U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 19951996
OR
[_][ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to ______
Commission File No. 1-8625
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CITADEL HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-3885184
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
90071
550 SOUTH HOPE STREET, SUITE 1825 90071(ZIP CODE)
LOS ANGELES, CA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICERS)OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 239-0540
Securities Registered pursuant to Section 12(b) of the Act:
Title of each class Names of exchangeseach exchange on which each class registered
-
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Common Stock, $0.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ------- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K of any amendments to
this Form 10-K. Yes No X
--- ---[___]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $10,266,000$12,208,000 as of April 11, 1996.March 20, 1997.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of April 11, 1996,March 20, 1997, there
were 6,003,924 shares of Common Stock, par value $.01 per share, and 1,329,114
shares of Serial Preferred Stock, par value $.01 per share outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
CITADEL HOLDING CORPORATION
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 19951996
INDEX
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PAGE
PART I.
Item 1. Business 1
Item 2. Properties 3
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 76
PART II.
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 87
Item 6. Selected Financial Data 109
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A") 1211
Item 8. Financial Statements and Supplementary Data F-119
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure II-141
PART III.
Item 10. Directors and Executive Officers of the Registrant II-242
Item 11. Executive Compensation II-343
Item 12. Security Ownership of Certain Beneficial Owners and Management II-646
Item 13. Certain Relationships and Related Transactions II-848
PART IV.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K 49
Signatures II-956
-i-
PART I
ITEM 1: BUSINESS
GENERAL
Citadel Holding Corporation, a Delaware corporation ("Citadel" and
collectively with its wholly owned subsidiaries, the "Company"), was organized in
1983 and has been engaged in recent periods primarily in the ownershipbusiness of owning
and management ofmanaging its commercial and residential property since August 1994. At December 31, 1995, Citadel's balance sheet
assets amountedproperties and in the offering of
various real estate consulting services to approximately $39.8 million and consisted primarily of two
office buildings, two apartment buildings and $16 million in cash. Management
is currently evaluating the assets and opportunities available toits affiliates. During 1996, the
Company with a viewalso considered certain opportunities to possibly acquiring or developing a new line of business. While
no assurance can be given, such line of business may includemove into other businesses,
including the participation
with the Company's affiliates in land based entertainment businesses such as
motion picture exhibition.
In 1983,industry and in October 1996 invested $7
million to acquire 70,000 shares of the Series A Voting Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock") of Reading Entertainment, Inc.
("REI" and collectively with its consolidated subsidiaries, "Reading") and the
Asset Put Option described below (the "Reading Investment Transaction"). Until
April 1994, Citadel was organized to serveengaged principally in the business of serving as the
holding company for Fidelity Federal Bank, FSB ("Fidelity").
At December 31, 1996, the Company's assets had a Federal Savings Bank, "Fidelity"book value of $30.3
million, consisting principally of two office buildings (located in Glendale,
California and Phoenix, Arizona), the Company's investment in Reading and cash
and cash equivalents, and long term liabilities of $10.3 million.
The Reading Investment Transaction provided the Company an opportunity to
make an initial investment in the movie exhibition industry, and the ability,
thereafter, to review the implementation by Reading of its business plan and, if
it approves of the progress made by Reading, to make a further investment in
this industry through the exercise of its Asset Put Option. The Company has the
right to require Reading to redeem the securities issued to it in the Reading
Investment Transaction after five years, or sooner if Reading fails to pay
dividends on such securities for four quarters.
As set forth in the Asset Put and Registration Rights Agreement, (the
"Asset Put Agreement"), the Asset Put Option is exercisable any time after
October 15, 1996 and until approximately April 2000. The Asset Put Option gives
the Company the right to require Reading to acquire, for shares of Reading
Common Stock, substantially all of the Company's assets and assume related
liabilities (such as mortgages) (the "Asset Put"). In exchange for up to $20
million in aggregate appraised value of such assets, Reading is obligated to
deliver to the Company that number of shares of Reading Common Stock determined
by dividing the value of Citadel's assets by $11.75 per share if the notice is
received by October 31, 1997 and thereafter $12.25 per share. If the appraised
value of the Company's assets is in excess of $20 million, Reading is obligated
pay for the excess by issuing Common Stock at the then fair market value, up to
a maximum of $30 million of assets. If the average trading price of Reading
Common Stock exceeds 130% of the then applicable exercise price for more than 60
days (the "Repricing Trigger"), then the exercise price will adjust to the fair
market of the Reading Common Stock from time to time, unless the Company
exercises the Asset Put within 120 days of receipt of notice from Reading of the
occurrence of the Repricing Trigger. The Asset Put Agreement has been filed as
Exhibit 10.52 to this Report. Any description of the rights granted by that
agreement is necessarily summary in nature and qualified by reference to the
definitive terms of the Asset Put Agreement.
Reading is currently involved in conventional multiplex cinema exhibition
in Puerto Rico through its Cine Vista Cinemas chain, in the exhibition of art
and specialty film through its interest in the Angelika Film Center (a specialty
art multiplex cinema and cafe complex located in the Soho area of New York
City), and the development of a new chain of conventional multiplex cinema and
entertainment center complexes in Australia. Reading opened its first multiplex
cinema in Australia in December 1996. In addition, Reading
1
intends to expand the Angelika Film Center concept to other U.S. cities. Reading
has executed a lease to develop an 8-plex art cinema and cafe complex as a part
of the Bayou Place development in Houston, Texas, and is currently reviewing a
number of potential locations suitable for such complexes. At December 31, 1996,
Reading owns approximately 26% of the Company's outstanding common stock.
Reading is a publicly traded company whose shares are quoted on the
NASD/NMS and listed for trading on the NASDAQ Philadelphia Stock Exchange. Set
forth as Exhibit 10.58 to this report is the Report on Form 10K filed by Reading
with respect to the fiscal year ended December 31, 1996. Reading is currently
controlled by Craig Corporation, a Delaware corporation ("Craig") which owns
common and preferred stock in Reading representing approximately 78% of the
voting power of that company. Craig also holds options to acquire 666,000 shares
of Citadel stock at $3.00 per share, which options are due to expire on April
11, 1997. Craig has advised the Company that it intends to exercise such
options.
On August 4, 1994, Citadel and Fidelity completed a recapitalization and
restructuring transaction (the "Restructuring"), which resulted in, among other
things, the reduction of Citadel's interest in Fidelity from 100% to
approximately 16%, the acquisition by the Company at bulk
sale prices from Fidelity of four Real Estate Owned properties (the "REO
Assets"), the sale by Citadel to Fidelity of its Gateway Investments ("Gateway")
subsidiary for approximately $1 million, the transfer to Citadel of Fidelity's
interest in certain outstanding litigation (the "D&O Litigation"),real
estate assets, and the receipt by way of dividend from Fidelity of options to
acquire at book value two
office buildings used by Fidelity in its operations.
In connection with the Restructuring, Citadel agreed to indemnify Fidelity
with respect to certain losses that might be incurred by Fidelity in the event
of breach by Fidelity of certain representations made by Fidelity to purchasers
in the bulk sale portion of the Restructuring (the "Bulk Sale Indemnity").
Citadel's liability under this indemnity was capped at $4 million, and pertains
only to those representations and warranties addressing certain environmental
and structural issues. The period for making claims under these representations
and warranties has now lapsed, with claims of approximately $3.9 million having
been asserted against Fidelity. However, Fidelity has asserted that these
remaining claims are subject to a cure threshold which would reduce the maximum
claim to $2.8 million. Furthermore, Fidelity has informed the purchaser that,
based upon its review to date, it believes the remaining claims to be without
merit. Citadel is advised that the purchaser disputes Fidelity's position. As
there continues to be a significant number of material issues to be resolved,
included on the Company's balance sheet at December 31, 1995 and 1994 is $4
million recorded as "Deferred proceeds from bulk sales agreements."
Also in connection with the Restructuring, Citadel and Fidelity entered
into a tax disaffiliation agreement (the "Tax Disaffiliation Agreement"). In
general, under the Tax Disaffiliation Agreement, Fidelity is responsible for (1)
all adjustments to the tax liability of Fidelity and its subsidiaries for period
before the Closing to operations of Fidelity, (ii) any tax liability of Fidelity
and its subsidiaries for the taxable year that begins before and ends after the
closing in respect to that part of the taxable year through the end of the date
of the Closing, and (iii) any tax liability of Fidelity and its subsidiaries for
periods after the Closing. For this purpose, Gateway is deemed to be a
subsidiary of Fidelity at all relevant times and any liability for taxes for
such period ending on or before the Closing is measured by Citadel's actual
liability for taxes for such period, after applying tax benefits otherwise
available to Citadel attributable to such period. In general, Citadel will be
responsible for all tax liabilities of Citadel and its subsidiaries (other than
Fidelity and its subsidiaries) for all periods prior to disaffiliation. Citadel
will be entitled to any refunds of taxes relating to its liabilities.
1
other real estate assets. During fiscal 1995,
substantially all of the Company's remaining interest in Fidelity was sold.
In JanuaryCitadel currently intends, at least for the near term, to continue to
manage its real estate assets, to provide real estate consulting services to its
affiliates, to work to resolve the outstanding litigation claims against it, and
to monitor the progress of Reading in its Beyond-the-Home entertainment
business. Depending upon the success of Reading in the implementation of its
business plan, the Company may exercise its Asset Put Option or elect to hold or
dispose of its current preferred stock interest in Reading, or to convert such
preferred stock interest into Reading common stock pursuant to the exercise of
the conversion feature of such preferred stock and/or to hold or dispose of such
Reading common stock. Alternatively or additionally, the Company may seek or
consider, if offered, some further transaction or transactions with Reading
and/or Craig which would permit the Company's stockholders to further
participate, directly or indirectly, in Reading's Beyond-the-Home entertainment
business. However, no such transaction is currently under consideration by the
Company. Furthermore, in the view of the Company, the continued presence of
various litigation claims constitute an impediment to a merger or liquidation of
the Company at the present time. No assurance can be given that the currently
outstanding litigation claims against the Company will necessarily be resolved
in the near term or on terms favorable to the Company or that any one or more
transactions with respect to Craig and/or Reading will be forthcoming. The
Company may, from time to time, also consider other real estate transactions.
Real estate consulting services are currently being provided by the Company
to Reading under an arrangement pursuant to which Reading reimburses Citadel for
its costs in providing such services. The Company believes that this arrangement
is beneficial to the Company, since the Company would not otherwise have
sufficient cash flow to maintain the level of executive talent currently
available to it and since this arrangement allows its executives to monitor and
to provide input with respect to the development of Reading's land based
entertainment businesses. During fiscal 1996, The company received notice fromReading paid to Citadel $169,000
with respect to such consulting services. Citadel's management is currently
studying ways in which to further reduce the Office of Thrift supervision that it had been deregistered as a savingsCompany's net overhead and loan
holding company.general
administrative expenses, however, no assurances can be given to this regard.
MANAGEMENT
Steve Wesson is the President and Chief Executive Officer of the Company.
From 1989 until he joined the Company in 1993, Mr. Wesson served as CEO of
Burton Property Trust Inc., the U.S. real estate subsidiary of The Burton Group
PLC. In this position he was responsible for the restructuring and eventual
disposal of the Company's assets in the U.S.
2
S. Craig Tompkins became the Secretary/Treasurer of Citadel in September,
1994. Mr. Tompkins is also the Vice Chairman and a director of Citadel, the
President and a director of Craig Corporation
("Craig") and its 49.3% affiliate, Reading Company.the Vice Chairman and a director of
Reading. Prior to joining Craig and Reading in March, 1993, Mr. Tompkins was a
partner in the law firm of Gibson, Dunn & Crutcher.
Brett Marsh is responsible for the real estate activities of the Company.
Prior to joining the Company, Mr. Marsh was the Senior Vice President of Burton
Company Trust, Inc., the U.S. real estate subsidiary of the Burton Group PLC.
In this position, Mr. Marsh was responsible for the real estate portfolio of
that company.
The Company has twoone additional employees,employee, and shares space and has
contracted for certain administrative and accounting services with Craig.
2
ITEM 2: PROPERTIES
REAL ESTATE INTERESTS
The table below provides an overview of the Citadel Purchase Assetsreal estate assets owned by the
Company at December 31, 1995.1996.
UNITS/SQUARE % LEASED AT 12/31/96 MAJOR TENANTS REMAINING
ADDRESS TYPE FEET AT 12/31/95 * LEASE TERMS
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ARBOLEDA Office/ 178,000 99 American Express (58%(56%) February 1999
1661 Camelback Rd. Restaurant Others 1-5 Yrs.Years
Phoenix, Arizona
BRAND BUILDINGGlendale Building Office 89,000 100 Fidelity (65%(13%) May 2005
600 No. Brand Blvd.
Glendale, CA Public Storage (35%Disney (87%) April 96
VESELICH Apartment 216 93 None 6-12 months
3939 Veselich Ave. 176,000
Los Angeles, Calif.February 2007
PARTHENIA Apartment 27 8980 None 6-12 months
21028 Parthenia 26,000
Canoga Park, Calif.
CLAREMONT Land 26 Acres -- -- --
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*% of rentable space leased
ARBOLEDA, PHOENIX
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This property was acquired by the Company for $6.4 million in August 1994
and is substantially leased at December 31, 1995, to American Express Company, which occupies 58% (100,09856%
(100,252 sq. ft.) of the property.
In March
1996, American Express entered into a two-year renewal of its lease to February
1999.
VESELICH, LOS ANGELES
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While the occupancy rate of this property in the last twelve months has
ranged from 90% to 95%, the property has historically experienced considerable
turnover of tenants. This has resulted in high overhead and reduced cash flows.
Management has addressed this issue by carrying out deferred maintenance,
increasing marketing expenditures and improving diligence on prospective
tenants. During the fourth quarter of 1995, the Company decided to seek offers
for the sale of the property and on March 26, 1996 entered into a Purchase and
Sale Agreement to sell the property for approximately $9.3 million. Pursuant to
the terms of the Agreement, the closing date, subject to certain conditions
precedent is scheduled to occur on or before May 29, 1996. However, the Company
can make no assurance that the sale will be closed.
3
BRAND, GLENDALE
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As part of the Restructuring, CitadelThis property was acquired by way of dividend, the Building Options, which were subsequently assigned to Citadel Realty, Inc., its
wholly owned subsidiary. The office buildings subject to the Building Options
included the Glendale Building which is used by Fidelity in its operations.
With regard to the purchase of the Glendale Building, Fidelity extended a five
year loan, amortizing over twenty years, at an adjustable rate of interest tied
to the 30-day LIBOR rate plus 4.5% per annum, adjustable monthly. The Company paid Fidelity points of 1% plus normal closing costs. The loan is subject to
prepayment penalties in year one of 4%, decreasing 1% in each subsequent year.
The interest rate on this loan is currently 9.843%.
The purchase of the Glendale Building closed on May 18, 1995. The Company
funded thefor $7.12 million exercise pricein May 1995 and
is leased 87% to purchaseDisney Enterprises, Inc. ("Disney") and 13% to Fidelity, with
Fidelity occupying the Glendale Building
through a borrowing from Fidelity of $5.34 million with the balance of the funds
coming from internal sources.ground floor.
3
The Glendale Building was until recently the headquarters building of
Fidelity. Effective at the closing, Citadel and Fidelity entered into a 10-
year, full service gross lease for four of the six floors of the Glendale
Building. Thebase rental rate for the first five years of the Fidelity lease term is
$26,000 per month (including parking) for. With the ground floor and approximately $75,000 per
month (including parking) for the fourth, fifth and sixth floors. The lease providesproviding for annual
rental increases at a rate equal to the lower of the increase in the Consumer
Price Index or 3%., the rental rate of the Fidelity lease at December 31, 1996 is
$26,600 per month. After the first five years of the lease term, the rental
rate for the ground floor will be adjusted to the higher of the then current market rate or $1.50 per
square foot increased by the annual rental rate increase applied during the
first five years of the lease as described in the preceding sentence. Fidelity
has the option to extend the lease of the ground floor for two consecutive five
year terms at a market rental rate.
On October 1, 1996, the Company entered into a ten year full service lease
for all of the floors, excluding the ground floor (approximately 80,000 square
feet), with Disney. The rental rate for the first five years of the lease term
beginning February 1, 1997 is approximately $148,000 per month (excluding
parking) and approximately $164,000 (excluding parking) for the remaining five-
year term. Disney has the option to renew the lease for two consecutive five
year terms. The lease provides that the Company will havecontribute towards tenant
improvements and common area upgrades approximately $2.3 million. In addition,
the Company anticipates incurring costs for other building upgrades,
governmental compliance, commissions and legal fees amounting to approximately
$1.2 million. Concurrently with the execution of the Disney lease, the Company
amended its then existing lease with Fidelity resulting in 1) termination of the
Fidelity lease with respect to floors four through six, resulting in a reduction
of rent payments amounting to approximately $75,000 per month after January 31,
1997, 2) termination of Fidelity's option to purchase the Glendale Building, at the market value
at the expiration3)
a modification of the lease term, provided thatmortgage with Fidelity on the building to eliminate the
prepayment penalty and 4) reimbursement on February 1, 1997 by the Company then ownsto
Fidelity of rental payments in the building. Fidelity finalized the move of its headquarters in March 1996, and is
currently attempting to sublease all or a portion of their leased premises
except the ground floor which serves as Fidelity's principal branch.
Public Storage occupies 31,946 square feet (two floors) on a lease that
expires in April 1996 with a total rental of $53,900 per month ($1.75/sq. ft.).
The Company is actively marketing this space and has had discussions with other
potential tenants for these premises. No definitive agreements have been reached
at this time and the Company can make no assurance that attractive terms will be
reached with an alternative tenant.
WESTERN, HARBOR CITY
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On January 6, 1995, the Company sold the Western property for a net price
of $5.9 million and a gainamount of approximately $981,000. In addition, a mortgage
note payable of $3.7 million was assumed and subsequently paid in full by$450,000 (See Note 3
to the purchaser. During the last several months prior to its sale, this property has
consistently operated at 99% occupancy with low tenant turnover.
CLAREMONT
-Consolidated Financial Statements).
PARTHENIA
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The Company foreclosed on a loan previously made by Fidelity and receivedParthenia property was sold in the Restructuring on August 14, 1995. The property is currently carried on the
books at $400,000.January 1997 for $1,210,000, which
amount, net of closing costs, approximated book value.
EXECUTIVE OFFICES
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The Company currently shares executive office space with Craig, under an
arrangement whereby the Company and Craig allocate the costs of such office
space and certain support facilities. During fiscal 1996, the Company's share of
such office space and support facilities approximated $24,000. The Company
believes that this arrangement is currently marketing this property for sale
but, due to certain conditions attachedbeneficial to the entitlements which require action
of the adjacent owners,Company in that it permits
the Company can make no assuranceto maintain quality executive office facilities at a lesser cost
that would be the property can
be sold incase if the near term.
4
Company were to maintain comparable facilities
separate and apart from Craig.
FINANCING OF REAL ESTATE INTERESTS
The Company's 1994 acquisition of the REO PropertiesArboleda and Parthenia properties was
100% leveraged: $13.9
million was obtained in the form of conventional mortgage loans by Fidelity
against the Arboleda, Veselich and Western Avenue Properties, while the balanceFinancing was obtained through the combination of a conventional
mortgage loan from Fidelity on the Arboleda Property with the balance of the
Arboleda purchase price and the entire purchase price of the Parthenia Property
financed through drawdowns ($6.2 million) on an $8.2 million line of credit from Craig (the
"Craig Line of Credit").
With respect to each of the Western Avenue Property and the Veselich
Property (two apartment complexes), Fidelity extended a 10-year loan, amortizing
over 30 years, at an adjustable rate of interest tied to the one-year Treasury
rate plus approximately 3.70% per annum, with an initial interest rate of 7.25%.
The mortgage on the Western Avenue Property was assigned to the Buyer at the
time of its sale in January 1995. The rate on the Veselich Property loan is
currently 8.75%. The loan secured by the Arboleda Property (an office building)
is guaranteed by Citadel, has a seven-year term, amortizing
over 25 years, with an adjustable rate of interest tied to a six-month30 day LIBOR rate
plus 4.5% per annum, with an initial rate of 9.25% per annum. The interest rate
on this loan is currently 9.937%9.875%.
Fidelity did not provide financing with respect to the
Parthenia Property (an apartment complex).
The remainder of the purchase price of the REO Properties was drawn on the
Craig Line of Credit. At the time of the Restructuring, Craig held approximately
9% of the outstanding stock of Citadel. James J. Cotter is Chairman of each of
Citadel and Craig. S. Craig Tompkins is a director of Citadel and the President
and a director of Craig.4
The Craig Line of Credit was initially committed in the amount of $8.2
million, of which $6.2 million was immediately drawn down. On November 10, 1994,
the Company retired $5.25 million of the Craig Line of Credit by issuance to
Craig of 1,329,114 shares of 3% Cumulative Voting Convertible Preferred Stock
(the "Preferred Stock"). The rights, privileges and preferences of the Preferred
Stock are described below under Item 5, under the caption - "Dividends on 3%
Voting Cumulative Convertible Preferred Stock." In May of 1995, the remaining balance of $950,000 on
the Craig line of credit was paid in full and the line of credit was canceled.
With regard to the purchase of the Glendale Building, Fidelity extended a
five year loan, amortizing over twenty years, at an adjustable rate of interest
tied to the 30-day LIBOR rate plus 4.5% per annum, adjustable monthly. The
interest rate on this loan is currently 9.875%.
In May, 1995, Citadel obtained a loan of $765,000 from American Savings on
the Parthenia property. The loan providesprovided for a term of 30 years, amortizing
over 30 years, at a fixed rate of interest of 2.950 over the 11th District Cost
of Funds. The rate on thisThis loan is currently 7.983%.was repaid in full in January 1997, concurrent with the
sale of the Parthenia Property.
ITEM 3: LEGAL PROCEEDINGS
ROVEN LITIGATION
Citadel, Hecco Ventures I and James J. Cotter are defendants in a civil
action filed in 1990 by Alfred Roven in the United Sates District Court for the
Central District of California. The complaint alleged fraud by Citadel in a
proxy solicitation relating to Citadel's 1987 Annual Meeting of Stockholders and
breach of fiduciary duty. The complaint also sought compensatory and punitive damages
in an amount alleged to exceed $40 million. The complaint grew out of and was
originally asserted as a counter claim in an action brought by Citadel against
Roven to recover alleged short swing profits.profits (the "Section 16 Action"). Citadel
believes it has meritorious defenses to these claims and has not reserved any
amounts with respect thereto. In October 1995, Citadel, Hecco Ventures I and
James J. Cotter were granted summary judgment on all causes of action asserted
in the 1990 complaint in federal court. Roven has appealed that judgment.
In 1995, Roven filed a complaint in the California Superior Court against
Citadel, Hecco Ventures I and James J. Cotter and, in addition, S. Craig
Tompkins and certain other persons, including Citadel's outside 5
counsel and
certain former directors of Citadel (which directors are currently directors of
Craig andand/or Reading), alleging malicious prosecution in connection with the
short swing profits litigation.Section 16 Action. Citadel believes that it has meritorious defenses to these
claims, and has not reserved any amounts with respect thereto. Defense of the
action has been accepted by Citadel's insurers. However, no assurance can be given that additional costs of defense will not be
material to Citadel's future operating results considering Citadel's limited
revenue and operating profits.
FIDELITY EMPLOYEE CLAIMS
Citadel is advised that, followingIn August 1996, the Restructuring of Fidelity, Fidelity
significantly reduced staffing as part of its efforts to reduce costs. Certain
terminated employees have threatened, andLos Angeles
County Superior Court ordered summary judgment in one case, as detailed below, filed
claims asserting that Citadel is in some manner liable for what is asserted to
be wrongful termination of these individuals by Fidelity. In light of the fact
that, among other things, these employees were never employeesfavor of Citadel and were terminated only after Citadel's interestall other
defendants. Roven has appealed that judgment.
FIDELITY EMPLOYEE LITIGATION
A former Fidelity employee, William Strocco, brought a wrongful termination
and defamation action against Fidelity and Citadel, which was filed in Los
Angeles County Superior Court on March 9, 1995. Citadel was named as a defendant
on the basis that Citadel allegedly conspired with and induced Fidelity had been reduced to
a
16%,breach its employment agreement with Strocco. In July 1996, the Superior Court
ordered summary judgment in essentially, non-voting interest in Fidelity. Citadel believes that
it has no liability to these individuals. Defensefavor of this action has been
acceptedCitadel. The case was subsequently settled
by Citadel's insurer's, although Citadel expects to incur some
additional costs of defense.
RESTRUCTURINGFidelity and the plaintiff.
5
SECURITIES LITIGATION
In July 1995, Citadel was named as a defendant in a lawsuit alleging
violations of federal and state securities laws in connection with the offering
of common stock of Citadel's then wholly owned subsidiary, Fidelity, as part of the
Restructuringin 1994
(the "Harbor Finance Litigation"). The suit was filed by Harbor Financefinance Partners
in an alleged class action complaint in the United States District Court -
Central District of California, and named as defendants Citadel, Fidelity,
Richard M. Greenwood (Fidelity's chief executive officer and Citadel's former
chief executive officer), J.P. Morgan Securities, Inc. and Deloitte & Touche
LLP. That suitThe complaint which has been amended on three occasions in response to
motions to dismiss brought by Fidelity and Citadel, and which as amended, has
deleted defendants, J.P. Morgan Securities, Inc. and Deloitte & Touche LLP,
alleged that false and misleading information was provided by the defendants in
connection with Fidelity's stock offering in the
Restructuring and the defendants knew and failed to
disclose negative information concerning Fidelity. Fidelity and Citadel filed a MotionDefendant has also alleged
that defendants should have advised it of its legal rights with respect to
Dismiss,
which was granted with leave to amend on January 25, 1996. Plaintiff has now
retained new counsel and filed a new complaint alleging essentiallywithdrawal from the same
claims, but adding state securities law causes of action, and not naming J.P.
Morgan Securities or Deloitte & Touche. On March 15, 1996, Fidelity and Citadel
filed a Motion to Dismiss the new complaint.offering after it had executed subscription documentation.
Defense of the action has been accepted by Fidelity under the terms of the
Stockholders Agreement entered into between Citadel and Fidelity as part of the
Restructuring,restructuring of Citadel's interest in Fidelity, and Citadel, to date, has not
retained separate counsel with respect to this litigation and is not incurring
outside costs of defense. SinceIn August 1996, the filingFederal District Court for the
Central District of California dismissed with prejudice all federal claims in
the case against Citadel, Fidelity and Greenwood and dismissed all state claims
without prejudice to the ability of the initial complaintplaintiff to file such claims in a new
state court action. The plaintiff has appealed this judgment. In October 1996,
the plaintiff filed a class action suit in the Harbor Finance Litigation, Fidelity has completed a second recapitalization
transaction,Los Angeles Superior Court
alleging claims substantially similar to those previously filed in federal
court, to which it raised gross proceeds of approximately $146 million,
throughCitadel and the sale of common and preferred stock. Citadel has been named in only
tworemaining defendants demurred. In March 1997,
the Superior Court sustained this demurrers without leave to amend. In light of
the four alleged claims for relief and only in its capacity as an alleged
controlling entity of Fidelity.
Both the initial complaint and the new complaint filed by Harbor Finance
Partners make certain assertions previously made in a wrongful termination and
defamation action brought by William Strocco against Fidelity and Citadel,
which was filed in Los Angeles County Superior Court on March 9, 1995. The
plaintiff in that case is the former manager of Fidelity's REO Department who
alleges that his employment was terminated in violation of public policy and was
a result of breaches of his implied employment contract and the implied covenant
of good faith and fair dealing. The plaintiff alleges his termination was
related to the fact that he objected to various aspectsPlaintiff's appeal of the Restructuring,
includingFederal District Court's dismissal of its Federal
claims, the selling of REO properties in bulk sales, as not in the interests
of Fidelity, and he assertsCompany assumes that the same wasPlaintiff will likewise appeal the Superior
Court's dismissal of its State claims. Citadel believes that it has meritorious
defenses to these claims, and has not fully disclosed to potential
investors andreserved any amounts with respect thereto.
However, the Office of Thrift Supervision. Strocco also seeks damages for
defamation and interference with contractual relationship. Citadel has been
named in only one ofclaimed by the five causes of action brought by Strocco, and is made a
party defendant only on the basis that Citadel allegedly conspired with and
induced Fidelity to breach its employment agreement with Strocco.
6
Both the Harbor Finance and Strocco complaints seek damagesplaintiff are in an unspecified amount. Citadel believes these claims against it are without meritamount, and
the proceeds of the offering which is vigorously contesting them.the subject of the complaint were in
excess of the net worth of the Company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1995.
71996.
6
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's common stock is listed and quoted on the American Stock
Exchange ("AMEX"). The following table sets forth the high and low closing bid
prices of the common stock of the Company as reported by AMEX for each of the
following quarters:
HIGH LOW
(IN DOLLARS)
1996:
Fourth Quarter 2 13/16 2 7/16
Third Quarter 2 13/16 2 1/4
Second Quarter 2 1/2 2 1/4
First Quarter 2 9/16 2 1/4
1995:
Fourth Quarter 2 1/2 2
Third Quarter 2 3/8 2
Second Quarter 2 7/16 2
First Quarter 3 1/8 2 1/16
1994:
Fourth Quarter 4 3/16 2 1/16
Third Quarter 6 3/8 3 1/2
Second Quarter 8 3 7/8
First Quarter 12 1/4 4 1/4
HOLDERS OF RECORD
The number of holders of record of the Company's common stock at April 10,
1996March 20,
1997 was 250.
DIVIDENDS ON COMMON STOCK
While Citadel has never declared a dividend on its Common Stock and has no
current plan to declare a dividend, it is Citadel's policy to review this matter
on an ongoing basis.
DIVIDENDS ON 3% VOTING CUMULATIVE CONVERTIBLE PREFERRED STOCK
On November 10, 1994, the Company issued 1,329,114 shares of 3% Cumulative
Voting Convertible Preferred Stock ("Preferred Stock") at a stated value of
$3.95 per share, or $5,250,000, to Craig.Craig in satisfaction of certain indebtedness
owed by the Company under the Craig Line of Credit. The Preferred Stock carriescarried
a liquidation preference equal to its stated value and bears a cumulative
(noncompounded) annual dividend equal to 3% of the stated value. Each share ofIncident to the
Reading Investment Transaction, Craig transferred the Preferred Stock entitlesto
Reading, and Reading and the holder to one vote on all matters submitted to
a voteCompany exchanged the Preferred Stock for an equal
number of shares of the Company's stockholders. TheSeries B 3% Cumulative Voting Convertible
Preferred Stock is convertible at(the "Series B Preferred Stock" and collectively with the
optionPreferred Stock, the "CHC Preferred Stock"), such Series B Preferred Stock
included certain revised terms as negotiated by the Company in the context of
the holder into Common Stock.
Set forth below is a descriptionReading Investment Transaction. In December 1996, the Company redeemed such
Series B Preferred Stock pursuant to the exercise of certain
terms7
redemption rights in favor of the issuance of the
Preferred Shares. Such description is summaryCompany, as set forth in nature and is qualified in its
entirety by reference to the Certificate of
Designation, and the related stock
purchase agreement with Craig, which was filed as an exhibit to the Company's
Report on 8-K filed on November 14, 1994.
8
Holders of the Preferred Shares have the right to convert such shares into
Common Stock at any time at a conversion ratio based upon the market price of
Common Stock, subject to certain limitations. In addition, the Preferred Shares
are subject to automatic conversion into Common Stock under certain
circumstances if Citadel undertakes a rights offering of Common Stock to its
stockholders. Citadel has the option to redeem the Preferred Shares at any time
after November 10, 1997 at a premium. Holders of Preferred Shares have the right
to require Citadel to purchase their shares at a premium under certain
circumstances, including a "Change in Control." A Change in Control is defined
as the occurrence of either of the following events: (i) any person, entity or
"group" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the rules thereunder) other than Craig, and
its successors and affiliates, acquires beneficial ownership of over 35% of the
outstanding voting securities of Citadel; or (ii) the directors of Citadel as of
October 10, 1994 (the "Current Directors"), and any future directors
("Continuing Directors") of Citadel who have been elected or nominated by a
majority of the Current Directors or the Continuing Directors, cease to
constitute a majority of the Board of Directors. The Preferred Shares vote
jointly (not as a separate class) with the Common Stock on most matters,
including the election of directors.for approximately $6.19 million.
During 1995,1996, the Board of Directors declared and paid dividends to Craig
foron the period from the date of theCHC
Preferred Stock issuance in November 1994
through June 30, 1995. Asthe amount of December 31, 1995, undeclared cumulative dividends
amounted to $78,750. Such amounts were declared and paid during March 1996.
9approximately $232,000.
8
ITEM 6. SELECTED FINANCIAL DATA
The table below sets forth certain historical financial data regarding the
Company. This information is derived in part from, and should be read in
conjunction with, the consolidated financial statements of the Company.
At or for the Year Ended December 31,
1996 1995 1994 1993 1992
1991
---------- ---------- ---------- ---------- ---------------------
(In thousands, except per share data)
Income from real estate
operations $ 5,871 $ 6,112 $ 2,115
Gain on property sales 1,493 1,541
Net interest income after
provision for estimated
loan losses $ 36,101 $ 79,601
$ 92,264
Gains (losses) on sale of
loans, net 194 1,117
2,118
Gains (losses) on sale of
mortgage-back securities 1,342
8,993
Gains (losses) on sales of
investment securities (54)
1
Other income (expense) (35,870) (6,602)
(5,616)
Administrative charge from
Fidelity 916
LossGain (Loss) of and Write-down
of investment in Fidelity 41 171,964(6) 4,000 (41) (171,964)
Operating expense 6,214 4,060 105,341 77,911 79,446(4,938) (6,214) (4,060) (105,341) (77,911)
---------- ---------- ---------- ---------- ----------
Earnings (loss) before
income taxes 6,426 1,398 (174,825) (103,628) (3,795) 18,314
Income tax expense (benefit) (36,467) (5,841)
15,651---------- ----------
---------- ---------- ---------- ---------- ----------
Net earnings (loss) $ 6,426 $ 1,398 $ (174,825) $ (67,161) $ 2,046
$ 2,663
========== ========== ===================== ========== ==========
Earnings (loss) per
common and common
equivalent share $0.16$0.80 $0.17 $(26.45) $(11.56) $0.62 $0.81
Average common and common
equivalent shares (1)(2)(3) 8,616,613(5) 7,983,416 8,233,174 6,610,280 5,809,570 3,297,812 3,297,812
Balance sheet Data:
Total assets $ 30,292 $ 39,815 $ 39,912 $4,389,519 $4,698,326
$5,126,525
Cash and investments 6,356 16,291 4,805 238,220 177,599 289,150
Total loans, net 3,713,383 3,991,781
4,550,848
Deposits 3,368,643 3,457,918
3,884,707
Borrowings 10,303 16,186 14,846 734,230 908,400
871,150
Subordinated notes 60,000 60,000
60,000
Stockholders' equity 17,724 17,720 17,838 187,403 223,186 221,140
Cash dividends declared
on Preferred Stock 232 101 -- -- -- --
109
ITEM 6. SELECTED FINANCIAL DATA (CONT'D)
At or for the Year Ended December 31,
1996 1995 1994 1993 1992
1991
------ ------ -------- -------- ------------------ ---------- ---------- ---------- -----------
Other Data:
Real estate loans funded $422,355 $435,690
$509,625
Average interest rate on
new loans 6.75% 7.77%
9.07%
Loans sold $137,870 $204,435 $282,728
Nonperforming assets to
total assets 5.37% 4.99%
2.43%
Number of deposit accounts 241,093 233,037 238,187
Interest rate margin at
end of period (3) 2.19% 2.68%
3.20%
Interest rate margin for
the period (3) 2.28% 2.67%
2.54%
Retail branch offices (4) 42 43 43
(1) Net of treasury shares, where applicable.
(2) 1993 data includes 3,297,812 shares issued in March 1993 in connection with
a stocks rightstock rights offering, which produced net proceeds to the Company of $31.4
million.
(3) Excluding the writedowns of core deposit intangibles of $5.2 million,
interest rate margins at and for the year ended December 31, 1993, would
have been 2.32% and 2.39%.
(4) All retail branches were located in Southern California.
(5) The 1996 and 1995 data includes the effect of shares assumed to be issued on
the conversion of the then outstanding 3% Cumulative Voting Convertible
Preferred Stock amounting to 2,430,223.
112,046,784 common shares.
(6) The 1996 gain resulted from a non-recurring recognition of previously
deferred proceeds from the bulk sale of loans and properties by the
Company's previously owned subsidiary, Fidelity.
10
ITEM 7. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Citadel Holding Corporation, a Delaware corporation ("Citadel" and
collectively with its wholly owned subsidiaries, the "Company") has been engaged
primarily in the ownership and management of commercial and residential property
since August 1994. During this time period, the Company has considered
acquisitions outside of the ownership and management of commercial and
residential properties, and as a consequence of the real estate advisory and
consulting services provided on a fee basis to its shareholder affiliate,
Reading Entertainment, Inc. ("REI" and collectively with its consolidated
subsidiaries, "Reading"), has gained familiarity with the cinema exhibition
industry and the operations and prospects of Reading.
In May 1996, the Company's shareholder affiliates, Reading and Craig
Corporation ("CC" and collectively with its consolidated subsidiaries, "Craig")
authorized their respective managements to work together to develop one or more
proposals to provide Reading with the capital funding necessary to pursue its
entertainment industry business plan. In June 1996, the Company authorized its
management to cooperate with such efforts and formed a special committee of the
Board composed of outside directors unaffiliated with Craig and/or Reading to
participate in the negotiation and review of any such potential transaction (the
"Independent Committee"). The Independent Committee retained legal counsel and
investment banking advisors to assist it in this process.
On October 15, 1996, the Company, with the approval of the Board of
Directors, consummated the transaction (the "Reading Investment Transaction")
contemplated by an exchange Agreement (the "Exchange Agreement") dated as of
September 4, 1996 by and among Citadel, Reading and Craig and certain of their
respective affiliates. Pursuant to the terms of the Exchange Agreement, the
Company contributed cash in the amount of $7 million to Reading in exchange for
70,000 shares of Reading Series A Voting Cumulative Convertible Preferred Stock
(the "Series A Preferred Stock") and the Asset Put Option. Craig contributed
assets in exchange for 2,476,190 shares of Reading Common Stock and 550,000
shares of Reading Series B Voting Cumulative Convertible Preferred Stock. The
assets transferred by Craig consisted of 693,650 shares of Series B Preferred
Stock of Stater Bros. Holdings Inc., Craig's 50% membership interest in Reading
International Cinemas LLC, and 1,329,114 shares of the Company's Preferred
Stock. Upon consummation of the transaction, Craig and the Company held in the
aggregate approximately 82.4% of the voting power of Reading, with Craig's
holdings representing approximately 77.4% of the voting power of Reading and the
Company's holdings representing approximately 5% of such voting power. See
footnote 4 of the Notes to Consolidated Financial Statements for more detailed
information concerning the provisions of the Exchange Agreement.
In accordance with the Exchange Agreement, Reading exchanged the Preferred
Stock of the Company received from Craig for an equal number of shares of the
Company's Series B 3% Cumulative Voting Convertible Preferred Stock (the "Series
B Preferred Stock"). The terms of the Company's Series B Preferred Stock were
substantially identical to the terms of the Company's previously issued
Preferred Stock except (i) the Redemption Accrual Percentage was reduced from 9%
to 3% after October 15, 1996 and (ii) except upon a change of control of the
Company, the holders of the Series
11
B Preferred Stock would no longer have the right to convert the Series B
Preferred Stock into Company Common Stock during the one year period commencing
on the fifteenth day following the filing of the Company's Annual Report on Form
10-K for the year ended December 31, 1996. In December 1996, Reading notified
the Company of its exercise of its conversion rights. On December 20, 1996,
Citadel redeemed the Series B Preferred Stock from Reading pursuant to the
exercise of certain redemption rights set forth in the Certificate of
Designation with respect to the Series B Preferred Stock. Such redemption price
amounted to approximately $6.19 million. As a consequence of the Series B
Preferred Stock redemption, Reading's ownership of Citadel decreased to reflect
its approximately 26% common stock holdings.
The Asset Put Option is exercisable any time after October 15, 1996 through
a date thirty days after Reading's Form 10-K is filed with respect to its year
ended December 31, 1999, and gives the Company the right to exchange, for shares
of Reading Common Stock, all or substantially all of the Company's
assets, as defined, together with any debt encumbering such assets (the "Asset
Put"). In exchange for up to $20 million in aggregate appraised value of the
Company's assets on the exercise of the Asset Put Option, Reading is obligated
to deliver to the Company that number of shares of Reading Common Stock
determined by dividing the value of the Company's assets by $11.75 per share, if
the notice is received by October 31, 1997, and thereafter, $12.25 per share. If
the appraised value of the Company's assets is in excess of $20 million, Reading
is obligated to pay for the excess by issuing Common Stock at the then fair
market value up to a maximum of $30 million of assets. If the average trading
price of Reading Common Stock exceeds 130% of the then applicable exchange price
for more than 60 days, then the exchange price will thereafter be the fair
market of the Reading Common Stock from time to time, unless the Company
exercises the Asset Put within 120 days of receipt of notice from Reading of the
occurrence of such average trading price over such 60 day period.
The Reading Investment Transaction provides the Company an opportunity to
make an initial investment in the Beyond-the-Home segment of the entertainment
industry, and the ability, thereafter, to review the implementation by Reading
of its business plan and, if it approves of the progress made by Reading, to
make a further investment in this industry through the exercise of its Asset Put
Option to exchange all or substantially all of its assets for Reading Common
Stock. The Company has the right to require Reading to redeem the securities
issued to it in the Reading Investment Transaction after five years or sooner if
Reading fails to pay dividends on such securities for four quarters.
Reading is a publicly traded company whose shares are listed on the NASDAQ.
Reading is currently involved in conventional multiplex cinema exhibition in
Puerto Rico through its Cine Vista Cinemas chain, in the exhibition of art and
specialty film through its interest in the Angelika Film Center (a specialty art
multiplex cinema and cafe complex located in the Soho area of New York City),
and the development of a new chain of conventional multiplex cinemas and
entertainment centers in Australia. Reading opened its first multiplex cinema in
Australia in December 1996. In addition, Reading expects to expand the Angelika
Film Center concept to other U.S. cities, has executed a lease to develop an 8-
plex art cinema and cafe complex as a part of the Bayou Place development in
Houston, Texas, and is currently reviewing a number of potential locations
suitable for such complexes.
12
RESULTS OF OPERATIONS
- ---------------------
Due to the nature of the Company's business activities the Company's
historical and future revenues have varied significantly reflecting the results
of real estate sales and the disposition of its previously owned subsidiary,
Fidelity. In addition, rental income and earnings may vary significantly
depending upon the properties owned by the Company during the periods being
reported. Accordingly, year to year comparisons of operating results will not
be indicative of future financial results.
YEAR ENDED DECEMBER 31, 1996 ("FISCAL 1996) VERSUS YEAR ENDED DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------
("FISCAL 1995")
- ---------------
The Company's net earnings for Fiscal 1996 amounted to approximately
$6,426,000 or $0.80 per share, as compared to $1,398,000 or $0.17 per share for
Fiscal 1995. Included in net earnings for Fiscal 1996 is (1) approximately
$1,493,000 from the sale of an apartment property and an undeveloped parcel of
land and (2) non-recurring income amounting to $4,000,000 resulting from the
recognition for financial statement purposes of previously deferred proceeds
from the bulk sale of loans and properties by Citadel's previously owned
subsidiary, Fidelity Federal Bank ("Fidelity"). At the time of the bulk sale in
1994 by Fidelity, Citadel agreed to indemnify Fidelity, up to $4,000,000, with
respect to certain losses that might be incurred by Fidelity in the event of a
breach by Fidelity of certain representations made to the purchaser of such
loans and properties. During 1996, Fidelity reached a settlement with the
purchaser regarding such bulk sale claims and released Citadel from the
indemnity. Included in the 1995 Fiscal Year net earnings is approximately
$1,541,000 from the sale of two rental properties.
Interest and dividend income amounted to $939,000 in Fiscal 1996 as
compared to $710,000 in Fiscal 1995. The increase between Fiscal 1996 and 1995
was due to higher investable fund balances during most of 1996. Cash balances
decreased in October 1996 as a result of the Company's $7 million investment in
Reading and again in December 1996 as a result of the Company's $6.19 million
redemption of its Series B Preferred Stock. Included in interest and dividend
income in Fiscal 1996 is dividend income of approximately $95,000 earned with
respect to the Company's Reading Series A Preferred Stock.
Rental income amounted to approximately $4,932,000 in Fiscal 1996 as
compared to $5,402,000 in Fiscal 1995. The decrease in Fiscal 1996 is
principally due to a reduction of the number of rental properties owned by the
Company between the periods. The apartment building held for sale at December
31, 1996 was sold in January 1997 for an amount, net of expenses, approximating
book value. An apartment building (the "Veselich Building") was sold in May
1996, resulting in a reduction of rental income amounting to approximately $1
million as compared to Fiscal 1995. Such decrease was partially offset by an
increase in rental income amounting to approximately $270,000 resulting, in
part, from the two-year lease renewal of approximately 58% of the Arboleda
property at increased rates and an increase in rental income amounting to
approximate ly $300,000 resulting from an entire years ownership of a six floor
commercial building located in Glendale, California (the "Glendale Building").
As of December 31, 1996 rental properties consisted of one apartment building
(held for sale) and two commercial buildings as compared to two apartment
buildings and two commercial buildings (one of which was purchased in May 1995)
as of December 31, 1995.
13
The Glendale Building was purchased in May 1995 from Fidelity. Two floors
of the Glendale Building were leased to Public Storage until April 1996 and four
floors, including the ground floor, were leased to Fidelity under a long-term
lease. In October 1996, the Company amended the office lease with Fidelity for
the Glendale Building resulting in, among other things, the termination of
Fidelity's lease of floors four through six, and concurrently with such
amendment, entered into a ten year lease with Disney Enterprises Inc. ("Disney")
for all the floors, excluding the ground floor, which continues to be leased by
Fidelity. The rental rate for the first five years of the Disney lease term
beginning February 1, 1997 is approximately $148,000 per month and approximately
$164,000 for the remaining five year term (in each case excluding parking).
Disney has the option to renew the lease for two consecutive five year periods.
The lease provides that the Company will contribute towards tenant improvements
and common area upgrades approximately $2.3 million. In addition, the Company
anticipates incurring costs for other building upgrades, governmental
compliance, commissions and legal fees prior to the commencement of lease
payments by Disney of approximately $1.2 million. The commissions, legal fees
and reimburse ment to Fidelity, totaling approximately $1,326,000 are included
in the Balance Sheet at December 31, 1996 as "Capitalized leasing costs" and are
being amortized over the term of the lease.
Real estate operating costs decreased in Fiscal 1996 to $2,481,000 as
compared to $2,660,000 in Fiscal 1995, principally as a result of the sale of
the Veselich Building. This decrease was partially offset by costs associated
with operating the Glendale Building purchased in May 1995.
Interest expense was comparable in Fiscal 1996 and 1995 and amounted to
approximately $1,317,000 in Fiscal 1996 as compared to $1,327,000 in Fiscal
1995. The comparability of such amounts reported as interest expense is a
result of the time periods mortgage loans were outstanding during each of the
two fiscal years. The Company obtained two mortgages aggregating approximately
$6.1 million in the second quarter of 1995. In May 1996, the Company upon the
sale of a rental property for approximately $8.941 million, net of expenses,
repaid a mortgage loan on said property amounting to approximately $5.7 million.
Accordingly, outstanding mortgages decreased approximately $5,882,000 between
December 31, 1996 and December 31, 1995 and in January 1997 decreased
approximately $755,000 due to an additional early repayment of a mortgage loan
upon the sale of the Parthenia property. The interest rate on the remaining
outstanding loans approximated 9.875% at December 31, 1996.
General and administrative expenses decreased to approximately $745,000 in
Fiscal 1996 as compared to $1,807,000 in Fiscal 1995. The $880,000 decrease
reflected in Fiscal 1996 is primarily attributable to (i) a $290,000 reduction
in outside legal and professional expenses, (ii) a decrease in directors fees of
approximately $250,000 in the Fiscal 1996, (iii) an $89,000 insurance
reimbursement of legal costs and (iv) the non-recurrence of approximately
$250,000 of costs incurred in Fiscal 1995 associated with a parcel of land which
was sold in Fiscal 1996. In addition, Fiscal 1996 general and administrative
expenses includes approximately $169,000 in fee income for consulting services
provided by employees of the Company to Reading as compared to $120,000 in
Fiscal 1995.
14
YEAR ENDED DECEMBER 31, 1995 ("FISCAL 1995) VERSUS YEAR ENDED DECEMBER 31, 1994
- -------------------------------------------------------------------------------
("FISCAL 1994")
- ---------------
Prior to the Restructuringa restructuring in August 1994, Citadel was a financial services
holding company engaged in the savings bank business through its previously
wholly owned subsidiary, Fidelity Federal Bank ("Fidelity").Fidelity. It
conducted virtually no operations at the holding company level. In the
Restructuring, Citadel's interest in Fidelity was reduced from 100% to 16.2% and
Citadel transferred the stock of its other subsidiary, Gateway, to Fidelity
leaving Citadel with no historical operating business. As a result, effective
January 1, 1994, Citadel ceased including the results of Fidelity and Gateway on
a consolidated basis in its financial statements and began accounting for its
investment in Fidelity on the cost basis. Since the Restructuring, Citadel has
been engaged primarily in the ownership and management of commercial and
residential real property. Therefore, no meaningful comparisons can be made
between Citadel's results of operations for the years ended December 31, 1995
(twelve months of real estate operations), and December 31, 1994 (5 months of
real estate operations) and December
31, 1993 (12 months as a financial services holding company).
In addition to the reduction of Citadel's interest in Fidelity, several
other significant events occurred in the
Restructuring, including (1) the acquisition by the Company acquired from Fidelity of four real properties for a
purchase price of approximately $19.8 million (Fidelity's book value) of which
$13.9 million was financed by Fidelity on a secured basis and the balance was
financed by Craig, Corporation ("Craig"), a significant stockholder of the Company, under a short-term line of credit; (2) the receiptCompany received,
by way of dividend from Fidelity, of options to acquire at book value ($9.3
million) two office buildings used by Fidelity in its operations (the "Building
Options"); (3) the transfer to the
Company acquired, again by way of Citadel'sa dividend, Fidelity's
interest in certain outstanding litigation, and (4) Citadel's agreementCitadel agreed to indemnify
Fidelity, up to a limit of $4 million, with respect to certain environmental and structural representations
and warranties made by Fidelity to certain third party buyers in connection with
bulk sales by
Fidelity made as part of the Restructuring ("Bulk(the "Bulk Sale Indemnity").
The Company reported net income for the year ended December 31, 1995 of
$1,398,000 or $0.16 per share, including a gain of approximately $1,541,000 from
the sale of thean office building in Sherman Oaks, BuildingCalifornia and a residential
property in Harbor City, California. The Company reported a net loss of $174.8
million or $26.45 per share in Fiscal 1994 comprised of (i) a $112.1 million
loss from the operations of its former subsidiary, Fidelity, through the date of
the Restructuring, (ii) writedowns of $59.9 million on the Company's investment
in Fidelity at and following the Restructuring, (iii) a $900,000 administrative
charge paid to Fidelity prior to the Restructuring, and (iv) a $1.9 million loss
from its ongoing operations.
During the first quarter of Fiscal 1995, the Company exercised its option
to purchase the Building
Options and on March 23, 1995 purchased and immediately sold the Sherman Oaks
Building for a gain of approximately $560,000. On May 18, 1995, the Company
purchased the Glendale Building for an exercise price of approximately $7.12
million. Concurrent with the purchase, the Company entered into a ten year,
full service gross lease with Fidelity for four of the six floors of the
Glendale Building providing for a base rent, subject to annual escalations, of
approximately $1,220,000 annually. At December 31, 1995 rental properties
consisted of one apartment building and two commercial buildings as compared to
three apartment buildings and one commercial building at December 31, 1994.
Properties held for sale at December 31, 1995 was comprised of one apartment
building with a book value of $7,542,000 and an undeveloped parcel of land with
a book value of $400,000.
1215
During the second quarter of fiscal 1995, the Company sold substantially
all of its investmentremaining interest in Fidelity and settled certain litigation, which
resulted in the Company receiving net cash proceeds of approximately $11,938,000
and the return of 666,000 shares of the Company's common stock. The Fiscal 1995
net earnings includes a loss of approximately $41,000 from the sale of such
Fidelity shares calculated by comparing (i) the net cash proceeds combined with
the amount ascribed to the common stock received ($2.125 per share), to (ii)the
carrying value of such Fidelity stock included in the balance sheet as
Investment in Fidelity held for sale at December 31, 1994. The Company has
reflected the return of the Company's common stock as treasury stock in the
amount of $1,415,000.
The sale of the real properties and the sale of the Fidelity stock
contributedattributed to the significant increase in cash and cash equivalents during
December 31, 1995. The increase in cash and cash equivalents was offset, in
part, by the purchase of the Glendale Building for approximately $7.12 million
which was funded with $1.78 million of cash and a mortgage of approximately
$5.34 million. Cash and cash equivalents amounted to $4,805,000 at December 31,
1994 as compared to $16,291,000 at December 31, 1995. Accordingly, interest
income increased significantly during the third and fourth quarter of Fiscal
1995. The Company's net operating results for Fiscal 1995 include interest
income amounting to $710,000, as compared to $45,000 in Fiscal 1994.
Rental income amounted to $5,402,000 in fiscal 1995 as compared to
$2,070,000 for fiscal 1994. Rental income may vary significantly depending upon
the properties owned by the Company during the periods being reported. As
described above, the Company did not engage in the ownership and management of
commercial and residential properties until the Restructuring in August 1994.
Accordingly, Fiscal 1994 reflects rental income for only five months as compared
to twelve months in Fiscal 1995. In addition, Fiscal 1995 includes rental
income from the Company's May acquisition of the Glendale Building, somewhat
offset, by a reduction in rental income resulting from the sale of the Harbor
City residential property in the first quarter of 1995.
During Fiscal 1995, the Company made a decision to sell the Veselich
residential property and, accordingly, has included this property with a carrying
value of $7,542,000 at December 31, 1995 in Properties held for sale. On March
26, 1996, the Company entered into a Purchase and Sale Agreement to sell the
Veselich property, whereby the Buyer agreed to purchase said property for
approximately $9.3 million. The Company received a $0.5 million deposit
which is refundable only under certain conditions. Pursuant to the terms of the
Purchase and Sale Agreement, the closing date, subject to certain conditions
precedent, is scheduled to occur on or beforeclosed in May 29, 1996. As of December 31,
1995, this property was encumbered by a mortgage in the amount of approximately
$5,731,000.
Interest expense amounted to $1,327,000 in Fiscal 1995 and $649,000 in
Fiscal 1994. As described above, at the date of the Restructuring, the Company
purchased the properties from Fidelity with an acquisition price of $19.8
million with mortgage financing from Fidelity and a short-term line of credit
amounting to $6.2 million from Craig. Fiscal 1994 interest expense reflects
interest for the five month period on the indebtedness incurred at the
Restructuring and includes $266,000 paid to Craig under the terms of the Craig
line of credit.
On November 10, 1994, the Company issued 1,329,114 shares of 3% Cumulative
Voting Convertible Preferred Stock ("Preferred Stock") at a stated value of
$3.95 per share. The sales price of the 1,329,114 shares sold was $5,250,000
which was paid through the conversion of a portion of the $6.2 million
indebtedness to Craig, resulting in a reduction in interest 13
costs. UponSubsequent
to the sale of the Fidelity shares in April 1995, the Company paid in full the
remaining $950,000 loan from Craig. Included in interest expense for Fiscal
1995 is approximately $59,000 related to the loan from Craig. The reduction in
interest costs associated with the pay-off and
16
conversion of the Craig loan to Preferred shares and the assignment of the
mortgage indebtedness as part of the sale of the Harbor City property was
offset, in part, by $5.34 million of mortgage financing obtained to purchase the
Glendale Building in Fiscal 1995.
General and administrative expenses from real estate operations amounted to
$1,807,000 in Fiscal 1995 as compared to $1,785,000 in Fiscal 1994. During
Fiscal 1995, the Company incurred additional legal fees pertaining to
outstanding litigation and paid bonuses and directors fees for past services
aggregating approximately $302,500, which were authorized by the Board to the
Chairman, Vice-Chairman and President. Such employee related costs were offset
by a payment of approximately $120,000 by affiliates of Craig to the Company for
real estate consulting services provided by employees to such affiliates.
Fiscal 1994 general and administrative expenses represented only five
months of operations and included approximately $1.1 million related to a
contested proxy, solicitation, litigation defense and settlement costs. Such
legal costs included the costs of defending a lawsuit filed in the Court of
Chancery of the State of Delaware by a stockholder, Dillon Investors L.P., in
November 1994, naming as defendants the Company, its directors and Craig. On
April 13, 1995, the Company, Craig and Dillon Investors and its affiliates (the
"Dillon Parties") entered into settlement agreements to resolve this litigation.
Under the settlement agreements, the Dillon Parties purchased from Citadel
1,295,000 shares of Class B common stock of Fidelity owned by the Company in
exchange for which the Company received from Dillon Parties $2.22 million and
666,000 shares of the Company's common stock, and all existing litigation among
the Company, Craig and the Dillon Parties was terminated, with mutual releases
executed and delivered. The Dillon Parties also agreed for a period of one year
following the closing, not to purchase or acquire any other beneficial interests
in any of the Company's securities, and not to engage in any solicitations of
consents or proxies.
The settlement terms also included an agreement by Craig with the Dillon
Parties not to exercise, prior to February 4, 1996, its right to tender any
shares of the Preferred Stock for conversion into the Company's common stock
without the prior written consent of the holders of a majority of the
outstanding shares of the Company's common stock. In exchange for such
concession from Craig, the Company agreed to grant Craig a two year warrant to
acquire the 666,000 shares of the Company's common stock acquired from the
Dillon Parties at a price of $3.00 per share, and agreed to reimbursereimbursed Craig for certain
legal costs associated with the litigation amounting to approximately $62,000.
Fiscal 1995 general and administrative expenses amounted to $384,000 for
the three months ended December 31, 1995 as compared to $659,000, $339,000, and
$425,000 for the third, second and first quarter ended September 30, June 30,
and March 31, 1995. During Fiscal 1995, the Company incurred additional legal
fees pertaining to outstanding litigation (see Part II, Item 1-Legal
Proceedings) and paid bonuses and directors fees for past services aggregating
approximately $302,500, which were authorized by the Board to the Chairman,
Vice-Chairman and President. Such employee related costs were offset by a
payment of approximately $120,000 by affiliates of Craig to the Company for real
estate consulting services provided by employees to such affiliates.
14
BUSINESS PLAN, CAPITAL RESOURCES AND LIQUIDITY OF THE COMPANY
- -------------------------------------------------------------
Fiscal 1996
- ------------------------------------------------------------------------
Fiscal 1996 cash and cash equivalents decreased by approximately $9,932,000
from $16,291,000 at December 31, 1995 to $6,359,000 at December 31, 1996. Net
cash provided by investing activities for the year ended December 31, 1996
amounted to $1,460,000 and net cash used in financing activities amounted to
approximately $12,305,000. The principal sources of liquid funds in Fiscal 1996
was from the sale of properties amounting to $9,361,000. The principal uses of
liquid funds in 1996 included (i) a $7 million investment in its shareholder,
Reading, (ii) a $5,883,000 repayment of mortgage loans including $5,690,000
repaid as a result of a rental property sale in May 1996, (iii) the Company's
redemption from Reading of its Series
17
B Preferred Stock in the amount of $6,190,000, (iv) improvements to rental
properties amounting to $504,000 and (v) the payment of preferred stock
dividends amounting to $232,000.
The Company expects that its sources of funds in the near term will include
(i) cash on hand and related interest income, (ii) cash flow from the operations
of its real estate properties, (iii) approximately $350,000 of proceeds from the
sale of a rental property net of a mortgage loan repayment with respect to an
apartment building sold in January 1997, (iv) consulting fee income from Reading
and (v) a quarterly preferred stock dividend from Reading amounting to
approximately $455,000 annually.
In the short-term, uses of funds are expected to include (i) funding of the
Glendale Building leasehold improvements and building upgrades required under
the terms of the Disney lease amounting to approximately $3 million, (ii)
operating expenses, (iii) payment of December 31, 1996 accrued liabilities
including approximately $870,000 of unpaid commissions and releasing costs
incurred in releasing the Glendale Building, and (iv) debt service pursuant to
the property mortgages.
Management believes that the Company's sources of funds will be sufficient
to meet its cash flow requirements for the foreseeable future. The October 1996
Reading Investment Transaction, described above, provided the Company with the
opportunity to make an initial investment in the Beyond-the-Home segment of the
entertainment industry, and the ability thereafter, to review the implementation
by Reading of its business plan and, if it approves of the progress made by
Reading, to make a further investment in this industry through the exercise of
its Asset Put Option to exchange all or substantially all of its assets for
Reading Common Stock. The Company has the right to require Reading to redeem
the securities issued to it in the Exchange Transaction after five years or
sooner if Reading fails to pay dividends on such securities for four quarters.
Fiscal 1995
- ------------
Cash and cash equivalents increased by approximately $11,486,000 from
$4,805,000 at December 31, 1994in Fiscal 1995
to $16,291,000 at December 31, 1995. Net cash provided by investing activities
for the year ended December 31, 1995 amounted to $11,165,000 including cash proceeds from the sale of its remaining
Fidelity stock and proceeds from the sale of properties amounting to $11,938,000
and $8,837,000, respectively. Fiscal 1995 proceeds from long-term mortgage
financingsfinancing amounted to approximately $6,104,000. During Fiscal 1995, $9,610,000principal
uses of such proceeds
were usedfunds included the purchase and improve realimprovement of rental properties
amounting to $9,610,000 and repaythe repayment of long-term and short-
termshort-term principal
borrowings of approximately $4,764,000.
The Company expects that its sourcesFiscal 1994
- -----------
Cash and cash equivalents decreased by approximately $141,156,000 in Fiscal
1994, inclusive of funds in the near term will include
cash on hand ($16,291,000 at December 31, 1995), cash flowa decrease of approximately $143,677,000, resulting from the
operations
of its real estate properties and proceeds from the sale of its properties.
In the short-term, uses of funds are expected to include (i) funding of the
repair of the earthquake damage to the parking structure of the Glendale
Building, (ii) operating expenses, (iii) any amounts that may become due under
the $4 million Bulk Sale Indemnity, (iv) debt service pursuant to the property
mortgages and (v) dividends declared, if any under the Preferred Stock. Annual
cumulative dividends accrue at $157,500 per year. The Company has declared and
paid dividends amounting to $101,500 on the Preferred Stock for the period from
its issuance in November 1994 through June 30, 1995. At December 31, 1995,
cumulative dividends not declared or paid amounted to $78,750. Such dividends
were declared and paid in March 1996.
Management is currently evaluating the assets and opportunities available
to the Company with a view to developing a new business plan. Among the
alternatives under consideration are the continuation and expansion of its real
estate operations, the movement into a new line of business, and the merger or
sale of the entire Company. Such alternatives may include the participation
with the Company's major beneficial shareholder, Craig and/or its affiliates in
land based entertainment businesses such as motion picture exhibition.
On March 29, 1996, the Company was notified by its major shareholder, Craig
that it had sold its common stock interest in the Company, representing
approximately 26% of the outstanding shares of the Company, to its 49.3% owned
affiliate, Reading Company ("Reading"). In addition, Craig sold to Reading an
option to purchase its 1,329,114 shares of Preferred Stock and its warrant to
purchase 666,000 sharesdeconsolidation of the Company's common stock. Such Preferred Stock
combined withpreviously owned subsidiary, Fidelity. In
August 1994, Citadel completed a restructuring in which among other things,
Citadel's ownership interest in Fidelity was reduced to 16% and the Common Stock currently held by Reading representCompany
formed a new subsidiary which purchased four real properties using funds of
approximately 40% of$20,055,000. Proceeds to purchase such properties was obtained
through long-term mortgage debt amounting to approximately $13,930,000 and a
$6,200,000 short-term credit line from the outstanding voting equity securities of the Company.
15Company's shareholder affiliate,
Craig.
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX PAGE
- - ----- ----
Report of Independent Auditors.................... F-220
Consolidated Balance Sheets
Years Ended December 31, 19951996 and 1994.......... F-31995.......... 21
Consolidated Statements of Operations
Years Ended December 31, 1996, 1995 1994 and 1993.... F-41994.... 22
Consolidated Statements of Stockholders' Equity
Three Years Ended December 31, 1995............. F-51996............. 23
Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 1994 and 1993.... F-61994.... 24
Notes to Consolidated Financial Statements........ F-825
Financial Statement Schedule - III - Real Estate
and Accumulated Depreciation.................... S-140
F-119
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Citadel Holding Corporation
We have audited the consolidated balance sheets of Citadel Holding Corporation
and subsidiaries as of December 31, 19951996 and 1994,1995 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995.1996. Our audits also included the
financial statementsstatement schedule listed in the Index at Item 8. These financial
statements and the financial statement schedule are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Citadel Holding Corporation and
subsidiaries as of December 31, 19951996 and 1994,1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995,1996, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presentpresents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 27, 1996
F-220, 1997
20
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(NOTE 1)
December 31,
1996 1995
1994
-------- -------------------- ------------
(In thousands of dollars)
ASSETS
- - ------
Cash and cash equivalents $ 16,2916,356 $ 4,805
Investment in Fidelity Federal Bank-held for sale 11 13,40516,291
Properties held for sale 1,145 7,942 --
Rental properties, less accumulated depreciation 13,288 14,251
19,858Investment in shareholder affiliate 7,000 --
Capitalized leasing costs 1,576 70
Other receivables 437 1,219311 447
Other assets 883 625616 814
-------- --------
Total assets $ 39,81530,292 $ 39,91239,815
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
LIABILITIES
Security deposits payable $ 25376 $ 227
Accrued legal fees 313 1,239253
Accounts payable and accrued liabilities 1,343 1,7622,189 1,656
Deferred proceeds from bulk sales agreement 4,000 4,000
Short-term line of credit with affiliate -- 9504,000
Mortgage notes payable 10,303 16,186 13,896
-------- --------
Total liabilities 12,568 22,095 22,074
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Serial preferred stock, par value $.01,
5,000,000 shares authorized, 3% Cumulative
Voting Convertible, ($3.95 per share or
$5,250,000 stated value) 1,329,114 shares
issued and outstanding at December 31, 1995 -- 13
13Serial preferred stock, par value $.01,
5,000,000 shares authorized, 3% Cumulative
Voting Convertible, none outstanding -- --
Common stock, par value $.01, 20,000,000
shares authorized, 6,669,924 shares issued
and outstanding at December 31, 19951996
and 19941995 67 67
Additional paid-in capital 59,020 65,197
65,298
Retained (deficit)Deficit (39,948) (46,142) (47,540)
Cost of treasury shares, 666,000 shares (1,415) --(1,415)
-------- --------
Total stockholders' equity 17,724 17,720 17,838
-------- --------
Total liabilities and stockholders' equity $ 39,81530,292 $ 39,91239,815
======== ========
See accompanying notes to consolidated financial statements.
F-321
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(NOTE 1)
Year Ended December 31,
1996 1995 1994
1993
------ --------- ---------------- -------- ----------
(In thousands of dollars,
except per share amounts)
Real Estate Operations:
Rental income $4,932 $5,402 $ 2,070
$ --
Interest income 939 710 45
-------- ------ ---------
---------5,871 6,112 2,115 --
Real estate operating expenses 2,481 2,660 1,350 --
Depreciation and amortization 395 420 276
--
Interest expense 1,317 1,327 649 --
General and administrative expenses 745 1,807 1,785
--
------ --------------- ---------
Total expenses 4,938 6,214 4,060 --
Gain on sale of properties 1,493 1,541 --
--
------ --------------- ---------
Earnings (loss) from Real Estate Operations 2,426 1,439 (1,945)
-------- ------ --------- ---------
Loss From Financial Services Operations
(Note 13) -- -- (103,628)
Administrative Charge from Fidelity Federal Bank-- -- (916)
--
LossGain (Loss) of and Write-down of Investment
in Fidelity Federal Bank4,000 (41) (171,964)
--
------ --------------- ---------
Earnings (loss) before taxes 6,426 1,398 (174,825) (103,628)
Income tax expense (benefit) -- -- (36,467)--
------ --------------- ---------
Net earnings (loss) $6,426 $1,398 $(174,825)
$ (67,161)
====== =============== =========
Net earnings (loss) per common and
common equivalent share $ 0.16 $ (26.45) $ (11.56)$0.80 $0.17 $(26.45)
====== =============== =========
See accompanying notes to consolidated financial statements.
F-422
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 19951996
(IN THOUSANDS OF DOLLARS) (NOTE 1)
Preferred Stock Common Stock
--------------- ---------------------------------- -------------- Treasury Stock-
Shares Par Shares Par Paid-In Retained Stock, holders'
Value Value Capital Earnings At Cost Equity
- - --------------------------------------------------------------------------------------------------------------
Balances at
January 1, 1993 3,2981994 6,596 $66 $60,052 $ 33 $28,707127,285 $ 194,446 $ 223,186
Net (loss) (67,161) (67,161)
Proceeds of rights
offering 3,298 33 31,345 31,378
----- ---- ----- ---- ------- --------- ------- ---------
Balances at
Dec. 31, 1993 6,596 66 60,052 127,285 187,403
Issuance of common
stock 74 1 285 286
Issuance of preferred
stock, net of
issuance costs of
$275 1,329 $ 13 4,961 4,974
Net (loss) (174,825) (174,825)
----------- ---- ----- ---- ------- --------- ------- ------------ -------- -------- ------ --------
Balances at
Dec. 31, 1994 1,329 13 6,670 67 65,298 (47,540) -- 17,838
Asset exchange for
666,000 shares of
common stock $(1,415) (1,415)
Net earnings 1,398 1,398
Preferred stock
dividends (101) (101)
----------- ---- ----- ---- ------- --------- ------- ------------ -------- -------- ------ --------
Balances at
Dec. 31, 1995 1,329 $ 13 6,670 67 65,197 (46,142) (1,415) 17,720
Redemption of
Preferred stock (1,329) (13) (6,177) (6,190)
Net earnings 6,426 6,426
Preferred stock
dividends (232) (232)
------ ---- ----- --- -------- -------- ------ --------
Balances at
Dec. 31, 1996 $ 67 $65,197-- 6,670 $67 $59,020 $ (46,142)(39,948) $(1,415) $ 17,720
=====17,724
====== ==== ===== ======= ======= ========= ======= =========
See accompanying notes to consolidated financial statements.
F-523
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)(NOTE 1)
Year Ended December 31,
1996 1995 1994
1993
------- --------- --------- ----------
OPERATING ACTIVITIES
Net earnings (loss) $ 6,426 $ 1,398 $(174,825) $ (67,161)
Adjustments to reconcile net earnings (loss) to
net cash provided (used) by operating activities:
Deconsolidation of Fidelity -- -- 111,988
--
Writedown of(Gain) Loss from investment in Fidelity (4,000) 41 59,892 --
Deferred proceeds from Bulk Sales Agreement -- -- 4,000 --
Depreciation and amortization 395 420 276 23,092
Gain on sale of rental property (1,493) (1,541) -- --
Amortization of deferred loan costs 88 58 (1,163)
Provision for estimated losses --
-- 95,300
Gains on sales of loans and securities -- -- (1,482)
Capitalized loan origination costs -- -- (2,187)
Purchases of investment securities -- -- (669,228)
Proceeds/maturities of investment securities -- -- 585,773
Purchases of mortgage-backed securities -- -- (446,809)
Proceeds from sales of mortgage-backed securities -- -- 514,981
Principal repayments of mortgage-backed securities -- -- 58,865
Writedown of investment securities -- -- 2,074
Originations of loans held for sale -- -- (162,868)
Proceeds from sale of loans held for sale -- -- 138,399
FHLB stock dividend -- -- (1,640)
Deferred income tax expense -- -- 14,491
Decrease (increase)(Increase) decrease in other receivables 137 382 (1,219)
4,080
Decrease (increase)(Increase) decrease in other assets (129) (216) (625) (49,414)
Increase in security deposits payable (177) 26 227 --
Increase (decrease) in accrued liabilities (337) (1,345) 3,001
(21,381)-------- ------- --------- ---------
Net cash provided by (used in) operating activities 910 (777) 2,715 13,722
INVESTING ACTIVITIES
Proceeds from sale of Fidelity stock -- 11,938 --
Purchase of Reading Entertainment, Inc. securities (7,000) -- --
Proceeds from sale of properties 9,361 8,837 --
Payment of capitalized leasing costs (397) -- --
Purchase of and additions to real estate (504) (9,610) (20,055)
--
Purchase of investment securities -- -- (200,055)
Maturities of investment securities -- -- 226,617
Proceeds from sale of investment securities -- -- 26,908
Principal repayments of mortgage-backed securities
held for investment -- -- 9,565
Proceeds from sale of mortgage backed securities
held for investment -- -- 7,114
Purchase of loans -- -- (3,951)
Loans receivable, net decrease -- -- 149,909
Proceeds from sale of real estate -- -- 41,608
Premises and equipment (additions), net -- -- (6,946)
Other, net -- -- 3,275-------- ------- --------- ---------
Net cash provided by (used in) investing activities 1,460 11,165 (20,055)
254,044
F-6
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(IN THOUSANDS OF DOLLARS) (NOTE 1)
Year Ended December 31,
1995 1994 1993
------- --------- ---------
FINANCING ACTIVITIES
Redemption of Preferred Stock from shareholder
affiliate (6,190) -- --
Proceeds from long-term mortgage borrowings -- 6,104 13,930 --
Repayments of long-term borrowings (5,883) (3,814) (34) (162,000)
Short-term borrowings from affiliates -- -- 6,200 --
Repayment of borrowings from affiliates -- (950) - --
Dividends paid (232) (101) -- --
Short-term borrowings increase -- -- 242,830
Capitalized financing costs -- (141) (246) --
Costs of preferred stock issuance -- -- (275) --
Proceeds from issuance of common stock -- -- 286
--
Proceeds from stock rights offering, net -- -- 31,378
Demand deposits and passbook savings decrease, net -- -- (111,601)
Certificate accounts, net increase -- -- 22,326
Proceeds from FHLB advances -- -- 250,000
Repayment of FHLB advances -- -- (505,000)-------- ------- --------- ---------
Net cash provided by (used in) financing activities (12,305) 1,098 19,861 (232,067)
Less cash and cash equivalents of Fidelity at
beginning of period -- -- (143,677)
---------- ------- --------- ---------
Net increase (decrease) in cash and cash equivalents (9,935) 11,486 (141,156) 35,699
Cash and cash equivalents at beginning of year 16,291 4,805 145,961
110,262-------- ------- --------- ---------
Cash and cash equivalents at end of year $ 6,356 $16,291 $ 4,805
$ 145,961======== ======= ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest on mortgages and line of credit $ 1,269 $ 1,292 $ 548 --
Interest on deposits, advances and other borrowings -- -- 180,861
Income taxes -- -- (679)
Noncash transactions:
Conversion of line of credit to preferred stock,
net of loan costs -- -- 4,974 --
Common stock received in exchange for Fidelity stock -- 1,415 -- --
Additions to real estate owned (other assets)
through foreclosure -- 400 -- 193,461
Loans originated to finance sale of real estate
acquired through foreclosure -- -- 51,607
Transfers from investment portfolio to held for
sale portfolio:
Loans receivable -- -- 325,222
Investment securities -- -- 14,264
Mortgage-backed securities -- -- 214,310
See notes to accompanying consolidated financial statements.
F-724
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLEPRINCIPLES OF CONSOLIDATION
- - ---------------------------------------------------------------------------------------------------------------------------
The consolidated financial statements include the accounts of Citadel Holding
Corporation ("Citadel") and its wholly owned subsidiaries (collectively the
"Company"). All significant intercompany balances and transactions have been
eliminated in consolidation.
On August 4, 1994October 15, 1996, the Company consummated the transaction (the "Closing""Exchange
Transaction"), Citadel completed contemplated by an exchange agreement (the "Exchange Agreement")
with its shareholder affiliates, Craig Corporation ("Craig") and Reading
Entertainment, Inc. ("Reading"). Pursuant to the terms of the Exchange
Agreement, the Company contributed cash in the amount of $7 million to Reading
in exchange for 70,000 shares of Reading Series A Voting Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock") and an option to transfer all
or substantially all (subject to certain limitations) of its assets to Reading
for Reading Common Stock (the "Asset Put Option"). See Note 4. The Company
accounts for its investment in Reading at cost.
As a result of a restructuring (together
with other transactions below, the "Restructuring") in which, among other
things, Citadel's ownership interestAugust 1994, described in Note 5, effective
January 1, 1994, Citadel no longer consolidates its previously wholly owned
subsidiary, Fidelity Federal Bank ("Fidelity"), was reduced to approximately 16%. The
reduction was a result of Fidelity issuing and selling to investors in a public
offering shares of Class A and Class C common stock. As of August 4, 1994,
Citadel's shares of Fidelity were reclassified into 4,202,243 shares of Class B
common stock of Fidelity. During April 1995, Citadel sold substantially all of
the Class B common stock of Fidelity received in the Restructuring.
As a result of the Restructuring, effective January 1, 1994, Citadel no longer
consolidates Fidelity in its financial statements;
rather it accounts for its investment in Fidelity on the cost basis. Accordingly,According
ly, information for the year ended December 31, 1994 presents the Company's
results of operations for the five months subsequent to the Restructuring
separate from the results of operations of Fidelity, which have been included in
the statement of operations as "Loss"Gain (Loss) of and writedownWritedown of investmentInvestment in
Fidelity" (see note 4). For the
period prior to the closing of the Restructuring, administrative expenses have
been recorded consistent with the previous allocations made to Citadel by
Fidelity. Note 13 relates to the Company as the holding company of Fidelity
prior to the Restructuring.
In addition to the reduction of Citadel's interest in Fidelity, several other
significant events occurred in the Restructuring, including:
a. Citadel sold to Fidelity all of the stock of Gateway Investment
Services, Inc., previously a wholly owned subsidiary of Citadel.
b. A newly formed subsidiary of Citadel, Citadel Realty, Inc. ("CRI")
purchased four real properties from Fidelity for a purchase price of $19.8
million (Fidelity's book value) of which $13.9 million was financed by Fidelity
on a secured basis, and the balance was financed by Craig Corporation
("Craig"), a significant stockholder of Citadel, under a short-term line of
credit.
c. Citadel received from Fidelity by way of a dividend (i) a one-year
transferable option (subsequently contributed to CRI) to acquire two office
building in Sherman Oaks and Glendale, California (the "Office Buildings") used
in the operations of Fidelity for an aggregate exercise price of $9.3 million,
portions of which buildings to be leased back to Fidelity upon purchase by the
F-8
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLE OF CONSOLIDATION, (CONT'D)
- - -----------------------------------------------------------------------
Company (Note 3), and (ii) Fidelity's interest in a lawsuit filed against the
former carrier of Fidelity's directors' and officers insurance policies,
involving certain coverage and indemnity issues (the "D & O Litigation"), which
resulted in Citadel collecting approximately $2.5 million.
d. Citadel and Fidelity entered into a Stockholders' Agreement, under which
Citadel is obligated to reimburse Fidelity for certain losses that may be
incurred by Fidelity as a result of certain environmental and other
representations made by Fidelity in connection with the bulk sale of loans and
other assets to certain third parties in connection with the Restructuring.
Subject to a $4 million limit, the Stockholders' Agreement requires Citadel to
reimburse Fidelity for certain losses incurred by Fidelity, in either
repurchasing assets sold in connection with the bulk sale in the event of
breached representations, or curing such breaches.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - ---------------------------------------------------
Cash and cash equivalents
-
- -------------------------
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Included in cash and cash
equivalents at December 31, 19951996 is approximately $15,780,000$5.75 million which is being
held in institutional money market mutual funds.
Depreciation and Amortization
-
- -----------------------------
Depreciation and amortization is generally provided using the straight-line
method over the estimated useful lives of the assets which range from 27 to 39
years. Leasehold improvements are amortized over the lives of respectedrespective leases
or the useful lives of the improvements, whichever is shorter.
25
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONT'D)
- -------------------------------------------------------------
Deferred Financing Costs
-
- ------------------------
Costs incurred in connection with obtaining financing are amortized over the
terms of the respective loans on a straight line basis.
InvestmentsCapitalized Leasing Costs
- -------------------------
Commissions and other costs incurred in Common Stock
- - ---------------------------
The Company's investment in common stockconnection with obtaining leases are
amortized over the terms of Fidelity is classified as "available
for sale" under the provisions of Statement of Financial Accounting Standards
F-9
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONT'D)
- - -------------------------------------------------------------
("SFAS") No. 115 and is reported at fair value. Under SFAS No. 115, fluctuations
in fair value are included inrespective leases on a separate component of stockholders' equity. If
there is decline in fair value judged to be other than temporary, the amount of
writedown is included in net income (loss).straight line basis.
Earnings (Loss) per Share Data
-
- ------------------------------
Earnings per share is based on 8,616,613,7,983,416, 8,233,174 and 6,610,280, and 5,809,570, the weighted
average number of shares of common stock and common stock equivalents
outstanding during the years ended December 31, 1996, 1995 1994 and 1993,1994,
respectively. The 3% Cumulative Voting Convertible Preferred Stock and the
outstanding Warrants and stock options are common stock equivalents. For 1996
and 1995, the calculation of the weighted average shares of common stock
outstanding included the effect of shares assumed to be issued on conversion of
the outstanding 3% Cumulative Voting Convertible Preferred Stock during the
period of time such stock was outstanding and the outstanding Warrants and stock
options. The number of Sharesshares assumed converted as of the beginning of the
period being reported amounted to 2,430,2232,046,784 and was calculated in accordance
with the Preferred Stock conversion terms described in Note 9 as of December 31, 1995.8. The Preferred
Stock is not included in the 1994 calculation as its effect was anti-
dilutive.anti-dilutive.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Accounting for the Impairment of Long Lived Assets
- --------------------------------------------------
During the fiscal year ended December 31, 1996, the Company adopted Statement of
Accounting Standard No. 121 "Accounting for the Impairment of Long Lived Assets
and for Long Lived Assets to be Disposed of". Among other provisions, the
statement changed current accounting practices for the evaluation of the
impairment of long lived assets. The adoption did not have a material affect
on the Company's Consolidated Financial Statements.
26
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 3 - RENTAL PROPERTIES AND PROPERTIES HELD FOR SALE
- - -------------------------------------------------------
The Company's rental properties and properties held for sale at December 31,
1996 and 1995 and 1994 consistconsisted of the following:
1996 1995 1994
-------- --------
(in(In thousands)
RENTAL PROPERTIES:
Land $ 4,6994,438 $ 5,5384,699
Building and improvements 9,389 9,855 14,517
------- -------
Total 13,827 14,554 20,055
Less accumulated depreciation (539) (303) (197)
------- -------
Rental properties, net $13,288 $14,251
$19,858======= =======
PROPERTIES HELD FOR SALE:
Apartment building $ 1,230 $ 7,791
Accumulated depreciation (85) (249)
------- -------
Net 1,145 7,542
Undeveloped land -- 400
------- -------
Properties held for sale $ 1,145 $ 7,942
======= =======
At December 31, 19951996 rental properties consisted of two commercial buildings as
compared to one apartment building and two commercial buildings as compared to three apartment buildings and one
commercial building at December 31,
1994. Properties1995. In January 1997, the property held for sale at December 31, 1996 was sold
at an amount approximating book value.
In May 1996, the Company sold the apartment rental property held for sale at
December 31, 1995, was comprisedfor approximately $8.94 million, net of one apartment building and anexpenses. The sale
resulted in a gain of approximately $1.473 million. Concurrent with the sale,
the Company paid off the related mortgage note payable amounting to
approximately $5.7 million. In addition, in August 1996, the Company sold the
undeveloped parcel of land amounting to $7,542,000 and $400,000, respectively.in Claremont for a price, net of expenses, which
resulted in a gain of approximately $20,000.
During 1995, the Company sold an apartment building for approximately $5.9
million, net of expenses. The sale resulted in a gain of approximately $981,000.
As a result of the sale, approximately $3,693,000 of a mortgage note payable was
assumed and subsequently paid off by the purchaser.
On February 2, 1995, the Company exercised the Building Options described in
Note 15 to purchase the two office buildings from Fidelity. On March 23, 1995,
the Company purchased and immediately sold the Sherman Oaks Building for a gain
of approximately $560,000. On May 18, 1995, the Company purchased the Glendale
Building at an exercise price of $7.12 million. In connection with the Glendale
F-10
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 3 - RENTAL PROPERTIES AND PROPERTIES HELD FOR SALE, (CONT'D)
- - -----------------------------------------------------------------Building the Company obtained a $5.34 million five year mortgage from Fidelity,
which amortizes on a twenty year basis with interest payable monthly at the 30
day LIBOR rate plus 4.5%. The Company paid Fidelity 1%a loan fee of the loan amount1% plus normal
closing costs;
such loan is subject to prepayment penalties in year one of 4%, decreasing 1%
each subsequent year.
Thecosts.
27
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 3 - RENTAL PROPERTIES AND PROPERTIES HELD FOR SALE, CONT'D
- ---------------------------------------------------------------
In August 1994, the Company and Fidelity have entered into a ten year, full service
gross lease for four of the six floors of an office building owned by the
Company in Glendale, Building.California (the "Glendale Building"). The rental rate for
the first five years of the lease term iswas approximately $26,000 per month
(including parking) for the ground floor and approximately $75,000 per month
(including parking), for the fourth through sixth floors. TheOn October 1, 1996,
the Company and Fidelity amended the office lease provides for annual rental increases
at a rate equal to the lowerGlendale Building
resulting in (1) termination of the increaselease obligation for floors four through six
resulting in a reduction of rent payments amounting to approximately $75,000 per
month after January 31, 1997, (2) termination of Fidelity's option to purchase
the Consumer Price Index or 3%.
After five years,Glendale Building, (3) a modification of the mortgage with Fidelity on the
Glendale Building eliminating the prepayment penalty and (4) an obligation by
the Company to refund to Fidelity previous rents approximating $450,000 on
February 1, 1997. Concurrent with the amendment of the Fidelity lease provides thatand
mortgage, the rental rateCompany entered into a ten year, full service lease for all of the
floors, excluding the ground floor will be adjusted to the higher(approximately 80,000 square feet), of the
then current market rate or $1.50 per
square foot increased by the annualGlendale Building with Disney Enterprises, Inc. ("Disney"). The rental rate increase applied duringfor
the first five years of the Disney lease as described interm beginning February 1, 1997 is
approximately $148,000 per month (excluding parking) and approximately $164,000
(excluding parking) for the preceding sentence. Fidelityremaining five year term. Disney has the option to
extendrenew the lease of the ground floor for two consecutive five year terms at a market rental rate and has the option to purchase the Glendale
Building, if still owned byperiods. The lease provides that
the Company at a market value at the expiration of
the lease. During February 1996, Fidelity discontinued use of floors four
through sixwill contribute towards tenant improvements and has notifiedcommon area upgrades
approximately $2.3 million. In addition, the Company that it is attempting to sublease such
space. In addition, during April 1996, the lease relatedanticipates incurring costs
for other building upgrades, governmental compliance, commissions and legal fees
prior to the two remaining
floorscommencement of lease payments by Disney of approximately $1.2
million. The commissions, legal fees and the $450,000 payment due Fidelity,
totaling approximately $1,326,000 are included in the Glendale Building expires. The Company is actively seeking a new
lessee.
On March 26, 1996, the Company entered into a Purchase and Sale Agreement to
sell an apartment rental property, whereby the Buyer agreed to purchase said
property for approximately $9.3 million, of which $0.5 million has been
deposited in escrow. As ofBalance Sheet at December
31, 1995, this property was encumbered by a
mortgage in the amount of approximately $5,731,000. Pursuant to1996 as "Capitalized leasing costs" and are being amortized over the term of
the Purchase and Sale Agreement, the closing date, subject to certain conditions
precedent, is scheduled to occur on or before May 29, 1996. Such property, with
a carrying value of approximately $7,542,000, has been included in the balance
sheet as "Property held for sale" at December 31, 1995.lease .
NOTE 4 - INVESTMENT IN FIDELITYSHAREHOLDER AFFILIATE
- --------------------------------------------
On October 15, 1996, the Company, with the approval of the Board of Directors,
consummated the transaction (the "Reading Investment Transaction") contemplated
by an exchange Agreement (the "Exchange Agreement") dated as of September 4,
1996 by and among the Company, Reading and Craig and certain of their respective
affiliates. Pursuant to the terms of the Exchange Agreement, the Company
contributed cash in the amount of $7 million to Reading in exchange for 70,000
shares of Reading Series A Voting Cumulative Convertible Preferred Stock (the
"Series A Preferred Stock") and the Asset Put Option. Craig contributed assets
in exchange for 2,476,190 shares of Reading Common Stock and 550,000 shares of
Reading Series B Voting Cumulative Convertible Preferred Stock. The assets
transferred by Craig consisted of 693,650 shares of Series B Preferred Stock of
Stater Bros. Holdings Inc., Craig's 50% membership interest in Reading
International Cinemas LLC, and 1,329,114 shares of the Company's Preferred
Stock. In accordance with the Exchange Agreement, Reading exchanged the
Preferred Stock
28
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 4 - -------------------------------INVESTMENT IN SHAREHOLDER AFFILIATE, CONT'D
- ----------------------------------------------------
of the Company received from Craig in the Exchange for an equal number of shares
of the Company's Series B 3% Cumulative Voting Convertible Preferred Stock (the
"Series B Preferred Stock"). Such Series B Preferred Stock received by Reading
in the Exchange Transaction was redeemed by the Company in December 1996 (Note
8).
Upon consummation of the transaction, Craig and the Company held in the
aggregate approximately 82.4% of the voting power of Reading, with Craig's
holdings representing approximately 77.4% of the voting power of Reading and the
Company's holdings representing approximately 5% of such voting power. In
February 1997, Craig increased its ownership in Reading resulting in an increase
in its voting power of Reading to 78%. At December 31, 1994,1996, Reading holds
1,564,973 shares or approximately 26% of the Company's investmentoutstanding common stock.
Craig also holds a warrant, which expires in April 1997, to purchase 666,000
shares of the Company's Common Stock at a purchase price of $3.00.
The 70,000 shares of Series A Preferred Stock acquired by the Company has (i) a
liquidation preference of $100 per share or $7 million ("Stated Value"), (ii)
bears a cumulative dividend of 6.5%, payable quarterly and (iii) is convertible
any time after 18 months from issuance (or earlier upon a change of control of
Reading) into shares of Reading Common Stock at a conversion price of $11.50 per
share. Reading may, at its option, redeem the Series A Preferred Stock at any
time after October 15, 2001, in whole or in part, at a redemption price equal to
a percentage of the Stated Value (initially 108% and decreasing 2% per annum
until the percentage equals 100%). The Company has the right for a 90-day period
beginning October 15, 2001 (provided the Company has not exercised the Asset Put
Option described below), or in the event of a change of control of Reading to
require Reading to repurchase the shares of the Series A Preferred Stock for
their aggregate Stated Value plus accumulated dividends. In addition, if Reading
fails to pay dividends for four quarters, the Company has the option to require
Reading to repurchase such shares at their aggregate liquidation value plus
accumulated dividends. Included in interest and dividend income is approximately
$95,000 representing dividends earned and paid to the Company with respect to
the Company's ownership of the Reading Series A Preferred Stock.
The Asset Put Option is exercisable any time after October 15, 1996 through a
date thirty days after Reading's Form 10-K is filed with respect to its year
ended December 31, 1999, and gives the Company the right to exchange all or
substantially all of its assets, as defined, together with any debt encumbering
such assets, for shares of Reading Common Stock (the "Asset Put"). In exchange
for up to $20 million in aggregate appraised value of the Company's assets on
the exercise of the Asset Put Option, Reading is obligated to deliver to the
Company a number of shares of Reading Common Stock determined by dividing the
value of the Company's assets by $11.75 per share if the notice is received by
October 31, 1997 and thereafter, $12.25 per share. If the appraised value of the
Company's assets is in excess of $20 million, Reading is obligated to pay for
the excess by issuing Common Stock at the then fair market value up to a maximum
of $30 million of assets. If the average trading price of Reading Common Stock
exceeds 130% of the then applicable exchange price for more than 60 days, then
the exchange price
29
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 4 - INVESTMENT IN SHAREHOLDER AFFILIATE, CONT'D
- ----------------------------------------------------
will thereafter be the fair market of the Reading Common Stock from time to
time, unless the Company exercises the Asset Put within 120 days of receipt of
notice from Reading of the occurrence of such average trading price over such 60
day period. For financial reporting purposes the Company did not allocate any
value to the Asset Put Option, due to the Company's belief that the value is not
material and that the methods of valuing options include numerous subjective
assumptions and are not intended to value non-transferable options.
The Company has certain demand and piggy-back registration rights with respect
to Reading Common Stock issuable on conversion of the Series A Voting Cumulative
Convertible Preferred Stock or on exercise of the Asset Put. With respect to
the Reading Investment Transaction, Reading agreed to reimburse the Company for
its out of pocket costs, estimated to be approximately $265,000, up to a maximum
of $280,000.
Reading is a publicly traded company whose shares are listed on the NASDAQ.
Reading is currently involved in conventional multiplex cinema exhibition in
Puerto Rico through its Cine Vista Cinemas chain, in the exhibition of art and
specialty film through its interest in the Angelika Film Center (a specialty art
multiplex cinema and cafe complex located in the Soho area of New York City),
and the development of a new chain of conventional multiplex cinemas and
entertainment centers in Australia. Reading opened its first multiplex cinema in
Australia in December 1996. In addition, Reading expects to expand the Angelika
Film Center concept to other U.S. cities, has executed a lease to develop an 8-
plex art cinema and cafe complex as a part of the Bayou Place development in
Houston, Texas, and is currently reviewing a number of potential locations
suitable for such complexes.
Summarized financial information of Reading as of and for the three months and
twelve months ended December 31, 1996 follows:
CONDENSED BALANCE SHEET:
December 31, 1996
-----------------
(In thousands)
Cash and cash equivalents $ 48,680
Other current assets 7,765
Equity investment in Citadel 4,850
Preferred stock of Stater 67,978
Property and equipment 21,130
Intangible assets 26,229
Other assets 5,122
--------
Total Assets $181,754
========
Current liabilities $ 13,716
Other liabilities 5,084
Preferred Stock held by Citadel 7,000
Shareholders' equity 155,954
--------
Total Liabilities and Equity $181,754
========
30
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 4 - INVESTMENT IN SHAREHOLDER AFFILIATE, CONT'D
- ----------------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS:
Three Months Ended Year Ended
December 31, 1996 December 31, 1996
------------------- ------------------
(In thousands) (In thousands)
Revenue:
Theater $ 5,233 $ 18,236
Real Estate 332 543
Interest and dividends 2,695 4,165
------- --------
Total revenue 8,260 22,944
Theater costs (4,204) (14,452)
Depreciation and amortization (578) (1,793)
General and administrative (3,869) (7,106)
------- --------
(Loss) from operations (391) (407)
Equity in earnings of Citadel 51 1,526
Other income, net 3,263 4,327
------- --------
Earnings before income taxes 2,923 5,446
Income tax benefit 1,315 1,236
Minority interest 353 321
------- --------
Net income 4,591 7,003
Less preferred stock dividends (911) (911)
Net Income applicable to common
stock shareholders $3,680 $6,092
====== ======
Included in income tax benefit for the three months and year ended December 31,
1996 is approximately $1.8 million resulting from the recognition of previously
reserved income tax assets, net of AMT tax. In addition, other income for the
three months and year ended December 31, 1996, includes legal settlements and
other non-recurring income of approximately $3.4 million and $4.6 million,
respectively.
NOTE 5 - INVESTMENT IN FIDELITY
- -------------------------------
On August 4, 1994, Citadel completed a restructuring in which, among other
things, Citadel's ownership interest in its previously wholly owned subsidiary,
Fidelity consistedFederal Bank ("Fidelity"), was reduced to approximately 16% through the
issuance of 4,202,243 shares of Class B Common Stock the fair value which was estimated by
managementA and Class C common stock of Fidelity to
be $3.19 per share, ornew investors in a total carrying value of approximately
$13,405,000.public offering.
During fiscal 1995, the Company's investment in Fidelity was reduced by (1) the
sale of 1,295,000 shares of the Class B Common Stock of Fidelity in
consideration for a cash
F-11
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 4 - INVESTMENT IN FIDELITY (CONT'D)
---------------------------------------- payment of $2,220,000 and the return of 666,000 shares
of the Company's common stock as part of the settlement of litigation with
Dillon Investors (Note 11), and 2)(2) the sale of 2,900,000 shares for
approximately $9,718,000, net of commissions. At December 31, 19951996 the Company
holds for sale 1,810 shares of Fidelity stock, which shares reflect a one for
four reverse stock split completed by Fidelity on February 14, 1996.stock.
31
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 5 - INVESTMENT IN FIDELITY, CONT'D
------------------------------
The loss of and writedown of investment in Fidelity for the year ended December
31, 1994 consisted of the following:
(in thousands)
--------------------------
Loss from operations of Fidelity through August 4, 1994 $112,072
Writedown of investment in Fidelity as of the date of
the Restructuring 52,811
Writedown representing other than temporary decline in
value from August 5, 1994 to December 31, 1994 7,081
--------
$171,964
========
Included in the writedown of investment in Fidelity as of the date of
Restructuring is the effect of the proceeds received from the D&O Litigation,
the writedown of uncollectible loans, and the deferral of the $4 million of
proceeds received from the Bulk Sale Asset Agreement relating to a sale of
Fidelity loans (see Note 1).described below. The loss from operations of Fidelity through
August 4, 1994 was partially offset by an income tax benefit of $16,524,000.
NOTE 5 - OTHER ASSETS
---------------------
Other assets are summarized as follows:
December 31,
1995 1994
----- -----
(in thousands)
Deferred financing costs $ 271 $ 256
Accumulated amortization (43) (79)
----- -----
Deferred financing costs, net 228 177
Impounds 291 --
Deposits 99 87
Prepaid expenses 195 329
Other 70 32
----- -----
$ 883 $ 625
===== =====
F-12
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 6 - DEFERRED PROCEEDS FROM BULK SALES AGREEMENT
----------------------------------------------------
UnderIn addition to the reduction of Citadel's interest in Fidelity, several other
significant events occurred in the Restructuring, including:
a. The purchase by a newly formed subsidiary of Citadel, Citadel Realty, Inc.
("CRI") of four real properties from Fidelity for a purchase price of $19.8
million (Fidelity's book value) of which $13.9 million was financed by Fidelity
on a secured basis, and the balance was financed by Craig, under a short-term
line of credit.
b. The receipt by Citadel from Fidelity by way of a dividend of (i) a one-year
transferable option (subsequently contributed to CRI) to acquire two office
building in Sherman Oaks and Glendale, California (the "Office Buildings") used
in the operations of Fidelity for an aggregate exercise price of $9.3 million,
portions of which buildings to be leased back to Fidelity upon purchase by the
Company (Note 3), and (ii) Fidelity's interest in a lawsuit filed against the
former carrier of Fidelity's directors' and officers insurance policies,
involving certain coverage and indemnity issues (the "D & O Litigation), which
resulted in Citadel collecting approximately $2.5 million.
c. The execution and delivery by Citadel and Fidelity of a Stockholders'
Agreement, (see Note 1),under which Citadel agreed to reimburse Fidelity for certain losses
incurred by Fidelity in either curing breached representations or repurchasing
assets sold under a bulk sales agreement, subject to a $4 million aggregate
limit, in the event Fidelity iswere to be determined to have breached certain
representations made in connection with certain Bulk Sales which were partbulk sales of the Restructuring. To date claims
totaling $3.9 million have been asserted. Citadel has been informed that
Fidelity is contesting these claimsloans and
has asserted that these claims are,properties in any event, subject to1994. As a cure threshold which reduces the maximum claim
to $2.8 million. A significant number of material issues remainwere unresolved
with regardsregard to the Company's ultimate exposure with respect to the Company's
ultimate exposure with respect to the indemnity clause negotiated with Fidelity. Accordingly,Fidelity,
the Company included $4 million on the
balance sheetits Balance Sheet at December 31, 1995 and 1994 is $4 million recorded as
32
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 5 - INVESTMENT IN FIDELITY, CONT'D
- ---------------------------------------
"Deferred proceeds from bulk sales agreement". During 1996, Fidelity reached a
settlement with the purchaser regarding the bulk sales claims and released the
Company from the indemnity given to Fidelity. Accordingly, the Company has
reflected in the Statements of Operations for the year ended December 31, 1996,
a non-recurring gain related to its previous investment in Fidelity, which
resulted from the reversal of the $4 million deferral.
NOTE 6 - OTHER ASSETS
- ---------------------
Other assets are summarized as follows:
December 31,
1996 1995
----- -----
(in thousands)
Deferred financing costs $ 204 $ 271
Accumulated amortization (64) (43)
----- -----
Deferred financing costs, net 140 228
Impounds 354 291
Prepaid expenses 110 195
Other 12 100
----- -----
$ 616 $ 814
===== =====
NOTE 7 - MORTGAGE NOTES PAYABLE
- -------------------------------
Mortgage notes payable at December 31, 19951996 and 19941995 is as follows:
December 31,
1996 1995 1994
-------- --------
(in thousands)
Notes payable to Fidelity - principal and
interest paid monthly at rates equal to
LIBOR plus 4.5% and 1-year Treasury rate
plus 3.7%, maturing through 2004 $ 9,548 $15,424 $13,896
Note payable to American Savings Bank -
principal and interest paid monthly at a
rate equal to the 11th District cost of
funds plus 2.95%, maturing June 1, 2025 755 762 --
------- --------
$10,303 $16,186 $13,896
======= ========
As of December 31, 1995,1996, the 30 day LIBOR interest rate was 5.843%, the 1-year
Treasury rate was 5.5%5.375% and the 11th
District Cost of Funds was 5.116%4.839%.
Aggregate future principal payments as of December 31, 1995 are as follows:
Year Ending
December 31, (in thousands)
------------ --------------
1996 $ 118
1997 167
1998 205
1999 227
2000 5,004
Thereafter 10,465
------
$16,186
======
F-1333
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 8 - SHORT-TERM LINE OF CREDIT
----------------------------------
In connection with the Restructuring the Company borrowed $6,200,000 under
a LineAggregate future principal payments as of Credit from its shareholder affiliate, Craig Corporation. In
November 1994, the amount was reduced to $950,000 through the issuance of
1,329,114 shares of 3% Cumulative Voting Convertible Preferred Stock with a
stated value of $5,250,000, and in May 1995 such $950,000 was repaid and
the line of credit agreement canceled. Included in interest expense for
the years ended December 31, 1995 and 1994 is approximately $59,000 and
$266,000 representing interest and amortization of loan fees paid pursuant
to the terms of the line of credit agreement.1996 are as follows:
Year Ending
December 31, (in thousands)
------------ --------------
1997 $ 170
1998 188
1999 207
2000 228
2001 252
Thereafter 9,258
-------
$10,303
=======
NOTE 98 - 3% CUMULATIVE VOTING CONVERTIBLE PREFERRED STOCK
- ---------------------------------------------------------
On November 10, 1994, the Company issued 1,329,114 shares of 3% Cumulative
Voting Convertible Preferred Stock ("Preferred Stock") at a stated value of
$3.95 per share.share to its shareholder affiliate, Craig Corporation ("Craig"). The
sales price of the 1,329,114 shares sold was $5,250,000 which was paid through
the conversion of existing indebtedness to Craig (Note 8).Craig. The Preferred Stock carriescarried a
liquidation preference equal to its stated value and bearshad a cumulative
(noncompounded) annual dividend equal to 3% of the stated value. Each share of
the Preferred Stock shall entitleentitled the holder to one vote on all matters submitted to
a vote of the Company's stockholders.
The Preferred Stock iswas convertible at the option of the holder into common
stock. The conversion ratio iswas one share of Preferred Stock for a fraction of
a share of common;common, the numerator which is $3.95 per share plus any unpaid
dividends, and the denominator which is the average of the closing prices per
share of the Company's common stock, as defined ("Market Price"). If the Market
Price exceeds $5.00 per share the conversion ratio
will be calculated using $5.00 and if the Market Price iswas below $3.00, the Company cancould redeem the Preferred Stock tendered for
conversion based upon
the following redemption provisions. The Company does not have the right
to call for the redemption of the Preferred Stock prior to November 1997.
Thereafter, the Company has the right, at its sole option, to redeem atcalculated as the sum of (1) $3.95 per share, (2) any unpaid
dividends, and (3) a premium at the redemption date equal to an accrual on the
Stated Value ranging from 9% per annum during the period from November 1994 to
November 1998 and thereafter reducing over timetime.
As described in Note 4, on October 15, 1996, the Company issued 1,329,114 shares
of Series B 3% Cumulative Convertible Preferred Stock ("Series B Preferred
Stock") to Reading in exchange for the Series A Preferred Stock. The terms of
the Series B Preferred Stock were substantially identical to the terms of the
Series A Preferred Stock except that (i) the Redemption Accrual Percentage was
reduced from 9% to 3% after October 15, 1996 and (ii) except upon a change
of control of the Company, the holders of the Series B Preferred Stock would no
longer have the right to convert the Series B Preferred Stock into Company
Common Stock during the one year period November 1998 to November
2006 atcommencing on the rate of 1% per year. Iffifteenth day
following the redemption date is after November
2006 there is no premium. Assuming a Market Price of $2.25, the closing
pricefiling of the Company's common stockAnnual Report on March 28, 1995, the Preferred Stock
would convert into 2,333,333 shares of the Company's common stock.
Included as a reduction of paid in capitalForm 10-K for the year
ended December 31, 1996. In December 1996, Reading notified the Company of its
exercise of its
34
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 8 - 3% CUMULATIVE VOTING CONVERTIBLE PREFERRED STOCK, CONT'D
- -----------------------------------------------------------------
conversion rights. On December 20, 1996, Citadel redeemed the Series B
Preferred from Reading pursuant to the exercise of certain redemption rights set
forth in the Certificate of Designation with respect to the Series B Preferred
Stock. Such redemption price amounted to approximately $6.19 million. As a
consequence of the Series B Preferred Stock redemption, Reading's voting
ownership of Citadel decreased to reflect their approximately 26% common stock
holdings.
Included as a reduction of stockholders' equity for the year ended December 31,
1996 and 1995 is $232,000 and $101,500, respectively, representing dividends
declared and paid to Craig for the period from the date of the Preferred Stock issuance
in November 1995
through June 30, 1995. As1994 until the redemption of the Series B Preferred Stock in
December 31, 1995, undeclared cumulative
dividends amounted to $78,750. Such amounts were declared and paid during
March 1996.
F-14
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 109 - FUTURE MINIMUM RENT
------------------------------ ----------------------------
The Company has operating leases with tenants at its commercial properties that
expire at various dates through 2005 and are subject to scheduled fixed
increases or adjustments based on the Consumer Price Index. Future minimum rent
under operating leases, excluding tenant reimbursements of certain costs, is
summarized as follows:
Year Ending
December 31, (in thousands)
------------ --------------
19961997 $ 3,549
1997 3,5074,503
1998 3,5264,596
1999 1,7682,814
2000 1,3222,223
2001 2,129
Thereafter 5,34714,111
-------
$19,019$30,376
=======
Leases related to the Company's residential properties have been excluded
from the above schedule as they are generally six months or less in length.
Commencing in August 1995, the Company began renting corporate office space from
its stockholder affiliate, Craig, on a month to month basis. In addition, the Company
engaged Craig to provide certain administrative services. Included in general
and administrative expenses is $96,000 and $45,000 paid to Craig for such rent
and services.services for the years ended December 31, 1996 and 1995, respectively. In
addition, the Company provided real estate consulting services to affiliates of CraigReading during
the yearyears ended December 31, 1996 and 1995 for which the Company was paid
approximately $120,000.$169,000 and $120,000, respectively. Such amounts are included in
the statement of operations as a reduction of general and administrative
expenses.
35
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 1110 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
There are several legal actions and claims against the Company. Based on advice
of legal counsel management believes that the ultimate liability, if any, which
may result from any of these lawsuits will not materially effect the financial
position or results of operations of the Company.
In November 1994, a stockholder, Dillon Investors L.P. filed a lawsuit in the
Court of Chancery of the State of Delaware naming as defendants the Company, its
directors and Craig. On April 13, 1995, the Company, Craig and Dillon Investors
and its affiliates (the "Dillon Parties") entered into settlement agreements to
resolve this litigation. Under the settlement agreements, the Dillon Parties
purchased from Citadel 1,295,000 shares of Class B common stock of F-15
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 11 - COMMITMENTS AND CONTINGENCIES, (CONT'D)
-------------------------------------------------
Fidelity
owned by the Company in exchange for which the Company received from the Dillon
Parties $2.22 million and 666,000 shares of the Company's common stock and all
existing litigation among the Company, Craig and the Dillon Parties was
terminated, with mutual releases executed and delivered.terminated. For financial statement purposes the Company reflected the return of
the Company's common stock as treasury stock in the amount of $1,415,000, or
$2.125 per share. The Dillon Parties also agreed for a period of one year
following the closing, not to purchase or acquire any other beneficial
interests in any of the Company's securities, and not to engage in any
solicitations of consents or proxies.
The settlement terms also included an agreement by Craig with the Dillon Parties
not to exercise, prior to February 4, 1996, its right to tender any shares of
the Preferred Stock for conversion into the Company's common stock without the
prior consent of the holders of a majority of the outstanding shares of the
Company's common stock. In exchange for such concession from Craig Corporation,
the Company agreed to grant Craig Corporation a two year warrant to acquire the
666,000 shares of the Company's common stock acquired from the Dillon Parties at
a price of $3.00 per share, and the Company agreed to reimburse Craig
Corporation for certain expenses associated with the litigation which amounted
to $62,000.
NOTE 1211 - STOCK OPTIONS
- -----------------------
Pursuant to an employment agreement, the Company granted to the President
Mr. Wesson, stock
options to purchase 33,000 shares of common stock at a price of $2.69 per share.
As of December 31, 1995, 22,0001996, the 33,000 shares were exercisable. The remaining 11,000 shares vest on August 4, 1996.
NOTE 13 - ACCOUNTING POLICIES AND FOOTNOTE DISCLOSURES PRIOR TO THE
-------------------------------------------------------------------
RESTRUCTURING
-------------
The consolidated financial statements includeEffective October
1996, the accounts ofCompany adopted the Citadel Holding Corporation ("Citadel"1996 Nonemployee Director Stock Option
Plan (the "1996 Stock Option Plan") and subsidiaries, which prior to August 4,
1994 included Fidelity Federal Bank and Gateway Investment Services Inc.
("Gateway"). As a resultprovides that each director who is not
an employee or officer of the Restructuring described in Note 1,Company will automatically be granted immediately
vested options to purchase 10,000 shares of Common Stock at an exercise price
that is greater or less than the fair market value, as defined, per share of
Common Stock on the date of grant by an amount equal to the amount by which
$3.00 per share is greater or less than the fair market value per share of
Common Stock on the effective January 1, 1994, Citadel no longer consolidates its previously
wholly-owned subsidiaries, Fidelity and Gateway in its financial
statements. Accordingly, onlydate of the financial statement information for the
year ended1996 Stock Option Plan. At December
31, 1993 includes the operating results and cash flows1996, vested options to purchase 20,000 shares of Fidelity and Gateway on a consolidated basis.
F-16Common Stock at an
exercise price of $3.00 per share are outstanding.
36
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 1312 - ACCOUNTING POLICIES AND FOOTNOTE DISCLOSURES PRIOR TO THE
-------------------------------------------------------------------
RESTRUCTURING (CONT'D)INCOME TAXES
- ----------------------
The following details the components of the Loss from Financial Services
Operations included in the Statement of Operations for the year ended
December 31, 1993:
Loss from Financial Services Operations:
(in thousands)
--------------
Interest income $289,592
Interest expense 188,391
---------
Net interest income 101,201
Provision for estimated loan losses 65,100
---------
Net interest income after
provision for estimated loan losses 36,101
Noninterest income (expense):
Loan and other fees 5,389
Gain (loss) on sale of loans, net 194
Fee income from investment products 4,313
Fee income on deposits and other income 3,271
Provision for estimated real estate losses (30,200)
Real estate operations on specific properties (18,643)
Gains on sales of mortgage-backed securities
and investment securities, net 1,288
Operating expenses (105,341)
----------
Total noninterest expense (139,729)
----------
Loss from financial services operations $ (103,628)
==========
The following summarizes the significant accounting policies and footnote
disclosures with respect to the year ended December 31, 1993.
Principles of Consolidation - The consolidated financial statements include
the accounts of Citadel Holding Corporation and subsidiaries. Citadel is
the holding company of Fidelity Federal Bank, a Federal Savings Bank and
Gateway Investment Services, Inc. Unless otherwise indicated, references
in this footnote to the "Company" include Citadel, Fidelity, Gateway, and
all subsidiaries of Fidelity and Citadel. All significant inter-company
transactions and balances have been eliminated.
Cash and cash equivalents - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks and federal
funds sold.
Investment Securities and Mortgage backed securities - U.S. Government and
agency obligations, commercial paper, mortgage backed securities and other
corporate debt securities identified as held for investment are recorded at
cost, with any
F-17
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 13 - ACCOUNTING POLICIES AND FOOTNOTE DISCLOSURES PRIOR TO THE
-------------------------------------------------------------------
RESTRUCTURING (CONT'D)
----------------------
discount or premium recognized over the life of the related security by
using a methodology which approximates the interest method. Fidelity's
portfolio of mortgage-backed securities consists of pools of mortgage loans
exchanged for mortgage-backed securities and those purchased. Securities
held for investment are those securities which the Company has the intent
and ability to hold to maturity, and are carried on an amortised cost
basis. Securities to be held for indefinite periods of time, including
securities that management intends to use as part of its asset/liability
strategy, or that may be sold in response to changes in interest rates,
changes in prepayment risk, the need to increase regulatory capital or
other similar factors, are classified as held for sale and are carried at
the lower of cost or market value. Any gains or losses incurred on sales
of securities are calculated based upon the specific identification method.
Any investment securities held for trading are carried at market value.
Proceeds from sales of securities held for investment during 1993 were
$26.9 million, with a resulting gain of $1,946,000. Proceeds from sales of
mortgage-backed securities held for trading during 1993 totaled $51.3
million and the gross gains of $54,000 realized from those sales are
reported in the statement of operations as a component of gains/losses on
sales of mortgage-backed securities, net. During the year ended December
31, 1993, the Company had gross gains of $1.5 million and gross losses of
$1,000 on the sale of mortgage-backed securities held for investment.
Loans - Interest on loans is credited to income as earned and is accrued
only if deemed collectible. Accrued interest is fully reserved on loans
over 90 days contractually delinquent and on other loans which have
developed inherent problems prior to being 90 days delinquent. Discounts
and premiums on loans are included with loans receivable and are credited
or charged to operations over the estimated life of the related loans using
the interest method. The Bank charges fees for originating loans. Loan
origination fees, net of direct costs of originating the loan are
recognized as an adjustment of the loan yield over the life of the loan by
the interest method, which results in a constant rate of return. When a
loan is sold, net loan, origination fees and direct costs are recognized in
operations. Other loan fees and charges representing service costs for the
prepayment of loans, for delinquent payments or for miscellaneous loan
services are recognized when collected. Loan commitment fees received are
deferred to the extent they exceed direct underwriting costs.
Loans held for sale by Fidelity are carried at the lower of cost or market.
Fidelity has sold loans which have generated gains on sale, a stream of
loan servicing revenue and cash for lending or liquidity. Sales of loans
are dependent upon various factors, including interest rate movements,
investor
F-18
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 13 - ACCOUNTING POLICIES AND FOOTNOTE DISCLOSURES PRIOR TO THE
-------------------------------------------------------------------
RESTRUCTURING (CONT'D)
----------------------
demand for loan products, deposit flows, the availability and
attractiveness of other sources of funds, loan demand by borrowers and
liquidity and capital requirements. Due to the volatility and
unpredictability of these factors, the volume of Fidelity's sales of loans
has fluctuated. All loans sold during 1993 were from the held for sale
portfolio.
Owned Real Estate - Real estate held for sale acquired in settlement of
loans generally results when property collateralizing a loan is foreclosed
upon or otherwise acquired by Fidelity in satisfaction of the loan. Real
estate acquired through foreclosure is recorded at the lower of fair value
or the recorded investment in the loan satisfied at the date of
foreclosure. Fair value is based on the amount that the Company could
reasonably expect to receive for the asset in a current sale between a
willing buyer and a willing seller, that is, other than a forced or
liquidation sale. Inherent in the computation of estimated fair value are
assumptions about the length of time the Company may have to hold the
property before disposition. The holding costs through the expected date
of sale and estimated disposition costs are included in the valuations.
Real estate held for investment or development is carried at the lower of
cost or fair value. Adjustments to the carrying value of the assets are
made through valuation allowances and charge-offs, through a charge to
operations. Net cash receipts on real estate owned or on those loans
designated as in-substance foreclosures and net cash payments are recorded
in real estate operations on specific properties.
The results of real estate operations for the year ended December 31, 1993
amounted to a loss of approximately $48,843,000 including income from real
estate acquired for investment or development amounting to $110,000, loss
from real estate acquired through foreclosure amounting to $18,753,000 and
a provision for estimated losses of $30,200,000.
Loans meeting certain criteria are accounted for as "in-substance
foreclosures". These substantially foreclosed assets are recorded at the
lower of the loans carrying amount or at the estimated fair value of the
collateral at the date the loan was determined to be in-substance
foreclosed. These assets are reported as real estate owned in addition to
formally foreclosed real estate.
Allowances for Estimated Losses on Loans and Real Estate - The Company has
established valuation allowances for estimated losses on specific loans and
real estate ("specific reserves") and for the inherent risk in the loan and
real estate portfolios which has yet to be specifically identified
("general valuation allowances" or "GVA"). The internal asset review
department reviews the quality and recoverability of the Company's assets
on a quarterly basis in order to establish adequate specific reserves and
general valuation allowances. Fidelity
F-19
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 13 - ACCOUNTING POLICIES AND FOOTNOTE DISCLOSURES PRIOR TO THE
-------------------------------------------------------------------
RESTRUCTURING (CONT'D)
----------------------
utilizes the delinquency migration and classification methods in
determining the adequacy of its GVA. The delinquency migration method
attempts to capture the potential future losses as of a particular date
associated with a given portfolio of loans, based upon Fidelity's own
historical migration experience over a given period of time. Under the
classification method, a reserve factor is applied to each aggregate
classification level by asset collateral type in an effort to estimate the
loss content in the portfolio. Fidelity calculates a range of loss by
applying both methodologies and then applies judgement and knowledge of
particular credits, economic trends, industry experience and other relevant
factors to estimate the GVA amount. Additions to the allowances, in the
form of provisions, are reflected in current operations. Charge-offs to
the allowance are made when the loss is determined to be significant and
permanent.
Depreciation and Amortization - Depreciation and amortization are computed
principally on the straight line method over the lives of the respective
leases or the useful lives of the improvements, whichever is shorter.
Intangible assets -The cost of core deposits purchased from various
financial institutions is amortized over the average life of the deposits
acquired, generally five to ten years. The amortization and writedown of
core deposit intangibles, resulting from purchases of deposits and goodwill
acquired in the acquisitions of other financial institutions for the year
ended December 31, 1993 amounted to approximately $18,458,000 including
$5,192,000 from the writedown of core deposit intangible assets (which
writedown is included in interest expense) based upon a branch
profitability and analysis and a $8,776,000 writedown of goodwill (which
writedown is included in operating expenses) based upon an analysis of the
recoverability of goodwill indicating an impairment of value.
Financial Instruments - In the normal course of business, the Company
enters into off-balance sheet instruments to enhance yields and to alter
its exposure to interest rate risk. The financial instruments include
interest rate swaps and swap option agreements and puts and calls. The
differences to be paid or received on swaps are included in interest
expense as payments are made or received. The swap options are held as
trading positions during the option period and are carried at market value
and gains and losses are reflected in operations.
NOTE 14 - TAXES ON INCOME
-------------------------
As of December 31, 1995,1996, the Company has for income tax purposes net operating
loss carryforwards and capital loss carryforwards of approximately $2.1 million
and $10$7.4 million, respectively. These carryforwards will expire in the years
1999 through 2004 and are subject to certain limitations.
F-20
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 14 - TAXES ON INCOME, (CONT'D)
----------------------------------- Since, in view of the
Company's recent history of operating losses, realization of such tax benefits
may be unlikely, a full valuation reserve has been provided.
The tax sharing agreement between Citadel and Fidelity was terminated prior to
the Restructuring. In connection with such termination, Citadel and Fidelity
agreed that certain amounts, estimated to be approximately $3.2 million, that
would have otherwise become payable by Citadel to Fidelity under the terms of
such agreement as a result of losses recognized by Fidelity during the second
quarter of 1994, would not be payable.
At the time of the Restructuring, Citadel and Fidelity entered into a tax
disaffiliation agreement (the "Tax Disaffiliation Agreement"). In general under
the tax disaffiliation Agreement, Fidelity is responsible for (a) all
adjustments to the tax liability of Fidelity and its subsidiaries for the
periods before the Restructuring relating to operations of Fidelity, (b) any tax
liability of Fidelity and its subsidiaries for the taxable year that begins
before and ends after the Restructuring in respect to that part of the taxable
year through the date of the Restructuring, and (c) any tax liability of
Fidelity and its subsidiaries for periods after the Restructuring. For this
purpose any liability for taxes for periods on or before the Restructuring is
measured by Fidelity's actual liability for taxes after applying tax benefits
attributable to periods prior to the closing otherwise available to Fidelity.
With certain exceptions Fidelity is entitled to any refunds relating to those
liabilities. During 1996, the Company and Fidelity reached settlement with
respect to all open tax periods prior to 1991. Subsequent tax years are
currently under audit by the Internal Revenue Service.
In general Citadel is responsible for all tax liabilities of Citadel and its
subsidiaries (other than Fidelity and its subsidiaries) for all periods.
Deferred income taxes reflect the net tax effect of "temporary differences"
between the financial statement carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
During 19951996, the Company finalized and filed its tax return for the year ended
December 31, 1994.1995. Based upon these filings the Company has made certain
adjustments to the deferred tax assets previously estimated for the year ended
December 31, 1994. Allocations of tax loss
carryforwards have been adjusted to reflect At December 31, 1995 and 1994,
the1995. The components of the deferred tax liabilities and assets
are as follows:
F-2137
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 1412 - TAXES ON INCOME, (CONT'D)
----------------------------------CONT'D
- ---------------------------------
December 31,
1996 1995
1994
--------- -----------------
(in thousands)
FEDERAL
Deferred tax liabilities:
Other $ -- $ 20
------- --------
Total deferred tax liabilities -- 20
------- --------FEDERAL:
Deferred tax assets:
Acquired and option properties 2,110 3,100 3,664
Investment in Fidelity -- 4,000
Capital losses from sale of Fidelity 2,600 3,430 --
Bulksale indemnification 1,400-- 1,400
Net operating loss carryforward 600 938 525
Other 385 385
------- ---------------
Gross deferred tax assets 5,695 9,253
5,974
------- ---------------
Valuation allowance $(9,253) (5,954)$(5,695) (9,253)
------- --------
Deferred tax assets, net of allowance -- 20
------- --------
Net Deferred tax liability $ -- $ --
======= ========
STATE
Deferred tax liabilities:
Other $ -- $ 5
------- --------
Gross deferred tax liabilities -- 5
------- --------=======
STATE:
Deferred tax assets:
Acquired and option properties 570 850 1,003
Investment in Fidelity -- 1,000
Capital losses from sale of Fidelity 690 930 --
Bulk sale indemnification 372-- 372
Net operating loss carryforward 120 94120
------- ---------------
Gross deferred tax assets 1,380 2,272 2,469
Valuation reserve (1,380) (2,272)
(2,464)
------- --------
Deferred tax assets, net of allowance 0 5-------
Net deferred tax liability $ -- $ 0
======= ========
F-22
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 14 - TAXES ON INCOME (CONT'D)
----------------------------------
Income tax expense (benefit) is as follows:
Year Ended December 31,
1995 1994 1993
----- ----- --------
(In thousands)
Current
Federal $ -- $ -- $(51,033)
State -- -- 75
----- ----- --------
-- -- (50,958)
----- ----- --------
Deferred
Federal -- -- 17,746
State -- -- (3,255
----- ----- --------
-- -- 14,491
----- ----- --------
$ -- $ -- $(36,467)
===== ===== ===============
The provision for income taxes is different from amounts computed by applying
the U.S. statutory rate to earnings losses(losses) before taxes. The reason for these
differences follows:
Year Ended December 31,
1996 1995 1994
1993
----- -------- -------------- ---------
(In thousands)
Expected tax provision (benefit) $ 2,185 $ 475 $(67,439) $(35,234)
(Increase) reduction in taxes
resulting from:
Realization of deferred tax asset
from book and tax basis of
acquired properties sold (520) (530) --
Bulk sale indemnification not
taxable (1,400) -- --
Utilization of net operating losses (310) -- --
Losses for which no tax benefit
was recorded -- 55 50,915
--
GoodwillOther 45 -- --
3,108
State taxes provided, net of
Federal tax benefit -- -- (4,398)
Other -- -- 57------- ----- -------- --------
Actual tax provision $ -- $ -- $(16,524)
$(36,467)======= ===== ======== ========
As stated in Note 4,5, an income tax benefit of $16,524,000$16.524 million was recorded duringfor
the year ended December 31, 1994 relating to and included in the loss from
operations of Fidelity.
F-2338
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 1514 - QUARTERLY OPERATING DATA (UNAUDITED)
- ----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- ----------------- --------
(In thousands except per share amounts)
1996
Real estate income $ 1,740 $ 1,572 $ 1,278 $ 1,281
Real estate general and
administrative expenses (1,497) (1,504) (1,101) (836)
Gain on sale of properties -- 1,473 20 --
Gain on Fidelity -- 4,000 -- --
Net income 243 5,541 197 445
Net income (loss) per share 0.02 0.69 0.03 0.06
1995
Real estate income $ 1,113 $ 1,432 $ 1,812 $ 1,755
Real estate general and
administrative expenses 1,308 1,362 1,907 1,637(1,308) (1,360) (1,907) (1,639)
Gain on sale of properties 1,541 -- -- --
LossGain (Loss) of Fidelity -- 41(41) -- --
Net income (loss) 1,346 31 (95) 116
Net income (loss) per share 0.15 0.00 (0.02) 0.01
1994
Real estate income $ $ $ 812 $ 1,303
Real estate general and
administrative expenses 940 3,120
Loss of Fidelity 14,757 91,218 58,908 7,081
Administrative charge from
Fidelity 393 393 130 --
Net (loss) (14,757) (92,004) (59,166) (8,898)
Net (loss) per share (2.24) (13.95) (8.97) (1.29)
The above unaudited quarterly finacialfinancial information reflects all adjustments
that are, in the opinion of management, necessary for a fair presentation of the
results of the quarterly periods presented.
Pursuant to the conversion terms of the 3% Cumulative Voting Convertible
Preferred Stock, the number of shares contingently issuable dependswhile they were
outstanding was dependent on the preceeding 60 day average market price of the
stock at the daydate of conversion. Earnings per share for the first, quartersecond and
third quarters of 19951996 has been retroactively restated from
$0.20 to $0.15 to reflect the number of
shares contingently issuable upon the conversionconversions of the Preferred Stock to
common stockCommon Stock based upon the values calculated as of December 31, 1995.
F-2419, 1996.
39
Financial Statement Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 19951996 (IN THOUSANDS)
-
- --------------------------------------------------------------------------------
INITIAL COST COSTS
---------------------- CAPITALIZED
BUILDING AND SUBSEQUENT TO
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
Commercial $ 4,3964,344 $1,488 $ 4,507 $103$4,507 $199
Apartment 5,732 2,917 4,874
Apartment 762755 261 970
Commercial 5,2965,204 2,951 4,212 63
Land 400 --469
------- ------ ------------- ----
$16,186 $8,017 $14,563 $166$10,303 $4,700 $9,689 $668
======= ====== ============= ====
DECEMBER 31, 19951996 LIFE
--------------------------------------------- ON WHICH
ACCUMULATED DATE DEPRECIATION
DESCRIPTION LAND BUILDING TOTAL DEPRECIATION ACQUIRED IS COMPUTED
Commercial $1,488 $ 4,6104,706 $ 6,098 $1846,194 $277 8/4/94 40
Apartment 2,917 4,874 7,791 250 8/4/94 27.5
Apartment 261 970 1,231 5085 8/4/94 27.5
Commercial 2,951 4,275 7,226 694,681 7,632 262 5/8/95 40
Land 400 400 8/14/95 N/A
------ ------- ------- ----
$8,017 $14,729 $22,746 $553$4,700 $10,357 $15,057 $624
====== ======= ======= ====
-
- -------------
(1) The properties listed above were acquired pursuant to agreements entered
into between the Company and Fidelity at the time of the Restructuring. The
aggregate gross cost of property held at December 31, 19951996 for federal
income tax purposes approximated $30,616,000.$20,972,000.
(2) The following reconciliation reflects the aggregate rollforward activity of
property held and accumulated depreciation for the twothree years ended
December 31, 1995:1996:
Gross Accumulated
Amount Depreciation
---------- ------------
Balance at December 31, 1993 $ -- $ --
Depreciation expense (197)
Acquisitions 20,055
------- -----
Balance at December 31, 1994 20,055 (197)
Depreciation expense (420)
Acquisitions 7,163
Improvements 166
Property received through
foreclosure on note receivable 400
Cost of real estate sold (5,038) 64
------- -----
Balance at December 31, 1995 $22,746 $(553)
Depreciation expense (395)
Acquisitions 504
Cost of real estate sold (8,193) 324
------- -----
Balance at December 31, 1996 $15,057 $(624)
======= =====
S-140
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
II-141
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS & EXECUTIVE OFFICERS
FIRST
BECAME
NAME AGE CURRENT OCCUPATION DIRECTOR
- - -------------------------------- --- ------------------------------------------------ --------
James J. Cotter(1)Cotter (1)(3) 5759 Chairman of the Board of 1986
Citadel, Chairman of the
Board of Craig Corporation
("Craig"), and Chairman of the
Board of Reading Company
William D. Gould(1) 57 Attorney and Member, Troy & 1995
Gould Professional Corporation;
Director of Craig CorporationEntertainment,
Inc. (`REI")
S. Craig Tompkins(3) 4546 Secretary/Treasurer and 1993
Principal 1993 Accounting Officer
of Citadel, Vice Chairman of
the Board of Citadel,
President and Director of
Craig, Corporation, President and DirectorVice Chairman of Reading Company,the Board
of REI, and Director of G&L
Realty Corp.
Ronald I. Simon(2)(3) 5758 Private Investor/Financial 1995
Consultant; Chairman and
Chief Financial Officer of
SonatSonant Corporation, Director
of each of Softnet Systems,
Inc., and Westcorp Investments.
Alfred Villasenor, Jr(1)(2). 66Jr. 67 President of Unisure Insurance 1987
(1)(2). Services, Inc.
Steve Wesson 38 President and Chief Executive
OfficerIncorporated
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Executive Committee.
Set forth below is certain information concerning the principal occupation
and business experience of each of the individuals named above during the past
five years.
Mr. Cotter was first elected to the Board in 1986, and resigned in 1988. He
was re-elected to the Board in June 1991, named Acting Chairman of the Board of
Directors of Citadel and Fidelity Federal Bank, a Federal Savings Bank
("Fidelity"federal savings bank
(''Fidelity'') previously owned by Citadel in October 1991, and named Chairman
of the Board of Citadel on June 5, 1992. Mr. Cotter has been Chairman of the
Board of Craig Corporation
("Craig Corporation") (retail, grocery, motion picture exhibition and real
estate) since 1988 and a Director of that company since 1985. HeSince 1996,
Mr. Cotter has served as a Director of REI (motion picture exhibition and real
estate), which the company was formed pursuant to a reorganization of Reading
Company under a Delaware holding company, effective October 1996. Since 1990 Mr.
Cotter has also served as a Director of Reading Company, currently a wholly
owned subsidiary of REI, and since 1991, as the Chairman of the Board of that
company. Craig owns approximately 78% of the voting power of the outstanding
securities of REI. Mr. Cotter is also the Executive Vice President and a
Director of The Decurion Corporation (motion picture exhibition). Mr. Cotter
began his association with The Decurion Corporation in 1969. Mr. Cotter is also
a Director and Executive Vice President of Pacific Theatres, Inc., a wholly
owned subsidiary of the Decurion Corporation. Mr. Cotter has been the Chief
Executive Officer and a Director of Townhouse Cinemas Corporation (motion
picture exhibition) since 1987. Mr. Cotter is the General Partner of James J.
Cotter, Ltd., a general partner in Hecco Ventures I, a California General
Partnership and a general partner in Hecco Ventures II, a California General
Partnership (Hecco I and Hecco II are involved in investment activities)activities and are
shareholders in Craig), and has been a Director of Stater Bros., Inc. (retail
grocery) since 1987.
Mr. Cotter has served as a
Director of Reading Company (motion picture exhibition and real estate) since
1990 and as the Chairman of the Board of that company since 1991.
Mr. Gould is Chairman of the Compensation Committee. Mr. Gould has been a
member of the law practice of Troy & Gould Professional Corporation specializing
in corporate law since July 1986. Mr. Gould
II-242
has been a Director of Craig Corporation for more than the past five years and
is currently Chairman of the Compensation Committee of Craig Corporation.
Mr. Simon has been a director of the Company since June 1995 and is Chairman
of the Audit Committee.1995. Mr. Simon is
a financial consultant and private investor. He is currently Chairman and Chief
Financial Officer of SonatSonant Corporation, a manufacturer of interactive voice
response equipment, Westcorp Investments, a wholly owned subsidiary of
Westcorp, and was a Director of Reading Company from
1990 to June 1995.Softnet Systems, Inc. Formerly, Mr. Simon was the Managing
Director of the Henley Group, Inc. and, a Director of Craig Corporation from 1987-1990.1987-
1990 and a Director of Reading Company from 1989 to 1995.
Mr. Tompkins was a partner of Gibson Dunn & Crutcher until March 1993 when
he resigned to become President of each of Craig and Reading. Mr. Tompkins has
served as a Director of each of Craig and Reading Company since February 1993.1993
and has served as a Director of REI since its formation in 1996. Mr. Tompkins
was elected to the Board of Directors of G&L Realty Corp., a New York Stock
Exchange listed real estate investment trust, in December of 1993, and was
elected Vice Chairman of the Board of Citadel in July of 1994. Mr. Tompkins also
serves as the Secretary/Treasurer and Principal Accounting Officer for Citadel.
In February 1997, Mr. Tompkins resigned as President of REI and was made Vice
Chairman of REI.
Mr. Villasenor is the President and the owner of Unisure Insurance
Services, Incorporated, a corporation which has specialized in life, business
life and group health insurance for over 3035 years. He is also a general partner
in the 2368 Torrance Partnership, a California real estate holding company. Mr.
Villasenor served on the Board of Directors of ELAR, a reinsurance company from
19901986 to 1991. In 1987, Mr. Villasenor was elected to the Board of Directors of
Citadel and Fidelity and served as a Directoron the Board of Fidelity from 1987 until the Restructuring and1994. Mr.
Villasenor also served as a Director of Gateway Investments, Inc. (a wholly
owned subsidiary of Fidelity) from June 22, 1993 until February 24, 1995.
Mr. Wesson served as CEO of Burton Property Trust Inc., the U.S. real estate
subsidiary of the Burton Group PLC until he joined the Company as a consultant
in 1993. Mr. Wesson became the President and Chief Executive Officer of the
Company at the date of the Restructuring in August 1994.
There are no family relationships between the officers of the Company. All officers are elected annually by the Board of Directors.
Directors who are not officers or employees of the Company receive for
services as a director, an annual retainer of $15,000 plus $1,500 if serving as
a Committee Chairman and $800 for each meeting attended in person (or $300 in
the case of telephonic meetings). During 1995, the Board of Directors authorized
a payment of $192,500 to Mr. Cotter, the Chairman of the Board, in recognition
of his past service to the Company with respect to the Restructuring.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The officers of Citadel currently include Steve Wesson and S. Craig
Tompkins. The Summary Compensation Table sets forth the compensation earned for
the years ended December 31, 1996, 1995 1994 and 19931994 by each of the most highly
compensated executive officers of the company whose compensation exceeded
$100,000 in all capacities in which they served.
43
ANNUAL COMPENSATION LONG TERM
COMPENSATION/------------------------------------- COMPENSATION
SECURITIES
UNDERLYING
OTHER STOCK
ANNUAL COMPENSATION AWARDS
--------------------------------------------- -----------
OTHER SECURITIES
ANNUAL UNDERLYINGOPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONSCOMPENSATION(1) GRANTED COMPENSATION
- - --------------------------------------------------------- ---- ------ ----- --------------- ------- -------- ------- --------------- ------------ ------------
Steve Wesson 1996 $175,000 $ 50,000 (1) -- --
President and Chief 1995 $175,000 $100,000 --(1) 33,000-- --
Executive Officer 1994(2) $ 70,564 $25,000 --$ 25,000 (1) 33,000 $5,564
II-3
(1) Excludes perquisites if the aggregate amount thereof is less than $50,000,
or 10% of salary plus bonus, if less.
(2) Includes compensation received as President and Chief Executive Officer of
Citadel from August 5, 1994 to December 31, 1994.1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following summarizes options were granted in 1995(1).1996.
POTENTIALLY REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------- --------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
EXERCISE
OPTIONS/SARS EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED FISCAL YEAR BASE PRICE DATE 5% 10%
- - ----------------------------- ------------ ---------------- ------- ----------- ---------- ---------- -------- ----------------------------- -- ---
Steve Wesson 33,000 100% $2.69 2004 $55,925 $141,144Alfred Villasenor 10,000 50% $3.00 2006 $18,900 $47,800
Ronald I. Simon 10,000 50% $3.00 2006 $18,900 $47,800
(1) Although not granted until August 31, 1995, such options were provided for
in Mr. Wesson's employment agreement with Citadel, effective August 4, 1994.
AGGREGATED OPTION/SAR IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTION/SARS
SHARES ACQUIRED VALUE AT FY-END (#) AT FY-END (#)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ----------------------------- --------------- ---------------- -------------- ----------- ------------------------- -------------------------
Steve Wesson N/A N/A 22,000/11,00033,000/0 $ 2,062
Alfred Villasenor N/A N/A 10,000/0 0(1)
Ronald I. Simon N/A N/A 10,000/0 0(1)
(1) None of theThe options held by Mr. Wesson are not in-the-money.
44
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
Citadel and Steve Wesson entered into an Executive Employment Agreement,
effective as of August 4, 1994 (the "Employment Agreement"''Employment Agreement''). The term of the
Employment Agreement is two years and is automatically renewed for subsequent
one yearone-year terms unless either party gives notice of non-renewal. Mr. Wesson is
paid an annual salary of $175,000 and a minimum annual bonus of $50,000.
Pursuant to the Employment Agreement, Mr. Wesson was granted options in 1995 to purchase
33,000 shares of Common Stock of Citadel.
On June 27, 1990 the Board authorized Citadel to enter into indemnity
agreements with its then current as well as future directors and officers. Since
that time, Citadel's officers and directors have entered such agreements. Under
these agreements, Citadel agrees to indemnify its officers and directors against
all expenses, liabilities and losses incurred in connection with any threatened,
pending or completed action, suit or proceeding, whether civil or criminal,
administrative or investigative, to which any such officer or director is a
party or is threatened to be made a party, in any manner, based upon, arising
from, relating to or by reason of the fact that he is, was, shall be or shall
have been an officer or director, employee, agent or fiduciary of Citadel. Each
of the current Citadel directors have entered into indemnity agreements with
Citadel. Similar agreements also exist between Citadel's subsidiaries and the
officers and directors of such subsidiaries.
II-4
COMPENSATION COMMITTEE
From August 4, 1994 to August 31, 1995, Citadel dissolved the Compensation
Committee and the entire Board of Directors took responsibility for the
compensation decisions. On August 31, 1995, the Compensation Committee was
reinstituted toand currently includes include Directors Cotter Gould and Villasenor. It
is currently Citadel's policy that directors who are executive officers and
whose compensation is at issue are not involved in the discussion of, or voting
on, such compensation.
Mr. Wesson and Mr. Tompkins are the executive officers of Citadel. In
accordance with Citadel's policy on executive officer compensation, Mr. Wesson
and Mr. Tompkins are not involved in the discussion of, or voting on, their
respective compensation. Mr. Tompkins receives no compensation for his services
as an executive officer, but received director's fees. Forfees for his service as Vice
Chairman in the year ended
December 31, 1995, such fee aggregated $95,700, including a bonusamount of $60,000 for
services rendered to Citadel$35,000 with respect to 1996.
Other than the Restructuring.Chairman of the Board, directors who are not officers or
employees of the Company receive, for their services as a director, an annual
retainer of $15,000 plus $1,500, if serving as Committee Chairman and $800 for
each meeting attended in person (or $300 in the case of a telephonic meeting).
The Chairman of the Board receives $45,000 annually. During 1996, Messrs.
Villasenor and Simon received $10,000 as additional fees for their participation
as members of the Independent Committee formed by the Company to review the
Reading Investment Transaction.
Additionally, pursuant to the Citadel Holding Corporation 1996 Nonemployee
Director Stock Option Plan effective October 1996 (the "1996 Stock Option
Plan"), each director of the Company who is not an employee or officer (for
purposes of the 1996 Stock Option Plan, the Chairman of the Board and the
Principal Accounting Officer of Citadel are deemed officers of the Company) of
the Company shall, upon becoming a member of the Board of Directors,
automatically be granted immediately vested option to purchase 10,000 shares of
Common Stock at an exercise price that is greater or less than the fair market
value (as such term is defined in the 1996 Stock Option Plan) per share of
Common Stock on the date of grant by an amount equal to the amount by which
$3.00 per share is greater or less than the fair market value per share of
Common Stock on the effective date of the 1996 Stock Option Plan (the "Plan
Effective Date"). The non-officer directors who were incumbent
45
on the Plan Effective Date (Messrs. Simon and Villasenor) received immediately
vested options to purchase 10,000 shares of Common Stock at an exercise price of
$3.00 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Tompkins is President of Craig and a Director of Craig Corporation and Reading
Corporation.REI. Mr.
Cotter is the Chairman of the Board of Craig Corporation and Reading.REI. Mr. Cotter is a member of
the Reading Executive Committee,executive committees of REI, which, serves
asamong other things, is responsible for
the compensation committee for that company. Mr. Gould is a Director of Craig
and is Chairman of the Craig Compensation Committee.
II-5
executive officers of such companies.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who own more than 10% of the Company's Common Stock to
file reports to ownership and changes in ownership with the SEC. The SEC 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 fiscal year ended December 31, 1996, all filing
requirements applicable to its reporting persons were complied with except Mr.
Alfred Villasenor filed one late Form 4 in December 1996 to report the sale of
900 shares of the Company's Common Stock, which transaction occurred in April
1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the shares of Common Stock, Preferred Stock and
Voting Stock beneficially
owned as of April 8, 1996March 20, 1997 by (i) each director and nominee, (ii) all directors
and executive officers as a group, and (iii) each person known to Citadel to be
the beneficial owner of more than 5% of either the Common Stock or the Preferred Stock. Except as noted, the
indicated beneficial owner of the shares has sole voting power and sole
investment power.
COMMON STOCK
----------------------------------------------
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASSCLASS(7)
- - ------------------------- ---------------------- ------------------------------------------------------- ----------------------- ----------------
James J. Cotter(1)(4) 4,424,371 shares of 49.9% of Common
Common Stock and Stock and 100% of
1,329,114 shares of Preferred Stock
Preferred Stock2,230,473 33.2%
Steve Wesson(4) 22,000 shares of33,000(2) *
Common Stock(2)
Alfred Villasenor, Jr.(4) 900 shares of10,000(3) *
Common Stock
S. Craig Tompkins(4) -- --
Ronald I. Simon(4) William D. Gould(4)10,000 shares(3) *
Craig Corporation(1)(4) 4,424,371 shares2,230,473 33.2%
Reading Holdings, Inc., an indirect 1,564,473 23.2%
wholly owned subsidiary of 49.9% of Common
Common Stock and Stock and 100% of
1,329,114 shares of Preferred Stock
Preferred Stock
Reading CorporationREI (1) 1,564,473 shares of 26% of Common Stock
30 South Fifteenth Street, Common Stock and 21.3% of Voting
Ste.Suite 1300 Stock
Philadelphia, PA 19102-4813
Lawndale Capital Management, Inc., 396,600 shares of 6.6% of Common Stock
Andrew E. Shapiro, Common Stock(3) and 5.4% of Voting
Diamond A Partners, L.P., and Stock(3)
Diamond A Investors, L.P.579,000(6) 8.6%
One Sansome Street, Suite 3900
San Francisco, California 94104(3)94104
Andrew E. Shapiro 579,000(6) 8.6%
One Sansome Street, Suite 3900
San Francisco, California 94104
II-646
COMMON STOCK
----------------------------------------------
AMOUNT AND NATURE
NAME AND ADDRESS OF AMOUNT AND NATURE BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- - ----------------------------- ------------------------ -------------------------------------------------------- ----------------------- ----------------
John Winfield(5) 342,200 shares of 5.7% of the Common
2121 Avenue of the Stars, Common Stock Stock and 4.7%Diamond A Partners, L.P 501,000(6) 7.5%
One Sansome Street, Suite 2020 of Voting Stock(3)
Los Angeles,3900
San Francisco, California 94104
Diamond A Investors, L.P. 77,900(6) 1.2%
One Sansome Street, Suite 3900
San Francisco, California 94104
Private Management Group(5) 675,000 10.0%
20 Corporate Park, Suite 400
Irvine, CA 9006792606
All directors and executive 4,447,271 shares of 50% of Common Stock2,283,473 34%
officers as a Group Common Stock and and 100% Preferred
(5 persons)(1) 1,329,114 shares of Stock
Preferred Stock
(1) Mr. Cotter is the Chairman of Craig and Reading,REI, and a principal stockholder of
Craig. Craig in turn,currently owns approximately 49.3%78% of the Common Stock of
Reading. Collectively, Mr. Cotter and Craig own approximately 50.8%voting power of the
Common Stockoutstanding capital stock of Reading.REI. Craig owns directly 1,329,114 shares of Preferred
Stock representing 18.1% of the currently outstanding voting securities of
Citadel and a warrant (the
"Warrant") to purchase 666,000 shares of Common Stock at $3.00 per share.
Reading owns directly 1,564,473 shares of Common Stock and has an option (the "Option"), not currently exercisable, to
acquire from Craig the Preferred Stock and the Warrant.Stock. These securities
have been listed as beneficially owned by Mr. Cotter and Craig due to the
inter-relationshipsrelationships between Mr. Cotter, Craig and Reading. The Preferred
Stock and the Common Stock underlying the Option have not been listed as
beneficially owned by Reading, as the Option is not currently exercisable.REI. The Common Shares
underlying the Warrant (representing 666,000 shares) have been listed as
beneficially owned by Mr. Cotter and Craig even though the exercise price is
currently materially in excess of the current market value of such Common Stock. Subject to certain limitations discussed elsewhere in
the Report on Form 10-K, the Preferred Stock is convertible by the holder
into Common Stock. The disclosures set forth with respect to Mr. Cotter and
Craig with respect to their respective beneficial ownership of Common Stock
for purposes of this Item have assumed conversion of the Preferred Stock
into 2,193,898 shares of Common Stock and exercise in full of the Warrants.
However, this conversion feature is subject to certain limitations,
including a formula exercise price which varies with the market price of
Common Stock and the right of the Company to redeem the Preferred Stock to
the extent that the conversion feature is exercised and the exercise price
would otherwise be less than $3.00 per share. Mr.
Cotter disclaims beneficial ownership of all Citadel securities owned by
Craig and/or Reading.
(2) Pursuant to the terms of an employment agreement,his Employment Agreement, Citadel granted Mr.
Wesson options to purchase 33,000 shares of Common Stock.
The option has
vested with respect to 22,000(3) Includes 10,000 shares and will vest as to 11,000 shares on
August 4, 1996.
(3) Based on ownership assuming no conversion of the PreferredCommon Stock orwhich may be acquired through the
exercise of stock options granted pursuant to the warrants.1996 Stock Option Plan.
(4) 550 S.South Hope St., Ste.Street, Suite 1825, Los Angeles, California 90071
(5) Based upon a 13-D, Mr. Winfield has soleSchedule 13-G filed February 28, 1997.
(6) Includes 501,100 shares which are owned by Diamond A Partners, L.P., ("DAP")
and 77,900 shares which are owned by Diamond A Investors, L.P. ("DAI") but
have shared voting and investmentdispositive power with respectLawndale Capital Management,
LLC ("LCM") and Andrew E. Shapiro. According to 155,000 sharesAmendment No. 5 to the
Report on Schedule 13D filed on October 29, 1996, LCM is the investment
advisor to and shares votinggeneral partner of DAP and DAI, which are investment power for an
additional 155,000 shares with Intergroup Corporation,limited
partnership. Andrew E. Shapiro is the sole manager of LCM.
(7) Based on ownership assuming conversion of the stock options (53,000 shares)
and also shares
investment power for an additional 32,200 shares with family members.the conversion of the Warrant to purchase 666,000 shares.
* Represents less than one percent of the outstanding shares of Citadel
Common Stock.
II-747
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
IssuanceCERTAIN TRANSACTIONS
Reading Investment Transaction
In October 1996, Citadel and its wholly-owned subsidiary, Citadel
Acquisition Corp., Inc. ("CAC"), closed a transaction with Craig, REI and
Reading Company and certain affiliates thereof. Pursuant to the terms of an
Exchange Agreement, CAC contributed cash in the amount of $7 million to REI in
exchange for (i) 70,000 shares of Series A Preferred Stock of REI, (ii) the
granting to Citadel of an option, exercisable at any time until 30 days after
REI files its Annual Report on Form 10-K for the year ended December 31, 1999,
to exchange all or substantially all of its assets for shares of REI Common
Stock, subject to certain contractual limitations and (iii) the granting of
certain demand and piggy-back registration rights with respect to REI Common
Stock received on the conversion of the Series A Preferred Stock or on such
asset exchange. Additionally, pursuant to the terms of such Exchange Agreement,
REI issued (i) 125,098 shares of its Series B Preferred Stock and 563,210 shares
of its common stock to Craig Corporation
In Octoberin exchange for Craig's 50% interest in a cinemas
joint venture with a Reading Company affiliate and November 1994, Citadel issued 74,300the 1,329,114 shares of
Common Stock
and 1,329,114 shares ofCitadel Series A 3% Cumulative Voting Convertible Preferred Stock, par value
$.01 per share (the "Citadel Series A Preferred Stock") owned by Craig and (ii)
424,902 shares of its Series B Preferred Stock and 1,912,980 shares of its
common stock to Craig. James J. Cotter, Chairmana Craig affiliate in exchange for 693,650 shares of stock of
State Bros. Holdings, Inc. Pursuant to the Exchange Agreement, REI exchanged the
Citadel Series A Preferred Stock for an equal number of shares of Citadel Series
B Preferred Stock. The terms of the BoardCitadel Series A Preferred Stock were
substantially identical to the Citadel Series B Preferred Stock except that (i)
the Redemption Accrual Percentage was reduced to 3% from and after the closing
and (ii) except on a change of control of Citadel, was, at the time of
such issuances, and currently is, the Chairmanholders of the Board and a major
stockholder of Craig. S. Craig Tompkins, Secretary/Treasurer and Principal
Accounting Officer of Citadel
was, atSeries B Preferred Stock did not have the time of such issuances, and currently
is,right to convert the President and a Director of Craig.
Settlement with Dillon and issuance of warrant to Craig Corporation
On April 3, 1995, Citadel Craig and Roderick K. Dillon and certain of his
affiliates ("Dillon") enteredSeries B
Preferred Stock into agreements to settle outstanding litigation
between such parties. At the time of such settlement, Dillon was the beneficial
owner of over 5% of the outstanding Common Stock during the one-year period commencing on the
15th day following the filing of Citadel.Citadel's Annual Report on Form 10-K for the
year ending December 31, 1996.
Redemption of Series B Preferred Stock
In connectionDecember 1996, REI notified to the Company of its exercise of its
conversion rights with respect to the settlement, Citadel issuedSeries B Preferred Stock. On
December 20, 1996, Citadel redeemed the Preferred Stock from Reading pursuant to
Craig a two-year warrantthe exercise of its redemption rights. The redemption price amounted to purchase at $3.00
per share 666,000 shares of Common Stock of Citadel that had been to Citadel by
Dillon in connection with such settlement.$6.19
million.
Transactions with Craig Corporation and Reading CompanyEntertainment, Inc.
Commencing in August 1995, Citadel began renting corporate office space from
Craig on a month to monthmonth-to-month basis and engaged Craig to provide Citadel with
certain administrative services. During fiscal 1995, $45,0001996, $96,000 was paid to Craig
for such rent and services. In addition,additional, Citadel provided real estate
consulting services to Craig's affiliate, Reading Company during fiscal 1995,1996, for which Citadel was
paid $120,000.
II-8$169,000.
48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
DESCRIPTION PG. NO
----------- ------
Report of Independent Auditor's Report...................................... F-2Auditors.................................... 20
Consolidated Balance Sheets as of December 31, 19951996 and 1994...... F-31995...... 21
Consolidated Statements of operations for Each of the Three
Years in the Period Ended December 31, 1995...................... F-41996...................... 22
Consolidated Statements of Stockholders' Equity for Each of the
Three Years in the Period Ended December 31, 1995................ F-51996................ 23
Consolidated Statements of Cash Flows for Each of the Three
Years in the Period Ended December 31, 1995...................... F-61996...................... 24
Notes to Consolidated Financial Statements........................ F-825
(a)(2) FINANCIAL STATEMENT SCHEDULE
Financial Statement Schedule III -- Real Estate and
Accumulated Depreciation......................................... 40
(a)(2) FINANCIAL STATEMENT SCHEDULE
Financial Statement Schedule III -- Real Estate
and Accumulated Depreciation............................... II-1
(b) REPORTS ON FORM 8-K
(i) The Company filed a Report on Form 8-K on April 4, 1995,October 30, 1996,
reporting on Item 5, "Other Information."
(ii) The Company filed a Report on Form 8-K on April 25, 1995,
reporting on Item 5, "Financial Statements"
(c) EXHIBITS II-9(Items denoted by * represent management or compensatory
contract)
49
EXHIBIT
NO. DESCRIPTION
- - ---
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.1 Certificate of Amendment of Restated Certificate of Incorporation of
Citadel Holding Corporation, (filed as Exhibit 3.1 to the Company's
Report on Form 10-K for the year-end December 31, 1994, and incorporated
herein by reference).
3.2 Restated By-laws of Citadel Holding Corporation (filed as Exhibit 3.2 to
the company's Form 10-K for the year ended December 31, 1988, and
incorporated herein by reference)
3.3 Amendment to By-laws of Citadel Holding Corporation (filed herewith).
3.4 Amendment to By-laws of Citadel Holding Corporation (filed herewith).
4.1 Certificate of Designation of the 3% Cumulative Voting Convertible
Preferred Stock of Citadel Holding Corporation (filed as Exhibit 3 to the
Company's Report on Form 8-K, filed on November 14, 1994, and
incorporated herein by reference)
10.1 Form of Investor Purchase Agreement between Fidelity Federal Bank and the
investors (filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference).
3.2 Restated By-laws of Citadel Holding Corporation (filed as Exhibit 3.2
to the company's Form 0-K for the year ended December 31, 1988, and
incorporated herein by reference)
3.3 Amendment to By-laws of Citadel Holding Corporation (filed as Exhibit
3.3 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
3.4 Amendment to By-laws of Citadel Holding Corporation (filed as Exhibit
3.4 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.)
3.5 Amendment to By-laws of Citadel Holding Corporation (filed as Exhibit
3.5 to the Company's Report on Form 8-K dated October 30, 1996.
4.1 Certificate of Designation of the 3% Cumulative Voting Convertible
Preferred Stock of Citadel Holding Corporation (filed as Exhibit 3 to
the Company's Report on Form 8-K, filed on November 14, 1994, and
incorporated herein by reference)
4.2 Certificate of Designation of the Series B 3% Cumulative Voting
Convertible Preferred Stock of Citadel Holding Corporation (filed
herewith)
10.1 Form of Investor Purchase Agreement between Fidelity Federal Bank and
the investors (filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1004, and
incorporated herein by reference)
10.2 Settlement Agreement between Fidelity Federal Bank, Citadel Holding
Corporation and certain lenders, dated as of June 3, 1994 (the
"Letter Agreement")(filed as Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.3 Amendment No. 1 to the Letter Agreement, dated as of June 30, 1994
(filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.4 Amendment No. 2 to Letter Agreement, dated as of July 28, 1994 (filed
as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by
reference)
10.5 Amendment No. 3 to Letter Agreement, dated as of August 3, 1994
(filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.6 Mutual Release, dated as of August 4, 1994, between Fidelity Federal
Bank, Citadel Holding Corporation and certain lenders (filed as
Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.7 Mutual Release between Fidelity Federal Bank, Citadel Holding
Corporation, and the Chase Manhattan Bank, N.A., dated June 17, 1994
(filed as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
50
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.8 Loan and REO Purchase Agreement (Primary), dated as of July 13, 1994,
between Fidelity Federal Bank and Colony Capital, Inc. (filed as
Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994, and incorporated herein by reference)
10.9 Deposit Escrow Agreement, dated as of July 13, 1994, among Colony
Capital, Inc., Fidelity Federal Bank, and Morgan Guaranty Trust Company
of New York (filed as Exhibit 10.9 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.10 Real Estate Purchase Agreement, dated as of August 3, 1994, between
Fidelity Federal Bank and Citadel Realty, Inc. (filed as Exhibit 10.10 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, and incorporated herein by reference)
II-10
EXHIBIT
NO. DESCRIPTION
- - --- -----------
10.11 Loan and REO Purchase Agreement (Secondary), dated as of July 12, 1994,
between Fidelity Federal Bank and EMC Mortgage Corporation (filed as
Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.12 Deposit Escrow Agreement, dated as of July 13, 1994, between EMC Mortgage
Corporation, Fidelity Federal Bank, and Morgan Guaranty Trust Company of
New York (filed as Exhibit 10.12 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.13 Loan and REO Purchase Agreement (Secondary), dated as of July 21, 1994,
between Fidelity Federal Bank and Internationale Nederlanden (US) Capital
Corporation, Farallon Capital Partners, L.P., Tinicum Partners, L.P., and
Essex Management Corporation (filed as Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.14 Deposit Escrow Agreement, dated as of July 21, 1994, between Fidelity
Federal Bank and Internationale Nederlanden (US) Capital Corporation,
Farallon Capital Partners, L.P., Tinicum Partners, L.P., Essex Management
Corporation, and Morgan Guaranty Trust Company of New York (filed as
Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.9 Deposit Escrow Agreement, dated as of July 13, 1994, among Colony
Capital, Inc., Fidelity Federal Bank, and Morgan Guaranty Trust
Company of New York (filed as Exhibit 10.9 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.10 Real Estate Purchase Agreement, dated as of August 3, 1994, between
Fidelity Federal Bank and Citadel Realty, Inc. (filed as Exhibit
10.10 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference)
10.11 Loan and REO Purchase Agreement (Secondary), dated as of July 12,
1994, between fidelity Federal Bank and EMC Mortgage Corporation
(filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.12 Deposit Escrow Agreement, dated as of July 13, 1994, between EMC
Mortgage Corporation, Fidelity Federal Bank, and Morgan Guaranty
Trust Company of New York (filed as Exhibit 10.12 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994,
and incorporated herein by reference)
10.13 Loan and REO Purchase Agreement (Secondary), dated as of July 21,
1994, between Fidelity Federal Bank and Internationale Nederlanden
(US) Capital Corporation, Farallon Capital Partners, L.P., Tinicum
Partners, L.P., and Essex Management Corporation (filed as Exhibit
10.13 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference)
10.14 Deposit Escrow Agreement, dated as of July 21, 1994, between Fidelity
Federal Bank and Internationale Nederlanden (US) Capital Corporation,
Farallon Capital Partners, L.P., Tinicum Partners, L.P., Essex
Management Corporation, and Morgan Guaranty Trust Company of New York
(filed as Exhibit 10.14 to the Company's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.15 Purchase of Assets and Liability Assumption Agreement by and between
Home Savings of America, FSB and Fidelity Federal Bank, FSB, dated as
of July 19, 1994 (filed as Exhibit 10.15 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.16 Credit Agreement among Citadel Realty, Inc., Citadel Holding
Corporation and Craig Corporation, dated as of August 2, 1994 (filed
as Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by
reference)
10.17 Promissory Note, dated as of August 2, 1994, by Citadel Realty Inc.
in favor of Craig Corporation (filed as Exhibit 10.17 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, and incorporated herein by reference)
10.18 Guaranty, dated as of August 2, 1994, by Citadel Holding Corporation
in favor of Craig Corporation (filed as Exhibit 10.18 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, and incorporated herein by reference)
10.19 Pledge Agreement, dated as of August
51
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.19 Pledge Agreement, dated as of august 2, 1994, between Citadel Holding
Corporation and Craig Corporation (filed as Exhibit 10.19 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1994, and incorporated herein by reference)
10.20 Promissory Note, dated August 3, 1994, by Citadel Realty, Inc., in favor
of Fidelity Federal Bank (filed as Exhibit 10.20 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.21 Promissory Note, dated July 28, 1994, by Citadel Realty, Inc., in favor
of Fidelity Federal Bank (filed as Exhibit 10.21 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
II-11
EXHIBIT
NO. DESCRIPTION
- - --- -----------
10.22 Guaranty Agreement, dated August 3, 1994, by Citadel Holding Corporation,
in favor of Fidelity Federal Bank (filed as Exhibit 10.22 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1994, and incorporated herein by reference)
10.23 Unsecured Environmental Indemnity Agreement dated as of August 3, 1994,
by Citadel Realty, Inc., in favor of Fidelity Federal Bank (filed as
Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.24 Unsecured Environmental Indemnity Agreement dated as of July 28, 1994, by
Citadel Realty, Inc. in favor of Fidelity Federal Bank (filed as Exhibit
10.24 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, and incorporated herein by reference)
10.20 Promissory Note, dated August 3, 1994, by Citadel Realty, Inc., in
favor of Fidelity Federal Bank (filed as Exhibit 10.20 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, and incorporated herein by reference)
10.21 Promissory Note, dated July 28, 1994, by Citadel Realty, Inc., in
favor of Fidelity Federal Bank (filed as Exhibit 10.21 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, and incorporated herein by reference)
10.22 Guaranty Agreement, dated August 3, 1994, by Citadel Holding
Corporation, in favor of Fidelity Federal Bank (filed as Exhibit
10.22 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference)
10.23. Unsecured Environmental Indemnity Agreement dated as of August 3,
1994, by Citadel Realty, Inc., in favor of Fidelity Federal Bank
(filed as Exhibit 10.23 to the Company's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.24 Unsecured Environmental Indemnity Agreement dated as of July 28,
1994, by Citadel Realty, Inc. in favor of Fidelity Federal Bank
(filed as Exhibit 10.24 to the Company's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.25 Registration Rights Agreement dated as of June 30, 1994, between
Fidelity Federal Bank, Citadel Holding Corporation and certain
holders of Class C Common Stock of Fidelity Federal Bank (filed as
Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.26 Stockholders Agreement, dated as of June 30, 1994, between Citadel
Holding Corporation and Fidelity Federal Bank (filed as Exhibit 10.26
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994, and incorporated herein by reference)
10.27 Tax Disaffiliation Agreement, dated as of August 4, 1994, by and
between Citadel Holding Corporation and Fidelity Federal Bank (filed
as Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by
reference)
10.28 Option Agreement, dated as of August 4, 1994, by and between Fidelity
Federal Bank and Citadel Holding Corporation (filed as Exhibit 10.28
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994, and incorporated herein by reference)
10.29 Assignment of Option Agreement, dated as of August 4, 1994, by and
between Citadel Holding Corporation and Citadel Realty, Inc. (filed
as Exhibit 10.29 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by
reference)
10.30 Amendment No. 2 to Executive Employment Agreement, dated as of August 4,
1994, between Richard M. Greenwood and Fidelity Federal Bank (filed as
Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.31 Amended and Restated Term Note, dated October 29, 1992, by Richard M.
Greenwood in favor of Citadel Holding Corporation (filed as Exhibit 10.31
to the Company's Quarterly Report on form 10-Q for the quarter ended June
30, 1994, and incorporated herein by reference)
10.32 Letter Agreement dated August 4, 1994, between Richard M. Greenwood and
Citadel Holding Corporation (filed as Exhibit 10.32 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.33 Amended and Restated Charter S of Fidelity Federal Bank (filed as Exhibit
10.33 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference)
II-12
52
EXHIBIT
NO. DESCRIPTION
- - --- -----------
10.34 Amended Service Agreement between Fidelity Federal Bank and Citadel
Holding Corporation dated as of August 1, 1994 (filed as Exhibit 10.34 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, and incorporated herein by reference)
10.35 Placement Agency Agreement, dated July 12, 1994 between JP Morgan
Securities, Inc., Fidelity Federal Bank and Citadel Holding Corporation
(filed as Exhibit 10.35 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.36 Side letter, dated August 3, 1994, between Fidelity Federal Bank and
Citadel Realty, Inc. (filed as Exhibit 10/36 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994, and incorporated
herein by reference)
10.37 Stock Exchange and Settlement Agreement, dated April 3, 1995, by and
among Citadel Holding Corporation, Dillon Investors, L.P., a Delaware
partnership, Roderick H. Dillon, Jr., an individual, Roderick H. Dillon,
Jr. Foundation, an Ohio trust, and Roderick H. Dillon, Jr.--IRA (filed as
Exhibit 10.1 to the Company's Report on Form 8-K, filed on April 4, 1995,
and incorporated herein by reference)
10.38 Stock Purchase Agreement, dated October 21, 1994, by and between Citadel
Holding Corporation and Craig Corporation, a Delaware corporation (filed
as Exhibit 2 to the Company's Report on Form 8-K, filed on October 25,
1994, and incorporated herein by reference)
10.39 Preferred Stock Purchase Agreement, dated November 10, 1994, by and
between Citadel Holding Corporation and Craig Corporation, a Delaware
corporation (filed as Exhibit 2 to the Company's Report on Form 8-K,
filed on November 14, 1994, and incorporated herein by reference)
10.40 Conversion Deferral, Warrant and Reimbursement Agreement, dated as of
April 11, 1995, by and between Citadel Holding Corporation and Craig
Corporation, a Delaware corporation (filed as Exhibit 10.40 to the
Company's Report on Form 10-K for the year ended December 31, 1994)
10.41 Employment Agreement between Citadel Holding Corporation and Steve Wesson
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.30 Amendment No. 2 to Executive Employment Agreement, dated as of August
4, 1994, between Richard M. Greenwood and Fidelity Federal Bank
(filed as Exhibit 10.30 to the Company's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.31 Amended and Restated Term Note, dated October 29, 1992, by Richard M.
Greenwood in favor of Citadel Holding Corporation (filed as Exhibit
10.31 to the Company's Quarterly Report on form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference)
10.32 Letter Agreement dated August 4, 1994, between Richard M. Greenwood
and Citadel Holding Corporation (filed as Exhibit 10.32 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, and incorporated herein by reference)
10.33 Amended and Restated Charter S of Fidelity Federal Bank (filed as
Exhibit 10.33 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.34 Amended Service Agreement between Fidelity Federal Bank and Citadel
Holding Corporation dated as of August 1, 1994 (filed as Exhibit
10.34 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference)
10.35 Placement Agency Agreement, dated July 12, 1994 between JP Morgan
Securities, Inc., Fidelity Federal Bank and Citadel Holding
Corporation (filed as Exhibit 10.35 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1994, and incorporated
herein by reference)
10.36 Side letter, dated August 3, 1994, between Fidelity Federal Bank and
Citadel Realty, Inc. (filed as Exhibit 10.36 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994,
and incorporated herein by reference)
10.37 Stock Exchange and Settlement Agreement, dated April 3, 1995, by and
among Citadel Holding Corporation, Dillon Investors, L.P., a Delaware
partnership, Roderick H. Dillon, Jr., an individual, Roderick H.
Dillon, Jr. Foundation, an Ohio trust, and Roderick H. Dillon, Jr.--
IRA (filed as Exhibit 10.1 to the Company's Report on Form 8-K, filed
on April 4, 1995, and incorporated herein by reference)
10.38 Stock Purchase Agreement, dated October 21, 1994, by and between
Citadel Holding Corporation and Craig Corporation, a Delaware
corporation (filed as Exhibit 2 to the Company's Report on Form 8-K,
filed on October 25, 1994, and incorporated herein by reference)
10.39 Preferred Stock Purchase Agreement, dated November 10, 1994, by and
between Citadel Holding Corporation and Craig Corporation, a Delaware
corporation (filed as Exhibit 2 to the Company's Report on Form 8-K,
filed on November 14, 1994, and incorporated herein by reference)
10.40 Conversion Deferral, Warrant and Reimbursement Agreement, dated as of
April 11, 1995, by and between Citadel Holding Corporation and Craig
Corporation, a Delaware corporation (filed as Exhibit 10.40 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994 and incorporated herein by reference).
10.41* Employment Agreement between Citadel Holding Corporation and Steve
Wesson (filed as Exhibit 10.41 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994, and incorporated
herein by reference)
10.42 Standard Office lease, dated as of July 15, 1994, by and between Citadel
Realty, Inc. and Fidelity Federal Bank (filed as Exhibit 10.42 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, and incorporated herein by reference)
10.43 First Amendment to Standard Office Lease, dated May 15, 1995, by and
between Citadel Realty, Inc. and Fidelity Federal Bank (filed as Exhibit
10.43 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, and incorporated herein by reference)
10.44 Form of Stock Purchase Agreement, dated April 17, 1995, entered into by
Citadel Holding Corporation and certain purchases of shares of Class B
Common Stock of Fidelity Federal Bank (filed as Exhibit 10.44 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, and incorporated herein by reference)
II-13
53
EXHIBIT
NO. DESCRIPTION
- - ---
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.42 Standard Office lease, dated as of July 15, 1994, by and between
Citadel Realty, Inc. and Fidelity Federal Bank (filed as Exhibit
10.42 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, and incorporated herein by reference)
10.43 First Amendment to Standard Office Lease, dated May 15, 1995, by and
between Citadel Realty, Inc. and Fidelity Federal Bank (filed as
Exhibit 10.43 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, and incorporated herein by reference)
10.44 Form of Stock Purchase Agreement, dated April 17, 1995, entered into
by Citadel Holding Corporation and certain purchases of shares of
Class B Common Stock of Fidelity Federal Bank (filed as Exhibit 10.44
to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995, and incorporated herein by reference)
10.45 Environmental Indemnity Agreement, dated May 15, 1995, by and among
Citadel Realty, Inc., in favor of Fidelity Federal Bank (filed as Exhibit
10.45 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, and incorporated herein by reference)
10.46 Promissory Note secured by Deed of Trust, dated May 15, 1995, made by
Citadel Realty, Inc., in favor of Fidelity Federal Bank (filed as Exhibit
10.45 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, and incorporated herein by reference)
10.47 Guaranty of Payment dated May 15, 1995 by Citadel Holding Corporation in
favor of Fidelity Federal Bank (filed as Exhibit 10.47 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and
incorporated herein by reference)
10.48 Deed of Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing, dated as of may 15, 1995, made by Citadel Realty, Inc. in favor of Fidelity Federal Bank (filed as
Exhibit 10.45 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, and incorporated herein by reference)
10.46 Promissory Note secured by Deed of Trust, dated May 15, 1995, made by
Citadel Realty, Inc., in favor of Fidelity Federal Bank (filed as
Exhibit 10.46 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, and incorporated herein by reference)
10.47 Guaranty of Payment dated May 15, 1995 by Citadel Holding Corporation
in favor of Fidelity Federal Bank (filed as Exhibit 10.47 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995, and incorporated herein by reference)
10.48 Deed of Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing, dated as of may 15, 1995, made by Citadel Realty,
Inc. in favor of Fidelity Federal Bank (filed as Exhibit 10.48 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995, and incorporated herein by reference)
10.49 Office Lease Modification between Citadel Realty, Inc. and American
Express Travel Related Services Company dated March 1. 1996 (filed as
Exhibit 10.49 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by reference)
10.50 Letter of Intent dated August 12, 1996 by and between Reading
Company, Citadel Holding Corporation, Craig Corporation, Reading
Entertainment, Inc., Craig Management, Inc., and Citadel Acquisition
Corp., Inc. (filed as Exhibit 10.50 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996 and incorporated
herein by reference)
10.51 Exchange Agreement dated September 4, 1996 among Citadel Holding
Corporation, Citadel Acquisition Corp., Inc. Craig Corporation, Craig
Management, Inc., Reading Entertainment, Inc., Reading Company dated March 1, 1996 (filed
herewith)
10.52 Asset Put and Registration Rights Agreement dated October 15, 1996
among Citadel Holding Corporation, Citadel Acquisition Corp., Inc.,
Reading Entertainment, Inc., and Craig Corporation (filed herewith)
10.53 Certificate of Designation of the Series A Voting Cumulative
Convertible Preferred Stock of Reading Entertainment, Inc., (filed
herewith)
54
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.54 Lease between Citadel Realty, Inc., Lessor and Disney Enterprises,
Inc., Lessee dated October 1, 1996 (filed as Exhibit 10.54 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 and incorporated herein by reference)
10.55 Second Amendment to Standard Office Lease between Citadel Realty,
Inc. and Fidelity Federal Bank dated October 1, 1996 (filed as
Exhibit 10.55 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated herein by
reference)
10.56 Modification Agreement to Loan No. 3038879 between Fidelity Federal
Bank and Citadel Realty, Inc. dated October 1, 1996 (filed as Exhibit
10.56 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996 and incorporated herein by reference)
10.57 Citadel 1996 Nonemployee Director Stock Option Plan (filed herewith)
10.58 Reading Entertainment, Inc., Annual Report on Form 10-K for the year
ended December 31, 1996 (TO BE FILED BY AMENDMENT)
21 Subsidiaries of the Company (filed herewith)
27 Financial Data Schedule (filed herewith)
II-14
55
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITADEL HOLDING CORPORATION
---------------------------
(Registrant)
Date: April 15, 1996March 31, 1997 /s/ Steve Wesson
----------------------------------------------------------------------------------
Steve Wesson
President and Chief Executive Officer
Date: April 15, 1996March 31, 1997 /s/ S. Craig Tompkins
----------------------------------------------------------------------------------
S. Craig Tompkins
Principal Accounting Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF REGISTRANT
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLES(S) DATE
- - ----------------------------- ----------------------------- --------------
/s/ James J. Cotter Chairman of the Board and April 15, 1996
- - ----------------------------- Director
James J. Cotter
/s/ S. Craig Tompkins Director, April 15, 1996
- - ----------------------------- Secretary/Treasurer and
S. Craig Tompkins Principal Accounting Officer
SIGNATURE TITLES(S) DATE
--------- -------- ----
/s/ James J. Cotter Chairman of the Board and Director March 31, 1997
- -------------------------
James J. Cotter
/s/ S. Craig Tompkins Director, Secretary March 31, 1997
- -------------------------
S. Craig Tompkins
/s/ Ronald I. Simon Director March 31, 1997
- -------------------------
Ronald I. Simon
/s/ Alfred Villasenor, Jr. Director March 31, 1997
- -------------------------
Alfred Villasenor, Jr.
Director April 15, 1996
- - -----------------------------
Alfred Villasenor, Jr.
II-15
56