<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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
CRAIG CORPORATION
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
CRAIG CORPORATION
550 SOUTH HOPE STREET, SUITE 1825
LOS ANGELES, CA 9007L
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 15, 1997
The Annual Meeting of Stockholders of Craig Corporation, a Delaware
corporation, will be held at the Regal Biltmore Hotel, 506 South Grand Avenue,
Los Angeles, California on Monday, December 15, 1997 at 10:00 a.m., Los
Angeles time, for the following purposes:
(1) To elect six directors to the Board of Directors for the ensuing
year; and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
A copy of the Company's Annual Report on Form 10K for its fiscal year ended
December 31, 1996 and a Quarterly Report on Form 10Q for the three and nine
month periods ended September 30, 1997 are enclosed. Only stockholders of
record at the close of business on November 4, 1997 will be entitled to notice
of and to vote at the meeting and any adjournment thereof.
Whether or not you expect to attend the Annual Meeting in person, please
fill in, sign, date and complete the enclosed proxy card and return it
promptly in the accompanying postage prepaid, pre-addressed envelope, to
assure that your shares will be represented.
By Order of the Board of Directors
/s/ Robert Ty Howard
Robert Ty Howard
Secretary
November 24, 1997
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE TO ENSURE THAT YOUR VOTES ARE COUNTED.
<PAGE>
CRAIG CORPORATION
550 SOUTH HOPE STREET, SUITE 1825
LOS ANGELES, CA 90071
(2L3) 239-0555
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 15, 1997
PERSONS MAKING THE SOLICITATION
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Craig Corporation (the "Company") of proxies for use at
the Annual Meeting of Stockholders to be held on Monday, December 15, 1997,
and at any adjournment thereof at the Regal Biltmore Hotel, 506 South Grand
Avenue, in Los Angeles, California. This proxy statement is first being mailed
to stockholders on or about November 24, 1997. You are requested to sign, date
and return the enclosed proxy card in order to ensure that your shares are
represented at the meeting.
In addition to the solicitation by mail, regular employees of the Company
and its Transfer Agent may solicit proxies in person or by telephone without
additional compensation. The Company also will pay persons holding shares in
their own names or in the names of their nominees, but not owning such shares
beneficially, for the expenses of forwarding soliciting materials to the
beneficial owners. The Company will bear all expenses incurred in soliciting
its stockholders.
REVOCABILITY OF PROXY
Any proxy given by a stockholder of the Company may be revoked at any time
before it is voted at the annual meeting by a written notice to the Secretary
of the Company or by executing and delivering a later dated proxy. Attendance
at the meeting by a stockholder who has given a proxy will not have the effect
of revoking it unless the stockholder gives such written notice of revocation
to the Secretary before the proxy is voted. Each valid proxy returned which is
not revoked, unless indicated otherwise on the proxy card, will be voted in
the election of directors for the nominees as described herein.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only holders of record of Common Stock and Class A Common Preference Stock
of the Company at the close of business on November 4, 1997 are entitled to
notice of and to vote at the meeting or any adjournment thereof. The
outstanding voting securities of the Company on that date consisted of
3,762,912 shares of Common Stock, $.25 par value and 1,622,000 shares of Class
A Common Preference Stock, $.01 par value. Stockholders are entitled to 30
votes for each share of Common Stock and 1 vote for each share of Class A
Common Preference Stock held of record.
The presence, in person or by proxy, of the holders of shares of stock
entitling them to cast a majority of the votes entitled to be cast at the
Annual Meeting will constitute a quorum. Abstentions and broker non-votes will
be counted for purposes of determining the presence of a quorum. Abstentions
and broker non-votes will not be counted either for or against the proposal
when determining whether a particular proposal has been approved.
1
<PAGE>
The following table sets forth information as of November 4, 1997 with
respect to persons known by the Company to own beneficially more than 5% of
the outstanding shares of Common Stock or Class A Common Preference Stock of
the Company and as to the number of shares beneficially owned by each director
and nominee, each of the Company's directors and most highly compensated
executive officers and all the officers and directors as a group. All persons
listed, unless otherwise stated, have sole voting and investment power with
respect to Common Stock and Class A Common Preference Stock beneficially owned
by them.
<TABLE>
<CAPTION>
CLASS A COMMON
COMMON STOCK PREFERENCE STOCK
------------------------- -------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OF BENEFICIALLY OF CLASS A
OF BENEFICIAL OWNER OWNED(11) COMMON STOCK OWNED(11) COMMON STOCK
------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
James J. Cotter(1).................... 2,063,302 50.6% 129,200 7.9%
120 N. Robertson Blvd.
Los Angeles, CA 90048
Hecco Ventures(1)..................... 617,438 15.1% 51,700 3.2%
120 N. Robertson Blvd.
Los Angeles, CA 90048
Dimensional Fund Advisors, Inc.(2).... 240,700 5.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
First Pacific Advisors, Inc.(3)....... 435,600 26.6%
11400 West Olympic Blvd. Suite 1200
Los Angeles, CA 90064
Lawndale Capital Management, Inc.(4).. 22,400 * 161,600 9.9%
One Sansome St. Ste. 3900
San Francisco, CA 94104
Margaret Cotter(5).................... 2,000 *
S. Craig Tompkins(5)(6)............... 1,000 * 18,500 1.1%
William D. Gould(5)(7)................ 17,900 * 2,000 *
Gerard P Laheney(5)(8)................ 15,000 *
Ralph B. Perry III(5)(9).............. 7,600 * 8,000 *
Ellen M. Cotter(5).................... 1,000 *
Officers and Directors as
a group (8 persons)(10).............. 2,107,802 51.7% 157,700 9.6%
</TABLE>
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* Percentages less than 1% have not been indicated.
(1) Includes the Common Stock and Class A Common Preference Stock owned by
Hecco Ventures I ("HVI"), which is a California general partnership.
James J. Cotter is a general partner of a limited partnership which is
the general partner of HVI and, accordingly, has shared voting and
dispositive power with respect to such shares held by HVI. With respect
to the Common Stock held by Mr. Cotter, the shares also include
exercisable options to acquire 300,000 shares held by Mr. Cotter.
Margaret Cotter, a nominee for director, and Ellen Cotter, Vice
President, Business Affairs for the Company, are the daughters of
Mr. Cotter and each are limited partners in the above referenced limited
partnership.
(2) According to filings made with the Securities and Exchange Commission
(the "SEC"), Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 240,700
shares of Craig Corporation stock as of December 31, 1996, all of which
shares are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which
2
<PAGE>
Dimensional Fund Advisors Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
(3) According to filings made with the SEC, includes 160,000 shares which are
owned by FPA Capital Fund, Inc. over which First Pacific Advisors, Inc.
has shared dispositive power.
(4) According to filing made with the SEC, includes 139,100 Class A Common
Preference Shares and 19,300 common shares which are owned by Diamond A
Partners, L.P. ("DAP") and 22,500 Class A Common Preference Shares and
3,100 common shares which are owned by Diamond A Investors L.P. ("DAI")
which partnerships have shared voting and dispositive power with Lawndale
Capital Management, Inc. and Andrew E. Shapiro. According to a report on
Schedule 13D dated May 22, 1995, Lawndale Capital Management, Inc., is the
investment advisor to DAP and DAI, which are investment limited
partnerships.
(5) Addresses are c/o Craig Corporation, 550 South Hope Street, Suite 1825,
Los Angeles, California 9007l.
(6) Includes 17,500 vested shares subject to a currently exercisable option
to purchase Class A Common Preference Stock.
(7) Includes 2,400 shares of Common Stock and 1,000 shares of Class A Common
Preference Stock owned by a trust for the benefit of Mr. Gould's
children, of which he is co-trustee; Mr. Gould disclaims beneficial
ownership of the shares held in the trust.
(8) Represents shares subject to an exercisable option to purchase Common
Stock.
(9) Includes 600 shares owned by Mr. Perry's wife, as to which Mr. Perry
disclaims beneficial ownership.
(10) The common shares beneficially owned include (i) 315,000 shares of Common
Stock subject to currently exercisable stock options and (ii) an
aggregate of 3,000 shares of Common Stock as to which Messrs. Gould and
Perry disclaim beneficial ownership. The Class A Common Preference shares
beneficially owned include 17,500 shares of currently exercisable stock
options and 1,000 shares as to which Mr. Gould disclaims beneficial
ownership.
(11) All shares subject to stock options currently exercisable, or which
become exercisable within 60 days of November 4, 1997, are deemed to be
outstanding for the purpose of determining the percentage of each class
held by such person.
ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting. The term of office
for all nominees listed below will expire at the next Annual Meeting to be held
in 1998 or when their successors are elected and qualified. Unless otherwise
instructed, proxy holders will vote the proxies received by them for the
election of the nominees below, whom, with the exception of Ms. Margaret Cotter,
are currently directors of the Company. If any nominee becomes unavailable for
any reason, it is intended that the proxies will be voted for a substitute
nominee designated by the Board of Directors. The Board of Directors has no
reason to believe the nominees named will be unable to serve if elected. Any
vacancy occurring on the Board of Directors for any reason may be filled by a
majority of the directors then in office until the next Annual Meeting of
Stockholders.
The names of the nominees for director, together with certain information
regarding them, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James J. Cotter................................. 58 Chairman of the Board
S. Craig Tompkins............................... 46 President and a Director
William D. Gould................................ 58 Director(1)(2)
Gerard P. Laheney............................... 59 Director(1)
Ralph B. Perry III.............................. 61 Director(2)
Margaret Cotter................................. 30 Nominee
</TABLE>
- -------
(1) Member of the Compensation Committee. The Compensation Committee's
functions include the review of all compensation and employment agreements
with the Company's officers and directors. The Compensation Committee held
one meeting during the year ended December 31, 1996.
(2) Member of the Audit Committee. The Audit Committee held one meeting during
the fiscal year ended December 31, 1996. The Audit Committee's functions
include the recommendation of independent auditors to the Board and
approval of the scope of their services and proposed fees for such
services.
3
<PAGE>
During the year ended December 31, 1996, the Board of Directors held seven
meetings and held three meetings during the three months ended December 31,
1995. Each director attended at least 80% of the meetings of the Board of
Directors and all committees on which he served.
Mr. Cotter has been a Director of Craig since 1985 and the Chairman of the
Board of Directors since 1988. Mr. Cotter has been Chairman of the Board of
Reading Entertainment, Inc. ("REI," and collectively with its predecessor,
Reading Company, "Reading") since its formation and of Reading since December
1991 and a director since September 1990. He also serves as the Chairman of
Reading Australia, Pty. Limited. Between 1987 and September 1997, Mr. Cotter
served as a director of Stater Bros. Holdings Inc. ("SBH") and its
predecessors (a retail grocery chain). Mr. Cotter has been a director and the
Chairman of the Board of Citadel Holding Corporation ("Citadel") since 1991.
From October 1991 to June 1992, Mr. Cotter also served as the acting Chairman
of Citadel's then wholly-owned subsidiary, Fidelity Federal Bank, FSB
("Fidelity") and served as a director of Fidelity until December 1993. Mr.
Cotter has been a director and Chief Executive Officer of Townhouse Cinemas
Corporation (motion picture exhibition) since 1987, the parent of City
Cinemas. Mr. Cotter is also an Executive Vice President and a director of the
Decurion Corporation (motion picture exhibition) since 1969 and of Pacific
Theatres, Inc., a wholly-owned subsidiary of Decurion Corporation.
Mr. Tompkins has been President and a director of Craig and a director of
Reading since March 1993 and served as the President of Reading between March
1993 and January 1997. Since January 1997 he has served as the Vice Chairman
of REI, Reading Cinemas of Puerto Rico, Inc. and Reading Australia, Pty.
Limited. Prior thereto, Mr. Tompkins was a partner in the law firm of Gibson,
Dunn & Crutcher for more than five years. Mr. Tompkins has been a director of
Citadel since May 1993, became Vice Chairman in August 1994 and Secretary,
Treasurer and Principal Accounting Officer in September 1994. He has been a
director of G&L Realty Corp., a New York Stock Exchange listed REIT, since
December 1993.
Ms. Margaret Cotter is a member of the New York State Bar and, since
September 1997, has been a Vice President of Cecelia Packing Corporation, a
company wholly owned by Mr. James J. Cotter engaged in the citrus packing and
marketing business in Fresno, California. From February 1994 until September
1997, Ms. Cotter was an Assistant District Attorney for King's County in
Brooklyn, New York. Ms. Cotter graduated from Georgetown University Law Center
in 1993 and is the daughter of Mr. James J. Cotter. Ms. Cotter, is a limited
partner in James J. Cotter, Ltd. (Mr. Cotter is a general partner), which is a
general partner of Hecco Ventures I. James J. Cotter has shared voting power
with respect to the Company's equity shares held by Hecco Ventures I.
Mr. Gould has been a director of the Company since 1985, and is Chairman of
the Compensation Committee. Mr. Gould served as a director of Citadel between
June 1995 and June 1996. Since July 1986, Mr. Gould has been a member of Troy
& Gould Professional Corporation, a law firm that the Company has retained
during its last fiscal year.
Mr. Laheney has been a director of the Company since 1990. Mr. Laheney
served as a director of Reading Company between November 1993 and June 1996.
Between July 1995 and July 1996, Mr. Laheney was a consultant for Portfolio
Resources Group overseeing global equities, fixed income and foreign exchange
investments. Mr. Laheney has been President of Aegis Investment Management
Company, an investment advisory firm specializing in global investment
portfolio management since August 1993. Mr. Laheney was Vice President of The
Partners Financial Group, Inc., between December 1993 through June 1995 and a
Vice President of Dean Witter Reynolds from April 1990 until December 1993.
Mr. Perry has been a director of the Company since 1985 and is Chairman of
the Audit Committee. Mr. Perry has been a member in the Los Angeles,
California law firm of Graven Perry Block Brody & Qualls, a professional
corporation, since 1968. He served as a director of Citadel Holding
Corporation from August 1985 through April 1993 and has served as a director
of Fidelity Federal Bank (a subsidiary of Bank Plus since May 1996) since
August 1985 and of Reading Company between December 1988 and June 1996.
4
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's officers, directors and persons who own more than 10%
of the Company's Common Stock or Class A Common Preference Stock to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). The Commission's rules also require such
reporting persons to furnish the Company with a copy of all Section 16(a)
forms they file.
Based solely on a review of the copies of the forms which the Company
received and written representations from certain reporting persons, the
Company believes that, during the year ended December 31, 1996 and the three
months ended December 31, 1995, all filing requirements applicable to
reporting persons were fulfilled.
DIRECTOR COMPENSATION
Directors who are not officers or employees of the Company receive for
services as a Director a fee of $25,000 per annum. Messrs. Gould, Laheney and
Perry received $12,000 as additional fees for their participation as members
of the Independent Committee formed by Craig to review the Stock Transaction
consummated on October 15, 1996 between the Company and Reading.
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES.
EXECUTIVE OFFICERS
The names of the executive officers of the Company, other than the nominees
for director, together with certain information regarding them, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robin W. Skophammer................ 42 Chief Financial Officer and Treasurer
Ellen M. Cotter.................... 31 Vice President--Business Affairs
Robert Ty Howard................... 40 Secretary
</TABLE>
Ms. Skophammer has been the Chief Financial Officer and Treasurer of Craig
since October 1991 and Secretary between September 1992 and June 1997. She
served as a Director of Stater Bros. Holdings Inc. between February 1993 and
March 1994. Prior to October 1991, Ms. Skophammer was a partner with KPMG Peat
Marwick.
Ms. Ellen Cotter has been the Vice President of Business Affairs of Craig
since August 1996. Prior thereto, she was an attorney specializing in
corporate law with White & Case, a New York law firm. Ms. Cotter is the
daughter of Mr. James J. Cotter.
Mr. Howard has been the Secretary of the Company since June 1997. He served
as a director of Reading from April 1989 to June 30, 1992 and served as
Secretary of Reading from July 1992 through June 1997. Mr. Howard has provided
monthly consulting services to the Company since 1991. He has been Vice
President of Hecco Ventures, a shareholder of the Company, since 1988 and is
currently Chief Investment Officer of various of the subsidiaries of Decurion
Corporation.
5
<PAGE>
EXECUTIVE COMPENSATION
I. Summary Compensation Table
The following table shows, for the designated periods, the cash compensation
paid by the Company, as well as certain other compensation paid or accrued for
those years, to the Chairman of the Board and each of the most highly
compensated executive officers of Craig whose compensation exceeded $100,000
in all capacities in which they served. Information is included for the three
month period ended December 31, 1995 due to the fact that in September 1996
the Company changed its fiscal year end from September 30 to December 31 for
the year 1996 and years subsequent thereto. As a result of Craig increasing
its ownership in Reading, to greater than 50% in Fiscal 1996, Craig reports
its ownership interest on a consolidated basis. Accordingly, the officers
listed below for the year ended December 31, 1996 include certain officers of
Reading.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION AWARDS
------------------------------------------------ ---------
NAME AND SALARY BONUS OTHER ANNUAL OPTIONS
PRINCIPAL POSITION PERIOD ($) ($) COMPENSATION(1) ($) (#)
------------------ ---------- -------- -------- ------------------- ---------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS OF CRAIG:
JAMES J. COTTER:
Chairman of the Board
Craig Dec. 1996 $350,000
Dec. 1995 87,500
Sept. 1995 350,000(2) 300,000 (6)
(175,000)(6)
Sept. 1994 $500,000 350,000(2)
Chairman of the Board
Reading(3) Dec. 1996 150,000
Dec. 1995 37,500
Sept. 1995 150,000
Sept. 1994 150,000
Director of SBH(3) Dec. 1996 25,550
Dec. 1995 6,250
Sept. 1995 25,000
Sept. 1994 25,000
Chairman of the Board
Citadel(3) Dec. 1996 45,000
Dec. 1995 11,250
Sept. 1995 192,500 52,243
Sept. 1994 84,511
S. CRAIG TOMPKINS(4):
President, Craig Dec. 1996 $180,000
Dec. 1995 45,000
Sept. 1995 180,000 80,000
Sept. 1994 180,000
President, Reading(3) Dec. 1996 180,000
Dec. 1995 45,000
Sept. 1995 180,000
Sept. 1994 180,000
Director, Citadel(3) Dec. 1996 35,000
Dec. 1995 8,750
Sept. 1995 60,000 41,184
Sept. 1994 64,062
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION AWARDS
----------------------------------------------- ---------
NAME AND SALARY BONUS OTHER ANNUAL OPTIONS
PRINCIPAL POSITION PERIOD ($) ($) COMPENSATION(1) ($) (#)
------------------ ---------- -------- ------- ------------------- ---------
<S> <C> <C> <C> <C> <C>
ROBIN SKOPHAMMER(5):
Chief Financial Officer Craig Dec. 1996 $165,000
Dec. 1995 41,200
Sept. 1995 150,000 $15,000
Sept. 1994 139,100
Director of SBH(3) Sept. 1994 $10,900
EXECUTIVE OFFICERS OF READING
ROBERT F. SMERLING(8)
President, Reading Cinemas of
Puerto Rico, Inc. Dec. 1996 175,000 60,000
B. JOHN ROCHESTER(7)
President and Chief Executive
Officer, Reading Australia Pty Ltd. Dec. 1996 156,620
JAMES A. WUNDERLE(8)
Chief Financial Officer and
Treasurer of REI Dec. 1996 130,000 70,000
</TABLE>
- --------
(1) Excludes perquisites if the aggregate amount of such annual compensation
to the executive did not exceed the lesser of $50,000 or 10% of the annual
salary plus bonus, if less.
(2) Amount was paid pursuant to a consulting agreement between the Company and
Mr. James J. Cotter which expired on September 30, 1997. The Company and
Mr. Cotter have agreed to continue the consulting arrangement on a month-
to-month basis for a monthly fee of approximately $29,166. The Company
owns a condominium in a high-rise building, located in Hollywood,
California, which the Company uses as an executive office, and which is
personally used from time to time by the Chairman of the Board. Since the
incremental cost to the Company of Mr. Cotter's personal use of these
facilities does not exceed $50,000 or 10% of his annual consulting fee,
the cost has not been included as compensation in the table.
(3) Reading Entertainment, Inc., became a majority owned subsidiary of Craig
in 1996. Stater Bros. Holdings Inc. ("SBH") and Citadel Holding
Corporation ("Citadel") are also considered affiliates of Craig for the
respective periods. Accordingly, amounts paid to or earned, by the listed
executives with respect to their services to these companies are included
in this schedule. As of December 31, 1996, Craig has no liability to the
individuals for the obligations of Reading, SBH or Citadel. All amounts
reported are liabilities or have been paid directly by the respective
company to the executives for services rendered in the capacities
outlined. Any shares listed as option awards refer to that company's
securities. In August 1997, Mr. Cotter received a $475,000 bonus from
Reading and in September 1997, the shareholders of REI approved the grant
of a non-qualified option to purchase, subject to certain conditions, up
to 460,000 shares of REI Common Stock for $12.80 per share.
(4) Mr. Tompkins was elected as the President of the Company and was appointed
to the Board of Directors of the Company on February 26, 1993. On that
same date, he was elected by the Directors of Reading Company as the
President and as a member of the Board of Directors of that corporation.
Effective January 17, 1997, Mr. Tompkins was appointed Vice Chairman of
the Board of Directors of REI and Mr. Smerling was appointed President of
REI. While no formal written agreement exists as to the terms of Mr.
Tompkins employment, in the case of his employment by Craig and Reading,
the Company agreed to provide Mr. Tompkins with a base salary of $180,000,
typical senior executive fringe benefits and a one year severance payment
in the event that his employment is voluntarily terminated and no change
of control has occurred. Mr. Tompkins is entitled to a severance payment
equal to two years his base salary in the event
7
<PAGE>
of a change of control of Craig, and to a two year severance payment in the
case of a change of control of Reading. In December 1995, Craig issued an
interest free demand loan to Mr. Tompkins in the amount of $25,000. Unless a
demand for payment is made by Craig, the terms of the loan require 84
monthly payments in the amount of $297.62.
(5) Ms. Skophammer and Craig entered into an employment agreement which
provides for pension benefits recognizing that the Company does not
currently have a pension plan. Craig agreed to create a plan in which Ms.
Skophammer will be provided with a pension benefit commensurate with her
salary and position. In addition, the agreement provides that in the event
of termination by Craig given for any reason other than death, Ms.
Skophammer would be entitled to receive on the date of termination her
annual base compensation or in the event of a merger, acquisition or any
restructuring of Craig in which there is a change of control, as defined,
a severance payment equal to two years base compensation.
(6) In June 1995, in consideration of, among other things, Mr. Cotter's
agreement to cancel his previously vested option rights (with an exercise
price of $10.50 per share) and to extend his consulting agreement with
Craig for an additional year with no increase in compensation, the Board
canceled an option to purchase 175,000 shares of Class A Common Preference
Stock and approved the grant of an option to acquire 300,000 shares of
Craig's Common Stock at an exercise price of $11.75 per share.
(7) Mr. Rochester is employed under the terms of an employment contract with
an initial term of two years beginning January 1, 1996, with automatic
renewal terms of one year each. The agreement provides for a one-time
incentive payment to Mr. Rochester after the fourth anniversary of the
agreement, based, subject to certain adjustments, on a percentage of a
multiple of the cash flow achieved by the Company's Australian theater
operations. Under the agreement, in the event Mr. Rochester's employment
is terminated by the Company without cause, he will be entitled to receive
such incentive payment plus 17 payments, each equal to his monthly
remuneration, if such termination is prior to January 1, 1998, or 11 such
monthly payments if such termination occurs thereafter. Mr. Rochester is
entitled to receive a lump sum distribution of such amounts, as
applicable, if Reading withdraws from Australia and he is not granted
employment under comparable terms by any successor to Reading's operations
in Australia.
(8) Mr. Smerling was appointed President of REI effective January 17, 1997.
Messrs. Smerling and Wunderle are entitled to receive a payment equal to a
year's annual base salary in the event their individual employment with
Reading is involuntarily terminated.
II. Option Grant Table
No options were granted by the Company during the year ended December 31,
1996 and the three months ended December 31, 1995. In September 1997, Mr.
Laheney's option to purchase 15,000 shares of Craig Common Stock at $13.875
was extended for a two-year term through October 10, 1999.
III. Option Exercises and Year-end Table
The following sets forth information with respect to the executives named in
the Summary Compensation Table, concerning the exercise of options during the
year ended December 31, 1996 and the three months ended December 31, 1995 and
unexercised options as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTION AT VALUE OF UNEXERCISED IN-THE-
SHARES DECEMBER 31, 1996 MONEY AT DECEMBER 31, 1996
NAME SECURITY EXERCISED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ---------------- --------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
James J. Cotter......... Common Stock 0 300,000/0 $787,500/$0
S. Craig Tompkins....... Class A Common 0 13,125/4,375 $ 44,297/$14,765
Preference Stock
Robin Skophammer........ Common Stock 0 15,000/0(2) $ 24,375/$0
</TABLE>
- --------
(1) Represents the amount by which the aggregate market price on December 31,
1996 of the shares subject to such options exceeded the exercise price of
such options.
(2) In consideration of Ms. Skophammer's agreement to not exercise such
options prior to their expiration on January 2, 1997, Craig paid to Ms.
Skophammer $30,000 in January 1997.
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently is composed of two directors, William
D. Gould and Gerard P. Laheney. Mr. Gould is a member of Troy & Gould
Professional Corporation, a law firm that Craig retained and paid
approximately $291,000 in Fiscal 1996. Messrs. Cotter and Tompkins serve as
members of REI's Board of Directors and, as directors, approve decisions of
REI's Compensation Committee with respect to compensation of REI's officers
and directors. Mr. Cotter was a member of REI's Executive Committee which
served as REI's Compensation Committee until October 1996, however, no action
concerning compensation matters was taken by the REI Executive Committee in
1996. Messrs. Cotter and Tompkins serve as members of Citadel Holding
Corporation's Board of Directors, and, as directors, approve decisions of
Citadel's Compensation Committee with respect to compensation of Citadel's
officers and directors. Mr. Cotter is a member of Citadel's Compensation
Committee.
CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS
On May 17, 1996, Craig purchased 67,000 shares of Reading Common Stock from
the Chairman of the Board, James J. Cotter in exchange for 66,042 shares of
Craig Common Stock, increasing the Company's ownership of Reading to more than
50% which resulted in the consolidation of Reading with Craig for financial
reporting purposes.
During the third quarter of 1997, Citadel formed a new subsidiary, Citadel
Agriculture, Inc., to engage in the business of owning and farming
agricultural land. The first transaction is expected to be the acquisition of
partnership interests representing an approximately 80% interest in three
partnerships newly formed to acquire approximately 1,580 acres of agricultural
land located in Kern County, California and commonly known as the Big 4 Ranch.
The remaining approximately 20% interest in these partnerships is being
acquired by a company controlled by Mr. Cotter, and owned by Mr. Cotter and
members of his family (including Ms. Margaret Cotter, director nominee, and
Ms. Ellen M. Cotter (Vice President--Business Affairs). It is expected that
Citadel and Mr. Cotter will contribute to the capital of the partnerships and
share in the allocation of profits and losses and in any distributions from
the partnerships on the same 80/20 basis. In addition, Cecelia Packing
Corporation, a company owned by Mr. Cotter, which employs Ms. Margaret Cotter,
is expected to provide certain executive management and accounting services
for the Big 4 Ranch operation.
In 1996, Reading and Sutton Hill Associates ("Sutton Hill"), a partnership
which is owned by Mr. Cotter and Mr. Michael Forman, acquired, for
approximately $12,429,000, the Angelika Film Center (the "Angelika"), a
multiplex theater located in New York City. The Company and Sutton Hill formed
AFC, a limited liability company, to hold their interest in the Angelika.
Reading contributed 83.3% of the capital of AFC and Sutton Hill contributed
the remaining 16.7%. The operating agreement of AFC provides that all
depreciation and amortization (the "Special Deductions") will first be
allocated to Sutton Hill until the aggregate amount of such Special Deductions
equals Sutton Hill's initial investment. Thereafter, Reading will receive all
Special Deductions until the relative ownership interests are equal to the
initial ownership interests of the parties. Sutton Hill has agreed to
subordinate its interest in AFC to Reading's interest in order to permit the
company to pledge AFC and its assets as collateral to secure borrowings by
Reading. In addition, Sutton Hill has agreed that Reading will be entitled to
receive up to 100% of the proceeds of borrowings of AFC, up to the amount of
Reading's initial capital contributions of AFC.
AFC is managed by City Cinemas (owned by Sutton Hill) pursuant to the terms
of a management agreement (the "Management Agreement"). The Management
Agreement provides for City Cinemas to manage the Angelika for a minimum
annual fee of $125,000 plus an incentive fee equal to 50% of cash flow (as
defined in the Management Agreement) over prespecified levels, provided
however, that the maximum annual fee (minimum fee plus incentive fee) may not
exceed 5% of the Angelika's annual revenues.
9
<PAGE>
Mr. Smerling serves as President of Reading and City Cinemas. Reading and
City Cinemas have entered into an Executive Sharing Agreement pursuant to
which Mr. Smerling provides services to both Reading and City Cinemas and the
cost of such services is shared equally by the parties, to the extent such
costs cannot be allocated directly to one of the parties. Prior to retaining
Mr. Smerling and entering into the Executive Sharing Agreement, the Board of
Directors of Reading determined that City Cinemas and Reading are not
competitors and that the arrangement provided Reading with a chief executive
officer with background and experience which Reading could not otherwise
afford based upon its scope of operations. In 1996 and January 1997, Reading
loaned Robert F. Smerling, President of Reading, a total of $70,000 pursuant
to an interest free promissory note payable upon demand.
Mr. Forman and his family own Decurion Company. Mr. Forman and a subsidiary
of Decurion Corporation are also general partners in HVI.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation policies and programs are designed to
attract and retain talented executives and motivate them to achieve the
Company's business objectives that the Board of Directors believes will
enhance stockholder value. Each of the Company's executive officers is
employed pursuant to employment agreements. The principal terms of these
arrangements, including salary and other base-level compensation, are
described herein under "Summary Compensation Table".
In May 1996, Reading became a majority owned subsidiary of the Company. The
Compensation Committee of REI's Board of Directors is responsible for
compensation matters of employees of REI. Certain executives and consultants
provide services to both Craig and REI. The compensation committee of Craig
considers compensation received from REI in determining the Company executive
compensation.
The Company's current compensation strategy is to supplement the executive
officers' base level compensation with periodic discretionary cash bonuses in
recognition of individual performance and stock option grants designed to link
the executives' long term compensation to appreciation in stockholder value
over time. To this end, the Compensation Committee from time to time
recommends to the Board of Directors the award of performance bonuses and
stock option grants to individual executive officers.
Periodic cash bonuses and stock option awards for executive officers of the
Company are determined primarily on the basis of the individual job
performance of the executive officers and achievement of the Company's
business objectives, but no particular weighting is given by the Compensation
Committee to individual performance versus the achievement of corporate
objectives. These variable elements in the compensation of the Company's
executive officers recognize individual contributions and are determined based
upon the level of the executive's responsibilities, the efficiency and
effectiveness with which he or she oversees the matters under his or her
supervision and the degree to which the officer has contributed to the
accomplishment of major tasks that advance the Company's goals. In light of
the nature of the executive officers' responsibilities, particularly the fact
that they have overall corporate policy-making and administrative
responsibilities but do not oversee operating businesses, the Compensation
Committee's assessment of Mr. Cotter's performance and the performance of
other executive officers is not based directly on corporate performance from a
financial point of view. However, the Company's financial performance is one
factor that affects the Compensation Committee's recommendation with respect
to the overall level of compensation to be made for all executive officers as
a group. In appropriate cases, the Compensation Committee takes into account
in making its recommendations compensation received by executive officers for
companies affiliated with the Company. Mr. Cotter, in his capacities as
Chairman of the Board and Chief Executive Officer, is involved in the
negotiation of employment arrangements with the Company's other executive
officers, reviews executive performance with the Compensation Committee and is
consulted with respect to the amounts of each other executive officer's
discretionary bonus and stock option award, if any.
Subject to an exception for "performance-based compensation", effective
January 1, 1994, corporations generally will be denied a deduction for federal
income tax purposes for compensation paid to senior executive
10
<PAGE>
officers to the extent that such compensation exceeds $1 million. This law did
not impact the Compensation Committee's deliberations with respect to 1996 and
for 1997 the Company does not expect to pay any executive officer cash
compensation in excess of the deductibility limit. The Compensation Committee
and the Board of Directors, however, retain discretion and authorize the
payment of compensation that does not qualify for income tax deductibility.
William D. Gould
Gerard P. Laheney
11
<PAGE>
PERFORMANCE GRAPH
The information set forth below shall not be deemed incorporated by
reference by any general statement incorporating by reference the Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company incorporates
this information by reference, and shall not otherwise be deemed soliciting
material or be deemed filed under such Acts.
The following line graph compares the cumulative total stockholder return on
Craig Corporation's Common Stock and Class A Common Preference Stock from
September 30, 1991 through September 30, 1995, the three month period ended
December 31, 1995 and the year ended December 31, 1996 against the cumulative
total return as calculated by the Center for Research in Securities Prices
("CRSP") of (i) the New York Stock Exchange and (ii) the CRSP Total Return
Index for NASDAQ, New York Stock Exchange ("NYSE") and the American Stock
Exchange ("AMEX") in the SIC Graph Code 7830-7839 (motion picture theaters and
allied businesses), and (iii) the cumulative return of the Company's former
peer group, the Total Return Index for NASDAQ, NYSE and AMEX in the SIC Graph
Code 5410-5419 (retail trade--food stores).
The past performance shown for the Company's common stock and Class A Common
Preference Stock is not necessarily indicative of future performance.
CUMULATIVE RETURN FROM SEPTEMBER 1991 TO DECEMBER 1996
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period Craig Class A NYSE Retail Food Motion Picture
(Fiscal Year Covered) Craig Common Common Stock Index Group Index Index
- ------------------- ------------ ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Measurement Pt- 9/30/91 $100 $100 $100 $100 $100
9/30/92 $ 49.2 $ 81.64 $111.0 $101.1 $127.4
9/30/93 $ 73.0 $130.4 $127.7 $104.8 $216.9
9/30/94 $ 71.4 $126.0 $130.9 $113.7 $197.2
9/30/95 $ 59.5 $102.8 $166.6 $131.7 $243.8
12/31/95 $ 62.6 $104.3 $176.0 $140.9 $249.8
12/31/96 $ 91.3 $160.8 $213.5 $179.9 $285.5
</TABLE>
The graph assumes a one hundred dollar ($100) investment on September 30,
1991 and reinvestment of dividends on the date such dividends were declared.
12
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP has examined, as independent auditors, the consolidated
financial statements of the Company since 1987. Ernst & Young LLP also serves
as auditors the Company's affiliates, Reading Entertainment, Inc. and Stater
Bros. Holdings Inc. A representative of Ernst & Young will attend the Annual
Meeting of Stockholders and will have the opportunity to make a statement if
he or she desires to do so and to respond to appropriate questions.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1996 (the "Annual Report") and Quarterly Report on Form 10-Q for
the three and nine month periods ending September 30, 1997 are enclosed.
STOCKHOLDER PROPOSALS
Any stockholder who, in accordance with and subject to the provisions of the
proxy rules of the SEC, wishes to submit a proposal for inclusion in the
Company's proxy statement for its 1998 Annual Meeting of Stockholders, must
deliver such proposal in writing to the Secretary of the Company at the
Company's principal executive offices at 550 South Hope Street, Suite 1825,
Los Angeles, CA 90071, no later than April 22, 1998.
OTHER MATTERS
The Board of Directors does not know of any other matters to be presented
for consideration other than the matters described in the Notice of Annual
Meeting, but if any matters are properly presented, it is the intention of the
persons named in the accompany proxy to vote on such matters in accordance
with their judgment.
By Order of the Board of Directors,
/s/ Robert Ty Howard
Robert Ty Howard, Secretary
Dated: November 24, 1997
13
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CRAIG CORPORATION
The undersigned stockholder of Craig Corporation, a Delaware corporation
(the "Company"), acknowledges receipt of the Notice of the Annual Meeting of
Stockholders of the Company and the accompanying Proxy Statement, each dated
November 24, and the undersigned hereby revokes all prior proxies and hereby
constitutes and appoints James J. Cotter, S. Craig Tompkins and Robin W.
Skophammer, and each of them (each with full power of substitution and with
full power to act without the others and, if two or more of them act
hereunder, by action of a majority of them), the proxies of the undersigned,
to represent the undersigned and to vote all the shares of voting stock of the
Company that the undersigned would be entitled to vote at the Annual Meeting
of Stockholders of the Company to be held December 15, 1997 at 10:00 a.m. (Los
Angeles time) at the Regal Biltmore Hotel, 506 S. Grand Avenue, Los Angeles,
California, and at any adjournment or postponement thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
FOLD AND DETACH HERE
<PAGE>
Please mark [X]
your votes as
indicated in
this example
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1 AND 2.
WITHHELD
FOR FOR ALL
1. ELECTION OF DIRECTORS [_] [_]
NOMINEES: James J. Cotter,
S. Craig Tompkins,
Margaret Cotter, William D. Gould,
Gerard P. Laheney and
Ralph B. Perry III
2. In the proxies' discretion to vote upon any other matter as may properly
come before the meeting or any adjournment or postponement thereof.
Management is not aware of any other matter that will be presented for
action at the meeting.
WITHHELD FOR: (Write that nominee's name in the space provided below).
- -------------------------------------------------------------------------------
Signature(s) ________________________________________ Date _________________
NOTE: Please sign exactly as name appears below. 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 the partnership name by an authorized person.
FOLD AND DETACH HERE
