SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
X Preliminary Information Statement
_ Definitive Information Statement
LoneStar Hospitality Corporation
(Name of Registrant as Specified in Its Charter)
LoneStar Hospitality Corporation
(Name of Person(s) Filing Information Statement)
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X $125 per Exchange Act Rules 0-11(c)(1)(ii) or 14c-5(g)
_ Fee computed on table below per Exchange Act Rules 14c-5(g)
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state how it was determined.
_ Check box if any part of the fee is offset as provided by
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PRELIMINARY COPY
LoneStar Hospitality Corporation
3131 Turtle Creek Boulevard, Suite 1301
Dallas, Texas 75219
(214) 520-9292
NOTICE OF ACTION BY WRITTEN CONSENT
To the Stockholders of
LoneStar Hospitality Corporation:
The Board of Directors of LoneStar Hospitality Corporation,
a Delaware corporation (the "Company"), and Gilbert Gertner,
George Sharp and Steven B. Solomon, all being stockholders who,
as of the Record Date (as defined herein) collectively own a
majority of the stock of the Company, wish to advise the holders
of all of the issued and outstanding shares of the Company's
common stock, par value $0.01 per share (the "Common Stock"), of
action to be taken pursuant to written consent of Messrs.
Gertner, Sharp and Solomon. The action to be taken by Messrs.
Gertner, Sharp and Solomon is as follows (the "Proposals"):
1. Approval and adoption of an amendment to the
Company's Certificate of Incorporation to change the
name of the Company to Citadel Computer Systems
Incorporated; and
2. Approval and adoption of an amendment to the Company's
Certificate of Incorporation to effect one-for-two reverse
stock split.
The Board of Directors of the Company approved and adopted
the first Proposal at a meeting held February 19, 1996, and the
second at a meeting held March 6, 1996.
The record date for the determination of stockholders of the
Company entitled to receive this Notice of Action by Written
Consent and the accompanying Information Statement and the
determination of the number of shares of Common Stock necessary
to approve the Proposal has been fixed as of the close of
business on April 10, 1996 (the "Record Date"). As provided in
the Company's Certificate of Incorporation, each share of Common
Stock entitles its holder to one vote on any matter that properly
comes before the stockholders of the Company and requires a vote
of the stockholders. The affirmative vote or written consent of
the holders of a majority of the outstanding shares of Common
Stock is necessary to approve the Proposals. As discussed
herein, Messrs. Gertner, Sharp and Solomon own, collectively,
approximately 60.3% of the issued and outstanding Common Stock as
of the Record Date. They will deliver a written consent that
will approve and adopt the Proposals as of approximately twenty
days after the date this Notice and the accompanying Information
Statement are first mailed or distributed to the Company's
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stockholders. No other class of voting security of the Company is
issued or outstanding.
NO STOCKHOLDERS' MEETING WILL BE HELD TO VOTE ON OR DISCUSS
THE PROPOSAL. ACCORDINGLY, WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
By Order of the Board of Directors
of LoneStar Hospitality Corporation
Steven B. Solomon
_______, 1996 Secretary
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PRELIMINARY COPY
WE ARE NOT ASKING YOU FOR A PROXY
YOU ARE REQUESTED NOT TO SEND US A PROXY
LoneStar Hospitality Corporation
3131 Turtle Creek Boulevard, Suite 1301
Dallas, Texas 75219
(214) 520-9292
____________________
INFORMATION STATEMENT
____________________
INTRODUCTION
This Information Statement is furnished by the Board of
Directors of LoneStar Hospitality Corporation, a Delaware
corporation (the "Company"), to holders of all of the issued and
outstanding shares (the "Shares") of the Company's common stock,
par value $0.01 per share (the "Common Stock"), for the purpose
of describing actions to be taken by the holders of a majority of
the Shares, Messrs. Gilbert Gertner, George Sharp and Steven B.
Solomon, with respect to the proposals set forth on the
accompanying Notice of Action of Written Consent.
This Information Statement and the Notice of Action by
Written Consent are first being mailed to stockholders of the
Company on approximately April 11, 1996.
Only holders of Shares of record at the close of business on
April 10, 1996 (the "Record Date") are entitled to receive this
Information Statement and Notice of Action by Written Consent.
As provided in the Certificate of Incorporation of the Company,
each share of Common Stock entitles its holder to one vote on any
matter requiring a vote by the Company's stockholders that
properly comes before the stockholders. As of the Record Date,
there are issued and outstanding 22,479,181 shares of Common
Stock, of which 13,559,250 shares, or approximately 60.3%, are
owned, beneficially and of record, by Messrs. Gertner, Sharp and
Solomon. No other class of voting security of the Company is
issued or outstanding.
The Company's Certificate of Incorporation and the Delaware
General Corporation Law (the "DGCL") each require an affirmative
vote or the written consent of the holders of a majority of the
outstanding Shares to approve the Proposals. Since Messrs.
Gertner, Sharp and Solomon collectively own 60.3% of the issued
and outstanding Shares on the Record Date, they together possess
the voting power to approve the Proposals. Each has advised the
Company's Board of Directors that he will execute a written
consent approving the Proposals for all of his Shares.
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Accordingly, Messrs. Gertner, Sharp and Solomon will be able to
cause the adoption of the Proposals without the receipt of
consents from the remaining stockholders of the Company.
No stockholders' meeting will be held to vote on or discuss
the Proposals, as permitted by the Company's Bylaws and the DGCL.
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PROCEDURE TO ADOPT THE PROPOSALS
The identity of the Company's stockholders entitled to
receive this Information Statement and the Notice of Action by
Written Consent and the number of Shares necessary to adopt the
Proposals were determined as of the close of business on the
Record Date. On the Record Date, 22,479,181 Shares of Common
Stock were validly issued and outstanding. There is no other
class of voting security of the Company issued or outstanding.
Each stockholder of Common Stock is entitled to one vote per
Share. Neither the Company's Certificate of Incorporation nor
its Bylaws provide for cumulative voting rights.
Receipt of affirmative votes or written consents from
holders of at least a majority of the outstanding Shares is
necessary to adopt the Proposal. As of the Record Date, Messrs.
Gertner, Sharp and Solomon collectively owned 13,559,250, or
approximately 60.3%, of the outstanding Shares, and each has
advised the Company that he will execute a written consent in
favor of the Proposals (the "Written Consent") for all of his
Shares. Accordingly, Messrs. Gertner, Sharp and Solomon will
cause the approval of the Proposals without the receipt of any
consents from any other stockholders of the Company. No
stockholders' meeting will be held to vote on or discuss the
Proposals and the vote will be conducted exclusively by means of
the Written Consent executed by Messrs. Gertner, Sharp and
Solomon, as permitted by the DGCL and the Company's Bylaws. The
Proposals will be adopted, and it is expected that the Company
will file a Certificate of Amendment to its Certificate of
Incorporation embodying the Proposals with the Secretary of State
of the State of Delaware on or shortly after the date the
Proposals are adopted.
SECURITY OWNERSHIP OF CERTAIN PERSONS
The following information is submitted as of March 11, 1996
with respect to the Company's voting securities owned
beneficially by each person known by the Company owning more than
5% of the Common Stock of the Company (this being the only class
of voting securities now outstanding) and by all directors and
officers of the Company, individually and as a group. Unless
otherwise indicated, the number of Shares and percentage of
ownership of Common Stock for each of the named stockholders
assumes (i) that Shares of Common Stock that the stockholder may
acquire within sixty days of the Record Date are outstanding, and
(ii) that all Shares issuable to Citadel Computer Systems
Incorporated ("Citadel") stockholders pursuant to the Company's
merger with Citadel are outstanding (as hereafter defined, the
"Merger")(See "Proposal to Change Name of the Company"). As of
the date of this Report, 22,479,181 shares of the Company,
including all shares issuable pursuant to the Merger, are
outstanding.
Outstanding as of March 21, 1996
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Name and address of
beneficial owner: Number
of
shares Approximat
e percent
of class
Gilbert Gertner
2950 North Loop West, Suite
1080
Houston, Texas 77092 10,188,000 1 40.1%
George Sharp
2950 North Loop West, Suite
1080
Houston, Texas 77092 6,327,000 1 24.9
Steven B. Solomon
3131 Turtle Creek Blvd.,
Suite 1301
Dallas, Texas 75219 5,838,171 1,2 23.0
Chris A. Economou
150 North Federal Highway,
Suite 210
Fort Lauderdale, Florida
33301 370,000 3 1.6
Axel Sawallich
Rudolfplatz 10
A-1080 Vienna, Austria 439,823 4 2.0
Jesse R. Marion
50 Briar Hollow, Suite 700
West
Houston, Texas 77027 -0- -0-
All officers and directors as
a group
(6 persons): 23,162,994 5 74.0
*Less than one percent.
1Includes 2,925,000 shares presently issuable, pursuant to
an option to purchase shares of the Company. The holders of
these options have, however, agreed to forego their exercise
until after the effectiveness of the Reverse Stock Split.
2Includes 18,921 shares presently issuable pursuant to an
option to purchase shares of the Company.
3Includes 50,000 shares presently issuable pursuant to an
option to purchase shares of the Company.
4Includes 225,000 shares held by Mr. Sawallich as trustee,
over which he has voting and dispositive power.
5Includes all shares issuable pursuant to presently
exercisable options to Messrs. Gertner, Sharp, Solomon and
Economou.
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PROPOSAL TO UNDERTAKE A REVERSE STOCK SPLIT
The Board of Directors has approved a proposal to amend the
Company's Certificate of Incorporation to undertake a one-for-two
reverse stock split (the "Reverse Stock Split").
General. Upon effectiveness of the proposed Reverse Stock
Split, every two outstanding shares of Common Stock of record at
the effective time of the Reverse Stock Split (the "Effective
Time") will be converted into one share. If a stockholder of
record holds a number of shares as of the Effective Time that is
not evenly divisible by two, the resulting fractional share will
be rounded up to the nearest whole share. The Reverse Stock
Split will not change the capital stock equity of the
stockholders. The principal effect of the Reverse Stock Split
will be to reduce the number of outstanding shares of Common
Stock.
The Company is undertaking the Reverse Stock Split in order
to assure that it has a sufficient number of authorized shares of
its Common Stock to issue upon exercise of currently outstanding
warrants and options and warrants and debentures being offered in
a private placement and an overseas offering currently underway.
The Company also believes that effecting the Reverse Stock Split
will enable the trading price for the Shares to be higher than it
would be if the Reverse Stock Split were not to occur. The
Company's management believes that a higher trading price for the
Common Stock would increase its appeal to potential investors and
enhance the Company's ability to raise funds through the sale of
Common Stock of securities convertible into Common Stock. In
addition, the Company's management believes that the ability of
its Common Stock to qualify for listing on a NASDAQ market or on
a securities exchange would by enhanced by the higher trading
price that is expected to result from the Reverse Stock Split.
There is no assurance, however, that the reverse stock split will
result in a higher trading price.
Certain Federal Income Tax Consequences. The Reverse Stock
Split generally should be a nontaxable transaction. The
aggregate tax basis received by a stockholder in the Reverse
Stock Split will equal such stockholder's aggregate tax basis in
the Common Stock exchanged therefor and generally will be
allocated among such Common Stock received on a pro rata basis.
A stockholder's holding period for Common Stock received in the
Reverse Stock Split will include the period during which the
Common Stock exchanged therefor was held, provided that such
Common Stock was held as a capital asset.
The foregoing discussion is based upon information available
to the Company, the Internal Revenue Code of 1986, as amended and
in effect on the date hereof, existing and proposed regulations
thereunder, reports of congressional committees, judicial
decisions and current administrative rulings and practices. Any
of these authorities could be repealed, overruled or modified at
any time after the date hereof. Any such change could be
retroactive and, accordingly, could modify the tax consequences
discussed herein. No ruling from the Internal Revenue Service
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with respect to the matters discussed herein has been requested
and there is no assurance that the Internal Revenue Service would
agree with the conclusions set forth in this discussion.
This discussion if for general information only and does not
address the federal income tax consequences that may be relevant
to particular stockholders of the Company in light of their
personal circumstances (such as dealers in securities, insurance
companies, foreign individuals and entities, financial
institutions and tax-exempt entities) who may be subject to
special treatment under the federal income tax laws. This
discussion also does not address any tax consequences under
state, local or foreign laws.
STOCKHOLDERS OF THE COMPANY ARE URGED TO CONSULT THEIR TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE
REVERSE STOCK SPLIT, INCLUDING THE APPLICABILITY OF ANY STATE,
LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS AND ANY
PENDING OR PROPOSED LEGISLATION.
PROPOSAL TO CHANGE THE NAME OF THE COMPANY
The Board of Directors has approved a proposal to amend the
Company's Certificate of Incorporation to change the Company's
name from LoneStar Hospitality Corporation to Citadel Computer
Systems Incorporated. This proposal was made to fulfill a
requirement of the Merger Agreement, described below, and to
reflect the Company's current business.
Effective February 29, 1996, Citadel merged with and into
(the "Merger") LSHC Acquisition, Inc., a wholly-owned Delaware
subsidiary of the Company ("Acquisition"), pursuant to an
Agreement and Plan of Merger, as amended (the "Merger
Agreement"). Pursuant to the terms of the Merger Agreement, each
holder of Citadel common stock received 4.5 shares of Common
Stock for each share of Citadel common stock held by such
stockholder. In addition, each outstanding option and warrant to
purchase Citadel capital stock became an option or warrant to
purchase a number of shares of Common Stock equal to four and
one-half times the number of shares subject to the Citadel
options and warrants at the same aggregate exercise price of the
Citadel options and warrants. As a result of the Merger, the
Citadel stockholders beneficially own approximately 75% of the
Company and the LoneStar stockholders own approximately 25%, on a
fully diluted basis.
The Merger Agreement requires the Company to change its name
to Citadel Computer Systems Incorporated as soon as practicable
after the effective date of the Merger.
The Merger Agreement also required that the Company sell or
enter into an agreement to sell all of its restaurant related
assets owned by LS Holding Corp., a wholly owned subsidiary of
the Company, on terms reasonably satisfactory to Citadel. The
Company and Miami Subs U.S.A., Inc. consummated this sale on
March 1, 1996. As a result of this sale and the effectiveness of
the Merger, the Company no longer owns or operates restaurants,
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and is engaged in the manufacture and sale of computer software.
The Company's management believes that the name change is
necessary to reflect the new direction of the Company's business.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Time, a letter of
transmittal (the "Letter of Transmittal") will be mailed to all
holders of record of the Shares. The Letter of Transmittal will
be used by such holders in surrendering to the Transfer Agent
certificates that represented the number of shares of Common
Stock owned of record by such holder prior to the Reverse Stock
Split (the "Old Common Shares"). The Letter of Transmittal will
contain instructions concerning the exchange of such certificates
for certificates representing the number of shares of Common
Stock owned of record by such holder following the Reverse Stock
Split and reflecting the Name Change (the "New Common Shares").
Certificates representing the Old Common Shares should not be
surrendered until the Letter of Transmittal is received by the
stockholder.
Following the surrender of certificates representing the Old
Common Shares, stockholders will receive in exchange therefor
certificates representing the whole number of New Common Shares,
including fractional shares issued in connection with the
rounding, to which the holder is entitled. In addition, if a
holder did not submit certificates for exchange following the
Company's one-for-five reverse stock split effected in December
1995, the certificate issued for the New Common Shares will
reflect that reverse stock split as well. After the Effective
Time and until so surrendered, each certificate representing Old
Common Shares shall be deemed for all corporate purposes to
represent and evidence ownership of the number of New Common
Shares, into which the shares represented by such certificate
have been converted.
Certificates representing New Common Shares will be
registered only in the name or names in which the surrendered
certificates were registered. The Transfer Agent will issue
certificates representing New Common Shares attributable to any
certificate that has been lost or destroyed only upon receipt of
satisfactory evidence of ownership of the shares represented
thereby and after appropriate indemnification.
Effective Time
The Reverse Stock Split and name change will be effected by
an amendment to the Company's Certificate of Incorporation. The
amendment to Company's Certificate of Incorporation that will
effect these changes will be filed with the Secretary of State of
the State of Delaware immediately following the execution of the
Written Consent by the holders of a majority of the outstanding
Shares.
CHANGES TO THE COMPANY'S BOARD OF DIRECTORS
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Following consummation of the Merger, Steven R. Leipsner,
David S. Lundeen, Lawrence E. Steinberg and James R. Bradshaw
have resigned as directors, and Gilbert Gertner, George Sharp and
Jesse R. Marion have been elected as directors.
Gilbert Gertner has been chairman of Citadel since its
inception in July 1992. From 1990 to 1995, Mr. Gertner was
president of Gertner Investments, an investment firm specializing
in identifying, capitalizing and developing high-tech companies.
Mr. Gertner served as a director of Microtel International, Inc.
(formerly known as CXR TELECOM CORP.) from 1986 to 1994, and as a
director of Data Systems and Software, Inc. (formerly known as
Defense Software and Systems, Inc.) from 1991 to 1994.
George Sharp has been President of Citadel since its
inception in July 1992. From 1991 to his tenure with Citadel,
Mr. Sharp was president of Matrix Systems, Inc., a developer of
computer systems for the insurance industry.
Jesse R. Marion is a Director of Seitel, Inc., a New York
Stock Exchange listed energy company. He also serves as
president of Seitel Data Corp., Seitel Delaware, Inc., and Seitel
Data, Ltd., all wholly-owned subsidiaries of Seitel, Inc. Prior
to joining Seitel, Inc. in April 1992, Mr. Marion was Executive
Vice President of Marketing for First Seismic Corp., a publicly
traded seismic data company, from January 1989 until April 1992.
Since 1981, Mr. Marion has held management and executive
positions in both private and publicly traded seismic data
companies.
By Order of the Board of Directors
of
LoneStar Hospitality Corporation
Dallas, Texas Steven B. Solomon
_______, 1996 Secretary
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