<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/X/ 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:
------------------------------------------------------------------------
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[LOGO]
CITADEL COMPUTER SYSTEMS INCORPORATED
3811 TURTLE CREEK BOULEVARD, SUITE 600
DALLAS, TEXAS 75219
(214) 520-9292
To Our Stockholders: January 30, 1998
You are cordially invited to attend the Annual Meeting of Stockholders of
Citadel Computer Systems Incorporated to be held in The Loft Room, Stoneleigh
Hotel, 2927 Maple Avenue, Dallas, Texas on February 26, 1998 at 10:00 a.m. I
believe that the Annual Meeting of Stockholders 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 Meeting of
Stockholders, 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 to 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
recommended approval of the proposals.
YOUR VOTE IS EXTREMELY IMPORTANT BECAUSE BOTH THE NAME CHANGE AND THE
INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY
REQUIRE THE APPROVAL OF A MAJORITY OF THE OUTSTANDING SHARES. IF YOU DO NOT
VOTE, IT WILL HAVE THE SAME EFFECT AS VOTING AGAINST THESE PROPOSALS. PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE AS
SOON AS POSSIBLE. IF YOUR SHARES OF COMMON STOCK ARE HELD IN THE NAME OF A
BANK OR BROKERAGE FIRM, ONLY THAT FIRM CAN EXECUTE A PROXY CARD ON YOUR
BEHALF. PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND GIVE
INSTRUCTIONS FOR A PROXY CARD TO BE VOTED FOR THE NAME CHANGE AND THE
INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY.
Thank you for your support and cooperation.
Sincerely,
/s/ Steven B. Solomon
Steven B. Solomon
CHIEF EXECUTIVE OFFICER AND PRESIDENT
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[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 in The Loft Room, Stoneleigh Hotel, 2927
Maple Avenue, Dallas, Texas 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
/s/ Richard L. Travis, Jr.
Richard L. Travis, Jr., Secretary
Dallas, Texas
January 30, 1998
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN
THE POSTAGE PAID ENVELOPE PROVIDED.
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[LOGO]
CITADEL COMPUTER SYSTEMS INCORPORATED
3811 Turtle Creek Boulevard, Suite 600
Dallas, Texas 75219
--------------------
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 26, 1998
--------------------
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 (the "Meeting") 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 30,
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 20,776,661 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 entitled to vote at the Meeting to approve
the amendments to the Company's Certificate of Incorporation.
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
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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; and
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.
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. 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 the proposals to
amend the Company's Certificate of Incorporation.
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. 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 number 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 30,
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.
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PROPOSAL ONE
ELECTION OF DIRECTORS
The number of directors authorized by the Company's Bylaws is currently
fixed at eight, with the exact number to be fixed from time to time by the
Board of Directors. The Board of Directors has fixed the number of directors
at seven. 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
- ---- --- --------------------- --------------
Victor K. Kiam, II 71 Chairman of the Board 1996
Steven B. Solomon 33 President, Chief Executive Officer,
and Assistant Secretary 1992
Gilbert Gertner 73 Director 1992
Mark Rogers 38 Director 1996
Kenneth Johnsen 44 Director 1997
Chris A. Economou 42 Director 1993
Axel Sawallich 54 Director 1993
VICTOR K. KIAM, II has served as a director of the Company since July 1996
and has served as Chairman of the Company since January 1998. 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, and has served in various managerial capacities at
Remington since 1979. From 1988 to 1992, Mr. Kiam was Chairman of the New
England Patriots Football Team. Mr. Kiam also serves on the boards of
directors of several other consumer product companies (including Cirrus Air
Technologies, Inc., a manufacturer and distributor of products for
travelers), has written several books, sits on the boards of numerous
charitable, sales and civic organizations, and has received many awards for
his marketing expertise.
STEVEN B. SOLOMON has served as the President and Chief Executive Officer of
the Company since May 1997, as a director of the Company since February 1996
and as Assistant Secretary of the Company since January 1998. From February
1996 through April 1997, Mr. Solomon also served as Chief Operating Officer
of the Company, and from February 1996 through January 1998, he served as
Secretary of the Company. He was the president and a director of LoneStar
Hospitality Corp. ("LoneStar"), a predecessor of the Company that owned and
operated six Miami Subs franchised restaurants in Dallas and Houston, Texas,
from its inception in February 1992 until its merger with the Company (the
"Merger") in February 1996 and was chairman of the Board of Directors of
LoneStar from December 1994 until February 1996. During his tenure at
LoneStar, 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 other collegiate and
professional sports.
GILBERT GERTNER has served as a director of the Company since February 1996
and served as Chairman of the Company from February 1996 until January 1998,
and was chairman of Citadel's predecessor ("Old Citadel") from its inception
in July 1992 until the Merger. Since 1992, Mr. Gertner has been a principal
and the president of Gertner Investments, an investment firm specializing in
capitalizing and assisting management in the development of high-tech
companies. Mr. Gertner serves as a director of CXR Telecom Corp. 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
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MARK ROGERS has served as a director of the Company since July 1996.
Mr. Rogers manages NFT Ventures, Inc., a venture capital fund established by
Ray Noorda, the founder of Novell, Inc. In connection with his position at
NFT Ventures, Mr. Rogers advises several computer software companies in Silicon
Valley, Texas and Utah, with respect to various strategic and developmental
matters. Mr. Rogers also serves on the boards of directors of several other
high-tech companies.
KENNETH R. JOHNSEN has served as a director of the Company since October
1997. Mr. Johnsen is president of Metamor Solutions, the information
technology services division of CORESTAFF, and is an executive vice president
of CORESTAFF, one of the largest providers of information technology and
staffing services in the U.S. From 1975 until joining CORESTAFF in May 1997,
Mr. Johnsen was employed with IBM Corporation 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. The Company and Steven B. Solomon are
parties to an agreement to use their best efforts to nominate and elect a
representative designated by CORESTAFF to the Company's Board of Directors at
all annual or special stockholder meetings at which directors are being
elected until such time as CORESTAFF is the beneficial owner of less than two
percent (2%) of the Company's then outstanding stock.
CHRIS A. ECONOMOU has served as a director of the Company since February
1996, and was a director of LoneStar from June 1993 until the Merger. 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 approximately 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 served as a director of the Company since February
1996 and was a director of LoneStar from March 1993 until the Merger. Since
January 1997, Dr. Sawallich has been chief investment consultant for LIFEPLAN
Investments, Vienna, Austria. Since 1993, he has been the managing partner of
Global Invest, an investment firm located in Vienna, Austria. From 1991
until 1994, he also was a consultant for SERCO Investment Counseling
Corporation. From 1989 to 1990, Dr. Sawallich was the general manager and
director of the Vienna regional branch of Alegmeine Sparkasse Bank AG. From
May 1985 to November 1989, Dr. Sawallich was with Bank fur Arbeit und
Wirtschaft AG, Vienna, 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.
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
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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.
Solomon, Johnsen, Economou and Rogers, 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
aggregate number of meetings held by the Company's Board of Directors and
committees on which he served during the fiscal year ended February 28, 1997.
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.
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EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
NAME AGE POSITION WITH CITADEL
- ---- --- ---------------------
Steven B. Solomon 33 President, Chief Executive Officer,
Assistant Secretary and Director
Richard L. Travis, Jr. 41 Chief Financial Officer,
Chief Operating Officer and Secretary
Carl E. Banzhof 30 Chief Technology Officer
Jack Doxey 31 Vice President-Sales and Marketing
Bennett Klein 41 Vice President-Business Development
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 of the Company.
RICHARD L. TRAVIS, JR. has served as Chief Operating Officer and Chief
Financial Officer since he joined Citadel in December 1996 and as Secretary
since January 1998 and has approximately 20 years of financial experience in
the manufacturing, financial services, real estate, construction and
telecommunications industries. Prior to joining Citadel, 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.
CARL E. BANZHOF has served as Chief Technology Officer since July 1997, prior
to which he served as Vice President - Development of Network Products since
joining the Company in February 1996. 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 and vice president of software
engineering from 1992 to 1995 of Circuit Masters Software, Inc., a software
company which developed and marketed network management utilities for Novell
NetWare environments and was acquired by the Company is February 1996. Prior
to joining Circuit Masters Software, Inc., Mr. Banzhof was lead software
developer from 1988 to 1992 at Fluor Daniel Engineering, a software
development and worldwide engineering company. He also served as a software
developer for Micro Computer Business Systems from 1986 to 1987 and for
Southwest Manufacturing from 1983 to 1986.
JACK W. DOXEY has served as Vice President of Sales and Marketing since
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 November 1996 until October 1997, he served as Vice
President of Sales and Marketing for Visual Applications, a privately held
software manufacturer based in Kansas City, MO. From March 1995 until
November 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.
From September 1994 until March 1995, he helped found MindShare Associates, an
out-source marketing company for software and hardware manufacturers, where
he served as a Vice President. From July 1993 until September 1994, he managed
the retail channel marketing efforts for DCA in Alpharetta, GA. From August
1989 until July 1993, 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.
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BENNETT KLEIN has served as Vice President of Business Development since
January 1998. Prior to joining the Company, Mr. Klein was employed at Iomega
Corporation, where he was part of the original marketing team that
successfully brought the JAZ and ZIP removable storage media to the mass
market. He has approximately 15 years experience in OEM development and sales
and marketing, including experience with such industry leaders as Cheyenne
Software, where he was product line manager helping to market their premier
network storage management product line, and IBM, where he focused on sales
and marketing of mass storage, network management, telecommunications,
telephony and optical storage solutions.
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 20,776,661 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 January 20, 1998, 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 stockholders set forth below assumes 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 3,476,375 /1/ 15.5%
701 North Post Oak Road, Suite 350
Houston, Texas 77024
George T. Sharp 1,763,500 /1/ 7.9%
701 North Post Oak Road, Suite 350
Houston, Texas 77024
Steven B. Solomon 4,269,124 /2/ 18.6%
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219
Richard L. Travis, Jr. 741,500 /3/ 3.5%
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219
Carl E. Banzhof 237,201 /4/ 1.1%
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219
Bennett Klein 66,666 /5/ *
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219
Jack Doxey 27,775 /6/ *
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219
Chris A. Economou 274,400 /7/ 1.3%
150 North Federal Highway, Suite 210
Fort Lauderdale, Florida 33301
Kenneth R. Johnsen 4,550,000 /11/ 19.9%
CORESTAFF, Inc.
4400 Post Oak Parkway
Suite 2000
Houston, Texas 77027
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Victor K. Kiam, II 716,250 /8/ 3.5%
RPI Corporation
350 Fifth Avenue, Suite 5408
New York, New York 10018
Mark Rogers 201,500 /9/ 1.0%
NFT Ventures, Inc.
751 Laurel Street, No. 119
San Carlos, California 94070
Axel Sawallich 269,461 /10/ 1.3%
Beatrixgasse 3
A-1030 Vienna, Austria
CORESTAFF, Inc. 4,500,000 /11/ 19.8%
4400 Post Oak Parkway
Suite 2000
Houston, Texas 77027
Stuart B. Marks 185,725 *
13302 Brandywyne Court
Houston, Texas 77077
All officers and directors
as a group (13 persons): 16,047,102 /12/ 54.1%
*Less than one percent.
/1/ Includes 1,462,500 shares presently issuable pursuant to an option to
purchase Common Stock held by each of Messrs. Gertner and Sharp. 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, and 732,375 shares standing in Worldwide PetroMoly's name pursuant
to a pledge by Steven B. Solomon, which shares Messrs. Gertner and Sharp
agreed to return to Mr. Solomon but which have not been returned. See
"Certain Relationships and Transactions." Does not include 2,500,000 and
1,400,000 shares for Messrs. Gertner and Sharp, respectively, that each has
agreed to transfer to the Company in exchange for certain accounts receivable
of the Company. See "Certain Relationships and Transactions." These shares
had not been received and cancelled by the Company as of the Record Date.
/2/ Includes 2,175,000 shares presently issuable pursuant to options to
purchase Common Stock and 732,375 shares that have been pledged by
Mr. Solomon to Worldwide PetroMoly, Inc., a company controlled by Gilbert
Gertner. Although Messrs. Gertner and Sharp agreed to cause Worldwide
PetroMoly to return the 732,375 shares, such shares have not yet been returned
to Mr. Solomon. See "Certain Relationships and Transactions."
/3/ Includes 600,000 shares presently issuable pursuant to options to purchase
Common Stock.
/4/ Includes 50,000 shares presently issuable pursuant to options to purchase
Common Stock and 2,000 shares owned by his spouse.
/5/ Includes 66,666 shares presently issuable pursuant to options to
purchase Common Stock.
/6/ Includes 27,775 shares presently issuable pursuant to options to purchase
Common Stock.
/7/ Includes 100,000 shares presently issuable pursuant to options to purchase
Common Stock.
/8/ Includes 506,250 shares presently issuable pursuant to options to purchase
Common Stock.
/9/ Includes 200,000 shares presently issuable pursuant to options to purchase
Common Stock.
/10/ 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.
/11/ Includes 2,000,000 shares presently issuable pursuant to warrants to
purchase Common Stock owned by CORESTAFF, 2,500,000 shares owned by
CORESTAFF, and 50,000 shares presently issuable pursuant to options to
purchase Common Stock owned by Mr. Johnsen. Mr. Johnsen is an executive
officer of CORESTAFF and disclaims beneficial ownership of such shares and
warrants owned by CORESTAFF.
/12/ Includes 8,900,691 shares presently issuable pursuant to presently
exercisable options or warrants held by Messrs. Gertner, Sharp, Banzhof,
Klein, Doxey, Solomon, Johnsen, Travis, Kiam, Rogers, Economou and Sawallich.
10
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE 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
Technology 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"), Messrs.
Gertner and Sharp agreed to the termination of their employment and
consulting agreements. The following is a brief description of Mr. Sharp's
prior contract, Mr. Gertner's prior 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 and settled in full in
April 1997 by Mr. Sharp and the Company in connection with a discharge of
certain indebtedness of GGS Investment Company to the Company (see also
"Certain Relationships and Related Transactions").
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. Gertner's consulting agreement was terminated and settled in
full in connection with the Company's restructuring.
Mr. Solomon's employment agreement is dated as of July 15, 1997, and its
initial term expires on February 28, 2002. 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 $132,000 during the first year of the employment agreement and
will be $144,000 during the second year and $168,000 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 provides life insurance in the amount of $1,000,000 on the
life of Mr. Solomon, in addition to a 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 provides 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, Gilbert Gertner, the Company's Chairman of the Board at
that time, 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 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.
As of the Record Date, the Company had not received the shares from Messrs.
Gertner and Sharp. 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.
In December 1996, Worldwide PetroMoly, Inc., a company controlled by Mr.
Gertner loaned Citadel the original principal amount of $500,000. In
connection with the loan, Citadel granted warrants to purchase 150,000 shares
of its 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 the GGS
joint venture note due the Company discussed below). The loan was secured by
a pledge of 732,375 shares of Citadel Common Stock owned by Mr. Solomon. 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 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, Mr. Sharp
and Mr. Solomon, who were 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 Mr. Gertner, 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.
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. 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 name under which the Company 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
stockholders, 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 January 20, 1998, 20,776,661 shares of Common Stock were
outstanding and an additional approximately 7,700,000 shares were reserved
for issuance in connection with the Company's stock option plans, and
approximately 4,100,000 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 approximately 27,400,000.
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 $2,500,000 at January 20, 1998. 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 60,000,000.
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 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 STOCKHOLDERS 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 nor 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 30, 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 I 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
Chief Executive Officer and President
20
<PAGE>
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
____________________
JANUARY 30, 1998
DALLAS, TEXAS
____________________
LOGO
21
<PAGE>
CITADEL COMPUTER SYSTEMS INCORPORATED
PROXY
FOR ANNUAL MEETING OF THE STOCKHOLDERS 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
Stockholders of the Company to be held at The Loft Room, Stoneleigh Hotel,
2927 Maple Avenue, 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 as in this
example using dark ink only [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 the following nominee(s) listed in space above.
<TABLE>
<S> <C> <C> <C>
FOR Amendment NOT FOR Amendment ABSTAIN
[ ] [ ] [ ]
2. Amendment of Certificate of
Incorporation to change name
to Citadel Technology, Inc.
FOR Amendment NOT FOR Amendment ABSTAIN
[ ] [ ] [ ]
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 ABSTAIN
[ ] [ ] [ ]
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.
</TABLE>
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
--------------
