<PAGE> 1
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
CT HOLDINGS, INC.
(FORMERLY 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> 2
[CT HOLDINGS,INC. LOGO]
CT HOLDINGS, INC.
(FORMERLY CITADEL TECHNOLOGY, INC.)
3811 TURTLE CREEK BOULEVARD, SUITE 770
DALLAS, TEXAS 75219
(214) 520-9292
January 26, 2000
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of CT
Holdings, Inc. (formerly Citadel Technology, Inc.) to be held in the Ballroom of
the Stoneleigh Hotel, 2927 Maple Avenue, Dallas, Texas on February 25, 2000 at
10:00 a.m. I believe that the Annual Meeting of Stockholders provides an
excellent opportunity for stockholders to become better acquainted with the
Company 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 the election of directors. Your Board has
recommended that the Stockholders vote in favor of the nominees for director.
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> 3
[CT HOLDINGS, INC. LOGO]
CT HOLDINGS, INC.
(FORMERLY CITADEL TECHNOLOGY, INC.)
3811 TURTLE CREEK BOULEVARD, SUITE 770
DALLAS, TEXAS 75219
(214) 520-9292
www.citadel.com
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 25, 2000
----------------------
To the Stockholders of CT Holdings, Inc. (formerly Citadel Technology, Inc.):
As a stockholder of CT Holdings, 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 in the
Ballroom of the Stoneleigh Hotel, 2927 Maple Avenue, Dallas, Texas on February
25, 1999 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; and
2. 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 December 30, 1999 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.
A Proxy Statement, form of Proxy and copy of the Annual Report on Form 10-KSB
for the fiscal year ended February 28, 1999 accompany this notice.
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.
Steven B. Solomon,
As Chief Executive Officer
and on behalf of the Board
of Directors
Dallas, Texas
January 26, 2000
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY
CARD IN THE POSTAGE PAID ENVELOPE PROVIDED.
<PAGE> 4
CT HOLDINGS, INC.
(FORMERLY CITADEL TECHNOLOGY, INC.)
3811 Turtle Creek Boulevard, Suite 770
Dallas, Texas 75219
www.citadel.com
----------------
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
to be held February 25, 2000
---------------
INFORMATION REGARDING SOLICITATION AND VOTING
GENERAL
This Proxy Statement and the enclosed Proxy are solicited on behalf of
CT Holdings, Inc. (the "Company") for use at the Annual Meeting of Stockholders
(the "Meeting") to be held February 25, 2000, 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.
In December 1999, the Company changed its corporate name to CT
Holdings, Inc. We believe that our new name is more descriptive of our focus on
incubation of emerging B2B ventures and our current substantial investment in
How2.com. We believe that any goodwill associated with our former legal name
will be preserved due to the continued use of the name "Citadel Technology" to
identify our software business. Following the inadvertent failure of our outside
consultants to file a return with the Delaware franchise tax authority in
November 1999, another entity obtained the name Citadel Technology, Inc. in
Delaware. When we filed reinstatement materials in Delaware, we adopted our new
name CT Holdings, Inc. pursuant to statutory procedures that also require the
officer who signed the renewal documents to call a stockholders meeting.
These proxy solicitation materials are being mailed on or about January
31, 2000 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 December 30, 1999
(the "Record Date") are entitled to notice of and to vote at the Meeting. On
December 30, 1999 there were issued and outstanding 44,870,698 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
<PAGE> 5
revocation in writing, executing a subsequent proxy or attending 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 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:
FOR THE ELECTION OF THE SEVEN NOMINEES LISTED UNDER "ELECTION OF
DIRECTORS" AS NOMINEES OF THE COMPANY FOR ELECTION AS DIRECTORS.
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. In connection with the election of
directors, 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.
The stockholders of the Company have no appraisal rights under the
DGCL, 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.
PROPOSAL
ELECTION OF DIRECTORS
In accordance with the Company's Bylaws and as required by the DGCL in
connection with the Company's renewal of its charter as described above in
"General," the Company is soliciting votes for election of its Board of
Directors. 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
2
<PAGE> 6
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 THE COMPANY DIRECTOR SINCE
- ----- --- -------------------------- --------------
<S> <C> <C> <C>
Steven B. Solomon 35 President, Chief Executive
Officer, and Assistant Secretary 1992
Victor K. Kiam, II 72 Director 1996
Lawrence Lacerte 47 Director 1999
Chris A. Economou 45 Director 1993
Mark Rogers 40 Director 1996
Michael Ruff 24 Director 1998
Dr. Axel Sawallich 55 Director 1993
</TABLE>
STEVEN B. SOLOMON has served as the President and Chief Executive Officer of the
Company since May 1997 and 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., a predecessor of the Company that owned and operated Miami
Subs franchised restaurants in Dallas and Houston, Texas, from its inception in
February 1992 until its merger with the Company 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
professional and collegiate sports. Mr. Solomon is also Chairman of the Board of
Directors and Chief Executive Officer of How2.com, Inc., a subsidiary of the
Company.
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, 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
Ronson, plc, a marketer of lighters and consumer products). Mr. Kiam also serves
on the Board of Directors of How2.com.
LAWRENCE LACERTE has served as a director of the Company since January 1999. Mr.
Lacerte has served as President of Lacerte Technologies, Inc., a Dallas based
investment firm, since July 1998. From 1978 until July 1998, Mr. Lacerte served
as Chairman and Chief Executive Officer of Lacerte Software Corporation, a tax
and accounting software company. In June 1998, Lacerte Software was acquired by
Intuit Corporation. Mr. Lacerte also serves on the Boards of Directors of
Universal Display Corporation, a publicly traded company engaged in the research
and development of flat panel displays, and Teraglobal Communications Corp., a
publicly traded communications technology company that designs and markets
microprocessor and software-based products and services for real-time
communications. Mr. Lacerte also serves as Vice Chairman of the Board of
Directors of How2.com.
3
<PAGE> 7
CHRIS A. ECONOMOU has served as a director of the Company since February 1996,
and was a director of LoneStar from June 1993 until its merger with the Company.
Mr. Economou 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 as a director from 1989 to
1994.
MARK ROGERS has served as a director of the Company since July 1996. Since 1989,
Mr. Rogers has served as a partner and Chief Operating Officer of NFT Ventures,
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 Texas, Utah and Silicon Valley, with respect to
various strategic and developmental matters. Mr. Rogers also serves on the
boards of directors of Cytation.com Incorporated, an online college application
assistance company, and several other high-tech companies.
MICHAEL RUFF has served as a director of the Company since July 1998. Mr. Ruff
served as chairman of the board of directors of Texas Central Bank, N.A., from
February 1998, and as a member of the board of directors of the bank from
December 1995, until the sale of Texas Central Bank to BankUnited in August
1999. Mr. Ruff has served as president of Lennox Properties Inc., a real estate
development company specializing in single and multi family developments in
Dallas, Colorado Springs and Atlanta, since June 1997 and as vice president
since June 1995. Mr. Ruff is President of Icarus Investments, Inc. (formerly
ALR, Inc.), a non-diversified hedge fund specializing in public securities
investments. He also served as Vice President of Icarus from August 1994 until
his appointment as President in August 1996. Mr. Ruff received his degree in
economics from Rice University. Mr. Ruff also serves on the Board of Directors
of Newsmax.com, an online news organization.
DR. AXEL SAWALLICH has served as a director of the Company since February 1996
and was a director of LoneStar from March 1993 until its merger with the
Company. 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. 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 1985 to 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. Dr.
Sawallich has also been acting as an independent, publicly certified, investment
advisor since 1993.
Upon the election of the nominees to the Board of Directors of the
Company, there will be two vacancies on the Company's Board of Directors. The
Company's bylaws provide that vacancies on the board of directors may be filed
by a majority of the current directors. At present, the Company has no immediate
plans to fill the vacancies existing on the Board of Directors.
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> 8
BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended February 28, 1999, the Board of Directors
held one meeting and took action by unanimous written consent on one occasion.
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, 1999. 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.
EXECUTIVE COMMITTEE
The Company currently has an Executive Committee comprised of Messrs.
Economou, Lacerte, Rogers and Solomon. 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. During the fiscal year ended
February 28, 1999, the Executive Committee took action by unanimous written
consent on thirteen occasions.
AUDIT COMMITTEE
In July 1999, the Board appointed an Audit Committee. The Audit
Committee consists of Messrs. Kiam, Lacerte and Rogers. The Audit Committee
examines and considers matters relating to the financial affairs of the Company,
including reviewing the Company's annual financial statements, the scope of the
independent annual audit and the independent auditor's letter to management
concerning the effectiveness of the Company's internal financial and accounting
controls. The Audit Committee held no meetings during the fiscal year ended
February 28, 1999, as it was formed subsequent to the end of fiscal 1999.
COMPENSATION COMMITTEE
In July 1999 the Board appointed a Compensation Committee, which is
comprised of Messrs. Economou and Lacerte. The Compensation Committee considers
and makes recommendations to the Company's Board of Directors with respect to
programs for human resource development and management organization and
succession, approves changes in senior executive compensation and makes
recommendations to the Company's Board of Directors with respect to compensation
matters and policies. The Compensation Committee also administers the Company's
benefit plans. The Compensation Committee held no meetings during the fiscal
year ended February 28, 1999, as it was formed subsequent to the end of fiscal
1999.
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 as of January 15, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Steven B. Solomon 35 President, Chief Executive Officer,
Assistant Secretary and Director
Carl E. Banzhof 33 Chief Technology Officer
Bennett Klein 44 Vice President of Business Development
Lester Sideropoulos 44 Vice President of Sales
</TABLE>
5
<PAGE> 9
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.
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, 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 original equipment manufacturer development
and sales and marketing, including experience with such industry leaders as
Cheyenne Software, where he was product line manager helping to market their
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.
LESTER SIDEROPOULOS has served as Vice President of Sales since joining the
Company in January 1999. Mr. Sideropoulos has over 20 years experience in sales.
Prior to joining the Company, Mr. Sideropoulos was Director of Business
Technology at Constellation Technology, a developer of data acquisition systems
from January 1998 to January 1999, Director of Sales for Oxford Instruments, a
developer of nuclear detection systems from May 1993 to January 1998, and has
held various other product management and direct sales positions during his 20
year career.
The Company's former Chief Operating Officer and Chief Financial Officer,
Richard L. Travis, Jr., resigned from the Company effective as of January 14,
2000. In connection with Mr. Travis' resignation, the Company entered into a
Settlement and Release Agreement with Mr. Travis, which provides for him to
provide certain financial consulting services to the Company. See "Employment
Agreements" and "Certain Relationships and Related Transactions."
6
<PAGE> 10
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL STOCKHOLDERS
As of December 30, 1999, there were issued and outstanding 44,870,698
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 December 30, 1999
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 and (iv) all directors, named executive 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 December 30, 1999 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 PERCENT OF
NAME AND ADDRESS SHARES OWNED CLASS
- ---------------- ------------ ---------------------
<S> <C> <C>
Carl E. Banzhof (1)
3811 Turtle Creek Blvd., Suite 770
Dallas, Texas 75219 .............. 159,401 *
Gilbert Gertner (2)
1300 Post Oak Blvd., Suite 1985
Houston, Texas 77056 .............. 2,345,000 5.2%
Chris A. Economou
150 North Federal Highway, Suite 210
Fort Lauderdale, Florida 33301 ..... 474,400 1.1%
Icarus Investments I, Ltd. (3)
8144 Walnut Hill Lane, Suite 172
Dallas, Texas 75231 ............... 4,750,000 10.6%
Victor K. Kiam, II (4)
RPI Corporation
350 Fifth Avenue, Suite 5408
New York, New York 10018 .......... 744,452 1.7%
Bennett Klein (5)
3811 Turtle Creek Blvd., Suite 770
Dallas, Texas 75219 ............... 208,325 *
Lawrence Lacerte
13155 Noel Road - Suite 2200
Dallas, Texas 75225 ............... 600,000 1.3%
Metamor Worldwide, Inc. (6)
4400 Post Oak Parkway, Suite 1100
Houston, Texas 77027 .............. 5,781,937 12.9%
Mark Rogers
NFT Ventures, Inc. .................
751 Laurel Street, No.19
San Carlos, California 94070 ...... 401,500 *
Michael Ruff (3)
Icarus Investments I, Ltd. .........
8144 Walnut Hill Lane, Suite 172
Dallas, Texas 75231 ............... 4,895,000 10.9%
Dr. Axel Sawallich (7)
Beatrixgasse 3
A-1030 Vienna, Austria ............ 137,144 *
</TABLE>
7
<PAGE> 11
<TABLE>
<S> <C> <C>
Steven B. Solomon
3811 Turtle Creek Blvd., Suite 600
Dallas, Texas 75219 ............... 5,485,993 12.2%
Lester Sideropoulos (8)
3811 Turtle Creek Blvd., Suite 770
Dallas, Texas 75219 .............. 66,668 *
Richard L. Travis, Jr
3811 Turtle Creek Blvd., Suite 770
Dallas, Texas 75219 ............... 1,220,000 2.7%
All officers and directors
As a group (10 persons) (9) ........ 13,172,483 29.4%
</TABLE>
- -------------
*Less than 1%
(1) Includes 100,000 shares presently issuable pursuant to options to
purchase Common Stock and 2,000 shares owned by his spouse.
(2) Includes 1,462,500 shares presently issuable pursuant to options to
purchase Common Stock held by Mr. Gertner.
(3) Includes 1,750,000 shares presently issuable pursuant to warrants to
purchase Common Stock owned by Icarus Investments I, Ltd. ("Icarus").
Based solely on the 13G/A (Amendment No. 1) filed with the Securities
and Exchange Commission ("SEC") on July 15, 1998 with respect to the
Company's Common Stock owned by Icarus. According to the 13G/A
(Amendment No. 1), Icarus may be deemed to own beneficially 3,000,000
shares of Common Stock, acquired for investment purposes. Mr. Ruff's
shares include the Icarus shares and shares owned by Mr. Ruff,
individually.
(4) Includes 250,000 shares held by RPI, Inc., a company owned and
controlled by Mr. Kiam.
(5) Consists of 208,325 shares presently issuable pursuant to options to
purchase Common Stock subject to options vesting within 60 days of
December 30, 1999.
(6) Includes 2,000,000 shares presently issuable pursuant to warrants to
purchase Common Stock. Mr. Pierce's shares include the shares and
warrants owned by Metamor as Mr. Pierce is a director and executive
officer of Metamor. Mr. Pierce disclaims beneficial ownership of such
shares and warrants owned by Metamor. Based solely on the 13D/A
(Amendment No. 2) filed with the SEC on November 24, 1999 with respect
to the Company's Common Stock owned by Metamor.
(7) Includes 12,144 shares held by Dr. Sawallich as trustee, over which he
has voting and dispositive power.
(8) Includes 66,668 shares presently issuable pursuant to options to
purchase Common Stock held by Mr. Sideropoulos.
(9) Includes shares issuable pursuant to presently exercisable options or
warrants or options or warrants exercisable within 60 days of December
30, 1999, held by Messrs. Banzhof, Klein, Ruff, Sideropoulos and/or
their affiliates.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPIANCE
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 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 1999 applicable to
such persons were complied with, the Company has determined that Messrs. Kiam
and Sawallich each filed a Form 5 late (such Form 5s related to the exercise of
certain options) and Mr. Klein filed a Form 4 late relating to the sale of
securities.
COMPENSATION OF EXECUTIVE OFFICERS
The total compensation for the three fiscal years ended February 28,
1999 of Steven B. Solomon, the Company's Chief Executive Officer (and the chief
executive officer of LoneStar prior to its merger with the Company); Richard L.
Travis, Jr., the Company's former Chief Operating and Financial Officer; Carl E.
Banzhof, the Company's Chief Technology Officer; and Bennett Klein, the
Company's Vice President of Business Development (the "Named Executive
Officers"), is set forth below in the following Summary Compensation Table. No
other person received cash compensation in excess of $100,000 during the fiscal
year ended February 28, 1999.
8
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
------------------- COMPENSATION
AWARDS
------
OTHER
ANNUAL SHARES
NAME AND FISCAL COMPENSATION UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) ($) OPTION COMPENSATION
---------- ------ -------- ------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven B. Solomon 1999 150,538 120,500 11,400(2) 0(3) 9,975(2)
President, 1998 135,000 104,000(1) 11,400(2) 2,000,000 8,342(2)
CEO and Asst. 1997 120,000 66,496 11,400(2) 0 7,446(2)
Sect'y ...............
Richard L. Travis, Jr. 1999 136,667 25,000 11,400(4) 0(3) 5,400
Former COO/CFO and 1998 130,000 10,000 11,400(4) 1,150,000 23,552(4)
Sect'y ............... 1997 29,791(4) 0 11,400(4) 0 0
Carl E. Banzhof 1999 115,000 0 0 0 4,093
Chief Technology 1998 100,625 500 0 100,000 3,552
Officer............... 1997 103,228 1,000 0 0 0
Bennett Klein 1999 135,000 37,000(5) 0 0 61,467(5)
V.P. - Business
Development........... 1998 21,548(5) 0 0 300,000 0
</TABLE>
(1) During fiscal 1998, in connection with the discharge of a debt owed to
the Company, Mr. Solomon forgave $79,000 in accrued compensation due
him. See "Certain Relationships and Related Transactions."
(2) Mr. Solomon received a car allowance of $950 per month and health, life
and disability insurance during each fiscal year. Subsequent to the end
of fiscal 1999, Mr. Solomon entered into an employment agreement with
How2.com, pursuant to which How2.com now pays Mr. Solomon's salary.
(3) Excludes 6,600,000 and 60,000 shares underlying options granted during
the year by How2.com to Messrs. Solomon and Travis respectively. Mr.
Travis was originally granted 120,000 shares underlying options that
vested over a three year period but pursuant to the terms of his
Settlement and Release Agreement with the Company, 60,000 of such
shares underlying options were forfeited. See "Employment Agreements"
and "Certain Relationships and Related Transactions."
(4) Mr. Travis received a car allowance of $950 per month for fiscal years
1997 (December 1996 through February 1997), 1998 and 1999 and health,
life and disability insurance during each fiscal year. Pursuant to Mr.
Travis' employment agreement, Mr. Travis could elect to receive Company
Common Stock in lieu of certain raises in salary. Mr. Travis exercised
this option during fiscal year 1998, and in connection therewith,
received 70,000 shares of the Company's common stock (valued at
$20,000). Mr. Travis commenced working for the Company in December 1996
and resigned from the Company effective January 14, 2000.
(5) Mr. Klein commenced working for the Company in January 1998. In
connection with his employment agreement, Mr. Klein received a
relocation package of $56,542 and 100,000 shares of the Company's
Common Stock as a sign-on bonus, valued at $37,000 as of the date of
grant. Mr. Klein also receives, as part of his employment agreement,
health, life and disability insurance.
OPTION GRANTS DURING FISCAL YEAR 1999
The Company did not grant any stock options or stock appreciation
rights to the Named Executive Officers during the fiscal year ended February 28,
1999. How2.com granted stock options to certain of the Named Executive Officers
during the 1999 fiscal year, as described in "Certain Relationships and Related
Transactions."
9
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table describes, for each of the Named Executive
Officers, options exercised and the potential values for their unexercised
in-the-money options at February 28, 1999 (the Company issued no SARs during the
1999 fiscal year):
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS AT FISCAL YEAR END
FISCAL YEAR END($) ($)(2)
---------------------- ---------------
SHARES VALUE
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE
----- ------------ --------- ------------- -------------
<S> <C> <C> <C> <C>
Steven B. Solomon....... 3,175,000(3) 878,750(3) 0/0(4) 0/0(4)
Richard L. Travis, Jr. . 1,100,000 363,750 0/0(4) 0/0(4)
Carl E. Banzhof......... 0 0 100,000/0 298,000/0
Bennett Klein........... 0 0 133,328/166,672 387,984/485,016
</TABLE>
(1) Based on the market price on 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, 1999) per share less the exercise price payable for each
share.
(3) Excludes options to purchase 4,000,000 shares of How2.com granted to
and exercised by Mr. Solomon during the 1999 fiscal year and options to
purchase 1,000,000 shares of How2.com granted to and exercised by Mr.
Solomon subsequent to the end of the 1999 fiscal year (after giving
effect to the four-for-one stock split of How2.com's common stock
effective in July 1999).
(4) Excludes How2.com options to purchase 1,600,000 shares (all of which
are currently unexercisable), and 120,000 shares (80,000 of which are
currently unexercisable), for Messrs. Solomon and Travis, respectively
(after giving effect to the four-for-one stock split of How2.com's
common stock effective in July 1999).
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Messrs.
Solomon and Klein. The annual base salaries being paid to Messrs. Solomon and
Klein were $165,000 and $135,000, respectively, as of February 28, 1999, and the
employment agreements provide for periodic salary increases and bonuses. The
employment agreements continue until February 2002 and January 2001,
respectively for Messrs. Solomon and Klein, and annually thereafter until
terminated by either party. In addition, the employment agreements provide for
severance benefits ranging from six months of base salary (for Mr. Klein), or
the greater of (i) the remaining term of the contract, discounted at a rate of
six percent, or (ii) 24 months of base salary (for Mr. Solomon), in the event of
termination without cause or constructive termination. Mr. Solomon has entered
into an Employment Agreement with How2.com effective as of January 1, 1999, and
the Company ceased paying Mr. Solomon's salary effective as of July 1, 1999.
Richard L. Travis, Jr., the Company's former Chief Operating Officer
and Chief Financial Officer, resigned from the Company and his employment
agreement was terminated effective as of January 14, 2000. In connection with
his resignation from the Company and the termination of his employment
agreement, Mr. Travis and the Company entered into a Settlement and Release
Agreement which provides, among other things, for the payment of an aggregate of
$50,001 to Mr. Travis in three equal monthly installments of $16,667 commencing
on the last day of each of the first three months following Mr. Travis'
resignation from the Company. The Settlement and Release Agreement also provides
for Mr. Travis to perform certain financial consulting services for the Company
(as an independent contractor) until April 14, 2000. See "Certain Relationships
and Related Transactions."
10
<PAGE> 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Solomon is the Chief Executive Officer and President and a director
of the Company and serves as the Chief Executive Officer and Chairman of the
Board of Directors of How2.com. Other than Mr. Solomon, none of the Company's
executive officers serve as members of the board of directors or compensation
committee of any entity that has one or more executive officers who serve on our
board or compensation committee. See "Certain Relationships and Related
Transactions" for information regarding transactions with members of the
compensation committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a discussion of certain relationships and related
transactions between the Company and its officers, directors and principal
shareholders. Please see below for a discussion of certain relationships and
related transactions between How2.com and the Company and its officers,
directors and principal shareholders.
During January 2000, the Company entered into a Settlement and Release
Agreement with Mr. Travis in connection with his resignation as the Company's
Chief Operating Officer and Chief Financial Officer and the termination of his
employment agreement. The Settlement and Release Agreement provides for the
payment of an aggregate of $50,001 to Mr. Travis in three equal monthly
installments of $16,667 commencing on the last day of each of the first three
months following Mr. Travis' resignation from the Company. Also, in connection
with the Settlement and Release Agreement, the Company agreed to forgive an
aggregate of $295,000, plus accrued interest, of indebtedness owed by Mr. Travis
to the Company. See "Employment Agreements."
During fiscal year 1999, the Company advanced funds to Mr. Solomon in
the amount of approximately $780,000 during the third quarter and $745,000
during the fourth quarter. Both advances were evidenced by unsecured promissory
notes bearing interest at 5%. The entire balance with the exception of $145,000
was repaid prior to the end of the fiscal year. The remaining balance was paid
as of April 30, 1999.
The Company contracted with Metamor Software Solutions, a division of
Metamor Worldwide, Inc. (formerly CORESTAFF, Inc.) to provide various
development services for the Company. The Company incurred approximately
$600,000 and $115,000 in expenses related to these services during the fiscal
years ended February 28, 1999 and 1998, respectively. Mr. Johnsen, a former
director of the Company, was the executive vice president of Metamor during this
time period, and Mr. Pierce, a former director of the Company, was Chief
Financial Officer of Metamor during that time and is now a director of Metamor.
In June 1999, Mr. Johnsen joined How2.com as President and Chief Operating
Officer, and Mr. Pierce joined the board of How2.com.
During the fiscal year ended February 28, 1999, the Company and
How2.com incurred legal fees in the amount of approximately $140,000 to Wood,
Exall & Bonnet, L.L.P. In fiscal 1998, the Company incurred approximately
$70,000 in legal fees to such firm. David Wood, a partner of such firm, is the
brother-in-law of Steven B. Solomon. Mr. Wood also serves as General Counsel of
How2.com.
In connection with a $1,125,000 8% redeemable convertible note offering
dated June 9, 1997, the Company's former chairman, Gilbert Gertner, 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
Gilbert Gertner and George Sharp, two of the Company's directors at the time
(the "Purchasers"). At the date of the agreement, the Purchasers together owned
approximately 31% of the Company's outstanding Common Stock. Pursuant to the
Agreement 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, the Company will retain a profits
11
<PAGE> 15
participation interest in the assets sold to the Purchasers 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 the Company
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 canceled the shares from the Purchasers. The
transaction resulted in no gain or loss to the Company.
In November 1996, the Company made a one-year, $625,000, 8% loan to GGS
Investment Company, a joint venture owned by Mr. Gertner, Mr. George 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.
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 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, 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
$122,000 to Mr. Solomon and was repaid in full prior to the end of such fiscal
year.
CERTAIN TRANSACTIONS BETWEEN THE COMPANY'S NAMED EXECUTIVE OFFICERS,
DIRECTORS AND PRINCIPAL STOCKHOLDERS AND HOW2.COM
Since its inception on January 7, 1999, How2.com has issued and sold
common stock to the Company and the executive officers and directors listed
below:
<TABLE>
<CAPTION>
SHARES OF AGGREGATE
INVESTOR COMMON STOCK (1)(#) PURCHASE PRICE($)
-------- ------------------- ----------------
<S> <C> <C>
Lawrence Lacerte................. 2,400,000 4,000,000
Edward Pierce.................... 20,000 25,000
CT Holdings, Inc................. 20,000,000 191,000(2)
Michael Ruff (3)................. 2,300,000 3,075,000
</TABLE>
(1) Does not include shares issued pursuant to the exercise of options.
(2) $141,000 of which represents an intercompany payable for services
performed by and expenditures paid by the Company in support of
How2.com's initial operations, which amount was converted into equity
subsequent to February 28, 1999.
(3) Represents shares owned by Icarus Investments I, Ltd., of which Mr.
Ruff is the president of the general partner.
How2.com sold the shares of its common stock to finance its development
activities, operations and acquisitions. How2.com issued the shares of common
stock to the Company on January 7, 1999 in a private transaction for a
promissory note plus the provision of services including administrative,
personnel, facilities and
12
<PAGE> 16
financial services through June 30, 1999. None of the investors were affiliated
with How2.com prior to purchasing these shares, other than Mr. Lacerte, who
served as a director of the Company at the time, and Mr. Ruff, who also served
as a director of the Company.
How2.com has granted options to purchase How2.com shares to some of the
Company's directors and named executive officers and certain of the directors
and named executive officers have exercised such options. How2.com granted
options to purchase 6,600,000 shares of its common stock to Mr. Solomon
(5,000,000 of which have been exercised at a weighted average exercise price of
$0.07 per share), 3,800,000 shares to Mr. Johnsen (2,000,000 of which have been
exercised at a weighted average exercise price of $0.025 per share), 600,000
shares to Mr. Economou (100,000 of which have been exercised at a weighted
average exercise price of $0.25 per share), 600,000 shares to Mr. Rogers
(100,000 of which have been exercised at a weighted average exercise price of
$0.25 per share), 800,000 to Mr. Wood (100,000 of which have been exercised at a
weighted average exercise price of $0.25 per share), and 120,000 to each of
Messrs. Travis, Klein, and Sideropoulos. How2.com has also granted Icarus
Investments warrants to purchase 1,000,000 shares of How2.com common stock
(300,000 of which have been exercised at an exercise price of $.25 per share).
During 1999 How2.com loaned an aggregate of $700,000 to Mr. Solomon,
which loans have been repaid in full. These loans bore interest at five percent
per annum, had a maturity of less than two years, were full recourse and were
secured by a pledge of 4,000,000 shares of the Company's stock owned by Mr.
Solomon. In addition, in July 1999 after repayment of the $700,000 in loans,
How2.com loaned $250,000 to Mr. Solomon, which loan has been repaid in full.
This loan which bore interest at five percent per annum was full recourse, had a
maturity of less than three months, and was secured by a pledge of 1,000,000
shares of How2.com common stock owned by Mr. Solomon.
How2.com loaned $50,000 to Mr. Johnsen, which loan has been repaid in
full. This loan bore interest at five percent per annum, had a maturity of less
than two years, was full recourse and was secured by a pledge of 2,000,000
shares of How2.com's common stock owned by Mr. Johnsen. In addition, after
repayment of the $50,000 loan, How2.com loaned $750,000 to Mr. Johnsen in
connection with his relocation. This loan bears interest at five percent per
annum, is full recourse, has a maturity of less than two years and is secured by
a pledge of all of the shares of How2.com's common stock owned by Mr. Johnsen.
CERTAIN TRANSACTIONS BETWEEN THE COMPANY AND HOW2.COM
As of November 30, 1999, the Company owned approximately 45.6% of
How2.com's outstanding shares of common stock. Through June 30, 1999, the
Company provided various services to How2.com, including the professional
services of a number of its executives and employees. In consideration for these
services, the Company allocated a portion of its overhead costs related to such
services to How2.com. These allocated expenses, totaling approximately $141,000,
were contributed to How2.com as a portion of the consideration for the shares of
How2.com issued to the Company. Management of the Company believes that the
amounts allocated to How2.com have been no less favorable to it than the
expenses it would have incurred to provide such services on its own or from
unaffiliated third parties. None of these services have been provided to
How2.com pursuant to any written agreement between How2.com and the Company. In
addition, the Company has guaranteed the obligations of How2.com under an office
lease in Santa Monica, California.
In the past, the Company has borrowed cash from How2.com to cover
short-term cash requirements. How2.com has made those loans to the Company,
totaling approximately $578,000, pursuant to a promissory note secured by
300,000 shares of How2.com common stock owned by the Company. The note is due
upon demand and bears interest at five percent per annum. As of December 31,
1999, the Company had repaid How2.com $500,000 under these notes.
The Company has announced that, subject to compliance with SEC and
state regulations and the expiration of a lock-up agreement with How2.com's
underwriters of its proposed initial public offering, the Company intends to
initiate a distribution of fifteen percent of the shares of How2.com's common
stock that the Company owns. If there are problems associated with compliance
with SEC requirements or state law, then the distribution of
13
<PAGE> 17
How2.com shares may be delayed or may not occur. There can be no assurance that
the Company will complete the distribution on the proposed terms or at all.
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 2000 Annual Meeting of Stockholders is scheduled to be
held on or about August 15, 2000. 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 May 15, 2000.
14
<PAGE> 18
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.
STEVEN B. SOLOMON
As Chief Executive Officer and President
and on behalf of the Board of Directors
Dallas, Texas
January 26, 2000
15
<PAGE> 19
[CT HOLDINGS INC. LOGO]
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
----------------------
February 25, 2000
DALLAS, TEXAS
----------------------
<PAGE> 20
CT HOLDINGS, INC.
(FORMERLY CITADEL TECHNOLOGY, INC.)
PROXY
FOR ANNUAL MEETING OF THE STOCKHOLDERS
OF CT HOLDINGS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints STEVEN B. SOLOMON, CARL E. BANZHOF and DAVID A.
WOOD, 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 in the Ballroom of the Stoneleigh Hotel,
2927 Maple Avenue, Dallas, Texas on February 25, 2000 at 10:00 a.m. and at any
adjournments thereof.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE> 21
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 WITHHOLD AUTHORITY
OF ALL TO VOTE FOR ALL
NOMINEES NOMINEES
1. Election of directors: Steven B. Solomon, [ ] [ ]
Victor K. Kiam, II, Lawrence Lacerte,
Chris A. Economou, Mark Rogers,
Michael Ruff and Dr. Axel Sawallich.
- --------------------------------------------------------------------------------
Instruction: To withhold authority to vote for any nominees, write the nominees'
names in the space above.
2. 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: , 2000
------------------
