<PAGE>

                                                                    EXHIBIT 10.7

                           ARTICLES OF INCORPORATION

                                      OF

                          READING ENTERTAINMENT, INC.

                             A NEVADA CORPORATION


     I, the Undersigned, being the original incorporator herein named, for the
purpose of forming a corporation under Chapter 78 of the Nevada Revised Statutes
(the "NRS"), to do business both within and without the State of Nevada, do make
and file these Articles of Incorporation hereby declaring and certifying that
the facts herein stated are true:

                                   ARTICLE I
                                     NAME

     The name of the corporation is Reading Entertainment, Inc. (the
"Corporation").

                                  ARTICLE II
                      RESIDENT AGENT AND REGISTERED OFFICE

     The name and address of the Corporation's resident agent for service of
process is Kummer Kaempfer Bonner & Renshaw, 3800 Howard Hughes Parkway, Seventh
Floor, Las Vegas, Nevada 89109.

                                  ARTICLE III
                                    PURPOSE

     The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the NRS.

                                  ARTICLE IV
                                 CAPITAL STOCK

          4.1.  Number of Shares Authorized; Par Value.  The aggregate number
                --------------------------------------
of shares which the Corporation shall have authority to issued is thirty-five
million (35,000,000) shares of which ten million (10,000,000) shares with the
par value $.001 per share shall be designated "Preferred Stock" and twenty-five
million (25,000,000) shares with the par value $.001 per share shall be
designated "Common Stock."

          4.2.  Preferred Stock.  The Preferred Stock may be issued at any time
                ---------------
from time to time, in any one or more series, and any such series shall be
comprised of such number of shares and may have such voting powers, whole or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
and restrictions thereof, including liquidation preferences, as shall be
<PAGE>

stated and expressed in the resolution or resolutions of the board of directors
of the Corporation, the board of directors being hereby expressly vested with
such power and authority to the full extent now or hereafter permitted by law.

          4.3.  Restrictions on Common Stock.  No share of Common Stock, or of
                ----------------------------
any other security of the Corporation which is treated as stock for purposes of
Section 382 of the Internal Revenue Code of 1986, as amended (the "Code") (the
Common Stock and any such other securities being hereinafter referred to as "New
Stock"), shall be transferable or assignable in any respect, either of record or
beneficially, unless such transfer or assignment is permitted under the
following provisions:

               (a)  Until the earliest of January 1, 2003, such date as the
     Corporation shall no longer have any unutilized federal income tax net
     operating loss carry forwards (the "Carryforwards") or such date after
     which Section 382 of the Code is repealed or so substantially modified that
     in the opinion of counsel to the Corporation the restrictions on transfer
     described herein are no longer necessary to accomplish their intended
     purpose: (i) any attempted sale, transfer, assignment or other disposition
     (including the granting of any option or entering into any agreement for
     the sale transfer assignment or other disposition), whether voluntary or
     involuntary, whether of record or beneficially and whether by operation of
     law or otherwise (a "Transfer"), of any share or shares of the New Stock of
     the Corporation or of any option, convertible security or other right to
     purchase or acquire such stock (collectively, "Rights") to any person or
     entity or group or persons or entities acting in concert (a "Transferee")
     who or which, directly or indirectly or by application of the constructive
     ownership rules set forth in Section 382(1)(3) of the Code and the Income
     Tax Regulations as now in effect or hereinafter promulgated pursuant
     thereto (the "Regulations"), owns, prior to the Transfer, an aggregate
     number of shares of the Corporation's outstanding New Stock having a fair
     market value equal to or greater than four point seven five percent (4.75%)
     of the fair market value of the total number of shares of the Corporation's
     outstanding New Stock shall be void ab initio insofar as it purports to
     transfer ownership to such Transferee, and (ii) any attempted Transfer of
     any share or shares of the New Stock of the Corporation or of any Rights to
     any Transferee not described in clause (i) hereof who or which directly,
     indirectly or by application of the constructive ownership rules in Section
     382(1)(3) of the Code and Regulations, would own as a result of the
     Transfer, or as a result of a subsequent Transfer of any share or shares of
     the New Stock or Rights, an aggregate number of shares of the Corporation's
     outstanding New Stock having a fair market value equal to or greater than
     four point seven five percent (4.75%) of the fair market value or total
     number of shares of the Corporation's outstanding New Stock shall, as to
     the number of shares or Rights representing such excess over four point
     seven five percent (4.75%), be void ab initio insofar as it purports to
     transfer ownership to such Transferee of any shares of New Stock or Rights.

               (b)  The restrictions contained in paragraph (a) of this Section
     4.3 of this Article Fourth have been included herein for the purpose of
     reducing the risk of occurrence of an "ownership change" as that term is
     defined in Section 382(g) of the Code and the Regulations that would result
     in the limitation or elimination of the Corporation's utilization of the
     Carryforwards.

                                       2
<PAGE>

               (c)  Neither clause (i) or (ii) of paragraph (a) of this Section
     4.3 of this Article Fourth shall restrict any Transfer of New Stock of the
     Corporation or Rights if (i) the prior written approval of the board of
     directors of the Corporation shall have been obtained with respect to such
     Transfer and (ii) if so requested by the board of directors of the
     Corporation, counsel to the Corporation shall have delivered its opinion
     that such Transfer would not result in an "ownership change" within the
     meaning of Section 382(g) of the Code and the Regulations that would result
     in the limitation or elimination or the Corporation's utilization of the
     Carryforwards. The board of directors shall have the authority, in its sole
     discretion, to adopt procedures for the orderly and effective
     administration and implementation of this Section 4.3, and, in deciding
     whether to approve any proposed Transfer of New Stock or Rights, the
     Corporation acting through any officer may request all relevant
     information, as well as an opinion of counsel, in form and substance
     reasonably satisfactory to the board of directors. No employee or agent of
     the Corporation shall be permitted to record any attempted or purported
     Transfer of the New Stock or Rights made in violation of this Article
     Fourth and no Transferee of the New Stock or Rights effected in violation
     of this Article Fourth shall be deemed to have acquired ownership of New
     Stock or Rights for any purpose. Such intended Transferee shall not be
     entitled to any rights as a stockholder of the Corporation with respect to
     such New Stock, including, without limitation, the right to vote such New
     Stock or to receive any distributions in respect thereof, whether as
     dividends or in liquidation.

               (d)  If the procedures adopted by the board of directors of the
     Corporation so require, the Corporation's transfer agent for any of the
     Corporation's securities (the "Transfer Agent") shall not issue any
     certificates transferring, assigning or disposing of or purporting to
     transfer assign or otherwise dispose of legal ownership of any shares of
     New Stock or Rights unless the Transfer Agent receives from the proposed
     Transferee, in addition to any other information requested by it, a
     certificate signed under penalty of perjury attesting to the fact that the
     Transferee is not and will not become as a result of the proposed Transfer,
     an owner of an aggregate number of shares of the Corporation's outstanding
     New Stock or Rights having a fair market value equal to or greater than
     four point seven five percent (4.75%) of the fair value of the total number
     of shares of the Corporation's outstanding New Stock. If at any time the
     Transfer Agent receives a request to make a change in record ownership of
     shares of New Stock or Rights which, if effective, would appear to the
     Transfer Agent on the basis of information in its possession to constitute
     a violation of this Article Fourth, then, prior to registering such change
     in ownership on the books of the Corporation, the Transfer Agent shall
     notify the Corporation. If the board of directors or an officer designated
     by the board of directors determines that the proposed change in ownership
     would violate this Article Fourth, then the Corporation shall so advise the
     Transfer Agent and the Transfer Agent shall not make such change in
     ownership on the books of the Corporation and shall return the certificates
     representing such shares of New Stock or Rights to the holder of record
     thereof.

               (e)  If, notwithstanding the foregoing prohibition, a Transferee
     shall, voluntarily or involuntarily, purportedly become or attempt to
     become the purported owner (the "Purported Owner") of shares of New Stock
     or Rights, or both, in excess of the limitations set forth above (the
     shares and Rights, including shares of New Stock

                                       3
<PAGE>

     issued in respect of Rights, so exceeding such limitations set forth herein
     shall be referred to herein as the "Excess Shares"), then:

                    (i)    The Purported Owner shall not obtain any rights in
          and to the Excess Shares, and the purported Transfer of the Excess
          Shares to the Purported Owner shall not be recognized by the
          Corporation or its Transfer Agent. Until the Excess Shares are
          transferred to a person whose acquisition thereof will not violate the
          foregoing limitations (a "Permitted Transferee"), (A) the Excess
          Shares shall be voted by such person as shall be appointed by the
          board of directors of the Corporation, which person shall be deemed to
          have been granted a proxy to vote the Excess Shares, (B) the
          transferor of the Excess Shares to the Purported Owner (the "Purported
          Owner's Transferor") shall be deemed to have retained the Excess
          Shares and shall hold and be entitled to exercise all other rights
          incident to ownership of such Excess Shares, and (C) if the Excess
          Shares are Rights, they may not be exercised, converted or exchanged
          until transferred to, and exercised, converted or exchanged in
          accordance with their terms by, a Permitted Transferee; provided,
          however, that notwithstanding the foregoing, in the event shares of
          New Stock are issued in respect of Rights which are Excess Shares
          prior to notice to the Corporation or its Transfer Agent that such
          Rights are Excess Shares, the shares of New Stock so issued shall be
          deemed to be issued and outstanding shares of New Stock of the
          Corporation and shall be Excess Shares deemed retained by the
          Purported Owner's Transferor. Rights issued by the Corporation shall
          reflect the provisions of the foregoing sentence. All Excess Shares
          will continue to be issued and outstanding.

                    (ii)   If the Transfer Agent obtains possession of a
          certificate or certificates representing the Excess Shares, the
          Transfer Agent shall deliver such certificate or certificates to a
          trustee appointed by the Corporation's board of directors (the "Share
          Trustee") who shall proceed forthwith to sell or cause the sale of the
          Excess Shares to a Permitted Transferee. If the Transfer Agent does
          not have possession of such certificate, upon notice from the
          Corporation of the existence of Excess Shares and the identity of the
          Purported Owner, the Share Trustee shall take all lawful action to
          cause the Purported Owner to deliver or cause delivery of the Excess
          Shares and any indicia of ownership thereof to the Share Trustee and,
          upon obtaining possession thereof, the Share Trustee shall proceed
          forthwith to sell or cause the sale of the Excess Shares to a
          Permitted Transferee. The Share Trustee shall sell or cause the sale
          of the Excess Shares in the then existing public market or in such
          other commercially reasonable fashion as the Corporation shall direct.
          In performing the duties herein imposed upon it, the Share Trustee
          shall act at all times as the agent for the Purported Owner's
          Transferor.

                    (iii)  Once the Excess Shares are acquired by a Permitted
          Transferee, the Permitted Transferee shall have and shall be entitled
          to exercise all rights incident to the ownership of such Excess
          Shares.

                                       4
<PAGE>

                    (iv) The proceeds from the sale of the Excess Shares (the
          "Proceeds") shall be distributed as follows: (A) first, to the Share
          Trustee to cover its costs and expenses; (B) second, to the Purported
          Owner, if known, in an amount up to the amount paid by the Purported
          Owner, if determinable, for the Excess Shares; and (C) third and
          finally, the remaining Proceeds, if any, shall be distributed to the
          Purported Owner's Transferor, if known, and if not known, such
          remaining Proceeds shall be held by the Corporation for the benefit of
          the Purported Owner's Transferor or such other person as their
          interests may appear. Notwithstanding anything contained in this
          Article Fourth to the contrary, the Corporation shall at all times be
          entitled to make application to any court of equitable jurisdiction
          within the State of Nevada for an adjudication of the respective
          rights and interests of any person in and to the Proceeds pursuant to
          this Article Fourth and applicable law and for leave to pay the
          Proceeds into such court.

               (f)  Immediately upon the purported acquisition of any Excess
     Shares, the Purported Owner thereof shall give, or cause to be given,
     written notice thereof to the Corporation. Each owner of shares of New
     Stock and Rights shall furnish to the Corporation all information
     reasonably requested with respect to all shares of New Stock and Rights
     directly and indirectly owned by such person.

               (g)  Upon a determination by the board of directors of the
     Corporation that a person has attempted or may attempt to transfer or to
     acquire Excess Shares, the board of directors may take such action as it
     deems advisable to refuse to give effect to such Transfer or acquisition on
     the books and records of the Corporation, including, without limitation, to
     cause the Transfer Agent to record the Purported Owner's Transferor as the
     record owner of the Excess Shares, to refuse to issue shares of New Stock
     upon the purported exercise of Rights which are Excess Shares and to
     institute proceedings to enjoin or rescind any such Transfer or
     acquisition.

               (h)  To the extent permitted by the Regulations promulgated under
     Section 382 of the Code, in determining whether any person has become a
     Purported Owner of Excess Shares, the Corporation may rely on filings on
     Schedules 13D and 13G as required by Rule 13d-1 of the Securities Exchange
     Act of 1934, as amended.

               (i)  If any provision of this Article Fourth or any application
     of any such provision is determined to be invalid by any federal or state
     court having jurisdiction over the issues, the validity of the remaining
     provisions shall not be affected and other applications of such provision
     shall be affected only to the extent necessary to comply with the
     determination of such court.

               (j)  All certificates representing shares of New Stock shall
     conspicuously bear the following legend:

          The shares represented by this certificate are subject to certain
          restrictions on transfer set forth in Article Fourth of the
          Corporation's Articles of Incorporation, the full text of which is

                                       5
<PAGE>

          available at the offices of the Corporation or on request to the
          Corporation.  ANY ATTEMPT TO ACQUIRE STOCK OF THE CORPORATION IN
          VIOLATION OF SUCH RESTRICTIONS SHALL BE NULL AND VOID AND MAY RESULT
          IN FINANCIAL LOSS TO THE PERSON OR ENTITY ATTEMPTING SUCH ACQUISITION.

                                   ARTICLE V
                                   DIRECTORS

     The business and affairs of the Corporation shall be managed by or under
the direction of the board of directors, which initially shall consist of one
director.  Provided that the Corporation has at least one director, the number
of directors may at any time or times be increased or decreased as provided in
the bylaws; provided, however that the number of directors shall not exceed ten.
The name and address of the initial member of the board of directors is as
follows:

          NAME                                   ADDRESS
          ----                                   -------
S. Craig Tompkins                 c/o Craig Corporation
                                  550 South Hope Street, Suite 1825
                                  Los Angeles, California 90071


                                  ARTICLE VI
                                    BYLAWS

     In furtherance and not in limitation of the powers conferred upon the board
of directors of the Corporation by the NRS, the board of directors shall have
the power to alter, amend, change, add to and repeal, from time to time, the
bylaws of the Corporation, subject to the rights of the stockholders entitled to
vote with respect thereto to alter, amend, change, add to and repeal the bylaws
adopted by the directors of the Corporation.

                                  ARTICLE VII
                             ELECTION OF DIRECTORS

     Except as may otherwise be provided in the bylaws of the Corporation, the
election of directors may be conducted at a meeting of the stockholders, whether
telephonic or not, within or without the State of Nevada or by written consent
and such election need not be by written ballot.

                                       6
<PAGE>

                                 ARTICLE VIII
                                SALE OF ASSETS

     In furtherance of the powers conferred on the stockholders of the
Corporation by the NRS, the stockholders of the Corporation shall have the power
to vote on any proposed sale of substantially all of the Corporation's assets.

                                  ARTICLE IX
                    AMENDMENT OF ARTICLES OF INCORPORATION

     In the event the board of directors of the Corporation determines that it
is in the Corporation's best interest to amend these Articles of Incorporation,
the board of directors shall adopt a resolution setting forth the proposed
amendment and declaring its advisability and submit the matter to the
stockholders entitled to vote thereon for the consideration thereof in
accordance with the provisions of the NRS and these Articles of Incorporation.
In the resolution setting forth the proposed amendment, the board of directors
may insert a provision allowing the board of directors to later abandon the
amendment, without concurrence by the stockholders, after the amendment has
received stockholder approval but before the amendment is filed with the Nevada
Secretary of State.

                                   ARTICLE X
                                 INCORPORATOR

     The name and address of the incorporator of the Corporation is Elizabeth A.
Savage, Kummer Kaempfer Bonner & Renshaw, 3800 Howard Hughes Parkway, Seventh
Floor, Las Vegas, Nevada 89109.

                                  ARTICLE XI
                     ACQUISITIONS OF CONTROLLING INTEREST

     The Corporation elects not to be governed by the provisions of Chapters
78.378 to 78.3793, inclusive, of the NRS pertaining to acquisitions of
controlling interest.

                                  ARTICLE XII
                   COMBINATIONS WITH INTERESTED STOCKHOLDERS

     The Corporation elects not to be governed by the provisions of Chapters
78.411 to 78.444, inclusive, of the NRS pertaining to combinations with
interested stockholders.

                                 ARTICLE XIII
                      DIRECTORS' AND OFFICERS' LIABILITY

     A director or officer of the Corporation shall not be personally liable to
this Corporation or its stockholders for damages for breach of fiduciary duty as
a director or officer, but this Article shall not eliminate or limit the
liability of a director or officer for (i) acts or omissions

                                       7
<PAGE>

which involve intentional misconduct, fraud or a knowing violation of law or
(ii) the unlawful payment of distributions. Any repeal or modification of this
Article by the stockholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director or officer of the Corporation for acts or omissions prior to such
repeal or modification.

                                  ARTICLE XIV
                                   INDEMNITY

     Every person who was or is a party to, or is threatened to be made a party
to, or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he, or a person of
whom he is the legal representative, is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, or as its
representative in a partnership, joint venture trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the laws of the State of Nevada from time to time against all expenses,
liability and loss (including attorneys' fees, judgments, fines and amounts paid
or to be paid in settlement) reasonably incurred or suffered by him in
connection therewith.  Such right of indemnification shall be a contract right
which may be enforced in any manner desired by such person.  The expenses of
directors, officers, employees and agent incurred in defending a civil or
criminal action, suit or proceeding must be paid by the Corporation as they are
incurred and in advance of the final disposition of the action suit or
proceeding, upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay the amount if it is ultimately determined by
a court of competent jurisdiction that he is not entitled to be indemnified by
the Corporation.  Such right of indemnification shall not be exclusive of any
other right which such directors, officers, employees or agents may have or
hereafter acquire, and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provision of law, or otherwise, as well as
their rights under this Article.

     Without limiting the application of the foregoing, the board of directors
may adopt bylaws from time to time with respect to indemnification, to provide
at all times the fullest indemnification permitted under the laws of the State
of Nevada, and may cause the Corporation to purchase and maintain insurance on
behalf of any person who is or was a director or officer of the Corporation, or
is or was serving at the request of the Corporation as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust or other enterprise against any liability asserted against such person and
incurred in any such capacity or arising out of such status, whether or not the
Corporation would have the power to indemnify such person.  The indemnification
provided in this Article shall continue as to a person who has ceased to be a
director, officer, employee, agent, and shall inure to the benefit of the heirs,
executors and administrators of such person.

                                       8
<PAGE>

     In witness whereof, I have hereunto set my hand this 25th day of October,
1999, declaring and certifying that the facts stated hereinabove are true.



                                       _________________________________
                                       Elizabeth A. Savage, Incorporator

                                       9
<PAGE>

                           CERTIFICATE OF ACCEPTANCE
                       OF APPOINTMENT BY RESIDENT AGENT

In the Matter of Reading Entertainment, Inc.:

     We, Kummer Kaempfer Bonner & Renshaw, do, hereby certify that on the 25th
day of October, 1999, we accepted the appointment as Resident Agent of the
above-entitled corporation in accordance with Section 78.090 of the Nevada
Revised Statutes.

     Furthermore, that the registered office in this State is located at 3800
Howard Hughes Parkway, Seventh Floor, Las Vegas, Nevada 89109.

     In witness whereof, I have hereunto set my hand this 25th day of October,
1999.


                                       Kummer Kaempfer Bonner & Renshaw



                                       By:  ___________________________________
                                            Elizabeth A. Savage

                                       10