<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CITADEL TECHNOLOGY, INC.
------------------------
(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 TECHNOLOGY, INC.
3811 TURTLE CREEK BOULEVARD, SUITE 600
DALLAS, TEXAS 75219
(214) 520-9292
June 29, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Citadel Technology, Inc. to be held at the corporate offices of the Company,
3811 Turtle Creek Blvd., Suite 600, Dallas, Texas 75219 on August 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 and the approval of the Company's auditors. Your Board has
recommended approval of these proposals.
YOUR VOTE IS IMPORTANT. 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.
Thank you for your support and cooperation.
Sincerely,
/s/ Steven B. Solomon
-------------------------------------
Steven B. Solomon
CHIEF EXECUTIVE OFFICER AND PRESIDENT
<PAGE>
[LOGO]
CITADEL TECHNOLOGY, INC.
3811 TURTLE CREEK BOULEVARD, SUITE 600
DALLAS, TEXAS 75219 (214) 520-9292
www.citadel.com
____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 26, 1998
______________________
To the Stockholders of Citadel Technology, Inc.:
As a stockholder of Citadel Technology, Inc., 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 corporate office of the Company at 3811 Turtle Creek Blvd., Suite
600, Dallas, Texas 75219 on August 26, 1998 at 10:00 a.m. for the following
purposes:
1. To elect seven members to the Company's Board of Directors, each to
hold office until the next annual meeting and until his successor is elected
and qualified;
2. To ratify the selection of Grant Thornton LLP as the Company's
independent auditors for the fiscal year ending February 28, 1999; and
3. 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 July 31, 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.,
CHIEF OPERATING AND FINANCIAL OFFICER &
CORPORATE SECRETARY
Dallas, Texas
June 29, 1998
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED
PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED.
<PAGE>
[LOGO]
CITADEL TECHNOLOGY, INC.
3811 Turtle Creek Boulevard, Suite 600
Dallas, Texas 75219
www.citadel.com
________________
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
AUGUST 26, 1998
________________
INFORMATION REGARDING SOLICITATION AND VOTING
GENERAL
This Proxy Statement and the enclosed Proxy are solicited on behalf of Citadel
Technology, Inc. (the "Company") for use at the Annual Meeting of Stockholders
(the "Meeting") to be held August 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 August 4,
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 July 31, 1998 (the "Record
Date") are entitled to notice of and to vote at the Meeting. On June 29,
1998, there were issued and outstanding 24,948,348 shares of Common Stock.
There is no other class of voting security of the Company issued or
outstanding and entitled to vote at the meeting. 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.
1
<PAGE>
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 presence at the Meeting, in person
or by proxy, of a majority of the outstanding shares of the Company's Common
Stock is necessary to constitute a quorum; abstentions and broker non-votes
will be counted for purposes of determining a quorum. 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 the directors
of the Company.
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; AND
2. FOR THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING FEBRUARY 28, 1999.
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 or broker non-vote 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 other than with respect to the
determination as to whether a quorum exists.
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, 1999, 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.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
In accordance with the Company's Bylaws, the Board of Directors has fixed the
number of directors at seven. All seven directors are proposed to be elected
at the Meeting and 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. 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 seven persons named below are the Board's nominees for election as
directors at the Meeting. All nominees are presently directors of the
Company. The information appearing in the following table with respect to
the nominees for directors has been furnished to the Company by the
respective nominees.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH CITADEL DIRECTOR SINCE
- ---- --- --------------------- --------------
<S> <C> <C> <C>
Victor Kiam, II 72 Chairman of the Board 1996
Steven Solomon 33 President, Chief Executive Officer,
and Assistant Secretary 1992
Mark Rogers 39 Director 1996
Kenneth Johnsen 44 Director 1997
Chris Economou 43 Director 1993
Axel Sawallich 54 Director 1993
Gilbert Gertner 74 Director 1992
</TABLE>
VICTOR 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 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.
From February 1996 through April 1997, Mr. Solomon served as Chief Operating
Officer 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.
3
<PAGE>
MARK ROGERS has served as a director of the Company since July 1996. Since
1989, Mr. Rogers has managed 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 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 Metamor Worldwide, Inc. (formerly CORESTAFF, Inc.) ("Metamor"), and
is an executive vice president of Metamor, one of the largest providers of
information technology and staffing services in the U.S. From 1975 until
joining Metamor 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 Metamor to the Company's Board of Directors
at all annual or special stockholder meetings at which directors are being
elected until such time as Metamor is the beneficial owner of less than two
percent (2%) of the Company's then outstanding stock. Mr. Johnsen also serves
on the board of Metamor.
CHRIS 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, primarily in the
transactional and corporate areas since 1988. He served as executive vice
president, secretary and general counsel of Miami Subs Corporation from
August 1992 until June 1994 and director from 1989 to 1994.
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 Allgemeine Sparkasse Bank AG. From May 1985 to
November 1989, Dr. Sawallich was with Bank fuer 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. Dr. Sawallich has also been acting as an independent, publicly
certified, investment advisor since 1993.
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.
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
4
<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. 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, 1998, the Board of Directors held
one meeting and took action by unanimous consent on two occasions, and the
executive committee took action by unanimous consent on seven occasions.
Each director, with the exception of Mr. Gertner, 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, 1998.
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.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH CITADEL
- --------------------------------------------------------------------------------
<S> <C> <C>
Steven B. Solomon 33 President, Chief Executive Officer,
Assistant Secretary and Director
Richard L. Travis, Jr. 42 Chief Financial Officer, Chief
Operating Officer and Secretary
Carl E. Banzhof 32 Chief Technology Officer
Bennett Klein 43 Vice President of Business
Development
</TABLE>
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 Financial Officer since he joined the
Company in December 1996, as Chief Operating Officer since April 1997, and as
Secretary since January 1998. He 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. 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.
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 in February 1996. Prior to
joining Circuit Masters
5
<PAGE>
Software, Inc., Mr. Banzhof was lead software developer from 1988 to 1992 at
Fluor Daniel Engineering, a software development and worldwide engineering
company.
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 DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
As of June 29, 1998, there were issued and outstanding 24,948,348 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 June 29, 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. Except as otherwise indicated, all shares
are owned directly and the owner has the sole voting and investment power
with respect thereto.
<TABLE>
<CAPTION>
NUMBER OF APPROXIMATE
NAME AND ADDRESS SHARES OWNED PERCENT OF CLASS
- --------------------------------------------------------------------------------
<S> <C> <C>
Carl Banzhof
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219 287,201 /1/ 1.1%
Metamor Worldwide, Inc.
4400 Post Oak Parkway, Suite 200
Houston, Texas 77027 6,360,465 /2/ 22.1%
Chris Economou
150 North Federal Highway, Suite 210
Fort Lauderdale, Florida 33301 274,400 /3/ 1.1%
Gilbert Gertner
1300 Post Oak Blvd., Suite 1985
Houston, Texas 77056 3,476,375 /4/ 13.1%
Kenneth Johnsen
Metamor Worldwide, Inc.
4400 Post Oak Parkway, Suite 200
Houston, Texas 77027 6,410,465 /2/ 22.2%
Icarus Investments I, Ltd.
8144 Walnut Hill Lane, Suite 172
Dallas, Texas 75231 3,115,000 /5/ 12.0%
Victor Kiam, II
RPI Corporation
350 Fifth Avenue, Suite 5408
New York, New York 10018 722,500 /6/ 2.8%
Bennett Klein
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219 216,664 /7/ .9%
Thomas Oxley
2727 South Ocean Blvd., Apt. 803
Highland Beach, Florida 33487 1,900,000 /8/ 7.5%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF APPROXIMATE
NAME AND ADDRESS SHARES OWNED PERCENT OF CLASS
- --------------------------------------------------------------------------------
<S> <C> <C>
Mark Rogers
NFT Ventures, Inc.
751 Laurel Street, No. 119
San Carlos, California 94070 401,500 /9/ 1.6%
Dr. Axel Sawallich
Beatrixgasse 3
A-1030 Vienna, Austria 137,144 /10/ .5%
George Sharp
15911 Champion Forrest
Spring, Texas 77379 1,513,500 /3/ 5.7%
Steven Solomon
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219 4,654,124 /11/ 17.0%
Richard Travis
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219 866,500 /12/ 3.4%
All officers and directors
as a group (10 persons): 16,708,248 /13/ 47.7%
</TABLE>
/1/ Includes 100,000 shares presently issuable pursuant to options to purchase
Common Stock and 2,000 shares owned by his spouse.
/2/ Includes 2,000,000 shares presently issuable pursuant to warrants to
purchase Common Stock owned by Metamor Worldwide, Inc. ("Metamor"), 2,500,000
shares owned by Metamor, and 1,860,465 shares of Common Stock issuable on
conversion of Preferred Stock owned by Metamor. Mr. Johnsen's shares include
the Metamor shares and 50,000 shares presently issuable pursuant to options
to purchase Common Stock owned by Mr. Johnsen. Mr. Johnsen is an executive
officer of Metamor and disclaims beneficial ownership of such shares and
warrants owned by Metamor.
/3/ Includes 100,000 shares presently issuable pursuant to options to purchase
Common Stock.
/4/ Includes 1,462,500 shares presently issuable pursuant to options 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. ("Petromoly"), a company controlled by Mr.
Gertner, and 732,375 shares standing in PetroMoly's name pursuant to a pledge by
Steven B. Solomon, which shares Messrs. Gertner and Sharp agreed to cause
Petromoly 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 ("these 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." Mr.
Gertner and Sharp have each filed affidavits of lost certificates with the
transfer agent relating to these shares. However, as of the Record Date, these
shares have not been canceled by the transfer agent as the shareholders had not
provided the transfer agent with the necessary bond or indemnification. These
shares have been excluded from the number of shares outstanding, as of the
Record Date.
/5/ Includes 1,000,000 shares presently issuable pursuant to warrants to
purchase Common Stock and 115,000 shares owned by Michael Ruff, President of
Icarus. Based solely on the Schedule 13G filed with the Securities and
Exchange Commission ("SEC") on June 5, 1998 with respect to the Company's
Common Stock owned by Icarus. According to the Schedule 13G, Icarus may be
deemed to own beneficially 2,000,000 shares of Common Stock, acquired for
investment purposes.
/6/ Includes 200,000 shares presently issuable pursuant to options to purchase
Common Stock and 56,250 shares presently issuable pursuant to warrants to
purchase Common Stock and includes warrants to purchase 250,000 shares held
by RPI, Inc., a company owned and controlled by Mr. Kiam..
/7/ Includes 166,664 shares presently issuable pursuant to options to purchase
Common Stock.
/8/ Includes 250,000 shares presently issuable pursuant to warrants to
purchase Common Stock. Based solely on information contained in the Schedule
13 G/A (Amendment No. 2) filed with the Securities and Exchange Commission
("SEC") on June 16, 1998 with respect to the Company's Common Stock owned by
Mr. Oxley. According to the Schedule 13 G/A, Mr. Oxley may be deemed to own
beneficially 1,900,000 Shares of Common Stock, acquired solely for investment
purposes. Mr. Oxley has sole voting and disposition power as to all such shares.
/9/ Includes 400,000 shares presently issuable pursuant to options to purchase
Common Stock.
/10/ Includes 12,144 shares held by Dr. Sawallich as trustee, over which he has
voting and dispositive power and 125,000 shares presently issuable pursuant to
options to purchase Common Stock.
7
<PAGE>
/11/ Includes 2,425,000 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."
/12/ Includes 725,000 shares presently issuable pursuant to options to purchase
Common Stock.
/13/ Includes 8,210,414 shares presently issuable pursuant to presently
exercisable options or warrants held by Messrs. Banzhof, Economou, Gertner,
Johnsen, Kiam, Klein, Rogers, Sawallich, Solomon, and Travis or their
affiliates and 1,860,465 shares of Common Stock issuable on the conversion of
Preferred Stock owned by Metamor.
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"). Such persons 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 all filing requirements
required by Section 16(a) for fiscal 1998 applicable to such persons were
complied with, except Messrs. Kiam and Johnsen filed a Form 5 late (such Form
5s related to grants to, or reductions in the exercise price of, options),
and Messrs. Sawallich and Solomon each filed one Form 4 late. Mr.
Sawallich's Form 4 related to the sale of securities and Mr. Solomon's
related to the purchase of securities and each were subsequently filed.
COMPENSATION OF EXECUTIVE OFFICERS
The total compensation for the three fiscal years ended February 28, 1998, for
George Sharp, the Company's former Chief Executive Officer; Steven Solomon, the
Company's current Chief Executive Officer (and the chief executive officer of
LoneStar prior to the Merger); Richard Travis, the Company's Chief Operating and
Financial Officer; and Carl Banzhof, the Company's 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
$100,000 during the fiscal year ended February 28, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NUMBER OF
FISCAL RESTRICTED UNDERLYING ALL OTHER
NAME AND POSITION (S) YEAR SALARY BONUS STOCK AWARD SHARES COMPENSATION
($) ($) ($) (#) ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George Sharp 1998 0 0 0 0 200,000 /1/
former Vice Chairman 1997 150,000 42,727 0 0 11,400 /1/
and President 1996 * 20,833 0 0 0 0
Steve Solomon
President, Chief 1998 135,000 104,000 /2/ 0 0 19,742 /2/
Executive Officer 1997 120,000 66,496 0 0 18,846 /2/
and Asst. Sect'y 1996 + 110,000 0 0 0 13,150 /2/
Richard Travis
Chief Operating 1998 130,000 10,000 20,000 /3/ 70,000 /3/ 14,952 /3/
and Financial 1997 29,791 /3/ 0 0 2,650 /3/
Officer and Sect'y 1996 0 0 0 0 0
Carl Banzhof 1998 100,625 500 0 0 0
Chief Technology 1997 103,228 1,000 0 0 0
Officer 1996 15,600 /4/ 0 0 0 0
</TABLE>
* Transition period
+ April 1, 1995 - February 29, 1996
/1/ Mr. Sharp received $200,000 as consideration for agreeing to terminate his
noncancellable employment contract. This amount was applied against amounts due
the Company from a certain joint venture in which Mr. Sharp was a partner - see
"Employment and Termination of Employment Arrangements" and "Certain
Relationships and Related Transactions." Mr. Sharp received a car allowance of
$950 per month during the fiscal years 1997 and 1998 (through April 1997). Mr.
Sharp ended his employment with the Company as part of the Company's
restructuring in April 1997.
8
<PAGE>
/2/ In connection with a discharge of a certain indebtedness, Mr. Solomon
forgave $79,000 in accrued compensation due him - see "Certain Relationships and
Related Transactions." Mr. Solomon received a car allowance of $950 per month
and life and disability insurance during fiscal years 1997 and 1998. Mr.
Solomon received a car allowance of $650 per month from March 1, 1995 through
June 30, 1995 and $950 per month after July 1, 1995, and life and disability
insurance during the fiscal year ended February 29, 1996.
/3/ Mr. Travis received a car allowance of $950 per month for fiscal years 1997
(December through February 1997) and 1998. In connection with Mr. Travis's
employment agreement Mr. Travis can elect to receive Company stock in-lieu of
certain stipulated raises based on the closing bid price of the Company's Common
Stock as of such date. Mr. Travis so elected this option during the fiscal year
ended February 28, 1998, and in connection therewith received 70,000 shares of
the Company's common stock. Mr. Travis commenced employment with the Company in
December 1996.
/4/ Mr. Banzhof started to work for the Company in December 1995.
OPTION GRANTS DURING 1998 FISCAL YEAR
The following table contains information concerning stock option grants made to
each of the Named Officers for the fiscal year ended February 28, 1998. No
stock appreciation rights were granted to these individuals during such year.
Mr. Sharp did not receive any stock option grants during the year and as such
has not been included in the table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
INDIVIDUAL GRANTS /1/ ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
TERM /2/
- ------------------------------------------------------------------- ------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/ EXERCISE OR
UNDERLYING SARS GRANTED BASE PRICE EXPIRATION
NAME OPTIONS/SARS TO EMPLOYEES ($ / SH ) DATE 5% ($) 10% ($)
GRANTED (#) IN FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Steven Solomon 1,000,000 17.5% .25 7/15/07 $ 157,224 $ 398,436
1,000,000 17.5% .25 7/15/07 157,224 398,436
Richard Travis 650,000 11.4% .20 7/15/07 $ 81,756 $ 207,187
500,000 8.7% .35 6/01/07 110,057 278,905
Carl Banzhof 100,000 4.0% .25 7/15/07 $ 15,722 $ 39,844
</TABLE>
/1/ The options disclosed in the table were granted on July 16, 1997, with the
exception of Mr. Travis's 500,000 options which were granted on June 1, 1997.
The exercise price for each option may be paid in cash, in shares of common
stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of purchased shares. The Company
may also finance the option exercise by loaning the optionee sufficient funds
to pay the exercise price for the purchased shares. Of Mr. Solomon's and Mr.
Travis's options, 1,000,000 and 650,000 respectively, were fully vested as of
the date of grant, and options for 1,000,000 and 500,000, respectively, were
granted in connection with their employment agreements. These options vest at
250,000 and 125,000 shares per year, respectively, commencing July 15, 1998 and
June 1, 1998, respectively. Mr. Banzhof's options vested as follows: 50,000 on
the date of grant, with the remaining 50,000 vesting on July 16, 1998.
/2/ The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can be
no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the life of
the options will be at the assumed 5% and/or 10% levels or at any other defined
levels. Unless the market of the Common Stock appreciates over the option term,
no value will be realized from the option grants made to the executive officers.
9
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table describes, for each of the Named Officers, options
exercised and the potential values for their unexercised in-the-money options
at February 28, 1998 (the Company issued no SARs during the year):
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISABLE IN-
UNEXERCISED THE-MONEY OPTIONS/
OPTIONS/SARS AT SARS AT FISCAL
FISCAL YEAR END YEAR END
($) ($)-/2/
SHARES VALUE ------------------- --------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) /1/ UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George Sharp 0 0 1,462,500 / 0 $0 / 0
Steven Solomon 400,000 $68,000 2,175,000 / 1,000,000 $304,500 / 140,000
Richard Travis 50,000 20,000 600,000 / 500,000 $114,000 / 20,000
Carl Banzhof 0 0 50,000 / 50,000 $7,000 / 7,000
</TABLE>
/1/ Based on the market price at the date exercised less the exercise price
payable for each share.
/2/ Based on the fair market value of the Company's Common Stock at February 28,
1998 of $.39 per share less the exercise price payable for each share.
REPRICING OF OPTIONS
<TABLE>
<CAPTION>
SECURITIES LENGTH OF ORIGINAL
UNDERLYING NUMBER MARKET PRICE OF OPTION TERM
OF OPTIONS/SARS STOCK AT TIME OF EXERCISE PRICE AT NEW REMAINING AT DATE
REPRICED OR REPRICING OR TIME OF REPRICING EXERCISE OF REPRICING
NAME DATE AMENDED (#) AMENDMENT OR AMENDMENT ($) PRICE ($) AMENDMENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Steven Solomon -
President and Chief
Executive Officer 7/15/97 1,575,000 $.20 $.89 $.25 3 1/2 years
Mark Rogers -
Director 7/15/97 400,000 $.20 $.89 $.40 3 1/2 years
Victor Kiam -
Chairman 7/15/97 400,000 $.20 $.89 $.40 3 1/2 years
Gil Gertner -
Director 7/15/97 1,000,000 $.20 $.89 $.40 2 1/2 years
</TABLE>
In July 1997, following a significant decline in the market price of the
Company's common stock, the board of directors of Citadel approved the
reduction in the exercise price of several outstanding options and warrants,
held by certain members of the board and employees, from their existing
exercise price to either $.25 per share (for employees) or $.40 (for
directors).
The board approved the reduction in order to encourage these persons to
increase their investment in Citadel at a time when additional funds were
needed in connection with the operation and growth of the Company's business
and to enhance the Company's ability to retain the services of such
individuals by reducing the exercise price of the options closer to the then
current market price of the Company's common stock. Mr. Solomon and Mr. Kiam
exercised options to purchase 400,000 shares and 200,000 shares,
respectively. The board approved the reduction in the exercise price of 1
million options held by Mr. Gertner, former chairman of the board, from $.89
to $.40, at the same time, in consideration of Mr. Gertner agreeing to
forgive his consulting contract - see "Employment and Termination of
Employment Arrangements" and "Certain Relationships and Related Transactions.
10
<PAGE>
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
Company renegotiated Mr. Solomon's employment agreement as of July 15, 1997, and
entered into an employment agreement with Mr. Travis and Mr. Klein as of June 1,
1997 and January 5, 1998, respectively. Each agreement provides for an annual
base salary and bonus to be awarded at the discretion of the Board. In
addition, each agreement provides for the payment of certain benefits in the
event of termination other than for cause and certain life and disability
benefits.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, contracted with Metamor Software Solutions, division of Metamor
Worldwide, Inc. (formerly CORESTAFF, Inc.) to provide various development
services for the Company. The Company incurred $112,629 in expenses related
to these services during the fiscal year ended February 28, 1998. Mr.
Johnsen, one of the Company's directors, is executive vice president of
Metamor.
In connection with a $1,125,000 8% redeemable convertible note offering dated
June 9, 1997, the Company's former chairman pledged stock of a company
controlled by him to secure the repayment of up to $500,000 of this
indebtedness. In connection with this pledge, the Company paid Mr. Gertner a
fee of $25,000. On February 15, 1998 the Company restructured this indebtedness
and in connection therewith Mr. Gertner's collateral was released.
In April 1997, the Company entered into an Asset Sale Agreement with Messrs.
Gertner and Sharp, two of the Company's directors at the time (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 $155,000
($72,000 related to the discharge of joint venture indebtedness discussed
below). The carrying value of the receivables at February 28, 1997, net of
allowance, was $1,992,000. Pursuant to the participation interest retained by
the Company, 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. Consideration received from the Purchasers included 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 $2,147,500). The shares acquired
represented approximately 23% of the Company's then issued and outstanding
shares and are deemed treasury shares. As of the Record Date, the Company
had not canceled the shares from the Purchasers because the certificates
had been lost by the Purchasers, who have submitted lost stock affidavits
to the Company's transfer agent but have not paid the indemnity bond to
effect the cancellation. The transaction resulted in no gain or loss
to the Company.
At various times during the year ended February 28, 1998, Messrs. Solomon and
Travis advanced funds to the Company to fund various short-term obligations of
the Company.
During the year ended February 28, 1998, the Company lent approximately
$122,000 to its chief executive officer.
During the fiscal year ended February 28, 1998, the Company incurred legal
fees in the amount of $69,800 to Wood, Exall & Bonnet, L.L.P. David Wood, an
officer of one of the partners of such firm, is the brother-in-law of Steven
B. Solomon. The Company also granted options to purchase up to 200,000 shares
of its Common Stock to Mr. Wood.
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 754,000 shares of the Company's Common
Stock, valued at approximately $1,282,000 as of the date of the transaction.
11
<PAGE>
The joint venture was not profitable, and the loan was discharged in April 1997
in the following manner: Mr. Solomon forgave $79,000 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.
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 certain obligations of the Company. At various times
during the year, Messrs. Gertner and Solomon advanced funds to the Company to
fund various short-term obligations.
12
<PAGE>
PROPOSAL TWO
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,
1998, 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, 1999, 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
13
<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.
STOCKHOLDER PROPOSALS
The Company's 1999 Annual Meeting of stockholders is scheduled to be held on
or about August 26, 1999. In order to be considered for inclusion in the
Company's proxy materials for that meeting, stockholders proposals must be
received at the Company's executive offices, addressed to the attention of
the Secretary, no later than March 1, 1999.
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 TECHNOLOGY, INC.
/s/ Steven B. Solomon
- -------------------------------------
STEVEN B. SOLOMON
CHIEF EXECUTIVE OFFICER AND PRESIDENT
Dallas, Texas
June 29, 1998
14
<PAGE>
CITADEL TECHNOLOGY, INC.
PROXY
FOR ANNUAL MEETING OF THE STOCKHOLDERS
OF CITADEL TECHNOLOGY, INC.
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 corporate office of the Company at
3811 Turtle Creek Blvd., Dallas, Texas 75219 on August 26, 1998 at 10:00 a.m.
and at any adjournments thereof.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
(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.
<TABLE>
FOR ELECTION WITHHOLD AUTHORITY TO
OF ALL NOMINEES VOTE FOR ALL NOMINEES
<S> <C> <C>
1. Election of directors: Steven B. Solomon, [ ] [ ]
Gilbert Gertner, Kenneth Johnsen,
Victor K. Kiam, II, Mark Rogers,
Chris Economou, and Axel Sawallich.
</TABLE>
________________________________________________________________________________
INSTRUCTION: To withhold authority to vote for any nominee, write the nominees
name in the space above.
<TABLE>
<CAPTION>
FOR RATIFICATION NOT FOR RATIFICATION ABSTAIN
<S> <C> <C> <C>
2. Ratification of Grant Thornton, LLP [ ] [ ] [ ]
as independent accountants for fiscal
year ending February 28, 1999.
</TABLE>
3. 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
