EXHIBIT 10.9
NATIONAL AUTO CREDIT, INC.
LETTERHEAD
April 5, 2000
James J. Cotter, Chairman
Reading Entertainment, Inc.
One Penn Square West
30 South Fifteenth Street, Suite 1300
Philadelphia, PA 19103-4831
Re: Acquisition of Domestic Cinema Assets
Dear Mr. Cotter:
As we have discussed, National Auto Credit, Inc. ("National") is interested in
entering into the motion picture exhibition business in the United States
through it wholly-owned subsidiary National Cinemas, Inc. ("National Cinemas").
National and National Cinemas have entered into an agreement (the "Angelika
Agreement") with Reading Entertainment, Inc. ("RDG" and collectively with its
consolidated subsidiaries, "Reading") to acquire a 50% membership interest in
Angelika Film Centers, LLC ("AFC"). The purpose of this letter is to set out the
terms under which Reading has agreed to grant to National an option to acquire
the remainder of Reading's domestic cinema assets.
A. The Option Fee: Promptly following the execution and delivery of this
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letter agreement, National will transfer to Reading the sum of $500,000, in
consideration of the rights granted by Reading to National pursuant to this
letter agreement.
B. The Assets Covered: In consideration of the payment of this fee, National
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will have the option, as described hereinbelow, to acquire the following assets:
1. The City Cinemas Rights: These are the rights held by Reading under
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that certain Agreement in Principle between RDG, James J. Cotter and Michael
Forman dated December 2, 1998, a copy of which is appended as Appendix A to this
letter (the "City Cinemas Agreement"), other than the right to acquire the 1/6th
interest in AFC and the right to acquire by merger Off Broadway, Inc. described
in that Agreement in Principle. The purchase price of this asset will be an
amount equal to Reading's transaction costs with respect to such transaction
(including reimbursement of the $1 million deposit previously made by Reading
and which counts as a credit against the option fee specified in the City
Cinemas Agreement).
2. The Domestic Cinema Assets: These include the following cinema assets:
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a) The remaining interest held by Reading in AFC (including the
interest being acquired pursuant to the City Cinemas Agreement);
b) The Angelika Film Center Houston (Houston, Texas);
c) The Reading Mansville 12 (Mansville, New Jersey);
d) The St. Anthony Main (Minneapolis, Minnesota);
e) The Tower Cinema (Sacramento, California)
f) The Angelika Film Center Buffalo (Buffalo, New York); and
g) The Angelika Film Center Dallas (under development in Dallas,
Texas).
Provided, that Reading is currently in negotiations with respect to
the Angelika Film Center Buffalo, and may terminate its rights and
obligations with respect to such cinema complex if it is not satisfied
with the results of such negotiation.
The purchase price of the Domestic Cinema Assets will be as follows:
a) With respect to the remaining interest in AFC, the million;
amount of $13.5
b) With respect to the cinemas at Houston, Mansville, Minneapolis,
Sacramento and Buffalo, the lesser of Reading's historic cost
basis in such assets and the fair market value of such cinemas
(such fair market value to be determined, in the event of dispute
between the parties, by binding arbitration under the rules of
the American Arbitration Association); and
c) With respect to the cinema under development in Dallas, Reading's
cost basis in such asset.
C. Exercise Option: National will have a period of sixty (60) days, through
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and including June 5, 2000 in which to determine whether or not it wishes to
proceed with the acquisition of the City Cinema Rights and the Domestic Cinema
Assets. National shall have the right to extend the sixty (60) day period
provided in the immediately preceding sentence for up to two (2) additional
periods of thirty (30) days, by written notice to Reading given on or before the
expiration of such sixty (60) day period (or extension thereof) accompanied by
payment to Reading of $100,000 in immediately available funds for each such
thirty (30) day extension. If National determines that it wishes to exercise the
option, it will give written notice of that election to Reading within this
period. Thereafter, National and Reading will cooperate and work in good faith
to complete the definitive documentation necessary to complete the transaction,
with an intention to close such transactions within sixty (60) days of the date
of such election. Closing shall be subject to compliance with the Hart-Scott-
Rodino Antitrust Improvements Act.
D. Citadel Offer: In the event that National elects to exercise the Option
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that is the subject of this letter agreement, National will offer to Citadel
Holding Corporation ("Citadel") the right to form a joint venture with National
or National Cinemas (as the case may be) to acquire the City Cinemas Rights and
the Domestic Cinema Assets. The joint venture would be structured as a
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Delaware limited liability company, and would be generally on the terms set out
in Appendix B to this letter. Citadel will have until the later of (i) thirty
(30) days following the date on which National offers Citadel such right and
(ii) two (2) business days following the date on which National notifies Citadel
(by coy of its notice to Reading) whether it elects to exercise the option
granted to National by RDG and FA, Inc. by letter of even date herewith to
purchase the additional 1/3 Membership Interest in AFC held by FA, Inc., in
which to elect in writing to accept such offer. Thereafter, if Citadel elects to
accept such offer, National and Citadel will cooperate and work in good faith to
complete the definitive documentation necessary to complete the transaction
within the time periods specified above. If Citadel has elected to participate
in the joint venture and then fails for any reason, other than default by
National or National Cinemas, to close, National will be entitled, at its
option, within ten (10) business days of such default, to revoke through written
notice to Reading, its exercise of the option to acquire the city Cinema Rights
and the Domestic Cinema Assets.
E. Exclusivity: Reading agrees to deal exclusively with National during the
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term of this option; provided, however, that Reading will be entitled to
continue its negotiations with Citadel and to enter into agreements with Citadel
with respect to the City Cinema Rights and the Domestic Cinema Assets, so long
as any agreements entered into with Citadel are entered into subject to the
rights of National under this letter agreement. National also acknowledges and
agrees that Reading may elect to dispose of its interest in the Angelika Film
Center Buffalo separate from this agreement.
F. Return of Option Fee: In the event of failure to close the acquisition of
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the City Cinemas Rights and the Domestic Cinema Assets due to default on the
part of Reading, National will be entitled to a refund of the option fee. In all
other cases, such fee will be deemed fully earned by Reading upon the execution
and delivery of this letter agreement by Reading.
G. Form and Payment of the Purchase Price: The purchase price will be paid in
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full at the Closing by wire transfer of currently available funds. In the event
of such a closing, the option fee will be credited to the purchase price
(including any fee paid for the extension thereof).
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Should you have any questions, please feel free to contact me at (440) 349-1000.
Sincerely,
/s/ David L. Huber
David L. Huber
Chairman of the Board and
Chief Executive Officer
ACCEPTED AND AGREED
AS OF THIS 5th DAY
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OF APRIL, 2000
READING ENTERTAINMENT, INC.
By: /s/ S. Craig Tompkins
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Its: Vice Chairman
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