SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
<square>Preliminary Information Statement
<checked-box>Definitive Information Statement
LONESTAR HOSPITALITY CORPORATION
(Name of Registrant as Specified in Its Charter)
LONESTAR HOSPITALITY CORPORATION
(Name of Person(s) Filing Information Statement)
Payment of Filing Fee (Check the appropriate box):
<square>$125 per Exchange Act Rules 0-11(c)(1)(ii) or 14c-5(g)
<square>Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-
11
1)Title of each class of securities to which transaction applies:
2)Aggregate number of securities to which transaction applies:
3)Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
4)Proposed maximum aggregate value of transaction:
* Set forth amount on which the filing is calculated and state
how it was determined.
<checked-box>Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
1)Amount Previously Paid: $125
2)Form, Schedule or Registration Statement No.: Preliminary
Information Statement
3)Filing Party: Registrant
4)Date Filed: March 25, 1996
<PAGE>
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 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
April 11, 1996 SECRETARY
<PAGE>
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. 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.
<PAGE>
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 the Record Date 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.
<TABLE>
<CAPTION>
OUTSTANDING AS OF APRIL 10, 1996
<S> <C> <C>
Number Approximate PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER: OF SHARES CLASS
Gilbert Gertner 10,188,000{ 1} 40.1%
1300 Post Oak Blvd., 9th Floor
Houston, Texas 77092
George Sharp 6,327,000{ 1} 24.9
1300 Post Oak Blvd.,9th Floor
Houston, Texas 77092
Steven B. Solomon 5,838,171{ 1,2} 23.0
3131 Turtle Creek Blvd., Suite 1301
Dallas, Texas 75219
Chris A. Economou 370,000{ 3} 1.6
150 North Federal Highway, Suite 210
Fort Lauderdale, Florida 33301
Axel Sawallich 439,823{ 4} 2.0
Rudolfplatz 10
A-1080 Vienna, Austria
Jesse R. Marion -0- -0-
50 Briar Hollow, Suite 700 West
Houston, Texas 77027
All officers and directors as a group 23,162,994{ 5} 74.0
(6 persons):
</TABLE>
*Less than one percent.
{1}Includes 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.
{2}Includes 18,921 shares presently issuable pursuant to an option to purchase
shares of the Company.
{3}Includes 50,000 shares presently issuable pursuant to an option to purchase
shares of the Company.
{4}Includes 225,000 shares held by Mr. Sawallich as trustee, over which he has
voting and dispositive power.
{5}Includes all shares issuable pursuant to presently exercisable options to
Messrs. Gertner, Sharp, Solomon and Economou.
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 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, 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
Following consummation of the Merger, Steven R. Leipsner, David S.
Lundeen, Lawrence E. Steinberg and James R. Bradshaw resigned as directors,
and Gilbert Gertner, George Sharp and Jesse R. Marion were 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
April 11, 1996 SECRETARY
