<PAGE>
As filed with the Securities and Exchange Commission on May 8, 1996
Registration No. 33-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------------------
CITADEL COMPUTER SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 75-2432011
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3131 Turtle Creek Blvd., Suite 1301
Dallas, Texas 75219
(Address of principal executive offices) (Zip Code)
1) Directors Stock Options
2) Consulting Agreement between registrant and Lybster Limited
3) 1993 Employee Incentive Stock Option Plan
4) Employee Stock Option Agreement
5) Stock Options to Consultants
(Full title of the plans)
----------------------------------
Steven B. Solomon Copy to:
Chief Operating Officer Paul W. Talbot, Esq.
Citadel Computer Systems Incorporated Citadel Computer Systems Incorporated
3131 Turtle Creek Blvd, Ste. 1301 3131 Turtle Creek Blvd., Suite 1301
Dallas, Texas 75219 Dallas, Texas 75219
(214) 520-9292 (214) 520-9292
(Name, address and telephone number
including area code of agent for service)
----------------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered per Share(1)(2) Offering Price(1)(2) Fee(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value per share 640,288 Shares $11.88 $7,606,621.44 $2,622.97
==================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Calculated pursuant to Rule 457(c) and (h) under the Securities
Act of 1933, as amended. Accordingly, the price per share of the common stock
offered hereunder, at a price per share of $11.88, which was the average closing
bid and asking price per share of common stock on the OTC Bulletin Board on
May 6, 1996. The Share amounts and prices per share reflect a one-for two
reverse stock split effective May 1, 1996.
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The registrant and the Plan hereby incorporates by reference in this
registration statement the following documents previously filed by the
registrant with the Securities and Exchange Commission (the "Commission"):
(1) the registrant's Annual Report on Form 10-KSB and the amendment to
such Report on Form 10-KSB/A, both filed with the Commission for
the fiscal year ended March 31, 1995;
(2) the registrant's Quarterly Reports on Form 10-QSB for the quarters
ended June 30, September 30 and December 31, 1995, filed with the
Commission;
(3) the registrant's definitive Information Statements dated November
1, 1995 and April 11, 1996, each filed with the Commission;
(4) the registrant's Current Reports on Form 8-K dated December 4,
1995 and February 29, 1996, each filed with the Commission;
(5) the registrant's four reports on Form 10-C filed with the
Commission on March 25, 1996, March 25, 1996, April 22, 1996 and
May 8, 1996, respectively.
(6) the description of the common stock, par value $0.01 per share, of
the registrant (the "Common Stock") set forth in the Registration
Statement on Form S-1 for Apollo Resources, Inc., filed with the
Commission on November 1, 1988, and declared effective January 4,
1989, including any amendment or report filed for the purpose of
updating such description.
All documents filed by the registrant with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), subsequent to the date of this registration
statement shall be deemed to be incorporated herein by reference and to be a
part hereof from the date of the filing of such documents until such time as
there shall have been filed a post-effective amendment that indicates that all
securities offered hereby have been sold or that deregisters all securities
remaining unsold at the time of such amendment.
Item 5. Interests of Named Experts and Counsel
Paul W. Talbot, counsel to the registrant, holds options to acquire
5,000 shares of the Common Stock of the registrant. Such shares are included
among the shares being registered pursuant to this registration statement.
Item 6. Indemnification of Directors and Officers.
Registrant's Certificate of Incorporation provides that no director of
the Registrant will be personally liable to the Registrant or any of its
stockholders for monetary damages arising from the director's breach of
fiduciary duty as a director, with certain limited exceptions.
Pursuant to the provisions of Section 145 of the Delaware General
Corporation Law, every Delaware corporation has the power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of the corporation) by reason of the fact that he or
she is or was a director, officer, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, against any and all
expenses, judgments, fines and amounts paid in settlement and reasonably
incurred in connection with such action, suite or proceeding. The power to
indemnify applies only
II-1
<PAGE>
if such person acted in good faith and in a manner he or she reasonably believed
to be in the best interest, or not opposed to the best interest, of the
corporation and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of
the corporation as well, but only to the extent of defense and settlement
expenses and not to any satisfaction of a judgment or settlement of the claim
itself, and with the further limitation that in such actions no indemnification
shall be made in the event of any adjudication unless the court, in its
discretion, believes that in the light of all the circumstances indemnification
should apply.
To the extent any of the persons referred to in the two immediately
preceding paragraphs is successful in the defense of the actions referred to
therein, such person is entitled, pursuant to Section 145, to indemnification as
described above.
In addition, the Registrant's Certificate of Incorporation and Bylaws
provide for indemnification of officers and directors to the fullest extent
permitted by the Delaware General Corporation Law.
Item 8. Exhibits.
(a) Exhibits.
The following documents are filed as a part of this
registration statement.
Exhibit Description of Exhibit
------- ----------------------
4.1 Certificate of Incorporation (incorporated by reference to
Registration Statement on Form S-1, File No. 33-25462, for
Apollo Resources, Inc., on November 10, 1988 and declared
effective January 4, 1989).
4.2 Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on June 4, 1990 (incorporated
by reference to Form 10-K for year ended December 31, 1990).
4.3 Bylaws (incorporated by reference to Registration Statement on
Form S-1, File No. 33-25462, filed with the Commission on
November 10, 1988).
4.4 Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on October 15, 1991
(incorporated by reference to Form 10-K for year ended December
31, 1991).
4.5 Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on July 20, 1994 (incorporated
by reference to Form 10-QSB for quarter ended June 30, 1994).
4.6 Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on December 11, 1995
(incorporated by reference to Form S-8, File No. 33-65189,
filed with the Commission on December 20, 1995).
4.7* Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on May 1, 1996.
4.8* Form of Directors' Options
4.9* 1993 Employee Stock Option Plan.
4.10* Consulting Agreement between Lybster Limited and LoneStar
Hospitality Corporation/Citadel Computer Systems dated
March 21, 1996.
II-2
<PAGE>
4.11* Form of Employee Stock Option.
4.12* Form of Stock Options granted during 1994 to consultants of
registrant's SportsWaves! television program.
5* Opinion of Paul W. Talbot, counsel to registrant.
10* Form of Directors' Options (included as Exhibit 4.8)
23.1* Consent of Grant Thornton LLP, independent certified public
accountants.
23.2* Consent of Paul W. Talbot (included as part of Exhibit 5).
25 Power of Attorney is found on pages II-6 to II-7 hereof.
____________________
* Filed herewith.
Item 9. Undertakings.
A. The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of
--------------
1933, the registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston,State of Texas, on May 7, 1996:
CITADEL COMPUTER SYSTEMS INCORPORATED
By: George Sharp
----------------------------
George Sharp
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints George Sharp and Steven B. Solomon, or either of
them, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same with all
exhibits, thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
Gilbert Gertner Chairman of the Board of Directors May 7, 1996
- ------------------------
Gilbert Gertner
George Sharp President & Director (Principal May 7, 1996
- ------------------------ Executive Officer)
George Sharp
Steven B. Solomon Chief Operating Officer, Secretary & May 7, 1996
- ------------------------ Director (Principal Financial Officer)
Steven B. Solomon
Chris A. Economou Director May 7, 1996
- ------------------------
Chris A. Economou
Jesse Marion Director May 7, 1996
- ------------------------
Jesse Marion
Axel Sawallich Director May 7, 1996
- ------------------------
Axel Sawallich
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
Number Document Description Number
------ -------------------- ------
4.1 Certificate of Incorporation (incorporated by reference to
Registration Statement on Form S-1, File No. 33-25462, for
Apollo Resources, Inc., on November 10, 1988 and declared
effective January 4, 1989 ).
4.2 Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on June 4, 1990 (incorporated
by reference to Form 10-K for year ended December 31, 1990).
4.3 Bylaws (incorporated by reference to Registration Statement on
Form S-1, File No. 33-25462, filed with the Commission on
November 10, 1988).
4.4 Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on October 15, 1991
(incorporated by reference to Form 10-K for year ended December
31, 1991).
4.5 Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on July 20, 1994 (incorporated
by reference to Form 10-QSB for quarter ended June 30, 1994).
4.6* Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on December 11, 1995
(incorporated by reference to Form S-8, File No. 33-65189,
filed with the Commission December 20, 1995).
4.7* Certificate of Amendment to Certificate of Incorporation filed
with Delaware Secretary of State on May 1, 1996.
4.8* Form of Directors' Option.
4.9* 1993 Employee Stock Option Plan.
4.10* Consulting Agreement between Lybster Limited and LoneStar
Hospitality Corporation/Citadel Computer Systems dated March
21, 1996.
4.11* Form of Employee Stock Option.
4.12* Form of Stock Options granted during 1994 to consultants
of registrant's SportsWaves! television program.
5* Opinion of Paul W. Talbot, counsel to Citadel Computer Systems
Incorporated
10* Form of Directors' Stock Option (included as Exhibit 4.8).
23.1* Consent of Grant Thornton LLP, independent certified public
accountants.
23.2* Consent of Paul W. Talbot (included as part of Exhibit 5).
25 Power of Attorney is found on pages II-6 to II-7 hereof.
<PAGE>
CERTIFICATE OF AMENDMENT
TO CERTIFICATE OF INCORPORATION
OF LONESTAR HOSPITALITY CORPORATION
LONESTAR HOSPITALITY CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Laws of the State of Delaware
(the "Corporation"), does hereby certify:
FIRST: Article IV of the Certificate of Incorporation is amended as
follows:
(a) By changing the name of the Corporation to Citadel Computer Systems
Incorporated. Accordingly, Article I of the Certificate of Incorporation, as
amended, is deleted and the following new Article I is substituted in lieu
thereof:
"ARTICLE I
The name of the Corporation is Citadel Computer Systems Incorporated."
SECOND: That thereafter, pursuant to a resolution of its Board of
Directors, a consent in writing, including the proposed amendment, was signed by
the holders of in excess of a majority of the outstanding Common Stock of the
Corporation, which was not less than the minimum number of votes necessary to
authorize such an amendment at a meeting at which all members having the right
to vote thereon were present and voted, and written notices of such action has
been sent to all other stockholders who have not consented in writing to such
action.
THIRD: Said amendment was duly appointed in accordance with the provisions
of Section 228 and Section 242 of the General Corporation Laws of the State of
Delaware.
FOURTH: That upon the filing of this Certificate of Amendment with the
Secretary of State of Delaware, (i) each two (2) shares of Common Stock, par
value $.01 previously outstanding on such date of filing shall be deemed to have
been exchanged for one (1) new share of outstanding common stock, par value
$.01, (ii) certificates representing shares of Common Stock previously
outstanding on such date of filing shall be exchanged on such date for new
certificates reflecting the one-for-two (1:2) reverse stock split; and (iii)
fractional shares shall be rounded up to the nearest whole share.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunder subscribed our names
this 1ST day of MAY, 1996.
George Sharp
-----------------------------------------------
George Sharp
President
Steven B. Solomon
-----------------------------------------------
Steven B. Solomon
Secretary
<PAGE>
THE OPTION REPRESENTED BY THIS AGREEMENT AND THE SHARES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS
LONESTAR HOSPITALITY CORPORATION
STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 19th day of February,
1996, between LoneStar Hospitality Corporation, a Delaware corporation (the
"Corporation"), and DIRECTOR (the "Holder") in connection with the grant of an
option to purchase common stock of the Corporation.
W I T N E S S E T H:
WHEREAS, the Holder is a director of the Corporation;
WHEREAS, in connection with the services Holder has provided to the
Corporation as a director, the Corporation desires to grant the Holder an option
to purchase shares of common stock ("Stock") of the Corporation under terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of these premises, the parties agree that
the following shall constitute the Agreement between the Corporation and the
Holder:
1. Definitions. For purposes of this Agreement, defined terms shall have
-----------
the meanings given to them by the Plan except as specified below:
1.1 "Agreement" shall mean this document as executed by the Corporation
and the Holder, and as it may be subsequently amended.
1.2 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar or superseding statute or statutes.
1.2 "Option" shall mean the stock option granted pursuant to this
Agreement; such Option is a "nonstatutory option" and does not satisfy the
requirements of section 422 of the Internal Revenue Code (the "Code").
1.3 "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar or superseding statute or statutes.
1.4 "Stock" shall mean the common stock of the Corporation, par value
$.01.
<PAGE>
2. Grant of Option. Subject to the terms and conditions set forth in this
---------------
Agreement, the Corporation grants to the Holder a Option to purchase from the
Corporation during the period ending May 31, 1996, 50,000 shares of Stock at a
price of $1.75 per share, subject to adjustment, if any, as provided in this
Agreement. This Option is exercisable with respect to the shares of Stock as of
the date hereof.
3. Notice of Exercise. This Option may be exercised in whole or in part,
------------------
from time to time, during the period specified in Paragraph 2, by written notice
to the Corporation at the address provided in this Agreement. Such notice shall
(a) specify the number of shares of Stock to be purchased and the exercise price
to be paid for such shares; (b) if the person exercising this Option is not the
Holder himself, contain or be accompanied by evidence satisfactory to the
Committee of such person's right to exercise this Option; and (c) be
accompanied by payment in full of the purchase price in the form of cash or a
certified cashier's check to the order of the Corporation.
4. Investment Intent. The Holder agrees that until the shares of stock
------------------
acquired upon exercise of this Option have been registered under the Securities
Act, such shares shall be acquired for his own account for investment only and
not with a view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act or other applicable
securities laws. If the Board of Directors so determines, any Stock
certificates issued upon exercise of this Option shall bear a legend to the
effect that the shares have been so acquired. The Corporation may, but in no
event shall be required to, bear any expenses of complying with the Securities
Act, other applicable securities laws or the rules and regulations of any
national securities exchange or other regulatory authority in connection with
the registration, qualification, or transfer, as the case may be, of this Option
or any shares of Stock acquired upon the exercise of this Option. The foregoing
restrictions on the transfer of the shares of Stock shall be inoperative if (a)
the Corporation previously shall have been furnished with an opinion of counsel,
satisfactory to it, to the effect that such transfer will not involve any
violation of the Securities Act or other applicable securities laws, or (b) the
shares of Stock shall have been duly registered in compliance with the
Securities Act and other applicable securities laws.
5. Transfer and Exercise of Option. This Option shall not be transferable
--------------------------------
except by will or by the laws of descent and distribution. No assignment or
transfer of this Option, whether voluntary or involuntary, by operation of law
or otherwise, except a transfer by will or by the laws of descent or
distribution, shall vest in the assignee or transferee any interest or right
whatsoever in this Option.
During the Holder's lifetime, this Option may be exercised only by him, his
guardian or his legal representative.
6. Status of Holder. The Holder shall not be deemed a stockholder of the
----------------
Corporation with respect to any of the shares of Stock subject to this Option,
except to the extent that such shares shall have been purchased and transferred
to him. The Corporation shall not be required to issue or transfer any
certificates for shares of Stock purchased upon exercise of this Option until
all applicable requirements of law have been satisfied and such shares shall
have been duly listed on any securities exchange on which the Stock may then be
listed.
7. No Effect on Capital Structure. This Option shall not affect the right
------------------------------
of the Corporation or any Affiliate to reclassify, recapitalize or otherwise
change its capital or debt structure or to merge, consolidate, convey any or all
of its assets, dissolve, liquidate, windup, or otherwise reorganize.
8. Adjustments Upon Changes in Capitalization, Merger, Etc.
--------------------------------------------------------
Notwithstanding any other provision of this Agreement, in the event of any
change in the number of outstanding shares of Stock
2
<PAGE>
(a) effected without receipt of consideration by the Corporation, by reason
of a stock dividend, split, combination, exchange or other
recapitalization, merger, or otherwise, in which the Corporation is the
surviving corporation, or
(b) by reason of a spin-off of a part of the Corporation into a separate
entity, or assumptions and conversions of outstanding grants due to an
acquisition by the Corporation of a separate entity,
(1) the aggregate number and class of shares subject to this Option and (2) the
exercise price of this Option shall be automatically adjusted to accurately and
equitably reflect the effect of such changes. In the event of a dispute
concerning such adjustment, the Committee shall have full discretion to resolve
the dispute. The number of shares subject to this Option shall be automatically
reduced by any fraction which results from any adjustment made pursuant to this
Paragraph.
10. Authority of Board of Directors. Any question concerning the
--------------------------------
interpretation of this Agreement, any adjustments required to be made under this
Agreement, and any controversy which may arise under this Agreement shall be
determined by the Board of Directors in its sole discretion.
11. Notice. Whenever any notice is required or permitted under this
------
Agreement, such notice must be in writing and delivered (personally or by
courier), telecopied (if confirmed) or sent by mail. Any notice required or
permitted to be delivered under this Agreement shall be deemed to be delivered
on the date which it is personally delivered, or, whether actually received or
not, on the third business day after it is deposited in the United States mail,
certified or registered, postage prepaid, addressed to the person who is to
receive it at the address which such person has previously specified by written
notice delivered in accordance with this Agreement. The Corporation or Holder
may change, at any time and from time to time, by written notice to the other,
the address previously specified for receiving notices. Until changed in
accordance with this Agreement, the Corporation and the Holder specify their
respective addresses as set forth below:
Corporation: LoneStar Hospitality Corporation
3131 Turtle Creek Boulevard, Suite 1301
Dallas, Texas 75219
Holder: DIRECTOR
ADDRESS
CITY, STATE ZIP
12. Modification, Extension and Renewal of Option. The Board of Directors
may modify, extend or renew this Option or accept the surrender of this Option,
(to the extent not previously exercised), and authorize the granting of a
substitute Option (to the extent not previously exercised). The Board of
Directors may not, without the consent of the Holder, modify this Option so as
to specify a higher or lower exercise price or number of shares. In addition,
no modification of this Option shall, without the consent of the Holder, alter
or impair any rights or obligations under this Option to Holder.
3
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed and the Holder has executed this Agreement on the day and year first
above written.
"CORPORATION"
LONESTAR HOSPITALITY CORPORATION
By:
-----------------------------
Steven B. Solomon, President
"HOLDER"
--------------------------------
DIRECTOR
4
<PAGE>
INCENTIVE EMPLOYEE STOCK OPTION PLAN
As Adopted by the Board of Directors
as of June 22, 1993
1. Purpose of the Plan
-------------------
This Incentive Stock Option Plan (hereinafter called the "Plan") for
LONESTAR HOSPITALITY CORPORATION. (hereinafter called the "Company") is intended
to advance the interest of the Company by providing officers and other key
employees who have substantial responsibility for the direction and management
of the Company with additional incentive for them to promote the success of the
business, to increase their proprietary interest in the success of the Company,
and to encourage them to remain in its employ. The above aims will be
effectuated through the granting of certain stock options. It is intended that
options issued under the Plan and designated by the Board of Directors or the
Committee under Section 3(b) will qualify as Incentive Stock Options
(hereinafter called "ISOs") under Section 422 of the Internal Revenue Code and
the terms of the Plan shall be interpreted in accordance with this intention.
2. Administration of the Plan
--------------------------
The Plan initially shall be administered by the Board of Directors of the
Company. The interpretation and construction by the Board of any provisions of
the Plan or of any option granted hereunder shall be final. No member of the
Board shall be liable for any action or determination made in good faith with
respect to the Plan or any option granted under it. The Board shall have the
authority to appoint a Committee to assume the duties and responsibilities of
administering the Plan. The Committee, if such be established by the Board,
shall be composed of certain members of the Board who are not eligible to
receive options under the Plan, and it shall have the same power and authority
in the administration of the Plan as the Board of Directors.
3. Eligibility and Limitations on Options Granted Under the Plan
-------------------------------------------------------------
(a) Options will be granted only to persons who are key employees of the
Company or a subsidiary corporation of the Company. The term "key employees"
shall include officers, directors, executives, and supervisory personnel, as
well as other employees of the Company or a subsidiary corporation of the
Company. The term "subsidiary corporation" shall, for the purposes of this Plan
by defined in the same manner as such term is defined in Section 425(f) of the
Internal Revenue Code.
(b) At the time of the grant of each option under this Plan, the Committee
shall determine whether such option is to be
1
<PAGE>
designated as an ISO. If an option is to be so designated as an ISO, then the
provisions of Section 7(d) of this Plan shall be made applicable to such option.
In addition, no option granted to any employee, who at the time of such grant,
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any of its subsidiaries, may be
designated as an ISO, unless at the time of such grant, the option price is
fixed at not less than one hundred ten percent (110%) of the fair market value
of the stock subject to the option, and exercise of such option is prohibited by
its terms after the expiration of five (5) years from the date such option is
granted.
(c) The aggregate fair market value of the stock for which any employee may
be granted options designated as ISOs in any calendar year (under this or any
other stock option plan established by the Company or a subsidiary corporation
of the Company) shall not exceed One Hundred Thousand Dollars ($100,000) plus
any unused limit carryover (as defined in 3(d) hereof) to such year from any
prior calendar year beginning on or after January 1, 1981.
(d) The unused limit carryover from any such calendar year shall be one-
half (1/2) of any excess of One Hundred Thousand Dollars ($100,000) over the
aggregate fair market value of the stock for which an employee was granted
options that qualify (whether from their issuance or as a result of subsequent
amendment and election by the Company) as ISOs in any such calendar year (under
this and all other stock option plans established by the Company or a subsidiary
corporation of the Company). The unused limit for any calendar year shall be
carried forward for three (3) years. ISOs granted in any year shall be applied
against the current year limitation first and then against the remaining unused
limit carryovers to such year in the order of the calendar year in which the
carryovers arose.
4. Shares of Stock Subject to the Plan
-----------------------------------
There will be reserved for use upon the exercise of options to be granted
from time to time under the plan (subject to the provisions of Section 12) an
aggregate of _______ shares of the Common Stock of the par value of one cent
($.01) per share (hereinafter called the "Common Stock") of the Company, which
shares may be in whole or in part, as the Board of Directors of the Company
(hereinafter called the "Board") shall from time to time determine, authorized
but unissued shares of the Common Stock or issued shares of the Common Stock
which shall have been reacquired by the Company. Any shares subject to an
option under the Plan, which option for any reason expired or is terminated
unexercised as to such shares, may again be subjected to an option under the
Plan.
2
<PAGE>
5. Option Price
------------
The purchase price under each option issued shall be determined by the
Board at the time the option is granted, but in no event shall such purchase
price be less than one hundred percent (100%) of the fair market value of the
Company's Common Stock on the date of grant.
The term "fair market value" shall be the book value of the Common Stock
with respect to options granted prior to the time the Company has outstanding
shares of Common Stock which are traded in the over-the-counter market. In the
event the Common Stock is traded on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") the term "fair market value"
shall be defined as the average of the highest and lowest market price of said
Common Stock on NASDAQ on the date of the grant of the option, or, if there are
no sales on such date, on the most recent date upon which such stock was traded.
6. Dilution or Other Agreement
---------------------------
In the event that additional shares of Common Stock are issued pursuant to
a stock split or a stock dividend, the number of shares of Common Stock then
covered by each outstanding option granted hereunder shall be increased
proportionately with no increase in the total purchase price of the shares then
so covered, and the number of shares of Common Stock reserved for the purpose of
the Plan shall be increased by the same proportion. In the event that the
shares of Common Stock of the Company from time to time issued and outstanding
are reduced by a combination of shares, the number of shares of Common Stock
then covered by each outstanding option granted hereunder shall be reduced
proportionately with no reduction in the total price of the shares then so
covered, and the number of shares of Common Stock reserved for the purposes of
the Plan shall be reduced by the same proportion. In the event that the Company
should transfer assets to another corporation and distribute the stock of such
other corporation without the surrender of Common Stock of the Company, and if
such distribution is not taxable as a dividend and no gain or loss is recognized
by reason of Section 355 of the Internal Revenue Code of 1954, or some similar
section, then the total purchase price of the shares covered by each outstanding
option shall be reduced by an amount which bears the same ratio to the total
purchase price then in effect as the market value of the stock distributed in
respect of a share of the Common Stock of the Company, immediately following the
distribution, bears to the aggregate of the market value at such time of a share
of the Common Stock of the Company and the stock distribution in respect
thereof. All such adjustments shall be made by the Board, whose determination
upon the same shall be final and binding upon the optionees. No fractional
shares shall be issued, and any fractional shares resulting from the
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<PAGE>
computations pursuant to this Section 6 shall be eliminated from the respective
option. No adjustment shall be made for cash dividends or the issuance to
stockholders of rights to subscribe for additional Common Stock or other
securities.
7. Period of Option and Certain Limitations on Right to Exercise
-------------------------------------------------------------
(a) All options issued under the Plan shall be for such period as the Board
shall determine, but for not more than ten (10) years from the date of grant
thereof.
(b) The period of the option, once it is granted, may be reduced only as
provided in Section 9 in connection with the termination of employment or death
of the optionee or in Section 7(c) in the case of less than satisfactory
performance.
(c) Except as provided in Section 9 hereof, no option may be exercised
unless the optionee is at the time of such exercise in the employ of the Company
or of a subsidiary corporation of the Company and shall have been continuously
so employed since the grant of his option. Absence or leave approved by the
management of the Company shall not be considered an interruption of employment
for any purpose under the Plan.
(d) No option under this Plan designated by the Board as an ISO may be
exercised while there is outstanding in the hands of the optionee any ISO
(whether granted under this Plan or any other stock option plan established by
the Company or a subsidiary corporation of the Company) which was granted before
the granting of the ISO hereunder sought to be exercised. For purposes of this
Section 7(d), any ISO shall be treated as outstanding until such option is
exercised in full or expires by reason of lapse of time.
(e) The exercise of any option shall also be contingent upon receipt by the
Company of cash or certified bank check to its order, shares of the Company's
Common Stock, or any combination of the foregoing in an amount equal to the full
option price of the shares being purchased. For purposes of this paragraph,
shares of the Company's Common Stock that are delivered in payment of the option
price shall be valued at their fair market value determined under the method set
forth in Section 5 of this Plan applied as of the date of the exercise of the
option.
(f) No optionee or his legal representative, legatees, or distributees, as
the case may be, will be, or will be deemed to be, a holder of any shares
subject to an option unless and until certificates for such shares are issued to
him or them under the terms of the Plan. No adjustment shall be made for
dividend or other rights for which the record date is prior to the date such
stock certificate is issued.
4
<PAGE>
(g) In no event may an option be exercised after the expiration of its
term.
8. Assignability
-------------
Each option granted under this Plan shall be transferable only by will or
the laws of descent and distribution and shall be exercisable, during his
lifetime, only by the employee to whom the option is granted. Except as
permitted by the preceding sentence, no option granted under the Plan or any of
the rights and privileges thereby conferred shall be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and no such option, right and privilege shall be subject to execution,
attachment, or similar process. Upon any attempt so to transfer, assign,
pledge, hypothecate, or otherwise dispose of the option, or of any right for
privilege conferred thereby, contrary to the provisions hereof, or upon the levy
of any attachment or similar process upon such option, right or privilege, the
option and such rights and privileges shall immediately become null and void.
9. Effect of Termination of Employment, Death or Disability
--------------------------------------------------------
(a) In the event of the termination of employment of an optionee during the
five (5) year period after the date of issuance of an option to him either by
reason of (i) a discharge for cause or (ii) voluntary separation on the part of
the optionee and without consent of his employing company or companies, any
option or options theretofore granted to him under this Plan to the extent not
theretofore exercised by him shall forthwith terminate.
(b) In the event of the termination of employment of an optionee (otherwise
than by reason of death or retirement of the optionee at his Retirement Date by
the Company or by a subsidiary corporation of the Company employing the optionee
at such time), any option or options granted to him under the Plan to the extent
not theretofore exercised shall be deemed cancelled and terminated forthwith,
except that, subject to the provisions of section (a) of this Section, such
optionee may exercise any options theretofore granted to him, which have not
then expired and which are otherwise exercisable within the provisions of
Section 7(c) hereof, within three (3) months after such termination. If the
employment of an optionee shall be terminated by reason of the optionee's
retirement at his Retirement Date by the Company or by any subsidiary
corporation of the Company employing the optionee at such time, the optionee
shall have the right to exercise such option or options held by him to the
extent that such options have not expired, at any time within three (3) months
after such retirement. The provisions of Section 7(c) to the contrary
notwithstanding, upon retirement, all options held by an optionee shall be
immediately exercisable in full. The transfer of an optionee from the employ
5
<PAGE>
of the Company to a subsidiary corporation of the Company or vice versa, or from
one subsidiary corporation of the Company to another, shall not be deemed to
constitute a termination of employment for purposes of this Plan.
(c) In the event that an optionee shall die while employed by the Company
or by any subsidiary corporation of the Company or shall die within three (3)
months after retirement at his Retirement Date (by the Company or by any
subsidiary corporation of the Company), any option or options granted to him
under this Plan and not theretofore exercised by him or expired shall be
exercisable by the estate of the optionee or by any person who acquired such
option by bequest or inheritance from the optionee in full, notwithstanding
Section 7(c), at any time within one (1) year after the death of the optionee.
References hereinabove to the optionee shall be deemed to include any person
entitled to exercise the option after the death of the optionee under the terms
of this Section.
(d) In the event of the termination of employment of an optionee by reason
of the optionee's disability, the optionee shall have the right, notwithstanding
the provisions of Section 7(c) hereof, to exercise all options held by him, to
the extent that options have not previously expired or been exercised, at any
time within one (1) year after such termination. The term "disability" shall,
for the purposes of this Plan, be defined in the same manner as such term is
defined in Section 105(d)(4) of the Internal Revenue Code of 1954.
10. Investment Purpose
------------------
(a) Each optionee receiving an option pursuant hereto must represent, and
agree to give such further representation as may be reasonably required by the
Company upon the exercise of its option or any part thereof, that any shares
purchased pursuant to the option will be or are acquired for his own account for
investment and not with a view of, or for offer or sale in connection with, the
distribution of any thereof, unless in the opinion of Company counsel the same
is not necessary at the time.
(b) Each option shall be subject to the requirement that if at any time the
Directors shall determine, in its discretion, that the listing, registration, or
qualification of the shares covered thereby upon any securities exchange or
under any state or federal law or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such option or the issue or purchase of shares thereunder,
such option may not be exercised in whole or in part unless and until such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
6
<PAGE>
11. Expiration and Termination of the Plan
--------------------------------------
Options may be granted under the Plan at any time or from time to time as
long as the total number of shares optioned or purchased under this Plan does
not exceed three hundred thousand (300,000) shares of Common Stock. The Plan
may be abandoned or terminated at any time by the Board of Directors of the
Company except with respect to any options then outstanding under the Plan. No
option shall be granted pursuant to the Plan after ten (10) years from the
effective date of the Plan.
12. Indemnification of Committee
----------------------------
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including attorneys'
fees actually and necessarily incurred in connection with the defense of any
action, suit or proceeding or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by the independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, a suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such Committee member is liable for negligence or
misconduct in the performance of his duties; provided that within sixty (60)
days after institution of any such action, suit or proceeding a Committee member
shall in writing offer the Company the opportunity, at its own expense, to
handle and defend the same.
13. Forfeiture
----------
Notwithstanding any other provision of this Plan, if the Committee finds by
a majority vote, that: (i) the Optionee, before or after termination of his
employment with the Company (as used in this Section, an "Employer"), committed
fraud, embezzlement, theft, a felony, or proven dishonesty in the course of his
employment by Employer which damaged Employer, or for disclosing trade secrets
of Employer, or (ii) the Optionee, before or after termination of his employment
with Employer for any reason, participated, engaged in or had a financial or
other interest (whether as an employee, officer, director, consultant,
contractor, stockholder, owner, or otherwise) in any commercial endeavor in the
United States which is competitive with the business of Employer, then any
outstanding options which have not been exercised by Optionee will for
forfeited. The decision of the Committee as to the nature of an Optionee's
conduct, the damage done to Employer and the extent of the Optionee's
competitive activity will be final. No decision of
7
<PAGE>
the Committee, however, will affect the finality of the discharge of the
Optionee by Employer in any manner. In order to provide the Corporation with an
opportunity to enforce this Section 10, no option may be exercised without the
certification by the Committee that no such forbidden action has been raised for
their determination.
14. Amendment of Plan
-----------------
The Board of Directors may at any time and from time to time modify and
amend the Plan (including such form of option agreement) in any respect;
provided, however, that no such amendment shall: (a) increase (except in
accordance with Section 6) the maximum number of shares for which options may be
granted under the Plan either in the aggregate or to any individual employee; or
(b) reduce (except in accordance with Section 6) the minimum option prices which
may be established under the Plan; or (c) change the provisions relating to the
determination of employees to whom options shall be granted and the number of
shares to be covered by such options; or (d) change the provisions relating to
adjustment to be made upon changes in capitalization. The termination or any
modification or amendment of the Plan shall not, without the consent of an
employee, affect his rights under an option theretofore granted to him.
15. Rights as a Stockholder
-----------------------
An Optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any shares covered by his Option until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 6 hereof.
16. Effective Date of Plan
----------------------
This Plan shall become effective on the later of the date of its adoption
by the Board of Directors of the Company or its approval by the vote of the
holders of the majority of the outstanding shares of the Company's Common Stock.
This Plan shall not become effective unless such stockholder approval shall be
obtained within twelve (12) months before or after the adoption of the Plan by
the Board of Directors.
8
<PAGE>
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into this 21st
day of March 1996 by and between LYBSTER LIMITED (the "Consultant"), whose
principal place of business is at c/o Suite No. 2, Seaton House, 17-19 Seaton
Place, St. Helier, Jersey, Channel Islands JE2 3QL and LoneStar Hospitality
Corp. / Citadel Computer Systems (the "Client"), whose principal place of
business is at 3131 Turtle Creek Blvd., Suite 1301, Dallas, TX 75219.
WHEREAS, Consultant is in the business of providing management consulting
and advisory services; and
WHEREAS, the Client deems it to be in its best interest to retain
Consultant to render to the Client management consulting and advisory services;
and
WHEREAS, Consultant is ready, willing and able to render such consulting
and advisory services to the Client as hereinafter described on the terms and
conditions more fully set forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Consulting Services. The Client hereby retains the Consultant as an
-------------------
independent Consultant to the Client and the Consultant hereby accepts and
agrees to such retention. Consultant shall render to the Client such services
as set forth on Exhibit A, attached hereto and by reference incorporated herein.
---------
It is acknowledged and agreed by the Client that Consultant carriers no
professional licenses, other than any that may be listed on Exhibit A and is not
---------
rendering legal advice or performing accounting services, nor acting as an
investment advisor or broker-dealer within the meaning of applicable state and
federal securities laws. It is further acknowledged and agreed by the Client
that the consulting advisory services to be provided to the Client hereunder
shall not be rendered in connection with the offer and sale of securities in a
capital raising transaction.
2. Independent Contractor. Consultant agrees to perform its consulting
----------------------
duties hereto as an independent contractor. Nothing contained herein shall be
considered to create the relationship of employer-employee between parties to
this Agreement. The Client shall not be liable to third parties for the acts of
Consultant or its servants or agents in performing
1
<PAGE>
the consulting duties hereunder, except in the case of damage or injuries caused
directly by the Client's agents or employees, or if the Consultant shall have
been acting on behalf of the Client. The client shall not make social security
workers' compensation or unemployment insurance payments on behalf of
Consultant. The parties hereto acknowledge and agree that Consultant cannot
guarantee the results or effectiveness of any of the services rendered or to be
rendered by Consultant hereunder. Rather, Consultant Shall use its best efforts
to conduct its services and affairs in a professional manner and in accordance
with good industry practice.
3. Time, Place and Manner of Performance. The Consultant shall be
-------------------------------------
available for advice and counsel to the officers and directors of the Client at
such reasonable and convenient time sand places as may be mutually agreed upon.
Except as aforesaid, the time, place and manner of performance of the services
hereunder, including the amount of time to be allocated by the Consultant to any
specific service, shall be determine in the sole discretion of the Consultant.
4. Term of Agreement. The term of this Agreement shall be twenty-four
-----------------
(24) months, commencing March 21, 1996 and terminating March 20, 1998, subject,
however, to prior termination as hereinafter provided.
5. Compensation. In full consideration of the services to be provided for
------------
the Client by the Consultant, as fully set forth in Exhibit A upon execution of
---------
this Agreement, the Client agrees to compensate Consultant in the manner set
forth in Exhibit B.
---------
6. Expenses. The Client shall reimburse the consultant for all pre-
--------
approved expenses and disbursements incurred by the Consultant on behalf of the
Client in connection with the performance of the consulting services pursuant to
this Agreement. Consultant shall be solely responsible for all expenses and
disbursements anticipated to be made in connection with its performance under
this Agreement.
7. Termination.
-----------
(a) Consultant's relationship with the Client hereunder may be
terminated at a any time by mutual written agreement of the parties hereto.
(b) This Agreement shall terminate upon the dissolution, bankruptcy or
insolvency of the Client.
(c) This Agreement may be terminated by either party upon giving
written notice to the other party if the other party is in default
hereunder and such default is not cured within fifteen (15) days of written
notice of such default.
2
<PAGE>
(d) Without executing the Client's obligations under Section 5
hereinabove, which shall continue to be effective, Consultant shall have
the right and discretion to terminate this Agreement should the Client
violate any law, ordinance, permit or regulation of any governmental
entity, except for violations which either singularly or in the aggregate
do not have or will not have a material adverse effect on the operations of
the Client.
(e) Without excusing Consultant's obligations under Section 9
hereinbelow, which shall continue to be effective, the provisions of this
Agreement relating to Consultant's hiring may be terminated at any time by
the Client upon fifteen (15) days prior to written notice if any of the
following shall occur:
(i) Any willful breach of duty or habitual neglect of duty by
Consultant;
(ii) Any material breach by Consultant of the obligations in
Section 9;
(iii) Any material acts or events which inhibit Consultant from
fully performing its responsibilities under this Agreement
in good faith.
8. Work Product. It is agreed that all information and materials produced
------------
for the Client shall be the property of the Consultant, free and clear of all
claims thereto by the Client, and the Client shall retain no claim of authorship
therein.
9. Confidentiality. The Consultant recognizes and acknowledges that it
---------------
has and will have access to certain confidential information of the Client and
its affiliates that are valuable, special and unique assets and property of the
Client and such affiliates. The Consultant will not, during or after the term of
this Agreement, disclose, without the prior written consent or authorization of
the Client, any of such information to any person, except to authorized
representatives of the Consultant or its affiliates, for any reason or purpose
whatsoever. In this regard, the Client agrees that such authorization or consent
to disclosure may be conditioned upon the disclosure being made pursuant to a
secrecy agreement, protective order, provision of statute, rule, regulation or
procedure under which the confidentiality of the information is maintained in
the hands of the person to whom the information is to be disclosed or in
compliance with the terms of a judicial order or administrative process.
10. Conflict of Interest. The Consultant shall be free to perform services
--------------------
for other persons. The Consultant will notify the Client of its performance of
consulting services for
3
<PAGE>
any other person which could conflict with its obligations under this Agreement.
Upon receiving such notice, the Client may terminate this Agreement or consent
to the Consultant's outside consulting activities; failure to terminate this
Agreement, within seven (7) days of receipt of written notice of conflict, shall
constitute the Client's ongoing consent to the Consultant's outside consulting
services.
11. Disclaimer of Responsibility for Acts of the Client. The obligations of
---------------------------------------------------
the Consultant described in this Agreement consist solely of the furnishing of
information and advice to the Client in the form of services. In no event shall
Consultant be required by this Agreement to represent or make management
decisions for the Client. All final decisions with respect to acts and omissions
of the Client or any affiliates and subsidiaries, shall be those of the Client
of such affiliates and subsidiaries, and Consultant shall under no circumstances
be liable for any expense incurred or less suffered by the Client as a
consequence of such acts or omissions.
12. Indemnity by the Client. The Client shall protect, defend, indemnify
-----------------------
and hold Consultant and its assigns and attorneys, accounts, employers, officers
and directors harmless from and against all losses, liabilities, damages,
judgments, claims, counterclaims, demands, actions, proceedings, costs and
expenses (including reasonable attorneys' fees) of every kind and character
resulting from or relating to or arising out of (a) the inaccuracy,
nonfulfillment or breach of any representation, warranty, covenant or agreement
made by the Client herein; or (b) any legal action, including any counterclaim,
to the extent it is based upon alleged facts that, if true, would constitute a
breach of any representation, warranty, covenant or agreement made by the Client
herein; or (c) negligent actions or omissions of the Client or any employee or
agent of the Client, or any reckless or willful misconduct, occurring during the
term hereof with respect to any of the decisions made by the Client.
13. Notices. Any notices required or permitted to be given under this
-------
Agreement shall be sufficient if in writing and delivered or sent by registered
or certified mail to he principal office of each party.
14. Waiver or Breach. Any waiver by either party of a breach of any
----------------
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by any party.
15. Assignment. This Agreement and the rights and obligations of the
----------
Consultant hereunder shall not be assignable without the written consent of the
Client.
16. Applicable Law. It is the intention of the parties hereto that this
--------------
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Colorado shall be
4
<PAGE>
applicable and shall govern to the exclusion of the law and any other forum,
without regard to the jurisdiction in which any action or special proceeding may
be instituted.
17. Severability. All agreements and covenants contained herein are
------------
severable, and in the event any of them shall be held to be invalid by any
competent court, the Agreement shall be interpreted as if such invalid
agreements or covenants were not contained herein.
18. Entire Agreement. This Agreement constitutes and embodies the entire
----------------
understanding and agreement of the parties and supersedes and replaces all prior
understandings, agreements and negotiations between the parties.
19. Waiver and Modification. Any waiver, alternation or modification of any
-----------------------
of the provisions of this Agreement shall be valid only if made in writing and
signed by the parties hereto. Each party hereto, from time to time, may waive
any of its rights hereunder without effecting a waiver with respect to any
subsequent occurrences or transactions hereof.
20. Attorney's Fees and Costs. In the event of any dispute arising out of
-------------------------
the subject matter of this Agreement, the prevailing party shall recover, in
addition to any damages assessed, its attorneys' fees and court costs incurred
in litigating or otherwise settling or resolving such dispute. In construing
this Agreement, none of the parties hereto shall have any term or provision
construed against such party solely by reason of such party having drafted the
same.
21. Liquidated Damages. The Client and Consultant hereby acknowledge and
------------------
agree that any default hereunder by the Client will cause damage to Consultant
in an amount difficult to ascertain. Accordingly, the Client agrees that, upon
a default of this Agreement by the Client, Consultant shall retain all
compensation provided for under Section 5 as liquidated damages, as Consultant's
sole legal and equitable remedy.
22. Counterparts and Facsimile Signatures. This Agreement may be executed
-------------------------------------
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument. Execution and delivery of this Agreement by exchange of facsimile
copies bearing the facsimile signature of a party hereto shall constitute a
valid and binding execution and delivery of this Agreement by such party. Such
facsimile copies shall constitute enforceable original documents.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the day and year first above written.
CONSULTANT: LYBSTER LIMITED CLIENT: LoneStar Hospitality Corp./
Citadel Computer Systems
By: Robert Harman By: Steven B. Solomon
------------------------------- -------------------------------
Authorized Agent Authorized Officer
Title: President Title: Chief Operating Officer, Secretary
---------------------------- ----------------------------
6
<PAGE>
EXHIBIT A
CONSULTANT AGREES TO PROVIDE THE FOLLOWING SERVICES TO CLIENT
Consultant shall provide serves to Client as an independent management
consultant. Consultant shall make itself available to consult with the board of
directors, officers, employees and representatives and agents of the Client at
reasonable times, concerning matters pertaining to the overall business and
financial operations of the Client, as well as the organization of the
administrative staff of the Client, the fiscal policy of the Client, and in
general, concerning any problem of importance concerning the business affairs of
the Client. Consultant may, at the request of the Client, assist in the
Preparation of written reports on financial, accounting or marketing matters,
review final information, analyze markets and re ports to the Client's Chief
Executive Officer, President, Vice-Presidents, or Treasurer on proposed
investment opportunities, and develop short and long-term strategic business
plans. In addition, Consultant shall provide liaison services to the Client
with respect to the Client's relationships with unaffiliated third parties.
Date: March 21, 1996
CONSULTANT:
By: Robert Harman
-------------------------------------------------
Authorized Agent
Title: President
----------------------------------------------
7
<PAGE>
EXHIBIT B
CLIENT AGREES TO COMPENSATE CONSULTANT IN THE MANNER
DESCRIBED
As a condition of, and in consideration for Consultant's entering into this
Agreement, the Company agrees that concurrently with the execution of this
Agreement (the "Execution"), the Company shall issue to Consultant 400,000 stock
options (the "Stock Options"), having a six month expiration from the date of
issuance, to purchase Common Stock at a cost basis of $.75/share (subject only
to legal restrictions on transferability) and 500,000 stock options having a two
year expiration from the date of issuance (but the 500,000 cannot be exercised
for eighteen (18) months from date of grant), having exercise prices of $1.50
for 400,000 options, and $2.00 for 100,000 options. The Company agrees that
(subject to applicable law) it will have such shares included within and covered
by a Registration Statement on Form S-8 (or any other applicable form) which the
Company will file with the Securities and Exchange Commission as soon as
possible following the Execution. The Company shall pay all of the expenses
relating to the foregoing. The following option will be adjusted for any stock
splits that might occur in the company in the future.
Date: March 21, 1996
CLIENT:
By: Steven B. Solomon
------------------------------------------------
Authorized Agent
Title: Chief Operating Officer, Secretary
---------------------------------------------
8
<PAGE>
THE OPTION REPRESENTED BY THIS AGREEMENT AND THE SHARES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS
LONESTAR HOSPITALITY CORPORATION
STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 19th day of March, 1996
(the "Option Date"), between LoneStar Hospitality Corporation, a Delaware
corporation (the "Corporation"), and EMPLOYEE (the "Holder") in connection with
the grant of an option to purchase common stock of the Corporation.
W I T N E S S E T H:
WHEREAS, in connection with the services Holder has provided to the
Corporation, the Corporation desires to grant the Holder an option to purchase
shares of common stock ("Stock") of the Corporation under terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of these premises, the parties agree that
the following shall constitute the Agreement between the Corporation and the
Holder:
1. Definitions. For purposes of this Agreement, defined terms shall have
-----------
the meanings given to them by the Plan except as specified below:
1.1 "Agreement" shall mean this document as executed by the Corporation
and the Holder, and as it may be subsequently amended.
1.2 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar or superseding statute or statutes.
1.2 "Option" shall mean the stock option granted pursuant to this
Agreement; such Option is a "nonstatutory option" and does not satisfy the
requirements of section 422 of the Internal Revenue Code (the "Code").
1.3 "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar or superseding statute or statutes.
1.4 "Stock" shall mean the common stock of the Corporation, par value
$.01.
1
<PAGE>
2. Grant of Option. Subject to the terms and conditions set forth in this
---------------
Agreement, the Corporation grants to the Holder an Option to purchase from the
Corporation during the period beginning on the Option Date and ending March 19,
2001, 10,000 shares of Stock at a price of $2.00 per share, subject to
adjustment, if any, as provided in this Agreement.
3. Notice of Exercise. This Option may be exercised in whole or in part,
------------------
from time to time, during the period specified in Paragraph 2, by written notice
to the Corporation at the address provided in this Agreement. Such notice shall
(a) specify the number of shares of Stock to be purchased and the exercise price
to be paid for such shares; (b) if the person exercising this Option is not the
Holder himself, contain or be accompanied by evidence satisfactory to the
Committee of such person's right to exercise this Option; and (c) be
accompanied by payment in full of the purchase price in the form of cash or a
certified cashier's check to the order of the Corporation.
4. Investment Intent. The Holder agrees that until the shares of stock
------------------
acquired upon exercise of this Option have been registered under the Securities
Act, such shares shall be acquired for his own account for investment only and
not with a view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act or other applicable
securities laws. If the Board of Directors so determines, any Stock
certificates issued upon exercise of this Option shall bear a legend to the
effect that the shares have been so acquired. The Corporation shall bear any
expenses of complying with the Securities Act, other applicable securities laws
or the rules and regulations of any national securities exchange or other
regulatory authority in connection with the registration, qualification, or
transfer, as the case may be, of this Option or any shares of Stock acquired
upon the exercise of this Option. The foregoing restrictions on the transfer of
the shares of Stock shall be inoperative if (a) the Corporation previously shall
have been furnished with an opinion of counsel, satisfactory to it, to the
effect that such transfer will not involve any violation of the Securities Act
or other applicable securities laws, or (b) the shares of Stock shall have been
duly registered in compliance with the Securities Act and other applicable
securities laws.
5. Transfer and Exercise of Option. This Option shall not be transferable
--------------------------------
except by will or by the laws of descent and distribution. No assignment or
transfer of this Option, whether voluntary or involuntary, by operation of law
or otherwise, except a transfer by will or by the laws of descent or
distribution, shall vest in the assignee or transferee any interest or right
whatsoever in this Option.
During the Holder's lifetime, this Option may be exercised only by him, his
guardian or his legal representative.
6. Status of Holder. The Holder shall not be deemed a stockholder of the
----------------
Corporation with respect to any of the shares of Stock subject to this Option,
except to the extent that such shares shall have been purchased and transferred
to him. The Corporation shall not be required to issue or transfer any
certificates for shares of Stock purchased upon exercise of this Option until
all applicable requirements of law have been satisfied and such shares shall
have been duly listed on any securities exchange on which the Stock may then be
listed.
7. No Effect on Capital Structure. This Option shall not affect the right
------------------------------
of the Corporation or any Affiliate to reclassify, recapitalize or otherwise
change its capital or debt structure or to merge, consolidate, convey any or all
of its assets, dissolve, liquidate, windup, or otherwise reorganize.
8. Adjustments Upon Changes in Capitalization, Merger, Etc.
--------------------------------------------------------
Notwithstanding any other provision of this Agreement, in the event of any
change in the number of outstanding shares of Stock
2
<PAGE>
(a) effected without receipt of consideration by the Corporation, by reason
of a stock dividend, split, combination, exchange or other
recapitalization, merger, or otherwise, in which the Corporation is the
surviving corporation, or
(b) by reason of a spin-off of a part of the Corporation into a separate
entity, or assumptions and conversions of outstanding grants due to an
acquisition by the Corporation of a separate entity,
(1) the aggregate number and class of shares subject to this Option and (2) the
exercise price of this Option shall be automatically adjusted to accurately and
equitably reflect the effect of such changes. In the event of a dispute
concerning such adjustment, the Committee shall have full discretion to resolve
the dispute. The number of shares subject to this Option shall be automatically
reduced by any fraction which results from any adjustment made pursuant to this
Paragraph.
If the Company shall be the surviving corporation in any merger or
consolidation, the option granted hereunder shall pertain to and apply to the
securities to which a holder of the number of shares of common stock subject to
the option would have been entitled. A dissolution or liquidation of the
Company shall cause the option granted hereunder to terminate. A merger or
consolidation in which the company is not the surviving corporation shall also
cause the option granted hereunder to terminate, but the Optionee shall, in such
event, have the right immediately prior to a merger or consolidation in which
the Company is not the surviving corporation, to exercise this option in whole
or in part without regard to the provisions of Paragraph 3 hereof; provided,
however, that if the surviving corporation shall provide Optionee with an option
to purchase a like number of shares at a similar price as that afforded Optionee
hereunder, subject to proportional adjustment pursuant to the merger or
consolidation agreement, then the option granted hereunder shall terminate.
10. Authority of Board of Directors. Any question concerning the
--------------------------------
interpretation of this Agreement, any adjustments required to be made under this
Agreement, and any controversy which may arise under this Agreement shall be
determined by the Board of Directors in its sole discretion.
11. Notice. Whenever any notice is required or permitted under this
------
Agreement, such notice must be in writing and delivered (personally or by
courier), telecopied (if confirmed) or sent by mail. Any notice required or
permitted to be delivered under this Agreement shall be deemed to be delivered
on the date which it is personally delivered, or, whether actually received or
not, on the third business day after it is deposited in the United States mail,
certified or registered, postage prepaid, addressed to the person who is to
receive it at the address which such person has previously specified by written
notice delivered in accordance with this Agreement. The Corporation or Holder
may change, at any time and from time to time, by written notice to the other,
the address previously specified for receiving notices. Until changed in
accordance with this Agreement, the Corporation and the Holder specify their
respective addresses as set forth below:
Corporation: LoneStar Hospitality Corporation
3131 Turtle Creek Boulevard, Suite 1301
Dallas, Texas 75219
Holder: EMPLOYEE
ADDRESS
CITY, STATE ZIP
3
<PAGE>
12. Modification, Extension and Renewal of Option. The Board of Directors
may modify, extend or renew this Option or accept the surrender of this Option,
(to the extent not previously exercised), and authorize the granting of a
substitute Option (to the extent not previously exercised). The Board of
Directors may not, without the consent of the Holder, modify this Option so as
to specify a higher or lower exercise price or number of shares. In addition,
no modification of this Option shall, without the consent of the Holder, alter
or impair any rights or obligations under this Option to Holder.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed and the Holder has executed this Agreement on the day and year first
above written.
"CORPORATION"
LONESTAR HOSPITALITY CORPORATION
By:
------------------------------------------
Steven B. Solomon,Chief Operating Officer
"HOLDER"
---------------------------------------------
EMPLOYEE
4
<PAGE>
EXHIBIT 4.12
STOCK OPTION
OF
LONESTAR HOSPITALITY CORPORATION
This stock option (the "Option") is granted by LONESTAR HOSPITALTY
CORPORATION, a Delaware corporation with its office and place of business in
Dallas, Dallas County, Texas (hereinafter referred to as the "Company"), to
_______________ (hereinafter referred to as the "Optionee") as of the 1st day of
October, 1994 (the "Option Grant Date").
1. Grant of Option and Exercise Price. The Optionee is hereby granted an
Option to purchase up to __________________ (_________) shares (the "Shares") of
the $.04 par value common stock of the Company (the "Common Stock") at an
exercise price of $1.00 per Share and upon the following terms and conditions:
2. Exercise. This option shall be exercisable, subject to the terms and
conditions set out herein, during the period beginning on the Option Grant Date
and ending at the close of business on the second anniversary of the Option
Grant Date ("the Option Term"). The Option shall expire at the end of the Option
Term, whether or not exercised. The Optionee or his estate, as applicable, will
exercise this Option by actual delivery to the Company of a written notice of
intent to purchase such stock, stating the number of Shares which the Optionee
or his estate desires to purchase and the date on which payment is to be made,
or by sending such notice to the Company at its address by certified or
registered mail, return receipt requested, which notice must be so mailed
during the Option Term. Upon the exercise of an Option, the Optionee or his
estate, as applicable, shall be obligated to make payment as provided in
Paragraph 3 hereinbelow.
3. Payment and Delivery. Payment shall be made in full in cash (or by
certified or cashier's check) to the Company at its principal address in the
State of Texas on the date specified in the notice referred to in Paragraph 2
above. Upon payment, the Company shall issue a certificate or certificates
representing the number of Shares purchased. Such Shares, when issued, will be
fully vested, paid and non-assessable.
4. Non-Transferability of Options. During the Optionee's lifetime, the
Option shall be exercisable only by the Optionee or, in the event of the
Optionee's death, by his estate, and shall not be transferable.
5. Adjustments. If the number of outstanding shares of Common Stock of
the Company changes by reason of a stock dividend, stock split, reverse stock
split, or other recapitalization involving the increase or decrease of the
number of outstanding shares, the number of Shares subject to the Option and the
option price per Share shall be fairly and appropriately adjusted to reflect
such change. The Board of Directors of the Company may determine such
adjustments without notice to or approval by Optionee and shall be final and
conclusive upon both the Company and the Optionee. No adjustment to the number
of shares subject to the Option or to the option purchase price shall be made or
required if the Company is a party to a merger or other corporate
reorganization, except as the Board of Directors of the Company, in its sole
discretion, may determine. If,
<PAGE>
however, the Company is a party to a merger or other corporate reorganization
which involves the termination of the corporate existence of the Company, this
Option must be exercised in its entirety within thirty (30) days prior to the
effective date of such merger or corporate reorganization, notwithstanding any
other provision of this Option, unless such merger or corporate reorganization
provides that the Shares subject to this Option may be converted into shares of
stock of another corporation which is the party to the reorganization.
6. Stock an Investment.
a. The Optionee agrees that any Shares issued pursuant to this Option
will be purchased by him for investment purposes only and not with a view to the
distribution thereof, and at the time of purchase, he will give the Company a
written representation to that effect in form satisfactory to the Company.
Optionee agrees that such stock is and shall not be freely transferable and may
be subject to other restrictions on transfer as required by state or federal
law.
b. The Optionee acknowledges that the Company has provided to him a copy
of the Company's Annual Report on Form 10-K for the year ended March 30, 1994
and the Quarterly Report on Form 10-QSB for the quarter ended June 30, 1994, and
that the Company has provided to him or his representatives the opportunity to
ask questions of the management of the Company regarding the Company's business
and financial condition.
IN WITNESS WHEREOF, the Company has caused this Option to be duly exercised
by its officers, thereunto duly authorized by its Board of Directors, and the
Optionee has hereunto set his hand as of the ___ day of _______, 19__.
LONESTAR HOSPITALITY CORPORATION
By:_________________________________
Its:________________________________
ATTEST:
____________________________
Secretary
2
<PAGE>
May 7, 1996
Citadel Computer Systems Incorporated
3131 Turtle Creek Blvd.
Suite 1301
Dallas, Texas 75219
Re: Registration Statement on Form S-8
Gentlemen:
The undersigned has acted as counsel to Citadel Computer Systems
Incorporated, a Delaware corporation (the "Company"), in connection with the
preparation of the Registration Statement on Form S-8 (the "Registration
Statement") to be filed with the Securities and Exchange Commission on May 8,
1996, under the Securities Act of 1993, as amended (the "Securities Act"),
relating to (i) 450,000 shares of the $.01 par value common stock (the "Common
Stock") of the Company that may be issued upon exercise of stock options granted
pursuant to that certain consulting agreement dated March 21, 1996 between the
Company and Lybster Limited (the "Lybster Agreement"); (ii) 44,038 shares of
Common Stock that may be issued upon the exercise of options granted pursuant to
the Company's 1993 Employee Incentive Stock Option Plan (the Employee Plan");
(iii) 5,000 shares granted to the undersigned in connection with services
rendered by the undersigned to the Company (the "Employee Option"); and (iv)
100,000 shares of Common Stock of the Company that may be issued upon the
exercise of stock options granted to certain directors of the Company in
February 1996 (the "Director Plan").
You have requested the opinion of the undersigned with respect to certain
legal aspects of the proposed offering. In connection therewith, the
undersigned has examined and relied upon the original, or copies identified to
my satisfaction, of (1) the Certificate of Incorporation and the Bylaws of the
Company, each as amended; (2) minutes and records of the corporate proceedings
of the Company with respect to the approval of the Lybster Agreement, to the
establishment of the Director Plan, the Employee Plan and the Employee Option,
and the reservation of an aggregate of 640,288 shares of Common Stock to be
issued upon the exercise of options granted under the Lybster Agreement, the
Employee Plan, the Director Plan, and the Employee Option (collectively, the
"Options") and to which the Registration Statement relates; (3) the Registration
Statement and exhibits thereto; and (4) such other documents and instruments as
we have deemed
<PAGE>
Citadel Computer Systems Incorporated
May 7, 1996
Page 2
necessary for the expression of the opinions herein contained. In making the
foregoing examinations, I have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of all documents submitted to us as certified or
photostatic copies. As to various questions of fact material to this opinion,
and as to the content and form of the Certificate of Incorporation, the Bylaws,
minutes, records, resolutions and other documents or writings of the Company, I
have relied, to the extent I deem reasonably appropriate, upon representations
or certificates of officers or directors of the Company and upon documents,
records and instruments furnished to me by the Company, without independent
confirmation or verification of their accuracy.
Based upon my examination and consideration of, and reliance on, the
documents and other matters described above, and subject to the comments and
exceptions noted below, the undersigned is of the opinion that the Company
presently has available sufficient shares of authorized but unissued shares of
Common Stock from which the 644,288 shares of Common Stock subject to the
exercise of Options may be issued. Furthermore, assuming that (i) the
outstanding Options were duly granted, the shares of Common Stock to be issued
pursuant to the exercise of Options are duly issued in accordance with the terms
of the applicable Agreement or Plan, (ii) the Company maintains an adequate
number of authorized but unissued shares and/or treasury shares of Common Stock
available for issuance to those persons who exercise Options, and (iii) the
consideration for shares of Common Stock issued pursuant to the exercise of
Options is actually received by the Company in accordance with the terms of the
applicable Agreement or Plan and exceeds the par value of such shares, then the
undersigned is of the opinion that the shares of Common Stock issued pursuant to
the exercise of Options and in accordance with the terms of the applicable
Agreement or Plan, will be duly and validly issued, fully paid and
nonassessable.
The undersigned hereby consents to the filing of this opinion as an exhibit
to the Registration Statement and to references to the undersigned included in
or made a part of the Registration Statement. In giving this consent, the
undersigned does not admit that he comes within the category of person whose
consent is required under Section 7 of the Securities Act or the Rules and
Regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
Paul W. Talbot
Counsel to Citadel Computer Systems Incorporated
<PAGE>
CONSENT OF GRANT THORNTON LLP,
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated July 7, 1995 accompanying the consolidated
financial statements of LoneStar Hospitality Corporation and Subsidiary
appearing in the annual report on Form 10-KSB for the year ended March 31, 1995,
which is incorporated by reference in this Registration Statement. We consent
to the incorporation by reference in the Registration Statement of the
aforementioned report.
Grant Thornton LLP
GRANT THORNTON LLP
Dallas, Texas
April 29, 1996
