash and non-cash)
opportunities competitive with the market to attract and retain the caliber of
executive talent capable of creating and leading a successful financial services
company. The market used to establish competitive averages was comprised of
financial services institutions, including commercial banks, savings banks and
mortgage banks as applicable to specific functional areas.
As of December 31, 1993, it was also the philosophy of the Committee and
Citadel to limit fixed compensation costs (e.g., base salaries) to competitive
averages and leverage, in the form of incentives, "above average" costs
specifically to Citadel and/or individual performance. Competitive data was
obtained through published survey data and custom surveys conducted by Citadel
or a third party. Information regarding this market includes the OTS Peer Group
as defined in the Performance Graph provided below.
As of December 31, 1993, executive compensation plans in use included base
salary, annual incentive, limited use of stock options, and certain executive
benefits and perquisites. Other executive compensation programs used in the past
included a Supplemental Executive Retirement Plan ("SERP") and Split Dollar Life
Insurance. Of the named executive officers as of December 31, 1993, only Mr.
Evans participated in the SERP, which was suspended as of February 28, 1994.
Due to the financial position of Citadel in late 1993, only limited bonuses
and pay raises were awarded.
1993 Performance
In 1993, an analysis of the competitive market and Citadel performance was
conducted. This analysis showed base salaries of executive officers to be
competitive with market averages. The average relationship of officer base
salaries to salary range midpoints (i.e., market) was 102% of midpoint as of
December 31, 1993.
During 1993, the Committee reviewed proposals from its advisors (the CEO
and SVP, Human Resources) for a 1993 Management Incentive Plan. The proposed
plan linked an annual incentive with a long-term incentive component. After much
discussion, the Committee was unable to agree on the appropriate measures and
performance levels and the proposed Plan was not approved.
The Committee did, however, recommend for Board approval discretionary
bonuses to certain executives in recognition of outstanding individual
performance during 1993. Of the four named executive officers, Mr. Shih
16
<PAGE>
received a bonus of $25,000 for exceptional performance in fulfilling his duties
as Treasurer and Acting Chief Financial Officer.
CEO Pay
The salary and other compensation paid to Mr. Greenwood in 1993 was
provided for in the employment contract Citadel and Mr. Greenwood entered into
upon the commencement of Mr. Greenwood's employment in June 1992. The contract
was the result of arms-length negotiations. Pursuant to the agreement, Mr.
Greenwood received i) a salary increase of 5.5%, resulting in his 1993 annual
salary of $385,000; ii) a $50,000 bonus upon completion of one year's service;
and iii) a stock option grant of 20,000 shares at a grant price equal to 100% of
fair market value.
Committee Members:
James J. Cotter Ralph B. Perry, III
Mel Goldsmith Alfred Villasenor, Jr.
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent that Citadel specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
ADDITIONAL CURRENT INFORMATION
Following the Restructuring and Recapitalization Transaction, Citadel has
adopted a revised board fee schedule to provide as follows: Non-employee
Directors (which include all directors other than Mr. Wesson) will be paid an
annual retainer of $10,000. Directors receive no additional compensation for
serving as committee chairmen. Directors will receive no extra compensation for
attending regularly scheduled monthly meetings, but will receive $1,000 for
attendance at any special board meetings and $850 for attendance at any
committee meetings. Directors will receive $350 for participation in any
telephonic Board or committee meetings. Prior to the Restructuring and
Recapitalization Transaction, Citadel and Fidelity provided fees to non-employee
directors in the amount of a $23,000 annual retainer plus $1,000 for each board
meeting and $850 for each committee meeting attended in person (or $300 in the
case of telephonic meetings). In addition, Mr. Villasenor was paid $750
quarterly for his attendance at the Fidelity CRA Committee meetings. Committee
chairmen who were not Company employees received an additional $2,500 per year.
The Chairman of the Board was paid, in lieu of any other retainer and attendance
fees, an annual retainer of $100,000. On a going forward basis, this retainer
has been reduced to $45,000 and continues to be in lieu of any other retainers
or attendance fees. The Secretary/Treasurer and Principal Accounting Officer
will be paid an annual retainer as a director of $25,000 in addition to his
retainer as a director and attendance fees .
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG CITADEL, S&P 500 INDEX AND ADJUSTED OTS PEER GROUP A*
The Stock Price Performance Graph below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Exchange Act, except to the
extent Citadel specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Act.
The graph below comprises cumulative total return of Citadel, The S & P
Index and the Adjusted OTS Peer Group A (Bay View Capital, Coast Savings, Downey
Savings, First Federal Financial, San Francisco Federal Corporation and Union
Federal Financial Corporation). Peer group returns have been weighted by market
capitalization of the individual peers.
17
<PAGE>
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
CITADEL
Measurement Period HOLDING S&P 500 ADJUSTED OTS
(Fiscal Year Covered) CORPORATION INDEX PEER GROUP A
<S> <C> <C> <C>
Measurement Pt-12/31/1988 $100 $100 $100
FYE 12/31/1989 127 127 125
FYE 12/31/1990 58 119 73
FYE 12/31/1991 54 150 107
FYE 12/31/1992 58 157 121
FYE 12/31/1993 34 168 145
</TABLE>
* Assumes $100 invested on December 31, 1988 in Citadel Common Stock, S&P 500
Index and the Adjusted OTS Peer Group A.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the shares of Common Stock, Preferred Stock
and Voting Stock owned as of November 14, 1994 by (i) each director, (ii) all
directors and officer as a group, and (iii) each person known to Citadel to be
the beneficial owner of more than 5% of either the Common Stock or the Preferred
Stock. Except as noted, the indicated beneficial owner of the shares has sole
voting power and sole investment power.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------------------ ----------------------------------------- ----------------
<S> <C> <C>
James J. Cotter (1) (6) 667,012 shares of Common Stock and 1,329,114 10% of Common Stock and
shares of Preferred Stock 25% of Voting Stock
Steve Wesson (5) (2) *
Peter W. Geiger (5) --- ---
Alfred Villasenor, Jr. (5) 900 shares of Common Stock *
S. Craig Tompkins (6) --- ---
Craig Corporation (6) 667,012 shares of Common Stock and 1,329,114 10% of Common Stock and
shares of Preferred Stock 25% of Voting Stock
Dillon Investors, L.P., 661,000 shares of Common Stock (3) 9.9% of Common Stock
Roderick H. Dillon, Jr., and 8.3% of Voting Stock
Roderick H. Dillon, Jr.-IRA, (3)
Roderick H. Dillon, Jr. Foundation and
Bradley C. Shoup-IRA
21 East State Street, Suite 1410
Columbus, Ohio 43215 (3)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Lawndale Capital Management, Inc., 420,100 shares of Common Stock (4) 6.3% of Common Stock
Andrew E. Shapiro, and 5.25% of Voting
Diamond A Partners, L.P., Stock (4)
and Diamond A Investors, L.P.
One Sansome Street, Suite 3900
San Fransisco, California 94104 (4)
All directors and executive officers as a 667,912 shares of Common Stock and 1,329,114 10% of Common
Group (5 persons) (1) shares of Preferred Stock Stock and 25% of
Voting Stock
</TABLE>
(1) Mr. Cotter is the Chairman and a principal stockholder of Craig
Corporation. Craig Corporation holds 667,012 shares of Common Stock and
1,329,114 shares of Preferred Stock. Mr. Cotter disclaims beneficial
ownership of these shares.
(2) It is contemplated that Mr. Wesson will be granted stock options as a part
of his compensation arrangement with the Company. Although no final
determination has been made, it is estimated that options to purchase
approximately 35,000 shares will be granted. It is further anticipated
that such options will have an exercise price equal to the market price at
the time of grant, will have a 10 year term and will vest over a period of
two years.
(3) Based on Amendment No. 4 to Schedule 13D dated November 7, 1994.
(4) Based on Schedule 13D dated October 20, 1994.
(5) 600 North Brand Boulevard, Glendale, California 91203.
(6) 116 North Robertson Boulevard, Los Angeles, California 90048
* Represents less than one percent of the outstanding shares of Citadel
Common Stock.
PERSONS DEEMED TO BE PARTICIPANTS
The name, business address and present occupation or employment or business
of the persons deemed to be "participants" in the Proxy Solicitation is set
forth above under "DIRECTORS." None of such participants has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors)
during the past ten years. None of the persons deemed to be participants has
purchased or sold Citadel securities within the past two years.
CITADEL'S RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche have been the independent certified public accountants
for Fidelity since 1976 and for Citadel since 1983 and have been selected by
Citadel to continue to serve as the accountants for Citadel for 1993.
Representatives of Deloitte & Touche will attend the Annual Meeting with an
opportunity to make a statement if they desire to do so and will be available to
respond to questions.
STOCKHOLDERS' PROPOSALS
Any stockholder of Citadel wishing to submit a proposal for inclusion in
the Proxy Statement relating to the Company's 1995 annual meeting of
stockholders must deliver such proposal to the Company at its principal office
on or before not less than 120 days in advance of the date of this Proxy. The
Board of Directors will review any proposals from eligible stockholders which it
receives by that date and will determine whether any such proposal will be
included in its 1995 proxy solicitation materials. An eligible stockholder is
one who is the record or beneficial owner of at least 1% or $1,000 in market
value of securities entitled to be voted at the 1994 annual meeting of
stockholders, who has held such securities for at least one year, and who shall
continue to own such securities through the date on which the meeting is held.
19
<PAGE>
OTHER MATTERS
At the time of preparation of this Proxy Statement, the Board of Directors
of Citadel was not aware of any other matters to be brought before the Annual
Meeting. However, if any other matters are properly presented for action, it is
the intention of the persons named in the enclosed form of proxy to vote, or
refrain from voting, in accordance with their respective best judgment on such
matters.
FILING OF ANNUAL STATEMENTS
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules promulgated thereunder, officer and directors of Citadel and persons who
beneficially own more than 10% of a registered class of Citadel's equity
securities are required to file with the Securities and Exchange Commission and
the American Stock Exchange and furnish to Citadel reports of ownership and
changes in ownership of all classes of Citadel's equity securities.
Based solely on its review of the copies of such reports received by it
during or with respect to the year ended December 31, 1993, and/or written
representations from such reporting persons, the Board of Citadel believes that
all reports required to be filed by such reporting persons during or with
respect to the year ended December 31, 1993 were timely filed.
By order of the Board of Directors,
S. Craig Tompkins
Corporate Secretary
Glendale, California
November __,1994
PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY CARD PROMPTLY.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
If your shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can vote your shares. Accordingly, please contact the
person responsible for your account and give instructions for your shares to be
voted .
If you have any questions, or have any difficulty voting your shares,
please contact D.F. King & Co., Inc. by calling 1-800-669-5550.
20
<PAGE>
PROXY PRELIMINARY COPY
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CITADEL HOLDING
CORPORATION
FOR ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 12, 1994
The undersigned stockholder of Citadel Holding Corporation, a Delaware
corporation (the "Company"), acknowledges receipt of the Notice of the Annual
Meeting of Stockholders of the Company and the accompanying Proxy Statement,
each dated November __, 1994, and the undersigned hereby revokes all prior
proxies and hereby constitutes and appoints James J. Cotter, Steve Wesson and S.
Craig Tompkins, and each of them (each with full power of substitution and with
full power to act without the others and, if two or more of them act hereunder,
by action of a majority of them), the proxies of the undersigned, to represent
the undersigned and to vote all the shares of common stock of the Company that
the undersigned would be entitled to vote at the Annual Meeting of Stockholders
of the Company to be held December 12, 1994 at 10:00 a.m. (Los Angeles time) at
the Four Seasons Hotel, 300 S. Doheny, Beverly Hills, California, and at any
adjournment or postponement thereof.
THIS PROXY WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED BELOW; WHERE NO
CHOICE IS SPECIFIED, IT WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 BELOW AND IN THE
DISCRETION OF THE PROXIES IN THE MATTERS DESCRIBED IN PROPOSAL 4.
The Board of Directors recommends a vote FOR Proposal 1:
1. Election of directors.
[_] FOR all nominees listed below
(except as marked to the contrary below)
[_] WITHHOLD AUTHORITY
to vote for all nominees listed below
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
James C. Cotter
Steve Wesson
S. Craig Tompkins
Peter W. Geiger
Alfred Villasenor, Jr.
The Board of Directors recommends a vote FOR Proposal 2.
2. To adopt the proposal to amend the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from 10,000,000
shares to 20,000,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
The Board of Directors recommends a vote FOR Proposal 3.
3. To adjourn the Annual Meeting to a later date in the discretion of the
Board of Directors.
[_] FOR [_] AGAINST [_] ABSTAIN
4. IN THE PROXIES DISCRETION TO VOTE UPON ANY OTHER MATTER AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF. MANAGEMENT
IS NOT AWARE OF ANY OTHER MATTER THAT WILL BE PRESENTED FOR ACTION AT THE
MEETING.
(PLEASE MARK, SIGN AND DATE THIS BLUE PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.)
DATED: ______________, 1994
____________________________
____________________________
Please sign exactly as name appears
hereon. If the stock is registered in
the name of two or more persons, each
should sign. When signing as an
executor, administrator, trustee,
guardian, attorney, or corporate
officer, please add your full title as
such.
COMMENTS: (Change of address)
____________________________
____________________________
____________________________
____________________________
