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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
READING ENTERTAINMENT, INC
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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Reading Entertainment, Inc.
____________
Notice of Annual Meeting of Stockholders
To Be Held on SEPTEMBER 12, 2000
____________
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders (the "Annual Meeting") of Reading
Entertainment, Inc., a Nevada corporation (the "Company"), will be held on
September 12, 2000 at 1:30 p.m., Los Angeles time, at the Regal Biltmore Hotel,
506 South Grand Avenue, Los Angeles, California, subject to adjournment or
postponement, for the following purposes:
1. To elect six directors to serve until the expiration of their terms and
until their successors are duly elected;
2. To consider and act on a non-binding stockholder proposal forwarded by
William Steiner (the beneficial owner of 600 shares of the Company's Common
Stock) and entitled by Mr. Steiner the "Maximize Value Resolution"; and
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment thereof.
A complete list of stockholders entitled to vote at the Annual Meeting will
be available at the Company's principal executive office located at 550 South
Hope Street, Suite 1800, Los Angeles, California, 90071 for examination by any
stockholder, during ordinary business hours, for a period of not less than ten
days prior to the Annual Meeting.
The Board of Directors has fixed the close of business on July 19, 2000 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournment or postponement thereof.
Copies of the Company's Annual Report for the year ended December 31, 1999
(Form 10K), Amendment No. 1 the Annual Report (Form 10K/A) and the Quarterly
Report for the six-month period ending June 30, 2000 (Form 10Q) are enclosed.
Whether or not you expect to attend the Annual Meeting in person, please
fill in, sign and return the enclosed form of proxy in the envelope provided.
By Order of the Board of Directors,
Robert F. Smerling, President
Dated: August 30, 2000
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PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE TO ENSURE THAT YOUR VOTES ARE COUNTED.
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Reading Entertainment, Inc.
550 South Hope Street
Suite 1800
Los Angeles, California 90071
213 235-2226
____________
Proxy Statement
____________
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Reading
Entertainment, Inc., a Nevada corporation (collectively with its corporate
predecessors, the "Company" or "REI", and collectively with its consolidated
subsidiaries, "Reading"), in connection with the solicitation of proxies by the
Board of Directors for use at the annual meeting of stockholders (the "Annual
Meeting") of the Company to be held on Tuesday, September 12, 2000, at 1:30
p.m., Los Angeles time, at the Regal Biltmore Hotel, Los Angeles, California and
at any adjournment or postponement thereof. A copy of the notice of the meeting
accompanies this Proxy Statement. It is anticipated that the mailing of this
Proxy Statement will commence on or about August 30, 2000.
At the Annual Meeting, stockholders will be asked to elect six directors
and to consider and act on a non-binding stockholder proposal forwarded by
William Steiner (the beneficial owner of 600 shares of the Company's Common
Stock) and entitled by Mr. Steiner the "Maximize Value Resolution" (the "Steiner
Proposal").
VOTING AND PROXIES
Only stockholders of record at the close of business on July 19, 2000, the
record date ("Record Date") for the Annual Meeting, will be entitled to notice
of and to vote at the Annual Meeting. On the Record Date, the Company had
outstanding 7,449,364 shares of common stock, par value $.001 per share (the
"Common Stock"), each of which is entitled to one vote, and 70,000 shares of
Series A Voting Cumulative Convertible Preferred Stock, par value $.001 per
share (the "Series A Stock"), and 550,000 shares of Series B Voting Cumulative
Convertible Preferred Stock, par value $.001 per share (the "Series B Stock"
and, together with the Series A Stock, the "Convertible Preferred Stock"), each
of which is entitled to 9.64 votes.
Execution of a proxy will not in any way affect a stockholder's right to
attend the Annual Meeting and vote in person. Any person giving a proxy has the
right to revoke it at any time before it is exercised by (i) filing with the
Corporate Secretary of the Company, prior to the commencement of the Annual
Meeting, a duly executed instrument dated subsequent to such proxy revoking the
same or a duly executed proxy bearing a later date or (ii) attending the Annual
Meeting and voting in person.
Directors of the Company will be elected by a plurality vote of the
outstanding shares of Common Stock and Convertible Preferred Stock present and
entitled to vote at the Annual Meeting. The Steiner Proposal is a proposed non-
binding expression to the Board. Approval of the Steiner Proposal requires the
affirmative vote of the majority of the votes cast. Management of the Company
has been advised that Craig Corporation (collectively with its corporate
predecessors "Craig Corp." and together with its wholly-owned subsidiaries,
"Craig"), which directly or indirectly owns of record 5,165,516 shares of Common
Stock and 550,000 shares of Series B Stock, will vote all of such shares in
favor of the directors named herein and against the Steiner Proposal. If all
such shares are so voted, such directors
1
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will be elected and the Steiner Proposal will be defeated.
The presence, in person or by proxy, of the holders of shares of stock
entitling them to cast a majority of the votes entitled to be cast at the Annual
Meeting will constitute a quorum. Abstentions will be counted for purposes of
determining the presence of a quorum, as will broker non-votes, provided
authority is given to attend the meeting or to vote on any matter to come before
the meeting. Because directors are elected by a plurality vote, abstentions and
broker non-votes will not be counted either for or against the election of
directors when determining whether a particular director has been elected.
Abstentions and broker non-votes also will not be counted either for or against
the Steiner Proposal.
Proposal No. 1
--------------
ELECTION OF DIRECTORS
Beneficial Ownership of Common Stock and Voting Stock
The following tables set forth certain information regarding the Common
Stock and total voting stock (including the Series A Stock and the Series B
Stock) of the Company owned on the Record Date by (i) each person or group who
is known by the Company to own beneficially more than 5% of any class of the
Company's voting securities, (ii) each of the Company's directors, nominees for
election and most highly compensated executive officers, and (iii) all directors
and officers of the Company as a group.
5% Beneficial Owners
<TABLE>
<CAPTION>
Common Stock Convertible Preferred Stock
Series A Series B
-------- ---------
Amount Amount and Amount and
and Nature of Nature of
Nature of Percent Beneficial Percent Beneficial Percent Percent
Name and Address Beneficial of of of of Voting
of
Beneficial Owner Ownership(1) Class(1) Ownership(1) Class(1) Ownership(1) Class(1) Stock (1)
------------------ ------------------ ------------ ---------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Craig Corp. (2) (3) 10,467,510(4) 82.09 0 0 550,000 100 77.96
550 So. Hope St.
Suite 1825
Los Angeles, CA
90071
Citadel Holding 2,241,349(5) 23.1 70,000 100 0 0 5.03
Corp.(3)
550 So. Hope St.
Suite 1825
Los Angeles, CA
90071
Lawndale Capital 394,875 5.30 0 0 0 0 2.94
Mgmnt.
One Sansome St.
Suite 3900
San Francisco, CA
94104
</TABLE>
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(1) Applicable percentage of ownership is based on 7,449,364 shares of Common
Stock, 70,000 shares of Convertible Preferred Stock-Series A ("Series A
Stock"), and 550,000 shares of Convertible Preferred Stock-Series B
("Series B Stock") outstanding as of the Record Date plus the applicable
options for such shareholder. Beneficial ownership is determined in
accordance with the rules of the securities exchange Commission and
includes voting and investment power with respect to such shares. Shares
subject to options currently exercisable within 60 days of the Record Date
are deemed outstanding for computing the percentage ownership of the person
holding such options, but not deemed outstanding for computing the
percentage ownership of any other person. The calculation of the Percent of
Voting Stock gives effect to the voting rights of the Series A Stock, all
of which is owned by a subsidiary of Citadel Holding Corporation
(collectively with its predecessors "CHC" and together with its
consolidated subsidiaries, "Citadel"), and of the Series B Stock, all of
which is owned by Craig. The holders of the Series A Stock and Series B
Stock are entitled to cast 9.64 votes per share, voting together with the
holders of the Common Stock and the other series of Convertible Preferred
Stock, on any matters presented to stockholders of the Company, except as
required by law.
(2) Includes amounts held by Craig Management, Inc., a wholly-owned subsidiary
of Craig Corp.
(3) James J. Cotter is Chairman of the Board of the Company, Craig Corp. and
CHC, and the Chief Executive Officer of CHC. S. Craig Tompkins is Vice
Chairman of the Board of the Company, a director and President of Craig
Corp., and the Vice Chairman and Corporate Secretary of CHC. James J.
Cotter is also a principal stockholder of Craig Corp., having the power
directly or through proxies to vote securities representing approximately
51% of the voting power of Craig Corp. Craig and the Company collectively
own approximately 48% of CHC's outstanding Class A Non-Voting Common Stock
and approximately 49% of CHC's outstanding Class B Voting Common Stock. Mr.
Cotter and Mr. Tompkins disclaim beneficial ownership of all of the CHC
securities held by the Company or Craig Corp. and all of the Company's
securities held by Craig Corp. and CHC.
(4) Includes 4,489,796 shares of Common Stock which may be acquired through the
conversion of the Series B Preferred Stock.
(5) Includes 608,696 shares of Common Stock, which may be acquired through the
conversion of the Series A Preferred Stock.
3
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Security Ownership of Management
<TABLE>
<CAPTION>
Amount and Percentage
Nature of of Percentage
Beneficial Common of Voting
Name of Beneficial Owner Ownership(1) Stock(1) Stock(2)
----------------------- ------------ ------- --------
<S> <C> <C> <C>
James J. Cotter.................................... 353,732(3)(4)(5) 4.54 2.57
Scott A. Braly..................................... 3,000(6) 0 0
Robert M. Loeffler................................. 3,000(6) 0 0
Kenneth S. McCormick............................... 3,000(6) 0 0
Robert F. Smerling................................. 23,438(7) * *
S. Craig Tompkins.................................. 16,400(3)(4)(8) * *
Andrzej Matyczynski................................ 0(9) 0 0
Ellen Cotter....................................... 7,500(10) * *
All Directors and Officers As a Group (8 Persons).. 410,070(11) 5.25 2.97
</TABLE>
* Percentages of less than one percent have not been indicated.
** All persons listed in this table have as their address: Reading
Entertainment, Inc., 550 South Hope Street, Suite 1800, Los Angeles, California
90071.
(1) Includes outstanding shares of Common Stock and shares issuable within 60
days of the Record Date upon the exercise of outstanding stock options.
Shares subject to options currently exercisable within 60 days of the
Record Date are deemed outstanding for computing the percentage ownership
of the person holding such options, but not deemed outstanding for
computing the percentage ownership of any other person.
(2) Gives effect to the voting rights of 70,000 shares of Series A Stock, all
of which are owned by Citadel, and 550,000 shares of Series B Stock, all of
which are owned by Craig. The holders of the Series A Stock and Series B
Stock are entitled to cast 9.64 votes per share, voting together with the
holders of the Common Stock and the other series of Convertible Preferred
Stock, on any matters presented to stockholders of the Company, except as
required by law.
(3) Does not include amounts held by Craig or Citadel.
(4) James J. Cotter is Chairman of the Board of the Company, Craig Corp. and
CHC, and the Chief Executive Officer of CHC. S. Craig Tompkins is Vice
Chairman of the Board of the Company, a director and President of Craig,
and the Vice Chairman and Corporate Secretary of CHC. James J. Cotter is
also a principal stockholder of Craig Corp. Craig and the Company
collectively own approximately 48% of CHC's outstanding Class A Non-Voting
Common Stock and approximately 49% of CHC's outstanding Class B Voting
Common Stock. Mr. Cotter and Mr. Tompkins disclaim beneficial ownership of
all of the CHC securities held by the Company or Craig Corp. and all of the
Company's securities held by Craig Corp. and CHC.
(5) Includes 6,000 shares held in a profit sharing plan, and 347,732 shares
issuable within 60 days of the Record Date upon the exercise of outstanding
stock options. Mr. Cotter is also the beneficial owner of 2,385,142 shares
of the Common Stock and 2,021,702 shares of the Class A Common Preference
Stock of Craig Corp., including 594,940 shares of
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Craig Corp. Common Stock issuable within 60 days of the Record Date upon
exercise of outstanding stock options previously issued to Mr. Cotter, and
617,438 shares of Craig Corp. Common Stock and 720,838 shares of Craig
Corp. Class A Common Preference Stock owned by Hecco Ventures, a California
general partnership ("Hecco"). Mr. Cotter is the general partner of a
limited partnership which is, in turn, a general partner of Hecco and,
accordingly, has shared voting and investment power with respect to such
securities. Mr. Cotter is also a principal stockholder of Craig Corp.,
having the power directly or through proxies to vote securities
representing approximately 51% of the voting power of Craig Corp.
(6) Includes 3,000 shares each issuable within 60 days of the Record Date upon
the exercise of outstanding stock options granted to such directors in
November, 1999.
(7) Includes 23,438 shares issuable within 60 days of the Record Date upon the
exercise of outstanding stock options.
(8) Includes 15,000 shares issuable within 60 days of the Record Date upon the
exercise of outstanding stock options. Excludes 200 shares held in Mr.
Tompkins' wife's retirement plan and 500 shares held in a trust for Mr.
Tompkins' minor child as to which Mr. Tompkins disclaims beneficial
ownership. Mr. Tompkins is also the beneficial owner of 37,000 shares of
the Class A Common Preference Stock of Craig Corp., including 35,000 shares
of Class A Common Preference Stock issuable within 60 days of the Record
Date upon the exercise of outstanding options and of 8,000 shares of CHC
Class A Non-Voting Common Stock issuable within 60 days of the Record Date
upon the exercise of outstanding stock options.
(9) Andrzej Matyczynski was elected as the Chief Administrative Officer of the
Company on November 19, 1999 and became Chief Financial Officer of the
Company on June 2, 2000. Mr. Matyczynski is also the Chief Financial
Officer of Craig Corp. and CHC. Mr. Matyczynski has been granted options
acquire to 30,000 shares of Craig Corp. Class A Common Preference Stock and
30,000 of CHC Class A Non-Voting Common Stock. These options vest over a
four-year period. None of the options were exercisable within 60 days the
Record Date.
(10) Includes 7,500 shares issuable within 60 days of the Record Date upon the
exercise of outstanding stock options.
(11) Includes 402,670 shares issuable within 60 days of the Record Date upon the
exercise of outstanding stock options.
Nominees for Election
Six directors are to be elected at the Annual Meeting. Each director will
serve for a term of one year or until his successor has been elected. Unless
otherwise instructed, proxy holders will vote the proxies received by them for
the election of the nominees named below, all of whom are currently directors of
the Company. If any nominee becomes unavailable for any reason, it is intended
that the proxies will be voted for a substitute nominee designated by the Board
of Directors. The Board of Directors has no reason to believe the nominees
named will be unable to serve if elected. Any vacancy occurring on the Board of
Directors for any reason may be filled by a majority of the directors then in
office until the next Annual Meeting of Stockholders.
5
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The names of the nominees for director, together with certain information
regarding them, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
James J. Cotter (1) 62 Chairman of the Board, Chairman of the Executive
Committee of the Board and a Director
Robert F. Smerling 65 President and a Director
S. Craig Tompkins (1) 49 Vice Chairman of the Board and a Director
Scott A. Braly (1)(2)(3)(4) 47 Director
Robert M. Loeffler (2)(4) 77 Director
Kenneth S. McCormick (2)(3)(4) 49 Director
</TABLE>
________________
(1) Member of the Executive Committee. The Executive Committee is appointed
annually by the Board of Directors and exercises the authority of the Board
of Directors in the management of the business and affairs of the Company
between meetings of the Board of Directors. The Executive Committee is
also responsible for recommending to the Board of Directors nominees to be
elected to the Board of Directors by the stockholders or by the Board of
Directors in the case of vacancies which occur between meetings of the
stockholders.
(2) Member of the Audit and Finance Committee. The Audit and Finance Committee
is appointed annually by the Board of Directors to recommend the selection
of independent auditors, review the scope and results of the annual audit,
review financial results and status, review and assess the adequacy of the
Company's accounting practices, financial controls and reporting systems
and assess the financial planning functions of the Company. The Audit and
Finance Committee held two meetings during the fiscal year ended December
31, 1999. The committee was reconstituted in 1999 into the Audit Committee
with a new Audit Committee Charter. See below, New Audit Committee
Charter.
(3) Member of the Compensation Committee. The Compensation Committee is
appointed annually by the Board of Directors to recommend to the Board of
Directors remuneration
for senior management and officers of the Company, the adoption of
compensation plans and the granting of options under the Company's stock
option plan.
(4) Member of the Conflicts Committee. The Conflicts Committee is appointed
annually by the Board of Directors to evaluate and make recommendations to
the Board of Directors concerning matters in which the Board of Directors
or management may have a conflict of interest.
During 1999, the Company's Board of Directors held six meetings. No
director attended fewer than 80% of the total number of meetings of the Board of
Directors and of the committees of the Board of Directors on which such director
served, during the term of such individual's services as a director.
Mr. Cotter has been Chairman of the Board of Directors since December 1991
and a director since September 1990. Mr. Cotter has been Chairman of the Board
of Craig Corp. since 1988 and a
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director since 1985. Mr. Cotter has been Chairman of the Board and a director of
CHC since 1991 and the Chief Executive Officer of CHC since August 1999. Mr.
Cotter is Chairman of the Board and a director of Citadel Agricultural, Inc.
("CAI"), a wholly-owned subsidiary of CHC and a member of the Management
Committee of each of the three agricultural partnerships which constitute the
principal assets of CAI (the "Agricultural Partnerships"), and Chairman of the
Board and a member of the Management Committee of Big 4 Farming LLC ("Farming"),
a farm management company, 80% owned by Citadel and formed to manage the
properties owned by the Agricultural Partnerships. Also, Mr. Cotter has served
since December 1997 as the Managing Director of Visalia LLC (a company owned 1%
by Mr. Cotter and 99% by certain members of his family, "Visalia"), which holds
a 20% interest in each of the Agricultural Partnerships and a 20% interest in
Farming. Mr. Cotter has been a director and Chief Executive Officer of Townhouse
Cinemas Corporation (motion picture exhibition) since 1987 and has been the
Executive Vice President and a director of the Decurion Corporation (real estate
and motion picture exhibition) and of Pacific Theaters, Inc. (motion picture
exhibition), a wholly owned subsidiary of Decurion, since 1969. Mr. Cotter is
the general partner of a limited partnership which is, in turn, the general
partner of Hecco Ventures, a California general partnership engaged in the
business of investing in securities, and the holdings of which include shares
representing approximately 17.5% of the voting power of Craig Corp. Mr. Cotter
was a director of Stater Bros. Holdings Inc. and its predecessors from 1987
until September 1997.
Mr. Tompkins has been Vice Chairman since January 1997 and Corporate
Secretary since December 1999. Mr. Tompkins has been a director of the Company
since March 1994 and was President of the Company from March 1993 through
December 1996. Mr. Tompkins is also President and a director of Craig Corp. and
has served in such positions since March 1, 1993. Mr. Tompkins has been a
director of CHC since May 1993, the Vice Chairman since August 1994 and
Corporate Secretary of CHC since September 1994. Mr. Tompkins is also President
and a director of CAI, a member of the Management Committee of each of the
Agricultural Partnerships and of Farming, and serves, for administrative
convenience, as an Assistant Secretary of Visalia and Big 4 Ranch, Inc., ("BRI")
a partner with CAI and Visalia in each of the Agricultural Partnerships. Prior
to March 1993, Mr. Tompkins was a partner in the law firm of Gibson, Dunn &
Crutcher. Mr. Tompkins has been a director of G&L Realty Corp., a New York
Stock Exchange listed REIT (Real Estate Investment Trust), since December 1993
and currently serves as Chairman of the Audit Committee and Chairman of the
Strategic Planning Committee of that company. Mr. Tompkins has been a director
of Fidelity Federal Bank, FSB, since April 2000, where he serves on the Audit
and Compensation Committees.
Mr. Smerling has been a director since September 1997, and President of the
Company since January 1997. Mr. Smerling has served as President of the
Company's various domestic and Puerto Rican exhibition subsidiaries since 1994.
Mr. Smerling served as President of Loews Theater Management Corporation, a
subsidiary of Sony Corporation, from May 1990 until November 1993. Mr. Smerling
also serves as President and Chief Executive Officer of City Cinemas Corporation
("City Cinemas"), a motion picture exhibitor located in New York City. City
Cinemas is an affiliate of James J. Cotter and has entered into an Executive
Sharing Agreement with the Company with respect to the services of Mr. Smerling.
Mr. Braly has been a director of the Company since July 1999 and is
Chairman of the Conflicts Committee. Mr. Braly also is a member of the
Conflicts Committee and Compensation Committee. Mr. Braly served as President
and Chief Executive Officer of Hawthorne Savings FSB from July 1993 to November
1999.
Mr. Loeffler has been a director of the Company since July 1999, is
Chairman of the Audit Committee and a member of the Conflicts Committee. Mr.
Loeffler became a director of Craig Corp. in February 2000 and is a member of
its Audit Committee. Mr. Loeffler also has served as a director of CHC since
March 2000. Mr. Loeffler has been a director of PaineWebber Group, Inc. since
1978. Mr. Loeffler is
7
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a retired attorney and was Of Counsel to the California law firm of Wyman
Bautzer Kuchel & Silbert from 1987 to March 1991. He was Chairman of the Board,
President and Chief Executive Officer of Northview Corporation from January to
December 1987 and a partner in the law firm of Jones, Day, Reavis & Pogue until
December 1986. Mr. Loeffler is also a director of Advanced Machine Vision Corp.
Mr. McCormick has been a director of the Company since July 1999 and is a
member of the Conflicts Committee and the Compensation Committee. During 1999,
Mr. McCormick served as the Senior Executive Vice President of Metro-Goldwyn-
Meyer, Inc., responsible for strategic development. Prior to joining Metro-
Goldwyn-Meyer, Mr. McCormick was a managing director of J.P. Morgan & Co. for
more than the prior five years.
Director Compensation
Directors who are not employees of the Company receive an annual retainer
of $24,000, except for the Chairmen of the Audit Committee, the Conflicts
Committee, and the Compensation Committee, each of whom receives an annual
retainer of $26,000. The Chairman of the Board receives an annual retainer of
$150,000. No separate fees were paid in 1999 for meetings of the Board or
committee meetings. With respect to the period August 1, 1999 through July 31,
2000, the directors' fees for Messrs. Braly, Loeffler and McCormick were
increased to $52,000 to reflect the extra time required for these new directors
to become acquainted with the Company and in connection with the performance of
their responsibilities as members of the Conflicts Committee.
New Audit Committee Charter
During the fiscal year ended December 31, 1999, the Company reconstituted
the Audit and Finance Committee into the Audit Committee and adopted a new Audit
Committee Charter ("Charter"). The Charter requires the Audit Committee to meet
at least four times annually and at least once separately with the independent
auditors and management. The Board of Directors included additional provisions
in the new Charter to aid the Audit Committee in overseeing the quality and
integrity of the accounting, audit, internal control and financial reporting
policies and practices of the Company. The Charter includes professional
criteria for the members of the Audit Committee and empowers the Audit Committee
to investigate any matter for which it has oversight authority. The Audit
Committee, among other things, makes recommendations to the Board concerning the
engagement of the Company's independent auditors; monitors and reviews the
performance of the Company's independent auditors; reviews with management and
the independent auditors the Company's financial statements, including the
matters required for discussion under Statement of Auditing Standards No. 61;
monitors the adequacy of the Company's operating and internal controls;
discusses with management legal matters that may have a material impact on the
Company's financial statements; and issues an annual report to be included in
the Company's proxy statement as required by the rules of the Securities and
Exchange Commission. The current members of the Audit Committee are directors
Robert W. Loeffler (Chairman), Kenneth S. McCormick and Scott A. Braly.
Vote Required; Recommendation of Board
The six nominees receiving the highest number of votes will be elected to
the Board of Directors. The Company has been advised by Craig that it intends to
vote its shares to elect each of the nominees listed above. If such shares are
so voted, each of the nominees listed above will be elected.
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES.
8
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PROPOSAL NO. 2
STEINER PROPOSAL
William Steiner, 4 Radcliff Drive, Great Neck, New York 11024, the
beneficial owner of 600 shares of Common Stock, has notified the Company of his
intention to introduce the following non-binding proposal at the Annual Meeting.
The Board of Directors expresses no opinion on the Steiner Proposal. The
Company, however, has been advised by shareholders owning approximately 78% of
the voting power of the Company that they intend to vote against the proposal.
Mr. Steiner's proposed resolution and supporting statement, for which the
Board of Directors and the Company accept no responsibility, are set forth
below.
MAXIMIZE VALUE RESOLUTION
Resolved that the shareholders of Reading Entertainment, Inc.
corporation [sic] urge the Reading Entertainment, Inc. Board of Directors
to arrange for the prompt sale of Reading Entertainment, Inc. to the
highest bidder.
The purpose of the Maximize Value Resolution is to give all Reading
Entertainment, Inc. shareholders the opportunity to send a message to the
Reading Entertainment, Inc. Board that they support the prompt sale of
Reading Entertainment, Inc. to the highest bidder. A strong and/ or
majority vote by the shareholders would indicate to the board the
displeasure felt by the shareholders of the shareholder returns over many
years and the drastic action that should be taken. Even if it is approved
by the majority of the Reading Entertainment, Inc. shares represented and
entitled to vote at the annual meeting, the Maximize Value Resolution will
not be binding on the Reading Entertainment, Inc. Board. The proponent
however believes that if this resolution receives substantial support from
the shareholders, the board may choose to carry out the request set forth
in the resolution:
The prompt auction of Reading Entertainment, Inc. should be
accomplished by any appropriate process the board chooses to adopt
including a sale to the highest bidder whether in cash, stock, or a
combination of both. It is expected that the board will uphold its
fiduciary duties to the utmost during the process.
The proponent further believes that if the resolution is adopted, the
management and the board will interpret such adoption as a message from the
company's stockholders that it is no longer acceptable for the board to
continue with its current management plan and strategies.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION
---------------------------------------------
William Steiner
As noted above, no recommendation is made with respect to the Steiner Proposal.
Craig has advised the Company that it intends to vote against the Steiner
Proposal. If Craig votes in accordance with its stated intention, then this
proposal will be defeated.
9
<PAGE>
EXECUTIVE OFFICERS
The names of the executive officers and significant employees of the
Company, other than the nominees for director, together with certain information
regarding them, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Brett Marsh 53 Vice President-Real Estate
Andrzej Matyczynski 48 Chief Administrative Officer and
Chief Financial Officer
Eugene Cheah 32 Financial Controller, Australia and New Zealand
Ellen M. Cotter 34 Vice President, Business Affairs; President of
Reading Entertainment Australia Pty, Ltd.
David Lawson 42 Director of Real Estate Development, Australia
and New Zealand
Neil Pentecost 42 Chief Operating Officer, Australia and New Zealand
</TABLE>
Brett Marsh has been with CHC since 1993 and has been responsible, through
a consulting arrangement with Citadel, for the real estate activities of the
Company. Mr. Marsh became Vice President-Real Estate of the Company in March
2000, but historically has been paid through Citadel. Prior to joining the CHC,
Mr. Marsh was the Senior Vice President of Burton Property 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.
Andrzej Matyczynski became Chief Administrative Officer of the Company
effective November 19, 1999. On that date, Mr. Matyczynski became Chief
Financial Officer of CHC and the Chief Financial Officer of Craig Corp. On June
2, 2000, Mr. Matyczynski was appointed Chief Financial Officer of the Company
concurrent with the resignation of James Wunderle who had held that position.
Prior to joining the Company, Mr. Matyczynski was associated with Beckman
Coulter and its predecessors for more than the past twenty years and also served
as a director for certain Beckman Coulter subsidiaries.
Mr. Cheah has been the Financial Controller of Reading Entertainment
Australia Pty, Ltd. ("Reading Australia") since August 1998. Mr. Cheah served as
the Planning and Projects Manager (Retail Strategy and Projects) for Myer Grace
Bros. from 1996 to 1998, and as Project Accounting Manager (Property
Development) for Coles Myer Properties from 1992-1995. Prior thereto, he was a
Senior Accountant (Business Services) with Price Waterhouse.
Ms. Cotter has been Vice President, Business Affairs of the Company since
March 1998 and President of Reading Australia since September 1999. Ms. Cotter
has been Vice President of Business Affairs of Craig Corp. since August 1996,
Vice President of Angelika Cinemas, Inc. since May 1998 and Secretary/Treasurer
of Citadel Agriculture, Inc. since December 1997. From October 1992 through July
1996, Ms. Cotter was an attorney specializing in corporate law with White &
Case, a New York law firm. Ms. Cotter is the daughter of James J. Cotter. Ms.
Cotter is a member of Visalia and a limited partner in James J. Cotter, Ltd.
(Mr. Cotter is the general partner), which is a general partner of Hecco
Ventures I, a privately held investment partnership.
Mr. Lawson has been the Director of Real Estate Development for Australia
and New Zealand since December 1998, and since May 1999 has served as a director
of the Company's principal Australian operating company, Reading Australia.
Prior to joining the Company, Mr. Lawson served as the Asset
10
<PAGE>
General Manager responsible for New South Wales for Westfield from 1996 to 1998,
and as the General Manager (Retail Property Development) for Coles Myer from
1994 to 1995.
Mr. Pentecost has been the Chief Operating Officer for Australia and New
Zealand since August 1999 and a director of Reading Australia since September
1999. Prior to joining the Company, Mr. Pentecost was with Hoyts, where he
served in a number of positions, most recently serving as Operations and
Services Manager (National). Mr. Pentecost joined Hoyts in 1995. Prior thereto,
Mr. Pentecost served as the Director of Retail Services (Operations) for KFC in
Australia.
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 of 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, 1999, all Section 16(a) filing requirements applicable to its
reporting persons were complied with.
Executive Compensation
I. Summary Compensation Table
The following table shows, for the years ending December 31, 1999, 1998 and
1997, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to each of the most highly
compensated executive officers of the Company whose compensation exceeded
$100,000 in all capacities in which they served:
<TABLE>
<CAPTION>
Long
Annual Compensation (1) Term
Awards
---------------------------------------------------------
Other
Name and Position Year Salary Other Other Annual Options Compensation
($) Bonus Compensation (#) (2)
($) ($) ($)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James J. Cotter (3) 1999 150,000
Chairman of the Board 1998 150,000
of Directors 1997 475,000 150,000 460,000
S. Craig Tompkins (4) 1999 180,000
Vice Chairman of the 1998 180,000
Board of Directors 1997 180,000 20,000
Robert F. Smerling (5) 1999 175,000 20,415
President and Director 1998 175,000 20,415
1997 175,000 20,415 35,000
Ellen M. Cotter 1999 150,000 4,800
Vice President, 1998 80,770 25,000 2,423
Business Affairs 1997 10,000
</TABLE>
11
<PAGE>
<TABLE>
<S> <C> <C> <C>
James A. Wunderle 1999 175,000 4,800
Executive Vice 1998 175,000 4,500
President, Chief 1997 170,000 5,000 17,000
President, Chief
Financial Officer and
Treasurer
</TABLE>
(1) While the executive officers enjoy certain perquisites, such perquisites
do not exceed the lesser of $50,000 or 10% of such officer's salary and
bonus, unless otherwise so noted.
(2) Other compensation represents contributions under the Company's Employee
Retirement Savings Plan.
(3) Mr. Cotter receives a fee for his services as Chairman of the Board of
Directors of $150,000 per annum. The figures presented do not include
amounts paid by CHC for director's fees of $45,000 annually for each of
the years 1999, 1998, and 1997 or a bonus of $200,000 in 1998 for
services provided to CHC.
(4) Does not include $40,000 paid by CHC for his services as Vice Chairman in
each of the years 1999, 1998 and 1997, or a bonus of $50,000 paid in 1998
for services provided to CHC.
(5) "Other Annual Compensation" includes premiums paid on a Company paid life
insurance policy on the life of Mr. Smerling. Mr. Smerling is permitted
to designate the beneficiary of such policy.
Mr. Tompkins is entitled to a severance payment equal to his annual base
salary and continuation of medical and insurance benefits in the event that his
employment is involuntarily terminated and no change in control of the Company
has occurred. Mr. Tompkins is entitled to a severance payment equal to two years
annual salary in the event that a change in control of the Company occurs.
Mr. Smerling is entitled to receive payment equal to twelve months of annual
base salary in the event his individual employment with the Company is
involuntarily terminated.
Mr. Wunderle resigned as Executive Vice President and Chief Executive Officer
effective June 2, 2000 and is currently serving as a consultant to the Company.
12
<PAGE>
II. Option Grant Table
As of December 31, 1999, the Company had options outstanding under two
stock option plans, the 1992 Non-qualified Stock Option Plan (the "1992 Plan")
and the 1997 Equity Incentive Plan (the "1997 Plan"). Each plan was approved by
stockholders in the year of adoption. The 1997 Plan reserved 200,000 shares for
grant and provides for one-fourth of the options granted to be exercisable on
the first anniversary of the date of grant, and an additional one-fourth on each
subsequent anniversary, unless the Compensation Committee of the Board of
Directors, in its discretion, decides otherwise.
The 1992 Plan reserved 500,000 shares for grant and provides for one-third
of options granted to be immediately exercisable, one-third exercisable on the
first anniversary of the date of grant, and the final one-third exercisable upon
the second anniversary date of the date of grant unless the Compensation
Committee of the Board of Directors, in its discretion, decides otherwise.
On November 19, 2000, the Compensation Committee, on the recommendation of
the Board of Directors, granted Options under the Company's 1992 Stock Option
Plan to Messrs. Braly, Loeffler and McCormick as described in the following
table:
Options Granted under
1992 Stock Option Plan to Acquire Shares of
Common Stock
-----------------------------------------------------------------------------
Name and Position Number of Vesting
Options of Options
Granted(1)
-----------------------------------------------------------------------------
Scott A. Braly 15,000 3,000 vest on the date of grant and
the remainder to vest 3,000 annualy
over four years.
-----------------------------------------------------------------------------
Robert M. Loeffler 15,000 3,000 vest on the date of grant and
the remainder to vest 3,000 annualy
over 4 years.
-----------------------------------------------------------------------------
Kenneth S. McCormick 15,000 3,000 vest on the date of grant and
the remainder to vest 3,000 annualy
over 4 years.
-----------------------------------------------------------------------------
III. Option Exercises and Year-End Table
The following table sets forth information with respect to the options held
by the persons named in the Summary Compensation Table above as of December 31,
1999. No options were exercised by such persons during the fiscal year ended
December 31, 1999 and none of the options held by such persons at December 31,
1999 had exercise prices which were below the market price of the Common Stock
as of that date. All of such options had an exercise price of $12.80 per share
except for options held by Mr. Cotter to purchase 265,232 shares, which have an
exercise price of $14.00 per share.
13
<PAGE>
Fiscal Year-End Option Values
Number of
Unexercised Options
at 12/31/99
------------
Name # Exercisable/Unexercisable
James J. Cotter(1) 320,232 / 405,000
S. Craig Tompkins 15,000 / 5,000
Robert F. Smerling 23,438 / 11,562
James A. Wunderle(2) 12,750 / 4,250
Ellen Cotter 7,500 / 2,500
(1) All of the options granted to executive officers other than Mr. Cotter were
from the 1997 Plan. Shareholders of the Company approved a grant of options
on September 16, 1997 to James J. Cotter, Chairman of the Board of
Directors of the Company (the "Cotter Options"). The Cotter Options are
divided into two groups: options (the "Basic Options") to purchase up to
110,000 shares of Common Stock, which become exercisable in four equal
installments commencing one year form the date of grant; and options (the
"Convertible Preferred Options") to purchase up to 260,000 shares of Common
Stock, which become exercisable over a similar vesting schedule, but only
in proportion to the number of shares of Convertible Preferred Stock which
are converted into Common Stock. At December 31, 1999, Mr. Cotter also held
options to purchase up to 90,000 shares of Common Stock, the exercisability
of which were subject to certain conditions precedent, which were never
satisfied. These options expired unexercised in April 2000. All shares
granted under the Cotter Options have an exercise price of $12.80 per
share.
(2) Mr. Wunderle did not exercise his options and all of his options have now
expired.
Compensation Committee Interlocks and Insider Participation
Mr. John W. Sullivan, Chairman of the Compensation Committee until May 28,
1999, served as the President and Chief Executive Officer of the Company from
1981 through 1986. Mr. Edward L. Kane, who served as a member of the
Compensation Committee until December 1999, was President of the Company from
December 1991 through January 1993. Messrs. Cotter and Tompkins each have a 1.6%
beneficial interest and the Company has a 33.4% beneficial interest in BRI.
Messrs. Cotter and Tompkins are directors and executive officers of Craig and
Citadel which collectively own securities representing approximately 83% of the
voting power of the Company. Mr. Cotter, as a result of his direct ownership and
proxies, votes Craig Corp. securities representing approximately 51% of the
voting power of the Company.
Certain Relationships and Related Transactions
Certain Ownership and Management Overlaps
Craig Corp., a publicly traded company listed on the New York Stock
Exchange, owns Common Stock and Convertible Preferred Stock comprising 78% of
the voting securities of the Company. Mr. Cotter owns capital stock of Craig
Corp. representing 33.1% of the voting securities and is the general partner of
a limited partnership that is a partner with Michael R. Forman and an affiliate
of the Decurion Corporation in an investment partnership which owns capital
stock comprising 17.5% of Craig's voting securities. Mr. Cotter holds a proxy to
vote the Craig Corp. securities owned by Hecco.
14
<PAGE>
Craig and the Company own approximately 16.4% and 31.7%, respectively, of
the outstanding Class A Non-Voting Common Stock of CHC and approximately 17.3%
and 31.7%, respectively, of the Class B Voting Common Stock of CHC.
BRI was formed as a subsidiary of Citadel and spun off to its stockholders
(including Reading and Craig) in December 1997. The Company owns 33.4% of BRI,
and Craig owns 16% of BRI. Cecelia Packing, a company owned by Mr. Cotter
("Cecelia"), and a trust of which Mr. Tompkins is the trustee for the benefit of
one of his children (the "Trust"), each owns shares representing an additional
1.6% of the outstanding shares of BRI, or an aggregate total of 3.2% of the
outstanding shares of BRI. Collectively, the Company, Craig and Cecelia and the
Trust own a majority of the outstanding shares of BRI. The Board of Directors of
BRI consists of two directors of Craig Corp., including Margaret Cotter, James
J. Cotter's daughter and a member of Visalia. The Company, as a result of the
ownership of both BRI and CHC securities, owns approximately 39.5% of the
Agricultural Partnerships
The Company utilizes the services of certain Citadel employees for real
estate advisory services. The Company pays Citadel for such services at a rate
which is believed to approximate the fair market value of such services. During
1999, the amount paid to Citadel for such services totaled $215,000. The
Company, Craig and Citadel are currently working on a plan to centralize all
administrative functions for the three companies in Los Angeles. Upon
consummation of this centralization, it is contemplated that all general and
administrative personnel will be employees of the Craig, and that the costs of
such personnel will be allocated on the business and affairs of the three
companies. Following a review of the time spent by Messrs. Cotter and Tompkins
and certain administrative employees of the Craig, the Board of Directors of the
Company determined it appropriate to reimburse Craig in the amount of $580,000
with respect to services performed by these individuals and administrative
employees for the benefit of the Company. There was no similar reimbursement
with respect to 1998.
James J. Cotter, the principal stockholder of Craig Corp., is Chairman of
the Board of Directors of the Company, Craig Corp. and CHC and the Chief
Executive Officer of CHC. Mr. Cotter also serves as the managing director of
each of the Agricultural Partnerships and of Farming and is the managing member
of Visalia LLC.
S. Craig Tompkins, the Vice Chairman of the Board of Directors and the
Corporate Secretary of the Company, is also a director and the President of
Craig Corp. and the Vice Chairman of the Board and Corporate Secretary of CHC.
Mr. Tompkins also serves as the President of Citadel Agriculture, Inc., a wholl
y-owned subsidiary of CHC, and as a managing director of each of the
Agricultural Partnerships and Farming, ands serves, for administrative
convenience, as the assistant secretary of BRI and Visalia.
Andrzej Matyczynski, the Chief Administrative Officer of the Company, is
also the Chief Financial Officer of the Company, Craig Corp. and CHC.
Ellen Cotter, Vice President of Business Affairs of the Company and
President of Reading Australia, is also the Vice President -Business Affairs of
Craig Corp.
Robert Loeffler, a member of the Board of Directors of the Company and the
Chairman of the Audit Committee of the Company, also serves as a director and a
member of the Audit committee of each Craig Corp. and CHC.
15
<PAGE>
Certain Related Party Transactions
Agricultural Activities
On December 31, 1997, Citadel Agricultural, Inc. (a wholly owned subsidiary
of Citadel), BRI and Visalia (a limited liability company owned 1% by Mr. Cotter
and 99% by certain members of his family) entered into three general
partnerships (the "Agricultural Partnerships"). The Agricultural Partnerships
are owned 40%, 40% and 20% by the above referenced entities. On December 31,
1997, the Agricultural Partnerships acquired an agricultural property (purchase
price amounting to approximately $7.6 million) principally improved with citrus
trees. The Agricultural Partnerships currently use Farming to farm their
properties. Farming is owned 80% by Citadel and 20% by Visalia, and receives in
consideration of its services reimbursement of its costs plus 5% of the net
revenues of the farming operations after picking, packing and hauling. Farming,
in turn, contracts with Cecelia for certain bookkeeping and administrative
services, for which it pays a fee of $6,000 per month. Cecelia also packs fruit
for the Agricultural Partnerships. The acquisition by the Agricultural
Partnerships of the agricultural property was financed by a ten year purchase
money mortgage in the amount of $4.05 million, a line of credit from Citadel and
pro-rata contributions from the partners of the Agricultural Partnerships.
Through its holdings in BRI and Citadel, the Company owned approximately 26% of
the Agricultural Partnerships at December 31, 1997.
In December 1998, the Agricultural Partnerships suffered a freeze, which
destroyed the 1998-1999 crop. As a consequence of the freeze, the Agricultural
Partnerships had no funds, other than partner contributions, with which to repay
the drawdowns on the $1,850,00 line of credit ("Line of Credit") from Citadel.
Furthermore, the Agricultural Partnerships generally had no source of funding,
other than their partners, for the cultural expenses needed for production of
the 1999-2000 crops, or to fund crop-planting on their undeveloped acreage.
Since September 1999, the Agricultural Partnerships have been funded on an
80/20 basis by Citadel and Visalia, pursuant to loans made by the two entities.
In light of this funding arrangement, on February 24, 2000, the line of credit
was increased to $3,250,000, of which $3,170,000 had been drawn as of March 31,
2000. In addition, during 1999 Citadel and Visalia each guaranteed the
obligations of the Agricultural Partnerships under certain equipment leases, up
to $220,000. BRI has no funds or resources with which to provide such funding
required by the Agricultural Partnerships.
Although the Big 4 Properties produced substantial orange crops for the
1999-2000 season, market conditions were unfavorable, resulting in a loss on
operations. It is projected that the crops produced by Big 4 Properties will not
produce sufficient cash flow to cover the costs of producing the 2000-2001 crop.
All capital improvements scheduled for 2000 have been cancelled. The only source
of working capital for the Agricultural Partnerships continues to be Citadel and
Visalia. Citadel is currently reviewing the commercial viability of its ongoing
involvement with the Big 4 Properties and the Agricultural Partnerships.
Domestic Cinema Exhibition and Live Theatre Activities
The Company owns 33.33% of Angelika Film Centers LLC ("AFC"), which owns
and operates the Angelika Film Center ("Angelika") in New York City. National
Auto Credit, a Delaware corporation whose stock is traded over the counter
("NAC") owns 50% of AFC and the remaining 16.67% is owned by Sutton Hill
Associates ("Sutton Hill"), a partnership owned in equal parts by James J.
Cotter and Michael Forman. City Cinemas, which is also owned by Messrs. Cotter
and Forman, manages the Angelika and two other cinemas operated by the Company
pursuant to management agreements. Management fees paid to City Cinemas pursuant
to the management agreements totaled $448,000 in 1999. Robert F. Smerling,
President of the Company, serves in the same positions with City Cinemas.
16
<PAGE>
The Company and City Cinemas entered into an Executive Sharing Agreement
pursuant to which Mr. Smerling provided services to both the Company and City
Cinemas and the cost of such services was shared by the parties, if such costs
could not be allocated directly to such parties.
In December 1998, the Company and Sutton Hill entered into an Agreement in
Principle (the "Agreement in Principle") for the Company to lease and operate
four cinemas and to manage three other cinemas all of which are located in
Manhattan and which together constitute the City Cinemas circuit. In addition
the Agreement in Principle provides for the Company to acquire Sutton Hill's
interest in AFC and for the acquisition by the Company of three live "Off
Broadway" theaters also located in Manhattan. In May 2000, Citadel and the
Company entered into an agreement in which the Company assigned its rights, and
Citadel assumed the Company's obligations, under the Reading Agreement in
Principle, subject to certain modifications agreed to by Messrs. Cotter and
Forman. Under that assignment, Citadel reimbursed the Company for a deposit of
$1,000,000 that it had made under the Reading Agreement in Principle.
The modified Reading Agreement in Principle provided, among other things,
for Citadel to sublease, from Sutton Hill Associates ("Sutton Hill," a
partnership owned equally by Messrs. Cotter and Forman) or a subsidiary, and
operate four cinemas, and manage three other cinemas then managed by City
Cinemas Corporation (a company also owned by Messrs. Cotter and Forman), all of
which are located in Manhattan (New York City) and which together are known as
the "City Cinemas Circuit."
On July 28, 2000, the Citadel and Sutton Hill reached agreement on
definitive documentation for the transactions contemplated by the modified
Reading Agreement in Principle (collectively, the "Sutton Hill Transactions").
The agreements and other documents relating to the Sutton Hill Transactions (the
"Sutton Hill Transaction Documents") will be delivered on behalf of the parties
upon receipt by Sutton Hill of certain third-party consents. The parties
initially set August 25, 2000 as the date for Sutton Hill to receive such
consents, but by mutual agreement have extended the deadline to September 8,
2000. Although the parties do not anticipate any further extensions, absent a
material adverse change, it is likely that the parties would agree to extend the
deadline if the same should by required to obtain the third-party consents. The
Sutton Hill Transactions, once effective, will include:
. An operating sublease ("Operating Lease") between Citadel
Cinemas, Inc. ("Citadel Cinemas"), a wholly-owned subsidiary of
Citadel and Sutton Hill Capital, L.L.C. ("SHC"), a wholly-owned
subsidiary of Sutton Hill. Under the Operating Lease, Citadel,
through Citadel Cinemas, will sublease from SHC four Manhattan
theatres (the "City Cinemas Theatres"), for a term of ten years
at an annual rent of $3,217,500, subject to certain cost-of-
living and other adjustments. In addition, Citadel will be
responsible for the rent and other payments due under the
underlying leases, which currently aggregate approximately
$990,000 per year (including $330,000 payable to affiliates of
Mr. Forman). At the end of the initial ten-year term, Citadel
will have options to either purchase the underlying leases for
the City Cinemas Theatres, for a cash purchase price of $44
million, or renew the Operating Lease at the then fair market
rental. Citadel will pay $5,000,000 in cash (including the
deposit referred to above) in consideration of the option, which
will be a credit against the purchase price if the option is
exercised. In addition, if Citadel exercises the purchase option,
Citadel will also have the option to purchase from an affiliate
of Mr. Forman, for an additional $4,000,000 in cash, the fee
interests underlying two of the City Cinemas Theatres.
. An agreement between Citadel and City Cinemas, for Citadel to act
as submanager for three cinemas for which City Cinemas is the
manager. Also, City Cinemas will assign to Citadel management
agreements, between the Company and City Cinemas, under which
City Cinemas manages the Angelika Film Center & Cafe and certain
other theatres
17
<PAGE>
controlled by the Company.
. The purchase by Citadel from Messrs. Cotter and Forman of a one-
sixth interest in Angelika Film Centers, LLC ("AFC"), which owns
and operates the Angelika Film Center Cafe. In payment for that
interest, Citadel will issue notes in the aggregate principal
amount of $4,500,000, which will bear interest at the rate of
8.25%, payable quarterly, and mature two years from July 28,
2000.
. A credit facility (the "SHC Credit Facility"), under which SHC
may borrow up to $28,000,000 from Citadel. Borrowings under the
SHC Credit Facility will bear interest at the rate of 8.25%
(subject to certain adjustments), payable quarterly, and will
mature on December 1, 2010 or, if earlier, the closing of
Citadel's purchase of the leases for the City Cinemas Theatres on
exercise of its purchase option under the Operating Lease.
Citadel will not be obligated to make such loans prior to July
28, 2007, although Citadel has certain options to accelerate that
date. The indebtedness under the SHC Credit Facility will be
secured by a pledge of the membership interests in SHC and will
be subordinate to $11 million of indebtedness of SHC to an
affiliate of Mr. Forman.
. The OBI Merger which will be consummated by merging OBI into
Citadel Off Broadway Theatres, Inc., a wholly-owned subsidiary of
the Company, which will be the surviving corporation, provided
the stockholders of CHC approve the issuance of CHC Common Stock
to acquire OBI. CHC will issue up to 2,625,820 shares of Class A
Non-Voting Common stock and 656,455 shares of Class B Voting
Common stock in the OBI Merger. If the issuance of shares is not
approved, the OBI Merger will be completed by CHC paying
$10,000,000 cash, less certain expenses.
. A first of right negotiation to acquire the remainder of the
Company's domestic cinema assets.
The Operating Lease, the AFC purchase agreement, the SHC Credit Facility,
the OBI Merger, and related matters (collectively, the "Sutton Hill
Transactions") were negotiated and approved by the CHC's Conflicts Committee,
which received an opinion of its financial advisor as to fairness of the Sutton
Hill Transactions to CHC.
Certain Family Relationships
The Company has employed Ellen Cotter as Vice President, Business Affairs
since April 1998, and she serves as a director and officer of various of its
subsidiaries. Ms. Cotter has been an employee of Craig Corp. since August 1996.
Ms. Cotter has also served as the Secretary/Treasurer of Citadel Agricultural,
Inc. since December 1997. She is not currently paid any compensation with
respect to her services for Craig or Citadel Agricultural, Inc. Ms. Cotter is
the daughter of Mr. James J. Cotter, Chairman of the Board of Directors, a
member of Visalia and a limited partner in James J. Cotter Ltd. In 1999, Ms.
Cotter received compensation for her services to the Company in the amounts of
$150,000 in salary and other compensation of $4,800 in the form of contributions
to the Company's Employee Retirement Savings Plan. In 1997 Ms. Cotter was
granted options for 10,000 shares of the Company's stock.
Margaret Cotter, also a daughter of Mr. Cotter, is a director of Craig
Corp. and BRI, a member of Visalia and a limited partner of James J. Cotter Ltd.
She is also President of Off Broadway Investments, Inc. and the Vice President
of Union Square Management, Inc. ("Union Square"), a company which provides live
theatre management services to the Company. The Company paid Union Square fees
of
18
<PAGE>
$25,000 with respect to services rendered in 1999. It is contemplated that
Ms. Cotter will continue to serve as the President of Off Broadway Investments,
Inc. following its acquisition by Citadel.
Citadel owns stock representing a 15% interest in Gish Biomedical, Inc., a
publicly traded company whose securities are quoted on the Nasdaq National
Market ("Gish"). The stock was acquired principally between March and July 1999.
On September 15, 1999, James J. Cotter, Jr., the son of Mr. Cotter, was elected
to the Board of Directors of Gish. The Directors of Gish are currently serving
without compensation.
Certain Miscellaneous Transactions
In 1996 and 1997 the Company loaned Robert Smerling, President, a total of
$70,000 all of which remains outstanding. The non-interest bearing loan is
payable upon demand. In December 1998, the Company agreed to guarantee a bank
loan to the principal shareholder of Union Square Management, Inc.
19
<PAGE>
Compensation Committee of the Board of Directors
------------------------------------------------
Report on Compensation
At the present time, the Compensation Committee of the Board of Directors
("Compensation Committee") of the Company is comprised of two directors, Mr.
Kenneth McCormick (Chairman) and Scott A. Braly. The following is the
committee's report:
General Statement: The Company is endeavoring to expand its operations in
the Beyond-the-Home segment of the entertainment industry principally
through the acquisition and/or development of multiplex cinemas and cinema
based entertainment centers. In light of this expansion oriented business
plan, the Compensation Committee recognizes that compensation paid to
executives may be disproportionate to revenues pending full deployment of
the Company's cash resources.
The Compensation Committee recognizes that, to successfully implement and
consummate this growth oriented business strategy, the Company must attract
and retain highly skilled executive employees capable not only of
effectively administering existing operations, but also of building
systems, developing opportunities and expanding operations on an
international basis. Since the Company's line of business is expanding, the
Compensation Committee views the scope of responsibilities of the
individuals occupying executive positions in the Company and the success of
these individuals in carrying out their responsibilities to be the most
relevant factor in determining compensation rather than comparisons with
businesses in similar historical lines of business or which may currently
be of a similar revenue size. Other factors considered in establishing
compensation of the Company's officers include qualitative factors relating
to the Company's progress in achieving its business plan, personal
performance and the amount which must be paid in the market in order to
attract management capable of achieving the Company's business plan.
In 1997, the Board of Directors decided that the establishment of employee
compensation levels should, in the first instance, be the responsibility of
management and that the establishment of compensation arrangements with
respect to senior executives should, again in the first instance, be the
responsibility of the Chairman. Under this approach, the Compensation
Committee, and the Board of Directors serves principally as a sounding
board for the Chairman, as requested, and focuses its independent attention
on the job performance of the Chairman and on the compensation to be paid
to the Chairman.
Domestic Compensation Plan: In 1999, the Chairman informed the Compensation
Committee that he did not intend to recommend any increase in base salaries
or payment of any bonuses for senior executive officers residing in the
United States until the Company's financial performance improved.
Accordingly, no such increases or bonuses were paid with respect to 1999.
In the past, the Compensation Committee has been advised by the Chairman
that base salary was based on the Chairman's view of comparable
compensation for positions requiring similar skills and capabilities and
reflected the performance of the executive in fulfilling his or her duties.
Base salary does not directly reflect the financial performance of the
Company. In addition, officers and other employees may be awarded bonuses
in the discretion of the Chairman, subject to the review of the
Compensation Committee in
20
<PAGE>
the case of bonuses paid to senior executive officers. Such bonuses are
typically totally discretionary, and not a part of any employment
agreement. In the past, the Compensation Committee also has been advised by
the Chairman that factors considered have included the extent to which the
duties of particular officers have required time commitments materially
beyond those contemplated at the time the base compensation for such
officer was established, the identification and successful acquisition or
development, as the case may be, of new business opportunities, resolution
of significant litigation, and effectiveness in promoting the Company's
business plan.
Australian Compensation Plan: The compensation of the Company's Australia
based executives is also determined by the Chairman. Currently, there is no
general plan in place with respect to the bonuses to be paid to such
individuals, however, the Company has from time to time negotiated specific
bonuses with individual executives tied to the achievement of specific
goals. Also, certain executives have, under their respective contracts with
Reading Australia, an incentive compensation arrangement under which he is
entitled to receive a percentage of the increased value of Reading
Australia, after deduction for equity contributed by the Company and debt,
over the term of his tenure with the Company. Compensation and bonus levels
for Australia based executives were established by Mr. Cotter for Fiscal
1999.
Compensation of Chief Executive Officer: Mr. Cotter is the principal
executive officer of the Company and has therefore served in a capacity
similar to the chief executive officer of the Company. At the time Mr.
Cotter became the Chairman of the Board of Directors in December 1991, the
Board of Directors approved a resolution which provided that the Chairman
of the Board is to receive an annual retainer of $150,000. In 1992, Mr.
Cotter was granted options representing approximately 5% of the outstanding
common shares of the Company, priced at $14.00 per share. The amount of the
retainer and the stock options were based upon the Board's belief that
compensation in this amount was appropriate for an executive of Mr.
Cotter's experience and background and his anticipated role in the
redirection of the Company's operations. Payment of such retainer is not
dependent upon or related to the financial performance of the Company. The
base compensation paid to Mr. Cotter has not been reviewed or revised since
1991, however, the stockholders of the Company did approve a grant to Mr.
Cotter of additional options in 1997, which grant was designed to maintain
Mr. Cotter's interest in the Company at the 5% level and reflect the
issuance of additional shares and convertible securities by the Company in
1996. It is not unlikely that a review of Mr. Cotter's compensation package
will be forthcoming in the near term. No assurances can be given that the
Company will be able to continue to retain Mr. Cotter's services at his
current compensation levels.
Kenneth S. McCormick
Scott A. Braly
21
<PAGE>
Performance Graph
The following line graph compares the cumulative total stockholder return
on the Company's Class A Common Stock from December 31, 1994 through October 15,
1996 and Reading Entertainment, Inc.'s Common Stock from October 16, 1996
through December 31, 1998 against the cumulative total return of the Center for
Research in Securities Prices ("CRSP") Total Return Index for the Nasdaq
National Market (U.S. Companies), the cumulative total return of the Company's
current peer group, the CRSP Total Return Index for Nasdaq, New York Stock
Exchange ("NYSE"), and American Stock Exchange ("AMEX") Companies in the SIC
Group Code 7830-7839 (motion picture theaters and allied businesses), and the
cumulative total return of the Company's former peer group, the CRSP Total
Return Index for Nasdaq Companies in the SIC Group Code 6500-6599 (real estate)
over the same period. The graph assumes a one hundred dollar ($100) investment
on December 31, 1994 and reinvestment of all dividends on a daily basis.
The Company has in the past measured its performance against that of the
real estate industry in the compilation of this graph; that information is
presented here for continuity to prior periods. In light of recent developments
in the direction of the Company and its entry into the "Beyond-the-Home" segment
of the entertainment industry, management believes current performance is more
appropriately compared to the new peer group and has chosen to use results from
all the major markets in order to present as comprehensive a comparison as is
available.
FIVE YEAR - CUMULATIVE TOTAL RETURNS
Performance Graph for Reading Entertainment, Inc.
[PERFORMANCE GRAPH APPEARS HERE]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Symbol CRSP Total Returns Index for: 12/1994 12/1995 12/1996 12/1997 12/1998 12/1999
------ ---------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
[ ] READING ENTERTAINMENT, INC. 100.0 82.0 92.1 114.6 70.8 51.7
* Nasdaq Stock Market (US Companies) 100.0 141.3 173.9 213.1 300.4 557.4
. NASDAQ Stocks (SIC 65000-6599 US Companies) 100.0 109.5 130.4 168.7 111.7 332.4
Real estate
* NYSE/AMEX/Nasdaq Stock Market (US Companies) 100.0 136.3 165.3 216.4 267.2 334.6
. NYSE/AMEX/NASDAQ Stocks (SIC 7830-7839 US Companies) 100.0 125.7 143.6 163.5 164.7 84.6
Motion Picture Theatres
</TABLE>
--------------------------------------------------------------------------------
22
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's financial statements for the year ended December 31, 1999
were examined by Deloitte & Touche LLP, certified public accountants. The
Company has been advised by Deloitte & Touche LLP that none of its members has
any financial interest in the Company. The Company expects that a
representative of Deloitte & Touche LLP will attend the Annual Meeting of
Stockholders and will have the opportunity to make a statement if he or she
desires to do so and to respond to appropriate questions.
ANNUAL REPORT
Copies of the Company's Annual Report for the year ended December 31, 1999
(Form 10K), Amendment No. 1 the Annual Report (Form 10K/A) and the Quarterly
Report for the six-month period ending June 30, 2000 (Form 10Q) are enclosed.
STOCKHOLDER PROPOSALS
Any stockholder who, in accordance with and subject to the provisions of
the proxy rules of the SEC, wishes to submit a proposal for inclusion in the
Company's proxy statement for its 2001 Annual Meeting of Stockholders, must
deliver such proposal in writing to the Secretary of the Company at the
Company's principal executive offices at 550 South Hope Street, Suite 1800, Los
Angeles, CA 90071, no later than May 2, 2001. If the Company does not receive
notice of a stockholder's proposal prior to July 17, 2001, the persons named in
management's proxy will vote the shares represented thereby in accordance with
the judgment of management on any such stockholder proposal.
The Board of Directors will consider written nominations for directors from
stockholders. Nominations for the election of directors made by the
stockholders of the Company must be made by written notice delivered to the
Secretary of the Company at the Company's principal executive offices not less
than 120 days prior to the first anniversary of the immediately preceding annual
meeting of stockholders at which directors are to be elected. Such written
notice must set forth, among other things, the name, age, address, principal
occupation or employment, the number of shares of the Company's Common Stock
owned by such nominee and such other information as is required by the proxy
rules of the SEC with respect to a nominee of the Board of Directors.
Nominations not made in accordance with the foregoing procedure will not be
valid.
23
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the Notice of Annual Meeting,
but if any matters are properly presented, it is the intention of the persons
named in the accompanying proxy to vote on such matters in accordance with their
judgment.
By Order of the Board of Directors,
Robert F. Smerling, President
Dated: August 30, 2000
24
<PAGE>
PROMPTLY COMPLETE AND RETURN THE
PROXY/VOTING INSTRUCTION FORM BELOW
IN THE ENVELOPE PROVIDED
Carefully fold & detach along perforation
--------------------------------------------------------------------------------
PROXY/VOTING INSTRUCTION CARD
READING ENTERTAINMENT, INC.
The undersigned hereby appoints James J. Cotter, S. Craig Tompkins and Robert
F. Smerling and each or any of them, proxies of the undersigned, with full power
of substitution, to vote all of the shares of Reading Entertainment, Inc. (the
"Company") which the undersigned may be entitled to vote at the Annual Meeting
of Shareholders of the Company to be held at 1:30 p.m., Los Angeles time, on
September 12, 2000, at the Regal Biltmore Hotel, 506 S. Grand Avenue, Los
Angeles, California for the following purposes and any adjournment thereof, as
follows:
1. Election of Directors (Mark only one box)
<TABLE>
<S> <C>
[_] Vote FOR all nominees listed below. [_] Vote WITHHELD from all nominees.
(except as marked to the contrary below).
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the following list:
James J. Cotter, Scott A. Braly, Robert F. Loeffler, Kenneth S.
McCormick, Robert F. Smerling and S. Craig Tompkins.
2. Non-binding stockholder proposal forwarded by William Steiner
(beneficial owner of 600 shares of the Company's Common Stock) and
referred to in the Proxy Statement as the "Steiner Proposal".
<TABLE>
FOR AGAINST ABSTAIN
<S> <C> <C>
[_] [_] [_]
</TABLE>
(continued, and to be signed, on other side)
<PAGE>
PROMPTLY COMPLETE AND RETURN THE
PROXY/VOTING INSTRUCTION FORM BELOW
IN THE ENVELOPE PROVIDED
Carefully fold & detach along perforation
--------------------------------------------------------------------------------
(continued from other side)
THIS PROXY WILL BE VOTED AS SPECIFIED. IF A CHOICE IS NOT SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR AND AGAINST THE NON-BINDING
STOCKHOLDER PROPOSAL FORWARDED BY WILLIAM STEINER (BENEFICIAL OWNER OF 600
SHARES OF THE COMPANY'S COMMON STOCK) AND REFERRED TO THE PROXY STATEMENT AS THE
"STEINER PROPOSAL."
THIS PROXY SHOULD BE DATED, SIGNED BY THE SHAREHOLDER EXACTLY AS SUCH
STOCKHOLDER'S NAME APPEARS ON SUCH STOCKHOLDER'S STOCK CERTIFICATE AND
RETURNED PROMPTLY.
PLEASE SIGN, DATE,
DETACH AND RETURN
THIS PROXY, USING THE
ENCLOSED POSTAGE
PREPAID REPLY ENVELOPE.
Dated ______ SIGN HERE ______________________________________
When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If the signer is a
corporation, sign the full corporate name by duly authorized
officer.
