Exhibit 10.1
READING ENTERTAINMENT, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT, dated April 18, 1997 (the "Grant Date"), between Reading
Entertainment, Inc., a Delaware corporation (the "Company"), with an address at
Xxx Xxxx Xxxxxx Xxxx, Xxxxx 0000, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, and Xxxxx X.
Xxxxxx (the "Consultant"), with an address c/o Pacific Theatres, 000 Xxxxx
Xxxxxxxxx Xxxxxxxxx, Xxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
WHEREAS, the Board of Directors of the Company has, on the Grant Date,
granted to the Consultant an option to purchase shares of the common stock, par
value $.001 per share, of the Company (the "Common Stock"), as hereinafter set
forth, and authorized the execution and delivery of this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. The Consultant is hereby granted the options (the "Options") to
purchase from the Company, subject to the terms and conditions set forth in this
Agreement, all or any part of 460,000 shares of Common Stock (the "Option
Shares") at a purchase price of $12.80 per share. All of the Options shall be
treated as non-qualified stock options.
2. The Options shall become exercisable as follows, subject to prior
expiration or termination of the Options:
(a) Basic Options. Options to purchase 110,000 Option Shares (the
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"Basic Options") shall become exercisable in four equal installments of
27,500 Option Shares each, the first such installment to become exercisable
on the first anniversary of the Grant Date and the remaining installments
to become exercisable on each subsequent anniversary thereof until all
Basic Options have become exercisable.
(b) Convertible Preferred Options. Options to purchase 260,000 Option
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Shares (the "Convertible Preferred Options") shall become exercisable in
four equal installments of 65,000 Option Shares each, the first such
installment to become exercisable on the first anniversary of the Grant
Date and the remaining installments to become exercisable on each
subsequent anniversary thereof until all Convertible Preferred Options have
become exercisable; provided, that (i) no Convertible Preferred Options
shall be exercisable prior to the date that shares of the Company's Series
A Voting Cumulative Convertible Preferred Stock and Series B Voting
Cumulative Convertible Preferred Stock (collectively, the "Convertible
Preferred Stock") are converted (by election of the holders thereof or
otherwise) into Common Stock, and (ii) if fewer than 620,000 shares of
Convertible Preferred Stock have at any time been converted into Common
Stock, the number of Option Shares for which Convertible Preferred Options
shall be exercisable (inclusive of any Convertible Preferred
Exhibit 10.1
Options which have previously been exercised) in each installment shall be
reduced as of such date to equal (to the nearest whole number) one-fourth
of the total number of Option Shares subject to Convertible Preferred
Options (inclusive of those exercised) without regard to this Section
2(b)(ii) multiplied by a fraction, the numerator of which is the aggregate
number of shares of Convertible Preferred Stock which have been converted
into Common Stock as of such date and the denominator of which is 620,000,
provided further, however, (iii) that if on any date any shares of
Convertible Preferred Stock are redeemed or repurchased by the Company, the
number of Option Shares for which Convertible Preferred Options shall be
exercisable (inclusive of any Convertible Preferred Options which have
previously been exercised) in each installment shall be permanently reduced
to equal (to the nearest whole number) one-fourth of the total number of
Option Shares subject to Convertible Preferred Options (inclusive of those
exercised) without regard to this Section 2(b)(iii) or Section 2(b)(ii)
multiplied by a fraction, the numerator of which is 620,000 minus the
aggregate number of shares of Convertible Preferred Stock which have been
redeemed or repurchased to such date and the denominator of which is
620,000 and any Convertible Preferred Options which are excluded from
becoming exercisable as a result of this Section 2(b)(iii) shall be
immediately and without further action deemed canceled.
(c) Asset Put Options. Options to purchase 90,000 Option Shares (the
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"Asset Put Options") shall become exercisable in four equal installments of
22,500 Option Shares each, the first such installment to become exercisable
on the first anniversary of the Grant Date and the remaining installments
to become exercisable on each subsequent anniversary thereof until all
Asset Put Options have become exercisable; provided, that (i) no Asset Put
Options shall be exercisable prior to the date on which shares of Common
Stock have been issued to Citadel Holding Corporation, a Delaware
corporation ("Citadel"), pursuant to the Asset Put (as defined in the
Asset Put and Registration Rights Agreement, dated as of October 15, 1996
(the "Asset Put Agreement") , among the Company, Citadel, and Citadel's
subsidiary Citadel Acquisition Corp., Inc. ("CAC")), or to any successor in
interest to Citadel, and (ii) if fewer than 1,700,000 shares of Common
Stock are issued pursuant to the Asset Put, the number of Option Shares for
which Asset Put Options become exercisable in each installment shall be
reduced to equal (to the nearest whole number) one-fourth of the total
number of Option Shares subject to Asset Put Options (inclusive of those
exercised) without regard to this Section 2(c)(ii) multiplied by a
fraction, the numerator of which is the number of shares of Common Stock
issued pursuant to the Asset Put and the denominator of which is 1,700,000
(the number 1,700,000 in each being subject to adjustment in proportion to
any adjustments made pursuant to Section 8 in the number of Option Shares),
and any Asset Put Options which are excluded from becoming exercisable as a
result of this Section 2(c)(ii) shall be immediately and without further
action deemed canceled.
3. All Options shall terminate and thereafter no longer be exercisable
(subject to Section 7) on April 18, 2007 (the "Expiration Date").
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Exhibit 10.1
4. Option Shares purchased pursuant to this Agreement shall be paid for
in full at the time of purchase. Payment may be made in cash, shares of Common
Stock, Options, or such other consideration as may be approved by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"), or a combination thereof, provided that such consideration shall
be such that the Option Shares shall be fully paid and nonassessable, and
provided further that no shares of Common Stock or Options may be so delivered
if, as a result thereof, the Consultant or other person exercising Options would
incur liability under Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). If payment is made in whole or part by tender of
(a) shares of Common Stock, such shares shall be valued at the Fair Market Value
thereof (as defined below), (b) Options, the Options tendered as payment must be
exercisable at the date of such tender, shall be deemed to have been exercised
for purposes of Section 2, and shall be valued at an amount equal to the excess
of the Fair Market Value of the Option Shares issuable on exercise of such
Options over the aggregate exercise price of such Options, or (c) consideration
other than cash, shares of Common Stock, or Options, such consideration shall
have such value as determined by the Committee (whose determination shall be
final). Upon receipt of written notice of exercise of Options in the form
attached hereto as Exhibit A together with payment and delivery of any other
required documentation, the Company shall, without stock transfer tax to the
Consultant or any other person entitled to exercise such Options, deliver to the
person exercising such Options a certificate or certificates for the Option
Shares so purchased. It shall be a condition to the performance of the
Company's obligation to issue or transfer Common Stock upon exercise of Options
that the Consultant or other person exercising such Options pay, or make
provision satisfactory to the Company for the payment of, any taxes (other than
stock transfer taxes) which the Company is obligated to collect with respect to
the issue or transfer of Common Stock upon exercise, including any Federal,
state, or local withholding taxes. The "Fair Market Value" of a share of Common
Stock on any date shall mean the closing price of the Common Stock on the
trading day prior to such date, as reported in the Wall Street Journal or, if
not so reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation (Nasdaq) System or, if not so reported, as
determined by the Committee (whose determination shall be final).
5. No person shall have any rights as a stockholder with respect to any
Option Shares until the date a stock certificate is issued to such person for
such Option Shares. Except as otherwise expressly provided herein, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
6. Options may be transferred only (a) by will or the laws of descent and
distribution or (b) by the Consultant during his lifetime to any immediate
family member (as defined in Rule 16a-1(e) under the Exchange Act) of the
Consultant, any trust for the benefit of any one or more of the Consultant and
his immediate family members, or any partnership, corporation, limited liability
company, or other entity owned or controlled by any one or more of the
Consultant and his immediate family members, and are exercisable, during the
lifetime of the Consultant, only by the Consultant or the Consultant's personal
representative or guardian or a transferee permitted pursuant to this Section 6.
Subject to the foregoing, Options may be transferred whether or not exercisable
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Exhibit 10.1
at the time of transfer. The Consultant or his representative shall give the
Company notice of any transfer, specifying the name and address of the
transferee and the number and class of Options transferred.
7.(a) This option shall terminate 30 days (but not later than the
Expiration Date) after the date of the termination for cause, or 120 days (but
not later than the Expiration Date) after the date of the termination for any
reason, other than for cause, death, or Retirement (as hereinafter defined), of
the association of the Consultant with the Company.
(b) Upon the termination of the Consultant's association with the Company
due to Retirement, the Consultant or any transferee under Section 6 may, during
the Retirement Period (as hereinafter defined), exercise any or all of the
Options which were exercisable under this Agreement immediately prior to such
termination. "Retirement" means the termination of association due to
retirement with the consent of the Committee or as a result of the Consultant
becoming permanently disabled; and "Retirement Period" shall mean the period
from the date of Retirement to the later of (i) the date determined by the
Committee at the time of Retirement and (ii) three years from the date of
Retirement, provided that in no case shall the Retirement Period extend to a
date after the Expiration Date. The Committee shall have the sole discretion
whether or not to consent to a Retirement, which determination shall be final.
(c) Upon the termination of the Consultant's association with the Company
due to death, (i) all vesting provisions of Section 2 which would be satisfied
solely by the passage of time and the continuation of the Consultant's
association with the Company shall be accelerated and deemed satisfied and (ii)
the person or persons to whom the Consultant's rights hereunder are transferred
by will or the laws of descent and distribution, or any transferee under Section
6, may, at any time on or prior to the Expiration Date, exercise any or all of
the Options which (after giving effect to such acceleration) were exercisable as
of the date of the Consultant's death or which subsequently become exercisable
as a result of the conversion of Convertible Preferred Stock into Common Stock
or the exercise of the Asset Put Option.
(d) Upon the death of the Consultant during a period following termination
of such association in which Options are exercisable under Section 7(a) or 7(b),
(i) if such death resulted from a disability which occasioned Retirement, all
vesting provisions of Section 2 which would be satisfied solely by the passage
of time and the continuation of the Consultant's association with the Company
shall be accelerated and deemed satisfied and (ii) in any case, the person or
persons to whom the Consultant's rights hereunder are transferred by will or the
laws of descent and distribution, or any transferee under Section 6, shall have
the right, during the period ending on the later of the end of the period
provided in Section 7(a) or (b), as the case may be, for exercise of Options and
the period ending 18 months after the date of the Consultant's death, to
exercise any or all of the Options which (after giving effect to such
acceleration, if applicable) were exercisable as of the date of the Consultant's
death or which subsequently become exercisable as a result of the
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Exhibit 10.1
conversion of Convertible Preferred Stock into Common Stock or the exercise of
the Asset Put Option.
(e) If the Consultant is granted an approved leave of absence, the
Committee may, if it determines that to do so would be in the best interests of
the Company, provide for continuation of the Options during such leave of
absence, such continuation to be on such terms and conditions as the Committee
determines to be appropriate, provided that (except as provided in Section 7(d))
in no event shall Options be exercisable after the Expiration Date.
(f) For all purposes of this Agreement, the Consultant shall be considered
associated with the Company, and his association with the Company shall be
deemed to continue, so long as he is an officer, director, or employee of, or
consultant to, or otherwise associated with (other than solely as a
stockholder), the Company or any subsidiary or parent of the Company, and the
Options shall not be affected by any change of type of any such association as
long as the Consultant continues to be associated in any such manner with the
Company or any parent or subsidiary of the Company.
(g) Nothing in this Agreement shall confer on the Consultant any right to
continue to be associated with the Company or any parent or subsidiary of the
Company or interfere in any way with the right of the Company or any parent or
subsidiary of the Company to terminate the association with it of the Consultant
at any time.
8. The number of Option Shares (including the number subject to each
class of Options and each installment thereof), and the exercise price per
share, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made as determined by the Committee, whose determination
shall be final. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number of Option Shares or the exercise price of the
Options.
9. If the Company is merged or consolidated with another corporation, or
the property or stock of the Company is acquired by another corporation, or on
the reorganization or liquidation of the Company, the Board of Directors of the
Company, or the Board of Directors of any corporation assuming the obligations
of the Company hereunder, shall either make appropriate provisions for the
protection of the Options by the substitution on an equitable basis of
appropriate stock of the Company, or appropriate stock of the merged,
consolidated, or otherwise reorganized corporation.
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Exhibit 10.1
10.(a)(i) If the Company shall receive a written request (specifying that
it is being made pursuant to this Section 10(a)) from holders of Options or
Option Shares representing a majority of the Registrable Securities (as defined
below) that the Company file a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), covering the registration of at
least 50% of the Registrable Securities, the Company shall, within ten business
days of the receipt thereof, give written notice of such request to all holders
of Registrable Securities ("Eligible Holders") and shall file as soon as
practicable, and in any event within 60 days of the receipt of such request, a
registration statement under the Securities Act covering all Registrable
Securities which the Eligible Holders request to be registered within 30 days of
the mailing of such notice to all Eligible Holders. The term "Registrable
Securities" shall mean Option Shares which have not previously been sold and are
not then eligible for immediate sale (not limited by volume limitations) by the
holders thereof pursuant to an effective registration statement under the
Securities Act or pursuant to paragraph (k) of Rule 144 under the Securities
Act.
(ii) Notwithstanding the foregoing, (A) the Company shall not be obligated
to effect a registration pursuant to this Section 10(a) (I) unless Form S-3 is
then available for such registration or (II) during the period starting with the
date 60 days prior to the Company's estimated date of filing of, and ending on a
date six months following the effective date of, a registration statement
pertaining to an underwritten public offering of securities for the account of
the Company, provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective and
that the Company's estimate of the date of filing such registration statement is
made in good faith; (B) if the Company shall furnish to the Eligible Holders
initiating the registration request hereunder (the "Initiating Eligible
Holders") a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors it would be materially
detrimental to the Company or its stockholders for a registration statement to
be filed in the near future, then the Company's obligation to file a
registration statement shall be deferred for a period not to exceed six months;
provided, however, that the Company may furnish such a certificate to Initiating
Eligible Holders only once in any one-year time period; and (C) if the managing
underwriter of an underwritten offering to be made pursuant to this Section
10(a) advises the Initiating Eligible Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Eligible Holders shall so advise all Eligible Holders whose
Registrable Securities would otherwise be underwritten pursuant hereto, and the
number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Eligible Holders thereof in proportion
to the amount of Registrable Securities owned by each Eligible Holder.
(iii) The Company shall be obligated to effect only one registration
pursuant to this Section 10(a).
(b)(i) If at any time the Company determines to register (including for
this purpose a registration effected by the Company for securityholders other
than the Eligible Holders) any shares of Common Stock under the Securities Act
in connection with the public offering of such securities
6
Exhibit 10.1
solely for cash on a Form and under circumstances that would also permit the
registration of the Registrable Securities (other than Forms S-4 and S-8), the
Company shall promptly give each Eligible Holder written notice of such
determination. Upon the written request of each Eligible Holder given within 20
days after mailing of any such notice by the Company, the Company shall, subject
to the provisions of this Section 10(b), cause to be registered under the
Securities Act all of the Registrable Securities that each such Eligible Holder
has requested be registered; provided however, that the Company shall not be
required to proceed with such registration if the offering is abandoned in its
entirety and no other securities are offered for sale.
(ii) In connection with any offering involving an underwriting of shares
being issued by the Company, the Company shall not be required under this
Section 10(b) to include any of the Eligible Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity as will not, in the reasonable opinion of the underwriters, jeopardize
the success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by the Eligible Holders and other
securityholders having registration rights to be included in such offering
exceeds the amount of securities to be sold other than by the Company (or the
securityholders initiating the registration) that the underwriters reasonably
believe compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters believe will not
jeopardize the success of the offering. In such event, the securities requested
to be included which are excluded shall be apportioned pro rata among the
Eligible Holders and, to the extent permitted by the contractual rights of other
selling securityholders, all other prospective selling securityholders according
to the total amount of securities requested to be included therein owned by each
such Eligible Holder and other selling securityholder or in such other
proportions as shall mutually be agreed to by such Eligible Holders and such
other selling securityholders. To the extent required by the rights of other
selling securityholders, including the rights of Citadel and CAC under the Asset
Put Agreement, the Registrable Securities shall be excluded prior to any
exclusion of securities held by such other securityholders.
(c) The Company shall not be required to include in any registration any
Registrable Securities unless the holder thereof shall have furnished to the
Company such information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as shall be
required to effect the registration of the Registrable Securities.
(d) All expenses other than underwriting discounts and commission incurred
in connection with any registration, filing, or qualification pursuant to this
Section 10, including, without limitation, all registration, filing, and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of a single
counsel for and selected by the Eligible Holders and any other selling
securityholders, shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 10(a) if the registration request
7
Exhibit 10.1
is subsequently withdrawn at the request of the Eligible Holders of a majority
of the Registrable Securities to be registered (in which case all participating
Eligible Holders shall bear such expenses in proportion to the respective
numbers of Registrable Securities they requested to be included in such
registration, or as they may otherwise agree), unless, at the time of such
withdrawal, the Eligible Holders have learned of a material adverse change in
the condition, business or prospects of the Company from that known to the
Eligible Holders at the time of their request, in which case the Eligible
Holders shall not be required to pay any such expenses and shall retain all
rights pursuant to Section 10(a).
(e) The provisions of this Section 10 may be amended or waived in any
respect with the consent of holders of Options and Option Shares representing a
majority of the Registrable Securities, and any such amendment or waiver shall
be binding on all then and future holders of Options or Option Shares.
11. The Company shall at all times reserve and keep available out of its
authorized Common Stock the full number of shares of Common Stock of the
Corporation issuable upon exercise of Options.
12. If at any time the Board of Directors shall determine, in its
discretion, that the listing, registration, or qualification of any of the
Option Shares upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the issue or purchase of
Option Shares, the Options may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors. Any notice of exercise of Options which would be effective except
for this Section 12 shall be deemed effective immediately upon satisfaction of
all such conditions (even if such notice could not otherwise then have been
given).
The Company shall not be obligated to sell or issue any Option Shares in
any manner in contravention of the Securities Act, the Exchange Act, or any
state securities law. The Board of Directors may, at any time, require as a
condition to the exercise of Options that the Option Shares be acquired for
investment purposes only and that the certificate therefor contain a legend
restricting transfer.
13. All notices hereunder shall be in writing, and (a) if to the Company,
shall be delivered personally to the Secretary of the Company or mailed to its
principal office, addressed to the attention of the Secretary, (b) if to the
Consultant, shall be delivered personally or via courier or mailed via certified
mail, postage prepaid, return receipt requested to the Consultant at the address
first set forth above, or (c) if to any subsequent holder of Options or Option
Shares, to the address specified for such holder in the notice provided for in
Section 6 or on the stock records of the Company. Such addresses may be changed
at any time by notice from one party to the other.
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Exhibit 10.1
14. All decisions or interpretations made by the Committee with regard to
any question arising hereunder shall be binding and conclusive on the Company
and the Consultant.
15. This Agreement shall bind and inure to the benefit of the parties
hereto and the successors and assigns of the Company and, to the extent provided
in Section 6, the executors, administrators, legatees, heirs, guardians, legal
representatives, successors, and assigns of the Consultant.
16. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania, without giving effect to rules
governing the conflict of laws.
17. Notwithstanding anything to the contrary herein, the effectiveness of
this Agreement and the Options granted hereby is subject to the approval of this
Agreement by the stockholders of the Company, and no Options may be exercised
unless and until such approval is obtained.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
READING ENTERTAINMENT, INC.
By: /s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
9
Exhibit 10.1
EXHIBIT A
EXERCISE NOTICE
The undersigned, pursuant to the Option Agreement, dated April 18, 1997
(the "Option Agreement;" terms used and not defined herein have the meanings as
defined in the Option Agreement), between Reading Entertainment, Inc., a
Delaware corporation (the "Company"), and Xxxxx X. Xxxxxx (the "Consultant"),
hereby elects to exercise Options to purchase ______________________ Option
Shares (comprised of _______ Option Shares underlying Basic Options, _____
Option Shares underlying Convertible Preferred Options, and _____ Option Shares
underlying Asset Put Options) and herewith makes payment in full therefor by
delivery of
(i) $_____________ in cash,
(ii) _______ shares of Common Stock having a Fair Market Value of
$________,
(iii) Options (comprised of _______ Basic Options, _____ Convertible
Preferred Options, and _____ Asset Put Options), other than those exercised
hereby, to purchase ________ Option Shares, which Options have a value as
determined in accordance with the Option Agreement of $_________; and
(iv) other property described on the attachment hereto, if any, which
property has been approved by the Committee and valued by the Committee at
$______.
1. If the sale of the Option Shares and the resale thereof has not, prior
to the date hereof, been registered pursuant to a registration statement filed
and declared effective under the Securities Act, the undersigned hereby agrees,
represents, and warrants that:
(a) I am acquiring the Option Shares for my own account (and not for
the account of others) for investment and not with a view to the
distribution or resale thereof;
(b) By virtue of my position, I have access to the same kind of
information which would be available in a registration statement filed
under the Securities Act;
(c) I am a sophisticated investor;
(d) I understand that I may not sell or otherwise dispose of such
shares in the absence of either a registration statement under the
Securities Act or an exemption from the registration provisions of the
Securities Act; and
(e) The certificates representing such shares may contain a legend to
the effect of 1(d) above.
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Exhibit 10.1
2. If the sale of the Option Shares and the resale thereof has been
registered under the Securities Act, the undersigned hereby represents and
warrants that I have received the applicable prospectus and all reports
incorporated therein by reference.
Very truly yours,
--------------------------------------
(type name under signature line)
Dated: ____________________
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