SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):December 4, 1995
LONESTAR HOSPITALITY CORPORATION
(Exact name of registrant as specified in charter)
Delaware
(State or other jurisdiction
of Incorporation) 0-08718
(Commission File
Number) 75-2242792
(IRS Employer
Identification No.)
3131 Turtle Creek Blvd., Suite 1301, Dallas, Texas 75219
(Address of Principal Executive Offices)
Registrant's telephone number, including area code:
(214) 520-9292
(Former name or former address, if changed since last report)
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Item 5. Other Events
Proposed Acquisition of Citadel Computer Systems, Inc.
On December 7, 1995 the Company signed a letter of intent to
acquire all of the stock of Citadel Computer Systems, Inc. in
exchange for shares of common stock of the Company. It is
anticipated that upon consummation of this transaction, the
shareholders of Citadel will own approximately 72% of the
outstanding common stock of the Company on a fully diluted basis.
It is anticipated that the transaction will be consummated on or
before January 15, 1996. The consummation of this acquisition is
subject to the negotiation and execution of a definitive
agreement approved by the Board of Directors of each company and
other conditions. There is no assurance that the Company and
Citadel (and its shareholders) will reach a definitive agreement
or that the proposed acquisition will be consummated.
Citadel has advised the Company as follows:
Citadel is a Houston, Texas-based developer and marketer of
computer software products designed to secure and manage computer
networks. Citadel's strategic plan calls for the annexation,
through in-house development and acquisition of computer software
products that may broadly be categorized as "network utilities."
An example of Citadel's products is NetOFF, Citadel's
premier logoff utility. During the past two years, Citadel has
distributed over 15,000 copies to large network users. Citadel
estimates that its sales will increase substantially during the
remainder of the decade.
Citadel's product development strategy to date has been to
closely monitor network shortfalls and create or acquire suitable
acquisitions to develop them.
Employment Agreement Between Steven B. Solomon and the Company
Steven B. Solomon, the President of the Company, has entered
into an employment agreement with the Company as of June 28, 1995
and expiring on May 31, 2000. The employment agreement provides
for a base annual salary of $120,000 during the period from June
28, 1995 through May 31, 1996; $132,000 during the period from
June 1, 1996 through May 31, 1997; and $144,000 thereafter. Mr.
Solomon has agreed to defer receipt of his base salary payable
during the period from June 28, 1995 through May 31, 1996 until
the earlier of the date the Company (i) has a positive cash flow,
including general and administrative expenses and debt service
requirements, or (ii) has raised at least $1,000,000 in capital
(including both debt and equity), or (iii) has received at least
$1,000,000 of value in an acquisition or merger for stock or
substantially all the assets of the Company. In addition, upon
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the occurrence of the events described in (ii) or (iii) above,
Mr. Solomon may elect to receive a one-time bonus of $100,000.
The Company shall provide life insurance in the amount of
$1,000,000 on Mr. Solomon's life, in addition to any key man life
insurance maintained by the Company for its benefit. The Company
shall provide Mr. Solomon with an automobile allowance of $950
per month and automobile liability insurance.
The employment agreement provides Mr. Solomon an option to
acquire 200,000 shares of the Company's common stock at an
exercise price of $.75 per share (as adjusted to reflect the one-
for-five reverse stock split). The Company's Board of Directors
has approved an amendment to the employment agreement that grants
Mr. Solomon the right to elect to reduce the exercise price to
$.35 per share.
If the Company terminates Mr. Solomon's employment agreement
for cause, death or disability, Mr. Solomon shall be entitled to
any unpaid salary, bonus and vacation pay. If Mr. Solomon is
terminated otherwise than for cause, death or disability, Mr.
Solomon shall be entitled to a severance payment equal to the sum
of any unpaid salary, bonus and vacation pay, and the greater of
(i) the remaining payments that would have been made during the
term of the employment agreement or any extension thereof,
discounted to present value using an interest rate of 6%, or (ii)
an amount determined by multiplying his base salary for the most
recently completed full month of employment by 24. All severance
payments would be payable in a lump sum within 30 days after the
effective date of the termination of employment, and any options
to purchase shares that would be exercisable during the term of
the employment agreement or any extension thereof would become
fully exercisable during the term the employment agreement would
become fully exercisable upon the termination of the employment
agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
LONESTAR HOSPITALITY CORPORATION
(Registrant)
Date: December 14, 1995 By: /s/ Steven B. Solomon
Steven B. Solomon, President
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