Document:

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                                                                   EXHIBIT 10.11

                          Sutton Hill Capital, L.L.C.
                         120 North Robertson Boulevard
                         Los Angeles, California 90048

                                           July 28, 2000

Citadel Holding Corporation
Citadel Cinemas, Inc.
550 South Hope Street
Suite 1825
Los Angeles, CA 90071

          RE:  Lease Agreement -- Financial Statements
               ---------------------------------------

Dear Sirs:

     We refer to the Lease Agreement, dated as of the date hereof (the "Lease"),
between Sutton Hill Capital, L.L.C., a New York limited liability company
("SHC"), and Citadel Cinemas, Inc., a Nevada corporation ("Citadel Cinemas"),
the obligations of which have been guaranteed by its parent, Citadel Holding
Corporation, a Nevada corporation ("Citadel"). Terms used and not defined herein
have the meanings as defined in the Lease.

     In consideration of the execution and delivery of the Lease, the Fee Option
Agreement, the License of Intangibles, the Sub-Management Agreement, the
Assignment and Assumption Agreement of even date herewith relating to certain
operating contracts, the letter agreement of even date herewith relating to
certain employee matters, the apportionments letter of even date herewith, and
the assignments on the date hereof of certain management agreements, SHC hereby
represents and warrants to and agrees with Citadel Cinemas and Citadel as
follows:

     1.  SHC represents and warrants to Citadel Cinemas and Citadel as follows:

         Attached hereto as Exhibit A are the unaudited operating statements of
     operations of the theatres located at the Leased Sites (the "Theatres") for
     the fiscal years ended December 30, 1999 and December 31, 1998 and for the
     three month periods ended March 30, 2000 and April 1, 1999 (collectively,
     the "Theatre Statements"). The Theatre Statements fairly present the
     financial results of operations at the Theatres for the periods indicated
     therein and have been prepared in accordance with GAAP. The Theatre
     Statements were prepared and are derived from, and are in accordance with,
     the books and records of Sutton Hill Associates and its Subsidiaries
     (collectively, "Sutton Hill"), which books and records were used to prepare
     the audited consolidated financial statements of Sutton Hill for the fiscal
     years ended December 30, 1999 and December 31, 1998 (the "Sutton Hill
     Statements"), and the Sutton Hill Statements were prepared in

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     accordance with GAAP and include all footnote disclosures related to
     recognition of revenue and expense.

     2.  SHC shall indemnify and defend the Tenant Indemnified Persons from any
breach of any representation or warranty made herein, to the same extent as
provided in Section 11(b)(ii) of the Lease, and subject to the provisions and
limitations of Section 11 of the Lease, as if the representations and warranties
made herein were made in the Lease. Notwithstanding anything to the contrary
herein, all claims for indemnification hereunder shall be included in computing
claims for indemnification subject to the limitations set forth in Section 11(c)
of the Lease.

     3.  This letter agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof, supersedes any previous
agreements between the parties with respect to the subject matter hereof, and
may be modified only in writing signed by the parties hereto.

     4.  The terms of this Letter Agreement shall be binding upon SHC and its
successors and assigns and shall inure to the benefit of, and be enforceable by,
Citadel, Citadel Cinemas, and their respective successors and assigns.

     5.  This Letter Agreement shall be construed in accordance with and
governed by the internal laws of the State of New York.

     6.  The provisions of Sections 28(a) - (f) and (l) of the Lease shall apply
to this Letter Agreement as if set forth herein in full, and applied to the
provisions hereof.

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     7.  Nothing contained in this Letter Agreement and the exhibits attached
hereto shall be construed as a representation or warranty by SHC of the future
performance of the Theatres.

                                    Very truly yours,

                                    SUTTON HILL CAPITAL, L.L.C.

                                    By:  /s/ James J. Cotter
                                       -------------------------
                                       Name:  James J. Cotter
                                       Title: Operating Manager

                                      85<PAGE>

                                                                   EXHIBIT 10.12

                             CITADEL CINEMAS, INC.
                             550 South Hope Street
                                  Suite 1825
                             Los Angeles, CA 90071

                                         July 28, 2000

City Cinemas Corporation
120 North Robertson Blvd.
Los Angeles, California 90048

     Re:  Employees of City Cinemas Corporation
          -------------------------------------

Dear Sirs:

     On the date hereof (the "Effective Date"), Citadel Cinemas, Inc., a Nevada
corporation ("Citadel Cinemas"), is subleasing from Sutton Hill Capital, L.L.C.
("SHC") various Theatre Properties as described in a certain Lease Agreement,
dated the date hereof (the "Lease"), between SHC, as lessor, and Citadel
Cinemas, as lessee. City Cinemas Corporation, a New York corporation ("City
Cinemas") and an Affiliate of SHC, has served as manager of the Theatre
Properties through the Effective Date. In addition, City Cinemas has managed
certain other theatre properties and, as of the Effective Date, Citadel Cinemas
will become the manager or submanager of those theatres, either by assignment
from City Cinemas of its management agreement or by the execution and delivery
by City Cinemas to Citadel Cinemas of a submanagement agreement. All of the
theatre properties managed by City Cinemas in respect of which Citadel Cinemas
is to become manager or submanager as of the Effective Date are listed on
Exhibit "A" hereto (the "Properties").

     As manager of the Properties, City Cinemas has employed at the Properties
or in connection with the management thereof the individuals listed on Exhibit
"B" hereto (the "Employees").  It is the intention of Citadel Cinemas to engage
all or substantially all of such Employees with respect to its operations at the
Properties; provided, however, that Citadel Cinemas will not be assuming the
            --------  -------
obligations of City Cinemas as employer with respect to those employees of City
Cinemas who are also currently employees of Reading Entertainment, Inc. or one
or more of its subsidiaries, and such individuals, who are listed on Exhibit B-1
hereto, shall not be considered "Employees" for purposes of this letter.
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     Accordingly, this letter agreement shall confirm the assumption by Citadel
Cinemas of the duties and responsibilities as employer with respect to the
Employees. From and after the Effective Date, Citadel Cinemas shall be
considered the employer of the Employees, with City Cinemas released from all of
its duties and obligations with respect thereto except as expressly set forth
herein. Capitalized terms used herein but not defined herein shall have the
meaning set forth in the Lease.

     1.  Covenants of Citadel Cinemas
         ----------------------------

     (a) From and after the Effective Date, Citadel Cinemas shall be deemed to
have offered employment to the Employees. Citadel Cinemas shall be responsible
for the wages of the Employees listed on Exhibit "B" and all other
responsibilities of the employer with respect to the Employees accruing from and
after the Effective Date as well as those previously accrued liabilities for
other benefits except as specifically excluded hereunder. Citadel Cinemas shall
provide all Employees, for a period of at least sixty (60) days immediately
subsequent to the Effective Date, the applicable rate of pay not less than that
provided by City Cinemas immediately prior to the Effective Date and employee
benefits comparable, in the aggregate, to those in effect as of the Effective
Date.

     (b) Citadel Cinemas acknowledges the rates of pay, hours of work and other
conditions of employment of certain of the Employees are subject to the
provisions of the bargaining agreements (including any applicable side letters,
oral agreements and schedules) set forth in Exhibit "C" (the "Bargaining
Agreements"). Citadel Cinemas shall assume the obligations of City Cinemas under
the Bargaining Agreements according to their terms as in effect on and as of the
Effective Date as relates to the applicable Employees, and shall honor the
Bargaining Agreements for the remainder of their respective terms following the
Effective Date.

     (c) Citadel Cinemas shall assume the obligations of City Cinemas under the
Benefit Plans (as defined below).

     (d) Citadel Cinemas agrees to pay and be responsible for all liability,
cost, expense and sanctions relating to, arising from or resulting from Citadel
Cinemas's failure to comply after the Effective Date with the Worker Adjustment
and Retraining Notification Act of 1988, 29 USC 2101-2109 (the "Federal WARN
ACT"), and the regulations thereunder or any State or local law and applicable
regulations of similar import (the Federal WARN ACT and such State and local
laws and applicable regulations, the "WARN ACT") for any action by Citadel
Cinemas which causes the WARN ACT to apply.

     (e) Citadel Cinemas shall have responsibility for all workers' compensation
events which relate to incidents occurring on and after the Effective Date.

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     2.  Representations by City Cinemas
         -------------------------------

     City Cinemas hereby represents and warrants to Citadel Cinemas that as of
the date hereof:

     (a) Except for the Employees listed on Exhibit "B", there are no other
individuals employed by City Cinemas at the Properties or in connection with the
management thereof.

     (b) Exhibit "B" correctly sets forth for each Employee his or her current
compensation including salary and bonus, if any, social security number, date of
birth, date of hire, benefits, and amount and date of last bonus.

     (c) True and correct copies of the Bargaining Agreements have been
delivered to Citadel Cinemas

     (d) Except for the Bargaining Agreements, there are no other union
agreements or benefit and severance agreements or policies maintained or
contributed to by City Cinemas in which the Employees are entitled to
participate or other employee related agreements which relate to the Employees.

     (e) Exhibit "D" lists all of the benefit and severance agreements or
policies maintained or contributed to by City Cinemas in which the Employees are
entitled to participate (collectively the "Benefit Plans") and copies of all
such written Benefit Plans have been made available to Citadel Cinemas.  Except
as listed on Exhibit "D", (i) such Benefit Plans comply in all material
respects, to the extent applicable, with the requirements of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA"); (ii) City Cinemas
has not incurred any material liability for any tax imposed under Section 4975
of the Internal Revenue Code of 1986, as amended (the "Code"), or Part 4,
Subtitle B of Title 1 of ERISA with respect to any of the Benefit Plans; (iii)
none of the Benefit Plans is a multiemployer plan within the meaning of Section
3(37)(A) of ERISA; (iv) except as otherwise is provided in this Agreement, all
contributions to the Benefit Plans that were required to be made under such
Benefit Plans as of the date hereof have been paid; and (v) each Benefit Plan
covering non-U.S. Employees complies in all material respects with all
applicable laws, rules and regulations.

     (f) All payments owed to the Employees or made on their behalf (including
payments to governmental authorities) have been made through the Effective Date.

     (g) The signatory for City Cinemas hereto is in all respects authorized and
qualified to enter into this letter agreement on behalf of City Cinemas and City
Cinemas has authorized the assumption of the obligations described herein.

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     (h) City Cinemas has not, at any time within the 60-day period prior to the
Effective Date, effectuated a mass layoff, as that term is defined in the
Federal WARN ACT or any State or local law of similar import, affecting in whole
or in part any City Cinema's site of employment, theatre or employee.

     3.  Representations by Citadel Cinemas
         ----------------------------------

     The signatory for Citadel Cinemas is in all respects authorized and
qualified to enter into this letter agreement on behalf of Citadel Cinemas and
Citadel Cinemas has authorized the assumption of the obligations described
herein.

     4.  Indemnities.
         -----------

     (a) Citadel Cinemas shall, and hereby does, indemnify, defend, protect and
hold harmless City Cinemas, any successor or successors and any affiliate of
each of the foregoing parties, and their respective officers, directors,
incorporators, shareholders, partners, members, employees, agents and servants
from and against all liabilities, losses, obligations, claims, penalties, causes
of action, suits, demands, damages, costs and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) or
judgments of any nature ("Losses") relating to or arising out of the liabilities
and obligations assumed by Citadel Cinemas hereby. Notwithstanding the
foregoing, Citadel Cinemas shall not be responsible for any Losses which are
finally determined to have resulted from City Cinemas' bad faith or gross
negligence.

     (b) City Cinemas shall and hereby does indemnify, defend, protect and hold
harmless Citadel Cinemas, any successor or successors and any affiliate of the
foregoing parties, and their respective officers, directors, incorporators,
shareholders, partners, members, employees, agents and servants from and against
all Losses arising out of or otherwise in respect of (i) termination by City
Cinemas of any of the Employees on or prior to the Effective Date; (ii) any
claim made by any Employee based on events arising prior to or upon the
Effective Date; (iii) any suit or claim of violation brought against Citadel
Cinemas under the WARN Act for any action taken by City Cinemas on or prior to
the Effective Date; (iv) any claims by Employees for workers' compensation which
relate to incidents occurring prior to the Effective Date; and (v) a breach of
any representation made by it hereunder.

     (c) Notwithstanding anything to the contrary contained herein, all claims
for indemnification under clause (v) of paragraph B of this Section IV shall be
included in computing claims for indemnification subject to the limitations set
forth in paragraph (c) of Section 11 of the Lease, which limits claims brought
under clause (ii) of paragraph (b) of Section 11 of the Lease.

     5.  Miscellaneous
         -------------

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     (a) On and as of the Effective Date, Citadel Cinemas and City Cinemas will
adjust and apportion Employee salaries (including manager concession
commissions) and benefit costs, including year-end incentive or bonus
compensation, except that year-end and other incentive or bonus compensation
shall be apportioned only as and when actually paid by Citadel Cinemas and such
apportionment shall be based on the portions of the year any such compensated
Employee was employed by City Cinemas and Citadel Cinemas (or their respective
Affiliates), respectively.

     (b) This letter agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof, supersedes any previous
agreements between the parties with respect to the subject matter hereof and may
be modified only in writing signed by the parties hereto.

     (c) Each party acknowledges that the facts and circumstances were
negotiated and executed in, and shall be governed by the laws of, the State of
New York.

     (d) Each party agrees to submit to the jurisdiction of the courts of the
State of New York.

     (e) Nothing herein expressed or implied confers upon any Employee any
rights or remedies of any nature or kind, including, without limitation, any
rights of employment with Citadel Cinemas for a specified period of time.

     (f) EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY.

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     If this letter agreement reflects our mutual understanding, please execute
two copies in the space indicated below and return one to us and this will
constitute the entire agreement between us.

                                    Very truly yours,

                                    Citadel Cinemas, Inc.

                                    By: /s/ Andrzej Matyczynski
                                       ---------------------------
                                       Name: Andrzej Matyczynski
                                       Title: Chief Financial Officer

Agreed and accepted this
28/th/ day of July, 2000

City Cinemas Corporation

By:  /s/ James D. Vandever
   ------------------------------
   Name: James D. Vandever
   Title: Secretary

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