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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 6)*
Citadel Holding Corporation
____________________________________________________________________________
(Name of Issuer)
Common Stock, No Par Value
____________________________________________________________________________
(Title of Class of Securities)
172862104
_________________________________________________________________
(CUSIP Number)
Randall J. Demyan,
Dillon Capital Management,
21 East State Street, Suite 1410
Columbus, Ohio 43215
(614) 222-4204
___________________________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 30, 1994
_________________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box.
____________
____________
Check the following box if a fee is being paid with the statement .
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five
percent of the class of securities described in Item 1; and (2) has filed
no amendment subsequent thereto reporting beneficial ownership of five
percent or less of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
Page 1 of 18 Pages
SCHEDULE 13D
CUSIP NO. 172862104 Page 2 of 18 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
Dillon Investors, L.P.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
(a) __X__ (b) _____
3. SEC USE ONLY:
4. SOURCE OF FUNDS*:
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e):
_____
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 647,000
8. SHARED VOTING POWER: None
9. SOLE DISPOSITIVE POWER: 647,000
10. SHARED DISPOSITIVE POWER: None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
647,000
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*:
_____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
9.70%
14. TYPE OF REPORTING PERSON*:
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
SCHEDULE 13D
CUSIP NO. 172862104 Page 3 of 18 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
Roderick H. Dillon, Jr.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
(a) __X__ (b) _____
3. SEC USE ONLY:
4. SOURCE OF FUNDS*:
PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e):
_____
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
U.S.A.
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 5,000
8. SHARED VOTING POWER: None
9. SOLE DISPOSITIVE POWER: 5,000
10. SHARED DISPOSITIVE POWER:None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,000
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*:
_____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
.075%
14. TYPE OF REPORTING PERSON*:
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
SCHEDULE 13D
CUSIP NO. 172862104 Page 4 of 18 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
Roderick H. Dillon, Jr. - IRA
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
(a) __X__ (b) _____
3. SEC USE ONLY:
4. SOURCE OF FUNDS*:
PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e):
_____
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
U.S.A.
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 5,000
8. SHARED VOTING POWER: None
9. SOLE DISPOSITIVE POWER: 5,000
10. SHARED DISPOSITIVE POWER:None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,000
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*:
_____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
.075%
14. TYPE OF REPORTING PERSON*:
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
SCHEDULE 13D
CUSIP NO. 172862104 Page 5 of 18 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
Roderick H. Dillon, Jr. Foundation
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
(a) __X__ (b) _____
3. SEC USE ONLY:
4. SOURCE OF FUNDS*:
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e):
_____
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Ohio
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 2,000
8. SHARED VOTING POWER: None
9. SOLE DISPOSITIVE POWER: 2,000
10. SHARED DISPOSITIVE POWER:None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
2,000
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*:
_____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
.030%
14. TYPE OF REPORTING PERSON*:
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
SCHEDULE 13D
CUSIP NO. 172862104 Page 6 of 18 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
Bradley C. Shoup - IRA
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*:
(a) __X__ (b) _____
3. SEC USE ONLY:
4. SOURCE OF FUNDS*:
PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e):
_____
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
United States of America
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 2,000
8. SHARED VOTING POWER: None
9. SOLE DISPOSITIVE POWER: 2,000
10. SHARED DISPOSITIVE POWER:None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
2,000
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*:
_____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
.030%
14. TYPE OF REPORTING PERSON*:
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
Supplement to Amendment No. 6 to Schedule 13D
Issuer - Citadel Holding Corporation
Reporting Persons - Dillon Investors, L.P., Roderick H. Dillon,
Jr., Roderick H. Dillon, Jr. - IRA, Roderick H. Dillon, Jr.
Foundation and Bradley C. Shoup - IRA.
Item 1. Security and Issuer
This Amendment No. 6 to Schedule 13D filed by the
reporting persons Dillon Investors, L.P. ("DI"), Roderick H.
Dillon, Jr. ("RHD"), Roderick H. Dillon, Jr.-IRA ("RHD-IRA") and
Roderick H. Dillon, Jr. Foundation ("RHD-Foundation")
(collectively, the "Dillon Entities") and Bradley C. Shoup
("Shoup") (the "Dillon Entities" and "Shoup" are collectively
referred to as the "Reporting Persons") with the Securities and
Exchange Commission (the "SEC") relates to the common stock,
without par value ("Common Stock"), of Citadel Holding
Corporation, a Delaware corporation (the "Issuer"). The
principal executive offices of the Issuer are located at 700
North Central, Suite 500, Glendale, California 91203. This
Amendment No. 6 amends certain information set forth in the
Schedule 13D filed by the Dillon Entities on March 18, 1994, as
amended by Amendment No. 1 filed on September 9, 1994 ("Amendment
No. 1"), Amendment No. 2 filed on October 17, 1994 ("Amendment
No. 2"), Amendment No. 3 filed on November 4, 1994 ("Amendment
No. 3"), Amendment No. 4 filed on November 8, 1994 ("Amendment
No. 4") and Amendment No. 5 filed on November 18, 1994
("Amendment No. 5").
Item 4. Purpose of Transaction
As previously stated in Amendment Nos. 3, 4 and 5, the
Dillon Entities determined to solicit proxies from the
stockholders of the Issuer for election at the Issuer's annual
meeting of stockholders scheduled to be held December 12, 1994
(the "1994 Annual Meeting") of a slate of directors (the "Dillon
Nominees") in opposition to that expected to be nominated by the
Board of Directors of the Issuer. On November 8, 1994, DI filed
preliminary proxy materials with the SEC to solicit proxies for
the election of the Dillon Nominees and to oppose a proposed
amendment to the Issuer's Restated Certificate of Incorporation
to double the number of authorized shares of Common Stock (the
"Proxy Solicitation").
In addition, as previously stated in Amendment Nos. 4
and 5, on November 7, 1994, a Stockholder Consent in Lieu of
Meeting was executed and delivered to the Issuer on behalf of RHD
in which RHD consented to, and on November 16, 1994, DI filed
preliminary consent solicitation materials with the SEC with
respect to the solicitation of consents from the stockholders of
the Issuer (the "Consent Solicitation") to, (1) the removal of
the current directors of the Issuer, (2) the election of the
Dillon Nominees and (3) the amendment of the Issuer's By-Laws to
restrict the indemnification of (or the advancement of expenses
to) the Issuer's officers, directors, employees and agents
without the prior approval of the holders of a majority of the
Common Stock outstanding. The record date for determining the
persons entitled to deliver a consent in the Consent Solicitation
is November 7, 1994. Written consents of stockholders given
pursuant to the Consent Solicitation would not be effective
unless valid consents from a majority of the outstanding shares
of Common Stock on November 7, 1994 are delivered to the Issuer
on before January 6, 1995.
As previously stated in Amendment No. 3, because the
Issuer is registered with the Office of Thrift Supervision (the
"OTS") as a savings and loan holding company, certain notices may
have to be filed with the OTS if any action the Dillon Entities
proposed to take could result in a change of control of the
Issuer for purposes of the OTS' regulations governing acquisition
of control of savings and loan holding companies set forth in
Part 574 of Title 12 of the Code of Federal Regulations (the "OTS
Control Regulations"). The Dillon Entities, therefore, filed
with the OTS concurrently with the filing of Amendment No. 3 a
letter dated November 3, 1994 (the "OTS Letter") requesting a
determination by the OTS that the OTS would refrain from
initiating or recommending enforcement action against the Dillon
Entities if the Dillon Entities acquired proxies or otherwise
obtained votes from stockholders of the Issuer enabling the
Dillon Entities to elect the Dillon Nominees without first filing
a change of control notice or rebuttal of control submission
pursuant to the OTS Control Regulations.
On November 30, 1994, the OTS notified a representative
of the Dillon Entities that the OTS would not be in a position to
respond to the OTS Letter prior to the December 12, 1994 Annual
Meeting date but would continue to consider the matters set forth
therein if DI so requested. In light of the OTS response, DI has
determined not to proceed with the Proxy Solicitation or Consent
Solicitation at this time, although DI may determine to solicit
consents pursuant to the Consent Solicitation if a response is
received from the OTS sufficiently prior to January 6, 1995 to
make such solicitation viable. DI has requested the OTS to
continue to consider the matters set forth in the OTS Letter and
currently intends to pursue the filing of a rebuttal of control
submission or a change of control notice, if necessary. DI also
intends to continue to prosecute the litigation (the "Delaware
Litigation") which it commenced in the Court of Chancery of the
State of Delaware in and for New Castle County against the
Issuer, its present directors and Craig Corporation ("Craig") to
invalidate the issuance by the Issuer to Craig of 74,300 shares
of Common Stock on October 21, 1994 and of the 1,329,114 shares
of 3% Cumulative Voting Convertible Preferred Stock (the "New
Preferred Stock") on November 10, 1994. The Delaware Litigation
is further described in Amendment Nos. 4 and 5.
A rebuttal of control submission by DI would set forth
the facts and circumstances which support DI's contention that no
actual control relationship would exist, within the meaning of
the OTS Control Regulations and applicable federal law, if DI
acquired proxies or otherwise obtained votes from stockholders
enabling it to elect more than one-third of the directors of the
Issuer. Within 20 days of its receipt of a rebuttal submission,
the OTS may accept or reject the submission or request additional
information. If additional information is requested, the OTS
must notify DI within 15 days of its receipt of such additional
information whether the rebuttal submission is deemed to be
sufficient.
In lieu of a rebuttal submission or in the event that a
rebuttal submission is not deemed sufficient by the OTS, DI may
file a change of control notice with the OTS. The period for
determining the completeness of a change of control filing is 30
days, subject to extension if the public comment period is
extended for a period of 20 days. During such period, the OTS
may request additional information. If additional information is
provided, the OTS must notify DI within 15 days of the receipt of
such additional information as to the sufficiency of the notice.
Once the notice is deemed sufficient, the OTS must accept or
reject the notice within 60 days, subject to extension for up to
30 days and further extension for two additional periods of 45
days each.
If DI obtains OTS clearance with respect to the matters
set forth in the OTS Letter at a time when pursuing the Consent
Solicitation is no longer viable or receives OTS approval with
respect to either a rebuttal of control submission or a change of
control notice, it is DI's current intention to commence a new
solicitation of consents from the stockholders of the Issuer to
the removal of the directors of the Issuer then in office and the
election of a new slate of directors. DI intends to propose the
same persons as it had proposed for election pursuant to the
Proxy Solicitation, although there can be no assurance that such
persons (other than RHD and Shoup) will continue to serve as
nominees. More detailed information with respect to such persons
is set forth in Schedule I attached hereto.
As previously stated in Amendment Nos. 3, 4 and 5, if
elected, it is the intention of the Dillon Nominees to propose,
subject to their fiduciary duties, that the Issuer effect a pro
rata distribution to the Issuer's stockholders of the common
stock of Fidelity Federal Bank, a Federal Savings Bank
("Fidelity"), held by the Issuer and an orderly sale of the
Issuer's real estate assets at the best available price, and
thereafter promptly dissolve and liquidate the Issuer. Schedule
II attached hereto sets forth DI's proposed strategy, as of
November 29, 1994, as described in DI's revised preliminary proxy
materials filed with the SEC. Assuming the Consent Solicitation
or a new consent solicitation is successful, subject to a change
in circumstances or the receipt of additional information not
currently available, DI intends to continue to seek to implement
such strategy in substantially the same manner as described in
Schedule II.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer
See Item 4 above.
Item 7. Material to Be Filed as Exhibits
Exhibit A - Joint Filing Agreement, dated November 11,
1994, among the Reporting Persons. (Incorporated
herein by reference to Exhibit A of Amendment No. 5 to
Schedule 13D filed on November 18, 1994 with the SEC).
Exhibit B - Schedule I providing certain information
with respect to the Dillon Nominees. (Included at
page 12 of this Amendment No. 6 to Schedule 13D).
Exhibit C - Schedule II providing certain information
with respect to DI's proposed strategy for the Issuer
as of November 29, 1994 as described in DI's revised
preliminary proxy materials filed with the SEC on
November 30, 1994. (Included beginning at page 14 of
this Amendment No. 6 to Schedule 13D).
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
Date: November 30, 1994 Dillon Investors, L.P.
By: /s/ Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr.,
General Partner
Roderick H. Dillon, Jr.
By: /s/ Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr. - IRA
By: /s/ Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr. - Foundation
By: /s/ Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr.,
Trustee
Bradley C. Shoup - IRA
By: /s/ Bradley C. Shoup
Bradley C. Shoup
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
Date: November 30, 1994 Dillon Investors, L.P.
By:
Roderick H. Dillon, Jr.,
General Partner
Roderick H. Dillon, Jr.
By:
Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr. - IRA
By:
Roderick H. Dillon, Jr.
Roderick H. Dillon, Jr. - Foundation
By:
Roderick H. Dillon, Jr.,
Trustee
Bradley C. Shoup - IRA
By:
Bradley C. Shoup
EXHIBIT B
SCHEDULE I
Roderick H. Dillon, Jr., 38, has served as Chief
Investment Officer of Dillon Capital Management Limited
Partnership, an investment advisory and management firm which
manages over $50 million in assets, since July 1993. In such
capacity, Mr. Dillon actively manages investments in over 50
public companies, including over five companies in the thrift
industry. From June 1986 through June 1993, Mr. Dillon was Vice
President of Loomis, Sayles & Co., Inc., an investment advisory
firm. In such capacity, Mr. Dillon managed approximately $300
million in separate equity portfolios and co-managed the Loomis
Sayles Small Cap Fund. Investments managed by Mr. Dillon
included those in numerous financial institutions such as Coast
Savings, Westcorp and First Republic. Mr. Dillon's business
address is Suite 1410, 21 East State Street, Columbus, Ohio
43215-4228.
Bradley C. Shoup, 36, is a Partner in Batchelder &
Partners, Inc., a financial advisory firm, and has held such
position since 1988. In such capacity, Mr. Shoup has served as a
financial advisor to various public companies. From 1987 until
1988, Mr. Shoup was an independent corporate finance consultant
engaged in the venture capital and energy industries. Mr. Shoup
was a Financial Analyst with Mesa Petroleum Co. from 1984 until
1986, responsible for identifying and evaluating investment
opportunities. Mr. Shoup's business address is 4180 La Jolla
Village Drive, Suite 560, La Jolla, California 92037.
Timothy M. Kelley, 36, is Secretary, Treasurer and
General Counsel of Donald W. Kelley & Associates, Inc., a real
estate consulting and development firm, and has held such
position since 1984. In such capacity, Mr. Kelley is actively
engaged in real estate development, investment, acquisition and
financing activities, as the firm and affiliated entities own
more than 4,300 apartment units. Mr. Kelley also serves as Vice
President, Secretary and a director of an affiliated company,
Oakwood Management Company, which manages over 80 apartment
projects consisting of more than 8,800 apartment units. Mr.
Kelley's business address is 250 E. Broad Street, 11th Floor,
Columbus, Ohio 43215.
Ralph V. Whitworth, 39, has served as President of
Whitworth & Associates, a corporate consulting firm, since 1988.
From 1986 until 1993, Mr. Whitworth was President of United
Shareholders Association, a prominent shareholder rights group.
In such capacity, Mr. Whitworth served as chief strategist,
spokesman and negotiator for, among other things, negotiations
which resulted in agreements with 46 public companies to improve
corporate governance and shareholder rights. From 1989 until
1992, Mr. Whitworth served as President of Development at United
Thermal Corporation which owns the district heating systems for
the cities of Baltimore, Philadelphia, Boston and St. Louis. Mr.
Whitworth also served on United Thermal's Board of Directors
until December 1993 when the company was merged with Trigen
Energy Corporation. Mr. Whitworth currently serves on the Boards
of Directors of Catalyst Vidalia Corporation, the developer and
manager of a 200 megawatt hydroelectric facility on the
Mississippi River, and CD Radio, Inc., a satellite radio company.
Mr. Whitworth's business address is 801 Pennsylvania Avenue,
N.W., Suite 747, Washington, D.C. 20004.
Jordan M. Spiegel, 32, is Executive Vice President of
A. B. Laffer, V. A. Canto & Associates, an economic consulting
firm, and has held such position since 1987. In such capacity,
Mr. Spiegel manages the firm's corporate finance advisory
business through its wholly owned subsidiary Laffer Advisors
Incorporated, and currently serves as a financial advisor to over
20 different companies. Prior to 1987, Mr. Spiegel was an equity
securities analyst with Crowell, Weedon & Co., the largest
private regional brokerage house in Southern California,
specializing in, among other things, real estate investment
trusts. Mr. Spiegel's business address is Regents Square One,
4275 Executive Square, Suite 330, La Jolla, California 92037.
EXHIBIT C
SCHEDULE II
The following is material contained in DI's preliminary
proxy materials filed with the SEC on November 30, 1994 with
respect to DI's strategy for the Issuer as of November 29, 1994.
The Distribution
In connection with the restructuring and
recapitalization of the Issuer (the "Restructuring and
Recapitalization"), the Issuer's equity interest in Fidelity was
reclassified into 4,202,243 shares of Fidelity's non-voting Class
B Common Stock (the "Fidelity Class B Stock"), representing
approximately 16.18% of the outstanding shares of Fidelity.
DI believes that, to maximize value for all
stockholders and establish the stockholders' direct investment in
Fidelity, the Board should effect a pro rata distribution of the
shares of Fidelity currently held by the Issuer to the
stockholders of the Issuer (the "Distribution") as soon as
practicable after March 31, 1995. DI believes that the value of
such shares of Fidelity are being discounted by the market due to
the operation of the Issuer as a real estate company, wherein
such shares are mixed with the Issuer's real estate assets.
While there is not an active market for Fidelity shares, which
are currently unregistered, DI has been informed by J.P. Morgan
Securities Inc., the principal market maker for the Fidelity
voting Class A Common Stock (the "Fidelity Class A Stock") (into
which the Fidelity Class B Stock is automatically convertible
upon transfer by the Issuer to an unaffiliated party) that since
the offering of Fidelity common stock at $5.25 per share pursuant
to the Restructuring and Recapitalization, the Fidelity Class A
Stock has traded between $4.88 and $5.75 per share. These prices
would be equal to approximately $3.07 to $3.62 per share of
Common Stock (on a primary basis, not including as outstanding
shares of Common Stock issuable upon conversion of the New
Preferred Stock issued to Craig). DI therefore believes that the
shares of Fidelity would be more valuable to the stockholders of
the Issuer if held by them directly, as opposed to being held by
the Issuer.
If elected, the Dillon Nominees intend to fix a record
date for the Distribution as soon as practicable after March 31,
1995 and distribute to each holder of shares of Common Stock on
such record date, on a pro rata basis, shares of Fidelity. As a
result of the Distribution, stockholders of the Issuer would hold
shares in both the Issuer and Fidelity.
All stockholders of the Issuer would likely receive
shares of Fidelity Class A Stock as a result of the Distribution.
Currently, the Issuer holds shares of Fidelity Class B Stock.
However, the terms of the Fidelity Class B Stock provide that
such shares will automatically be converted into shares of
Fidelity Class A Stock when they are received by any person who
is not a holder of at least 5% or more of Fidelity's outstanding
common stock or a member of a "group" under Section 13(d) of the
Securities Exchange Act of 1934, as amended, which holds at least
5% or more of Fidelity's outstanding common stock (collectively,
a "Fidelity 5% Holder"). In addition, the terms of the Fidelity
Class B Stock provide that all shares of Fidelity Class B Stock
will automatically be converted into shares of Fidelity Class A
Stock at such time as all shares of Fidelity Class B Stock
represent less than 10% of the outstanding common stock of
Fidelity on a fully diluted basis. Since the Fidelity Class B
Stock currently represents approximately 16.18% of the
outstanding fully diluted common stock of Fidelity and since,
according to the Issuer's preliminary proxy materials and
Fidelity's offering materials in the Restructuring and
Recapitalization, less than 25% of the Issuer's stockholders
could be considered Fidelity 5% Holders, the Distribution would
likely cause all stockholders of the Issuer to receive Fidelity
Class A Stock. The preferences and privileges of the Fidelity
Class A Stock and the Fidelity Class B Stock are the same except
with respect to voting rights and conversion rights.
The exact timing and details of the Distribution will
depend on a variety of factors and legal requirements, including
determination by the Dillon Nominees that the Fidelity shares
received in the Distribution by the Issuer's stockholders (other
than affiliates, if any, of Fidelity) will be freely
transferable. This may require registration of the Fidelity
shares pursuant to existing registration rights for such shares,
which rights are not exercisable by the Issuer until March 31,
1995 (the date on which Fidelity's Report on Form 10-K for the
fiscal year ended December 31, 1994 is due). If for any reason
Fidelity were not to honor such registration rights in accordance
with their terms, the Distribution could be delayed until such
registration is effected. In addition, the Issuer has indicated
that Fidelity shares currently are required to trade in minimum
blocks of 100,000 shares. Such restriction will expire upon the
filing of Fidelity's Annual Report on Form 10-K for the year
ended December 31, 1994, which is due no later than March 31,
1995.
Notwithstanding their present belief that the
Distribution would maximize stockholder value, in the event that
the Dillon Nominees, following their election and after careful
review of then available information, were to determine, pursuant
to the exercise of their fiduciary duties, that stockholder
values would be maximized by other alternatives, such as a block
or other sale of the Fidelity shares and distribution of the net
proceeds to the Issuer's stockholders, the Dillon Nominees would
pursue such alternatives.
Real Estate Sales
As set forth above, DI's investment of over $3.8
million in the Issuer was not made for the purpose of investing
in a real estate company. DI also believes that most of the
Issuer's other stockholders did not intend to invest in a real
estate company. Based upon statements made by the Issuer in its
Quarterly Report on Form 10-Q for the period ended June 30, 1994
(the "Form 10-Q"), DI believes that the Issuer's real estate
assets (including assets on which the Issuer holds purchase
options) have a market value in excess of their purchase price or
option exercise price(Footnote 1). Therefore, DI believes that, to maximize
stockholder value, the Board should effect an orderly sale of the
real estate assets of the Issuer at the best available price (the
"Real Estate Sales"). The timing of the Real Estate Sales will
be determined after consideration of all relevant factors,
including detailed information then available regarding the
status of the properties and the condition of the relevant
property markets at that time, in order to maximize proceeds to
the Issuer and its stockholders.
________________
(Footnote 1)
The Form 10-Q states that with "active management and certan capital
expenditures, the [Issuer's] owned properties "if sold on an individual
basis, could be worth more than [the Issuer] purchased them for in
[connection with the Restructuring and Recapitalization], but there can
be no assurance on this point." In addition, the Form 10-Q states that
the value of the options could be "up to $3 million above the exercise
price of [the options], before costs the [Issuer] would incur in connection
with the exercise, which may be significant." The terms of the options
indicate that they are transferable prior to exercise.
________________
The Dissolution
Following the consummation of the Distribution and the
Real Estate Sales, the Dillon Nominees intend to dissolve and
liquidate the Issuer as promptly as practicable (the
"Dissolution"). DI's recommendation to effect the Dissolution is
based on its determination that no reasonable business
alternatives will exist for the Issuer following the Distribution
and the Real Estate Sales. Therefore, DI believes that, at such
time, the Dissolution is the most appropriate course of action.
In the Dissolution, the Issuer will take all necessary
steps to dissolve pursuant to the provisions of the DGCL,
including the filing of a Certificate of Dissolution with the
Delaware Secretary of State. Upon such a filing, the Issuer will
cease business operations. The Issuer's corporate existence will
continue thereafter, but solely for the purpose of liquidating
any remaining assets, winding up its business affairs, paying its
liabilities and distributing any cash remaining to stockholders.
The exact timing and details of the Distribution, the
Real Estate Sales and the Dissolution will depend on a variety of
factors and legal requirements. DI and the Dillon Nominees can
give no assurance that the Distribution, the Real Estate Sales
and the Dissolution will each be consummated or as to the timing
of such events if they are consummated. Although the Dillon
Nominees currently intend to propose the Distribution, the Real
Estate Sales and the Dissolution generally on the terms described
above, it is possible that, as a result of substantial delays in
the ability of the Dillon Nominees to effect such transactions,
information hereafter obtained by the Dillon Nominees, changes in
general economic or market conditions or in the business of the
Issuer or other presently unforeseen factors, the Distribution,
the Real Estate Sales and the Dissolution may not be so proposed,
or may be delayed or abandoned (whether before or after
stockholder authorization or consent). Although it has no
current intention to do so, the Dillon Nominees expressly reserve
the right to propose the Distribution, the Real Estate Sales and
the Dissolution on terms other than described above, if they, in
the exercise of their fiduciary duties, believe such action to be
appropriate.
Valuation
While RHD has from time to time publicly expressed his
views as to potential ranges of values for the shares of Common
Stock, neither DI nor any of the Dillon Entities has conducted
any formal valuation or liquidation analyses with respect to the
Issuer or its properties, and neither DI nor any of the Dillon
Entities is able to accurately determine or predict the value of
the amounts which would be received by the Issuer's stockholders
pursuant to the Distribution, the Real Estate Sales and the
Dissolution.
Potential Adverse Consequences
DI is not aware of any adverse consequences to the
Issuer with respect to its proposed strategy other than with
respect to triggering change of control provisions installed by
Craig in a line of credit agreement between the Issuer and Craig
(the "Craig Line of Credit") and the New Preferred Stock(Footnote 2).
DI does not believe the other adverse consequences discussed in the
Issuer's preliminary proxy materials are applicable or would
foreclose such strategy. Specifically, DI has stated that any
distribution of Fidelity shares to stockholders would only be of
freely transferable shares and would occur after March 1995 when
registration rights would be available and the current
restriction on market trading in 100,000 share blocks would have
terminated. DI also has indicated that the Dillon Nominees
intend to exercise their fiduciary duties in maximizing
stockholder values and would consider alternatives to the
Distribution such as a block sale of the Fidelity shares and a
distribution of the proceeds if this were to be in the best
interest of all stockholders. The Dillon Nominees further intend
to conduct an orderly sale of the Issuer's real estate properties
in order to maximize the sales proceeds to the Issuer. DI
believes the Issuer can realize the value of the real estate
options held by the Issuer through the sale of such options,
which are all transferable prior to exercise. Finally, in
formulating its proposed strategy, DI considered the Issuer's
disclosed liabilities, including its liability of up to $3.9
million to Fidelity, and any plan of dissolution recommended by
the Dillon Nominees would, as required by Delaware law, take into
account all liabilities of the Issuer.
__________________
(Footnote 2)
The election of the Dillon Nominees would, depending upon whether the
issuance of the New Preferred Stock is invalidated, pursuant to the
Delaware Litigation or otherwise, either permit Craig to accelerate its
original $6.2 million loan to the Issuer or to accelerate the remaining
$950,000 loan and require the Issuer to repurchase the New Preferred Stock
at a premium, for a total cost to the Issuer of $6.2 million plus accrued
dividends of 3% per annum plus a premium of approximately $39,000 per month,
pro rated, from the date of issuance to the date of redemption of the New
Preferred Stock. Although DI has not approached any financing sources with
respect to the Issuer's obtaining funds to enable it to meet such obligations,
DI believes that financing, secured by such assets, would be available, based
upon the fact that Craig was willing to supply the Craig Line of Credit and
the Issuer's statement with respect to its real estate assets in the Form
10-Q, although there can be no assurance on this point. To DI's knowledge,
the Issuer has only one employment agreement outstanding, a two-year contract
with its President, Steve Wesson, for $225,000 per year expiring in August
1996, and such contract does not terminate upon a change of control of the
Issuer. DI is not aware of any other costs which would be occasioned by a
change of control of the Issuer.
__________________
Stockholder Vote
Pursuant to Section 271 and Section 275 of the Delaware
General Corporation Law (the "DGCL"), respectively, the approval
of stockholders owning a majority of the outstanding stock of the
corporation entitled to vote thereon is required to effect a sale
of substantially all of the assets, or a dissolution, of such
corporation. The Dissolution will require a vote pursuant to
Section 275 of the DGCL. Whether the Distribution and/or the
Real Estate Sales will require stockholder approval may depend
upon the order and timing of such transactions which, as stated
above, will be determined by the Dillon Nominees, if elected,
consistent with their fiduciary duties. The Dillon Nominees
intend to seek any such approvals necessary in order to carry out
such transactions, but will not submit any such transactions to a
stockholder vote unless then required under Delaware law. If any
vote is taken, DI and its affiliates intend to vote any shares of
Common Stock owned by them in favor of such actions.
Federal Income Tax Consequences
DI does not have sufficient financial information to
determine the exact federal income tax consequences of its
planned strategy upon the Issuer and its stockholders. In
general, DI believes that the Distribution and the Real Estate
Sales will be taxable events to the Issuer causing the Issuer to
recognize gains or losses on its holdings of Fidelity shares and
real estate assets upon their distribution or sale, respectively.
DI believes that the Issuer has net operating losses available
which may be carried forward to offset gains in this respect. In
addition, DI believes that the distribution to a stockholder of
Fidelity shares at any time and the distribution to a stockholder
of cash upon complete liquidation of the Issuer will each be
treated as a return of such stockholder's basis in the shares of
Common Stock to the extent of such stockholder's basis, and a
capital gain to the extent that such distribution exceeds the
stockholder's basis, in the shares of Common Stock.