<PAGE>
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)
--Enter Company Name Here--
--------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
<PAGE>
CRAIG CORPORATION
550 South Hope Street, Suite 1825
Los Angeles, CA 9007l
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 12, 2000
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Craig Corporation, a Nevada
corporation (collectively with its corporate predecessors, the "Company" or
"Craig Corp."), will be held at the Regal Biltmore Hotel, 506 South Grand
Avenue, Los Angeles, California on Tuesday, September 12, 2000, at 2:30 p.m.,
Los Angeles time, subject to adjournment or postponement for the following
purposes:
(1) To elect six directors to the Board of Directors to serve until the
2001 Annual Meeting of Stockholders;
(2) To approve the adoption by the Board of Directors of the 1999 Stock
Option Plan of Craig Corporation; and
(3) To transact such other business as may properly come before the
meeting, or any adjournment or postponement thereof.
A copy of the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1999 and a Quarterly Report on Form 10-Q for the six-month
period ended June 30, 2000 are enclosed. Only stockholders of record at the
close of business on July 19, 2000 will be entitled to notice of and to vote at
the meeting and any adjournment or postponement thereof. Prior to the voting
thereof, a proxy may be revoked by the person executing such proxy by (i) filing
with the Corporate Secretary of Craig Corporation, prior to the commencement of
the Annual Meeting, either a written notice of revocation or a duly executed
proxy bearing a later date or (ii) by voting in person at the Annual Meeting.
The Company will make available a list of the stockholders entitled to vote
at the Annual Meeting for examination at its principal executive offices located
at 550 S. Hope Street, Suite 1825, Los Angeles, California 90071, at least ten
days prior to the date of the Annual Meeting.
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/ S. Craig Tompkins
S. Craig Tompkins
President
August 30, 2000
--------------------------------------------------------------------------------
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 9007l
(2l3) 239-0555
PROXY STATEMENT
Annual Meeting of Stockholders
September 12,2000
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Craig Corporation (collectively with its corporate
predecessors, the "Company" or "Craig Corp." and collectively with its
consolidated subsidiaries, "Craig") of proxies for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Tuesday, September 12, 2000,
at 2:30 p.m., and at any adjournment or postponement thereof, at the Regal
Biltmore Hotel, 506 South Grand Avenue, Los Angeles, California. This Proxy
Statement is first being mailed to stockholders on or about August 30, 2000.
You are requested to sign, date and return the enclosed proxy card in order to
ensure that your shares are represented at the meeting.
At the Annual Meeting, stockholders will be asked (i) to elect six
directors and (ii) to approve the adoption by the Board of Directors of the 1999
Stock Option Plan of Craig Corporation (the "Stock Option Plan Proposal").
VOTING AND PROXIES
Shares represented by properly executed proxies received by the Company
will be voted at the Annual Meeting in the manner specified therein or, if no
instructions are marked on the enclosed proxy card, will be voted "FOR" each of
the nominees for director as identified on such card and "FOR" the Stock Option
Plan Proposal. Although management does not know of any other matter to be
acted upon at the Annual Meeting, shares represented by valid proxies will be
voted by the persons named on the accompanying proxy card in accordance with
their judgment with respect to any other matters that may properly come before
the Annual Meeting.
Execution of a proxy will not in any way affect a stockholder's right to
attend the Annual Meeting and vote in person, and any person giving a proxy has
the right to revoke it at any time before it is exercised by (i) filing with the
Corporate Secretary of the Company, prior to the commencement of the Annual
Meeting, a duly executed instrument dated subsequent to such proxy revoking the
same or a duly executed proxy bearing a later date or (ii) attending the Annual
Meeting and voting in person.
In addition to the solicitation by mail, regular employees of the Company
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
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<PAGE>
expenses of forwarding solicitation materials to the beneficial owners. The
Company will bear all expenses incurred in soliciting its proxies.
Only stockholders of record of Common Stock and Class A Common Preference
Stock (as defined below) of the Company at the close of business on July 19,
2000 are entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof. The outstanding voting securities of the
Company on that date consisted of 3,436,808 shares of Common Stock, $.25 par
value, and 7,058,408 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 will be counted for purposes of
determining the presence of a quorum, as will broker non-votes, provided
authority is given to attend the meeting or to vote on any matter to come before
the meeting. Because directors are elected by a plurality vote, abstentions and
broker non-votes will not be counted either for or against the election of
directors when determining whether a particular director has been elected.
Approval of the Stock Option Plan Proposal also requires the affirmative vote of
a majority of the votes cast on such proposal. Stockholders may vote their
shares in favor of the proposal, or against the proposal, or they may abstain.
Abstentions and brokers non-votes are not counted as votes for or against the
Stock Option Plan Proposal and, accordingly, are not taken into consideration in
determining whether or not such proposal is approved.
Mr. James J. Cotter currently owns or has proxies to vote shares
representing approximately 51% of the voting power of the Company. Mr. Cotter
has advised the Company that he intends to vote in favor of each of the
individuals identified herein as nominees for election to the Board of
Directors, Proposal No. 1, and in favor of the Stock Option Plan Proposal,
Proposal No. 2. If Mr. Cotter votes in accordance with his stated intention,
then the individuals identified herein as nominees for election to the Board of
Directors will be elected and the Stock Option Proposal will be adopted.
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<PAGE>
ELECTION OF DIRECTORS
Beneficial Ownership of Securities
The following table sets forth information as of the Record Date with
respect to (i) persons known by the Company to own beneficially more than 5% of
the outstanding shares of Common Stock or Class A Common Preference Stock, (ii)
each director and nominee, (iii) each of the Company's most highly compensated
executive officers, and (iv) all the officers and directors as a group. Except
as otherwise noted, the indicated beneficial owner has sole voting power and
sole investment power with respect to such shares.
<TABLE>
<CAPTION>
Class A Common
Common Stock Preference Stock
------------ ----------------
Amount Percentage Amount Percentage
Name and Address Beneficial of Beneficially of Class A
of Beneficial Owner Owned(1) Common Stock(1) Owned(1) Common Stock(1)
------------------- ---------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
James J. Cotter(2) 2,385,142 59.16% 2,021,702 28.64%
120 N. Robertson Blvd.
Los Angeles, CA 90048
Hecco Ventures(2) 617,438 17.97% 720,838 10.21%
120 N. Robertson Blvd.
Los Angeles, CA 90048
Artisan Partners LTD/(3) 649,000 18.88%
Artisan Investment Corporation
1000 North Water Street, #1770
Milwaukee, WI 53202
Dimensional Fund Advisors, Inc.(4) 257,900 7.50%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
First Pacific Advisors, Inc.(5) 896,400 12.69%
11400 West Olympic Blvd.
Suite 1200
Los Angeles, CA 90064
Lawndale Capital Management, Inc.(6) 628,000 8.89%
One Sansome St. Ste. 3900
San Francisco, CA 94104
Ellen M. Cotter** 1,000 * 1,000 *
Margaret Cotter**(7) 9,500 * 9,500 *
William D. Gould**(8) 17,000 * 20,000 *
Gerard P Laheney**(9) 15,000 * 15,000 *
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Robert W. Loeffler**
Andrzej Matyczynski**
S. Craig Tompkins**(10) 37,000 *
Officers and Directors as
a group (8 persons)(11) 2,427,642 59.87% 2,104,202 29.57%
</TABLE>
---------------
* Represents less than 1%.
** Business address: c/o Craig Corporation, 550 South Hope Street, Suite 1825,
Los Angeles, CA 90071.
(1) Applicable percentage of ownership is based on 3,436,808 shares of Common
Stock and 7,058,408 shares of Class A Common Preference Stock shares
outstanding as of the Record Date plus the applicable options for such
shareholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and includes voting and
investment power with respect to such shares. Shares subject to options
currently exercisable or exercisable within 60 days of the Record Date are
deemed outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage ownership of any other person.
(2) Includes the Common Stock and Class A Common Preference Stock owned by
Hecco Ventures ("HV"), which is a California general partnership. James J.
Cotter is the general partner of a limited partnership which is the general
partner of HV. Also includes 594,940 shares of common stock subject to
stock options held by Mr. Cotter. Margaret Cotter, a director, and Ellen
Cotter, Vice President of Business Affairs for the Company, are the
daughters of Mr. Cotter and each are limited partners in the above-
reference limited partnership. The other general partners of HV are
Michael Forman and a subsidiary of the Decurion Corporation, a company
privately owned by Michael Forman and certain members of his family. HV
has granted Mr. Cotter the right to vote the shares held by it. Mr.
Cotter is also the beneficial owner of 353,723 shares of the Common Stock
of REI consisting of 6,000 shares held in a profit sharing plan, and
347,732 shares issuable within 60 days of the Record Date upon the exercise
of outstanding stock options.
(3) According to filing with the Securities and Exchange Commission ("SEC")
dated February 14, 2000, includes 649,000 Common Stock shares which are
owned of record by Artisan Partners LTD/Artisan Investment Corporation
("Artisan").
(4) According to filing with the SEC dated February 3, 2000, Dimensional Fund
Advisors Inc. ("Dimensional"), a registered investment manager to certain
other investment vehicles, including commingled group trusts (the
"Portfolios"). Dimensional possesses both voting and investment power over
the shares of Common Stock shown, however, the shares are owned of record
by the Portfolios, and Dimensional disclaims beneficial ownership of all
such shares.
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<PAGE>
(5) According to filings with the SEC dated February 11, 2000, includes 217,200
shares which have shared voting power.
(6) According to filings with the SEC dated April 11, 2000, includes shares
which are owned of record by Diamond A Partners, L.P. ("DAP") and by
Diamond A Investors L.P. ("DAI") over which Lawndale Capital Management,
Inc. ("LAM") and Andrew E. Shapiro have shared voting and dispositive
power. According to filings with the SEC, Lawndale Capital Management,
Inc., is the investment advisor to DAP and DAI, which are investment
limited partnerships and Mr. Shapiro is the sole manager of LAM.
(7) The shares held by Ms. Cotter include 7,500 shares of both Common and Class
A Common Preference Stock subject to a vested stock option.
(8) Includes 2,000 shares of Common Stock and 3,000 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.
(9) Represents shares subject to an exercisable option to purchase Common Stock
and/or Class A Common Stock within 60 days of the Record Date.
(10) Includes 35,000 shares subject to a vested stock option and 2,000 shares
held in various retirement accounts for the benefit of Mr. Tompkins and his
wife.
(11) Includes 617,440 shares of Common Stock and 57,500 shares of Class A Common
Preference Stock subject to stock options exercisable within 60 days of the
Record Date.
-5-
<PAGE>
Nominees for Election
Six directors are to be elected at the Annual Meeting to serve until the
next annual meeting of stockholders to be held in 2001 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, all of whom
are currently directors of the Company. The six nominees for election to the
Board of Directors who receive the greatest number of votes cast for the
election of directors by the shares present and entitled to vote will be elected
directors. 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.
The names of the nominees for director, together with certain information
regarding them, are as follows:
Name Age Position
---- --- --------
James J. Cotter 62 Chairman of the Board
S. Craig Tompkins 49 President and a Director
Margaret Cotter 31 Director
William D. Gould 61 Director(1)(2)(3)
Gerard P. Laheney 62 Director(1)(2)(3)
Robert M. Loeffler 77 Director(2)
(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.
(2) Member of the Audit Committee. 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) Member of the Stock Options Committee.
During the year ended December 31, 1999, the Board of Directors held six
meetings. Each director attended at least 75% of the meetings of the Board of
Directors and all committees on which he or she served, during the period such
individual was a director.
Mr. Cotter has been a Director of the Company since 1985 and the Chairman
of the Board of Directors since 1988. Mr. Cotter has been Chairman of the Board
of Reading Entertainment, Inc. (collectively with its predecessors, "REI," and
with its consolidated subsidiaries, "Reading") since December 1991. REI is an
affiliate of the Company, and is engaged principally in the business of
developing, owning and operating cinemas and cinema-based entertainment centers
in the United States, Australia, New Zealand and Puerto Rico. Mr. Cotter has
been a director and the Chairman of the Board of Citadel Holding Corporation
(collectively with its predecessors, "CHC", and with its consolidated
subsidiaries, "Citadel") since 1991 and the Chief Executive Officer of CHC since
August 1999. Citadel is an affiliate of the Company. Citadel is engaged in the
commercial real estate and agricultural businesses and recently has started to
expand into the domestic film exhibition and live theatrical businesses. Mr.
Cotter is
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<PAGE>
the Chairman and a director of Citadel Agriculture, Inc., a wholly owned
subsidiary of CHC ("CAI"); the Chairman and member of the Management Committees
of each of the three agricultural partnerships (the "Agricultural Partnerships")
which constitute the principal assets of CAI, and the Chairman and a member of
the Management Committee of Big 4 Farming, LLC ("Farming"), a farm management
company 80% owned by Citadel, which was formed to manage the properties owned by
the Agricultural Partnerships. From 1988 through January 1993, Mr. Cotter also
served as the President and a director of Cecelia Packing Corporation (a citrus
grower and packer), a company wholly owned by Mr. Cotter, and is the Managing
Director of Visalia, LLC, a company owned 1% by Mr. Cotter and 99% by certain
members of his family and which holds a 20% interest in each of the Agricultural
Partnerships and in Farming. Between 1987 and September 1997, Mr. Cotter served
as a director of Stater Bros. Holdings Inc. and its predecessors (a retail
grocery chain). Mr. Cotter has been a director and Chief Executive Officer of
Townhouse Cinemas Corporation (motion picture exhibition) since 1987, and has
been the Executive Vice President and a director of the Decurion Corporation
(real estate and motion picture exhibition) and of Pacific Theaters, Inc.
(motion picture exhibition), a wholly owned subsidiary of Decurion Corporation,
since 1969. Mr. Cotter is the General Partner of a limited partnership which is,
in turn, the General Partner of HV, a California general partnership engaged in
the business of investing in securities, and the holdings of which include
shares representing approximately 16.9% of the voting power of the Company.
Mr. Tompkins has been President and a director of the Company and a
director of REI since March 1993 and served as the President of REI between
March 1993 and January 1997. Since January 1997 he has served as the Vice
Chairman of REI. Prior thereto, Mr. Tompkins was a partner in the law firm of
Gibson, Dunn & Crutcher. Mr. Tompkins has been a director of CHC since May
1993, became Vice Chairman on August 3, 1994 and has served as Corporate
Secretary since September 15, 1994. In 1997, Mr. Tompkins became the President
of CAI and a member of the Management Committee of each of the Agricultural
Partnerships and of Farming. For administrative convenience, Mr. Tompkins also
serves as an Assistant Secretary of Big 4 Ranch, Inc. (BRI") and Visalia LLC.
BRI is an affiliate of the Company and owns a 40% interest in each of the
Agricultural Partnerships. Mr. Tompkins has been a director of G&L Realty
Corp., a New York Stock Exchange listed REIT, since December 1993 and serves as
the Chairman of the Audit Committee and of the Strategic Planning Committee of
that company. Mr. Tompkins has been a director of Fidelity Federal Bank, FSB,
since April 2000, where he serves on the Audit and Compensation Committees.
Ms. Margaret Cotter is a member of the New York State Bar and, since
September 1997, has been Vice President of Cecelia Packing Corporation. 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., which is a
general partner of HV. Ms. Cotter serves as a director of BRI and is a member
of Visalia LLC. She is also President of Off Broadway Investments, Inc. and the
Vice President of Union Square Management, Inc. ("Union Square"), a company
which provides theatre management services to Reading.
Mr. Gould has been a director of the Company since 1985, and is Chairman of
the Audit Committee and also is a member of the Compensation Committee and Stock
Options Committee. Mr. Gould served as a director of CHC between June 1995 and
June 1996 and in December 1997 became a director of BRI. 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.
-7-
<PAGE>
Mr. Laheney has been a director of the Company since 1990. Mr. Laheney
served as a director of Reading Company, the predecessor of REI, between
November 1993 and June 1996. In November 1998, Mr. Laheney became Chairman and
President of BRI and a member of the management committee of each of the
Agricultural Partnerships. Mr. Laheney served in such capacities until his
resignation on February 14, 2000. 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. Loeffler joined the Board on February 22, 2000 and is a member of the
Audit Committee. Mr. Loeffler became a director of CHC on March 27, 2000, and
has been a director of REI since July 1999. Mr. Loeffler has been a director of
PaineWebber Group, Inc. since 1978. Mr. Loeffler is a retired attorney and was
Of Counsel to the California law firm of Wyman Bautzer Kuchel & Silbert from
1987 to March 1991. He was Chairman of the Board, President and Chief Executive
Officer of Northview Corporation from January to December 1987 and a partner in
the law firm of Jones, Day, Reavis & Pogue until December 1986. Mr. Loeffler is
also a director of Advanced Machine Vision Corp.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 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, 1999, all filing requirements
applicable to reporting persons were fulfilled on a timely basis.
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. During fiscal 1999, Mr.
Gould, Mr. Laheney and Ms. Cotter, who served as directors of BRI, and in the
case of Mr. Laheney and Ms. Cotter, as officers of BRI, received no
compensation for their services to that company.
New Audit Committee Charter
During the fiscal year ended December 31, 1999, the Company adopted a new
Audit Committee Charter ("Charter") to replace the Audit and Finance Committee.
The Charter requires the Audit Committee to meet at least four times annually
and at least once separately with the independent auditors and management. The
Board of Directors included additional provisions in the new Charter to
strengthen the Audit Committee's function of overseeing the quality and
integrity of the accounting, audit, internal control and financial reporting
policies and practices of the Company. The Charter includes professional
criteria for the members of the Audit Committee and empowers the Audit Committee
to investigate any matter for
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<PAGE>
which it has oversight authority. The Audit Committee, among other things, makes
recommendations to the Board concerning the engagement of the Company's
independent auditors; monitors and reviews the performance of the Company's
independent auditors; reviews with management and the independent auditors the
Company's financial statements, including the matters required for discussion
under Statement of Auditing Standards No. 61; monitors the adequacy of the
Company's operating and internal controls; discusses with management legal
matters that may have a material impact on the Company's financial statements;
and issues an annual report to be included in the Company's proxy statement as
required by the rules of the Securities and Exchange Commission. The current
members of the Audit Committee are directors William D. Gould, Chairman, Gerard
P. Laheney and Robert W. Loeffler
Vote Required; Recommendation of the Board
The six nominees receiving the greatest number of votes will be elected to
the Board of Directors. The Company has been advised that Mr. Cotter intends to
vote 3,811,904 shares of the Company's Common Stock, representing 51% of the
voting power of the Company, in favor of the nominees listed above. If Mr.
Cotter votes as he has indicated, each of the nominees listed above will be
elected.
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES.
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
---------------------------------------------
Summary Compensation Table
The following table shows, for the periods designated, the cash compensation
paid by the Company and its affiliates, 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
$100,000 in all capacities in which they served.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Other Annual Securities
Compensation Underlying All Other
Name and Salary Bonus (1)(9) Stock Options Compensation
Principal Position Year ($) ($) ($) (#) ($)
------------------ ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
James J. Cotter:
Chairman of the Board
Craig Corp.(2)(11) 1999 -- -- $350,000 -- --
1998 -- -- $350,000 -- --
1997 -- -- $350,000 -- --
Chairman of the Board
REI (3) 1999 -- -- $150,000 -- --
1998 -- -- $150,000 -- --
1997 -- $475,000 $150,000 460,000(7) --
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Chairman of the Board
CHC(3) 1999 -- -- $ 45,000 -- --
1998 -- $200,000 $ 45,000 -- --
1997 -- -- $ 45,000 -- --
S. Craig Tompkins(4):
President of 1999 $180,000 -- -- -- $ 21,422(8)
Craig Corp.(11) 1998 $180,000 -- -- -- $106,931(8)
1997 $180,000 -- -- -- --
Vice Chairman, REI(3) 1999 $180,000 -- -- -- --
1998 $180,000 -- -- -- --
1997 $180,000 -- -- 20,000(7) --
Vice Chairman, CHC(3) 1999 -- -- $40,000 40,000(13) --
1998 -- $ 50,000 $ 40,000 -- --
1997 -- -- $ 40,000 -- --
Robin W. Skophammer
Chief Financial 1999 $151,250 -- $ 15,400 -- $ 20,880(8)
Officer of Craig Corp.(12) 1998 $165,000 -- $ 16,800 30,000 $135,866(8)
1997 $165,000 -- $ 16,800 -- $ 30,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Other Annual Securities
Compensation Underlying All Other
Name and Salary Bonus (1)(9) Stock Options Compensation
Principal Position Year ($) ($) ($) (#) ($)
------------------ ---- ------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Andrzej Matyczynski(5):
Chief Financial 1999 180,000(5) -- -- 30,000(14) 40,000(5)
Officer, Craig Corp.(11)
Chief Administrative 1999 0(5) -- -- -- --
Officer, REI(11)
Chief Financial
Officer, CHC(11) 1999 0(5) -- 30,000(14) --
Ellen M. Cotter:
Vice President, Business 1999 -- -- -- -- --
Affairs, Craig Corp. 1998 $ 16,700 -- $ 2,300 --
1997 $ 92,500 -- $12,220 -- --
Vice President, Business
Affairs, REI 1999 $150,000 -- $14,331 -- $ 4,800
1998 $80,770 $ 25,000 $11,148 $2,423(10)
1997 -- -- -- 10,000(7) --
Officers of REI
---------------
Robert F. Smerling(6)
President, REI 1999 $175,000 -- -- -- $20,415
1998 $175,000 -- -- -- --
1997 $175,000 -- -- 35,000(7) --
James A. Wunderle
Exec. Vice President 1999 $175,000 -- -- -- $ 4,800
and Chief Financial 1998 $175,000 -- -- -- 4,500(10)
Officer and Treasurer, 1997 $170,000 $5,000 -- 17,000(7) --
REI
</TABLE>
(1) Excludes perquisites if the aggregate amount of such annual compensation to
the executive did not exceed $50,000 or 10% of the annual salary plus
bonus, unless otherwise noted.
-11-
<PAGE>
(2) Amount is paid pursuant to a consulting agreement between the Company and
Mr. James J. Cotter. 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) REI is a majority owned subsidiary of the Company and CHC is considered an
affiliate of the Company and, accordingly, amounts paid or earned by the
listed executives from their services provided to these companies are
included in this schedule. As of December 31, 1999, the Company had no
liability to the individuals for these amounts. 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 respective company's securities.
(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 REI 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 the Company and REI, Mr. Tompkins is
entitled to his annual base salary from each respective company for a
period of a year in the event that his employment is involuntarily
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 of a
change of control of the Company, and to a two-year severance payment in
the case of a change of control of REI.
(5) Mr. Matyczynski was named the Chief Financial Officer of the Company and
CHC and the Chief Administrative Officer of REI in November 1999. Pursuant
to the employment agreement, in the event of termination of his employment
for any reason other than death, or in the event of a merger, acquisition
or any restructuring of the Company in which there is a change of control,
as defined, a severance payment equal to six months' base compensation
would be paid on the date of termination. In addition, Mr. Matyczynski was
granted a $33,000 loan in November 1999, to be forgiven ratably over the
next three years. Mr. Matyczynski's compensation for the year ended
December 31, 1999 did not exceed $100,000, however, the Company has
contracted to pay Mr. Matyczynski an annual salary of $180,000.
(6) Mr. Smerling was appointed President of REI effective January 17, 1997.
Mr. Smerling also serves as President of City Cinemas from which he is paid
separately. City Cinemas provides management services to Reading for a
fee. Mr. Smerling is
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<PAGE>
entitled to receive a payment equal to a year's annual base salary in the
event his individual employment with Reading is involuntarily terminated.
(7) In September 1997, the shareholders of REI approved the grant of an option
to Mr. Cotter to purchase, subject to various conditions and certain
contingencies, up to 460,000 shares of REI Common Stock at $12.80 per
share. In addition, the shareholders of REI approved a 1997 Equity
Incentive Plan under which Ms. Ellen Cotter and Messrs. Smerling, Wunderle
and Tompkins, as employees of Reading, were granted incentive stock options
to exercise REI common stock, subject to vesting conditions, at $12.80 per
share in amounts as detailed in the schedule. Messrs. Tompkins, Smerling
and Wunderle surrendered non-qualified options to purchase 17,500, 15,000
and 5,000 shares, respectively, of REI stock in connection with such grant.
Mr. Wunderle's options expired unexercised.
(8) Effective January 1, 1999, two individuals became participants in a Pension
Plan authorized by the Board of Directors. Included in Fiscal 1998 is the
past service cost accrued to Mr. Tompkins and Ms. Skophammer since their
dates of hire.
(9) Other annual compensation consists of an automobile allowance.
(10) Other compensation represents contributions under Reading's Retirement
Savings Plan.
(11) Pursuant to the management agreement entered into by the Company, Reading,
and Citadel in December 1999, compensation paid to certain executives by
the Company was reallocated, through a management fee arrangement, between
the three companies.
(12) Ms. Skophammer and the Company entered into a letter agreement dated as of
September 24, 1999, pursuant to which Ms. Skophammer continued as the
Company's Chief Financial Officer through November 19, 1999, and agreed
thereafter to make herself available as a consultant through December 31,
2000 subject to a right by Ms. Skophammer to terminate such consulting
arrangement on 30 days' notice. In addition, such letter agreement
provides for Ms. Skophammer to receive a bonus under certain circumstances.
The amount of such bonus has not yet been finalized, nor included in the
compensation schedule for 1999.
(13) In April 2000, the CHC Stock Options Committee granted Mr. Tompkins options
to acquire 40,000 shares of CHC Class A Non-Voting Common Stock Under the
option grant, Mr. Tompkins may acquire 8,000 shares of CHC Class A Non-
Voting Common Stock within 60 days of the Record Date. The remaining
options granted to Mr. Tompkins vest over four years in equal amounts. All
of the stock option shares have exercise prices equal to the fair market
value of the shares on the date of the grant.
(14) Mr. Matyczynski was granted 30,000 shares of the Company's Class A Common
Preference Stock in November 1999 and 30,000 shares of CHC Class A Non-
Voting
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<PAGE>
Common Stock in April 2000. The options to acquire 15,000 shares of the
Company's Class A Common Preference Stock and CHC's Class A Non-Voting
Common Stock vest on the first anniversary date of his employment (November
15, 2001) and the remaining shares vest over the next three years in equal
amounts.
Director Compensation
Directors who are not officers or employees of the Company receive for
services as a Director a fee of $25,000 per annum.
Option Grant Table
The following provides information regarding the grant of Craig stock
options during 1999.
<TABLE>
<CAPTION>
% Potential Realizable Value
of Total at Assumed Annual Rates of
Options Stock Price Appreciation
Options Granted in Exercise for Option Term
----------------------------
Granted Fiscal Price Expiration
Name (#) Year ($/sh) Date 5% 10%
---- --- --- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Andrzej Matyczynski (1) 30,000(1) 100% $6.00 11/15/2009 $203,700 $229,700
</TABLE>
------------------
(1) Options to acquire 15,000 shares of the Company's Class A Common Preference
Stock vest on the first anniversary date of Mr. Matyczynski's employment
(November 15, 2001) and the remaining shares vest over the next three years
in equal amounts.
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<PAGE>
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, 1999 and unexercised options as of December 31, 1999.
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercisabled
Option at In-the-Money at
12-31-1999 12-31-99
Shares Exercisable/ Exercisable/
Name Security Exercised Unexercisable Unexercisable(1)
---- -------- --------- ------------- ----------------
<S> <C> <C> <C> <C>
James J. Cotter Common Stock 0 594,940/0 $612,800/$0
S. Craig Tompkins Class A Common 0 35,000/0 $ 59,500/$0
Preference Stock
Andrzej Matyczynski Class A Common 0 $ 0/30 $ 0/0
Preference Stock
</TABLE>
----------------
(1) Represents the amount by which the aggregate market price on December
31, 1999 of the shares subject to such options exceeded the exercise
price of such options.
Pension Plans
During the first quarter of 1999, the Board of Directors finalized the
Craig Corporation Key Personnel Retirement Plan ("Plan"). Such Plan provides
that any participant, as permitted by the Board, will be credited an amount
equal to 10% of such participants compensation (up to the maximum allowed by
Section 401(c)(17) of the Internal Revenue Code). As of the effective date of
the Plan, January 1, 1999 only two employees have been granted participation in
the Plan which resulted in past service costs accruing of approximately
$243,000. Any amounts credited to the participants account earn interest at
LIBOR and may be paid to the employee upon their termination. Each participant
may, from time to time, irrevocably elect to convert a part or all of such
amounts accrued to their account into Phantom Common Stock based upon the
closing price of such stock on the date of election. One of the two
participants in the Plan terminated her employment with the Company in November
1999 and received a lump-sum distribution of her account balance. At December
31, 1999, the Plan liabilities totaled approximately $159,000.
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 the Company retained and paid
approximately $33,000 in fiscal 1999. 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. Messrs. Cotter and Tompkins serve as members of CHC Board of
Directors, and, as directors, approve decisions of CHC's Compensation Committee
with respect to compensation of Citadel's officers and directors. Until July
2000, Mr. Cotter
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<PAGE>
was a member of the CHC Compensation Committee. Mr. Loeffler serves as a
director of each of the Companies, REI and CHC.
The Company, together with Reading, owns a 49% interest in BRI. Mr. Cotter
and a trust for the benefit of one of Mr. Tompkins' children each have a 1.6%
beneficial interest in BRI. Messrs. Gould and Laheney and Ms. Margaret Cotter
served as directors of BRI and, in the case of Mr. Laheney and Ms. Cotter, as
officers of BRI, for which they received no compensation in 1999 (See "Director
Compensation"). Mr. Laheney resigned as a director and as President of BRI
effective February 14, 2000.
Certain Transactions and Related Transactions
General
The Company is principally engaged in the business of identifying,
acquiring, owning and strategically managing controlling interests in other
operating public companies. Accordingly, the Company operates primarily through
less than wholly-owned affiliates. Only one of these affiliates, REI, is
consolidated for financial reporting purposes. These affiliated companies have
certain over-lapping ownership and management structures, as described below.
Ownership and Management Interlocks
The Company's principal asset is its REI securities. The Company owns
Common Stock and Convertible Preferred Stock comprising 78% of the voting
securities of REI (cinemas, and cinema based entertainment centers). The
Company, on a consolidated basis with Reading (REI and its wholly-owned
subsidiaries), owns Common Stock representing approximately 49% of CHC (real
estate, agricultural interests and more recently, cinemas and live theatre
operations), and 49% of BRI (agricultural interests). Cecelia Packing, a
company wholly owned by Mr. Cotter ("Cecelia"), and the trust for one of Mr.
Tompkins' children each owns an additional 1.6 percent of the Common Stock of
BRI, resulting in a combined voting interest of greater than 51% in that
company. Citadel and BRI each own a 40% interest (for an aggregate 80%
interest) in the three Agricultural Partnerships which collectively own
approximately 1,600 acres of California agricultural land, improved principally
with citrus groves. Citadel owns 80% of Farming, which manages the agricultural
properties for the Agricultural Partnerships. The Company, as a result of its
ownership of CHC and BRI securities, owns approximately 39.5% of the
Agricultural Partnerships.
James J. Cotter is the Chairman of the Board of the Company, REI and CHC
and the Chief Executive Officer of CHC. S. Craig Tompkins is the President and
a director of the Company, the Vice Chairman and Corporate Secretary of REI, the
Vice Chairman and Corporate Secretary of CHC, and serves for administrative
convenience as an assistant secretary of BRI and Visalia. Margaret Cotter is a
director of the Company, and a director and Chief Financial Officer of BRI. Ms.
M. Cotter is currently the President of Off Broadway Investments, Inc., and it
is anticipated that she will serve as the President of CHC's live theatres
subsidiary upon the closing of the OBI Merger, discussed below. William D.
Gould is a director of BRI, and Gerard P. Laheney was Chairman and President of
BRI until his resignation on February 14, 2000. Mr. Laheney also resigned on
that date from the management committees of the Agricultural Partnerships.
Ellen Cotter is the Vice President-Business Affairs of the Company and REI. She
also serves as a director and officer of various subsidiaries of REI and CHC.
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<PAGE>
The Company shares office space and certain administrative costs and
expenses with Citadel. Citadel provides real estate advisory services to
Reading, and certain general administrative services to BRI, for which it was
paid $215,000 in 1999. Farming receives in consideration of its services to the
Agricultural Partnerships reimbursement of its costs plus 5% of the net revenues
from the farming operation, calculated after picking, packing and hauling.
The Company, REI and CHC are currently working on a plan to centralize all
administrative functions for the three companies in Los Angeles. Upon
consummation of this centralization, it is contemplated that all general and
administrative personnel will be employees of the Company, and that the costs of
such personnel will be allocated on the business and affairs of the three
companies. Following a review of the time spent by Messrs. Cotter and Tompkins
and certain administrative employees of the Company, the Board of Directors of
REI determined it appropriate to reimburse the Company in the amount of $580,000
with respect to services performed by these individuals and administrative
employees for the benefit of REI. There was no similar reimbursement with
respect to 1998.
Relate Party Transactions
The Company's operating affiliates - Reading, Citadel and BRI - have from
time to time entered into transactions involving the Company's controlling
stockholders and affiliates. These transactions, are described in greater
detail below.
Certain Agricultural Transactions
On December 31, 1997, BRI, Citadel, and Visalia, LLC (a limited liability
company owned 1% by Mr. Cotter and 99% by certain of his family members) formed
the Agricultural Partnerships. The Agricultural Partnerships are owned 40%, 40%
and 20%, respectively, by these three entities. On December 31, 1997 the
Agricultural Partnerships acquired an agricultural property (purchase price
amounting to approximately $7.6 million) which property is improved principally
with citrus orchards. The Partnerships currently use Farming to farm their
properties as described above. Farming is owned 80% by Citadel and 20% by
Visalia. Farming, in turn, contracts with Cecelia for certain bookkeeping and
administrative services, for which it pays a fee of $6,000 per month. Cecelia
also packs fruit for the Agricultural Partnerships.
The acquisition of the agricultural property was financed by a ten-year
purchase-money mortgage from the Prudential Life Insurance Company in the amount
of $4.05 million (the "Prudential Loan") and by drawdowns in the amount of
$831,000 under a $1.2 million crop finance line of credit from Citadel to the
Agricultural Partnerships (the "Crop Financing"). The Prudential Loan bears
interest at 7.70%, provides for quarterly payment of interest, and provided
certain levels of capital investment are achieved, calls for principal
amortization payments of $200,000 per year commencing January 2002. The Crop
Financing accrues interest, payable quarterly, at the rate of prime plus 100
basis points, and was due and payable in August 1998. Upon the expiration of
the Crop Financing, Citadel increased the line of credit to $1,850,000 for an
additional twelve months under the same terms and conditions.
In December 1998, the Agricultural Partnerships suffered a devastating
freeze, which resulted in a loss of substantially all of its 1998-1999 corp. As
a consequence of the freeze, the Agricultural
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<PAGE>
Partnerships had no funds, other than partner contributions, with which to repay
the drawdowns on the Line of Credit. Furthermore, the Agricultural Partnerships
generally had no source of funding, other than their partners, for the cultural
expenses needed for production of the 1999-2000 crops, as well as the funding of
a crop-planting program on the undeveloped acreage.
Since September 1999, the Agricultural Partnerships have been funded on an
80/20 basis by Citadel and Visalia, pursuant to loans made by these two
entities. In light of this funding arrangement, on February 24, 2000, the line
of credit was increased to $3,250,000, of which $3,170,000 had been drawn as of
March 31, 2000. In addition, during 1999 Citadel and Visalia each guaranteed the
obligations of the Agricultural Partnerships under certain equipment leases, up
to $220,000. BRI, which was spun off to Citadel's stockholders in December 1997,
has no funds with which to make contributions to the Agricultural Partnerships.
Subsequent to year-end, Citadel and Visalia have continued to fund, on an 80/20
basis pursuant to loans to the Agricultural Partnerships, the Agricultural
Partnerships' operating and crop costs.
Although the Big 4 Properties produced substantial orange crops for the
1999-2000 season, market conditions were unfavorable, resulting in a loss on
operations. It is projected that the crops produced by Big 4 Properties will not
produce sufficient cash flow to cover the costs of producing the 2000-2001 crop.
All capital improvements scheduled for 2000 have been cancelled. The only source
of working capital for the Agricultural Partnerships continues to be Citadel and
Visalia. Citadel is currently reviewing the commercial viability of its ongoing
involvement with the Big 4 Properties and the Agricultural Partnerships.
Sutton Hill Transactions
In December 1998, Reading, James J. Cotter, the Chairman of the Board of
the Company, and Michael R. Forman entered into an Agreement in Principle (the
"Reading Agreement in Principle") providing for a series of transactions which
contemplated Reading leasing or acquiring various cinemas and live theatre
properties held by entities owned by Messrs. Cotter and Forman. Through their
interests in the Company, Messrs. Cotter and Forman are principal stockholders
of both Reading and the Citadel. See Beneficial Ownership of Securities. In May
2000, Citadel and Reading entered into an agreement in which Reading assigned
its rights, and Citadel assumed Reading's obligations, under the Reading
Agreement in Principle, subject to certain modifications agreed to by Messrs.
Cotter and Forman. Under that assignment, Citadel reimbursed Reading for a
deposit of $1,000,000 that Reading had made under the Reading Agreement in
Principle.
The modified Reading Agreement in Principle provided for Citadel to
sublease, from Sutton Hill Associates ("Sutton Hill," a partnership owned
equally by Messrs. Cotter and Forman) or a subsidiary, and operate four cinemas,
and manage three other cinemas then managed by City Cinemas Corporation (a
company also owned by Messrs. Cotter and Forman), all of which are located in
Manhattan (New York City) and which together are known as the "City Cinemas
Circuit." The Reading Agreement in Principle also provided for certain other
transactions, as described below.
On July 28, 2000, the Company and Sutton Hill reached agreement on
definitive documentation for the transactions contemplated by the modified
Reading Agreement in Principle (collectively, the "Sutton Hill Transactions").
The agreements and other documents relating to the Sutton Hill Transactions (the
"Sutton Hill Transaction Documents") will be delivered on behalf of the parties
upon receipt by
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<PAGE>
Sutton Hill of certain third-party consents. The parties initially set August
25, 2000 as the date for Sutton Hill to receive such consents, but by mutual
agreement have extended the deadline to September 8, 2000. Although the parties
do not anticipate any further extensions, absent a material adverse change, it
is likely that the parties would agree to extend the deadline if the same should
by required to obtain the third-party consents. The Sutton Hill Transactions,
once effective, will include:
. An operating sublease ("Operating Lease") between Citadel
Cinemas, Inc. ("Citadel Cinemas"), a wholly-owned subsidiary of
Citadel and Sutton Hill Capital, L.L.C. ("SHC"), a wholly-owned
subsidiary of Sutton Hill. Under the Operating Lease, Citadel,
through Citadel Cinemas, will sublease from SHC four Manhattan
theatres (the "City Cinemas Theatres"), for a term of ten years
at an annual rent of $3,217,500, subject to certain cost-of-
living and other adjustments. In addition, Citadel will be
responsible for the rent and other payments due under the
underlying leases, which currently aggregate approximately
$990,000 per year (including $330,000 payable to affiliates of
Mr. Forman). At the end of the initial ten-year term, Citadel
will have options to either purchase the underlying leases for
the City Cinemas Theatres, for a cash purchase price of $44
million, or renew the Operating Lease at the then fair market
rental. Citadel will pay $5,000,000 in cash (including the
deposit referred to above) in consideration of the option, which
will be a credit against the purchase price if the option is
exercised. In addition, if Citadel exercises the purchase option,
Citadel will also have the option to purchase from an affiliate
of Mr. Forman, for an additional $4,000,000 in cash, the fee
interests underlying two of the City Cinemas Theatres.
. An agreement between Citadel and City Cinemas, for Citadel to act
as submanager for three cinemas for which City Cinemas is the
manager. Also, City Cinemas will assign to Citadel management
agreements, between Reading and City Cinemas, under which City
Cinemas manages the Angelika Film Center & Cafe and certain other
theatres controlled by Reading.
. The purchase by Citadel from Messrs. Cotter and Forman of a one-
sixth interest in Angelika Film Centers, LLC ("AFC"), which owns
and operates the Angelika Film Center Cafe. In payment for that
interest, Citadel will issue notes in the aggregate principal
amount of $4,500,000, which will bear interest at the rate of
8.25%, payable quarterly, and mature two years from July 28,
2000.
. A credit facility (the "SHC Credit Facility"), under which SHC
may borrow up to $28,000,000 from Citadel. Borrowings under the
SHC Credit Facility will bear interest at the rate of 8.25%
(subject to certain adjustments), payable quarterly, and will
mature on December 1, 2010 or, if earlier, the closing of
Citadel's purchase of the leases for the City Cinemas Theatres on
exercise of its purchase option under the Operating Lease.
Citadel will not be obligated to make such loans prior to July
28, 2007, although Citadel has certain options to accelerate that
date. The indebtedness under the SHC Credit Facility will be
secured by a pledge of the membership interests in SHC and will
be subordinate to $11 million of indebtedness of SHC to an
affiliate of Mr. Forman.
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<PAGE>
. The OBI Merger which will be consummated by merging OBI into
Citadel Off Broadway Theatres, Inc., a wholly-owned subsidiary of
the Company, which will be the surviving corporation, provided
the stockholders of CHC approve the issuance of CHC Common Stock
to acquire OBI. CHC will issue up to 2,625,820 shares of Class A
Non-Voting Common stock and 656,455 shares of Class B Voting
Common stock in the OBI Merger. If the issuance of shares is not
approved, the OBI Merger will be completed by CHC paying
$10,000,000 cash, less certain expenses.
. A first of right negotiation to acquire the remainder of REI's
domestic cinema assets.
The Operating Lease, the AFC purchase agreement, the SHC Credit Facility,
the OBI Merger, and related matters (collectively, the "Sutton Hill
Transactions") were negotiated and approved by the CHC's Conflicts Committee,
which received an opinion of its financial advisor as to fairness of the Sutton
Hill Transactions to CHC.
Certain Family Relationships
Mr. Cotter, the Company's controlling stockholder, has advised the Company
that he considers his holdings in the Company to be a long-term investment, to
be passed to and eventually to be controlled by his heirs. The Directors believe
that it is in the best interests of the Company and its stockholders for these
heirs to become experienced in the operations and affairs of the Company and its
operating affiliates. Accordingly, Margaret Cotter serves as a director of the
Company, and as an officer and Director of BRI. Ms. M. Cotter currently serves
as the President of Off Broadway Investments, Inc., and it is contemplated that
she will serve as the President of CHC's live theatre subsidiary upon the
closing of the OBI Merger. Ms. M. Cotter also serves as an officer of Cecelia
and Union Square Management, Inc., a company which provides certain live theatre
management services to Reading. Ellen Cotter serves as the Vice President -
Business Affairs for the Company and REI and a director and officer of certain
wholly owned subsidiaries of REI. Mss. M. Cotter and E. Cotter are each
graduates of the Georgetown Law Center and were in public and private practice,
respectively, prior to joining the Company. Mr. Cotter's son, an attorney, was
elected to the Board of Directors of Gish Biomedical, Inc. on September 15,
1999. Citadel owns 15% of the outstanding common stock of Gish. The directors of
Gish currently serve without compensation.
Certain Miscellaneous Transactions
In 1997 and 1998, Reading loaned Robert Smerling, its President, an
aggregate of $70,000. The non-interest bearing loan is payable upon demand. In
December 1998, the Company agreed to guarantee a bank loan to the principal
shareholder of Union Square Management, Inc.
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. The principal terms of the Company's current employment
arrangements with its principal executive officers, including salary and other
base-level compensation, are described herein under "Summary Compensation
Table."
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<PAGE>
In 1996, Reading became a majority-owned subsidiary of the Company. In
1997, CHC became a controlled subsidiary of the Company. The Compensation
Committee of REI's Board of Directors is responsible for compensation matters of
employees of REI, and the Compensation Committee of CHC's Board of Directors is
responsible for compensation matters of employees of CHC. Certain executives and
consultants provide services to both the Company and REI. The Compensation
Committee considers compensation received REI and CHC from 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. No bonuses were paid by the Company with
respect to 1999.
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 officers to the
extent that such compensation exceeds $1 million. This law did not impact the
Compensation Committee's deliberations with respect to 1999 and for 2000 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 to authorize the payment of compensation
that does not qualify for income tax deductibility.
William D. Gould
Gerard P. Laheney
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<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, 1994 through September 30, 1995, the three-month period ended
December 31, 1995 and the years ended December 31, 1996, 1997 and 1998 against
the cumulative total return as calculated by the Center for Research in
Securities Prices ("CRSP") of (i) the New York Stock Exchange ("NYSE")/ American
Stock Exchange ("AMEX")/ NASDAQ Stock Market Index (U.S. Companies) and (ii) the
CRSP Total Return Index for NYSE/AMEX/NASDAQ in the SIC Graph Code 7830-7839
(motion picture theaters and allied businesses).
The past performance shown for the Company's Common Stock and Class A
Common Preference Stock are not necessarily indicative of future performance.
CUMULATIVE RETURN FROM SEPTEMBER 1994 TO DECEMBER 1999
[PERFORMANCE GRAPH APPEARS HERE]
CRAIG CRAIG CLASS STOCK MARKET PEER INDEX
Date COMMON A COMMON INDEX INDEX
9/94 100.000 100.000 100.000 100.000
9/95 83.333 81.609 128.919 119.719
12/95 87.778 82.759 135.151 127.909
12/96 127.778 127.586 163.854 162.208
12/97 180.556 173.563 214.48 223.223
12/98 143.333 144.828 264.795 317.043
12/99 120 114.943 327.523 199.559
The graph assumes a $100 investment on September 30, 1994 and reinvestment
of dividends on the date such dividends were declared.
-22-
<PAGE>
PROPOSAL NO. 2
PROPOSAL FOR APPROVAL OF 1999 STOCK OPTION PLAN OF
CRAIG CORPORATION
1999 Stock Option Plan
----------------------
Background and Overview
The Company's previously adopted and approved stock option plan has
expired. As a result, on November 19, 1999, the Company's Board of Directors
adopted the 1999 Stock Option Plan of Craig Corporation ("1999 Stock Option
Plan" or "1999 Plan"). The purpose of the 1999 Plan is to (a) encourage
selected employees, directors and consultants of the Company to increase Company
profits, (b) encourage selected employees, directors and consultants to accept
and/or continue their relationship with the Company and (c) increase the
interest of selected employees, directors and consultants in the Company's
welfare through participation in the growth in value of the Company's capital
stock.
The principal provisions of the 1999 Stock Option Plan are summarized
below. This summary does not, however, purport to be complete and is qualified
in its entirety by the terms of the 1999 Stock Option Plan, a copy of which is
attached hereto as Appendix A and is incorporated herein by reference.
Types of Options and Who Is Eligible
The 1999 Stock Option Plan permits two types of stock options (collectively
"Options"): Incentive stock options ("ISOs"), intended to satisfy the
requirements of Section 422 of the Internal Revenue Code ("Code"), and what are
commonly referred to as "nonqualified options" (NQOs"). ISOs and NQOs may be
granted to persons who at the time of the grant are employed by the Company or
Company "Affiliate" and such person is either an officer or director
("Employees"). An "Affiliate" is defined in the 1999 Plan and generally refers
to the parent and any subsidiary of the Company. Directors or consultants of the
Company and its Affiliates may be granted NQOs, but not ISOs.
Total Authorized Options
The total number of authorized Options under the 1999 Stock Option Plan is
350,000 shares of Common Stock and 700,000 shares of the Class A Preference
Common Stock. Options that are granted, but subsequently expire, terminate or
are cancelled become eligible again for grants.
Administration; 10 Year limit; Option Agreements
The 1999 Stock Option Plan will be administered by an "Administrator",
which shall be the Company's Board of Directors or, at the Board's discretion, a
committee appointed by the Board. The Administrator may in turn delegate
nondiscretionary administrative duties.
The Administrator will determine the persons to whom the Options should be
granted and the number and timing of any Options granted. No Options may be
granted after 10 years from the date the Board adopts the 1999 Plan, and each
optionee will be required to sign a stock option agreement in a form
-23-
<PAGE>
prescribed by the Administrator. Subject to the terms and conditions of the 1999
Plan, the Administrator will be responsible for all administration over the 1999
Plan, including prescribing rules and regulations applicable to the Options and
making final and binding determinations under the 1999 Plan.
The Company intends that Options granted under the 1999 Plan will be exempt
from Section 16(b) of the Securities Exchange Act of 1934, as amended, pursuant
to Rule 16b-3 promulgated thereunder, which exempts certain short-swing gains
from recapture by the Company. Accordingly, to satisfy the requirements of Rule
16b-3, the Board of Directors formed the "Stock Options Committee," to be
comprised entirely of independent non-employee directors and to be the
Administrator of the 1999 Plan. The Board appointed Directors Gerard P. Laheney
(Chairman) and William D. Gould as the initial members of the Stock Options
Committee.
Terms and Conditions
Options under the 1999 Plan will not be transferable other than by will or
by the laws of descent and distribution. Options become effective on the date
the stock option agreement is executed. The maximum term of an Option is 10
years. The 1999 Stock Option Plan contains additional terms and conditions
applicable to the Options, including, without limitation, the effect of changes
in the Company's capital structure and certain corporate transactions (e.g.,
mergers or consolidations) involving the Company, time and manner of Option
exercise, payment terms for any exercised Options, and the effect of termination
of employment.
Exercise Price
The exercise price per share of any option granted under the 1999 Plan may
not be less than the fair market value per share of the applicable stock on the
date the Option is granted, as determined by the Administrator in accordance
with the 1999 Plan. Under the Code and the 1999 Plan, the exercise price for an
ISO granted to a person then owning more than 10% of the voting power of all
classes of the Company's stock may not be less than 110% of the fair market
value of the stock covered by the Option on the date of grant.
-24-
<PAGE>
Options Granted under the 1999 Plan
On November 19, 2000, the Stock Options Committee granted Options under the
1999 Plan as described in the following Table on 1999 Stock Option Plan:
Options Granted under
1999 Stock Option Plan to Acquire Shares of
Class A Common Preference Stock
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Name and Position Number of Vesting
Options of Options
Granted(1)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Andrzej Matyczynski 30,000 15,000 on first anniversary date
of employment (November 15, 2000)
remainder to vest 5,000 annually
over 3 years thereafter.
------------------------------------------------------------------------------------------------------
Jorge Alvarez 5,000 1,250 on first anniversary date of
employment (February 14, 2000),
1,250 to vest annually over 3
years.
------------------------------------------------------------------------------------------------------
Barbara Cho 5,000 1,250 on first anniversary date of
employment (January 10, 2000),
1,250 shares to vest annually over
the following 3 years.
------------------------------------------------------------------------------------------------------
</TABLE>
The Board of Directors supported the action by the Stock Options Committee. No
Options under the 1999 Plan may be exercised until the 1999 Plan's adoption is
approved by the Company's shareholders.
Recommendation of the Board
Mr. James J. Cotter currently owns or has proxies to vote shares
representing apparently 51% of the voting power of the Company. Mr. Cotter has
advised the Company that he intends to vote in favor of the adoption of the 1999
Stock Option Plan of Craig Corporation. If Mr. Cotter votes in accordance with
his stated intention, then the 1999 Stock Option Plan will be adopted.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
1999 STOCK OPTION PLAN OF CRAIG CORPORATION.
-25-
<PAGE>
Independent Public Accountants
The Company's financial statements for the year ended December 31, 1999
were examined by Deloitte & Touche LLP, certified public accountants. The
Company has been advised by Deloitte & Touche LLP that none of its members has
any financial interest in the Company. The Company expects that a
representative of Deloitte & Touche LLP 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
Copies of the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1999 (the "Annual Report") and quarterly report for the six-
month period ended June 30, 2000 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 2001 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 May 2, 2001. If the Company is not notified of
a stockholder proposal by July 17, 2001, the proxies held by management of the
Company may confer discretionary authority to vote against such stockholder
proposal, even though such proposal is not discussed in the Proxy Statement.
The Board of Directors will consider written nominations for directors from
stockholders. Nominations for the election of directors made by the stockholders
of the Company must be made by written notice delivered to the Secretary of the
Company at the Company's principal executive offices not less than 120 days
prior to the first anniversary of the immediately preceding annual meeting of
stockholders at which directors are elected. Such written notice must set forth,
among other things, the name, age, address and principal occupation or
employment of such nominee, the number of shares of the Company's Common Stock
beneficially owned by such nominee and such other information as is required by
the proxy rules of the SEC with respect to a nominee of the Board of Directors.
Nominations not made in accordance with the foregoing procedure will not be
valid.
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/ S. Craig Tompkins
S. Craig Tompkins, President
Dated: August 30, 2000
-26-
<PAGE>
APPENDIX A
1999 STOCK OPTION PLAN
OF
CRAIG CORPORATION
1. PURPOSES OF THE PLAN
--------------------
The purposes of the 1999 Stock Option Plan ("Plan") of Craig Corporation, a
Delaware corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to improve
operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to accept
or continue employment or association with the Company or its Affiliates; and
(c) Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code"), or "nonqualified options" ("NQOs").
2. ELIGIBLE PERSONS
----------------
Every person who at the date of grant of an Option is an employee of the
Company or of any Affiliate (as defined below) of the Company is eligible to
receive NQOs or ISOs under this Plan. Every person who at the date of grant is
a consultant to, or non-employee director of, the Company or any Affiliate (as
defined below) of the Company is eligible to receive NQOs under this Plan. The
term "Affiliate" as used in this Plan means a parent or subsidiary corporation
as defined in the applicable provisions (currently Sections 424(e) and (f),
respectively) of the Code. The term "employee" includes an officer or director
who is an employee of the Company. The term "consultant" includes persons
employed by, or otherwise affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS
----------------------------------------------------
Subject to the provisions of Section 6.1.1 of this Plan, the total number
of shares of stock which may be issued under Options granted pursuant to this
Plan shall not exceed 700,000 shares of the Company's Class A Common Preference
Stock and
1999 Stock Option Plan (Revised)
Page 1 of 10
<PAGE>
APPENDIX A
350,000 shares of Common Stock. The shares covered by the portion of any grant
under this Plan which expires, terminates or is cancelled unexercised shall
become available again for grants under this Plan. Where the exercise price of
an Option is paid by means of the optionee's surrender of previously owned
shares of Common Stock or the Company's withholding of shares otherwise issuable
upon exercise of the Option as permitted herein, only the net number of shares
issued and which remain outstanding in connection with such exercise shall be
deemed "issued" and no longer available for issuance under this Plan. No
eligible person shall be granted Options during any twelve-month period covering
more than 200,000 shares.
4. ADMINISTRATION
--------------
(a) This Plan shall be administered by the Board of Directors of the
Company (the "Board") or by a committee (the "Committee") to which
administration of this Plan, or of part of this Plan, is delegated by the Board
(in either case, the "Administrator"). The Board shall appoint and remove
members of the Committee in its discretion in accordance with applicable laws.
If necessary in order to comply with Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Section 162(m) of the Code,
the Committee shall, in the Board's discretion, be comprised solely of "non-
employee directors" within the meaning of said Rule 16b-3 and "outside
directors" within the meaning of Section 162(m) of the Code. The foregoing
notwithstanding, the Administrator may delegate nondiscretionary administrative
duties to such employees of the Company as it deems proper and the Board, in its
absolute discretion, may at any time and from time to time exercise any and all
rights and duties of the Administrator under this Plan.
(b) Subject to the other provisions of this Plan, the Administrator
shall have the authority, in its discretion: (i) to grant Options; (ii) to
determine the fair market value of the Common Stock subject to Options; (iii) to
determine the exercise price of Options granted; (iv) to determine the persons
to whom, and the time or times at which, Options shall be granted, and the
number of shares subject to each Option; (v) to construe and interpret the terms
and provisions of this Plan and of any option agreement and all Options granted
under this Plan; (vi) to prescribe, amend, and rescind rules and regulations
relating to this Plan; (vii) to determine the terms and provisions of each
Option granted (which need not be identical), including but not limited to, the
time or times at which Options shall be exercisable; (viii) with the consent of
the optionee, to modify or amend any Option; (ix) to reduce the exercise price
of any Option; (x) to accelerate or defer (with the consent of the optionee) the
exercise date of any Option; (xi) to authorize any person to execute on behalf
of the Company any instrument evidencing the grant of an Option; and (xii) to
make all other determinations deemed necessary or advisable for the
administration of this Plan or any option agreement or Option. The
Administrator may delegate
1999 Stock Option Plan (Revised)
Page 2 of 10
<PAGE>
APPENDIX A
nondiscretionary administrative duties to such employees of the Company as it
deems proper.
(c) All questions of interpretation, implementation, and
application of this Plan or any option agreement or Option shall be determined
by the Administrator, which determination shall be final and binding on all
persons.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
-------------------------------------
(a) No Options shall be granted under this Plan after 10 years
from the date of adoption of this Plan by the Board.
(b) Each Option shall be evidenced by a written stock option
agreement, in form satisfactory to the Administrator, executed by the Company
and the person to whom such Option is granted. In the event of a conflict
between the terms or conditions of an option agreement and the terms and
conditions of this Plan, the terms and conditions of this Plan shall govern.
(c) The stock option agreement shall specify whether each Option
it evidences is an NQO or an ISO, provided, however, all Options granted under
this Plan to non-employee directors and consultants of the Company are intended
to be NQOs.
(d) Subject to Section 6.3.3 with respect to ISOs, the
Administrator may approve the grant of Options under this Plan to persons who
are expected to become employees, directors or consultants of the Company, but
are not employees, directors or consultants at the date of approval, and the
date of approval shall be deemed to be the date of grant unless otherwise
specified by the Administrator.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NQOs shall be also subject to the terms
and conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All Options
-----------------------------------------------------
granted under this Plan shall be subject to the following terms and conditions:
6.1.1 Changes in Capital Structure. Subject to Section 6.1.2, if
----------------------------
the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, recapitalization, combination or reclassification, or if
the Company effects a spin-off of the Company's subsidiary, appropriate
adjustments shall be made by the
1999 Stock Option Plan (Revised)
Page 3 of 10
<PAGE>
APPENDIX A
Board, in its sole discretion, in (a) the number and class of shares of stock
subject to this Plan and each Option outstanding under this Plan, and (b) the
exercise price of each outstanding Option; provided, however, that the Company
shall not be required to issue fractional shares as a result of any such
adjustments.
6.1.2 Corporate Transactions. In the event of a Corporate
----------------------
Transaction (as defined below), the Administrator shall notify each optionee at
least 30 days prior thereto or as soon as may be practicable. To the extent not
previously exercised, all Options shall terminate immediately prior to the
consummation of such Corporate Transaction unless the Administrator determines
otherwise in its sole discretion; provided, however, that the Administrator, in
its sole discretion, may permit exercise of any Options prior to their
termination, even if such Options would not otherwise have been exercisable.
The Administrator may, in its sole discretion, provide that all outstanding
Options shall be assumed or an equivalent option substituted by an applicable
successor corporation or any Affiliate of the successor corporation in the event
of a Corporate Transaction. A "Corporate Transaction" means a liquidation or
dissolution of the Company, a merger or consolidation of the Company with or
into another corporation or entity, a sale of all or substantially all of the
assets of the Company, or a purchase of more than 50 percent of the outstanding
capital stock of the Company in a single transaction or a series of related
transactions by one person or more than one person acting in concert.
6.1.3 Time of Option Exercise. Subject to Section 5 and Section
-----------------------
6.3.4, an Option granted under this Plan shall be exercisable (a) immediately as
of the effective date of the stock option agreement granting the Option, or (b)
in accordance with a schedule or performance criteria as may be set by the
Administrator and specified in the written stock option agreement relating to
such Option. In any case, no Option shall be exercisable until a written stock
option agreement in form satisfactory to the Company is executed by the Company
and the optionee.
6.1.4 Option Grant Date. The date of grant of an Option under this
-----------------
Plan shall be the effective date of the stock option agreement granting the
Option.
6.1.5 Nontransferability of Option Rights. Except with the express
-----------------------------------
written approval of the Administrator which approval the Administrator is
authorized to give only with respect to NQOs, no Option granted under this Plan
shall be assignable or otherwise transferable by the optionee except by will or
by the laws of descent and distribution. During the life of the optionee, an
Option shall be exercisable only by the optionee.
6.1.6 Payment. Except as provided below, payment in full, in cash,
-------
shall be made for all stock purchased at the time written notice of exercise of
an Option is given to the Company, and proceeds of any payment shall constitute
general funds of
1999 Stock Option Plan (Revised)
Page 4 of 10
<PAGE>
APPENDIX A
the Company. The Administrator, in the exercise of its absolute discretion after
considering any tax, accounting and financial consequences, may authorize any
one or more of the following additional methods of payment:
(a) Acceptance of the optionee's full recourse promissory note
for all or part of the Option price, payable on such terms and bearing such
interest rate as determined by the Administrator (but in no event less than the
minimum interest rate specified under the Code at which no additional interest
or original issue discount would be imputed), which promissory note may be
either secured or unsecured in such manner as the Administrator shall approve
(including, without limitation, by a security interest in the shares of the
Company);
(b) Subject to the discretion of the Administrator and the terms
of the stock option agreement granting the Option, delivery by the optionee of
shares of Common Stock already owned by the optionee for all or part of the
Option price, provided the fair market value (determined as set forth in Section
6.1.9) of such shares of Common Stock is equal on the date of exercise to the
Option price, or such portion thereof as the optionee is authorized to pay by
delivery of such stock;
(c) Subject to the discretion of the Administrator, through the
surrender of shares of Common Stock then issuable upon exercise of the Option,
provided the fair market value (determined as set forth in Section 6.1.9) of
such shares of Common Stock is equal on the date of exercise to the Option
price, or such portion thereof as the optionee is authorized to pay by surrender
of such stock; and
(d) By means of so-called cashless exercises as permitted under
applicable rules and regulations of the Securities and Exchange Commission and
the Federal Reserve Board.
6.1.7 Withholding and Employment Taxes. In the case of an employee
--------------------------------
exercising an NQO, at the time of exercise and as a condition thereto, or at
such other time as the amount of such obligation becomes determinable, the
optionee shall remit to the Company in cash all applicable federal and state
withholding and employment taxes. Such obligation to remit may be satisfied, if
authorized by the Administrator in its sole discretion, after considering any
tax, accounting and financial consequences, by the optionee's (i) delivery of a
promissory note in the required amount on such terms as the Administrator deems
appropriate, (ii) tendering to the Company previously owned shares of Common
Stock or other securities of the Company with a fair market value equal to the
required amount, or (iii) agreeing to have shares of Common Stock (with a fair
market value equal to the required amount) which are acquired upon exercise of
the Option withheld by the Company.
1999 Stock Option Plan (Revised)
Page 5 of 10
<PAGE>
APPENDIX A
6.1.8 Other Provisions. Each Option granted under this Plan may
----------------
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under this
Plan shall include such provisions and conditions as are necessary to qualify
the Option as an "incentive stock option" within the meaning of Section 422 of
the Code.
6.1.9 Determination of Value. For purposes of this Plan, the fair
----------------------
market value of Common Stock or other securities of the Company shall be
determined as follows:
(a) If the stock of the Company is listed on a securities
exchange or is regularly quoted by a recognized securities dealer, and selling
prices are reported, its fair market value shall be either, as determined by the
Administrator, (i) the closing price of such stock on the date the value is to
be determined, or (ii) the average closing price of such stock over such number
of trading days (not to exceed ten (10) trading days) immediately preceding the
date the value is to be determined, as determined by the Administrator, but if
selling prices are not reported, its fair market value shall be the mean between
the high bid and low asked prices for such stock on the date the value is to be
determined (or if there are no quoted prices for the date of grant, then for the
last preceding business day on which there were quoted prices).
(b) In the absence of an established market for the stock, the
fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective earning
power, dividend-paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry, the Company's management, and the values of
stock of other corporations in the same or a similar line of business.
6.1.10 Option Term. Subject to Section 6.3.4, no Option shall be
-----------
exercisable more than 10 years after the date of grant, or such lesser period of
time as is set forth in the stock option agreement (the end of the maximum
exercise period stated in the stock option agreement is referred to in this Plan
as the "Expiration Date").
6.2 Terms and Conditions to Which Only NQOs Are Subject. Options granted
---------------------------------------------------
under this Plan which are designated as NQOs shall be subject to the following
terms and conditions:
6.2.1 Exercise Price. (a) The exercise price of an NQO shall be the
--------------
amount determined by the Administrator as specified in the option agreement.
(a) To the extent required by applicable laws, rules and
regulations, the exercise price of an NQO granted to any person who owns,
directly or by
1999 Stock Option Plan (Revised)
Page 6 of 10
<PAGE>
APPENDIX A
attribution under the Code (currently Section 424(d)), stock possessing more
than ten percent of the total combined voting power of all classes of stock of
the Company or of any Affiliate (a "Ten Percent Stockholder") shall in no event
be less than 110% of the fair market value (determined in accordance with
Section 6.1.9) of the stock covered by the Option at the time the Option is
granted.
6.2.2 Termination of Employment. Except as otherwise provided in the
-------------------------
stock option agreement, if for any reason an optionee ceases to be employed by
the Company or any of its Affiliates, Options that are NQOs held at the date of
termination (to the extent then exercisable) may be exercised in whole or in
part at any time within 90 days of the date of such termination or such longer
period as the Administrator may approve (but in no event after the Expiration
Date). For purposes of this Section 6.2.2, "employment" includes service as a
director or as a consultant. For purposes of this Section 6.2.2, an optionee's
employment shall not be deemed to terminate by reason of sick leave, military
leave or other leave of absence approved by the Administrator, if the period of
any such leave does not exceed 90 days or, if longer, if the optionee's right to
reemployment by the Company or any Affiliate is guaranteed either contractually
or by statute.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted
---------------------------------------------------
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:
6.3.1 Exercise Price. (a) The exercise price of an ISO shall be not
--------------
less than the fair market value (determined in accordance with Section 6.1.9) of
the stock covered by the Option at the time the Option is granted.
(a) The exercise price of an ISO granted to any Ten Percent
Stockholder shall in no event be less than 110% of the fair market value
(determined in accordance with Section 6.1.9) of the stock covered by the Option
at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by exercise of an
--------------------------
ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code (a disposition within
two years from the date of grant of the Option or within one year after the
transfer of such stock on exercise of the Option), the holder of the stock
immediately before the disposition shall promptly notify the Company in writing
of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in anticipation of employment
----------
as provided in Section 5(d), the Option shall be deemed granted, without further
approval, on the date the grantee assumes the employment relationship forming
the
1999 Stock Option Plan (Revised)
Page 7 of 10
<PAGE>
APPENDIX A
basis for such grant, and, in addition, satisfies all requirements of this Plan
for Options granted on that date.
6.3.4 Term. Notwithstanding Section 6.1.10, no ISO granted to any Ten
----
Percent Stockholder shall be exercisable more than five years after the date of
grant.
6.3.5 Termination of Employment. Except as otherwise provided in
-------------------------
the stock option agreement, if for any reason an optionee ceases to be employed
by the Company or any of its Affiliates, Options that are ISOs held at the date
of termination (to the extent then exercisable) may be exercised in whole or in
part at any time within 90 days of the date of such termination or such longer
period as the Administrator may approve (but in no event after the Expiration
Date). For purposes of this Section 6.3.5, an optionee's employment shall not
be deemed to terminate by reason of sick leave, military leave or other leave of
absence approved by the Administrator, if the period of any such leave does not
exceed 90 days or, if longer, if the optionee's right to reemployment by the
Company or any Affiliate is guaranteed either contractually or by statute.
7. MANNER OF EXERCISE
------------------
(a) An optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price and withholding taxes as provided in Sections 6.1.6 and
6.1.7. The date the Company receives written notice of an exercise hereunder
accompanied by payment of the exercise price will be considered as the date such
Option was exercised.
(b) Promptly after receipt of written notice of exercise of an
Option and the payments called for by Section 7(a), the Company shall, without
stock issue or transfer taxes to the optionee or other person entitled to
exercise the Option, deliver to the optionee or such other person a certificate
or certificates for the requisite number of shares of stock. An optionee or
permitted transferee of the Option shall not have any privileges as a
stockholder with respect to any shares of stock covered by the Option until the
date of issuance (as evidenced by the appropriate entry on the books of the
Company or a duly authorized transfer agent) of such shares.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
-------------------------------------
Nothing in this Plan or any Option granted hereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
1999 Stock Option Plan (Revised)
Page 8 of 10
<PAGE>
APPENDIX A
9. CONDITIONS UPON ISSUANCE OF SHARES
----------------------------------
Shares of Common Stock shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act").
10. NONEXCLUSIVITY OF THIS PLAN
---------------------------
The adoption of this Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options other than under this Plan.
11. MARKET STANDOFF
---------------
Each optionee, if so requested by the Company or any representative of the
underwriters in connection with any registration of the offering of any
securities of the Company under the Securities Act, shall not sell or otherwise
transfer any shares of Common Stock acquired upon exercise of Options during the
180-day period following the effective date of a registration statement of the
Company filed under the Securities Act; provided, however, that such restriction
shall apply only to the first registration statement of the Company to become
effective under the Securities Act after the date of adoption of this Plan which
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restriction until the end of such 180-day period.
12. AMENDMENTS TO PLAN
------------------
The Board may at any time amend, alter, suspend or discontinue this Plan.
Without the consent of an optionee, no amendment, alteration, suspension or
discontinuance may adversely affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to the requirements of federal or other
tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require stockholder approval unless (a)
stockholder approval is required to preserve incentive stock option treatment
for federal income tax purposes or (b) the Board otherwise concludes that
stockholder approval is advisable.
1999 Stock Option Plan (Revised)
Page 9 of 10
<PAGE>
APPENDIX A
13. EFFECTIVE DATE OF PLAN; TERMINATION
-----------------------------------
This Plan shall become effective upon adoption by the Board provided,
however, that no Option shall be exercisable unless and until written consent of
the stockholders of the Company, or approval of stockholders of the Company
voting at a validly called stockholders' meeting, is obtained within twelve
months after adoption by the Board. If any Options are so granted and
stockholder approval shall not have been obtained within twelve months of the
date of adoption of this Plan by the Board, such Options shall terminate
retroactively as of the date they were granted. Options may be granted and
exercised under this Plan only after there has been compliance with all
applicable federal and state securities laws. This Plan (but not Options
previously granted under this Plan) shall terminate within ten years from the
date of its adoption by the Board.
1999 Stock Option Plan (Revised)
Page 10 of 10
<PAGE>
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PROXY PROXY
CRAIG CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 12, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby revokes all prior proxies and constitutes and
appoints James J. Cotter and S. Craig Tompkins, and each or any of them,
proxies of the undersigned, with full power of substitution, to vote all of
the shares of Common and Class A Common Preference Stock of Craig Corporation
(the "Company") which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at 2:30 p.m. Los Angeles
time, on September 12, 2000 at the Regal Biltmore Hotel, 506 S. Grand Avenue,
Los Angeles, California for the following purposes and any adjournment or
postponement thereof, as follows:
(Continued, and to be marked, dated and signed, on the other side)
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<PAGE>
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Please mark
your votes as [X]
indicated in
this example
In their discretion the proxies are authorized to vote upon such other business
as may properly come before the meeting and any adjournment thereof.
1. ELECTION OF DIRECTORS FOR WITHHOLD AUTHORITY TO
all nominees listed vote for all nominees
below (excepted as below.
marked to the
contrary below.)
[_] [_]
2. PROPOSAL TO APPROVE THE ADOPTION BY THE BOARD OF DIRECTORS OF THE 1999
STOCK OPTION PLAN OF CRAIG CORPORATION
FOR AGAINST ABSTAIN
[_] [_] [_]
INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the following list: James J. Cotter,
Margaret Cotter, William D. Gould, Gerard P. Laheney, S. Craig Tompkins,
Robert M. Loeffler.
THIS PROXY SHOULD BE DATED, SIGNED BY THE SHAREHOLDER EXACTLY AS SUCH
STOCKHOLDER'S NAME APPEARS ON SUCH STOCKHOLDER'S STOCK CERTIFICATE AND RETURNED
PROMPTLY TO THE COMPANY C/O CHASE MELLON SHAREHOLDER SERVICES, IN THE ENCLOSED
ENVELOPE. PERSONS SIGNING IN AS A BENEFICIARY CAPACITY SHOULD SO INDICATE.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF A CHOICE IS NOT SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR AND FOR EACH OF THE ABOVE
PROPOSALS.
Signature ___________________________________________ Dated: ______________,2000
Please sign name(s) exactly as registered (if there are co-owners, both should
sign) Telephone Number
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