<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CITADEL COMPUTER SYSTEMS INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
CITADEL COMPUTER SYSTEMS INCORPORATED
3811 TURTLE CREEK BOULEVARD, SUITE 600
DALLAS, TEXAS 75219
(214) 520-9292
To Our Stockholders: January __, 1998
You are cordially invited to attend the annual meeting of stockholders of
the Citadel Computer Systems Incorporated to be held at the Company's offices on
February 26, 1998 at 10:00 a.m. I believe that the annual stockholder meeting
provides an excellent opportunity for stockholders to become better acquainted
with Citadel and its directors and officers. I hope that you will be able to
attend.
Enclosed you will find proxy materials for our annual stockholder meeting,
at which you will be asked to consider several proposals, including the election
of directors, the change of the Company's name to Citadel Technology Inc. to
more accurately reflect our business strategy, the increase of our authorized
capital, which will better position the Company to take advantage of business
opportunities as they arise and to provide for changing business needs, and
the approval of the Company's auditors. Your Board has unanimously recommended
approval of the proposals.
Whether or not you plan to attend the meeting, the prompt execution and
return of your proxy card will assure that your shares are represented at the
meeting and minimize the cost of proxy solicitation.
Sincerely,
Steven B. Solomon
CHIEF EXECUTIVE OFFICER AND PRESIDENT
1
<PAGE>
[LOGO]
CITADEL COMPUTER SYSTEMS INCORPORATED
3811 TURTLE CREEK BOULEVARD, SUITE 600
DALLAS, TEXAS 75219
(214) 520-9292
______________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 26, 1998
______________________
To the Stockholders of Citadel Computer Systems Incorporated:
As a stockholder of Citadel Computer Systems Incorporated, a Delaware
corporation (the "Company"), you are hereby given notice of and invited to
attend in person or by proxy the Annual Meeting of Stockholders of the
Company (the "Meeting") to be held at the Company's offices on February 26,
1998 at 10:00 a.m. for the following purposes:
1. To elect seven members to the Company's Board of Directors to hold
office until the next annual meeting and until their successors are
elected and qualified;
2. To amend the Company's Certificate of Incorporation to change the
Company's name to Citadel Technology, Inc.;
3. To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 30,000,000 to
60,000,000;
4. To ratify the selection of Grant Thornton LLP as the Company's
independent auditors for the fiscal year ending February 28, 1998; and
5. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on January 20, 1998
as the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Meeting and any adjournments thereof.
Only stockholders of record as of the close of business on the Record Date are
entitled to notice of and to vote at the Meeting and any adjournments thereof.
The transfer books of the Company will not be closed.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, THE COMPANY DESIRES TO HAVE THE MAXIMUM
REPRESENTATION AT THE MEETING AND RESPECTFULLY REQUESTS THAT YOU SIGN, DATE AND
MAIL PROMPTLY THE ENCLOSED PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED. NO
ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES OF AMERICA. A
PROXY MAY BE REVOKED BY A STOCKHOLDER AT ANY TIME PRIOR TO ITS USE AS SPECIFIED
IN THE ENCLOSED PROXY STATEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
Steven B. Solomon, Secretary
Dallas, Texas
January __, 1998
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED PROXY CARD IN
THE POSTAGE PAID ENVELOPE PROVIDED.
2
<PAGE>
[LOGO]
CITADEL COMPUTER SYSTEMS INCORPORATED
3811 Turtle Creek Boulevard, Suite 600
Dallas, Texas 75219
--------------------
PROXY STATEMENT
--------------------
GENERAL
This Proxy Statement and the enclosed Proxy are solicited on behalf of
Citadel Computer Systems Incorporated (the "Company") for use at the Annual
Meeting of Stockholders to be held February 26, 1998, at the time and place and
for the purposes set forth herein and in the accompanying Notice of Annual
Meeting of Stockholders (the "Notice"), or any adjournment(s) of the Meeting.
These proxy solicitation materials are being mailed on or about January 20,
1998 to holders of the issued and outstanding shares (the "Shares") of the
Company's common stock, par value $0.01 per share (the "Common Stock"), entitled
to vote at the Meeting.
RECORD DATE AND PRINCIPAL STOCKHOLDERS
Stockholders of record at the close of business on January 20, 1998 (the
"Record Date") are entitled to notice of and to vote at the Meeting. On the
Record Date, there were issued and outstanding _______ shares of Common Stock.
There is no other class of voting security of the Company issued or outstanding.
For information regarding security ownership by management and certain other
holders of the Common Stock, see "Security Ownership of Certain Persons."
REVOCABILITY OF PROXIES
Any stockholder of the Company has the unconditional right to revoke his or
her proxy at any time prior to the voting thereof by any act inconsistent with
the proxy, including notifying the Secretary of the Company of such revocation
in writing, executing a subsequent proxy or attending at the Meeting and casting
a contrary vote. However, no revocation shall be effective unless notice of
such revocation has been received by the Company at or prior to the Meeting.
VOTING AND SOLICITATION
Pursuant to the Certificate of Incorporation of the Company, each share of
Common Stock entitles the holder thereof to one vote on any matter requiring a
vote by the Company's stockholders that properly comes before the stockholders
at the Meeting or any adjournments. The Company's Bylaws and the Delaware
General Corporation Law (the "DGCL") require an affirmative vote or written
consent of a plurality of the outstanding Shares present in person or by proxy
and entitled to vote at the Meeting to elect directors and a majority of the
outstanding Shares present and entitled to vote at the Meeting to approve any
other Proposals.
Shares represented by valid proxies will be voted in accordance with the
stockholder's instructions, or, in the absence of instructions, will be deemed
to grant authority to vote:
1. FOR the election of the seven nominees listed under "Election of
Directors" as nominees of the Company for election as directors;
2. FOR the amendment of the Company's Certificate of Incorporation to
change the
3
<PAGE>
Company's name to "Citadel Technology, Inc.";
3. FOR the amendment of the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from
30,000,000 to 60,000,000;
4. FOR the ratification of the appointment of Grant Thornton LLP as the
Company's independent auditors for the fiscal year ending February 28,
1998; and
The Company is unaware of any additional matters not set forth in the Notice of
Annual Meeting of Stockholders that will be presented for consideration at the
Annual Meeting. If any other matters are properly brought before the Meeting or
any adjournments thereof and presented for a vote of the stockholders, the
persons named in the proxy will vote in accordance with their best judgment upon
such matters, unless otherwise restricted by law.
Any stockholder who is present in person or by proxy at the Meeting but who
abstains from voting shall be counted for purposes of determining whether a
quorum exists, but an abstention shall not be counted as an affirmative vote
with respect to any matter. Stockholders are not entitled to cumulate their
votes in the election of directors or with respect to any matter, and are not
entitled to vote for a greater number of persons than the number of nominees
named in this Proxy Statement. The election of each director requires a
plurality of votes cast. Abstentions and broker non-votes will be deemed not
to have been cast and will have no legal effect in the election of directors
and will have the effect of a negative vote on all other proposals.
Stockholder ratification is not required for the selection of Grant
Thornton, LLP as the Company's independent auditors for the fiscal year ending
February 28, 1998, because the Board of Directors has responsibility for
selection of the Company's independent auditors. The selection is being
submitted for ratification with a view toward soliciting the opinion of
stockholders, which opinion will be taken into consideration in future
deliberations.
The stockholders of the Company have no appraisal rights under the Delaware
General Corporation Law, the corporation law statute of the Company's place of
incorporation, or under any other statute or regulation, with respect to the
matters specified in the Notice.
The cost of solicitation of proxies will be borne by the Company. The
Company has engaged _________________ to solicit proxies from beneficial
owners of shares standing in the name of brokers and other nominees. The
Company has agreed to pay _________________ Services LLC a fee of
$__________ and the amount of its expenses for such service. In addition to
the use of the mails, proxies may also be solicited by personal interview,
facsimile transmission, and telephone by directors, officers, employees, and
agents of the Company. The Company will also supply brokers, nominees, or
other custodians with the numbers of Proxy forms, Proxy Statements, and
Annual Reports they may require for forwarding to beneficial owners, and the
Company will reimburse such persons for their expense in so doing.
PROPOSALS OF STOCKHOLDERS AT NEXT ANNUAL MEETING OF STOCKHOLDERS
The Company anticipates holding its next annual meeting of stockholders
on or about September 30, 1998. Proper proposals submitted by a stockholder
in accordance with applicable rules and regulations for presentation at the
Company's next annual meeting of stockholders that are received by April 15,
1998, at the Company's principal executive office, 3811 Turtle Creek
Boulevard, Suite 600, Dallas, Texas 75219, Attention: Secretary, will be
included in the Company's proxy statement and form of proxy for that meeting.
4
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The number of directors authorized by the Company's Bylaws is currently
fixed at seven, with the exact number to be fixed from time to time exclusively
by the Board of Directors. Seven directors are proposed to be elected at the
Meeting. All seven directors proposed to be elected will hold office until the
next annual meeting of stockholders and until their successors shall be elected
and shall qualify. Proxies in the accompanying form will be voted FOR the seven
nominees, except where authority is specifically withheld by the stockholder.
All nominees are presently directors of the Company. If any nominee should
become unable to accept election, votes will be cast pursuant to the
accompanying Proxy for a substitute as may be designated by the Board of
Directors. The nominees have indicated that they are willing and able to
serve as directors. The nominees were nominated for election to the Board of
Directors by the current Board of Directors.
NOMINEES FOR DIRECTORS
The following table sets forth the name and age of each nominee, the
principal occupation of each during the past five years, and the period during
which each has served as a director of the Company:
NAME AGE POSITION WITH CITADEL DIRECTOR SINCE
- ---- --- --------------------- --------------
Steven B. Solomon 33 President, Chief Executive Officer,
and Secretary 1992
Gilbert Gertner 73 Director 1992
Victor K. Kiam, II 72 Director 1996
Mark Rogers 34 Director 1996
Kenneth Johnsen 43 Director 1997
Chris A. Economou 41 Director 1993
Axel Sawallich 53 Director 1993
STEVEN B. SOLOMON has been the President and Chief Executive Officer since
May 1997 and served as Chief Operating Officer, Secretary and a director of
the Company from February 29, 1996, through April 25, 1997. He was the
president and a director of LoneStar Hospitality Corp. ("LoneStar"), a
predecessor of the Company, from its inception in February 1992 until
February 1996 and chairman of the Board of Directors from December 1994 until
February 1996. Mr. Solomon also served as developer and executive producer
of SportsWaves!, a division of LoneStar that produced syndicated television
programs covering the National Football League and collegiate and professional
sports. From November 1991 to September 1992, Mr. Solomon served as vice
president of corporate development for Europa Cruises Corporation. He also
served as a business advisor and as a development and corporate finance
consultant. From May 1990 to November 1991, Mr. Solomon served as president
of Solomon Associates, a firm which offered consulting services relating to
investments and acquisitions in the shipping industry and venture capital
projects.
GILBERT GERTNER has been Chairman of the Company since February 29, 1996, and
was chairman of Citadel's predecessor ("Old Citadel") from its inception in
July 1992 until the Merger. 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. Mr. Gertner also serves as chairman of the board of directors of
Worldwide PetroMoly, Inc., a public company involved in the manufacturing and
marketing of synthetic petroleum products.
5
<PAGE>
VICTOR K. KIAM, II was elected to the Board of Directors in July 1996. Mr.
Kiam is chairman of Remington Products, L.L.C., a manufacturer, distributor
and marketer of electrical shavers and other consumer products based in
Bridgeport, Connecticut. Mr. Kiam also serves on the boards of directors of
several other consumer product companies.
MARK ROGERS was elected to the Board of Directors in July 1996. Mr. Rogers
manages NFT Ventures, Inc., the venture capital fund established by Ray
Noorda, the founder of Novell, Inc. Through NFT, Mr. Rogers works with
several computer software companies in Silicon Valley, Texas and Utah,
ranging from start-up phase through sale of the company. Mr. Rogers also
serves on the boards of directors of several other high technology firms.
KENNETH R. JOHNSEN was elected to the board in October 1997. Mr. Johnsen is
President of Information Technology Services Group of CORESTAFF and an
Executive Vice President of CORESTAFF, one of the largest providers of
information technology and staffing services in the U.S. Prior to joining
CORESTAFF in May 1997, Mr. Johnsen was employed with IBM Corporation since 1975
in various managerial capacities, including Vice President of Worldwide
Commercial Operations for IBM PC Company from January 1997 to May 1997, Vice
President, Business Services and Business Development for ISSC, IBM's
outsourcing subsidiary, from January 1994 to December 1996 and General Manager
of IBM China/Hong Kong from September 1991 to December 1993.
CHRIS A. ECONOMOU was elected to the Board of Directors of the Company on
February 29, 1996, and has been a director of LoneStar since June 1993. He has
been engaged in the private practice of law in Fort Lauderdale, Florida, in the
areas of real estate, business and corporate law for more than ten years. He
served as executive vice president, secretary, general counsel and director of
Miami Subs Corporation from August 1992 until June 1994. He is also a director
of Z-Communications, Inc., a privately-held electronic parts manufacturer.
DR. AXEL SAWALLICH has been a director of the Company since February 1996 and a
director of LoneStar since March 1993. Dr. Sawallich is in the business of
providing investment advisory services in Vienna, Austria. Since 1993, Dr.
Sawallich has been the managing partner of Global Invest, an investment firm
located in Vienna, Austria, since 1994. From 1991 until 1994, he was employed
by SERCO Investment Counseling Corporation, an investment firm located in
Vienna, and was its executive director from 1992 until 1993. From November 1989
to November 1990, Dr. Sawallich was the general manager and director of the
Vienna, Austria, regional branch of Allegmeine Sparkasse Bank AG, Linz, a
banking firm. From May 1985 to November 1989, Dr. Sawallich was with Bank fur
Arbeit und Wirtschaft AG, a Vienna, Austria banking firm, serving as the deputy
head of the credit department until 1986 and as the executive vice president of
the Bank's Bureau for Commercial Customers, thereafter. Dr. Sawallich received
a Doctor of Law from the University of Vienna.
There are no family relationships among any of the directors or executive
officers of the Company. See "Certain Relationships and Related Transactions"
for a description of transactions between the Company and its directors,
executive officers or their affiliates.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to vote for them shall be elected as
directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEES FOR DIRECTOR
6
<PAGE>
BOARD MEETINGS AND COMMITTEES
Each director is elected to serve until the next annual meeting of
stockholders or until the director's successor is duly elected and qualified.
Officers serve at the discretion of the Board of Directors.
The Company currently has an executive committee comprised of Messrs.
Gertner and Solomon and George Sharp, and may also appoint additional
committees from time to time. The Executive Committee is authorized to act
on behalf of the Board on all corporate actions for which applicable law
does not require participation by the full Board. The Company does not
currently have an audit, compensation or nominating committee.
BOARD OF DIRECTORS AND MEETINGS
During the fiscal year ended February 28, 1997, the Board of Directors held
two meetings and took action by unanimous consent on one occasion, and the
executive committee held three meetings and took action by unanimous consent on
eight occasions. Each director attended at least 75% of the number of meetings
of the Company's Board of Directors and committees on which he served.
COMPENSATION OF DIRECTORS
The members of the Board of Directors do not receive cash compensation in
connection with their service but are entitled to reimbursement for their
expenses incurred in connection with attendance at meetings of the Board of
Directors or committees.
7
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and key employees of the Company are as follows:
NAME AGE POSITION WITH CITADEL
- ---- --- ---------------------
Steven B. Solomon 33 President, Chief Executive Officer,
Secretary and Chairman of the Board
Richard L Travis, Jr. 41 Chief Financial Officer and
Chief Operating Officer
Stuart B. Marks 33 Former Chief Technology Officer
Carl E. Banzhof 30 Chief Technology Officer
Jack Doxey 31 Vice President-Marketing
Information concerning the business experience of Mr. Solomon is provided
under the caption "Election of Directors" above. Set forth below is information
concerning the business experience of the other executive officers and key
employees of the Company.
RICHARD L. TRAVIS, JR., Chief Operating Officer and Chief Financial Officer,
joined Citadel in December 1996 and has almost 20 years of financial experience
in the manufacturing, financial services, real estate, construction and
telecommunications industries. Mr. Travis served for ten years as executive
vice president and chief financial officer of Texwood Industries, Inc., a
manufacturing and distribution company. Prior to joining Texwood Industries,
Inc., Mr. Travis was senior audit manager from 1983 to 1986 at Grant Thornton
LLP, an accounting firm providing audit, tax and management consulting
services, where he managed the firm's Dallas Savings and Loan practice. Mr.
Travis received a B.S./B.B.A. with honors in Accounting from Florida Atlantic
University in 1977, and he earned his Certified Public Accountant designation
in 1978.
STUART B. MARKS, former Chief Technology Officer, joined Citadel in November
1994. Mr. Marks has more than 17 years of experience designing and developing
application software for commercial and entertainment markets, including
political, real estate, construction, education and financial markets. He has
extensive experience in systems integration and is the author of Citadel's
most recent upgrade of NetOFF. Mr. Marks was president of Marcor, Inc., a
software development and consulting group he founded in 1985, until it was
acquired by Citadel in November 1994. Mr. Marks resigned his position with
the Company effective July 1997.
CARL E. BANZHOF, present Chief Technology Officer, former Vice President -
Development of Network Products, joined the Company in February 1996 in
connection with the Company's acquisition of Circuit Masters Software, Inc.
Mr. Banzhof has more than 15 years of experience in the software industry,
including designing, developing and marketing software products; building
software development teams and organizations and managing products in Network
Management and PC DESKTOP markets. He was the founding partner of Circuit
Masters Software, Inc., a software company which developed and marketed
JACK W. DOXEY was appointed Vice President of Marketing and Sales in
October 1997. Mr. Doxey has 10 years experience in the field of software
sales and marketing including extensive work in the retail and VAR channels
of distribution. From 1996-1997 he served as Vice President of Sales and
Marketing for Visual Applications, a privately held software manufacturer
based in Kansas City, MO. From 1994-1996 Mr. Doxey served as an independent
sales and marketing consultant to software and hardware manufacturers
including: Attachmate, MicroHelp, Eicon Technologies, Penumbra, and smaller
start-up manufacturers. In 1994 he helped found MindShare Associates, an
out-source marketing company for software and hardware manufacturers, where
he served as a Vice President. In 1993 he managed the retail channel
marketing efforts for DCA in Alpharetta, GA. Prior to DCA he served as a
regional manager for Technology Advancement Corporation, an out-source
marketing firm in Utah, where he established regional operations in the
Southeast, Southern California, and London, England.
8
<PAGE>
SECURITY OWNERSHIP OF CERTAIN PERSONS
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
The record date for the determination of the Stockholders entitled to
notice of and to vote at the Meeting has been established by the Board as the
close of business on January 20, 1998 (the "Record Date"). As of the Record
Date, there were issued and outstanding 18,563,902 shares of Common Stock.
There is no other class of voting security of the Company issued or
outstanding.
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned, as of October 14, 1997, by (i) each person known to
the Company to own more than 5% of the Common Stock of the Company (the only
class of voting securities now outstanding), (ii) each of the nominees for
director, (iii) each executive officer named in the Summary Compensation Table
(the "Named Officers") and (iv) all nominees, Named Officers and other executive
officers as a group. Unless otherwise indicated, the number of Shares and
percentage of ownership of Common Stock for each of the named stockholders
assumed that shares of Common Stock that the stockholder may acquire within
sixty days of the Record Date are outstanding.
NUMBER APPROXIMATE
NAME AND ADDRESS OF SHARES PERCENT OF CLASS
- ---------------- --------- ----------------
Gilbert Gertner 2,744,000 /1/ 9.9%
1300 Post Oak Blvd., 9th Floor
Houston, Texas 77056
George T. Sharp 1,762,500 /1/ 6.4%
1300 Post Oak Blvd., 9th Floor
Houston, Texas 77056
Steven B. Solomon 4,303,000 /2/ 15.5%
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219-4421
Richard L. Travis, Jr. 671,500 /3/ 2.4%
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219-4421
Carl Banzhof 233,151 /4/ *
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219-4421
Jack Doxey 50,000 /5/ *
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219
Chris A. Economou 274,400 /6/ *
150 North Federal Highway, Suite 210
Fort Lauderdale, Florida 33301
Kenneth R. Johnsen 0 *
CORESTAFF, Inc.
4400 Post Oak Parkway
Suite 2000
Houston, Texas 77027
9
<PAGE>
Victor K. Kiam, II 472,500 /7/ 1.7%
RPI Corporation
350 Fifth Avenue, Suite 5408
New York, New York 10018
Mark Rogers 200,000 /8/ *
NFT Ventures, Inc.
751 Laurel Street, No. 119
San Carlos, California 94070
Axel Sawallich 269,461 /9/ *
Rudolfplatz 10
A-1080 Vienna, Austria
CORESTAFF, Inc. 4,500,000 /10/ 16.3%
4400 Post Oak Parkway
Suite 2000
Houston, Texas 77027
All officers and directors
as a group (10 persons): 15,480,112 /11/ 55.9%
*Less than one percent.
/1/ Includes 1,462,500 shares presently issuable pursuant to an option to
purchase Common Stock. The number of shares held by Mr. Gertner also includes
warrants to purchase 150,000 shares held by Worldwide PetroMoly, Inc., a
company controlled by Mr. Gertner.
/2/ Includes 2,575,000 shares presently issuable pursuant to options to
purchase Common Stock.
/3/ Includes 650,000 shares presently issuable pursuant to options to purchase
Common Stock.
/4/ Includes 50,000 shares presently issuable pursuant to options to purchase
Common Stock.
/5/ Includes 50,000 shares presently issuable pursuant to options to purchase
Common Stock.
/6/ Includes 100,000 shares presently issuable pursuant to options to purchase
Common Stock.
/7/ Includes 262,500 shares presently issuable pursuant to options to purchase
Common Stock.
/8/ Includes 200,000 shares presently issuable pursuant to options to purchase
Common Stock.
/9/ Includes 112,500 shares held by Dr. Sawallich as trustee, over which he has
voting and dispositive power and 50,000 shares presently issuable pursuant to
options to purchase Common Stock.
/10/ Includes 2,000,000 shares presently issuable pursuant to warrants to
purchase Common Stock owned by CORESTAFF and 2,500,000 shares owned by
CORESTAFF. Mr. Johnsen is an executive officer of CORESTAFF and disclaims
beneficial ownership of such shares and warrants.
/11/ Includes 9,125,000 shares presently issuable pursuant to presently
exercisable options held by Messrs. Gertner, Sharp, Banzhof, Doxey, Solomon,
Johnsen, Travis, Kiam, Rogers, Economou, and Sawallich.
10
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's officers, directors and persons who own more than
ten percent (10%) of a registered class of the Company's equity securities
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than ten
percent (10%) stockholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on
its review of the copies of such forms received by it, or written
representations from certain reporting persons that no Form 5s were required
for those persons, the Company believes that during the fiscal year ended
February 28, 1997, Mr. Solomon filed Form 4s late. Such Form 4s related to
grants to, or extensions of, exercise periods or reductions in exercise
prices of options held by such persons.
COMPENSATION OF EXECUTIVE OFFICERS
The total compensation for the three fiscal years ended February 28, 1997,
for George T. Sharp, the Company's former Chief Executive Officer; Steven B.
Solomon, the Company's current Chief Executive Officer (and the chief executive
officer of LoneStar prior to the Merger); Stuart B. Marks, the Company's former
Chief Technology Officer; and Carl E. Banzhof, the Company's present Chief
Technology Officer (the "Named Executive Officers"), is set forth below in the
following Summary Compensation Table. No other person received cash
compensation in excess of $100,000 during the fiscal year ended February 28,
1997.
SUMMARY COMPENSATION TABLE
Fiscal Annual Compensation All Other
Name and Position Year Salary Bonus Compensation
----------------- ------ ------ ------------ -------------
George T. Sharp, 1997 150,000 42,727 11,400 /1/
Vice Chairman 1996* 20,833 0
1995 81,947 45,433
Steven B. Solomon, 1997 120,000 66,496 18,846 /1/
President, Chief 1996+ 110,000 0 13,150 /2/
Executive Officer 1995 91,923 0 23,900 /3/
and Secretary
Stuart B. Marks, 1997 108,330 1,000
Former Chief 1996 83,162 0
Technolog Officer 1995 34,664 /4/ 0
Carl E. Banzhof, 1997 103,228 1,000
Present Chief 1996 15,600 /5/ 0
Technology 1995 0 0
Officer
- ---------------------------
* Transition period
+ April 1, 1995 - February 29, 1996
11
<PAGE>
/1/ Mr. Sharp received a car allowance of $950 per month during fiscal year
ended February 28, 1997. Mr. Solomon received a car allowance of $950 per month
and life and disability insurance during the fiscal year ended February 28,
1997.
/2/ Mr. Solomon received a car allowance of $650 per month through June 1995
and $950 per month after July 1, 1995, life insurance and disability insurance
during the fiscal year ended February 29, 1996.
/3/ Mr. Solomon received a car allowance of $650 per month during the fiscal
year ended March 31, 1995. He also received approximately $15,000 in
connection with his efforts to raise capital during that fiscal year and
disability insurance.
/4/ Mr. Marks started to work for the Company in November 1994. Mr. Marks
resigned his employment with the Company effective July 1997.
/5/ Mr. Banzhof started to work for the Company in December 1995.
OPTION GRANTS DURING 1997 FISCAL YEAR
During the fiscal year ended February 28, 1997, no options were granted to
the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table describes, for each of the Named Executive Officers,
options exercised and the potential values for their unexercised in-the-money
options at February 28, 1997:
<TABLE>
Number of Unexercised Value of Unexercised
Shares Acquired on Value Options SARs at FY-End (#) Options/SARs at FY-End (#)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------ ------------ ------------------------- --------------------------
<S> <C> <C> <C> <C>
George T. Sharp 0 0 1,125,000/0 457,031/0
George T. Sharp 0 0 337,500/0 5,484/0
Steven B. Solomon 0 0 1,584,461/0, 25,593/0
Stuart B. Marks 0 0 33,345/0 542/0
</TABLE>
EMPLOYMENT AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
In March 1996, the Board of Directors approved employment agreements
between the Company and Messrs. Sharp and Solomon and a consulting agreement
between the Company and Mr. Gertner. In April 1997, in connection with the
discharge of a certain indebtedness due the Company by GGS Investment Company
(see also "Certain Relationships and Related Transactions"), Mr. Sharp agreed
to the termination of his employment agreement. The following is a brief
description of Mr. Sharp's prior contract, Mr. Gertner's consulting agreement
and Mr. Solomon's employment agreement.
Mr. Sharp's employment agreement, dated December 1, 1995, had an initial
term through November 30, 2000, with automatic renewals annually unless
otherwise extended or terminated in writing. Mr. Sharp's employment agreement
provided for an annual base salary and permitted bonuses at the discretion of
the Board. The base salary was $150,000 during the first year of the agreement,
$165,000 during the second year, $181,500 during the third year, $199,644
during the fourth year and $219,600 during the fifth year. If Mr. Sharp was
unable to perform his duties during the term because of personal injury,
disability or illness, the Company was required to pay his salary during the
full term of
12
<PAGE>
the agreement. In consideration of certain intellectual property that Mr.
Sharp contributed to the Company in the past, the Company could not
terminate his employment for any reason during the initial five-year term of
the agreement. If, however, the Company elected to terminate the employment
agreement for any reason during the initial five-year term, the balance of
the base salary during the balance of that initial term would be accelerated
and payable immediately. This contract was terminated in April 1997.
Mr. Gertner's consulting agreement, dated December 1, 1995, has an initial
term expiring November 30, 2000, with automatic renewals annually unless
terminated in writing or otherwise extended. Mr. Gertner's consulting
agreement provides for an annual compensation, with additional compensation at
the discretion of the Board. The compensation was $120,000 during the first
year of the consulting agreement, $132,000 during the second year and $144,000
during remaining three years of the consulting agreement. If Mr. Gertner's
consulting contract is terminated, other than for death or disability, he shall
be entitled to any unpaid compensation and additional compensation, and any
options to purchase Company securities exercisable during the term of the
consulting agreement would become immediately exercisable.
Mr. Solomon's employment agreement is dated as of March 1, 1996, and its
initial term expires on February 28, 2001. The agreement will be automatically
renewed annually unless terminated in writing or otherwise extended. Mr.
Solomon's employment agreement provides for an annual base salary and permits
the award of bonuses at the discretion of the Board. The base salary is
$120,000 during the first year of the employment agreement and will be $132,000
during the second year and $144,000 during the remaining three years of the
employment agreement. If Mr. Solomon is terminated other than for cause, he
will be entitled to a severance payment equal to the greater of the remaining
payments due under the employment agreement or any extension thereof,
discounted at 6%, or 24 months' base salary in effect at the time of such
termination.
The Company shall provide life insurance in the amount of $1,000,000 on the
life of Mr. Solomon, in addition to key man life insurance policy on Mr.
Solomon maintained by the Company for its benefit. The Company also provides
disability insurance for Mr. Solomon. The Company shall provide Mr. Solomon
with an automobile allowance of $950 per month and automobile liability
insurance.
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with a $1,125,000, 8% Redeemable Convertible Note offering
dated June 9, 1997, the Company's Chairman of the Board pledged stock of a
company controlled by him to secure the repayment of up to $500,000 of this
indebtedness.
In April 1997, the Company entered into an Asset Sale Agreement with
Messrs. Gertner and Sharp, two of the Company's directors (the
"Purchasers"). At the date of the agreement, the Purchasers owned
approximately 31% of the Company's outstanding Common Stock. The Company
sold to the Purchasers, $3,750,000 of trade accounts receivable and forgave
indebtedness owed by the Purchasers to the Company in the amount of $72,000.
The carrying value of the receivables at February 28, 1997, net of allowance,
was $1,877,000. Consideration received consisted of 3,900,000 shares of the
Company's Common Stock, with a market value of approximately $2,750,000, as
of the date of the transaction (for accounting purposes, the stock was valued
at approximately $1,950,000). The shares acquired represent approximately
23% of the Company's then issued and outstanding shares and are held as
treasury shares. Pursuant to the participation interest, Citadel will retain
a profits participation interest in the Assets in the event the Purchasers
collect in excess of $2,250,000 of the accounts receivable (after expenses of
collection), in which case the Purchasers shall pay to Citadel 50% of such
amounts collected in excess of $2,250,000. The transaction will result in no
gain or loss to the Company.
At various times during the year ended February 28, 1997, Messrs.
Gertner, Sharp and Solomon, or their affiliates, personally guaranteed or
pledged securities to secure the repayment of various obligations of the
Company, including the personal guarantees of Messrs. Gertner and Sharp and
the pledge by Messrs. Gertner and Solomon of stock to secure the repayment of
certain loans. At various times during the year ended February 28, 1997,
Messrs. Gertner, Sharp and Solomon, or their affiliates, advanced funds to
Citadel to fund various short-term obligations of Citadel. See Item 6.
"Management's Discussion and Analysis."
In December 1996, Worldwide PetroMoly, Inc., a company controlled by Mr.
Gertner, Chairman of the Board of the Company, made a loan to Citadel in the
original principal amount of $500,000. In connection with the loan, Citadel
granted warrants to purchase 150,000 shares of Citadel Common Stock at an
exercise price of $2.00 per share (the exercise price was reduced to $.59 per
share in connection with Mr. Gertner's assumption of this indebtedness in
connection with the discharge of a certain GGS joint venture note due the
Company as discussed below). The loan was secured by a pledge of 732,375
shares of Citadel Common Stock owned by Mr. Solomon, a director and officer
of the Company. The loan bears interest at ten percent (10%) per annum and
had a one-month term. The Company made a payment of $250,000 in March 1997,
and Mr. Gertner and Mr. Sharp agreed to assume the balance of the remaining
indebtedness pursuant to the discharge of the joint venture's indebtedness
due the Company, as detailed below. Although Messrs. Gertner and Sharp
agreed to assume the Citadel note, obtain the release of Citadel and the
return of Mr. Solomon's shares, Worldwide PetroMoly has not yet signed a
release or returned the shares.
In November 1996, the Company made a one-year, $625,000, 8% loan to GGS
Investment Company ("GGS"), a joint venture owned by Mr. Gertner, Chairman of
the Board of the Company, Mr. Sharp, former Chief Executive Officer of the
Company and Steven B. Solomon, former Chief Operating Officer of the Company,
who were also directors and owned an aggregate of approximately 6,800,000
shares of the Company's outstanding Common Stock, at that time. The purpose
of the joint venture was to invest in securities for short-term profits. The
loan agreement provided that interest would be waived for the first six
months in consideration of 100% of the net profits, during that period, being
paid to the Company. The loan was guaranteed by each of the officers, and
the guaranty was secured by a pledge of
14
<PAGE>
754,000 shares of the Company's Common Stock, valued at approximately
$1,282,000 as of the date of the transaction.
The joint venture was not profitable, and the loan was discharged
subsequent to February 28, 1997 in the following manner: Mr. Solomon forgave
$78,000 of accrued compensation due him, Mr. Gertner and Mr. Sharp assumed
debt of approximately $275,000 (including accrued interest) due to a company
controlled by him, Mr. Sharp received a credit against the loan of $200,000
as consideration for agreeing to terminate his noncancellable employment
contract, and approximately $72,000 was forgiven in connection with the Asset
Sale Agreement discussed above.
In February 1996, LoneStar issued to Chris A. Economou, Steven R.
Leipsner, David S. Lundeen and James E. Bradshaw, each being a member of the
Board of Directors, as then constituted, options to acquire 25,000 shares of
Common Stock at $3.50 per share until May 31, 1996.
During the fiscal year ended February 29, 1996, Axel Sawallich, a
director of the Company, received options to purchase 75,000 shares of Common
Stock as compensation for his assistance in the placement of securities to
investors in Europe.
Chris A. Economou, a director of the Company, provided legal services to
LoneStar. During the fiscal year ended February 29, 1996, Mr. Economou
agreed to receive 105,500 shares of Common Stock in lieu of $35,000 as legal
fees for legal services performed for the Company.
Lawrence E. Steinberg, a director of LoneStar until February 29, 1996, is
of counsel to Jenkens & Gilchrist, a Professional Corporation, a Dallas law
firm that performs legal services for LoneStar. During the year ended
February 29, 1996, LoneStar had incurred legal fees totaling $418,784 to
Jenkens & Gilchrist.
15
<PAGE>
PROPOSAL TWO
AMENDMENT TO CERTIFICATE OF INCORPORATION TO CHANGE NAME OF THE COMPANY TO
CITADEL TECHNOLOGY, INC.
The Board of Directors has approved and recommends that the stockholders
of the Company adopt an amendment to the Certificate of Incorporation of the
Company to change the Company's name to Citadel Technology, Inc. The Board
of Directors believes that this new name is more descriptive of the Company's
current and anticipated business activities and that the good will associated
with. Accordingly, the Company has been doing business under the assumed
name "Citadel Technology, Inc.", since June 1997 and the amendment would have
the effect of changing the Company's legal name to correspond to the under
which the Company currently does business. The Company believes that any
goodwill associated with the Company's current legal name will be preserved
due to the continued use of the term "Citadel". The form of amendment to the
Certificate of Incorporation is annexed as Appendix A to this Proxy
Statement. If this Proposal is approved by the shareholders, an amendment to
the Company's Certificate of Incorporation will be filed in a form similar to
that set forth in Appendix A to effect the name change as promptly as
practicable.
VOTE REQUIRED
The affirmative vote of the holders of the Common Stock representing a
majority of the shares of capital stock outstanding, in person or by proxy,
is required to approve the proposal to amend the Company's Certificate of
Incorporation to change the name of the Company to Citadel Technology, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ADOPTION OF
THIS AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY TO CITADEL TECHNOLOGY, INC.
16
<PAGE>
PROPOSAL THREE
AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
The Board has approved and recommends that the stockholders of the
Company adopt an amendment to the Certificate of Incorporation of the Company
to increase the number of authorized shares of Common Stock from 30,000,000
shares to 60,000,000 shares, in order to give the Board the ability to issue
additional shares in connection with additional issuances of shares in
circumstances when, and if, the Board determines that such course of action
is advisable. The form of amendment to the Certificate of Incorporation is
annexed as Appendix A to this Proxy Statement.
As of October 14, 1997, 18,563,902 shares of Common Stock were
outstanding and an additional 10,146,000 shares were reserved for issuance in
connection with the Company's stock option plans, and 4,404,489 shares were
reserved for issuance in connection with other outstanding warrants. If the
proposal to increase the authorized Common Stock is adopted, the number of
authorized but unissued and unreserved Common Stock would be increased to
27,000,000.
The Board is considering the pursuit of one or more offerings, the
proceeds of which would likely be used to repay all or a portion of the
indebtedness outstanding pursuant to the Company's securities that are
convertible to shares of common stock at a discount. Such indebtedness
amounted to approximately $2,000,000 at November 30, 1997. The Company has
been engaged in negotiations with the holders of such securities with respect
to the restructuring of such securities. Any remainder would be used for
general corporate purposes. Although the Board has no other present plans,
arrangements, understandings or commitments to issue the additional shares
that would be authorized if this proposal is adopted, such shares may be
issued from time to time to raise new capital, for future financing, for
stock dividends and stock splits and to achieve other corporate objectives
not foreseeable at this time.
No further authorization by vote of the stockholders will be solicited
for the issuance of the additional shares of Common Stock proposed to be
authorized, except as might be required by law, regulatory authorities or
rules of any stock exchange on which the Company's shares may then be listed.
The stockholders do not have any preemptive right to purchase or subscribe
for any part of any new or additional issuance of the Company's securities.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required to approve the proposal to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 30,000,000 to 50,000,000.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THIS
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
17
<PAGE>
PROPOSAL FOUR
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Grant Thornton LLP, independent certified public accountants, served as
independent auditors for the Company for the fiscal year ended February 28,
1997, and has reported on the Company's consolidated financial statements.
The Board of Directors has selected Grant Thornton LLP as the Company's
independent auditors for the fiscal year ending February 28, 1998, and
recommends that the stockholders ratify this selection. The Board of
Directors has been advised that Grant Thornton LLP has no relationship with
the Company or its subsidiaries.
A representative of Grant Thornton LLP is expected to be present at the
Meeting, will have an opportunity to make a statement if he desires to do so,
and is expected to be available to respond to appropriate questions.
While stockholder ratification is not required for selection of Grant
Thornton LLP because of the Board of Directors has the responsibility for
selection of the Company's independent auditors, the selection is being
submitted for ratification at the Meeting with a view toward soliciting the
stockholders' opinion thereon, which opinion will be taken into consideration
in future deliberations.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCHOLDERS VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS
THE COMPANY'S INDEPENDENT ACCOUNTANTS
18
<PAGE>
AVAILABILITY OF ANNUAL REPORT ON FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB containing audited
financial statements accompanies or has preceded this proxy statement. The
Annual Report does not constitute a part of the proxy solicitation material.
OTHER MATTERS
As of the time this proxy statement was printed, neither management and the
Board of Directors is aware of any matter to be presented for action at the
Meeting other than matters set forth herein. If any other matters requiring a
vote of stockholders are properly brought before the Meeting, the proxies in the
enclosed form confer on the person or persons entitled to vote the shares
represented by such proxies discretionary authority to vote the shares in
accordance with their best judgment in the interest of the Company. It is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares you hold and whether you intend to attend the meeting.
You are therefore urged to complete, date, execute and return, at your earliest
convenience, the accompanying proxy card in the postage paid envelope which has
been enclosed.
FOR THE BOARD OF DIRECTORS OF
CITADEL COMPUTER SYSTEMS INCORPORATED
STEVEN B. SOLOMON
Chief Executive Officer and President
Dallas, Texas
January 20, 1998
19
<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
CITADEL COMPUTER SYSTEMS INCORPORATED
CITADEL COMPUTER SYSTEMS INCORPORATED, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY as follows:
FIRST: The Certificate of Incorporation of the Corporation is hereby amended
by deleting the first paragraph of Article IV of the Certificate of
Incorporation in its entirety and substituting therefor the following:
ARTICLE IV: The corporation shall be authorized to issue two classes of
stock to be designated respectively "Common" and "Preferred." The
total number of shares of Common Stock that the corporation shall have
authority to issue shall be Sixty Million (60,000,000), and the par
value of each share of Common Stock shall be one cent ($.01). The
total number of shares of Preferred Stock that the corporation shall
have authority to issue shall be One Million (1,000,000), and the par
value of each share of Preferred Stock shall be one cent ($.01).
SECOND: The capital of the Corporation will not be reduced under or by reason of
this Amendment to the Certificate of Incorporation of the Corporation.
THIRD: The Certificate of Incorporation of the Corporation is hereby amended by
deleting the first paragraph of Article _____ of the Certificate of
Incorporation in its entirety and substituting therefor the following:
ARTICLE I: The name of the corporation shall be "Citadel Technology, Inc."
FOURTH: The amendment to the Certificate of Incorporation of the Corporation set
forth in this Certificate of Amendment has been duly adopted by the vote of the
stockholders of the Corporation in accordance with Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to
be signed and attested by its duly authorized officers as of this day of
, 1998.
CITADEL COMPUTER SYSTEMS INCORPORATED
By:
- --------------------------------------
Steven B. Solomon
President
20
<PAGE>
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
____________________
JANUARY __, 1998
DALLAS, TEXAS
____________________
LOGO
21
<PAGE>
CITADEL COMPUTER SYSTEMS INCORPORATED
PROXY
FOR ANNUAL MEETING OF THE SHAREHOLDERS OF
CITADEL COMPUTER SYSTEMS INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints STEVEN B. SOLOMON and RICHARD L. TRAVIS, JR.,
and each of them, with full power of substitution, as proxies to vote the
shares which the undersigned is entitled to vote at the Annual Meeting of the
Company to be held at the offices of the Company, 3811 Turtle Creek
Boulevard, Suite 600, Dallas, Texas on February 26, 1998 at 10:00 a.m. and at
any adjournments thereof.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3, AND 4.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
This proxy when properly signed will be voted in the manner directed herein by
the undersigned shareholder. Please mark your votes [X]
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL.
FOR Election NOT FOR Election
of directors of directors
1. Election of directors: Steven B. Solomon, [ ] [ ]
Gilbert Gertner, Kenneth Johnsen, Victor
K. Kiam, II, Mark Rogers, Chris Economou,
and Axel Sawallich.
Except vote withheld from following nominee(s) listed in space above.
-------------------------------------------
FOR Amendment NOT FOR Amendment
[ ] [ ]
2. Amendment of Certificate of
Incorporation to change name
to Citadel Technology, Inc.
FOR Amendment NOT FOR Amendment
[ ] [ ]
3. Amendment of Certificate of
Incorporation to increase
authorized shares of common stock
to 60,000,000 from 30,000,000.
FOR Ratification NOT FOR Ratification
[ ] [ ]
4. Ratification of Grant Thornton, LLP
as independent accountants for fiscal
year ending February 28, 1998.
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
IMPORTANT - PLEASE SIGN AND RETURN PROMPTLY. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
Signature
--------------------------------------------------
Title:
--------------------------------------------------
Signature if held jointly
------------------------------------
Dated: , 1998
--------------
