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                               CRAIG CORPORATION

                  AMENDED AND RESTATED STOCK OPTION AGREEMENT

     THIS AMENDED AND RESTATED AGREEMENT ("this Amended Agreement") is made and
entered into as of this 8th day of December 1997, by and between CRAIG
CORPORATION, a Delaware corporation (the "Company"), and JAMES J. COTTER ("Mr.
Cotter"), for the purpose of amending in certain respects and restating in its
entirety the certain Stock Option Agreement, dated as of June 12, 1995, between
the Company and Mr. Cotter (the "Original Agreement") as set forth here in.

                              W I T N E S S E T H
                              - - - - - - - - - -

        NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:

        1.   Exchange of Original Agreement. This Amended Agreement is hereby 
             ------------------------------
executed and delivered to Mr. Cotter in exchange for Mr. Cotter's surrender to 
the Company for cancellation of the Original Agreement.

        2.   Grant of Option. The Company grants to Mr. Cotter the right and
             ---------------
option to purchase, on the terms and conditions hereinafter set forth, all or
any part of an aggregate of 300,000 shares (the "Shares") of the common stock
(the "Common Stock") of the Company at the price of $11.75 per Share (the
"option"), exercisable from time to time subject to the provisions of this
Amended Agreement prior to the close of business on June 11, 2005 (the
"Expiration Date"). The Option is intended to be a nonqualified stock option.

        3.   Exercisability of Option. Except as otherwise provided in this
             ------------------------
Amended Agreement, the Option shall be fully vested upon the date hereof and may
be exercised from time to time as to all or any portion of the Shares.

        4.   Method of Exercise of Option and Payment of Purchase Price. The 
             ----------------------------------------------------------
option shall be exercisable by the delivery to the Secretary of the Company of a
written notice stating the number of shares to be purchased pursuant to the
Option and accompanied by payment of the purchase price in full (i) in cash,
(ii) by check made payable to the order of the Company, (iii) by delivery by Mr.
Cotter or a Permitted Transferee (as hereinafter defined) of shares of Common
Stock already owned by Mr. Cotter or such Permitted Transferee with a fair
market value on the date of exercise equal to the aggregate exercise price of
the share as to which the Option is being exercised, (iv) by means of so-called

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cashless exercises as permitted under applicable rules and regulations of the
Securities and Exchange Commission and the Federal Reserve Board, or (v) by a
combination of the foregoing means of payment. Fractional Share interests shall
be cashed out at that price equal to the fair market value of a single share
multiplied by the fraction representing the fractional Share which, but or this
sentence, would otherwise have been issuable.

     5.   Continuance of Consulting Agreement. Nothing contained in this Amended
          -----------------------------------
Agreement shall confer upon Mr. Cotter any right with respect to the
continuation of his status as a consultant by the Company or interfere in any
way with the rights of the Company under the Consulting Agreement, as amended.

     6.   Non-Assignability of Option. During Mr. Cotter's lifetime, the Option 
          ---------------------------
and any other rights hereunder may be exercised only by Mr. Cotter or by a
Permitted Transferee. The term "Permitted Transferee" shall mean (i) any trust
or any corporation, limited liability company or partnership for the benefit of
or owned directly or indirectly by Mr. Cotter and/or anyone or more of his
children or other heirs and (ii) any foundation, trust or not-for-profit
corporation established by Mr. Cotter for charitable purposes. In the event of
the death of Mr. Cotter, the Option in addition may be exercised in whole or in
part by the person or persons (including individuals and trusts, corporations,
partnership and other entities) to whom Mr. Cotter's rights under this Option
shall pass by will or by the applicable laws of descent at any time on or prior
to the Expiration Date. The Option and such rights shall not be offered, sold,
transferred, assigned, pledged, hypothecated or otherwise disposed of in any way
(whether by operation of law or otherwise) except by will or the laws of descent
and distribution or to a Permitted Transferee, and shall not be subject to
execution, attachment or similar process. In the event of the death of Mr.
Cotter, each recipient of all or any portion of this Option, and/or each
Permitted Transferee, will have and succeed to the rights and obligations of Mr.
Cotter under the Option. No sale, transfer, assignment, pledge, hypothecation or
other disposition of all or any portion of the Option by Mr. Cotter to a
Permitted Transferee or by a Permitted unless and Transferee to another
Permitted Transferee shall be effective until the Company shall have received an
agreement in writing executed by the Permitted Transferee agreeing to be bound
by all the terms and conditions of this Agreement.

     7.   Adjustment and Other Rights. If the outstanding shares of Common Stock
          ---------------------------
are increased, decreased or changed into, or exchanged for, a different number
or kind of shares or securities of the Company through reorganization, merger,
combination, recapitalization, reclassification, stock/split, reverse stock

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split, stock dividend, stock consolidation or otherwise, or a dividend or other
distribution is made with respect to the Common Stock either in Common Stock or
Class A Preference Stock or any other security of which the Company or any
affiliate of the Company is the issuer, or otherwise, an appropriate and
proportionate adjustment shall be made in the unexercised portion of the Option
or portions that Mr. Cotter of a Permitted Transferee shall be receive the
number and kind of securities which he owned or would have been entitled to 
receive immediately after the happening of any of the events described
above, had the option been exercised immediately prior to the happening of such
event or any record date with respect thereto. The foregoing sentence
notwithstanding, if a dividend or other distribution is made with respect to the
Common Stock in Class A Common Preference Stock or any other equity security
(other than Common Stock) of which the Company or any affiliate of the Company
is the issuer, an appropriate adjustment shall be made in the unexercised 
portion of the option so that Mr. Cotter or a permitted Transferee shall be
entitled to receive an additional number of shares of Common Stock (rather than
any such Class A Common Preference Stock or other equity security) with a value
as of such adjustment equivalent to the value of such Class A Common Preference
Stock or other equity security to which Mr. Cotter or such Permitted Transferee
otherwise would have been entitled under this Amended Agreement, it being the
intent of the Company and Mr. Cotter that Mr. Cotter or such Permitted
Transferee shall be entitled in any such event to purchase under the Option such
equivalent number of additional shares of Common Stock in lieu of any such Class
A Common Preference stock or other security. Any such adjustment pursuant to
this paragraph shall be made without change in the total price applicable to the
unexercised portion of the Option, but with a corresponding adjustment in the
price for each share.

        In the event of an extraordinary dividend of cash or other property 
(other than securities), the Board of Directors will consider the extent to 
which it would be equitable under the circumstances to reduce the option 
exercise price to reflect the extraordinary nature of such dividend.  If the 
Board determines that such an adjustment would be equitable under the 
circumstances, an appropriate reduction in the exercise price will be made, the 
amount of such adjustment to be in the discretion of the Board.

        If the Company proposes to dissolve, or to liquidate or proposes in one 
or more transactions to combine, merge or consolidate with or into any other
corporation, or to sell, all or substantially all of its assets whether for
cash, securities, notes or any other property or consideration, the Option shall
be adjusted effective as of the Closing of such transaction so as to

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apply to the cash, securities, notes or other property or consideration to which
a holder of the number of shares of Common Stock subject to the unexercised 
portion of the Option would have been entitled by reason of such transaction.  
In the event the consideration to be received by holders of Common Stock in any 
such transaction is other than exclusively cash and/or publicly traded common 
stock listed on the New York stock Exchange, the American Stock Exchange or the 
NASDAQ-NMS and having voting rights no less than those granted to any other 
class or series of the voting securities of such surviving corporation, and in 
the further even that, upon consummation, the holders of Common Stock hold a 
minority of the outstanding voting equity of the surviving entity, then the 
Option may be exercised a the option of Mr. Cotter without the payment of any 
exercise price, by the netting of the exercise price against the cash, 
securities, notes or other property or consideration to be received in 
connection with or as a result of such transaction.

     The Company and Mr. Cotter or a Permitted Transferee will meet and confer 
in good faith to determine any appropriate adjustments which may be required in 
order to carry out the intent of the immediately preceding paragraphs; provided,
however, that if the parties are unable to agree as to such adjustments within a
period of five (5) days or such longer period as they may mutually agree, the 
matter shall be resolved by binding arbitration conducted in Los Angeles, 
California under the rules of the American Arbitration Association (the "AAA"). 
The arbitration will be chosen from one or more panels proposed by the AAA as 
follows: the Company and Mr. Cotter or a Permitted Transferee will each select 
one arbitrator and those two arbitrators will then select a third arbitrator 
from the panel.  The parties shall use their good faith efforts to resolve such 
arbitration within a period of forty-five (45) days following selection of the 
arbitration panel.  All costs of arbitration will be paid for by the Company, 
unless the arbitration panel determines that the last adjustment proposed by the
Company was the correct adjustment, in which case the cost of arbitration will 
be borne by Mr. Cotter or such Permitted Transferee.  Until such determination 
is made, all such costs will be advanced by the Company.  The determination of 
the arbitrators will be final and non-appealable, but may be enforced in any 
court of competent jurisdiction.  If the arbitration results in a delay in the 
receipt by Mr. Cotter or Permitted Transferee of any cash, securities, notes, 
property or other consideration due to exercise of all or any portion of this 
Option prior to the completion of such arbitration, the arbitrator will also 
award to Mr. Cotter or such Permitted Transferee, in the event he is the 
prevailing party, such amount in cash as will fairly compensate Mr. Cotter or 
such Permitted Transferee for such delay.

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     8.   Limitation of Mr. Cotter's Rights. In no event shall Mr. Cotter or a 
          ---------------------------------
Permitted Transferee have any of the rights or privileges of a shareholder of 
the Company in respect of any Shares issuable upon exercise of this Option 
unless and until such Option shall have been exercised by Mr. Cotter or such 
Permitted Transferee.

     9.   Effect of Agreement. This Amended Agreement shall be assumed by 
          -------------------
binding upon and inure to the benefits of any successor corporation to the 
Company.

     10.  Representations of Mr. Cotter. Mr. Cotter represents, agrees and 
          -----------------------------
certificates that:

          a. If Mr. Cotter or a Permitted Transferee exercised the Option in 
whole or in pat at a time when there is not in effect under the Securities Act
of 1933, as amended (the "Act"), a registration statement relating to the Shares
issuable upon exercise hereof and available for delivery to him a prospectus
meeting the requirements of Section 10(a) (3) of the Act, Mr. Cotter or such
Permitted Transferee will acquire the Shares issuable upon such exercise for the
purposes of investment and not with a view to their resale or distribution and,
upon each exercise of this Option, Mr. Cotter or such Permitted Transferee will
furnish to the Company a written statement to such effect, reasonably
satisfactory in form and substance to the Company and its counsel;

          b. If and when Mr. Cotter or a Permitted Transferee proposes to offer 
to sell Shares which are issued to Mr. Cotter or such Permitted Transferee upon 
exercise of this Option at a time when there is not in effect under the Act a 
registration statement relating to the resale of such Shares and available for 
delivery a prospectus meeting the requirements of Section 10(a) (3) of the Act, 
Mr. Cotter or such Permitted Transferee will notify the company prior to and 
such offering or sale and will not offer or sell such Shares without first 
delivering to the Company an opinion of counsel reasonably acceptable to the 
Company to the effect that such offering and sale should not constitute a 
violation of such laws for which the Company would be liable; and 

          c. No Shares may be acquired hereunder pursuant to exercise of the 
Option granted hereby unless and until any then applicable requirements of the 
Securities and Exchange Commission, the California Department of Corporations, 
other regulatory agencies, including any other state securities law 
commissioners, having jurisdiction over the company or such issuance, and any 
exchanges upon which Common Stock of the Company may be listed shall have been 
fully satisfied. The 

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Company undertakes, at its own cost, to promptly satisfy all such then 
applicable requirements and to promptly reimburse Mr. Cotter or a Permitted 
Transferee for any costs which he may incur (including, without limitation, 
reasonable attorneys fees and expenses) in satisfying all such then applicable 
requirements. 

     Mr. Cotter and each Permitted Transferee understands that the certificate 
or certificates representing any Shares acquired upon the exercise, in whole or 
in part, of the Option may bear a legend referring to the foregoing matters and 
any limitations under the Act and state securities laws with respect to the 
transfer of such Shares, and the Company may impose stop transfer instructions 
to implement such limitations, if applicable.

     11.   Notices. Any notice to be given under the terms of this Amended 
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Agreement shall be in writing and addressed to the Secretary of the Company at 
its principal office and to Mr. Cotter's signature hereto, or at such other 
address as either party or any Permitted Transferee, if any, may hereinafter 
designate in writing to the other.

     12.   Laws Applicable to Construction.  The interpretation, performance and
           -------------------------------
enforcement of this Amended Agreement and all rights and obligations of the 
parties hereunder shall be governed by the laws of the State of California.

     IN WITNESS WHEREOF, the Company has caused this Amended Agreement to be 
executed on its behalf by a duly authorized officer and Mr. Cotter has hereunto 
set his hand.


                                       CRAIG CORPORATION

                                       By: /s/ S. Craig Tompkins
                                       -----------------------------------
                                       S. Craig Tompkins, President


                                        /s/ James J. Cotter 
                                       -----------------------------------
                                       JAMES J. COTTER 
                                       120 N. Robertson Blvd.
                                       Los Angeles, California 90048  



JC/STCKOPT.doc


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