-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E6pbknsAyXHZQ8pLsgbu3K5pVnfdcN3QfmVyKirGXfXoguJ6HWTZSr8Gkv2eER3C LZ3jsWJe2LGnf5CWhm0zzw== 0001036050-98-000821.txt : 19980513 0001036050-98-000821.hdr.sgml : 19980513 ACCESSION NUMBER: 0001036050-98-000821 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: READING ENTERTAINMENT INC CENTRAL INDEX KEY: 0001023993 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830] IRS NUMBER: 232859312 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-14504 FILM NUMBER: 98616549 BUSINESS ADDRESS: STREET 1: ONE PENN SQ WEST STREET 2: 30 S 15TH ST STE 1300 CITY: PHILADELPHIA STATE: PA ZIP: 19102-4813 BUSINESS PHONE: 2155693344 MAIL ADDRESS: STREET 1: ONE PENN SQ WEST STREET 2: 30 S 15TH ST STE 1300 CITY: PHILADELPHIA STATE: PA ZIP: 19102-4813 10-K/A 1 FORM 10K/A AMENDMENT #2 FORM 10-K/A Amendment No. 2 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ............... to ............... Commission file number 333-13413 READING ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) Delaware 23-2859312 (State of incorporation) (I.R.S. Employer Identification No.) 30 South Fifteenth Street Suite 1300 Philadelphia, Pennsylvania 19102 (Address of principal executive offices) (Zip Code) Registrant's telephone number: 215-569-3344 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.001 Par Value Philadelphia Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 Par Value Title of class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] As of March 26, 1998, 7,449,364 shares of Common Stock were outstanding and the aggregate market value of voting stock held by nonaffiliates of the Registrant was approximately $27,204,733.38. Part III, Items 10-13 are amended in their entirety as set forth herein. PART III Item 10. Directors and Executive Officers of the Registrant Name Age Position ---- --- -------- James J. Cotter (1) 59 Chairman of the Board of Directors S. Craig Tompkins 47 Vice Chairman of the Board of Directors and Director Robert F. Smerling 63 President and Director Gregory R. Brundage (2)(4) 54 Director Edward L. Kane (1)(2)(3) 60 Chairman of the Audit and Finance Committee of the Board and a Director John W. Sullivan (1)(3)(4) 63 Chairman of the Compensation Committee of the Board and a Director Albert J. Tahmoush (3)(4) 76 Chairman of the Conflicts Committee of the Board and a Director B. John Rochester 54 Chief Executive Officer, Australian Cinema Operations and Reading Australia Pty Ltd. James A. Wunderle 46 Executive Vice President, Chief Financial Officer and Treasurer Ellen M. Cotter 32 Vice President, Business Affairs John Foley 47 Vice President, Marketing Charles S. Groshon 44 Vice President, Finance Mark A. Novell 35 Controller -------------- (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 shareholders or by the Board of Directors in the case of vacancies which occur between meetings of the shareholders. (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. During 1997 the Audit and Finance Committee held one meeting. -1- (3) Member of the Compensation Committee. The Compensation Committee is responsible for recommending to the Board of Directors remuneration for senior management and officers of the Company, recommending adoption of compensation plans and the granting of options under the Company's stock option plans. The Compensation Committee held six meetings during 1997. (4) Member of the Conflicts Committee. The Conflicts Committee was formed in order 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. The Conflicts Committee held one meeting in 1997. Mr. Cotter has been Chairman of the Board of Directors since December 1991, Chairman of the Company's Executive Committee since March 1993 and a director since September 1990. Mr. Cotter has been Chairman of the Board of Craig since 1988 and a director since 1985. Mr. Cotter has been a director of Citadel since 1991, became acting Chairman in October of 1991 and was named Chairman in 1992. From October 1991 to June 1992, Mr. Cotter also served as the acting Chairman of Citadel's wholly owned subsidiary, Fidelity Federal Bank, FSB ("Fidelity"), and served as a director of Fidelity until December 1993. Mr. Cotter is the Chairman and a director of Citadel Agricultural, Inc. ("CAI"), a wholly owned subsidiary of Citadel; the Chairman and a member of the Management Committee of each of the agricultural partnerships which constitute the principal assets of CAI (the "Agricultural Partnerships"); and the Chairman and a member of the Management Committee of Big 4 Farming LLC ("Farming"), a farm management company, 80% owned by Citadel. From 1988 through January 1993, Mr. Cotter also served as the President and a director of Cecelia Packing Corporation ("Cecelia") (a citrus grower and packer), a company wholly owned by Mr. Cotter, and is the Managing Director of Visalia LLC ("Visalia"), which holds a 20% interest in each of the Agricultural Partnerships and a 20% interest in Big 4 Farming LLC. Mr. Cotter has been a director and Chief Executive Officer of Townhouse Cinemas Corporation (motion picture exhibition) since 1987, Executive Vice President and a director of The Decurion Corporation (motion picture exhibition) since 1969 and a director of Stater Bros. Holdings Inc. and its predecessors from 1987 until September 1997. Mr. Cotter is also a director and Executive Vice President of Pacific Theatres, a wholly owned subsidiary of Decurion. Mr. Smerling has been President of Reading Entertainment since January 1997. Mr. Smerling has served as President of several subsidiaries of the Company since November 1994. Mr. Smerling also serves as the President of CineVista. Mr. Smerling served as president of Loews Theater Management Corporation, a subsidiary of Sony Corporation, from May 1990 until November 1994. Mr. Smerling also serves as President and Chief Executive Officer of City Cinemas, a motion picture exhibitor located in New York City, New York. 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. Tompkins has been Vice Chairman since January 1997. Mr. Tompkins has been a Director of the Company since March 1994 and was President of the Company from March 1994 through December 1996. Mr. Tompkins is also President and Director of Craig and has served in such positions since March 1, 1994. Prior thereto, Mr. Tompkins was a partner in the law firm of Gibson, Dunn & Crutcher. Mr. Tompkins has been a director of Citadel since May 1994 and a director of G&L Realty Corp., a New York Stock Exchange listed REIT (Real Estate Investment Trust), since December 1994. Since July 1995, Mr. Tompkins has been the Vice Chairman of Citadel, and currently serves as that company's Secretary/Treasurer and Principal Accounting Officer. Mr. Tompkins is also President and a Director of CAI, a member of the Management Committee of each of the Agricultural Partnerships and of Big 4 Farming LLC, and serves for administrative convenience as an Assistant Secretary of Visalia and Big 4 Ranch, Inc. (a partner with CAI and Visalia in each of the Agricultural Partnerships). Mr. Rochester has been Chief Executive Officer of Reading Australia since November 1995. From 1990 through 1995, Mr. Rochester was the Managing Director of Television & Media Services Ltd. (formerly Hoyts Entertainment Ltd.). He also served in several other executive offices for that organization since 1987. Mr. Wunderle has been Chief Financial Officer since January 1987 and Executive Vice President, Treasurer, and Chief Financial Officer since December 1988. He has been Treasurer since March 1986. Ms. Cotter has been the Vice President, Business Affairs of the Company since March 1998. Ms. Cotter has held the same position with Craig since August 1996. Prior thereto, she was an attorney specializing in corporate law with White & Case, a New York law firm. Ms. Cotter is the daughter of Mr. James J. Cotter. Ms. Cotter is a member -2- of Visalia and a limited partner in James J. Cotter, Ltd. (Mr. Cotter is a general partner), which is a general partner of Hecco Ventures I, a privately held investment partnership. Mr. Groshon has been Vice President of the Company since December 1988. He was an internal auditor with the Company from August 1984 until December 1988, and a staff accountant prior thereto. Mr. Foley has been an officer of the Company since May 1997. Mr. Foley also has been an officer of City Cinemas since January 1997. Prior to joining City Cinemas and the Company, Mr. Foley was the President of Distribution for Miramax, where he, among other things, developed and implemented the distribution plan for "The English Patient," the winner of nine Academy Awards and one of the most profitable art films of all time. Prior to joining Miramax in 1994, Mr. Foley was the President of Distribution for MGM/UA from 1989 through 1993. Mr. Novell has been Controller of the Company since March 1998. Mr. Novell served as Controller for Einstein/Noah Bagels, L.P., a franchisee for the east coast of the United States, from November 1996 to January 1998. Prior thereto, Mr. Novell served as Controller for Expert Software, Inc. (a consumer software publisher/distributor). Mr. Novell is a Certified Public Accountant. The Company receives consulting services from the following individual; a full-time employee of an affiliated company, Citadel: Mr. Wesson has been the President and Chief Executive Officer of Citadel since August 1994. Prior to his employment by Citadel in 1993, Mr. Wesson was the Chief Executive Officer of Burton Properties Trust Inc., the U.S. real estate subsidiary of The Burton Group PLC, from 1989. Reading owns 23.5% of the outstanding Common Stock of Citadel, and receives real estate consulting services from Citadel pursuant to an agreement with that company. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's officers, directors and persons who own more than 10% of the Company's Common Stock to file reports to ownership and changes in ownership with the Securities Exchange Commission (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, 1997, all filing requirements applicable to its reporting persons were complied with except as follows: each of the Company's directors (Messrs. Cotter, Smerling, Tompkins, Brundage, Kane, Sullivan and Tahmoush) and each of the Company's officers (Messrs. Wunderle, Groshon, Foley and Ms. Mahady) who received options in 1997 did not file timely Form 5's disclosing the resultant change in beneficial ownership. All of the directors and officers have since filed the required reports with the Securities and Exchange Commission. -3- Item 11. Executive Compensation I. SUMMARY COMPENSATION TABLE The following table shows, for the years ending December 31, 1997, 1996 and 1995, 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 $100,000 in all capacities in which they served:
Long Term Annual Compensation Awards -------------------------------------------- -------------- Other Annual Salary Bonus Compensation Options Name and Principal Position Year ($) ($) ($) (#) - -------------------------------------------- -------- ------------- ------------- --------------- -------------- James J. Cotter/(1)(2)/ 1997 $475,000 $150,000 460,000 Chairman of the Board of Directors 1996 150,000 1995 150,000 S. Craig Tompkins/(2)(3)/ 1997 $180,000 20,000 Vice Chairman of the Board of Directors 1996 180,000 1995 180,000 Robert F. Smerling/(4)/ 1997 175,000 35,000 President and Director 1996 175,000 60,000 1995 175,000 B. John Rochester/(5)/ 1997 130,000 President and Chief Executive Officer, 1996 156,620 Reading Australia Pty Ltd. 1995 39,155 James A. Wunderle 1997 170,000 5,000 17,000 Executive Vice President, Chief 1996 130,000 70,000 Financial Officer and Treasurer 1995 130,000 52,500
(1) Mr. Cotter receives a fee for his services as Chairman of the Board of Directors of $150,000 per annum. (2) Does not include fees of $45,000 paid to Mr. Cotter in both 1997 and 1996 or fees of $40,000 and $35,000 paid in 1997 and 1996, respectively, to Mr. Tompkins by Citadel for services provided to Citadel. (3) Mr. Tompkins was appointed Vice Chairman of the Board of Directors effective January 17, 1997. (4) Mr. Smerling was appointed President of the Company effective January 17, 1997 and a Director on January 24, 1997. (5) Mr. Rochester's compensation is paid in Australian dollars, his base salary is A$200,000. The amounts presented in the table fluctuate due to fluctuations in the U.S. dollar / Australian dollar exchange rates at December 31 of the respective years presented. Mr. Rochester was retained effective November 1995. Amount set forth reflects salary for 1995. -4- Directors who are not employees of the Company receive an annual retainer of $24,000, except for the Chairmen of the Audit and Finance Committee, the Compensation Committee and the Conflicts 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 are paid for meetings of the Board or committee meetings. 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. Rochester is employed under the terms of an employment contract with an initial term of two years beginning January 1, 1996, with automatic renewal terms of one year each. The agreement provides for an incentive payment to Mr. Rochester after the fourth anniversary of the agreement, based on a multiple of cash flow of the Company's Australian theater operations. Under the agreement, in the event Mr. Rochester's employment is terminated by the Company without cause, he will be entitled to receive such incentive payment plus 17 payments, each equal to his monthly remuneration, if such termination is during the initial term, or 11 such monthly payments if such termination is after the initial term. Mr. Rochester is entitled to receive a lump sum distribution of such amounts, as applicable, if the Company and Craig both withdraw from any material investment or involvement in the Australian operations and he is not granted employment under comparable terms. Messrs. Smerling, Wunderle and Groshon and are entitled to receive payment equal to twelve, twelve and nine months, respectively, of annual base salary in the event their individual employment with the Company is involuntarily terminated. II. OPTION GRANT TABLE As of December 31, 1997, 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 shareholders 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 (the "Committee"), 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 Committee, in its discretion, decides otherwise.
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Individual Grants Term - ----------------------------------------------------------------------------------- ------------------------------- No. of % of Total Securities Options Underlying Granted to Exercise or Options Employees in Base Price Expiration Name Granted Fiscal Year ($) Date 5% ($) 10% ($) - --------------------- -------------- --------------- ------------- ------------ ------------- ---------------- James J. Cotter 110,000 17.61% 12.80 4/18/2007 652,551 1,873,084 James J. Cotter 260,000 41.63% 12.80 4/18/2007 1,542,395 4,427,290 James J. Cotter 90,000 14.41% 12.80 4/18/2007 533,906 1,532,523 Ellen M. Cotter 10,000 1.60% 12.80 4/18/2007 59,323 170,280 Robert F. Smerling 35,000 5.60% 12.80 4/18/2007 207,630 595,981 S. Craig Tompkins 20,000 3.20% 12.80 4/18/2007 118,646 340,561 James A. Wunderle 17,000 2.72% 12.80 4/18/2007 100,849 289,477
-5- Options granted under both the 1992 Plan and the 1997 Plan must have exercise prices equal to or greater than 100% of the fair market value of the underlying shares on the date of grant and expire ten years from the date of grant and may contain certain other terms and conditions as determined by the Committee. 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 three 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 from the date of grant; 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; and options (the "Asset Put Options") to purchase up to 90,000 shares of Common Stock which become exercisable over a similar vesting schedule, but only in proportion to the number of shares of Common Stock which are issued pursuant to the Asset Put Option (See Item I - Business General - The Reorganization and Stock Transactions). All shares granted under the Cotter Options have an exercise price of $12.80 per share. III. OPTION EXERCISES AND YEAR-END TABLE The following sets forth information with respect to the options held by the persons named in the Summary Compensation Table above as of December 31, 1997. No options were exercised by such persons during the fiscal year ended December 31, 1997 and none of the options held by such persons at December 31, 1997 had exercise prices which were below the market price of the Company's common stock as of that date. All of such options had an exercise price of $12.80 per share except for 265,232 held by Mr. Cotter which have an exercise price of $14.00 per share. Fiscal Year-End Option Values Number of Unexercised Options at 12/31/97 ----------------------- # Exercisable / Name Unexercisable ------------------------------- ----------------------- James J. Cotter (1) 265,232 / 460,000 Ellen M. Cotter 0 / 10,000 S. Craig Tompkins 0 / 20,000 Robert F. Smerling 0 / 35,000 James A. Wunderle 0 / 17,000 (1) Mr. Cotter's unexercisable options include all of the Convertible Preferred Options, Asset Put Options and the Basic Options. Compensation Committee Interlocks and Insider Participation Mr. Sullivan, Chairman of the Compensation Committee, served as the President and Chief Executive Officer of the Company from 1981 through 1986. Mr. Kane also a member of the Compensation Committee, served as President of the Company from December 1991 through January 1993. Messrs. Sullivan, Kane and James J. Cotter, the Company's Chairman, are members of the Executive Committee of the Board of Directors, which committee was responsible for compensation matters prior to the establishment of the Compensation Committee in October 1996. -6- Item 12. Security Ownership of Certain Beneficial Owners and Management Beneficial Ownership of Common Stock The following tables set forth certain information regarding the Common Stock and total voting stock (including the Series A Preferred Stock and the Series B Preferred Stock) of the Company owned on April 28, 1998 by (i) each person or group who is known by the Company to own beneficially more than 5 percent of the Company's Common Stock, (ii) each of the Company's directors and most highly compensated executive officers and (iii) all directors and officers of the Company as a group. 5% Beneficial Owners
-------------------------------------------------------------------------- Voting Cumulative Convertible Preferred Stock ------------------------------------------------ Common Stock Series A Series B - -------------------------------------------------------------------------------------------------------------------- Amount and Amount and Amount and Nature of Nature of Nature of Percent of Name and Address of Beneficial Percent Beneficial Percent Beneficial Percent Voting Beneficial Owner Ownership of Class Ownership of Class Ownership of Class Stock (1) ==================================================================================================================== Craig Corporation 550 South Hope Street 9,655,312 (3) 80.87 0 0 550,000 100 77.96 Los Angeles, CA 90071 (2) - -------------------------------------------------------------------------------------------------------------------- Citadel Holding Corporation 550 South Hope Street 2,241,349 (4) 23.13 70,000 100 0 0 5.03 Los Angeles, CA 90071 - --------------------------------------------------------------------------------------------------------------------
Security Ownership of Management
Amount and Nature of Beneficial Percentage of Percentage of Name of Beneficial Owner Ownership Common Stock Voting Stock (1) - ------------------------ --------- ------------ ---------------- James J. Cotter...................................... 298,732 (2)(5) 3.86 2.18 Gregory R. Brundage.................................. 0 0 0 Ellen M. Cotter...................................... 2,500 (6) * * Edward L. Kane....................................... 9,000 (7)(8) * * B. John Rochester.................................... 0 0 0 Robert F. Smerling................................... 7,812 (9) * * John W. Sullivan..................................... 165,441 (7)(10) 2.22 1.23 Albert J. Tahmoush................................... 7,500 (7) * * S. Craig Tompkins.................................... 6,400 (2)(11) * * James A. Wunderle.................................... 4,250 (12) * * All Directors and Officers As a Group (13 Persons)... 507,885 (13) 6.52 3.69
* Percentages of less than one percent have not been indicated. (1) Gives effect to the voting rights of 70,000 shares of Series A Preferred Stock and 550,000 shares of Series B Preferred Stock, all of which are owned by Citadel and Craig, respectively, both of which 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 shareholders of the Company. (2) Craig filed a Schedule 13D dated June 19, 1989, stating that the shares have been purchased for investment purposes. Share information is presented as of a report filed on Form 4 with the SEC dated February 4, 1997. James J. Cotter is Chairman of the Board of the Company and Craig. S. Craig Tompkins is Vice Chairman of the Board of the Company and President of Craig. James J. Cotter is also a principal -7- shareholder of Craig. Messrs. Cotter and Tompkins disclaim beneficial ownership of the Company's shares held by Craig. (3) Includes 4,489,796 shares of Common Stock which may be acquired through the conversion of the Series B Preferred Stock. (4) Includes 608,696 shares of Common Stock which may be acquired through the conversion of the Series A Preferred Stock and 1,632,653 shares of Common Stock which may be acquired through the exercise of the Asset Put Option. In accordance with the provisions of the Asset Put Option, Citadel may require the Company to purchase up to $30 million of Citadel assets and pay for such purchase through the issuance of Common Stock, the first $20 million of which is to be determined by valuing the Common Stock at $12.25 per share and the balance, if any, through the issuance of Common Stock valued at fair market value at the time of the exercise of the Asset Put Option. The amount set forth above includes only shares of Common Stock which will be issued to Citadel if the Company were required to purchase $20 million of Citadel assets pusuant to the exercise of the Asset Put Option. (5) Includes 265,232 which may be acquired through the exercise of stock options and stock options exercisable within 60 days of April 28, 1998. (6) Includes 2,500 shares which may be acquired through the exercise of stock options and stock options exercisable within 60 days of April 28, 1998. (7) Includes 7,500 shares which may be acquired through the exercise of stock options and stock options exercisable within 60 days of April 28, 1998. (8) Includes 1,500 shares held in a retirement account. (9) Includes 7,812 shares which may be acquired through the exercise of stock options and stock options exercisable within 60 days of April 28, 1998. (10) Includes 55,520 shares owned by a family trust for which Mr. Sullivan serves as a trustee, 32,785 shares held in a trust for the benefit of Mr. Sullivan's daughter for which Mr. Sullivan serves as a trustee and 29,636 shares held in custodial accounts for Mr. Sullivan's son for which Mr. Sullivan serves as custodian. Excludes 107,838 shares held in a charitable foundation of which Mr. Sullivan serves as a director, as well as 66,100 shares held by other trusts (of which Mr. Sullivan is not a trustee) for the benefit of Mr. Sullivan's children as to which Mr. Sullivan disclaims beneficial ownership. (11) Includes 5,000 shares which may be acquired through the exercise of stock options and stock options exercisable within 60 days of April 28, 1998. Excludes 200 shares held in Mr. Tompkins' wife's retirement plan and 500 shares held in the trust of Mr. Tompkins' minor child as to which Mr. Tompkins disclaims beneficial ownership. (12) Includes 4,250 shares which may be acquired through the exercise of stock options and stock options exercisable within 60 days of April 28, 1998. (13) Includes 341,044 shares which may be acquired through the exercise of stock options and stock options exercisable within 60 days of April 28, 1998. -8- Item 13. Certain Relationships and Related Transactions In December 1997, Citadel capitalized a wholly owned subsidiary, Big 4 Ranch, Inc. (BRI), with a cash contribution of $1,200,000 and then distributed 100% of the shares of Big 4 Ranch, Inc. to Citadel's common shareholders of record as of the close of business on December 23, 1997, as a spin-off dividend. The Company received 1,564,473 shares or 23.4% of Big 4 Ranch, Inc. Also, in December 1997, BRI (owning 40%), Citadel (owning 40%) and Visalia LLC (owning 20%; a limited liability company controlled by Mr. James J. Cotter, the Chairman of the Board of the Company, Craig, and Citadel, and owned by Mr. Cotter and certain members of his family) entered into three general partnerships, which partnerships acquired on December 31, 1997 certain agricultural properties located in Kern County, California (purchase price amounting to approximately $7,600,000). The acquisition was financed by a 10-year purchase money mortgage in the amount of $4,050,000, a line of credit from Citadel and pro rata contributions from the partners. Through the Company's holdings in Big 4 Ranch, Inc., and Citadel, the Company owned approximately 18.8% of such partnerships at December 31, 1997. The Partnerships have each retained Big 4 Farming LLC (owned 80% by Citadel and 20% by Visalia) to farm their properties. Certain officers and directors of the Company are officers, directors or management committee members of Citadel, BRI, Farming and/or the Agricultural Partnerships. Mr. James J. Cotter is the Chairman and a Director of each of Citadel, Craig and the Company, and is also Chairman of the management committees of Farming and of each of the Agricultural Partnerships. Mr. S. Craig Tompkins is the Vice Chairman and a Director of each of Citadel and the Company, the President and a Director of Craig, the Principal Accounting Officer of Citadel, and a member of the management committees of Farming and of each of the Agricultural Partnerships. Mr. Edward L. Kane, a Director of the Company, is the Chairman and President of BRI, and a member of the management committee of each of the Agricultural Partnerships. Ms. Margaret Cotter, a Director of Craig and the daughter of James J. Cotter, is also the Secretary, Treasurer and Principal Accounting Officer and a Director of BRI, an owner of Visalia and the Vice President of Ceceila. As an administrative convenience, Mr. Tompkins also serves as an assistant secretary of BRI and Visalia, for which he receives no compensation. In 1997 the Company's Board of Directors voted to waive the transfer restrictions imposed by the provisions of the Company's capital stock to the extent necessary to permit Craig to acquire additional shares of the Company's capital stock. The transfer provisions prohibit a party from acquiring more than 4.75% of the Company's outstanding capital stock without the permission of the Company's Board of Directors and are intended to assure the continuing availability of the Company's federal tax loss carryforwards by precluding a change in control which could limit the value of the carryforwards. Prior to granting the waiver of the restrictions, the Board of Directors had determined that acquisition of the shares by Craig would not affect the continuing availability of the Company's federal tax loss carryforwards. Mr. Smerling serves as President of the Company and City Cinemas, a New York motion picture theater exhibitor. City Cinemas is an affiliate of Mr. Cotter, the Company's Chairman. The Company, AFC, CineVista and City Cinemas entered into an Executive Sharing Agreement pursuant to which Mr. Smerling provides services to both the Company and City Cinemas entities and the cost of such services is shared by the parties, if such costs cannot be allocated directly to such parties. John Foley, Vice President, Marketing of the Company, also serves as Vice President of City Cinemas. The Company acquired the Angelika on August 27, 1996. The theater is owned jointly by the Company and Sutton Hill, a partnership affiliated with City Cinemas, a Manhattan-based theater operator and owned in equal parts by James J. Cotter and Mr. Michael Forman. City Cinemas (also owned indirectly in equal parts by Messrs. Cotter and Forman) operates the theater pursuant to a management agreement. Management fees paid to City Cinemas in 1997 and 1996 totaled approximately $370,000 and $43,000, respectively. For more detailed information concerning the ownership and management of AFC please see Item 1 - Description of Business - Angelika Film Centers. A company controlled by Mr. Forman and his family beneficially own 16.4% of Craig's outstanding common stock and 10.3% of Craig's Class A Common Preference Stock. The Company utilizes the services of certain Citadel employees, including the President and Chief Executive Officer of Citadel for real estate advisory services. The Company pays Citadel for such services at a rate which is -9- believed to approximate the fair market value of such services. Amounts paid for such services in 1997 and 1996 totaled approximately $240,000 and $169,000, respectively. In 1996 and January 1997 the Company loaned Robert F. Smerling, President of the Company, a total of $70,000 pursuant to a promissory note payable upon demand. The note is interest free. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. READING ENTERTAINMENT, INC. By: /s/ James A. Wunderle --------------------------- James A. Wunderle Executive Vice President May 11, 1998 -10- -----END PRIVACY-ENHANCED MESSAGE-----