CINEMARK USA INC /TX, S-4/A, 1996-10-09

CINEMARK USA INC /TX
S-4/A, 1996-10-09
MOTION PICTURE THEATERS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1996.

REGISTRATION NO. 333-11895
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------------

AMENDMENT NO. 1 TO

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

--------------------

CINEMARK USA, INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)

<TABLE>
<S> <C> <C>
TEXAS 8932 75-2206284
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

7502 Greenville Avenue, Suite 800 Lee Roy Mitchell
Dallas, TX 75231-3830 7502 Greenville Avenue, Suite 800
(214) 696-1644 Dallas, TX 75231-3830
(ADDRESS, INCLUDING ZIP CODE, AND (214) 696-1644
TELEPHONE NUMBER, INCLUDING (NAME, ADDRESS, INCLUDING ZIP CODE,
AREA CODE, OF REGISTRANTS' AND TELEPHONE NUMBER,INCLUDING
PRINCIPAL EXECUTIVE OFFICES) AREA CODE, OF AGENT FOR SERVICE)

--------------------

COPIES TO:

Terry M. Schpok, P.C. Michael D. Cavalier
Akin, Gump, Strauss, Hauer & Feld, L.L.P. Associate General Counsel
1700 Pacific Avenue Cinemark USA, Inc.
Suite 4100 7502 Greenville Avenue
Dallas, Texas 75201-4618 Suite 800
Dallas, Texas 75231-3830

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.

--------------------

================================================================================
<PAGE> 2

***************************************************************************
* *
* Information contained herein is subject to completion or amendment. *
* A registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may *
* not be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************

PROSPECTUS

CINEMARK USA, INC.

OFFER TO EXCHANGE ITS
[LOGO] 9-5/8% SERIES B SENIOR SUBORDINATED NOTES
DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
9-5/8% SERIES A SENIOR SUBORDINATED NOTES
DUE 2008

THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 p.m., NEW YORK CITY TIME,
ON NOVEMBER 8, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE")

Cinemark USA, Inc., a Texas corporation (the "Company"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange $1,000 principal amount of its 9-5/8% Series B Senior
Subordinated Notes due 2008 (the "Series B Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to a Registration Statement (as defined herein) of which this Prospectus is a
part, for each $1,000 principal amount of the outstanding 9-5/8% Series A
Senior Subordinated Notes due 2008 (the "Series A Notes"), of the Company of
which $200,000,000 principal amount is outstanding. The Series B Notes and the
Series A Notes are together referred to herein as the "Notes." The terms of
the Series B Notes are identical in all material respects to the terms of the
Series A Notes except that the registration and other rights relating to the
exchange of Series A Notes for Series B Notes and the restrictions on transfer
set forth on the face of the Series A Notes will not appear on the Series B
Notes. See "The Exchange Offer." The Series B Notes are being offered
hereunder in order to satisfy certain obligations of the Company under a
Registration Rights Agreement dated as of August 15, 1996 (the "Registration
Rights Agreement"). Based on an interpretation by the staff of the Securities
and Exchange Commission (the "Commission"), Series B Notes issued pursuant to
the Exchange Offer in exchange for Series A Notes may be offered for resale,
resold and otherwise transferred by a holder thereof (other than a holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act")), without compliance
with the registration and (except as provided in the following paragraph) the
prospectus delivery provisions of the Securities Act, provided that such Series
B Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement with any person to participate in the distribution of
such Series B Notes.

Each broker-dealer that receives Series B Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Series B Notes received in exchange for Series A Notes where
such Series A Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of twelve months after the effective date hereof, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "The Exchange Offer."
(cover page continued)
<PAGE> 3
The Company will not receive any proceeds from the Exchange Offer and will
pay all the expenses incident to the Exchange Offer. Tenders of Series A Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. If the Company terminates the Exchange Offer and does not
accept for exchange any Series A Notes, it will promptly return the Series A
Notes to the holders thereof. See "The Exchange Offer."

Prior to this Exchange Offer, there has been no public market for the
Series A Notes or the Series B Notes. To the extent that Series A Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Series A Notes could be adversely affected. If a market for the
Series B Notes should develop, the Series B Notes could trade at a discount
from their principal amount. The Company does not currently intend to list the
Series B Notes on any securities exchange or to seek approval for quotation
through any automated quotation system. There can be no assurance that an
active public market for the Series B Notes will develop.

The Exchange Agent for the Exchange Offer is United States Trust Company of
Texas, N.A.

SEE "RISK FACTORS" ON PAGE 14 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN
THE NOTES.

--------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

--------------------

The date of this Prospectus is October 9, 1996

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<PAGE> 4
AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Series B Notes offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Series B Notes offered hereby, reference is made
to the Registration Statement, including the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of certain documents
are not necessarily complete, and, in each instance, reference is made to the
copy of the document filed as an exhibit to the Registration Statement. Each
such statement is qualified in its entirety by such reference. The
Registration Statement can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at Suite
1400, Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511, and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can also be obtained from the Commission at prescribed
rates through its Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov.

In the event the Company is not subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") at any
time following the consummation of the Exchange Offer, the Company will be
required under the Indenture, dated as of August 15, 1996 (the "Indenture"),
among the Company and United States Trust Company of Texas, N.A., as trustee
(the "Trustee"), pursuant to which the Series A Notes were, and the Series B
Notes will be, issued, to continue to file with the Commission and furnish to
holders of the Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such financial information and
(ii) all reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such report. To permit compliance
with Rule 144A in connection with resales of Series A Notes, the Company will
furnish upon the request of a holder of a Series A Note and a prospective
purchaser designated by such holder the information required to be delivered
under Rule 144A(d)(4) under the Securities Act if at the time of such request
the Company is not a reporting company under Section 13 or 15(d) of the
Exchange Act nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder.
The Company is a reporting company under the Exchange Act and, as long as the
Company continues to be a reporting company, it will not be required to deliver
information required to be delivered under Rule 144A(d)(4).

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Company's Consolidated Financial Statements, including the
notes thereto, appearing elsewhere in this Prospectus. Unless the context
otherwise requires, references in this Propectus to the "Company" include the
Company and its subsidiaries. Also, as used in this Prospectus, the term
"Restricted Subsidiary" refers to any direct or indirect subsidiary of the
Company (and such Restricted Subsidiaries, collectively with the Company, the
"Restricted Group") other than Cinemark International, Inc. (f/k/a Cinemark
II, Inc.) ("Cinemark International"), and its subsidiaries. The term
"Unrestricted Subsidiary" refers to Cinemark International or any direct or
indirect subsidiaries of Cinemark International (collectively, the
"Unrestricted Group").

THE COMPANY

The Company is the fifth largest motion picture exhibitor in North America
in terms of the number of screens in operation. At June 30, 1996, the Company
operated 1,417 screens in 172 theatres located in 28 states, Canada, Chile and
Mexico, consisting of 1,055 screens in 121 "first run" theatres and 362 screens
in 51 "discount" theatres. Of the Company's 1,417 screens, 863 (or 61%) were
built by the Company over the past six years, and, as a result, the Company
believes it operates one of the most modern theatre circuits in the industry.
All of the Company's theatres are multiplex facilities with approximately 90%
of the Company's screens located in theatres of six or more screens. The
Company believes that its ratio of screens to theatres (8.2 to 1 at June 30,
1996) is the highest of the five largest theatre circuits in the U.S. and is
approximately 60% higher than the industry average (less than 5 to 1). From its
fiscal year ended December 31, 1991 through the twelve months ended June 30,
1996, the Company has increased consolidated revenues approximately 95% from
$164.4 million to $320.6 million and has increased EBITDA (as defined herein)
approximately 131% from $26 million to $60.0 million.

The Company is an industry leader in new theatre construction and operation
and, according to industry sources, has constructed more screens than any other
exhibitor during the 1990s. The Company believes that the attractiveness,
comfort and viewing experience provided by its modern facilities result in the
Company's theatres more often being the preferred destination for moviegoers in
its markets.

The Company believes that a number of positive trends have developed in the
theatre exhibition industry, including the ongoing trend toward the
development of larger multiplexes. The Company is actively participating in
this trend, commonly referred to as the "rescreening of America." The Company's
management experience and financial flexibility permit it to introduce larger
multiplex theatre facilities into areas previously served by smaller theatres,
thereby capturing moviegoers who seek more attractive surroundings, wider
variety of films, better customer service, shorter lines, more convenient
parking and a greater choice of seating to view popular movies. The Company's
larger multiplex facilities increase per screen revenues and operating margins
and enhance its operating efficiencies. Such theatres enable the Company to
present films appealing to several segments of the moviegoing public while
serving patrons from common support facilities (such as box office, concession
areas, rest rooms and lobby). In addition, larger multiplex facilities provide
the Company with greater flexibility in staffing, movie scheduling and
equipment utilization while reducing congestion throughout the theatre.

Theatrical exhibition is the primary distribution channel for new motion
picture releases. The Company believes that the successful theatrical release
of a movie abroad and in "downstream" distribution channels, such as home video
and pay-per-view, network and syndicated television, is largely dependent on
its successful theatrical release in the U.S. The Company believes that as a
result of increased revenues from the successful release of films in both movie
theatres and other distribution channels, major film production companies have
increased and will continue to increase the number of films being produced.
Additionally, increased revenues

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permit major film production companies to create "event" films such as Jurassic
Park, Twister and Independence Day which utilize the latest advances in
computer technology to enhance production quality and special effects. The
Company believes that an increasing supply of quality feature films and "event"
films will increase theatre attendance. The Company also believes that
international markets for theatrical exhibition, which have historically been
underserved due to antiquated and/or run-down theatres, will continue to
experience rapid growth as additional multiplex theatres are introduced.

In addition, the Company believes that certain demographic trends favor the
theatre exhibition industry. Information obtained from the U.S. Bureau of
Census indicates that the number of 12 to 20 year olds in the U.S., the largest
moviegoing segment of the population, is projected to grow an aggregate of 7.5%
through the year 2000. Furthermore, according to the Motion Picture Association
of America ("MPAA"), the number of patrons over 40 years old as a percentage of
the total movie audience has more than doubled from approximately 14% in 1986
to approximately 33% in 1995. The Company believes that film producers have
recognized the importance of this segment of the population and are producing
an increased number of films primarily targeted to this more mature audience,
including films such as Forrest Gump, Apollo 13, Mr. Holland's Opus and Sense
and Sensibility.

BUSINESS STRATEGY

The Company intends to continue to grow through new theatre development by
applying the same techniques it has implemented since it was founded. The
Company believes that it is unique among major theatre exhibitors in the
development and execution of the following four-part business strategy:

Continue to build in underserved mid-sized markets. The Company intends to
continue to build first run theatres in underserved mid-sized markets and
suburbs of major metropolitan areas with populations of 50,000 to 200,000 where
the Company frequently will be the sole or leading exhibitor in terms of first
run screens operated. The Company believes it gains maximum access to film
product, and thereby realizes a competitive advantage, by locating its modern
multiplex theatres in new and existing film zones where little or no
competition for film product exists.

Capitalize on popularity of "megaplex" concept. The Company intends to
expand its construction of larger "megaplex" entertainment centers in major
metropolitan areas. In December 1992, the Company opened its first megaplex,
Hollywood USA , a 15-screen, 52,000 square-foot complex containing a large
video arcade and a pizzeria. The Company subsequently opened two additional
megaplexes styled after the original Hollywood USA . Based upon the success of
these complexes, which consistently rank among the Company's top grossing
facilities on a per screen basis, the Company expanded the megaplex concept. In
the last twelve months, the Company has developed three megaplexes, each
exceeding 80,000 square feet and featuring 16 or more screens with 75 foot
screens in the largest auditoriums, stadium seating, digital sound, a pizzeria,
a coffee bar and a large video arcade room. Five of these megaplex facilities
are either currently under construction or scheduled to begin construction
during the remainder of 1996.

Continue to expand discount theatre niche. The Company intends to continue
to build discount theatres (admission of $1 to $2 per ticket) primarily in
major metropolitan markets to serve patrons who miss a film during its first
run exhibition or who may not be able to afford to attend first run theatres on
a frequent basis. The Company believes that its discount theatres allow it to
serve these segments of the total moviegoing population, increasing the number
of potential customers beyond traditional first run moviegoers. The Company
develops its multiplex discount theatres with many of the same amenities as its
first run theatres, including wall-to-wall screens, comfortable seating with
cupholder armrests, digital sound, multiple concession stands and a video game
room. The Company's discount theatres generally have higher attendance, lower
film

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costs and a greater proportion of concession revenues than its first run
theatres. As of June 30, 1996, approximately 30% of the Company's theatres were
discount theatres.

Develop modern American-style theatres in underserved international
markets. The Company intends to continue to develop multiplex theatres directly
or through joint venture arrangements with local partners in underserved
international markets. The Company's activities to date in international
markets have been directed toward Latin America, which the Company believes is
severely underscreened and is still typically served by one- and two-screen
theatres which are often antiquated and/or run-down. The Company believes that
the same economic factors giving rise to the multiplex rescreening trend in the
U.S. are similarly applicable to international markets. The Company believes
that it was the first U.S. circuit to open American-style modern multiplex
theatres in Chile and Mexico, and has recently begun exploring development
opportunities in Argentina and Brazil. For a discussion of an agreement in
principle to renegotiate certain indebtedness of Cinemark Mexico (as defined
herein) see "Description of Certain Debt Instruments -- Cinemark Mexico
Indenture."

RECENT DEVELOPMENTS

In February 1996, the Company replaced its existing bank line of credit
with the Credit Facility (as defined herein), which has a final maturity of
2003 and provides for borrowing availability of up to $175 million. In March
1996, the Company received $41 million from the sale of common stock to Cypress
Merchant Banking Partners L.P. and Cypress Pictures Ltd. (collectively,
"Cypress"). At the same time, Cypress purchased for $98 million outstanding
shares of common stock from shareholders.

On August 15, 1996, the Company issued $200 million aggregate principal
amount of Series A Notes (the "Series A Notes Offering"). The net proceeds of
the Series A Notes Offering were used by the Company to (i) repurchase an
aggregate of $123,370,000 principal amount of the Company's 12% Senior Notes
due 2001 (the "Old Notes") and pay premiums and consent fees related thereto
pursuant to an Offer to Purchase and Consent Solicitation (the "Repurchase
Offer") to repurchase all of the Company's outstanding $125 million principal
amount of Old Notes and (ii) reduce the Company's indebtedness under the Credit
Facility.

The Credit Facility, the Cypress investment, the completion of the
Repurchase Offer and the Series A Notes Offering have collectively extended the
average maturity of the Company's indebtedness, reduced the average interest
rate on its indebtedness and increased its equity capitalization base. The
Company believes that these steps will enhance its financial flexibility in
pursuing its business strategy and allow it to take advantage of the growth
opportunities in the theatre exhibition industry.

The Company's principal offices are located at 7502 Greenville Avenue,
Suite 800, Dallas, Texas 75231-3830, and its telephone number at that location
is (214) 696-1644.

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THE EXCHANGE OFFER

REGISTRATION RIGHTS AGREEMENT . . . The Series A Notes were issued by the
Company on August 15, 1995 to qualified
institutional buyers and institutional
accredited investors. In connection
therewith, the Company executed and
delivered for the benefit of the holders
of the Series A Notes the Registration
Rights Agreement providing for, among
other things, the Exchange Offer.

THE EXCHANGE OFFER . . . . . . . . The Company is offering to issue $1,000
principal amount of Series B Notes in
exchange for each $1,000 principal amount
of Series A Notes validly tendered
pursuant to the Exchange Offer. As of
the date hereof, $200,000,000 in
aggregate principal amount of Series A
Notes are outstanding. The Company will
issue the Series B Notes to holders
promptly following the Expiration Date.
See "Risk Factors--Consequences of
Failure to Exchange."

Based on an interpretation by the staff
of the Commission set forth in no-action
letters issued to third parties, the
Company believes that Series B Notes
issued pursuant to the Exchange Offer in
exchange for Series A Notes may be
offered for resale, resold and otherwise
transferred by a holder thereof (other
than a "Restricted Holder," being a
person that is an affiliate of the
Company within the meaning of Rule 405
under the Securities Act) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that the holder
is acquiring the Series B Notes in the
ordinary course of its business and is
not participating, and has no arrangement
or understanding with any person to
participate, in a distribution of the
Series B Notes. Eligible holders wishing
to accept the Exchange Offer must
represent to the Company that such
conditions have been met. Any
broker-dealer who holds Series A Notes
acquired for its own account as a result
of market-making or other trading
activities, and who receives Series B
Notes in the exchange for such Series A
Notes pursuant to the Exchange Offer, may
be a statutory underwriter and must
deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of Series B
Notes, which prospectus may be the
prospectus for the Exchange Offer so long
as it contains a plan of distribution
with respect to such resale transactions.
See "The Exchange Offer."

RESALE . . . . . . . . . . . . . . Based on an interpretation by the staff
of the Commission, the Company believes
that Series B Notes issued pursuant to
the Exchange Offer in exchange for Series
A Notes may be offered for resale and
resold or otherwise transferred by
holders thereof (other than any
Restricted Holder) without compliance
with the registration and prospectus
delivery provisions of the Securities
Act, provided that such Series B Notes
are acquired in the ordinary course of
such holders' business and such holders
have no arrangement with any person to
participate in the distribution of such
Series B Notes. See

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"Mary Kay Cosmetics, Inc.," SEC No-Action
Letter (available June 5, 1991); "Morgan
Stanley & Co., Incorporated," SEC
No-Action Letter (available June 5,
1991); and "Exxon Capital Holdings
Corporation," SEC No-Action Letter
(available May 13, 1988). Any broker
dealer who holds Series A Notes acquired
for its own account as a result of
market-making or other trading
activities, and who receives Series B
Notes in the exchange for such Series A
Notes pursuant to the Exchange Offer, may
be a statutory underwriter and must
deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of Series B
Notes, which prospectus may be the
prospectus for the Exchange Offer so long
as it contains a plan of distribution
with respect to such resale transactions.
See "Shearman & Sterling," No-Action
Letter (available July 2, 1993).

If any person were to participate in the
Exchange Offer for the purpose of
distributing securities in a manner not
permitted by the preceding paragraph,
such person (i) could not rely on the
position of the staff of the Commission
enunciated in "Exxon Capital Holdings
Corporation" or similar interpretive
letters and (ii) must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with a secondary resale
transaction. Therefore, each holder of
Series A Notes who accepts the Exchange
Offer must represent in the Letter of
Transmittal that it meets the conditions
described above. See "The Exchange
Offer--Terms of the Exchange Offer."

EXPIRATION DATE . . . . . . . . . . 5:00 p.m., New York City time, on
November 8, 1996 unless the Exchange
Offer is extended, in which case the term
"Expiration Date" means the latest date
and time to which the Exchange Offer is
extended. See "The Exchange
Offer--Expiration Date; Extensions;
Amendments."

CONDITIONS TO THE EXCHANGE
OFFER . . . . . . . . . . . . . . The Exchange Offer is subject to certain
customary conditions which may be waived
by the Company. See "The Exchange
Offer--Conditions."

No federal or state regulatory
requirements must be complied with or
approvals obtained in connection with the
Exchange Offer, other than the
registration provisions of the Securities
Act and any applicable registration or
qualification provisions of state
securities laws.

PROCEDURE FOR TENDERING OLD
NOTES . . . . . . . . . . . . . . Each holder of Series A Notes wishing to
accept the Exchange Offer must complete,
sign and date the Letter of Transmittal,
or a facsimile thereof, in accordance
with the instructions contained herein
and therein, and mail or otherwise
deliver such Letter of Transmittal, or
such facsimile, together with the Series
A Notes to

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<PAGE> 10

be exchanged and any other required
documentation, to the Exchange Agent (as
defined herein) at the address set forth
herein and therein. Series A Notes may
be physically delivered but physical
delivery is not required if a
confirmation of a book-entry of such
Series A Notes to the Exchange Agent's
account at The Depository Trust Company
("DTC" or the "Depository") is delivered
in a timely fashion. By executing the
Letter of Transmittal, each holder will
represent to the Company that, among
other things, the Series B Notes acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of
business of the person receiving such
Series B Notes, whether or not such
person is the holder, that neither the
holder nor any such other person is
engaged in, or intends to engage in, or
has an arrangement or understanding with
any person to participate in, the
distribution of such Series B Notes and
that neither the holder nor any such
other person is an "affiliate," as
defined under Rule 405 of the Securities
Act, of the Company or any Guarantor.
Each broker or dealer that receives
Series B Notes for its own account in
exchange for Series A Notes, where such
Series A Notes were acquired by such
broker or dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with
any resale of such Series B Notes. See
"The Exchange Offer-- Procedures for
Tendering" and "Plan of Distribution."
See "The Exchange Offer--Procedure for
Tendering" and "Plan of Distribution."

SPECIAL PROCEDURES FOR
BENEFICIAL HOLDERS . . . . . . . Any beneficial holder whose Series A
Notes are registered in the name of his
broker, dealer, commercial bank, trust
company or other nominee and who wishes
to tender in the Exchange Offer should
contact such registered holder promptly
and instruct such registered holder to
tender on his behalf. If such beneficial
holder wishes to tender on his own
behalf, such beneficial holder must,
prior to completing and executing the
Letter of Transmittal and delivering his
Series A Notes, either make appropriate
arrangements to register ownership of the
Series A Notes in such holder's name or
obtain a properly completed bond power
from the registered holder. The transfer
of record ownership may take considerable
time. See "The Exchange Offer--Procedure
for Tendering."

GUARANTEED DELIVERY
PROCEDURES . . . . . . . . . . . Holders of Series A Notes who wish to
tender their Series A Notes and whose
Series A Notes are not immediately
available or who cannot deliver their
Series A Notes and a properly completed
Letter of Transmittal or any other
documents required by the Letter of
Transmittal to the Exchange Agent prior
to the Expiration Date, as the case may
be, may tender their Series A Notes
according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."

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<PAGE> 11

WITHDRAWAL RIGHTS . . . . . . . . . Tenders of Series A Notes may be
withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration
Date. See "The Exchange
Offer--Withdrawal of Tenders."

ACCEPTANCE OF SERIES A NOTES AND
DELIVERY OF SERIES B NOTES . . . The Company will accept for exchange any
and all Series A Notes which are validly
tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the
Expiration Date. The Series B Notes
issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."

CERTAIN TAX CONSIDERATIONS . . . . The exchange pursuant to the Exchange
Offer will generally not be a taxable
event for federal income tax purposes.
See "Federal Income Tax Consequences."

EXCHANGE AGENT . . . . . . . . . . United States Trust Company of Texas,
N.A., the Trustee under the Indenture, is
serving as exchange agent (the "Exchange
Agent") in connection with the Exchange
Offer.

DESCRIPTION OF SERIES B NOTES

SECURITIES OFFERED . . . . . . . . $200,000,000 aggregate principal amount
of 9-5/8% Series B Senior Subordinated
Notes due 2008.

MATURITY DATE . . . . . . . . . . . August 1, 2008.

OPTIONAL REDEMPTION . . . . . . . . Interest on the Series B Notes will
accrue at the rate of 9-5/8% per annum
payable semi-annually in arrears on
February 1 and August 1 of each year,
commencing February 1, 1997.

OPTIONAL REDEMPTION . . . . . . . . The Series B Notes will be redeemable at
the option of the Company, in whole or in
part, at any time on or after August 1,
2001, at the redemption prices set forth
herein, plus accrued and unpaid interest,
if any, to the date of redemption. In
addition, on or before August 1, 1999,
the Company may redeem up to 35% of the
original aggregate principal amount of
the Series B Notes at a redemption price
of 110% of the principal amount thereof,
plus accrued and unpaid interest, if any,
to the date of redemption, with the net
proceeds of one or more Equity Offerings
(as defined herein); provided, however,
that at least 65% of the original
aggregate principal amount of the Series
B Notes remain outstanding following each
such redemption. See "Description of
Series B Notes--Optional Redemption."

CHANGE OF CONTROL OFFER . . . . . . Upon the occurrence of a Change of
Control (as defined herein), the Company
will be required to make an offer to
repurchase the

10
<PAGE> 12

Series B Notes at a price equal to 101%
of the principal amount thereof, plus
accrued and unpaid interest, if any, to
the date of repurchase. See "Description
of Series B Notes--Repurchase at the
Option of Holders--Change of Control."

RANKING . . . . . . . . . . . . . . The Series B Notes will be general
unsecured obligations of the Company,
subordinated in right of payment to all
existing and future Senior Indebtedness
of the Company, including all obligations
of the Company under the Credit Facility.
As of August 31, 1996, the Company had
outstanding $18.2 million of Senior
Indebtedness. The Series B Notes will be
effectively subordinated to the
indebtedness of the Company's
subsidiaries ($22.4 million at August 31,
1996). See "Description of Series B
Notes--Subordination."

CERTAIN COVENANTS . . . . . . . . . The Indenture pursuant to which the
Series B Notes will be issued (the
"Indenture") contains certain covenants
that, among other things, limit the
ability of the Company and its Restricted
Subsidiaries to incur additional
Indebtedness, pay dividends or make other
distributions, repurchase any capital
stock or subordinated Indebtedness, make
certain investments, create certain
liens, enter into certain transactions
with affiliates, sell assets or enter
into certain mergers and consolidations.
In addition, the Indenture contains a
covenant limiting the lines of business
of certain Unrestricted Subsidiaries.
See "Description of Series B
Notes--Certain Covenants."

USE OF PROCEEDS . . . . . . . . . . There will be no proceeds to the Company
from any exchange pursuant to the
Exchange Offer.

RISK FACTORS

For a discussion of certain factors that should be considered before
exchanging Series A Notes for Series B Notes in the Exchange Offer, see "Risk
Factors."

11
<PAGE> 13

SUMMARY FINANCIAL AND OPERATING DATA

The following tables set forth selected consolidated financial data for
the Company for the periods and at the dates indicated for each of the five
most recent fiscal years ended December 31, 1995, for the twelve months ended
June 30, 1996 and for the six months ended June 30, 1995 and 1996.
Supplemental financial data for the Restricted Group are derived from
supplemental schedules to the Consolidated Financial Statements, appearing
elsewhere in this Prospectus. The financial data for the twelve months ended
June 30, 1996 and for the six months ended June 30, 1995 and 1996 are derived
from the unaudited financial statements of the Company. The Company believes
the financial data for the twelve months ended June 30, 1996 and for the six
months ended June 30, 1995 and 1996 reflect all adjustments (which include only
normal recurring adjustments) necessary for a fair presentation of such data.
Operating results for the twelve months ended June 30, 1996 and for the six
months ended June 30, 1995 and 1996 are not necessarily indicative of results
for the full fiscal year. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements, including the
notes thereto, appearing elsewhere in this Prospectus.

SIX MONTHS
TWELVE ENDED
YEAR ENDED DECEMBER 31, MONTHS ENDED JUNE 30,
------------------------------------------------- JUNE 30, ---------------
1991 1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ---- ----
(In thousands, except theatre, screen and ratio data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (CONSOLIDATED):
Revenues . . . . . . . . . . . . . . . . . $164,425 194,652 $239,659 $ 283,077 $ 298,559 $ 320,649 $136,214 $158,304
Theatre operating costs . . . . . . . . . 132,523 154,825 185,100 218,748 227,719 242,655 105,343 120,280
General and administrative expenses . . . 7,993 10,119 12,162 17,095 19,555 21,814 9,141 11,400
Depreciation and amortization . . . . . . 9,817 9,830 10,939 15,121 15,925 17,491 7,105 8,672
Operating income . . . . . . . . . . . . . 14,092 19,878 31,458 32,113 35,361 38,688 14,625 17,953
Interest expense(1) . . . . . . . . . . . 7,653 12,258 17,102 18,917 19,374 18,825 10,315 9,767
Income before extraordinary items . . . . 4,770 5,726 9,720 7,006 13,155 17,681 2,638 7,164
Net income . . . . . . . . . . . . . . . . 3,701 5,829 9,720 7,006 13,155 17,346 2,638 6,829

OTHER FINANCIAL DATA (CONSOLIDATED):
Cash flow from operations . . . . . . . . $ 17,982 $23,376 $ 27,181 $ 32,665 $ 36,090 $ 50,507 $ 8,046 $ 22,463
Theatre level cash flow(2) . . . . . . . . 31,902 39,827 54,559 64,329 70,840 77,993 30,870 38,024
EBITDA(3) . . . . . . . . . . . . . . . . 25,977 32,117 45,808 50,851 55,708 59,951 24,014 28,258
Ratio of earnings to fixed charges(4) . . 1.46x 1.43x 1.61x 1.46x 1.69x 1.86x 1.32x 1.68x
Pro forma ratio of earnings to
fixed charges(5) . . . . . . . . . . . . 1.63x 1.85x 1.64x

SUPPLEMENTAL FINANCIAL DATA
(RESTRICTED GROUP):(6)
EBITDA(3) . . . . . . . . . . . . . . . . $ 25,977 $32,089 $ 45,433 $ 49,408 $ 54,319 $ 58,208 $ 23,622 $ 27,511
Pro forma interest expense(7) . . . . . . 19,799 19,623 9,812
Ratio of EBITDA to pro forma
interest expense . . . . . . . . . . . . 2.74x 2.97x 2.80x
Pro forma long-term debt, including
current maturities (at period end)(8) . 200,530 200,530
Ratio of pro forma long term debt
to EBITDA (at period end)(8) . . . . . . 3.45x

Outside United States (Unrestricted Group)
Theatres owned (at period end)(10) . . - - - 4 9 11 5 11
Screens owned (at period end)(10) . . . - - - 42 92 114 54 114
Total attendance (in thousands) . . . - - - 1,407 4,210 6,359 1,520 3,669
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
-------------------------------------------------- -------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(11)
---- ---- ---- ---- ---- ------ -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (CONSOLIDATED):
Cash and temporary cash investments . . . $ 3,885 $29,368 $ 44,454 $ 31,056 $ 13,925 $ 7,122 $ 8,042
Theatre properties and equipment-net . . . 77,274 93,952 117,017 155,798 224,482 287,563 287,563
Total assets . . . . . . . . . . . . . . . 99,321 147,661 189,361 217,185 267,747 326,106 330,477
Total long-term debt, including
current portion . . . . . . . . . . . 78,403 130,662 152,787 167,374 198,145 202,760 221,906
Shareholders' equity (deficiency) . . . . 1,933 (11,094) (760) 2,732 11,345 58,079 49,045
</TABLE>

12
<PAGE> 14

- ---------------

(1) Includes amortization of debt issue cost and debt discount.

(2) Revenues less theatre operating costs (which is not a measure of
financial performance under generally accepted accounting principles)
("GAAP"). Theatre level cash flow is a financial measure commonly used
in the Company's industry and should not be construed as an alternative
to cash flow from operations (as determined in accordance with GAAP) as
an indicator of operating performance or as a measure of liquidity.

(3) Represents net income before depreciation and amortization, interest
expense, changes in deferred lease expense, accrued and unpaid
compensation expense relating to any stock appreciation and stock
option plans, equity in income (loss) of affiliates, gain (loss) on
sale of assets, minority interests, provision for income taxes and
extraordinary items. EBITDA is a financial measure commonly used in
the Company's industry and should not be construed as an alternative to
cash flows from operating activities (as determined in accordance with
GAAP), as an indicator of operating performance or as a measure of
liquidity.

(4) For the purpose of calculating the ratio of earnings to fixed charges,
(i) earnings consist of income (loss) before income taxes and
extraordinary items plus fixed charges excluding capitalized interest
and (ii) fixed charges consist of interest expense, capitalized
interest, amortization of debt issue cost and debt discount and the
portion of rental expense which is deemed to be representative of the
interest factor.

(5) Gives effect to the Repurchase Offer and the Series A Notes Offering as
of the beginning of the period. See "Capitalization."

(6) The restrictive covenants in the Indenture apply only to the Restricted
Group and supplemental financial data represents data pertaining to the
Restricted Group only. See supplemental schedules to the Consolidated
Financial Statements, including the notes thereto, appearing elsewhere
in this Prospectus.

(7) Calculated based on debt outstanding at the end of the period for the
subsequent four quarter period. Gives effect to the Repurchase Offer
and the Series A Notes Offering as if both had occurred at the end of
such period and does not include amortization of debt issue cost for
the Series A Notes.

(8) Gives effect to the Repurchase Offer and the Series A Notes Offering as
if both had occurred at the end of such period. See "Capitalization."

(9) The data as of period end 1991, 1992, 1993, 1994 (and June 1995), 1995
(and June 1996) exclude two theatres (20 screens), two theatres (23
screens), two theatres (23 screens), three theatres (33 screens) and
four theatres (54 screens), respectively, operated by the Company
pursuant to management agreements.

(10) The data as of period end 1993, 1994 (and June 1995), 1995 and June
1996 exclude two theatres (18 screens), two theatres (18 screens),
three theatres (25 screens), three theatres (25 screens) and four
theatres (37 screens), respectively, operated through affiliates of
the Company in Canada and Chile.

(11) Gives effect to the Repurchase Offer and the Series A Notes Offering.
See "Capitalization."

13
<PAGE> 15
RISK FACTORS

Holders of Series A Notes should carefully consider the specific risk
factors set forth below as well as the other information contained in this
Prospectus before deciding to tender their Series A Notes in the Exchange
Offer.

DEPENDENCE UPON MOTION PICTURE PRODUCTION AND PERFORMANCE

The Company's business is dependent both upon the availability of suitable
motion pictures for exhibition in its theatres and the performance of such
films in the Company's markets. Poor performance of films or disruption in the
production of motion pictures by the major studios and/or independent producers
could have a material adverse effect on the Company's business. Since the major
film distributors have historically released those films which they anticipate
will be the most successful during the summer and holiday seasons, poor
performance of such films or disruption in the release of films during such
periods could adversely affect the Company's results for a particular quarter.

SUBSTANTIAL INDEBTEDNESS

As of August 31, 1996, the Company had total outstanding indebtedness of
$240.6 million. The Company's leveraged financial position poses substantial
risks to holders of the Series B Notes, including the risks that: (i) a
substantial portion of the Company's cash flow from operations will be
dedicated to the payment of interest on the Series B Notes and the payment of
principal of and interest on borrowings under the Credit Facility and other
indebtedness; (ii) the Company's ability to obtain financing in the future for
working capital, capital expenditures and general corporate purposes may be
impeded; and (iii) the Company may be more vulnerable to economic downturns
which may limit its ability to withstand competitive pressures. The Company
believes that, based on its current level of operations, it will have
sufficient liquidity and access to capital to carry on its business and will be
able to meet its scheduled debt service requirements. However, there can be no
assurance that the future cash flow of the Company will be sufficient to meet
the Company's obligations and commitments. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources," "Description of Series B Notes," and "Description of
Certain Debt Instruments."

SUBORDINATION OF SERIES B NOTES

The Series B Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company, including obligations under the Credit Facility. As of August
31, 1996, the Company had outstanding Senior Indebtedness of $18.2 million.
Subject to certain limitations, the Indenture permits the Company to incur
additional indebtedness, including Senior Indebtedness. See "Description of
Series B Notes -- Certain Covenants -- Limitation on Indebtedness." In
addition, the Series B Notes will be effectively subordinated to indebtedness
of the Company's subsidiaries ($22.4 million as of August 31, 1996). The
indebtedness under the Credit Facility will also become due prior to the time
the principal obligations under the Series B Notes become due. As a result of
the subordination provisions contained in the Indenture, in the event of a
liquidation or insolvency of the Company, the assets of the Company will be
available to pay obligations on the Series B Notes only after all Senior
Indebtedness has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Series B Notes then
outstanding. In addition, substantially all of the assets of the Company and
its subsidiaries may in the future be pledged to secure other indebtedness of
the Company. See "Description of Series B Notes" and "Description of Certain
Debt Instruments."

14
<PAGE> 16
SUBSTANTIAL CAPITAL EXPENDITURES; UNCERTAINTIES RELATING TO FUTURE EXPANSION
PLANS

The Company plans to open a total of approximately 390 screens in the U.S.
in 1996 and 1997. From January 1, 1996 to June 30, 1996, the Company has opened
four theatres (60 screens) and has fifteen theatres (191 screens) under
construction. In addition, as of June 30, 1996, the Company has approximately
ten theatres (139 screens) scheduled to begin construction during the remainder
of 1996 or in 1997. The Company estimates that capital expenditures in
connection with the development of these 390 screens in 1996 and 1997 will be
approximately $110 million and $70 million, respectively. As of June 30, 1996,
the Company had expended approximately $50 million toward the development of
these screens. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." These planned
capital expenditures are equal to or in excess of capital expenditures by the
Company over the last several years and there can be no assurance that the
financial performance of these screens will be equivalent to the performance of
the Company's existing screens.

The Company intends to pursue a strategy of expansion that will involve the
development of new theatres, both domestically and in international markets,
certain of which may be larger and more costly than those developed by the
Company to date. In addition, the Company's strategy of expansion may involve
acquisitions of existing theatres and theatre circuits. There is significant
competition for potential site locations and existing theatre and theatre
circuit acquisition opportunities. As a result of such competition, the Company
may be unable to acquire attractive site locations or existing theatres or
theatre circuits on terms the Company considers acceptable. Furthermore, the
Company can make no assurances that it will be able to successfully develop or
acquire suitable theatres in the future, that such theatres will be successful
or that the Company's expansion strategy will result in improvements to the
business, financial condition or profitability of the Company.

INTERNATIONAL OPERATIONS

All of the Company's operations outside of the U.S. and future expansion
outside of the U.S. and Canada will be conducted through Cinemark
International, an Unrestricted Subsidiary under the Indenture. As of June 30,
1996, the Company, through Cinemark Mexico (USA), Inc. ("Cinemark Mexico"), a
subsidiary of Cinemark International, operated eleven theatres (114 screens) in
Mexico. Additionally, the Company operates and owns a 50% interest in two
theatres (13 screens) in Chile. The Company continues to investigate
opportunities in these and other international markets. Governmental
regulation of the motion picture industry in international markets differs
significantly from regulation in the U.S. The Company's international
operations are subject to certain political, economic and other uncertainties
not encountered in domestic operations. The Company's international operations
also face the additional risks of fluctuating currency values, hard currency
shortages and controls of foreign currency exchange. Cinemark Mexico had net
operating losses during fiscal years 1994 and 1995 due principally to costs
associated with the development of new multiplex theatres, interest costs
relating to its debt obligations and the devaluation of the Mexican currency.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Company, through Cinemark
International, plans to invest up to $40 million in international ventures,
principally in Latin America, over the next two to three years. The Company
anticipates that investments in excess of Cinemark International's available
cash will be funded by the Company, subject to the restrictive covenants in the
Indenture, or by debt or equity financing to be provided by third parties
directly to Cinemark International or its subsidiaries. Indebtedness incurred
by Unrestricted Subsidiaries is not subject to the terms of the Indenture. See
"Description of Series B Notes."

In July 1996, Cinemark Mexico reached a non-binding agreement in principle
with the institutional holder of $22.0 million of its $22.4 million principal
amount 12% Senior Subordinated Notes due 2003 (the

15
<PAGE> 17
"Cinemark Mexico Notes") pursuant to which Cinemark Mexico and such holder
agreed to the exchange of all Cinemark Mexico Notes owned by such holder, and
accrued unpaid interest from February 1, 1996 to the date of such exchange, for
a new series of notes (the "New Mexico Notes").

As a result of the agreement in principle, Cinemark Mexico did not make the
approximately $1.3 million cash interest payment on the Cinemark Mexico Notes
otherwise due on August 1, 1996. The Company and the majority holder of the
Cinemark Mexico Notes are currently negotiating definitive documentation to
effectuate the terms of the non-binding agreement in principle. However, there
can be no assurance that any such documentation will be successfully
negotiated, approved or executed. In such event, and if Cinemark Mexico fails
to make the interest payment, an event of default under the Cinemark Mexico
Indenture (as defined herein) could result, which event of default would have a
material adverse effect on Cinemark Mexico if the maturity of the Cinemark
Mexico Notes is accelerated. Because Cinemark Mexico is an Unrestricted
Subsidiary, acceleration of the Cinemark Mexico Notes would not be an event of
default under the Indenture, the Credit Facility or any other of the Company's
existing debt instruments. See "Description of Certain Debt Instruments --
Cinemark Mexico Indenture."

RESTRICTIONS IMPOSED BY THE CREDIT FACILITY

The Credit Facility requires the Company to maintain specified financial
ratios and tests, including a Debt Service Coverage Ratio and a Total Debt to
Cash Flow Ratio, each as defined in the Credit Facility. In addition, the
Credit Facility restricts, among other things, the Company's ability to incur
additional indebtedness, make asset dispositions, create or incur liens on any
of the Company's assets, make certain payments and dividends or merge or
consolidate. A failure to comply with the restrictions contained in the Credit
Facility could lead to an event of default thereunder, which could result in an
acceleration of such indebtedness. There can be no assurance that the Company
would have sufficient resources or have access to sufficient resources to pay
its obligations under the Credit Facility if such indebtedness is accelerated.
See "Description of Certain Debt Instruments -- Credit Facility."

COMPETITION

The motion picture business is highly competitive. The Company competes
against both local and national exhibitors. Some of the Company's competitors
have substantially greater financial resources than the Company. The Company's
theatres also face competition from a number of alternative downstream
distribution channels, such as home video and network, syndicated and
pay-per-view television. The Company is also subject to competition from other
forms of entertainment competing for the public's leisure time and disposable
income. See "Business -- Competition."

EFFECTIVE CONTROL BY PRINCIPAL SHAREHOLDERS

As of June 30, 1996, the Company's Chief Executive Officer, Lee Roy
Mitchell and his affiliates beneficially owned an aggregate of 53.1% and
Cypress beneficially owned an aggregate of 46.1% of the outstanding shares of
common stock of the Company. Mr. Mitchell beneficially owns all of the voting
common stock of the Company and has the voting power to elect the entire Board
of Directors, subject to the ability of Cypress Advisors L.P. ("CALP") to
designate a specified number of Board members. Additionally, if such
shareholders were to vote all of their shares in a similar manner, they would
have sufficient voting power to determine the outcome of any corporate
transaction or other matter submitted to the shareholders for approval. See
"Principal Shareholders" and "Certain Transactions -- Cypress Investment."

16
<PAGE> 18
DEPENDENCE ON KEY PERSONNEL

The Company's success will depend, in large part, on the efforts, abilities
and experience of its executive officers and other key employees of the
Company. The loss of the services of such individuals could have a material
adverse effect on the Company's business. See "Management."

REPURCHASE OF SERIES B NOTES UPON CHANGE OF CONTROL

Upon the occurrence of a Change of Control, the Company will be required to
make an offer to repurchase the Series B Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase. Certain events involving a Change of Control will result in an
event of default under the Credit Facility and may result in an event of
default under other indebtedness of the Company that may be incurred in the
future. An event of default under the Credit Facility or other future Senior
Indebtedness could result in an acceleration of such indebtedness, in which
case the subordination provisions of the Series B Notes would require payment
in full of such Senior Indebtedness before repurchase of the Series B Notes.
See "Description of Series B Notes -- Repurchase at the Option of Holders --
Change of Control," "-- Subordination" and "Description of Certain Debt
Instruments -- Credit Facility." There can be no assurance that the Company
would have sufficient resources to repurchase the Series B Notes or pay its
obligations if the indebtedness under the Credit Facility or other future
Senior Indebtedness were accelerated upon the occurrence of a Change of
Control. The inability to repay Senior Indebtedness of the Company, if
accelerated, and to repurchase all of the tendered Series B Notes would
constitute an event of default under the Indenture. These provisions may be
deemed to have anti-takeover effects and may delay, defer or prevent a merger,
tender offer or other takeover attempt. No assurance can be given that the
terms of any future indebtedness will not contain cross default provisions
based upon Change of Control or other defaults under such debt instruments.

LACK OF PUBLIC MARKET

The Series B Notes are a new issue of securities for which there is
currently no trading market. The Company does not currently intend to list the
Series B Notes on any securities exchange or to seek approval for quotation
through the automated quotation system. There can be no assurance that an
active trading market for the Series B Notes will exist. If a market were to
exist, the Series B Notes could trade at prices that may be lower than the
initial offering price of the Series A Notes depending on many factors,
including prevailing interest rates and the markets for similar securities,
general economic conditions and the financial condition and performance of, and
prospects for, the Company. See "Description of Series B Notes -- Exchange
Offer; Registration Rights."

CONSEQUENCES OF FAILURE TO EXCHANGE

Holders of Series A Notes who do not exchange their Series A Notes for
Series B Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Series A Notes as set forth in the legend
thereon as a consequence of the issuance of the Series A Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Series A Notes
under the Securities Act. Series B Notes issued pursuant to the Exchange Offer
in exchange for Series A Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than any such holder which is an
"affiliate" of the Company or any Guarantor within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such Series
B Notes are acquired in the ordinary course of such holders' business and such
holders have no

17
<PAGE> 19
arrangement with any person to participate in the distribution of such Notes.
Each broker-dealer that receives Series B Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Series B Notes. The Letter of Transmittal
states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Series B Notes received in exchange for Series A Notes where
such Series A Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of twelve months after the effective date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution." However, to
comply with the securities laws of certain jurisdictions, if applicable, the
Series B Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from registration or
qualification is available and is complied with. To the extent that Series A
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Series A Notes will be adversely
affected.

18
<PAGE> 20
THE EXCHANGE OFFER

PURPOSES AND EFFECTS OF THE EXCHANGE OFFER

The Series A Notes were sold by the Company on August 15, 1996 to initial
purchasers (the "Initial Purchasers"), who resold the Series A Notes to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and other institutional "accredited investors" (as defined in Rule 501(a)
under the Securities Act). In connection with the sale of the Series A Notes,
the Company and the Initial Purchasers entered into the Registration Rights
Agreement pursuant to which the Company agreed to use its best efforts to file
with the Commission a registration statement (the "Exchange Offer Registration
Statement") with respect to an offer to exchange the Series A Notes for Series
B Notes within 30 days following the issuance of the Series A Notes. In
addition, the Company agreed to use its best efforts to cause the Exchange
Offer Registration Statement to become effective under the Securities Act and
to issue the Series B Notes pursuant to the Exchange Offer. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Exchange
Offer Registration Statement. See "Description of Notes--Exchange Offer;
Registration Rights."

This Exchange Offer is being made pursuant to the Registration Rights
Agreement to satisfy the Company's obligations thereunder. The term "holder,"
with respect to the Exchange Offer, means any person in whose name Series A
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Series A Notes are held of record by the Depository Trust Company.
The Company is generally not required to file any registration statement to
register any outstanding Series A Notes. Holders of Series A Notes who do not
tender their Series A Notes or whose Series A Notes are tendered but not
accepted would have to rely on exemptions to registration requirements under
the securities laws, including the Securities Act, if they wish to sell their
Series A Notes.

Based on an interpretation by the staff of the Commission, the Company
believes that Series B Notes issued pursuant to the Exchange Offer in exchange
for Series A Notes may be offered for resale, resold and otherwise transferred
by the holders thereof (other than a Restricted Holder) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Series B Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such Series B Notes. See "Mary Kay
Cosmetics, Inc.," SEC No-Action Letter (available June 5, 1991); "Morgan
Stanley & Co., Incorporated," SEC No-Action Letter (available June 5, 1991);
and "Exxon Capital Holdings Corporation," SEC No-Action Letter (available May
13, 1988). Any broker dealer who holds Series A Notes acquired for its own
account as a result of market-making or other trading activities, and who
receives Series B Notes in the exchange for such Series A Notes pursuant to the
Exchange Offer, may be a statutory underwriter and must deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
Series B Notes, which prospectus may be the prospectus for the Exchange Offer
so long as it contains a plan of distribution with respect to such resale
transactions. See "Shearman & Sterling," No-Action Letter (available July 2,
1993).

If any person were to participate in the Exchange Offer for the purpose of
distributing securities in a manner not permitted by the Commission's
interpretation, such person (i) could not rely on the position of the staff of
the Commission enunciated in "Exxon Capital Holdings Corporation" or similar
interpretive letters and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Accordingly, each eligible holder wishing to accept the
Exchange Offer must represent to the Company in the Letter of Transmittal that
the conditions described above have been met.

19
<PAGE> 21
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Series A Notes in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or Blue Sky laws of such jurisdiction. Prior to the
Exchange Offer, however, the Company will use its best efforts to register or
qualify the Series B Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions as is necessary to permit consummation of the
Exchange Offer and do any and all other acts or things necessary or advisable
to enable the offer and sale in such jurisdiction of the Series B Notes.

TERMS OF THE EXCHANGE OFFER

Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all
Series A Notes validly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date. The exchange of Series B Notes for Series A Notes will be
made with respect to all Series A Notes validly tendered and not withdrawn on
or prior to the Expiration Date, within two business days following the
Expiration Date. The Series B Notes issued pursuant to the Exchange Offer will
be delivered promptly following the Expiration Date. The Company will issue
$1,000 principal amount of Series B Notes in exchange for each $1,000 principal
amount of outstanding Series A Notes accepted in the Exchange Offer. Holders
may tender some or all of their Series A Notes pursuant to the Exchange Offer
in denominations of $1,000 and integral multiples of $1,000 in excess thereof.

The form and terms of the Series B Notes will be the same in all material
respects as the form and terms of the Series A Notes, except that the Series B
Notes will be registered under the Securities Act and hence will not bear
legends restricting the transfer thereof.

HOLDERS OF SERIES A NOTES DO NOT HAVE ANY APPRAISAL OR DISSENTERS' RIGHTS
UNDER THE TEXAS BUSINESS CORPORATIONS ACT OR THE INDENTURE IN CONNECTION WITH
THE EXCHANGE OFFER. THE COMPANY INTENDS TO CONDUCT THE EXCHANGE OFFER IN
ACCORDANCE WITH THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT. SERIES A
NOTES WHICH ARE NOT TENDERED FOR EXCHANGE OR ARE TENDERED BUT NOT ACCEPTED IN
THE EXCHANGE OFFER WILL REMAIN OUTSTANDING AND BE ENTITLED TO THE BENEFITS OF
THE INDENTURE, BUT WILL NOT BE ENTITLED TO ANY REGISTRATION RIGHTS UNDER THE
REGISTRATION RIGHTS AGREEMENT.

The Company shall be deemed to have accepted validly tendered Series A
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Series A Notes for the purpose of receiving Series B Notes from the
Company and delivering Series B Notes to such holders.

If any tendered Series A Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Series A Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.

The registration expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and accounting and
legal fees, will be paid by the Company. The Company has agreed to pay,
subject to the instructions in the Letter of Transmittal, all transfer taxes,
if any, relating to the sale or disposition of such holder's Series A Notes
pursuant to the Exchange Offer. See "--Fees and Expenses."

20
<PAGE> 22
EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The Exchange Offer will expire at 5:00 p.m., New York City time, on
November 8, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date to which the Exchange Offer is extended. The Company will notify the
Exchange Agent of any extension by oral or written notice and will make a
public announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.

The Company reserves the right (i) to delay accepting for exchange any
Series A Notes for Series B Notes, to extend the Exchange Offer or terminate
the Exchange Offer and to refuse to accept for exchange Series A Notes for
Series B Notes, if any of the conditions set forth herein under "--Conditions"
shall have occurred and shall not have been waived by the Company, by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, and (ii) to amend the terms of the Exchange Offer in any manner. Any
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by public announcements. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Series A Notes of such amendment, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the holders of the Series B Notes, if the Exchange Offer would
otherwise expire during such five to ten business day period. The rights
reserved by the Company in this paragraph are in addition to the Company's
rights set forth below under the caption "Conditions."

Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the Exchange Offer, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other than by
making a timely release to a financial news service.

PROCEDURE FOR TENDERING

Only a holder of Series A Notes may tender such Series A Notes in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Series A Notes are registered on the books of the Company
or any other person who has obtained a properly completed bond power from the
registered holder. To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Series A Notes (unless such tender is being effected pursuant
to the procedure for book-entry transfer described below) and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. Signatures on a Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States or by any other "Eligible Guarantor
Institution" as such term is defined in Rule 17Ad-15(a)(2) of the Exchange Act
(each an "Eligible Institution") unless the Series A Notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution.

Any financial institution that is a participant in the Depository's
Book-Entry Transfer Facility system may make book-entry delivery of the Series
A Notes by the Depository to transfer such Series A Notes into the Exchange
Agent's account in accordance with the Depository's procedure for such
transfer. Although delivery

21
<PAGE> 23
of Series A Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Depository, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received or confirmed by
the Exchange Agent at its address set forth in "Exchange Agent" below prior to
5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS
TO THE DEPOSITORY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.

The tender by a holder of Series A Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.

THE METHOD OF DELIVERY OF SERIES A NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS
USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO
THE COMPANY. HOLDERS MAY ALSO REQUEST THAT THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES EFFECT SUCH TENDER FOR SUCH
HOLDERS.

If the Letter of Transmittal or any Series A Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by
the Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Series A Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Series A Notes not properly tendered or any Series A Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Series A Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Series A Notes must be cured within such time as the
Company shall determine. Although the Company intends to request the Exchange
Agent to notify the holders of defects or irregularities with respect to
tenders of Series A Notes, neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Series A Notes nor shall any of them
incur any liability for failure to give such notification. Tenders of Series A
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Series A Notes received by the Exchange Agent that are
not validly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the Exchange Agent without cost to the
tendering holder unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.

By tendering, each holder will represent to the Company that, among other
things (i) it is not an affiliate of the Company, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Series B Notes to be issued
in the Exchange Offer and (iii) it is acquiring the Series B Notes in its
ordinary course of business. If the holder is a broker-dealer that will
receive Series B Notes for its own account in exchange for Series A Notes that

22
<PAGE> 24
were acquired as a result of market-making activities or other trading
activities, such holder by tendering will acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes.

GUARANTEED DELIVERY PROCEDURES

Holders who wish to tender their Series A Notes and (i) whose Series A
Notes are not immediately available, or (ii) who cannot deliver their Series A
Notes, the Letter of Transmittal or any other required documents to the
Exchange Agent, or cannot complete the procedure for book-entry transfer prior
to the Expiration Date, may effect a tender if:

(a) The tender is made through an Eligible Institution;

(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Series A Notes,
the certificate number or numbers of such Series A Notes (if available)
and the principal amount of Series A Notes tendered, together with a
duly executed Letter of Transmittal (or facsimile thereof), stating
that the tender is being made thereby and guaranteeing that, within
three business days after the Expiration Date, the certificate(s)
representing the Series A Notes to be tendered in proper form for
transfer (or a confirmation of a book-entry transfer into the Exchange
Agent's account at the Depository of Series A Notes delivered
electronically and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and

(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Series A Notes in proper form for transfer (or a confirmation
of a book-entry transfer into the Exchange Agent's account at the
Depository of Series A Notes delivered electronically) and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within five business days after the date of execution
of the Notice of Guaranteed Delivery.

Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Notes according to the
guaranteed delivery procedures set forth above.

WITHDRAWAL OF TENDERS

Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date, unless previously accepted for exchange.

To withdraw a tender of Series A Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Series A Notes to be withdrawn (the "Depositor"), (ii)
identify the Series A Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Series A Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Series A Notes were tendered (including required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Series A Notes to register the transfer
of such Series A Notes into the name of the Depositor withdrawing the tender
and (iv) specify the name in which any such Series A Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Company, whose

23
<PAGE> 25
determination shall be final and binding on all parties. Any Series A Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Series B Notes will be issued with respect thereto unless
the Series A Notes so withdrawn are validly re-tendered. Any Series A Notes
which have been tendered but which are not accepted for exchange will be
returned by the Exchange Agent to the holder thereof without cost to such
holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Series A Notes may be
retendered by following one of the procedures described above under
"--Procedure for Tendering" at any time prior to the Expiration Date.

CONDITIONS

In addition, and notwithstanding any other term of the Exchange Offer, the
Company will not be required to accept for exchange any Series A Notes for
Series B Notes tendered and may terminate or amend the Exchange Offer as
provided herein before the acceptance of such Series A Notes, if any of the
following conditions exist:

(i) there shall have been instituted, threatened or be pending any
action or proceeding before or by any court, governmental, regulatory or
administrative agency or instrumentality, or by any other person, in
connection with the Exchange Offer that is, or is reasonably likely to be,
or which would or might be, in the sole judgment of the Company, materially
adverse to the business, operations, properties, condition (financial or
otherwise), assets, liabilities or prospects of the Company and its
subsidiaries, taken as a whole, or which would or might, in the sole
judgment of the Company, prohibit, prevent, restrict or delay consummation
of the Exchange Offer or have a material adverse effect on the contemplated
benefits of the Exchange Offer to the Company; or

(ii) there shall have occurred any material adverse development, in
the sole judgment of the Company, with respect to any action or proceeding
concerning the Company and its subsidiaries, taken as a whole; or

(iii) there exists an order, statute, rule, regulation, executive
order, stay, decree, judgment or injunction that shall have been proposed,
enacted, entered, issued, promulgated, enforced or deemed applicable by any
court or governmental, regulatory or administrative agency or
instrumentality that, in the sole judgment of the Company, would or might
prohibit, prevent, restrict or delay consummation of the Exchange Offer, or
that is, or is reasonably likely to be, in the sole judgment of the
Company, materially adverse to the business, operations, properties,
condition (financial or otherwise), assets, liabilities or prospects of the
Company and its subsidiaries, taken as a whole; or

(iv) there shall have occurred or be likely to occur any event
affecting the business or financial affairs of the Company or any of its
subsidiaries that, in the sole judgment of the Company, would or might
prohibit, prevent, restrict or delay consummation of, or could materially
impair the contemplated benefits to the Company of, the Exchange Offer; or

(v) there shall have occurred (1) any general suspension of, or
limitation on prices for, trading in securities in the United States
securities or financial markets, (2) any significant adverse change in the
price of the Notes or in the United States securities or financial markets,
(3) a material impairment in the trading market for debt securities, (4) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (5) any
limitation (whether or not mandatory) by a government authority, or other
event that, in the reasonable judgment of the Company, might affect the
extension of credit by banks or other lending institutions in the United
States,

24
<PAGE> 26
(vi) a commencement of a war, armed hostilities or other national or
international crisis directly or indirectly involving the United States or

(vii) in the case of any of the foregoing existing on the date hereof, a
material acceleration or worsening thereof.

The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in its sole discretion regardless of the circumstances
giving rise to such conditions, and may be waived by the Company, in whole or
in part at any time and from time to time, in its sole discretion. If the
Company waives or amends the foregoing conditions, the Company will, if
required by applicable law, extend the Exchange Offer for a minimum of five
business days from the date that the Company first gives notice, by public
announcement or otherwise, of such waiver or amendment, if the Exchange Offer
would otherwise expire within such five business-day period. Any determination
by the Company concerning the events described in this section shall be final
and binding upon all persons.

EXCHANGE AGENT

United States Trust Company of Texas, N.A., the Trustee under the
Indenture, has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance and requests for additional copies of
this Prospectus or of the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:

By Hand Delivery, Mail United States Trust Company of Texas, N.A.
or Overnight Courier: 2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attn: Corporate Trust Department

Facsimile Transmission: (214) 754-1303
Attn: Corporate Trust Department
Confirm: (214) 754-1200

FEES AND EXPENSES

The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
telegraph, telephone or in person by officers and regular employees of the
Company and its affiliates in person, by telegraph or telephone.

The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Series A Notes and in handling or
forwarding tenders for exchange. The Company will pay the other expenses to be
incurred in connection with the Exchange Offer, including fees and expenses of
the Trustee, accounting and legal fees and printing costs.

The Company will pay all transfer taxes, if any, applicable to the exchange
of Series A Notes pursuant to the Exchange Offer. If, however, certificates
representing Series B Notes or Series A Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the

25
<PAGE> 27
name of, any person other than the registered holder of the Series A Notes
tendered, or if tendered Series A Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Series A
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.

ACCOUNTING TREATMENT

No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. The expenses of the Exchange
Offer will be amortized by the Company over the term of the Series B Notes
under generally accepted accounting principles.

26
<PAGE> 28
CAPITALIZATION

The following table sets forth the actual unaudited consolidated
capitalization of the Company at June 30, 1996 and the consolidated
capitalization of the Company as adjusted to give effect to the Repurchase
Offer and the Series A Offering. This table should be read in conjunction with
the more detailed information and the Company's Consolidated Financial
Statements, including the notes thereto, appearing elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
---------- --------------
(In thousands)
<S> <C> <C>
Cash and temporary cash investments . . . . . . . . . . . . . . . . . . . . . . $ 7,122 $ 8,042
========== =========

Long-term debt, including current maturities:
Credit Facility(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,500 $ --
12% Senior Notes due 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000 1,630
12% Senior Subordinated Notes of Cinemark Mexico due 2003(3) . . . . . . . . 20,640 20,640
9-5/8% Senior Subordinated Notes due 2008 . . . . . . . . . . . . . . . . . . -- 199,106(4)
Other indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530 530
---------- ---------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,670 221,906
Minority interest in subsidiaries(5) . . . . . . . . . . . . . . . . . . . . . 4,740 4,740
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,079 49,045(6)
---------- ---------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . $ 265,489 $ 275,691
========== =========
</TABLE>

- ---------------
(1) Gives effect to the Repurchase Offer and the Series A Offering.

(2) A total of $175 million is available to the Company under the Credit
Facility, subject to compliance with the terms thereof. As of August 31,
1996, the amount outstanding under the Credit Facility was $16 million and
the effective interest rate on such borrowing was 6.5%. See "Description
of Certain Debt Instruments--Credit Facility."

(3) The 12% Senior Subordinated Notes were issued by Cinemark Mexico, a
subsidiary of Cinemark International and an Unrestricted Subsidiary. The
amount shown is net of unamortized debt discount equal to approximately
$1.8 million associated with the issuance of such notes.

(4) The amount shown is net of debt discount equal to approximately $.9 million
associated with the issuance of the Series A Notes.

(5) Includes $3.4 million associated with warrants to purchase common stock of
Cinemark Mexico held by third parties.

(6) Gives effect to (i) the extraordinary loss resulting from the write off of
$2.5 million of unamortized financing costs attributable to the Old Notes
and (ii) the premium paid in the Repurchase Offer and the Consent Fee and
related fees, net of the tax benefit.

27
<PAGE> 29
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following tables set forth selected consolidated financial data for the
Company for the periods and at the dates indicated for each of the five most
recent fiscal years ended December 31, 1995, for the twelve months ended June
30, 1996 and for the six months ended June 30, 1995 and 1996. Supplemental
financial data for the Restricted Group are derived from supplemental schedules
to the Consolidated Financial Statements, appearing elsewhere in this
Prospectus. The financial data for the twelve months ended June 30, 1996 and
for the six months ended June 30, 1995 and 1996 are derived from the unaudited
financial statements of the Company. The Company believes the financial data
for the twelve months ended June 30, 1996 and for the six months ended June 30,
1995 and 1996 reflect all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of such data. Operating results
for the twelve months ended June 30, 1996 and for the six months ended June 30,
1995 and 1996 are not necessarily indicative of results for the full fiscal
year. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
TWELVE SIX MONTHS
MONTHS ENDED ENDED
YEAR ENDED DECEMBER 31, JUNE 30, JUNE 30,
------------------------------------------------ ---------------
1991 1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ---- ----
(In thousands, except theatre, screen and ratio data)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (CONSOLIDATED):
Revenues . . . . . . . . . . . . . . . . . $164,425 194,652 $239,659 $ 283,077 $ 298,559 $ 320,649 136,214 $158,304

Theatre operating costs . . . . . . . . . 132,523 154,825 185,100 218,748 227,719 242,655 105,343 120,280
General and administrative expenses . . . 7,993 10,119 12,162 17,095 19,555 21,814 9,141 11,400
Depreciation and amortization . . . . . . 9,817 9,830 10,939 15,121 15,925 17,491 7,105 8,672
Operating income . . . . . . . . . . . . . 14,092 19,878 31,458 32,113 35,361 38,688 14,625 17,953
Interest expense(1) . . . . . . . . . . . 7,653 12,258 17,102 18,917 19,374 18,825 10,315 9,767
Income before extraordinary items . . . . 4,770 5,726 9,720 7,006 13,155 17,681 2,638 7,164
Net income . . . . . . . . . . . . . . . . 3,701 5,829 9,720 7,006 13,155 17,346 2,638 6,829

OTHER FINANCIAL DATA (CONSOLIDATED):
Cash flow from (used for)
Operations . . . . . . . . . . . . . . $ 17,982 $23,376 $ 27,181 $ 32,665 $ 36,090 $ 50,507 $ 8,046 $ 22,463
Investing activities . . . . . . . . . (13,128) (35,432) (35,560) (62,876) (80,268) (124,465) (28,401) (72,598)
Financing activities . . . . . . . . . (2,587) 35,509 25,051 13,273 32,031 65,888 9,385 43,242
Theatre level cash flow(2) . . . . . . . . 31,902 39,827 54,559 64,329 70,840 77,993 30,870 38,024
EBITDA(3) . . . . . . . . . . . . . . . . 25,977 32,117 45,508 50,851 55,708 59,951 24,014 28,258
Ratio of earnings to fixed charges(4) . . 1.46x 1.43x 1.61x 1.46x 1.69x 1.86x 1.32x 1.68x
Pro forma ratio of earnings to
fixed charges(5) . . . . . . . . . . . 1.63x 1.85x 1.64x

SUPPLEMENTAL FINANCIAL DATA
(RESTRICTED GROUP):(6)
EBITDA(3) . . . . . . . . . . . . . . . . $ 25,977 $32,089 $ 45,433 $ 49,408 $ 54,319 $ 58,208 $23,622 $ 27,511
Pro forma interest expense(7) . . . . . . 19,799 19,623 9,812
Ratio of EBITDA to pro forma
interest expense . . . . . . . . . . . 2.74x 2.97x 2.80x
Pro forma long-term debt, including
current maturities (at period end)(8) 200,530 200,530
Ratio of pro forma long-term debt
to EBITDA (at period end) . . . . . . . 3.45x

OPERATING DATA:
United States (Restricted Group)
Theatres owned (at period end)(9) . . . 136 147 153 154 150 153 156 153
Screens owned (at period end)(9) . . . 915 1,010 1,084 1,121 1,155 1,212 1,141 1,212
Total attendance . . . . . . . . . . . 45,372 51,087 59,632 63,401 61,006 63,025 28,237 30,256
Outside United States
Theatres owned (at period end)(10) . . -- -- -- 4 9 11 5 11
Screens owned (at period end)(10) . . . -- -- -- 42 92 114 54 114
Average attendance per screen . . . . . -- -- -- 1,407 4,210 6,359 1,520 3,669
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
-------------------------------------------------- -------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(11)
---- ---- ---- ---- ---- ------ -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (CONSOLIDATED):
Cash and temporary cash investments . . . . . $ 3,885 $29,368 $ 44,454 $ 31,056 $ 13,925 $ 7,122 $ 8,042
Theatre properties and equipment-net . . . . 77,274 93,952 117,017 155,798 224,482 287,563 287,563
Total assets . . . . . . . . . . . . . . . . 99,321 147,661 189,361 217,185 267,747 326,106 330,477
Total long-term debt, including
current portion . . . . . . . . . . . . . . 78,403 130,662 152,787 167,374 198,145 202,760 221,906
Shareholders' equity (deficiency) . . . . . . 1,933 (11,094) (760) 2,732 11,345 58,079 49,045
</TABLE>

28
<PAGE> 30
- ---------------
(1) Includes amortization of debt issue cost and debt discount.

(2) Revenues less theatre operating costs (which is not a measure of financial
performance under generally accepted accounting principles) ("GAAP").
Theatre level cash flow is a financial measure commonly used in the
Company's industry and should not be construed as an alternative to cash
flow from operations (as determined in accordance with GAAP) as an
indicator of operating performance or as a measure of liquidity.

(3) Represents net income before depreciation and amortization, interest
expense, changes in deferred lease expense, accrued and unpaid compensation
expense relating to any stock appreciation and stock option plans, equity
in income (loss) of affiliates, gain (loss) on sale of assets, minority
interests, provision for income taxes and extraordinary items. EBITDA is a
financial measure commonly used in the Company's industry and should not be
construed as an alternative to cash flows from operating activities (as
determined in accordance with GAAP), as an indicator of operating
performance or as a measure of liquidity.

(4) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income (loss) before income taxes and extraordinary
items plus fixed charges excluding capitalized interest and (ii) fixed
charges consist of interest expense, capitalized interest, amortization of
debt issue cost and debt discount and the portion of rental expense which
is deemed to be representative of the interest factor.

(5) Gives effect to the Repurchase Offer and the Series A Notes Offering as of
the beginning of the period. See "Capitalization."

(7) Calculated based on debt outstanding at the end of the period for the
subsequent four quarter period. Gives effect to the Repurchase Offer and
the Series A Notes Offering as if both had occurred at the end of such
period and does not include amortization of debt issue cost for the Series
A Notes.

(8) Gives effect to the Repurchase Offer and the Series A Offering as if both
had occurred at the end of such period. See "Capitalization."

(9) The data as of period end 1991, 1992, 1993, 1994 (and June 1995), 1995 (and
June 1996) exclude two theatres (20 screens), two theatres (23 screens),
two theatres (23 screens), three theatres (33 screens) and four theatres
(54 screens), respectively, operated by the Company pursuant to management
agreements.

(10) The data as of period end 1993, 1994 (and June 1995), 1995 and June 1996
exclude two theatres (18 screens), two theatres (18 screens), three
theatres (25 screens), three theatres (25 screens) and four theatres (37
screens), respectively, operated through affiliates of the Company in
Canada and Chile.

(11) Gives effect to the Repurchase Offer and the Series A Notes Offering. See
"Capitalization."

29
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following is an analysis of the financial condition and results of
operations of the Company. This analysis should be read in conjunction with the
Company's Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus.

The Company's revenues are generated primarily from box office receipts and
concession sales. The Company's revenues are affected by changes in attendance
and average admission and concession revenues per patron. Attendance is
primarily affected by the commercial appeal of the films released during the
period or year reported. Since the Company's formation, attendance has grown
principally from the development and acquisition of theatres. The Company has
generally experienced increases in average admission and concession revenues
per patron from ticket and concession price increases as well as the
development of theatres in markets that can support higher ticket and
concession prices. Additional revenues related to theatre operations are
generated by electronic video games installed in video arcades located in some
of the Company's theatres.

Film rentals, concession supplies and salaries and wages vary directly with
changes in revenues. These expenses have historically represented approximately
65% of all theatre operating expenses and approximately 50% of revenues. Film
rental costs are based on a percentage of admissions revenues as determined by
film license agreements. The Company purchases concession supplies to replace
units sold. Although salaries and wages include a fixed component of cost
(i.e., the minimum staffing cost to operate a theatre facility during non-peak
periods), salaries and wages move in relation to revenues as theatre staffing
is adjusted to handle attendance volume.

Conversely, facility lease expense is primarily a fixed cost at the theatre
level as the Company's facility leases generally require a fixed monthly
minimum rent payment. Facility lease expense as a percentage of revenues is
also affected by the number of leased versus fee owned facilities. The addition
of a larger proportion of fee owned properties in the future should result in a
decrease in facility lease expense as a percentage of revenues and an increase
in the level of depreciation expense.

Additionally, advertising cost is primarily fixed at the theatre level as
daily movie directories placed in newspapers represent the largest component of
advertising costs. The monthly cost of these ads is based on the size of the
directory. However, advertising costs have remained relatively constant when
expressed as a percentage of revenues as screen growth results in the addition
of new or larger directory ads.

Utilities and other costs include certain costs that are fixed such as
property taxes, certain costs which are variable such as liability insurance,
and certain costs that possess both fixed and variable components such as
utilities, repairs and maintenance and security services.

The results of operations of acquired theatres are included in the
Company's Consolidated Financial Statements from their date of acquisition.
Fiscal years ended December 31, 1993, 1994 and 1995 are not directly comparable
due to the effects of new theatre openings, acquired theatres and the impact of
the debt service associated with the financings undertaken. Theatre closings
have had no significant effect on the operations of the Company. See notes 1
and 3 of notes to the Consolidated Financial Statements.

30
<PAGE> 32
RESULTS OF OPERATIONS

Set forth below is a summary of operating revenues and expenses, certain
income statement items expressed as a percentage of revenues, average screen
count and revenues per average screen count for the three most recent fiscal
years ended December 31, 1995 and the six months ended June 30, 1995 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
--------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA (In millions):
Revenues
Admissions . . . . . . . . . $ 147.0 $ 174.5 $ 183.1 $ 82.8 $ 97.4
Concessions . . . . . . . . . 83.3 95.2 102.1 46.4 53.5
Other . . . . . . . . . . . . 9.4 13.4 13.4 7.0 7.4
--------- ---------- --------- --------- ---------
Total revenues . . . . . . . . . $ 239.7 $ 283.1 $ 298.6 $ 136.2 $ 158.3
========= ========== ========= ========= =========

Cost of operations
Film rentals . . . . . . . . $ 70.3 $ 84.0 $ 89.0 $ 39.1 $ 46.9
Concession supplies . . . . . 15.3 17.5 17.3 8.4 9.0
Salaries and wages . . . . . 34.0 39.5 40.6 20.0 21.3
Facility leases . . . . . . . 27.3 29.6 30.9 15.3 15.9
Advertising . . . . . . . . . 6.0 7.2 7.6 3.5 4.2
Utilities and other . . . . . 32.2 40.9 42.3 19.0 23.0
--------- ---------- --------- --------- ---------
Total cost of operations . $ 185.1 $ 218.7 $ 227.7 $ 105.3 $ 120.3
========= ========== ========= ========= =========

OPERATING DATA AS A PERCENTAGE OF TOTAL REVENUES(1):
Revenues
Admissions . . . . . . . . . 61.3% 61.6% 61.3% 60.8% 61.5%
Concessions . . . . . . . . . 34.8 33.6 34.2 34.1 33.8
Other . . . . . . . . . . . . 3.9 4.8 4.5 5.1 4.7
--------- ---------- --------- --------- ---------
Total revenues . . . . . . 100.0 100.0 100.0 100.0 100.0

Cost of operations
Film rentals(1) . . . . . . . 47.8 48.1 48.6 47.2 48.2
Concession supplies(1) . . . 18.4 18.4 16.9 18.2 16.9
Salaries and wages . . . . . 14.2 14.0 13.6 14.7 13.4
Facility leases . . . . . . . 11.4 10.5 10.3 11.2 10.1
Advertising . . . . . . . . . 2.5 2.5 2.5 2.6 2.6
Utilities and other . . . . . 13.4 14.4 14.2 14.0 14.5

Total cost of operations . . . . 77.2 77.3 76.3 77.3 76.0
General and administrative
expenses . . . . . . . . . . 5.1 6.0 6.6 6.7 7.2
Depreciation and amortization . . 4.6 5.3 5.3 5.2 5.5
Operating income . . . . . . . . 13.1 11.4 11.8 10.8 11.3
Interest expense . . . . . . . . 7.1 6.7 6.4 7.6 6.2
Income before income taxes . . . 6.6 5.0 7.8 3.6 8.0
Net income . . . . . . . . . . . 4.1 2.5 4.4 1.9 4.3
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------- -----------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Average screen count
(month end average) 1,042 1,131 1,195 1,179 1,276
=========== =========== =========== =========== ===========
Revenues per average
screen count . . . $ 229,999 $ 250,289 $ 249,840 $ 115,533 $ 124,062
=========== =========== =========== =========== ===========
</TABLE>

- ---------------
(1) All costs are expressed as a percentage of total revenues, except film
rentals, which are expressed as a percentage of admissions revenues, and
concession supplies, which are expressed as a percentage of concessions
revenues.

31
<PAGE> 33
COMPARISON OF SIX MONTH PERIODS ENDED JUNE 30, 1996 AND JUNE 30, 1995

Operating results for the six month period ended June 30, 1996 are not
necessarily indicative of the results to be achieved for the full year.

Revenues. Revenues for the six months ended June 30, 1996, increased to
$158.3 million from $136.2 million for the six months ended June 30, 1995, a
16.2% increase. The increase in revenues is primarily attributable to a 14%
increase in attendance as the result of a strong industry performance during
the six months ended June 30, 1996, compared to the six months ended June 30,
1995, and the net addition of 131 screens since June 30, 1995. Revenues per
average screen increased 7.4% to $124,062 for the six months ended June 30,
1996 from $115,533 for the six months ended June 30, 1995.

Cost of Operations. Cost of operation, as a percentage of revenue,
decreased to 76.0% for the six months ended June 30, 1996 from 77.3% in 1995.
The decrease as a percentage of revenues resulted from a decrease in salaries
and wages as a percentage of revenues to 13.4% in 1996 from 14.7% in 1995, a
decrease in facility lease expense as a percentage of revenues to 10.1% in 1996
from 11.2% in 1995 and a decrease in concession supplies as a percentage of
concession revenues to 16.9% in 1996 from 18.2% in 1995. These decreases were
partially offset by increases during the period in film rentals as a percentage
of admission revenues to 48.2% in 1996 from 47.2% in 1995 and an increase in
utilities and other as a percentage of revenues to 14.5% in 1996 from 14.0% in
1995.

General and Administrative Expenses. General and administrative expenses
as a percentage of revenues increased for the six months ended June 30, 1996,
to 7.2% from 6.7% for the six months ended June 30, 1995. The absolute level
of general and administrative expenses increased to $11.4 million for the six
months ended June 30, 1996 from $9.1 million for the six months ended June 30,
1995. The increase as a percentage of revenues and in absolute terms is
primarily the result of a $1.8 million special bonus payment paid to key
employees during the second quarter of 1996 to provide for the estimated taxes
due on the exercise of non-qualified stock options.

Depreciation and Amortization. Depreciation and amortization increased
22.1% to $8.7 million for the six months ended June 30, 1996 from $7.1 million
for the six months ended June 30, 1995. The increase is a result of the net
addition of $119.7 million in theatre property and equipment since the second
quarter of 1995, a 50.4% increase. The difference in the percentage increase
in depreciation and amortization compared to the increase in theatre property
and equipment is a result of the timing of when the additions were placed in
service during the period.

Interest Expense. Interest costs incurred, including amortization of debt
issue cost and debt discount, increased 7.9% to $11.1 million (including the
capitalization of $1.4 million of interest to properties under construction)
for the six months ended June 30, 1996 from $10.3 million in the six months
ended June 30, 1995. The increase in interest costs incurred for the six
months ended June 30, 1996 was due principally to an increase in average debt
outstanding resulting from borrowings under the Credit Facility.

Income Taxes. Income taxes increased to $5.4 million for the six months
ended June 30, 1996 from $2.2 million in the six months ended June 30, 1995,
resulting primarily from the increase in income before taxes. The Company's
effective rate for the six months ended June 30, 1996 decreased to 43% from
45.7% in the six months ended June 30, 1995. The decrease was primarily a
result of the reduction in the relative level of goodwill amortization and
foreign losses as a result of the increase in total earnings. The effective
tax rates reflect the full reserve of the potential tax benefit associated with
the loss incurred by Cinemark Mexico.

32
<PAGE> 34
Other Gains and Losses. Other gains and losses for the six months ended
June 30, 1996 of $3.7 million is primarily attributable to a gain from the
settlement of litigation.

Extraordinary Items. The Company replaced its bank line of credit with a
revolving and term credit agreement in February 1996. Borrowings under the new
credit facility were used to repay indebtedness under the Company's previous
$75 million bank line of credit. As a result, an extraordinary loss of $.3
million (net of related tax benefit) was recognized in connection with the
write-off of the unamortized debt issue cost associated with the Company's
previous bank line of credit.

Net Income. Net income of $6.8 million for the six months ended June 30,
1996 and $2.6 million for the six months ended June 30, 1995 includes the
consolidated losses of the Cinemark Mexico of $1.6 million (net of minority
interest) and $1.5 million (net of minority interest), respectively.

COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

Revenues. Revenues in 1995 increased to $298.6 million from $283.1 million
in 1994, a 5.5% increase. The increase is primarily attributable to a combined
increase of 5.1% in admission and concession revenues per patron. Attendance
remained constant despite the addition of 130 screens. The contribution from
these new screens is not fully reflected in the Company's operations, as a
majority of the new screens were not opened until late 1995. The contribution
to revenues from admission and concession price increases was partially offset
by a decrease in per patron revenues in Mexico as a result of the devaluation
of the Mexican peso that began in late December 1994. Revenues per average
screen remained constant at approximately $250,000 per screen despite average
admission and concession price increases and improved revenues per screen from
new U.S. screen openings as revenues per screen for the 92 screens the Company
operated in Mexico declined significantly as a result of the Mexican peso
devaluation.

Cost of Operations. Cost of operations, as a percentage of revenues,
decreased to 76.3% in 1995 from 77.3% in 1994. The decrease resulted primarily
from a decrease in concession costs as a percentage of concession revenue to
16.9% in 1995 from 18.4% in 1994 associated with an increase in concession
pricing which was partially offset by an increase in film rental expense as a
percentage of admission revenues to 48.6% in 1995 from 48.1% in 1994. Other
operating costs as a percentage of revenues remained relatively constant
between the two periods.

General and Administrative Expenses. General and administrative expenses,
as a percentage of revenues, increased to 6.6% in 1995 from 6% in 1994. General
and administrative expenses increased to $19.6 million in 1995 from $17.1
million in 1994, primarily from increases in salaries and wages, travel, and
miscellaneous expenses associated with the Company's domestic and international
expansion and increased amortized compensation expense resulting from the grant
of stock options at less than fair market value.

Depreciation and Amortization. Depreciation and amortization increased
5.3% in 1995 to $15.9 million from $15.1 million in 1994. The increase is a
result of the net addition of $79.5 million in theatre property and equipment
during 1995, a 38.2% increase over 1994. Depreciation and amortization expense
did not increase in direct proportion with the increase in theatre property and
equipment as $43.7 million of the additions were either placed in service in
late 1995 or will be placed in service in 1996.

Interest Expense. Interest costs incurred, including amortization of debt
issue cost and debt discount, increased 2.4% during 1995 to $21.1 million
(including the capitalization of $1.7 million of interest to fee properties
under construction) from $19.5 million of interest costs in 1994 (including $.6
million of capitalized interest). The increase in interest costs incurred for
1995 was due principally to an increase in average debt outstanding resulting
from borrowings under the Company's bank line of credit.

33
<PAGE> 35
Other Gains and Losses. In 1995, the Company recorded a gain on the sale
of 10 theatre properties (46 screens) of $5.5 million and losses of $.6 million
relating to the disposition of an interest in Funtime Pizza International, L.C.
and the write-off of costs, principally professional fees, relating to merger
negotiations with another theatre circuit which were terminated in May 1995.

Income Taxes. Income taxes increased to $10.1 million in 1995 compared to
$7.1 million in 1994, a 42.9% increase, resulting from the increase in income
before taxes. The Company's effective tax rate for 1995 was 43.4% compared to
50.2% for 1994. The decrease in the effective tax rate was primarily a result
of reduction in the relative level of goodwill and foreign losses as a result
of the increase in total earnings. The effective tax rates reflect the full
reserve of the potential tax benefit associated with the loss incurred by
Cinemark Mexico.

Net Income. Net income of $13.2 million in 1995 and $7.0 million in 1994
included the consolidated losses of Cinemark Mexico of $2.7 million (net of
minority interest) and $2.5 million (net of minority interest), respectively.

COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993

Revenues. Revenues in 1994 increased to $283.1 million from $239.7 million
in 1993, an 18.1% increase. This increase is attributable to a 3.8% increase in
attendance for 1994 over 1993 (primarily attributable to a strong industry
performance), the addition of 91 screens in 1994 and the first full year of
operations of 96 screens opened or acquired in 1993. Revenues were also
positively affected by a combined 5.5% increase in average admission and
concession revenues per patron. Revenues per average screen increased 8.8% to
$250,289 in 1994 from $229,999 in 1993, resulting from a strong industry
performance, new screen openings and increases in average admission and
concession price revenues per patron.

Cost of Operations. Cost of operations as a percentage of revenues
remained flat at 77.3% in 1994 compared to 77.2% in 1993. Cost of operations
increased 18.2% in 1994 to $218.7 million from $185.1 million in 1993. An
increase in utility and other expenses as a percentage of revenues to 14.4% in
1994 from 13.4% in 1993 was substantially offset by a decrease in facility
leases as a percentage of revenues to 10.5% in 1994 from 11.4% in 1993. Other
operating costs as a percentage of revenues remained relatively constant
between the two periods.

General and Administrative Expenses. General and administrative expenses,
as a percentage of revenues, increased to 6.0% in 1994 from 5.1% in 1993.
General and administrative expenses increased to $17.1 million in 1994 from
$12.2 million in 1993, primarily from increases in salaries and wages, legal,
travel and miscellaneous expenses associated with the Company's development
program and cost of establishing an office in Mexico for international
expansion (including salaries and wages, rent and travel costs).

Depreciation and Amortization. Depreciation and amortization increased
38.2% to $15.1 million for 1994 from $10.9 million for 1993. The increase is a
result of the net addition of $48.4 million in theatre properties and equipment
during 1994, an increase of 30.3% over 1993 and the acceleration of the rate of
amortization of goodwill and non-competition agreements with respect to the
closing of certain Funtime Pizza restaurants resulting in an increase in
amortization of $1.6 million.

Interest Expense. Interest costs incurred, including amortization of debt
issue cost and debt discount, increased 10.6% to $18.9 million in 1994 from
$17.1 million in 1993. The increase was due principally to an increase in
average debt outstanding resulting from the issuance of 12% Senior Subordinated
Notes by Cinemark Mexico and borrowings under the Company's bank line of
credit.

Income Taxes. Income taxes increased to $7.1 million in 1994 from $6.2
million in 1993 resulting primarily from an increase in the effective tax rate
to 50% in 1994 from 39% in 1993. The increase in the effective rate is

34
<PAGE> 36
the result of a 128% increase in goodwill amortization during the year and the
full reserve of the potential tax benefit associated with the loss generated by
Cinemark Mexico.

Net Income. Net income of $7.0 million in 1994 and $9.7 million in 1993
included the consolidated losses of Cinemark Mexico of $2.5 million (net of
minority interest) and $.8 million (net of minority interest), respectively.

INFLATION AND FOREIGN CURRENCY

The Mexican currency has experienced a significant devaluation since
December 1994. Cinemark Mexico's debt and certain of Cinemark Mexico's theatre
lease rents are denominated in U.S. dollars while its revenues are denominated
in Mexican pesos. As a result of the devaluation, certain costs of Cinemark
Mexico have almost doubled in relation to Cinemark Mexico's revenues.
Additionally, almost all of the equipment and interior finish material of
Cinemark Mexico's theatres have been imported from the U.S. As a result of the
devaluation, Cinemark Mexico has recognized a $10.2 million cumulative
unrealized currency translation loss adjustment in shareholders' equity as of
March 31, 1996. The devaluation has significantly and adversely affected the
Mexican economy and will impact the short term profitability of Cinemark
Mexico's theatres. Additionally, there is a reduced level of available capital
in the Mexican financial markets due to a significant rise in Mexican interest
rates. This in turn has resulted in the reduced availability of developer
financing for future projects. Such events have caused delays in Cinemark
Mexico's current projects and a reduction in the rate of expansion initially
anticipated by Cinemark Mexico. The value of the Mexican peso has remained
constant since the end of the first quarter of 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Company's revenues are collected in cash, primarily through box office
receipts and the sale of concession items. Because its revenues are received in
cash prior to the payment of related expenses, the Company has an operating
"float" and, as a result, historically has not required traditional working
capital financing. Primarily due to the lack of significant inventory and
accounts receivable, the Company has typically operated with a negative working
capital position for its ongoing theatre operations. The major film
distributors generally release during the summer and holiday seasons those
films which they anticipate will be the most successful. Consequently, the
Company typically generates higher revenues during such periods. The Company's
cash flow from operations was $36.1 million in 1995 compared to $32.7 million
in 1994 and $27.2 million in 1993.

The Company's theatres are typically equipped with modern projection and
sound equipment, with approximately 61% of the screens operated by the Company
having been built in the last six years. Maintenance capital expenditures for
all theatres operated by the Company for 1995 were $5.1 million or
approximately 1.7% of revenues. The Company believes that future annual
maintenance capital expenditures will not significantly change as a percentage
of revenues. The Company's investing activities have been principally in
connection with new theatre openings and acquisitions of existing theatres and
theatre circuits and have amounted to $80.3 million, $62.9 million and $35.6
million in 1995, 1994 and 1993, respectively. New theatre openings and
acquisitions historically have been financed with internally generated cash and
by debt financing, including borrowings under the Company's bank line of
credit. Cash flow from financing activities amounted to $32 million, $13.3
million and $25.1 million in 1995, 1994 and 1993, respectively. The Company has
historically leased properties instead of purchasing because of the
significantly lower capital requirements for developing a leasehold theatre ($1
million to $2 million per theatre) compared to the capital requirements for
developing a fee owned theatre (generally $3.5 million to $6 million per
theatre). From January 1, 1996 to June 30, 1996, the Company has opened four
theatres (60 screens) and has fifteen theatres (191 screens) under
construction. In addition, as of June 30, 1996, the Company has ten theatres
(139 screens) scheduled to begin construction during the remainder of 1996 or
in 1997, and plans to open a total of 390 screens in the U.S. Certain of these
theatres will be megaplexes which may cost in excess of $15 million per
theatre. The Company currently estimates that its capital expenditures for the
development of these screens in 1996 and 1997 will be approximately $110
million and $70 million, respectively. As of June 30, 1996, the Company had
expended approximately $50 million toward the development of these screens.
Actual expenditures

35
<PAGE> 37
for theatre development and acquisitions during 1996 are subject to change
based upon the availability of attractive opportunities for expansion of the
Company's theatre circuit.

On June 10, 1992, the Company issued 12% Senior Notes due 2002 (the "Old
Notes"). The Old Notes bear interest at the rate of 12% per annum, payable
semi-annually on June 1 and December 1 of each year. A sinking fund providing
for the redemption of Old Notes in equal amounts on June 1, 2000 and June 1,
2001 is calculated to retire 50% of the Old Notes prior to maturity. From the
proceeds of the Old Notes, the Company contributed $20 million to the capital
of Cinemark International. Cinemark International plans to invest up to an
additional $40 million in international ventures principally in Latin America
over the next two to three years. The Company anticipates that investments in
excess of Cinemark International's available cash will be funded by the
Company, subject to the restrictive covenants in the Indenture, or by debt or
equity financing to be provided by third parties directly to Cinemark
International or its subsidiaries.

On February 14, 1996, the Company replaced its existing bank line of credit
with the Credit Facility, which has a final maturity of 2003 and provides for
borrowing availability of up to $175 million. Any amounts borrowed by the
Company under the Credit Facility prior to February 13, 1999 will be borrowed
on a revolving basis. On February 13, 1999, any outstanding revolving
borrowings under the Credit Facility will be converted into a term loan. In
addition, subject to the limitation on incurrence of indebtedness under the
Indenture and to the conditions set forth in the Credit Facility, on February
13, 1999, the Company may borrow as a term loan the difference between $175
million and the then outstanding balance under the Credit Facility (provided
such balance is less than $175 million). The term loan will be payable
quarterly beginning June 30, 1999 with 11.25%, 18.75%, 23.75% and 36.25% of the
initial principal amount of the term loan due in 1999, 2000, 2001 and 2002,
respectively. Any remaining principal amount of the term loan is due and
payable on February 13, 2003. Borrowings under the Credit Facility are secured
by a pledge of the issued and outstanding capital stock of the Company owned by
Mr. Mitchell and his affiliates. As of August 31, 1996, the Company had
borrowed $16 million under the Credit Facility and the effective interest rate
on such borrowings was 6.5% per annum. See "Description of Certain Debt
Instruments -- Credit Facility."

In 1993, the Company incorporated Cinemark de Mexico, S.A. de C.V.
("Cinemark de Mexico") as an indirect subsidiary of Cinemark International to
pursue new development opportunities in Mexico. At June 30, 1996, the Company
operated eleven theatres (114 screens) and had two theatres (25 screens) under
commitment with executed leases. In 1993 and 1994, Cinemark Mexico, which is
the direct parent of Cinemark de Mexico, issued $22.4 million principal amount
of Cinemark Mexico Notes (as defined herein) with detachable warrants. At June
30, 1996, Cinemark International owned 91.4% (71.8% on a fully diluted basis
including the exercise of the warrants) of the common stock of Cinemark Mexico.
The remaining 8.6% (6.7% on a fully diluted basis including the exercise of the
warrants) was owned by a corporation controlled by Mexican citizens. See
"Business -- International" and note 5 of the notes to the Consolidated
Financial Statements. The Cinemark Mexico Indenture (as defined herein)
governing the Cinemark Mexico Notes originally required Cinemark Mexico to
maintain a Cash Flow Coverage Ratio (as defined in the Cinemark Mexico
Indenture) of 2.0 to 1.0, beginning in the third quarter of 1995. Cinemark
Mexico has amended the Indenture to allow a postponement of the implementation
of this covenant until the third quarter of 1997. Cinemark Mexico has reached
an agreement in principle with the holder of a majority of the Cinemark Mexico
Notes to further postpone the implementation of this covenant until the first
quarter of 2000. The agreement in principle also provides that Cinemark Mexico
will issue new notes to such holder which provide for interest to be paid, at
the option of the Company, in cash or in kind, in exchange for all Cinemark
Mexico Notes owned by such holder, and accrued unpaid interest from February 1,
1996 to the date of such exchange. Cinemark Mexico will issue approximately
$1.3 million of a new series of notes, in exchange for all of the issued and
outstanding warrants to purchase shares of common stock of Cinemark Mexico
owned by such holder.

Cinemark Mexico and such holder elected to pursue the exchange of the
Cinemark Mexico Notes for such new notes in order to provide for additional
cash liquidity to fund capital investments in the Cinemark Mexico business and
to take full advantage of the opportunities Cinemark Mexico currently believes
exist in the Mexican motion

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<PAGE> 38
picture exhibition industry. In this connection, Cinemark International has
agreed to make an additional $10 million investment in common stock of Cinemark
Mexico when the new notes are issued. As a result of the agreement in
principle, Cinemark Mexico did not make the approximately $1.3 million cash
interest payment on the Cinemark Mexico Notes otherwise due on August 1, 1996.
For a discussion of the agreement in principle see "Certain Debt Instruments --
Cinemark Mexico Indenture."

The Cinemark Mexico Indenture also allows for the incurrence by Cinemark
Mexico of $10 million of additional senior debt. On December 4, 1995, Cinemark
Mexico entered into the Mexico Credit Facility (as defined herein), allowing
it to borrow $10 million from Cinemark International. As of June 30, 1996,
Cinemark Mexico had borrowed $9 million under the Mexico Credit Facility.

Cinemark International entered into a joint venture agreement in November
1992 with a Chilean theatre operator. Cinemark Chile, S.A. ("Cinemark Chile")
currently operates two theatres (13 screens), and as of June 30, 1996, had one
theatre (12 screens) under commitment. If additional capital is required for
other theatre development opportunities in Chile, the Company expects to obtain
such capital from third parties through debt or equity issuance by Cinemark
Chile. In December 1995, Cinemark entered into a joint venture agreement with
Argentine theatre operators to develop multiplex theatres in Argentina. In 1996
Cinemark LTDA, a Brazilian company ("Cinemark Brazil"), was organized as an
indirect subsidiary of Cinemark International. Cinemark Brazil will develop
modern multiplex theatres in Brazil. Cinemark Brazil plans to begin
construction on its first theatre within the next 90 days.

SALE OF STOCK

On March 12, 1996, the Company issued and sold to Cypress shares of common
stock for a total purchase price of $41 million. The net proceeds from the sale
of common stock to Cypress have been used to fund the Company's growth and
pursue its business plan.

REPURCHASE OFFER AND SERIES A OFFERING

On July 15, 1996, the Company commenced an offer to purchase and consent
solicitation (the "Repurchase Offer") to repurchase up to all of the Old Notes
and amend the Old Indenture (as defined herein) pursuant to which the Old Notes
were issued. The holders of an aggregate principal amount of $123,370,000 of
Old Notes (of a total of $125 million principal amount of Old Notes
outstanding) tendered their Old Notes and delivered consents pursuant to the
Repurchase Offer. On August 15, 1996, the Company issued $200 million aggregate
principal amount of Series A Notes pursuant to the Series A Offering. The net
proceeds of the Series A Offering were used by the Company to (i) repurchase an
aggregate of $123,370,000 principal amount of Old Notes and pay premium and
consents payments related thereto pursuant to the Repurchase Offer and (ii)
reduce the Company's indebtedness under the Credit Facility.

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<PAGE> 39
BUSINESS

THE COMPANY

The Company is the fifth largest motion picture exhibitor in North America
in terms of the number of screens in operation. At June 30, 1996, the Company
operated 1,417 screens in 172 theatres located in 28 states, Canada, Chile and
Mexico, consisting of 1,055 screens in 121 first run theatres and 362 screens
in 51 "discount" theatres. Of the Company's 1,417 screens, 863 (or 61%) were
built by the Company over the past six years, and, as a result, the Company
believes it operates one of the most modern theatre circuits in the industry.
All of the Company's theatres are multiplex facilities with approximately 90%
of the Company's screens located in theatres of six or more screens. The
Company believes that its ratio of screens to theatres (8.2 to 1 at June 30,
1996) is the highest of the five largest theatre circuits in the U.S. and is
approximately 60% higher than the industry average (less than 5 to 1). From its
fiscal year ended December 31, 1991 through the twelve months ended March 31,
1996, the Company has increased consolidated revenues approximately 88% from
$164.4 million to $309.1 million and has increased EBITDA approximately 129%
from $26 million to $59.4 million.

The Company is actively participating in the ongoing trend toward the
development of larger multiplexes, commonly referred to as "the rescreening of
America." The Company's management experience and financial flexibility permit
it to introduce larger multiplex theatre facilities into areas previously
served by smaller theatres, thereby capturing moviegoers who seek more
attractive surroundings, wider variety of films, better customer service,
shorter lines, more convenient parking and a greater choice of seating to view
popular movies. The Company's larger multiplex facilities increase per screen
revenues and operating margins and enhance its operating efficiencies. Such
theatres enable the Company to present films appealing to several segments of
the moviegoing public while serving patrons from common support facilities
(such as box office, concession areas, rest rooms and lobby). In addition,
larger multiplex facilities provide the Company with greater flexibility in
staffing, movie scheduling and equipment utilization while reducing congestion
throughout the theatre. Larger multiplex facilities also provide increased
flexibility in determining the length of time that a film will run. The Company
can lengthen the run of a film by switching it to a smaller auditorium after
peak demand has subsided and has the potential to generate higher profits as
film license agreements typically provide for a lower film rent to be paid
later in a film's run.

In addition, the Company owns a majority interest in and operates a chain
of 21 video rental stores (of which 20 stores are located in Texas and one
store is located in Georgia). See "Certain Transactions -- 2 Day Video, Inc."

OVERVIEW OF THE THEATRE INDUSTRY

The theatre exhibition industry in the U.S. is comprised of approximately
460 exhibitors, approximately 240 of which operate four or more theatres. As of
May 1995, the ten largest exhibitors (in terms of number of screens) operated
approximately 50% of the total screens, with no one exhibitor operating more
than 10% of the total screens.

U.S. box office sales of approximately $5.5 billion in 1995 was a record
for the industry. Overall attendance has remained stable during the most recent
six year period, with no single year varying more than 6.2% from the average.
The Company believes that the primary reason for the variances in the
year-to-year attendance is the overall audience appeal of the films released.
The following table represents the results of a survey by the National

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<PAGE> 40
Association of Theatre Owners outlining the historical trends in U.S. theatre
attendance, average ticket prices and box office sales for the last six years.
<TABLE>
<CAPTION>
U.S. Box
Attendance Average Office Sales
Year (Millions) Ticket Price (Millions)
---- ---------- ------------ ----------
<S> <C> <C> <C>
1990 . . . . . . . . . 1,189 $4.225 $5,022
1991 . . . . . . . . . 1,141 $4.211 $4,803
1992 . . . . . . . . . 1,173 $4.152 $4,871
1993 . . . . . . . . . 1,244 $4.143 $5,154
1994 . . . . . . . . . 1,292 $4.178 $5,386
1995 . . . . . . . . . 1,263 $4.351 $5,494
</TABLE>

Theatrical exhibition is the primary distribution channel for new motion
picture releases. The Company believes that the successful theatrical release
of a movie abroad and in "downstream" distribution channels, such as home video
and pay-per-view, network and syndicated television, is largely dependent on
its successful theatrical release in the U.S. The Company further believes
that the emergence of new motion picture distribution channels has not
adversely affected attendance at theatres and that these distribution channels
do not provide an experience comparable to the out-of-home experience of
viewing a movie in a theatre. The Company believes that the public will
continue to recognize the advantages of viewing a movie on a large screen with
superior audio and visual quality, while enjoying a variety of concessions and
sharing the experience with a large audience.

The Company believes that as a result of increased revenues from the
successful release of films in both movie theatres and other distribution
channels, major film production companies have increased and will continue to
increase the number of films being produced. Film producers have increased
their revenues from these distribution channels by approximately 200% over the
past ten years to $18.9 billion in 1995. The increased revenue potential from
film distribution in recent years can be attributed to increased demand
resulting from the domestic and international growth of the movie theatre
industry and the home video industry, and the significantly increased channel
capacity created by enhanced cable and satellite-based transmission systems.
Moreover, the Company believes independent producers and distributors, such as
Gramercy Pictures, Turner Pictures (which includes New Line Cinemas and Castle
Rock Entertainment) and Dreamworks SKG, the highly-publicized partnership among
Jeffrey Katzenberg, Steven Speilberg and David Geffen, should help increase
motion picture production. Additionally, increased revenues permit major film
production companies to create "event" films such as Jurassic Park, Twister and
Independence Day which utilize the latest advances in computer technology to
enhance production quality and special effects. The Company believes that an
increasing supply of quality feature films and "event" films exhibited with
advanced projection and stereo sound equipment such as Digital Theatre Sound
Systems, Dolby -- Digital Sound and Sony -- Dynamic Digital Sound will
enhance the moviegoing experience and will increase the theatre attendance of
exhibitors with modern multiplex theatres designed to exhibit such motion
pictures.

Increased international distribution is also producing important sources of
revenue for film distributors and growth opportunities for exhibitors. The
international market share of total box office receipts in 1995 was 49.3% up
from 30.4% in 1984. Since 1985, international box office receipts have grown at
a 10.8% compounded annual rate. The Company believes that many international
markets for theatrical exhibition, which have historically been underserved due
to antiquated and/or run-down theatres, will continue to experience rapid
growth as additional multiplex theatres are introduced.

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<PAGE> 41
audience has more than doubled from approximately 14% in 1986 to approximately
33% in 1995. The Company believes that film producers have recognized the
importance of this segment of the population and are producing an increased
number of films primarily targeted to this more mature audience, including
films such as Forrest Gump, Apollo 13, Mr. Holland's Opus and Sense and
Sensibility.

BUSINESS STRATEGY

Capitalize on popularity of "megaplex" concept. The Company intends to
expand its construction of larger "megaplex" entertainment centers in major
metropolitan areas. In December 1992, the Company opened its first megaplex,
Hollywood USA, a 15-screen, 52,000 square-foot complex containing a large
video arcade and a pizzeria. The Company subsequently opened two additional
megaplexes styled after the original Hollywood USA . Based upon the success of
these complexes, which consistently rank among the Company's top grossing
facilities on a per screen basis, the Company expanded the megaplex concept. In
the last twelve months, the Company has developed three megaplexes, each
exceeding 80,000 square feet and featuring 16 or more screens with 75 foot
screens in the largest auditoriums, stadium seating, digital sound, a pizzeria,
a coffee bar and a large video arcade room. Five of these megaplex facilities
are either currently under construction or scheduled to begin construction
during the remainder of 1996.

Continue to expand discount theatre niche . The Company intends to continue
to build discount theatres (admission of $1 to $2 per ticket) primarily in
major metropolitan markets to serve patrons who miss a film during its first
run exhibition or who may not be able to afford to attend first run theatres on
a frequent basis. The Company believes that its discount theatres allow it to
serve these segments of the total moviegoing population, increasing the number
of potential customers beyond traditional first run moviegoers. The Company
develops its multiplex discount theatres with many of the same amenities as its
first run theatres, including wall-to-wall screens, comfortable seating with
cupholder armrests, digital sound, multiple concession stands and a video game
room. The Company's discount theatres generally have higher attendance, lower
film costs and a greater proportion of concession revenues than its first run
theatres. As of June 30, 1996, approximately 30% of the Company's theatres were
discount theatres.

Develop modern American-style theatres in underserved international
markets. The Company intends to continue to develop multiplex theatres directly
or through joint venture arrangements with local partners in underserved
international markets. The Company's activities to date in international markets
have been directed toward Latin America, which the Company believes is severely
underscreened and is still typically served by one- and two-screen theatres
which are often antiquated and/or run-down. The Company believes that the same
economic factors giving rise to the multiplex rescreening trend in the U.S. are
similarly applicable to international markets. The Company believes that it
was the first U.S. circuit to open American-style modern multiplex theatres in
Chile and Mexico, and has recently begun exploring development opportunities in
Argentina and Brazil. For a discussion of an agreement in principle to
renegotiate certain indebtedness of Cinemark Mexico see "Description of Certain
Debt Instruments -- Cinemark Mexico Indenture."

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<PAGE> 42
OPERATIONS

The Company's corporate office, which employed approximately 130
individuals as of June 30, 1996, is responsible for theatre development and
site selection, lease negotiation, theatre design and construction, film
licensing and settlements, concession vendor negotiations and financial and
accounting activities. The Company's theatre operations are divided into six
geographic divisions, each of which is headed by a regional leader. The
Company's regional leaders have an average of 16 years experience in the movie
theatre industry and each is responsible for supervising approximately 15% of
the Company's theatre managers. Theatre managers are responsible for the
day-to-day operations of the Company's theatres including optimizing staffing,
developing innovative theatre promotions, preparing movie schedules, purchasing
concession inventory, maintaining a clean and functioning facility and training
theatre staff.

To maintain quality and consistency within the Company's theatres, the
Company conducts regular inspections of each theatre and operates a program
which involves unannounced visits by unidentified customers who report on the
quality of service, film presentation and cleanliness of the theatre.

Theatre Development

The Company continually evaluates existing and new markets for potential
theatre locations. The Company generally seeks to develop theatres in markets
that are underscreened as a result of changing demographic trends or that are
served by aging theatre facilities. Some of the factors the Company considers
in determining whether to develop a theatre in a particular location are the
market's population and average household income, the proximity to retail
corridors, convenient roadway access, the proximity to competing theatres and
the effect on the Company's existing theatres in the market, if any.

The Company designs its multiplex theatres with bright colors, neon, tile
and marble and state-of-the-art technology, to create a festive and memorable
experience for the customer. The Company has designed several prototype
theatres, each of which can be adapted to suit the size requirements of a
particular location and the availability of parking, and to respond to
competitive factors or specific area demographics. The Company believes the
fully designed prototypes result in significant construction and operating cost
savings. More importantly, the Company believes that construction and operation
of high quality theatres provides significant competitive advantages as theatre
patrons, and therefore film distributors, seek clean, conveniently located,
modern facilities with state-of-the-art equipment.

The Company's theatres typically contain auditoriums consisting of 100 to
400 seats each and feature wall-to-wall screens, high back rocking chairs with
cupholder armrests, digital sound, multiple concession stands and video game
rooms. The Company's megaplex facilities typically will exceed 80,000 square
feet, feature 16 or more screens with 75 foot screens in the largest
auditoriums, stadium seating, digital sound, a pizzeria, a coffee bar and a
large video arcade room. The Company believes that, in particular, stadium
style auditoriums with digital sound provide an entertainment experience which
is superior to that available at a conventional theatre. Jurassic Park,
released in the summer of 1993, was the first major motion picture to utilize
digital sound. The Company estimates that at least a majority of the films
produced in 1996 will have digital soundtracks available as an alternative to
the standard stereo soundtrack. More than 50% of the Company's first run
theatres have one or more auditoriums with digital sound capabilities, and the
Company is continuing to add digital sound capabilities.

Film Licensing

Films are typically licensed from film distributors owned by major film
production companies and from independent film distributors that distribute
films for smaller production companies. For first run films, film

41
<PAGE> 43
distributors typically establish geographic zones and offer each available film
to all theatres in a zone. The size of a film zone is generally determined by
the population density, demographics and box office potential of a particular
market or region, and can range from a radius of three to five miles in major
metropolitan and suburban areas to up to 15 miles in small towns. The Company
currently operates theatres in approximately 89 first run film zones. Each
film, regardless of the distributor, is generally licensed to only one theatre
in each zone. New film releases are licensed at the discretion of the film
distributors on an allocation or previewed bid basis. In film zones where the
Company has little or no competition, the Company selects those pictures it
believes will be most successful. In film zones where the Company faces
competition, the Company usually licenses films on an allocation basis. Under
an allocation process, a particular distributor will rotate films among
exhibitors, typically providing movies to competing exhibitors solely based on
the order of their release. For second run films, film distributors establish
availability on a market-by-market basis after the completion of exhibition at
first run theatres, and permit each theatre within a market to exhibit such
films without regard to film zones.

The Company licenses films through its booking office located at the
Company's corporate headquarters in Dallas, Texas. All of the major motion
picture studios and distributors also maintain offices in Dallas. The Company's
film bookers have significant experience in the theatre industry and have
developed long-standing relationships with the film distributors. Each film
booker is responsible for a geographic region and maintains relationships with
representatives of each of the major motion picture studios and distributors
having responsibility for their respective geographic regions. The Company
licenses films from all of the major distributors and is not dependent on any
one studio for motion picture product.

Prior to negotiating for a film license, the Company's booking personnel
evaluate the prospects for the film. The criteria considered for each film
include cast, director, plot, performance of similar films, estimated film
rental costs, expected MPAA rating and the outlook for other upcoming films.
Successful licensing depends upon knowledge of the tastes of local residents.

A film license typically specifies a rental fee to be paid to the
distributor based on the higher result of either a gross receipts formula or a
theatre admissions revenue sharing formula. Under a gross receipts formula, the
distributor receives a specified percentage of box office receipts, with the
percentage generally declining over the term of the run. First run film rental
percentages usually begin at 70% of box office receipts and gradually decline
to as low as 30% over a period of four to seven weeks. Second run film rental
percentages typically begin at 35% of box office receipts and often decline to
30% after the first week. Under the theatre admissions revenue sharing formula
(commonly known as the "90/10" clause), the distributor receives a specified
percentage (i.e., 90%) of the excess of box office receipts over a negotiated
reimbursement for theatre expenses. In general, most distributors follow an
industry practice of adjusting or renegotiating the terms of a film license
subsequent to exhibition based upon the film's success.

Concessions

Concession sales are the Company's second largest revenue source,
representing 34.2% of total revenues for 1995. The Company has devoted
considerable management effort to increasing concession sales and improving the
operating income margins from concession sales. These efforts include
implementation of the following strategies:

o Optimization of product mix. The Company's primary concession products
are various sizes of popcorn, soft drinks, candy and hot dogs, all of which the
Company sells at each of its theatres. However, different varieties and brands
of candy and soft drinks are offered at theatres based on preferences in that
particular

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<PAGE> 44
geographic region. The Company has also implemented "combo-meals," and "movie
meals" for children and senior citizens, both of which offer a pre-selected
assortment of concession products.

o Introduction of new products. The Company continues to introduce new
concession products designed to attract additional concession purchases. New
offerings have recently included bottled water, bulk candy, frozen yogurt and
ice cream. Additionally, the Company has introduced pizza, pastries and
specialty coffee in many of its megaplexes.

o Staff training. Employees are continually trained in "cross-selling"
and "upselling" techniques. This training occurs through situational
role-playing conducted at the Company's "Customer Service University" as well as
continual on-the-job training. Individual theatre managers receive a portion of
their compensation based on concession sales at their theatres and are therefore
motivated to maximize concession purchases.

o Theatre design. Newer theatres are designed to include at least two to
three concession stands, with each stand having multiple service stations to
make it easier to serve larger numbers of customers rapidly. Strategic
placement of large concession stands within theatres heightens their
visibility, aids in reducing the length of concession lines and improves
traffic flow around the concession stands.

o Cost control. The Company negotiates prices for its concession
supplies directly with concession vendors on a bulk rate basis and distributes
its concession supplies through a national concession contract distributor. The
concession distributor provides inventory and distribution services to the
theatres, which place volume orders directly with the concession distributor.
The concession distributor is paid a fee for such service equal to a percentage
of the Company's concession supply purchases. The Company believes that
utilization of a concession distributor is more cost effective than establishing
a concession warehousing network owned by the Company.

Marketing

In order to attract customers, the Company relies principally upon
newspaper display advertisements (substantially paid for by film distributors)
and newspaper directory film schedules (generally paid for by the exhibitor) to
inform its patrons of film titles and show times. Radio and television
advertising spots (generally paid for by film distributors) are used to promote
certain motion pictures and special events. The Company also exhibits previews
in its theatres of coming attractions and films presently playing on the other
screens which it operates in the same theatre or market.

Theatre Management

Each theatre is managed by one theatre manager and a number of assistant
managers. A typical ten screen movie theatre has approximately 40 employees and
two to three assistant managers, while a 16-screen megaplex has approximately
200 employees, including eight assistant managers. The theatre manager is paid
a salary and a commission based upon concession sales. A theatre manager can
increase the profitability of the theatre and his/her own compensation by
ensuring that the staff is properly trained to encourage patrons to "trade up"
in size or purchase additional concession items. The goal of a theatre manager
is to operate a theatre in the most efficient and profitable manner in order to
be promoted from managing a smaller theatre to managing a megaplex.

The Company believes strongly in customer service and it promotes this
through employee empowerment. Each theatre employee is authorized to deal with
all customer needs and complaints in a variety of ways, including offering free
tickets or free concession items, if necessary. Prior to peak seasons, the
Company

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teaches its employees customer service at its Customer Service University
training program. The Customer Service University is an active training program
consisting of role-playing exercises as well as typical classroom instruction.

Management Information Systems

The Company has developed its own point of sale ("POS") management
information system to further enhance its ability to maximize revenues, control
costs and efficiently manage the Company's theatre circuit. The POS information
system provides corporate management with a detailed daily admission and
concession revenue report by the start of business the following morning. This
information allows management to make real-time adjustments to movie schedules,
prolong runs or increase the number of screens on which successful movies are
being played and substitute films when gross receipts cease to meet expected
goals. Real-time seating and box office information is available to box office
personnel, making it possible for theatre management to avoid overselling a
particular film and providing faster and more accurate response to customer
inquiries regarding showings and available seating. The POS information system
also tracks concession sales and provides weekly in-theatre inventory reports,
leading to better inventory management and control.

INTERNATIONAL

The motion picture exhibition business has become increasingly global and
rising box office receipts from international markets indicate that some
international markets are poised for rapid growth. The Company believes that
its experience in developing and operating multiplex theatres provides it with
a significant advantage in developing multiplex facilities in international
markets. The Company's strategy in these markets is to form partnerships or
joint ventures with local operators, sharing risk and obtaining valuable market
insight.

Mexico

Cinemark International, through its subsidiary Cinemark Mexico, is
developing state-of-the-art multiplex theatres comparable to theatres developed
by the Company in the U.S. Cinemark Mexico's operations are conducted through
its subsidiary Cinemark de Mexico, which has its head office in Mexico City.
Cinemark Mexico currently operates eleven theatres (114 screens), with two
theatres (25 screens) under commitment with executed leases. The Company
manages all of Cinemark Mexico's theatres pursuant to a management agreement.
Cinemark Mexico's theatres are staffed primarily with Mexican nationals who
report to the Company's regional and corporate office personnel. The Company
provides all corporate operating functions, including film booking and
accounting.

Chile

In November of 1992, Cinemark International entered into a joint venture
with Conate, S.A., a Chilean movie theatre operator, to develop
state-of-the-art multiplex theatres in Chile. The joint venture provides for
the development of at least four new multiplex theatres and provides for the
licensing of the Company's technology, trademark and name. The joint venture
conducts its business through Cinemark Chile, which is 50% owned by Inversiones
Cinemark, S.A., a subsidiary of Cinemark International, and 50% owned by
Conate, S.A. Cinemark Chile, which is based in Santiago, Chile, currently
operates two theatres (13 screens).

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<PAGE> 46
Canada

Cinemark International, through its wholly owned subsidiary Cinemark
Holdings Canada, Inc., owns a 50% interest in Cinemark Theatres Alberta, Inc.
("Cinemark Alberta") which currently operates one first run theatre (12
screens) and one discount theatre (12 screens) managed by the Company pursuant
to a management agreement.

Argentina

In December 1995, Cinemark International entered into a joint venture
agreement with D'Alimenti S.A., an Argentinean corporation ("DASA"), and
Prodecine S.A., an Argentinean corporation ("Procine"), to develop
state-of-the-art multiplex theatres in Argentina. The joint venture agreement
provides for the development of at least ten multiplex theatres (100 screens)
by 2006. The joint venture agreement also provides for the licensing of the
Company's technology, trademark and name. The joint venture anticipates that
its business will be conducted through Cinemark Argentina, S.A., which is 50%
owned by Cinemark International and 50% owned by DASA and Procine in accordance
with their respective investments.

Brazil

In 1996, Cinemark Brazil was organized as an indirect subsidiary of
Cinemark International. Cinemark Brazil will develop state-of-the-art multiplex
theatres comparable to theatres developed by the Company in the U.S. Cinemark
Brazil's initial plans are to build approximately 200 screens by 2001. The
Company expects to begin construction of a theatre in Brazil in the fall of
1996.

COMPETITION

The Company is the fifth largest motion picture exhibitor in North America
in terms of the number of screens in operation. The Company competes against
both local and national exhibitors, some of which may have substantially
greater financial resources than the Company.

In film zones where the Company has little or no direct competition
(approximately 75% of the Company's theatres), the Company selects those
pictures it believes will be most successful in its markets from among those
offered to it by distributors. Where the Company faces competition, it usually
licenses films based on an allocation process. The Company currently operates
in approximately 89 first run film zones in the U.S. The Company believes that
no individual film zone is material to the Company. See "-- Operations -- Film
Licensing." The Company believes that the principal competitive factors with
respect to film licensing include capacity and location of an exhibitor's
theatre, theatre comfort, quality of projection and sound equipment, level of
customer service and licensing terms. The competition for customers is
dependent upon factors such as the availability of popular films, the location
of theatres, the comfort and quality of theatres and ticket prices. The Company
believes its admission prices at its first run and discount theatres are
competitive with admission prices of respective competing theatres.

The Company's theatres face competition from a number of other motion
picture exhibition delivery systems, such as network, syndicated and pay
television, pay-per-view and home video systems. The impact of such delivery
systems on the motion picture exhibition industry is difficult to determine,
and there can be no assurance that existing or future alternative delivery
systems will not have an adverse impact on attendance. The Company's theatres
also face competition from other forms of entertainment competing for the
public's leisure time and disposable income.

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PROPERTIES

Of the 157 theatres operated by the Company in the U.S. at June 30, 1996,
nineteen theatres (200 screens) were owned, 130 theatres (985 screens) were
leased pursuant to building leases, four theatres (27 screens) were leased
pursuant to ground leases and four theatres (54 screens) were managed. The
Company's leases are generally entered into on a long term basis with terms
(including options) generally ranging from 20 to 40 years. Approximately ten of
the Company's theatre leases (covering 40 screens) have remaining terms
(including renewal periods) of less than 5 years and approximately ninety-four
of the Company's theatre leases (covering 772 screens) have remaining terms
(including renewal periods) of more than 15 years. Rent is typically calculated
as a percentage of box office receipts or total theatre revenues, subject to an
annual minimum. The Company leases office space in Dallas, Texas for its
corporate office under a lease providing for average annual rental payments of
$367,676 and expiring on June 30, 1998. See note 9 of notes to the Consolidated
Financial Statements for information with respect to the Company's lease
commitments.

As of June 30, 1996, the Company operated fifteen theatres (151 screens)
outside the U.S., with two theatres (25 screens) under commitment with executed
leases. Of the fifteen theatres operated outside of the U.S. one theatre (12
screens) was owned and fourteen theatres (139 screens) were leased pursuant to
ground or building leases. The leases generally provide for contingent rental
based upon operating results (subject to an annual minimum). Generally, these
leases will include renewal options for various periods at stipulated rates.
The Company attempts to obtain lease terms that provide for build-to-suit
construction obligations of the landlord.

EMPLOYEES

As of June 30, 1996, the Company had approximately 7,000 employees in the
U.S., approximately 20% of whom are full time employees and 80% of whom are
part time employees. The Company is a party to collective bargaining agreements
with five unions of which approximately ten employees are members. As of June
30, 1996, Cinemark Mexico's subsidiaries employed approximately 600 employees,
approximately all of whom are full time employees. Cinemark Mexico's
subsidiaries are party to collective bargaining agreements with two unions of
which approximately 460 employees are members. The Company considers its
relations with its employees to be satisfactory.

REGULATION

The Company is subject to various general regulations applicable to its
operations including the Americans with Disabilities Act (the "ADA"). The
Company has established a program to review and evaluate the Company's existing
theatres and its specifications for new theatres and to make any changes to
such theatres and specifications required by the ADA. The Company develops new
theatres to be accessible to the disabled and believes that it is otherwise in
substantial compliance where readily achievable with current regulations
relating to accommodating the disabled. The Company believes that the cost of
complying with the ADA will not be material.

LEGAL PROCEEDINGS

From time to time, the Company is involved in various legal proceedings
arising from the ordinary course of its business operations, such as personal
injury claims, employment matters and contractual disputes. The Company
believes that its potential liability with respect to proceedings currently
pending is not material in the aggregate to the Company's consolidated
financial position or results of operations.

46
<PAGE> 48
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Lee Roy Mitchell* 59 Chairman of the Board; Chief Executive Officer; Director
Tandy Mitchell 46 Vice Chairman of the Board; Executive Vice President;
Secretary; Director
Alan W. Stock+ 36 President; Chief Operating Officer; Director
Jeffrey J. Stedman 33 Vice President; Treasurer; Chief Financial Officer;
Assistant Secretary; Director
Gary R. Gibbs 52 Vice President-General Counsel; Assistant Secretary;
Director
Margaret E. Richards 37 Vice President-Real Estate; Assistant Secretary
Rob Carmony 38 Vice President-Director of Operations
Jerry Brand 50 Vice President-Film Licensing
W. Bryce Anderson*+ 53 Director
Sheldon I. Stein*+ 42 Director
Heriberto Guerra, Jr.+ 46 Director
James A. Stern 45 Director
James L. Singleton+ 40 Director
</TABLE>

- ---------------------------
* Member Audit Committee
+ Member Compensation Committee

The Shareholders' Agreement (as defined herein) contains a voting agreement
pursuant to which Mr. Mitchell agreed to vote his share of common stock of the
Company to elect designees of CALP to the Board of Directors of the Company.
As of June 30, 1996, CALP had the right to designate two board members.
Additionally, the Shareholders' Agreement provides that the Company must obtain
the written consent of CALP for certain corporate acts. See "Certain
Transactions--Cypress Investment."

The directors of the Company are elected each year by the shareholders to
serve for a one-year term and until their successors are elected and qualified.
Directors of the Company are reimbursed for expenses actually incurred for each
Board meeting which they attend. In addition, Directors who are not employees
of the Company receive a fee of $1,000 for each meeting of the Board of
Directors attended by such person. The executive officers of the Company are
elected by the Board of Directors to serve at the discretion of the Board.

The following is a brief description of the business experience of the
directors and executive officers of the Company for at least the past five
years. All compensation of directors and officers is paid by the Company.

Lee Roy Mitchell has served as Chairman of the Board since March 1996, as
Director and Chief Executive Officer of the Company since its inception in 1987
and Vice Chairman of the Board of Directors from March 1993 to March 1996. Mr.
Mitchell was President of the Company from its inception in 1987 until March
1993. From 1985 to 1987, Mr. Mitchell served as President and Chief Executive
Officer of a

47
<PAGE> 49
predecessor corporation. Mr. Mitchell has served on the Board of Directors of
the National Association of Theatre Owners since 1991. Mr. Mitchell has been
engaged in the motion picture exhibition business for more than 35 years.

Tandy Mitchell has served as Vice Chairman of the Board since March 1996,
as Director of the Company since April 1992, as Executive Vice President of the
Company since October 1989 and as Secretary of the Company since its inception
in 1987. Mrs. Mitchell was General Manager of the theatre division of a
predecessor corporation from 1985 to 1987. From 1978 to 1985, Mrs. Mitchell
was employed by Southwest Cinemas Corporation, most recently as director of
operations. Mrs. Mitchell is the wife of Lee Roy Mitchell.

Alan W. Stock has served as President of the Company since March 1993, a
Director of the Company since April 1992 and as Chief Operating Officer of the
Company since March 1992. Mr. Stock was Vice President of the Company from
October 1989 to March 1993. Mr. Stock was General Manager of the Company from
its inception in 1987 to March 1992. Mr. Stock was employed by the theatre
division of a predecessor corporation from January 1986 to December 1987 as
Director of Operations. From 1981 to 1985, he was employed by Consolidated
Theaters, most recently as District Manager.

Jeffrey J. Stedman was elected Director of the Company in March 1996 and
has served as Vice President, Treasurer and Chief Financial Officer of the
Company since April 1993. From December 1989 to April 1993, Mr. Stedman was
Director of Finance of the Company. Prior to joining the Company in December
1989, Mr. Stedman was a Manager in the tax department of Deloitte & Touche,
where he was employed from December 1984 to December 1989. Mr. Stedman is a
certified public accountant.

Gary R. Gibbs has served as a Director of the Company since July 1995 and
has served as General Counsel to the Company since January 1990. Prior to
joining the Company, Mr. Gibbs spent the previous 17 years in the private
practice of law in Hot Springs, Arkansas, where he was the senior partner at
the law firm of Gibbs & Farnell.

Margaret E. Richards has served as a Vice President and Assistant Secretary
of the Company since October 1989 and as Vice President-Real Estate since March
1994. Ms. Richards has been Director of Leasing of the Company since its
inception in 1987 and was employed by the theatre division of a predecessor
corporation in its real estate section from August 1986 to December 1987.

Robert F. Carmony has served as Director of Operations of the Company since
June 1988. He was owner of O.C. Enterprises, a software development firm,
from 1986 to 1988. Prior to forming his own software company, Mr. Carmony
worked for Plitt-Cineplex Odeon theatres from 1985 to 1986. He worked as a
Systems Analyst for Electronic Data Systems (EDS) from 1984 to 1985. Mr.
Carmony was elected a Vice President-Director of Operations in March 1996.

Jerry Brand has served as Vice President-Film Licensing since March 1996.
Mr. Brand has over 27 years of experience in the theatre industry, beginning
his career with Paramount Pictures in 1968. Prior to joining the Company, Mr.
Brand served as Vice President and Head Film Buyer with Cobbs Theatres where
he was employed from 1983 to March 1996.

W. Bryce Anderson has served as a Director of the Company since June 1992.
Mr. Anderson has been Chairman of the Board of Directors of Ennis Steel
Industries, Inc., a steel fabricator, since 1980 and Chairman of the Board of
Directors of Reflex Glass Bead Co., Inc., a manufacturer of glass beads, since
September 1990. Mr. Anderson was Chairman of the Board of Centerline
Industries, Inc., an industrial paint manufacturer, from January 1989 to
December 1992. From 1976 to 1989, Mr. Anderson was Chairman of the Board of
Directors and Chief Executive Officer of Ennis Paint Manufacturing, Inc., an
industrial paint manufacturer.

48
<PAGE> 50
Sheldon I. Stein has served as a Director of the Company since June 1992.
Mr. Stein is a Managing Director of Bear, Stearns & Co. Inc., an investment
banking firm, and is in charge of its Southwest Corporate Finance Department.
Prior to joining Bear, Stearns & Co. Inc. in August 1986, Mr. Stein was a
partner in the Dallas law firm of Hughes & Luce. Mr. Stein is a director of
AMRE, Inc., Tandycrafts, Inc., Fresh America Corporation, Men's Wearhouse, Inc.
and RAC Financial Group, Inc.

Heriberto Guerra, Jr. has served as a Director of the Company since
December 1993. Mr. Guerra has been Managing Director-Corporate Development for
Southwestern Bell Telephone since 1995. From September 1985 to January 1987,
he was Area Manager-Marketing Operations for Southwestern Bell, and from 1987
to 1995, he was Executive Director-Government Relations for Southwestern Bell.
Prior to that, he served in an owner or manager capacity for various hotel,
restaurant and movie theatre businesses in Texas. Mr. Guerra is also a
director of Cinemark Mexico (USA), Inc. and Play by Play Toys and Novelties.

James A. Stern was elected Director of the Company in March 1996. Mr.
Stern has been Chairman of The Cypress Group L.L.C. ("Cypress Group") since its
formation in April 1994. Prior to joining Cypress Group, Mr. Stern spent his
entire career with Lehman Brothers, an investment banking firm, most recently
as head of the Merchant Banking Group. He served as head of Lehman's High
Yield and Primary Capital Markets Groups, and was co-head of Investment
Banking. In addition, Mr. Stern was a member of the firm's Operating
Committee. Mr. Stern is a director of Noel Group, Inc., Lear Corporation,
Infinity Broadcasting Corporation, R.P. Scherer Corporation and K&F Industries.

James L. Singleton was elected Director of the Company in March 1996. Mr.
Singleton has been Vice Chairman of Cypress since its formation in April 1994.
Prior to joining Cypress Group, Mr. Singleton was a Managing Director with
Lehman Brothers, an investment banking firm, where he worked in the Merchant
Banking Group, focusing much of his attention on media/communications related
investments. Mr. Singleton is a director of Infinity Broadcasting Corporation,
Able Body Corporation, and L.P. Thebault Company.

49
<PAGE> 51
EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

Annual Compensation Long Term
------------------- Compensation
Awards
------

Securities
Underlying All Other
Salary (A) Bonus Options/SARs Compensation
Name and Principal Position Year ($) ($) (#) ($)
--------------------------- ---- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Lee Roy Mitchell, Chairman of the Board 1995 $267,852 $1,733,976 - $120,828(B)
and Chief Executive Officer 1994 243,513 1,715,290 - 121,086(C)
1993 221,375 1,778,625 101,477(D)

Alan Stock, President and Chief 1995 $175,000 $80,043 - $6,930(E)
Operating 1994 125,070 71,729 - 5,541(E)
Officer 1993 121,850 111,058 - 5,677(E)

1995 $119,790 $19,980 - $21,884(F)
Tandy Mitchell, Vice Chairman of the 1994 108,900 17,450 - 22,165(G)
Board, Executive Vice President and 1993 99,000 12,004 - 22,510(H)
Secretary

1995 $110,000 $46,809 - $6,930(E)
Jeffrey J. Stedman, Vice President, 1994 82,500 44,461 100 6,746(E)
Treasurer and Chief Financial Officer 1993 70,189 30,769 400 6,935(E)

1995 $70,000 $23,700 - $2,063(E)
Margaret E. Richards, Vice President- 1994 $60,000 20,971 - 1,791(E)
Real Estate and Assistant Secretary 1993 $70,197 12,469 - 2,496(E)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

- ---------------------------
(A) Amounts shown include cash and non-cash compensation earned and
received by executive officers as well as amounts earned but deferred
at the election of those officers.
(B) Represents $98,844 of life insurance premiums paid by the Company for
the benefit of Mr. Mitchell, a $1,984 annual contribution to the
Company's 401(K) savings plan and $20,000 representing the value of
the use of a Company vehicle for one year.
(C) Represents $98,844 of life insurance premiums paid by the Company for
the benefit of Mr. Mitchell, a $2,242 annual contribution to the
Company's 401(k) savings plan and $20,000 representing the value of
the use of a Company vehicle for one year.
(D) Represents $98,844 of life insurance premiums paid by the Company for
the benefit of Mr. Mitchell and a $2,633 annual contribution to the
Company's 401(k) savings plan.
(E) Represents the Company's annual contribution to the Company's 401(k)
savings plan.
(F) Represents $13,880 of life insurance premiums paid by the Company for
the benefit of Mrs. Mitchell, a $2,134 annual contribution to the
Company's 401(K) savings plan and $5,870 representing the value of the
use of a Company vehicle for one year.
(G) Represents $13,880 of life insurance premiums paid by the Company for
the benefit of Mrs. Mitchell, a $2,415 annual contribution to the
Company's 401(k) savings plan and $5,870 representing the value of the
use of a Company vehicle for one year.
(H) Represents $13,880 of life insurance premiums paid by the Company for
the benefit of Mrs. Mitchell, a $2,760 annual contribution to the
Company's 401(k) savings plan and $5,870 representing the value of the
use of a Company vehicle for one year.

50
<PAGE> 52
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

There were no Options/SAR grants to the named Executive Officers for
fiscal year ended December 31, 1995.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-The-Money
Shares Acquired on Unexercised Options/SARs at
Name Exercise (#) Value Realized ($) Options/SARs at FY-End ($)
FY-End (#) Exercisable/
Exercisable/ Unexercisable
Unexercisable
<S> <C> <C> <C> <C>
Lee Roy Mitchell -- -- -- --
Alan Stock -- -- 1710/427 (A)
Tandy Mitchell -- -- -- --
Jeffrey J. Stedman -- -- 280/220 (A)
Margaret E. Richards -- -- 427/107 (A)
</TABLE>

- ---------------
(A) The Company has the right to call the shares issuable upon exercise of
the options for terminating employees. The call price increases over
the five year vesting period of the options.

401(K) PENSION PLAN

The Company sponsors a defined contribution savings plan (the "401(k)
Plan") whereby certain employees of the Company or its subsidiaries may (under
current administrative rules) elect to contribute, in whole percentages between
1% and 15% of such employee's compensation, provided no employee's elective
contribution shall exceed the amount permitted under Section 402(g) of the
Internal Revenue Code of 1986, as amended ($9,500 in 1995). A discretionary
matching contribution is made by the Company annually ($415,121 in 1995). The
Company's matching contribution is subject to vesting and forfeitures. The
Company's contributions vest at the rate of twenty percent (20%) per year
beginning two years from the date of employment. After an employee has worked
for six years, employees have full and immediate vesting rights to all of the
Company's matching contributions. The Company's contributions to the accounts
of the named Executive Officers are included in the Summary Compensation Table.

EMPLOYMENT AGREEMENTS

Mr. and Mrs. Mitchell each have an employment agreement with the Company
which contains the terms described below.

Lee Roy Mitchell's 1995 base salary was $267,864 and will increase
thereafter at the rate of 10% per year. In addition, Mr. Mitchell (i) is
entitled to receive an annual bonus, subject to approval by the Board of
Directors, in an amount not exceeding 10% of the aggregate amount of
consolidated theatre level cash flow of the Company in excess of $25 million
for each year, which bonus was approximately $1,732,148 for the year ended
December 31, 1995, (ii) is reimbursed for expenses incurred by him in
connection with his duties, and (iii) receives the use of an automobile of his
choice to be replaced at his election every three years, a club membership of
his choice, a whole life insurance policy in the amount of $3,300,000 insuring
his life during the period of his employment and any other benefits generally
available to the executives of the Company.

51
<PAGE> 53
The maximum base salary and bonus which Mr. Mitchell is entitled to receive for
any calendar year is limited to $2 million and the payment of any bonus
requires board approval. The employment agreement terminates on the earlier of
(i) Mr. Mitchell's death or permanent disability (except with respect to
amounts payable as described in the following sentence) or (ii) December 31,
2001. In the event of Mr. Mitchell's permanent disability, he will be entitled
to receive $10,000 per month for a period of 60 months.

Tandy Mitchell's 1995 base salary was $119,790 and will increase thereafter
at the rate of 10% per year. In addition, Mrs. Mitchell (i) is reimbursed for
expenses incurred by her in connection with her duties and (ii) receives the
use of an automobile of her choice to be replaced at her election every three
years, a whole life insurance policy in the amount of $1,000,000 insuring her
life during the period of her employment and any other benefits generally
available to the executives of the Company. The employment agreement
terminates on the earlier of (i) Mrs. Mitchell's death or permanent disability
or (ii) December 31, 2001.

The employment agreements of Mr. and Mrs. Mitchell provide that their
employment may be terminated by the unanimous decision of the Board of
Directors of the Company (other than the terminated party) for cause if the
terminated party is convicted of a felony and incarcerated or willfully refuses
to perform any of the duties required under the employment agreement for a
period of 60 days after notice from the Board of Directors.

The employment of Mr. and Mrs. Mitchell will be deemed to be constructively
terminated if, among other things, there is a change of control (as defined in
Item 6(c) under Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended) of the Company, a merger or consolidation of the Company, a
sale of all or substantially all of the assets of the Company, or if certain
changes related to their respective status or compensation by the Company
occur. In the event of termination of employment by the Company without cause,
Mr. and Mrs. Mitchell will be entitled to receive the amounts that would
otherwise be paid under their respective employment agreements for the
remaining term of such agreements.

The employment agreements of Mr. and Mrs. Mitchell further provide that
they will be indemnified against certain liabilities that may arise by reason
of their status or service as executive officers of the Company. The
employment agreements of Mr. and Mrs. Mitchell do not prohibit their engaging
in activities competitive with those of the Company, including the acquisition
of theatres (subject to fiduciary duties to the Company imposed by applicable
law or contractual obligation imposed upon Mr. Mitchell by the Shareholders'
Agreement). See "Certain Transactions--Competing Businesses Owned by Mr.
Mitchell" and "--Cypress Investment."

STOCK OPTIONS

Employee Stock Option Plan

The Company has established a Nonqualified Stock Option Plan (the "Plan")
under which the Chief Executive Officer of the Company, in his sole discretion,
may grant employees of the Company options to purchase up to an aggregate of
10,685 shares of the Company's Class B Common Stock. The Chief Executive
Officer of the Company has the ability to set the exercise price and the term
(of up to ten years) of the options. All options vest at the rate of one-fifth
of the total options granted per year generally beginning one year from the
date of grant, subject to acceleration by the Chief Executive Officer of the
Company. An employee's options are forfeited if the employee is terminated for
cause. Upon termination of an employee's employment with the Company and
provided that no public market exists for any class of common stock of the
Company at such time, the Company has the option to repurchase any shares of
capital stock of the Company that were acquired by the employee pursuant to the
Plan at a specified formula price based on theatre cash flow. As of June 30,
1996 there were outstanding options to purchase 8,806 shares of the Company's
Class B Common Stock.

52
<PAGE> 54
During 1995, the Company granted options under the Plan to purchase 1,981
shares of Class B Common Stock of the Company at an exercise price of $1.00 per
share. The options expire 10 years from the date of grant. The Company
believes that the market value of a share of Class B Common Stock on the date
of grant exceeded the option price by approximately $1,150. As a result, the
Company accrued $2.3 million for unearned compensation and will amortize this
noncash expense at a rate of approximately $.5 million per year during the five
year vesting period for the options granted.

Independent Director Stock Options

The Company has granted the unaffiliated directors of the Company options
to purchase up to an aggregate of 900 shares of the Company's Class B Common
Stock at an exercise price of $833.34 per share (the "Director Options").
Effective April 1995, the Company amended the Director Options to reduce the
aggregate number of shares of Common Stock issuable pursuant to the Director
Options from 900 to 600 shares and to reduce the exercise price of the Director
Options from $833.34 per share to $1.00 per share. The options vest on June 1,
1997, subject to acceleration in certain circumstances. The options expire ten
years from the date of grant. A director's options are forfeited if the
director resigns or is removed from the Board of Directors of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In January 1995, the Board of Directors established a Compensation
Committee of the Board to study senior management compensation and make
recommendations to the Board of Directors as a whole relating to said
compensation. Messrs. Stock, Stein, Anderson, Guerra and Singleton currently
serve as members of the Compensation Committee, with Mr. Stock being the only
member who is an officer or employee of the Company or any of its subsidiaries.

53
<PAGE> 55
PRINCIPAL SHAREHOLDERS

The following table and the accompanying footnotes set forth, as of June
30, 1996, the beneficial ownership of the Company's Common Stock by (i) each
person who is known to the Company to own beneficially more than 5% of either
class of its outstanding Common Stock, (ii) each director and named executive
officer, and (iii) all directors and officers as a group:

<TABLE>
<CAPTION>
NUMBER COMBINED
TITLE OF OF PERCENT PERCENT
NAMES AND ADDRESSES(1) CLASS SHARES(2) OF CLASS OF CLASSES
---------------------- -------- --------- -------- ----------
<S> <C> <C> <C> <C>
Lee Roy Mitchell(3) Class A Common Stock 1,500 100%
7502 Greenville Avenue 42.2%
Suite 800, LB-9 Class B Common Stock 77,687 42.8%
Dallas, TX 75231

Cypress Merchant Banking Class A Common Stock - -
Partners L.P. 42.2%
65 East 55th St. Class B Common Stock 78,469 42.8%
New York, New York 10022

Cypress Pictures Ltd. Class A Common Stock - -
c/o W.S. Walker Company 2.2%
Second Floor Class B Common Stock 4,079 2.2%
Caledonian House
Mary Street, P.O. Box 265
George Town, Grand Cayman
Cayman Islands

The Mitchell Special Trust Class A Common Stock - -
7502 Greenville Avenue 7.9%
Suite 800, LB-9 Class B Common Stock 14,667 8%
Dallas, TX 75231

Tandy Mitchell(4) Class A Common Stock - -
-
Class B Common Stock - -

Alan W. Stock(5) Class A Common Stock - -
*
Class B Common Stock 2,137 *

Jeffrey J. Stedman(6) Class A Common Stock - -
*
Class B Common Stock 280 *
</TABLE>

54
<PAGE> 56

Class B Common Stock 600 *

Margaret E. Richards(8) Class A Common Stock - - *

Class B Common Stock 534 *

W. Bryce Anderson Class A Common Stock - -
-
Class B Common Stock - -

Sheldon I. Stein Class A Common Stock - -
-
Class B Common Stock - -

Heriberto Guerra, Jr. Class A Common Stock - - -

Class B Common Stock - - -

James A. Stern Class A Common Stock - - -

Class B Common Stock - - -

James L. Singleton Class A Common Stock - - -

Class B Common Stock - - -

Directors and Officers as Class A Common Stock 1,500 100.0%
a Group (13 persons) (9) 44.6%
Class B Common Stock 81,638 44.1%
</TABLE>

- ---------------------
* Less than 1%.
(1) Unless otherwise indicated, the Company believes the beneficial owner has
both sole voting and investment powers over such shares.

(2) As of September 30, 1996, 1,500 shares of Class A Common Stock and 183,574
shares of Class B Common Stock were issued and outstanding. Includes 7,254
shares of Class B Common Stock issuable upon the exercise of options that
may be exercised within 60 days of the date of this Prospectus.

(3) Does not include 15,937 shares of Class B Common Stock held in trust for
the benefit of certain of Mr. Mitchell's grandchildren, as to which Mr.
Mitchell disclaims beneficial ownership. Mr. Mitchell is the co-trustee of
such trusts.
(4) Excludes any shares owned by Mr. Mitchell that Mrs. Mitchell may be deemed
to own as a result of community property laws.

(5) Includes 1,817 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this
Prospectus.

(6) Includes 205 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this
Prospectus.

55
<PAGE> 57
(7) Includes 510 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this
Prospectus.

(8) Includes 453 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this
Prospectus.

(9) Includes 3,406 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this
Prospectus.

COMMON STOCK

The rights of the holders of Class A and Class B are identical except for
voting and conversion rights. Each share of Class A Common Stock is entitled
to one vote on all matters submitted to a vote of the shareholders. The Class
B Common Stock is non-voting. Subject to contractual limitations regarding
conversion of Class B Common Stock into Class A Common Stock contained in the
Shareholders' Agreement and in Stock Transfer Restriction Agreements between
the Company and certain employees, each share of Class B Common Stock is
convertible at any time, at the option of and without cost to the shareholder,
into the same number of shares of Class A Common Stock upon surrender to the
Company of the certificate or certificates evidencing the Class B Common Stock
to be converted, together with a written notice of the election of such
shareholder to convert such shares into Class A Common Stock. Holders of Class
A and Class B Common Stock are entitled to receive pro rata per share such
dividends as the Board of Directors may from time to time declare out of funds
of the Company legally available for the payment of dividends. Upon
liquidation, dissolution or winding-up of the Company, the holders of Class A
and Class B Common Stock are entitled to share ratably in all assets available
for distribution after payment in full of creditors. In a merger,
consolidation or other business combination, the consideration to be received
per share by holders of Class A and Class B Common Stock must be identical,
except that in any such transaction in which shares of common stock are
distributed, such shares may differ to the extent that voting rights differ
among existing classes of Common Stock. See "Certain Transactions--Cypress
Investment."

56
<PAGE> 58
CERTAIN TRANSACTIONS

2 DAY VIDEO, INC.

On August 21, 1995, the Company loaned 2 Day Video, Inc. ("2 Day")
$500,000, evidenced by a promissory note of even date bearing interest at an
annual percentage rate equal to the prime rate set forth in the Wall Street
Journal from time to time plus 2%, payable in eighteen consecutive monthly
installments with the final installment due on February 25, 1997. On February
7, 1996, the Company loaned 2 Day $450,000 evidenced by a promissory note of
even date bearing interest at an annual percentage rate equal to the prime rate
set forth in the Wall Street Journal from time to time plus 2%, payable in
eighteen consecutive monthly installments with the final installment due on
August 1, 1997. 2 Day utilized the proceeds of these loans for store openings.
As of June 30, 1996, 2 Day operated 21 video rental stores, 20 of which are
located in Texas and one of which is located in Georgia. The Company and Mr.
Mitchell own 83.1% and 16.9%, respectively, of the common stock of 2 Day.

MANAGEMENT AGREEMENTS

The Company currently manages seven theatres (90 screens) for affiliates
under long term management agreements. The Company provides all operating
functions, including film booking, accounting and the operation and maintenance
of the theatres, in the same manner as such functions are performed by Company
personnel for Company owned or leased theatres. The operating and maintenance
expenses of the theatres are paid by the owners of the theatres. The Company
receives a specified percentage of the gross revenues of the theatres managed
by the Company and in some cases a percentage of the theatre cash flow above
certain targeted amounts. The Company may in the future enter into additional
management agreements with affiliates and/or third parties to manage theatres.

Movie Theatre Investors

The Company manages three theatres (37 screens) for Movie Theatre
Investors, Ltd. ("Movie Theatre Investors"). Mr. Mitchell is the sole
shareholder of one of the general partners of Movie Theatre Investors. In
addition, Mr. Mitchell owns 10.1%, Mrs. Mitchell and affiliates own 7.4% and
the Company owns 1% of the limited partnership interests in Movie Theatre
Investors. The Company received $300,662 in management fees from Movie Theatre
Investors in 1995.

Laredo Joint Venture

The Company manages one theatre (12 screens) for Laredo Theatre, Ltd.
("Laredo"). Lone Star Theatres, Inc. owns 25% of the limited partnership
interests in Laredo. Cinemark International is the sole general partner and
owns the remaining limited partnership interests. Lone Star Theatres, Inc. is
owned 100% by Mr. David Roberts, who is Mr. Mitchell's son-in-law. The Company
received $196,982 in management fees from Laredo in 1995.

Cinemark Partners II

The Company manages one theatre (17 screens) for Cinemark Partners II, Ltd.
("Cinemark Partners II"). Cinemark Partners I, Inc., a wholly owned subsidiary
of the Company, is the sole general partner of Cinemark Partners II. Mr.
Mitchell owns 10% and Cinemark Partners I, Inc. owns 1% of the limited
partnership interests in Cinemark Partners II. The Company received $171,500
in management fees from Cinemark Partners II in 1995.

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Cinemark Alberta

The Company manages one first run theatre (12 screens) and one discount
theatre (12 screens) for Cinemark Alberta. Cinemark Holdings Canada, Inc., a
wholly owned subsidiary of Cinemark International, owns 50% of Cinemark
Alberta. The Company received $74,928 in management fees from Cinemark Alberta
in 1995.

COMPETING BUSINESSES OWNED BY MR. MITCHELL

Mr. Mitchell currently owns a 10% interest in a discount theatre chain (5
theatres) located principally in Houston, Texas, with total assets of
approximately $683,100, a 50% interest in a theatre chain (15 theatres) located
principally in Louisiana, with total assets of approximately $1.26 million, a
33% interest in one theatre located in Louisiana, with total assets of
approximately $82,511 and a 33% interest in a theatre in South Louisiana with
total assets of approximately $101,622, to each of which he devotes a minimal
portion of his business time. The Company believes that five of these 23
theatres may compete with Company-owned theatres.

STARPLEX CINEMAS, INC.

On June 21, 1994, the Company executed a ground lease on property located
in Lewisville, Texas. The Company constructed and equipped an eight screen
multiplex theatre. The Company leases the theatre and the equipment to Starplex
Cinemas, Inc. ("Starplex"). The Company has recorded only $200,000 of rental
income since the inception of this lease as the theatre is performing below
expectations and Starplex is delinquent in making its required rent payments.
Starplex is 100% owned by Mr. Mitchell's brother.

CYPRESS INVESTMENT

The Company entered into the Shareholders' Agreement dated March 12, 1996
with Mr. Mitchell, his affiliates and Cypress (the "Shareholders' Agreement").
Among other things, the Shareholders' Agreement provides that, subject to
certain conditions, the Company must obtain (with certain exceptions) the
consent of CALP for certain corporate acts including, but not limited to,
amendments to the Articles of Incorporation of the Company, approval of annual
budgets under certain circumstances, asset dispositions or acquisitions in
excess of specified amounts, merger or consolidation of the Company, incurrence
of indebtedness over specified amounts, certain stock redemptions or dividends,
transactions with affiliates over specified amounts, certain management changes
or new compensation plans, financing theatres through limited partnerships,
settlements of litigation over specified amounts and issuance of common stock
under certain conditions. The Shareholders' Agreement also provides that
Cypress may not convert its Class B Common Stock to Class A Common Stock unless
certain events occur such as a Change of Control (as defined in the
Shareholders' Agreement) or the consummation of a public offering of the
Company's common stock. The above-described provisions terminate on the earlier
of (i) the public owning 25% or more of the common stock of the Company, (ii)
the merger of the Company with and into any publicly traded company or (iii)
ten years after the date of the Shareholders' Agreement. The Shareholders'
Agreement also contains a voting agreement pursuant to which Mr. Mitchell
agrees to vote his shares of common stock to elect certain designees of CALP
to the Board of Directors of the Company.

Mr. Mitchell also agreed that in the event any corporate opportunity is
presented to Mr. Mitchell or any of his affiliates to acquire or enter into any
business transaction involving the motion picture exhibition business that
would be significant to the Company, he would submit such opportunity to the
Board of Directors of the Company before taking any action.

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The Shareholders' Agreement further provides that the shareholders agree to
form a new corporation as the parent corporation of the Company and to
contribute their respective shares for like shares of this new corporation. As
of June 30, 1996, neither the Company nor the shareholders have pursued plans
to create such a holding company; however, the Company can give no assurances
that the Company will not pursue such a reorganization in the future.

INDEMNIFICATION OF DIRECTORS

The Company has adopted provisions in its Articles of Incorporation and
Bylaws which provide for indemnification of its officers and directors to the
maximum extent permitted under the Texas Business Corporation Act. In addition,
the Company has entered into separate indemnification agreements with each of
its directors which requires the Company, among other things, to indemnify them
against certain liabilities that may arise by reason of their status or service
as directors to the maximum extent permitted under the Texas Business
Corporation Act. The Company has obtained an insurance policy providing for
indemnification of officers and directors of the Company and certain other
persons against liabilities and expenses incurred by any of them in certain
stated proceedings and under certain stated conditions.

DESCRIPTION OF SERIES B NOTES

The Series A Notes were issued, and the Series B Notes will be issued,
under the Indenture dated as of August 15, 1996 (the "Indenture"), among the
Company and the Trustee. The Series A Notes were issued pursuant to the
Company's Offering Memorandum dated August 12, 1996 (the "Offering
Memorandum"). The Series B Notes will be issued solely in exchange for an
equal principal amount of the outstanding Series A Notes pursuant to the
Exchange Offer. The terms of the Series B Notes will be identical in all
material respects to the form and terms of the Series A Notes except that: (i)
the Series B Notes will have been registered under the Securities Act (and will
generally be freely transferable by holders thereof who are not Restricted
Holders); and (ii) the Registration Rights and Liquidated Damages (as defined
herein) applicable to the Series A Notes are not applicable to the Series B
Notes. The Series A Notes and the Series B Notes are collectively referred to
herein as the "Notes."

The following summary of the terms of the Indenture and the Notes is based
on certain provisions of the Indenture and the form of Note attached thereto.
It does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all of the provisions of the Indenture. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." Capitalized terms used herein and not otherwise
defined shall have the respective meanings assigned to them in the Indenture.

The Series B Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all present and future Senior Indebtedness
of the Company, and senior or pari passu in right of payment to all existing
and future subordinated Indebtedness of the Company. The Series B Notes will
be pari passu with the Series A Notes.

As of the date of the Indenture, all Subsidiaries of the Company will be
Restricted Subsidiaries, other than the Existing Unrestricted Subsidiaries.
However, under certain circumstances, the Company will be able to designate
additional current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to most of the restrictive
covenants set forth in the Indenture.

PRINCIPAL, MATURITY AND INTEREST

The Notes are limited in aggregate original principal amount to $200
million and will mature on August 1, 2008. Interest on the Notes will accrue
at the rate of 9-5/8% per annum and will be payable semi-annually

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in arrears on February 1 and August 1 of each year, commencing February 1, 1997
to Holders of record on the immediately preceding January 15 and July 15.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months. Principal of, and premium, if any, and interest on,
the Notes will be payable at the corporate trust office of the Trustee in New
York City or at the office of any Paying Agent in New York City appointed
pursuant to the Indenture. At the option of the Company, payment of interest
may be made by check mailed to the Holders of Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments with respect to Global Notes and Certificated Securities the Holders
of whom have given wire transfer instructions to the Company will be required
to be made by wire transfer of same day funds to the accounts specified by the
Holders thereof. The Notes will be issued in denominations of $1,000 and
integral multiples thereof.

The Trustee is Paying Agent and Registrar under the Indenture. The Company
may act as Paying Agent or Registrar under the Indenture, and the Company may
change the Paying Agent or Registrar without notice to the Holders of the
Notes.

SUBORDINATION

The payment of principal of, premium, if any, and interest on, and other
Obligations evidenced by, the Notes will be subordinated in right of payment,
as set forth in the Indenture, to the prior payment in full of all Senior
Indebtedness, whether outstanding on the date of the Indenture or thereafter
incurred.

Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full in cash (or U.S. dollar-denominated Cash Equivalents)
of all Obligations due in respect of such Senior Indebtedness (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Indebtedness) before the holders of Notes will be
entitled to receive any payment of any kind or character with respect to the
Notes, and until all Obligations with respect to Senior Indebtedness are paid
in full in cash (or U.S. dollar-denominated Cash Equivalents), any distribution
to which the holders of Notes would be entitled will be made to the holders of
Senior Indebtedness; provided that, notwithstanding the foregoing, holders of
Notes may receive (i) securities that are subordinated at least to the same
extent as the Notes to Senior Indebtedness and any securities issued in
exchange for Senior Indebtedness and (ii) payments made from the trust
described under "-- Satisfaction and Discharge of Indenture."

The Company also may not make any payment of any kind or character upon or
in respect of the Notes (except in such subordinated securities or from the
trust described under "-- Satisfaction and Discharge of Indenture") if (i) a
default in the payment of the principal of, premium, if any, or interest on
Designated Senior Indebtedness occurs and is continuing or (ii) any other
default occurs and is continuing with respect to Designated Senior Indebtedness
that permits holders of the Designated Senior Indebtedness as to which such
default relates to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or the holders of
any Designated Senior Indebtedness. Payments on the Notes may and will be
resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived and (b) in the case of a nonpayment default, upon
the earlier of (i) the date on which such nonpayment default is cured or waived
or (ii) 179 days after the date on which the applicable Payment Blockage Notice
is received by the Trustee (unless the maturity of any Designated Senior
Indebtedness has been accelerated or unless the subordination provisions of the
Indenture otherwise do not permit such payment). In no event shall more than
one period of payment blockage be made in any 360 consecutive day period. No
nonpayment default that existed or was continuing on the date of receipt by the
Trustee of any Payment Blockage Notice will be, or be made, the basis for a
subsequent Payment Blockage Notice. Following the expiration of any

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period during which the Company is prohibited from making payments on the Notes
pursuant to a Payment Blockage Notice, the Company will be obligated to resume
making any and all required payments in respect of the Notes, including without
limitation any missed payments.

The Indenture requires that the Company and the Trustee promptly notify
holders of Designated Senior Indebtedness if payment of the Notes is
accelerated because of an Event of Default.

As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. The Indenture
limits, subject to certain financial tests, the amount of additional
Indebtedness, including Senior Indebtedness, that the Company and its
Restricted Subsidiaries can incur. See "-- Certain Covenants -- Limitation on
Indebtedness." As of August 31, 1996, the Company had outstanding approximately
$18.2 million of Senior Indebtedness. The Notes are effectively subordinated to
Indebtedness of the Company's subsidiaries, which aggregated $22.4 million as
of August 31, 1996.

OPTIONAL REDEMPTION

The Notes are not redeemable at the option of the Company prior to August
1, 2001. Thereafter, the Notes will be redeemable, at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 calendar
days' prior notice to each Holder of Notes to be redeemed, at the redemption
prices (expressed as percentages of the principal amount) set forth below, plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve month period beginning on August 1 of the years
indicated below:

<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 . . . . . . . . . . 104.813%
2002 . . . . . . . . . . 102.406%
2003 and thereafter . . 100%
</TABLE>

Notwithstanding the foregoing, on and prior to August 1, 1999, the Company
may redeem up to 35% of the aggregate principal amount of the Notes originally
outstanding at a redemption price of 110% of the principal amount thereof, plus
accrued and unpaid interest thereon to the redemption date, with the net
proceeds of one or more Equity Offerings of the Company or, if applicable, a
Parent; provided that at least 65% of the aggregate principal amount of the
Notes originally issued remains outstanding immediately after the occurrence of
such redemption (but such unredeemed Notes may be redeemed pursuant to the
optional redemption procedure described in the immediately preceding
paragraph); and provided, further, that such notice of redemption shall be
given not later than 30 days, and such redemption shall occur not later than 90
days, after the date of the closing of any such Equity Offering.

Notice of redemption shall be mailed at least 30 but not more than 60
calendar days before the redemption date to each Holder of Notes to be redeemed
at such Holder's registered address. The notice of redemption shall identify
the Notes to be redeemed and shall state the redemption date; the redemption
price; the name and address of the Paying Agent; that Notes called for
redemption must be surrendered to the Paying Agent to collect the redemption
price plus accrued interest; and that, unless the Company defaults in making
such redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date. If less than all of the Notes are to
be redeemed, the Trustee shall select the Notes to be redeemed in compliance
with the requirements of any applicable depositary and securities exchange
requirements, or if the Notes are not so listed, on a pro rata basis, by lot or
by such other method as the Trustee may deem fair and appropriate and in such
manner as complies with any such requirements. The Trustee shall make the
selection from Notes outstanding and not previously called for redemption.
Notes and portions thereof selected by the Trustee for redemption shall be in
amounts of $1,000 or integral multiples of $1,000.

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MANDATORY REDEMPTION

Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.

REPURCHASE AT THE OPTION OF HOLDERS

Change of Control. The Indenture provides that upon the occurrence of a
Change of Control, the Company shall be required to make an offer (a "Change of
Control Offer") to Holders to repurchase any and all of the Notes (but only in
denominations of $1,000 or integral multiples of $1,000) at a purchase price
(the "Change of Control Offer Price") equal to 101% of the aggregate principal
amount, plus accrued and unpaid interest, if any, to the date of purchase
("Change of Control Purchase Date").

Notice of a Change of Control Offer shall be mailed by the Company, with a
copy to the Trustee, or, at the Company's option, by the Trustee (at the
Company's expense) not more than 30 calendar days after the Change of Control
to each Holder of the Notes at such Holder's last registered address appearing
in the Register. In such notice, the Company shall describe the transaction
that constitutes the Change of Control and offer to repurchase Notes pursuant
to the procedures required by the Indenture and described in such notice;
provided that, prior to complying with the provisions of this covenant, but in
any event within 90 days following a Change of Control, the Company will either
repay all outstanding Senior Indebtedness or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Indebtedness to permit
the repurchase of Notes required by this covenant. The notice shall contain all
instructions and materials necessary to enable Holders to tender Notes pursuant
to the Change of Control Offer. The Company will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the Notes as a result of a Change of
Control.

On the Change of Control Purchase Date, the Company shall (i) accept for
payment Notes or portions thereof validly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money in immediately
available funds sufficient to pay the purchase price of all Notes or portions
thereof so accepted, and (iii) deliver to the Trustee Notes so accepted
together with an Officer's Certificate stating the Notes or portions thereof
accepted for payment by the Company. If the Company complies with its
obligations set forth in the immediately preceding sentence, whether or not a
Default or Event of Default has occurred and is continuing on the Change of
Control Purchase Date, the Paying Agent shall as promptly as practicable mail
or deliver to each Holder of Notes so accepted payment in an amount equal to
the purchase price, and the Company shall execute and the Trustee shall as
promptly as practicable authenticate and mail or deliver to such Holder a new
Note equal in principal amount to any unpurchased portion of the Note
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. Any Notes not so accepted
shall be as promptly as practicable mailed or delivered by the Trustee to the
Holders thereof. The Company shall publicly announce the results of the Change
of Control Offer on or as promptly as practicable after the Change of Control
Purchase Date. For purposes of this covenant, the Trustee shall act as the
Paying Agent.

Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.

Asset Sales. The Indenture also contains provisions in respect of offers
to purchase Notes with Net Proceeds in the event of certain Asset Dispositions.
See "-- Certain Covenants -- Limitation on Asset Sales."

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Credit Facility. Certain events involving a Change of Control will result
in an event of default under the Credit Facility. An event of default under the
Credit Facility could result in an acceleration of indebtedness, in which case
the subordination provisions of the Notes would require payment in full of such
Senior Indebtedness before repurchases or other payments in respect of the
Notes. Any future credit agreements or other agreements relating to Senior
Indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs or a Net
Proceeds Offer is required by the Indenture at a time when the Company is
prohibited from purchasing Notes, the Company could seek the consent of its
lenders to the purchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company may remain prohibited from purchasing Notes.
In such case, the Company's failure to purchase tendered Notes would constitute
an Event of Default under the Indenture which would, in turn, constitute a
default under the Credit Facility. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the holders of
the Notes.

CERTAIN DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for
the full definition of all such terms as well as any other terms used herein
for which no definition is provided.

"Acquired Indebtedness" of any particular Person means Indebtedness of any
other Person existing at the time such other Person merged with or into or
became a Subsidiary of such particular Person or assumed by such particular
Person in connection with the acquisition of assets from any other Person, and
not incurred by such other Person in connection with, or in contemplation of,
such other Person merging with or into such particular Person or becoming a
Subsidiary of such particular Person or such acquisition.

"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

"Asset Disposition" means any sale, lease, conveyance, transfer or other
disposition (or series of related sales, leases, conveyances, transfers or
dispositions) of any Capital Stock of a Restricted Subsidiary of the Company
(whether or not upon issuance), or of any Capital Stock of Cinemark
International by the Company (but not the issuance and sale of Capital Stock by
Cinemark International), or of any other property or other assets (each
referred to for the purposes of this definition as a "disposition") by the
Company or any of its Restricted Subsidiaries, whether for cash or other
consideration, other than (i) a disposition by a Restricted Subsidiary of the
Company to the Company or a Wholly Owned Subsidiary of the Company that is a
Restricted Subsidiary, (ii) a disposition by the Company to a Wholly Owned
Subsidiary of the Company that is a Restricted Subsidiary, (iii) a disposition
that is a Permitted Investment or a Restricted Payment not prohibited by the
"Limitation on Restricted Payments" covenant (to the extent such Permitted
Investment or Restricted Payment may be deemed to constitute an Asset
Disposition), (iv) dispositions of inventory in the ordinary course of
business, (v) a disposition that is governed by the "Consolidation and Merger"
covenant, (vi) exchanges of theatre properties that comply with the
requirements described in the final paragraph under "-- Certain Covenants --
Limitation on Asset Sales ," provided that payment of any Other Consideration
(as defined therein) shall, to the extent provided therein, be treated as an
Asset Disposition, (vii) a designation of a Restricted Subsidiary as an
Unrestricted Subsidiary, if the Company elects to treat such designation as an
Investment and not as an Asset Disposition, or (viii) a disposition of Capital
Stock, property or assets in a single transaction or a series of related
transactions (other than dispositions of the type described in clauses

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(i) through (vii) above) having a Fair Market Value of less than $2 million.
For purposes of this definition, "Fair Market Value" of any Capital Stock,
property or other assets means the fair market value of such Capital Stock,
property or other assets at the time of disposition, which in the case of any
disposition or series of related dispositions having an aggregate fair market
value of $2 million or more shall be determined in good faith (taking into
account, without limitation, any assumption of indebtedness in connection with
such disposition) by resolution of the Board of Directors of the Company.
Notwithstanding any provision of the Indenture to the contrary, the expiration
or non-renewal of any lease of theatre properties or equipment at the normal
expiration date thereof without payment to the Company or any of its Restricted
Subsidiaries of consideration therefor shall not constitute an Asset
Disposition.

"Asset Disposition Expenses" shall have the meaning assigned to such term
in the definition of the term "Net Proceeds."

"Bankruptcy Law" means Title 11, United States Code, as may be amended from
time to time, or any similar federal or state law for the relief of debtors.

"Capitalized Lease Obligations" means the capitalized amount of the rental
obligations of any Person under any lease of any property (whether real,
personal or mixed) which, in accordance with GAAP, is required to be
capitalized on the balance sheet of such Person.

"Capital Stock" of any Person means (i) any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock and any warrants, options and similar rights to acquire such
capital stock, (ii) in the case of a partnership, partnership interests
(whether general or limited) and (iii) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.

"Cash Equivalents" means (i) direct obligations of the United States of
America or any agency thereof having maturities of not more than one year from
the date of acquisition, (ii) time deposits and certificates of deposit of any
domestic commercial bank of recognized standing having capital and surplus in
excess of $500 million, with maturities of not more than one year from the date
of acquisition, (iii) repurchase obligations issued by any bank described in
clause (ii) above with a term not to exceed 30 days; (iv) commercial paper
rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the
equivalent thereof by Moody's, in each case maturing within one year after the
date of acquisition and (v) shares of any money market mutual fund, or similar
fund, in each case having assets in excess of $500 million, which invests
predominantly in investments of the types described in clauses (i) through (iv)
above.

"Change of Control" means (i) the acquisition, including through merger,
consolidation or otherwise, by any Person or any Persons acting together which
would constitute a "group" (a "Group") for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), together with
all affiliates and associates (as defined in Rule 12b-2 under the Exchange Act)
thereof, of direct or indirect beneficial ownership (as defined in Rule 13d-3
under the Exchange Act) of more than 50% of (A) the outstanding shares of
common stock of the Company or (B) the total voting power of all classes of
Capital Stock of the Company entitled to vote generally in the election of
directors, or (ii) the election by any Person or Group, together with all
affiliates and associates thereof, of a sufficient number of its or their
nominees to the Board of Directors of the Company such that such nominees, when
added to any existing directors remaining on such Board of Directors after such
election who are affiliates or associates of such Person or Group, shall
constitute a majority of such Board of Directors; provided, however, that, for
purposes of this definition, the terms "Person" and "Group" shall be deemed
not to include (i) the Company, (ii) any Restricted Subsidiary of the Company
that is a Wholly Owned Subsidiary, (iii) Lee Roy Mitchell or Tandy Mitchell, or
any descendant of Lee Roy Mitchell or the spouse of any such descendant, the
estate of Lee Roy Mitchell, Tandy Mitchell, any descendant of Lee Roy Mitchell
or the spouse of any such descendant or any

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trust or other arrangement for the benefit of Lee Roy Mitchell, Tandy Mitchell,
any descendant of Lee Roy Mitchell or the spouse of any such descendant
(collectively, the "Mitchell Family"), (iv) any group which includes any member
or members of the Mitchell Family if a majority of the Capital Stock of the
Company held by such group is beneficially owned (including the power to vote
such Capital Stock of the Company) by such member or members or by one or more
affiliates at least 80% of the equity interests of which are owned by such
member or members or (v) Cypress Merchant Banking Partners L.P. or Cypress
Pictures Ltd., and provided, further, that, the term "Change of Control" shall
be deemed not to include any transaction or series of transactions that results
in the Capital Stock of the Company being held by one or more Persons if the
beneficial ownership, direct or indirect, of the Company after such transaction
or series of transactions is substantially the same as the beneficial
ownership, direct or indirect, of the Company prior to such transaction or
series of transactions.

"Consolidated EBITDA" of any Person means, for any period (without
duplication), (i) the sum of (A) Consolidated Net Income, (B) Consolidated
Interest Expense, (C) provisions for taxes based on or calculated with respect
to income, (D) depreciation expense, (E) amortization expense, and (F) all
other non-cash items reducing Consolidated Net Income, less all non-cash items
increasing Consolidated Net Income, minus (ii) any decrease in deferred lease
expenses, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP.

"Consolidated Interest Expense" of any Person means, for any period,
without duplication, the total interest expense of such Person and its
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP, including (i) non-cash, payable-in-kind interest, (ii) interest expense
attributable to capital leases, (iii) amortization of debt discount and debt
issue cost (excluding related legal and accounting fees), but only with respect
to transactions consummated after the Initial Issuance Date, (iv) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (v) net costs under Hedging Obligations
(including amortizations of discount), (vi) preferred stock dividends in
respect of preferred stock of Restricted Subsidiaries of such Person, other
than payable-in-kind dividends in respect of preferred stock that is not
Disqualified Stock, held by Persons other than such Person or one of its Wholly
Owned Subsidiaries that is a Restricted Subsidiary, and (vii) dividends in
respect of Disqualified Stock of such Person.

"Consolidated Net Income" of any Person means, for any period, the
aggregate of the Net Income of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP,
however, including, in the case of the Company and its Restricted Subsidiaries,
only those management fees actually received by the Company from its
Unrestricted Subsidiaries, and excluding amortization of debt discount and debt
issue costs with respect to transactions consummated on or prior to the Initial
Issuance Date, provided that (i) accrued but unpaid compensation expenses
related to any stock appreciation or stock option plans shall not be deducted
until such time as such expenses result in a cash expenditure, (ii)
compensation expenses related to tax payment plans implemented by the Company
from time to time in connection with the exercise and/or repurchase of stock
options shall not be deducted from Net Income to the extent of the related tax
benefits arising therefrom, (iii) the Net Income of any Person that is not a
Restricted Subsidiary of such Person or that is accounted for by such Person by
the equity method of accounting shall not be included in such Consolidated Net
Income, except that the Company's equity in the Net Income of any such Person
for any such period or any previous period shall be so included only up to the
aggregate amount of cash dividends or distributions paid to the Company or one
of its Restricted Subsidiaries, and (iv) the Net Income (if positive) of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded. For purposes of this
definition, "Net Income" of any Person means, for any period, the net income
(or loss) of such Person determined in accordance with GAAP, excluding,
however, from the determination (i) any extraordinary loss resulting from early
extinguishment of debt on or prior to the Initial Issuance Date, (ii) any net
gain or loss from any extraordinary item (net of all related taxes, fees, costs
and expenses), (iii) any net gain or loss (net of all

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related taxes and Asset Disposition Expenses) realized upon the sale or other
disposition during such period (including without limitation dispositions
pursuant to sale and leaseback transactions) of any real property, equipment or
other asset of such Person, which is not sold or otherwise disposed of in the
ordinary course of business, or of any Capital Stock of such Person or a
Restricted Subsidiary of such Person, and (iv) the cumulative effect of changes
in accounting principles.

"Consolidated Net Worth" of any Person means, as of any date, the amount
which, in accordance with GAAP, would be set forth under the caption
"Shareholders' Equity" (or any like caption) on a consolidated balance sheet of
such Person and its Restricted Subsidiaries, less amounts attributable to
Disqualified Stock of such Person or any of its Restricted Subsidiaries.

"Consolidated Tangible Assets" of any Person means, as of any date, the
amount which, in accordance with GAAP, would be set forth under the caption
"Total Assets" (or any like caption) on a consolidated balance sheet of such
Person and its Restricted Subsidiaries, less all intangible assets, including,
without limitation, goodwill, organization costs, patents, trademarks,
copyrights, franchises, and research and development costs.

"Credit Facility" means that certain Credit Agreement, dated as of February
14, 1996, among the Company, the financial institutions from time to time
parties thereto, and Bank of America National Trust and Savings Association, as
agent for such financial institutions, and the various ancillary documents
provided for therein, as the same may be amended, extended, increased, renewed,
restated, supplemented or otherwise modified (in whole or in part, and without
limitation as to amount, terms, conditions, covenants and other provisions)
from time to time, and any agreement or agreements governing Indebtedness
incurred to refinance, replace, restructure or refund such agreements in whole
or in part from time to time (whether with the original agent and lenders or
other agents and lenders or otherwise, and whether provided for under the
original Credit Facility or otherwise).

"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator, custodian or similar official under any Bankruptcy Law.

"Default" means any event, act or condition which is, or after notice or
passage of time or both would be, an Event of Default.

"Designated Senior Indebtedness" means (i) the Credit Facility and all
Indebtedness thereunder and (ii) any other Senior Indebtedness issued after the
Initial Issuance Date and permitted under the Indenture, the principal amount
of which is $10 million or more and that has been designated by the Company as
Designated Senior Indebtedness.

"Disqualified Stock" of any Person means any Capital Stock of such Person
that, by its terms (or by the terms of any security into which it is
convertible or for which it is exercisable, redeemable or exchangeable),
matures, or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder thereof, in whole or in
part (but only to the extent of such part), on or prior to the Stated Maturity
of the Notes.

"EBITDA Ratio" of any Person means the ratio of (i) the aggregate amount of
Consolidated EBITDA of such Person for the four full fiscal quarters
immediately prior to the date of the transaction giving rise to the need to
calculate the EBITDA Ratio (the "Determination Date") to (ii) the aggregate
Consolidated Interest Expense which such Person shall accrue during the fiscal
quarter in which the Determination Date occurs and the three fiscal quarters
immediately subsequent to such fiscal quarter, assuming that the Consolidated
Interest Expense shall accrue on the amount of such Person's Indebtedness on
the Determination Date, including any Indebtedness proposed to be incurred on
such date (as though all such Indebtedness was incurred on the first

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day of the quarter in which the Determination Date occurred), but specifically
excluding Indebtedness proposed to be repaid or defeased (or with respect to
the defeasance of which a deposit satisfying the defeasance requirements of
such Indebtedness has irrevocably been made) on such date (as though all such
Indebtedness was repaid on the first day of the quarter in which the
Determination Date occurred); provided that if during the four-quarter period
referred to in clause (i) above, the Person for which the EBITDA Ratio is being
determined or any of its Restricted Subsidiaries shall have acquired any assets
other than assets acquired as a result of capital expenditures made in the
ordinary course of business of such Person, the EBITDA Ratio of such Person as
of such Determination Date shall be calculated on a pro forma basis, as if such
acquisition had occurred at the beginning of such four-quarter period. For
purposes of this definition, interest on Indebtedness determined on a
fluctuating basis for periods succeeding the Determination Date shall be
calculated as if the rate in effect on the Determination Date had been the
applicable rate for the entire period, taking into account any Hedging
Obligations applicable to such Indebtedness.

"Equity Offering" means either (i) a bona fide underwritten sale to the
public of Common Stock of the Company or a Parent pursuant to a registration
statement (other than a Form S-8 or any other form relating to securities
issuable under any employee benefit plan of the Company) that is declared
effective by the Commission, or (ii) a privately negotiated sale of Common
Stock of the Company or a Parent by the Company or such Parent, as the case may
be, to a Person that, immediately prior to the time of such sale, is not an
Affiliate of the Company or such Parent, in each case completed following the
Initial Issuance Date and resulting in aggregate gross proceeds to the Company
or such Parent of at least $20 million; provided , that in the case of any such
sale of Common Stock of a Parent, (x) the net proceeds of such sale shall be
contributed within 30 days by such Parent to the Company or (y) the Parent
shall use such proceeds to purchase Capital Stock of the Company that is not
Disqualified Stock.

"Existing Unrestricted Subsidiaries" means Cinemark International and its
Subsidiaries.

"50% Entity" shall have the meaning assigned to such term in the definition
of the term "Subsidiary."

"GAAP" means generally accepted accounting principles as applied in the
United States set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States, which are applicable
as of the date of determination; provided that the definitions in the Indenture
and all ratios and calculations contained in the covenants shall be determined
in accordance with GAAP as in effect and applied by the Company on the date of
the Indenture, consistently applied; provided, further, that in the event of
any such change in GAAP or in any change by the Company in GAAP applied that
would result in any change in any such ratio or calculation, the Company shall
deliver to the Trustee each time any such ratio or calculation is required to
be determined or made, an Officer's Certificate setting forth the computations
showing the effect of such change or application on such ratio or calculation.

"guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of participation
arrangements, by agreement to keep well, or to maintain financial statement
conditions or otherwise), (ii) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the purpose of
enabling such other Person to make payment of such Indebtedness, (iii) to
supply funds to or in any other manner invest in such other Person (including
any agreement to pay for property or services irrespective of whether such
property is received or such services are rendered), or (iv) entered into for
the purpose of assuring the obligee of such Indebtedness in any other manner of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term

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"guarantee" shall not include (i) endorsements for collection or deposit in the
ordinary course of business, and (ii) leases entered into in the ordinary
course of business.

"Hedging Obligation" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.

"Holder" or "Securityholder" means a Person in whose name a Note is
registered on the Register.

"Indebtedness" of any Person means, at any date, and without duplication,
any obligation of such Person or its Restricted Subsidiaries for or in respect
of: (i) money borrowed (whether or not for a cash consideration and whether or
not the recourse of the lender is to the whole of the assets of such Person or
only a portion thereof) and premiums (if any) and capitalized interest (if any)
in respect thereof; (ii) any debenture, bond, note or similar instrument
(whether or not issued for a cash consideration), if it would appear as a
liability on a balance sheet of such Person prepared in accordance with GAAP;
(iii) any letter of credit (other than in respect of Trade Payables), bankers'
acceptance or note purchase facility or any liability with respect to any
recourse receivables purchase, factoring or discounting arrangement; (iv)
Capitalized Lease Obligations (whether in respect of buildings, machinery,
equipment or otherwise), except any such obligation that represents a Trade
Payable; (v) any deferred purchase or conditional sale agreement or arrangement
representing the deferred and unpaid balance of the purchase price of any
property (including pursuant to financing leases), except any such balance
which represents a Trade Payable; (vi) all obligations to purchase, redeem,
retire, defease or otherwise acquire for value any Disqualified Stock of such
Person (or any warrants, rights or options to acquire such Disqualified Stock)
valued, in the case of Disqualified Stock, at the greatest amount payable in
respect thereof on a liquidation (whether voluntary or involuntary), prior to
the Stated Maturity of the Notes, plus accrued and unpaid dividends; (vii)
preferred stock of Restricted Subsidiaries of such Person held by Persons other
than such Person or one of its Wholly Owned Subsidiaries that is a Restricted
Subsidiary; (viii) direct or indirect guarantees of all Indebtedness of other
Persons referred to in clauses (i) through (vii) above; and (ix) all
Indebtedness of the types referred to in clauses (i) through (viii) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on any asset owned by such
Person or its Restricted Subsidiaries (even though such Person or its
Restricted Subsidiaries have not assumed or become liable for the payment of
such Indebtedness); provided, that the term "Indebtedness" shall not be deemed
to include any liability for federal, state, local or other taxes owed or owing
by the Company. The amount of Indebtedness of any Person or its Restricted
Subsidiaries at any date shall be (without duplication) (i) the outstanding
balance at such date of all unconditional Indebtedness obligations as described
above and the maximum liability of any such contingent Indebtedness obligations
at such date, (ii) in the case of Indebtedness of others secured by a Lien to
which the property or assets owned or held by such Person or its Restricted
Subsidiaries is subject, the lesser of the fair market value at such date of
any property and assets subject to a Lien securing the Indebtedness of others
and the amount of the Indebtedness secured, and (iii) in the case of
Indebtedness of others guaranteed by such Person as described above, the lesser
of the maximum amount of such guaranty and the amount of the Indebtedness
guaranteed. A guaranty of Indebtedness of the Company or a Restricted
Subsidiary of the Company that is permitted under the Indenture shall not
constitute a separate incurrence of Indebtedness.

"Initial Issuance Date" means the date of original issuance of the Notes.

"Investment" means any direct or indirect advance, loan or other extension
of credit or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for

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the account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities issued by, any other Person, other
than (i) loans or advances made to employees in the ordinary course of business
not in excess of $50,000 outstanding at any time to any employee, (ii) advances
to customers or suppliers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of any Person or its Subsidiaries
and any securities received in settlement thereof or as a result of a
bankruptcy or an insolvency proceeding, (iii) workers' compensation, utility,
lease and similar deposits and prepaid expenses in the ordinary course of
business, (iv) Capital Stock, bonds, notes, debentures and other assets
received as a result of Asset Dispositions not prohibited by the "Limitation on
Asset Sales" covenant, and (v) endorsements of negotiable instruments and
documents in the ordinary course of business. In addition, (i) the fair market
value of the assets (net of liabilities) of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
shall constitute an Investment in such Subsidiary in such amount, if the
Company has elected that such designation be deemed to be an Investment and not
an Asset Disposition, and (ii) the lesser of (A) the amount of Restricted
Payments made to any Unrestricted Subsidiary or (B) the fair market value of
the assets (net of liabilities) of such Unrestricted Subsidiary, in each case
at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary of the Company, shall constitute a return of capital and a decrease
in the amount of the Company's Investment in such Subsidiary.

"Lien" means any mortgage, lien, pledge, security interest, conditional
sale or other title retention agreement, charge or other security interest or
encumbrance of any kind (including any agreement to give any security
interest).

"Marketable Equity Securities" means shares of Capital Stock of any Person
that are listed on the New York Stock Exchange, the American Stock Exchange or
the national market tier of The Nasdaq Stock Market and, upon receipt by the
Company or a Restricted Subsidiary, such shares are freely tradeable under the
Securities Act and applicable state securities laws and are so listed or
included for trading privileges.

"Net Proceeds" means the aggregate amount of consideration in the form of
cash, Temporary Cash Investments or Marketable Equity Securities received by
the Company or any of its Restricted Subsidiaries with respect to any Asset
Disposition, after deducting therefrom brokerage commissions, appraisal fees,
survey charges, engineering fees, title insurance premiums, legal fees,
finder's fees, loan origination and similar fees, underwriting fees, investment
banking fees and other similar commissions or fees, and any filing, recording
or registration fees, costs and expenses, recording taxes, transfer taxes,
provisions for all taxes payable as a result of such Asset Disposition, amounts
required to be paid to any Person owning a beneficial interest in the assets
subject to such Asset Disposition, and appropriate amounts to be provided as a
reserve in accordance with GAAP against any liabilities associated with such
Asset Disposition after such Asset Disposition (to the extent such reserves are
not subsequently reversed), including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Disposition ("Asset Disposition Expenses"), and also less any
amounts required to be applied to retire all or a portion of the Notes or
Indebtedness permitted under the "Limitation on Indebtedness" covenant having
the benefit of a Lien on the property or assets so transferred, to the extent,
but only to the extent, that such amounts are paid by the Company or one of its
Restricted Subsidiaries or are amounts for which the Company or one of its
Restricted Subsidiaries is directly and not contingently liable, as the case
may be, and properly attributable to the transaction in respect of which such
consideration is received or to the asset that is the subject of such
transaction.

"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

"Offer" means a Change of Control Offer or Net Proceeds Offer, as the case
may be.

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"Offer Purchase Date" means a Change of Control Purchase Date or Net
Proceeds Purchase Date, as the case may be.

"Old Notes" means the Company's 12% Notes Due June 1, 2002.

"Parent" shall mean a Person or group of Persons created to effectuate a
holding company structure for the Company and its Subsidiaries.

"Permitted Investment" means (i) an Investment in the Company or a
Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary; (ii) an
Investment in a Person, if such Person or a Subsidiary of such Person will, as
a result of the making of such Investment and all other contemporaneous related
transactions, become a Wholly-Owned Subsidiary of the Company that is a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to the Company or a Wholly-Owned
Subsidiary of the Company that is a Restricted Subsidiary; (iii) a Temporary
Cash Investment; (iv) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses in accordance with GAAP; (v) stock, obligations or securities received
in settlement of debts owing to the Company or a Restricted Subsidiary of the
Company as a result of bankruptcy or insolvency proceedings or upon the
foreclosure, perfection, enforcement or agreement in lieu of foreclosure of any
Lien in favor of the Company or a Restricted Subsidiary of the Company; (vi)
refundable construction advances made with respect to the construction of
properties of a nature or type that are used in a business similar or related
to the business of the Company or its Restricted Subsidiaries in the ordinary
course of business; (vii) advances or extensions of credit on terms customary
in the industry in the form of accounts or other receivables incurred, or
pre-paid film rentals, and loans and advances made in settlement of such
accounts receivable, all in the ordinary course of business; (viii) guarantees
not prohibited by the "Limitation of Indebtedness" covenant; (ix) entry into
and Investments in joint ventures, partnerships and other Persons engaged or
proposing to engage in the indoor motion picture exhibition business, provided
that (A) the Person into which such Investment is made is either a Restricted
Subsidiary of the Company, or such Person or a Subsidiary of such Person will,
as a result of the making of such Investment and all other contemporaneous
related transactions, become a Restricted Subsidiary of the Company and (B) the
amount of such Investment, valued at the time made, together with all
Investments previously made pursuant to this clause (ix), valued at the
respective times made, shall not exceed 10% of Consolidated Tangible Assets of
the Company as of the last day of the full fiscal quarter ending immediately
prior to the date of such Investment; (x) any Investment made solely with funds
the payment or application of which is not restricted as described in "--
Certain Covenants -- Limitations on Restricted Payments"; (xi) Investments in
the Notes; (xii) any consolidation or merger of a Restricted Subsidiary that is
a Wholly Owned Subsidiary of the Company to the extent otherwise permitted
under the Indenture; (xiii) payments of up to $1.5 million annually to
repurchase Capital Stock of the Company issued under the Company's employee
stock option plans; (xiv) Hedging Obligations of the Company or any of its
Restricted Subsidiaries to the extent otherwise permitted under the Indenture;
(xv) Investments in Cinemark International not to exceed $40 million; and (xvi)
other Investments not to exceed $10 million.

"Person" means any individual, corporation, partnership, joint venture,
limited liability company, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.

"Restricted Subsidiary" means (i) any Subsidiary of the Company in
existence on the Initial Issuance Date other than the Existing Unrestricted
Subsidiaries, (ii) any Subsidiary of the Company (other than a Subsidiary that
is also a Subsidiary of an Unrestricted Subsidiary) organized or acquired after
the Initial Issuance Date, unless such Subsidiary shall have been designated as
an Unrestricted Subsidiary by resolution of the Board of Directors as provided
in and in compliance with the definition of "Unrestricted Subsidiary," and
(iii) any Unrestricted Subsidiary which is designated as a Restricted
Subsidiary by the Board of Directors of the

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Company; provided that, immediately after giving effect to the designation
referred to in clause (iii), no Default or Event of Default shall have occurred
and be continuing and the Company could incur at least $1.00 of additional
Indebtedness under the first paragraph under the "Limitation on Indebtedness"
covenant. The Company shall evidence any such designation to the Trustee by
promptly filing with the Trustee an Officer's Certificate certifying that such
designation has been made and stating that such designation complies with the
requirements of the immediately preceding sentence.

"Senior Indebtedness" means (i) Indebtedness under the Credit Facility,
(ii) the Old Notes, and (iii) any other Indebtedness permitted to be incurred
by the Company under the terms of the Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes. Notwithstanding anything
to the contrary in the foregoing, Senior Indebtedness will not include (x) the
Notes, (y) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, or (z) any Indebtedness that is incurred in violation of the
Indenture.

"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of the Company that, together with its Restricted
Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for
more than 5% of the consolidated revenues of the Company and its Restricted
Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more
than 5% of the consolidated assets of the Company and its Restricted
Subsidiaries, all as set forth on the most recently available consolidated
financial statements of the Company for such fiscal year.

"Stated Maturity" means, when used with respect to any security, the date
specified in such security as the fixed date on which an amount equal to the
principal of such security is due and payable.

"Subsidiary" means, with respect to any Person, (i) a Person a majority of
whose Capital Stock with voting power under ordinary circumstances to elect
directors (or Persons having similar or corresponding powers and
responsibilities) is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) upon designation by the Company, and until
designation by the Company to the contrary, a Person, 50% of whose Capital
Stock with voting power under ordinary circumstances to elect directors (or
Persons having similar or corresponding powers and responsibilities) is at the
time, directly or indirectly, owned by such Person, by one or more Subsidiaries
of such Person or by such Person and one or more Subsidiaries thereof (a "50%
Entity"). The Company shall evidence any designation pursuant to clause (ii) of
the immediately preceding sentence to the Trustee by filing with the Trustee
within 45 days of such designation an Officer's Certificate certifying that
such designation has been made. All references within the Indenture to
designations of Unrestricted Subsidiaries as Restricted Subsidiaries or
Restricted Subsidiaries as Unrestricted Subsidiaries shall be deemed to include
designations of 50% Entities as Restricted Subsidiaries and Restricted
Subsidiaries as 50% Entities, respectively.

"Temporary Cash Investments" means any Investment in the following kinds of
instruments: (A) readily marketable obligations issued or unconditionally
guaranteed as to principal and interest by the United States of America or by
any agency or authority controlled or supervised by and acting as an
instrumentality of the United States of America if, on the date of purchase or
other acquisition of any such instrument by the Company or any Restricted
Subsidiary of the Company, the remaining term to maturity or interest rate
adjustment is not more than two years; (B) obligations (including, but not
limited to, demand or time deposits, bankers' acceptances and certificates of
deposit) issued or guaranteed by a depository institution or trust company
incorporated under the laws of the United States of America, any state thereof,
the District of Columbia, Canada or any province or territory thereof, provided
that (1) such instrument has a final maturity not more than one year from the
date of purchase thereof by the Company or any Restricted Subsidiary of the
Company and (2) such depository institution or trust company has at the time of
the Company's or such Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, (x)

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capital, surplus and undivided profits (as of the date of such institution's
most recently published financial statements) in excess of $100 million and (y)
the long-term unsecured debt obligations (other than such obligations rated on
the basis of the credit of a Person other than such institution) of such
institution, at the time of the Company's or such Restricted Subsidiary's
Investment therein or contractual commitment providing for such Investment, are
rated in the highest rating category of both Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc. ("S&P"), and Moody's Investors Service, Inc.
("Moody's"); (C) commercial paper issued by any corporation, if such commercial
paper has, at the time of the Company's or any Restricted Subsidiary's
Investment therein or contractual commitment providing for such Investment,
credit ratings of at least A-1 by S&P and P-1 by Moody's; (D) money market
mutual or similar funds having assets in excess of $100 million; (E) readily
marketable debt obligations issued by any corporation, if at the time of the
Company's or any Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment (1) the remaining term to maturity is
not more than two years and (2) such debt obligations are rated in one of the
two highest rating categories of both S&P and Moody's; (F) demand or time
deposit accounts used in the ordinary course of business with commercial banks
the balances in which are at all times fully insured as to principal and
interest by the Federal Deposit Insurance Corporation or any successor thereto
or any Canadian equivalent thereof; (G) demand or time deposit accounts used in
the ordinary course of business with overseas branches of commercial banks
incorporated under the laws of the United States of America, any state thereof,
the District of Columbia, Canada or any province or territory thereof, provided
that such commercial bank has, at the time of the Company's or such Restricted
Subsidiary's Investment therein, (1) capital, surplus and undivided profits (as
of the date of such institution's most recently published financial statements)
in excess of $100 million and (2) the long-term unsecured debt obligations
(other than such obligations rated on the basis of the credit of a Person other
than such institution) of such institution, at the time of the Company's or any
Restricted Subsidiary's Investment therein, are rated in the highest rating
category of both S&P and Moody's and (H) to the extent not otherwise included
herein, Cash Equivalents. In the event that either S&P or Moody's ceases to
publish ratings of the type provided herein, a replacement rating agency shall
be selected by the Company with the consent of the Trustee, and in each case
the rating of such replacement rating agency most nearly equivalent to the
corresponding S&P or Moody's rating, as the case may be, shall be used for
purposes hereof.

"Trade Payables" of any Person means accounts payable or any other
indebtedness or monetary obligations to trade creditors created, assumed or
guaranteed by such Person or any of its Subsidiaries in the ordinary course of
business in connection with the obtaining of materials or services.

"Unrestricted Subsidiary" means, until such time as any of the following
shall be designated as a Restricted Subsidiary of the Company by the Board of
Directors of the Company as provided in and in compliance with the definition
of "Restricted Subsidiary," (i) each of the Existing Unrestricted Subsidiaries,
(ii) any Subsidiary of the Company or of a Restricted Subsidiary of the Company
organized or acquired after the Initial Issuance Date that is designated
concurrently with its organization or acquisition as an Unrestricted Subsidiary
by resolution of the Board of Directors of the Company, (iii) any Subsidiary of
any Unrestricted Subsidiary, and (iv) any Restricted Subsidiary of the Company
that is designated as an Unrestricted Subsidiary by resolution of the Board of
Directors of the Company, provided that, (A) immediately after giving effect to
such designation, no Default or Event of Default shall have occurred and be
continuing and (B) any such designation shall be deemed, at the election of the
Company at the time of such designation, to be either (but not both) (x) the
making of a Restricted Payment at the time of such designation in an amount
equal to the Investment in such Subsidiary subject to the restrictions
contained in the "Limitation on Restricted Payments" covenant or (y) the making
of an Asset Disposition at the time of such designation in an amount equal to
the Investment in such Subsidiary subject to the restrictions contained in the
"Limitation on Asset Sales" covenant. The Company shall evidence any
designation pursuant to clause (ii) or (iv) of the immediately preceding
sentence to the Trustee by filing with the Trustee within 45 days of such
designation an Officer's Certificate certifying that such designation has been
made and, in the case of clause (iv), the related election of the Company in
respect thereof.

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"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian, with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt; provided, however, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.

"Weighted Average Life" means, as of any date, with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of the
number of years from such date to the dates of each successive scheduled
principal payment (including any sinking fund payment requirements) of such
debt security multiplied by the amount of such principal payment, by (ii) the
sum of all such principal payments.

"Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person
all of whose Capital Stock with voting power under ordinary circumstances to
elect directors (or Persons having similar or corresponding powers and
responsibilities), other than directors' qualifying shares if required by
applicable law, is owned by such Person (either directly or indirectly through
Wholly Owned Subsidiaries).

CERTAIN COVENANTS

Limitation on Restricted Payments. The Indenture will provide that the
Company shall not, and shall not permit any of the Restricted Subsidiaries of
the Company to, directly or indirectly, (i) declare or pay any dividend on, or
make any distribution to the holders of, any Capital Stock of the Company or a
Restricted Subsidiary, other than dividends or distributions (A) from a
Restricted Subsidiary of the Company to the Company or to a Restricted
Subsidiary or (B) payable in Capital Stock of the Company that is not
Disqualified Stock; (ii) repay, redeem or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Subsidiaries (other than Wholly
Owned Subsidiaries of the Company that are Restricted Subsidiaries), other than
a Permitted Investment; (iii) prepay, repay, redeem, defease or otherwise
acquire or retire for value prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of the Company
that is pari passu with or subordinated in right of payment to the Notes,
other than a Permitted Investment and except (A) as permitted pursuant to
clause (vii) under the second paragraph under "-- Limitation on Indebtedness",
(B) upon a change of control, as defined in and to the extent required by the
indenture or other agreement or instrument pursuant to which such pari passu
or subordinated Indebtedness was issued, provided the Company is then in
compliance with the covenant described under "-- Repurchase at the Option of
Holders -- Change of Control" and (C) any payment pursuant to a Pari Passu
Offer (as defined in the "Limitation on Asset Sales" covenant); or (iv) make
any Investment other than a Permitted Investment or as permitted under clauses
(ii) and (iii) above (the foregoing actions set forth in clauses (i) through
(iv) being referred to hereinafter as "Restricted Payments" ), if at the time
of any such Restricted Payment, and after giving effect thereto on a pro forma
basis, (A) a Default or an Event of Default shall have occurred and be
continuing or would result therefrom or (B) the aggregate amount of all
Restricted Payments declared or made after the Initial Issuance Date including
such Restricted Payment (the value of any such payment, if other than cash,
shall be the value determined in good faith by resolution of the Board of
Directors of the Company) shall exceed the sum of: (1) 50% of the aggregate
Consolidated Net Income (after deducting from such Consolidated Net Income
accrued but unpaid compensation expenses related to any stock appreciation or
stock option plans net of tax benefits), or, in the event such aggregate
Consolidated Net Income shall be a loss, minus 100% of such loss, of the
Company and its Restricted Subsidiaries earned

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subsequent to the Initial Issuance Date to the end of the fiscal quarter
immediately preceding the date of such Restricted Payment (treated as a single
accounting period), plus (2) the aggregate net proceeds received by the Company
from the issuance or sale (other than to a Subsidiary of the Company) of
Capital Stock of the Company, including any such shares issued upon exercise of
any warrants, options or similar rights (other than Disqualified Stock),
subsequent to the Initial Issuance Date, plus (3) the aggregate net proceeds
received by the Company from the issuance or sale of Indebtedness that is
convertible into Capital Stock after the Initial Issuance Date, to the extent
that such Indebtedness is actually converted into Capital Stock (other than
Disqualified Stock), plus (4) the aggregate net proceeds received after the
Initial Issuance Date by the Company as capital contributions to the Company
(other than from a Subsidiary), plus (5) an amount equal to the net reduction
in Investments resulting from payments of principal of Indebtedness, return of
capital and other transfers of assets, in each case to the Company or any
Restricted Subsidiary of the Company (but excluding any such amounts included
in Consolidated Net Income), or from designations of Unrestricted Subsidiaries
as Restricted Subsidiaries, plus (6) $15 million.

The provisions of this covenant shall not prevent (i) the payment of any
dividend within 60 calendar days after the date of its declaration if the
dividend would have been permitted on the date of declaration, (ii) the
repayment, redemption, acquisition or retirement for value of any Capital Stock
of the Company or any of its Subsidiaries in exchange for, or out of the
aggregate net proceeds of, a substantially concurrent issuance (other than to
the Company or any of its Restricted Subsidiaries) of Capital Stock of the
Company or a Restricted Subsidiary of the Company, (iii) the prepayment,
repayment, redemption, defeasance or other acquisition or retirement for value
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Indebtedness of the Company that is pari passu with or
subordinated in right of payment to the Notes, in exchange for, or out of the
aggregate net proceeds of, a substantially concurrent issuance (other than to
the Company or a Restricted Subsidiary) of Capital Stock of the Company or a
Restricted Subsidiary of the Company, (iv) the prepayment, repayment,
redemption, defeasance or other acquisition or retirement for value prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment
of any Indebtedness of the Company that is pari passu with or subordinated in
right of payment to the Notes, in exchange for, or out of the aggregate net
proceeds of, a substantially concurrent issuance (other than to the Company or
a Restricted Subsidiary) of Indebtedness of the Company that is pari passu
with or subordinated in right of payment to, the Notes, but only if the
Weighted Average Life and period of time to Stated Maturity of such new
Indebtedness are each greater than the Weighted Average Life and period of time
to Stated Maturity of such retired Indebtedness, and (v) the payment of any
dividend or distribution to any holder of Capital Stock of a Restricted
Subsidiary of the Company, other than a holder that is an Affiliate of the
Company (except a holder that is an Affiliate of the Company solely by virtue
of the ownership of such Capital Stock), as part of a pro rata dividend or
distribution to all holders of such class or series of Capital Stock (but only
the amount of such dividend or distribution paid to a Person other than the
Company or a Restricted Subsidiary of the Company shall constitute a Restricted
Payment). For purposes of calculating the aggregate amount of Restricted
Payments made pursuant to the first sentence of the immediately preceding
paragraph, payments made under this paragraph (other than under clause (iv)
hereof) shall be included in such amount; provided that dividends paid within
60 calendar days of the date of declaration shall be deemed to be paid at the
date of declaration.

Limitation on Indebtedness. The Indenture provides that the Company shall
not, and shall not permit any Restricted Subsidiary of the Company to, directly
or indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to, any Indebtedness (collectively,
an "incurrence"; with respect to any non-interest bearing or other discount
Indebtedness, an "incurrence" shall be deemed to have occurred only on the date
of original issuance thereof), unless, after giving effect to the incurrence of
such Indebtedness and the application of the net proceeds therefrom, the EBITDA
Ratio (as calculated on the Determination Date) is greater than 2.0 to 1.0;
provided that if the Indebtedness which is the subject of a determination under
this provision is Acquired Indebtedness, then the Consolidated EBITDA of the
Company shall be determined by giving effect (on a pro forma basis, as if the
transaction had occurred at the beginning

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of the immediately preceding four-quarter period) to both the incurrence or
assumption of such Acquired Indebtedness by the Company and the inclusion in
the Consolidated EBITDA of the Person whose Indebtedness would constitute
Acquired Indebtedness.

Notwithstanding the foregoing, Indebtedness may be incurred as follows: (i)
Indebtedness under the Credit Facility in an aggregate principal amount not to
exceed $195 million at any one time outstanding, less the aggregate amount of
all permanent reductions thereto pursuant to the "Limitation on Asset Sales"
covenant; (ii) Indebtedness represented by amounts due under Hedging
Obligations (provided that the obligations under such Hedging Obligations are
related to Indebtedness otherwise permitted by the terms of this covenant and
that the aggregate notional principal amount of such Hedging Obligations shall
not exceed 105% of the total amount of the related underlying Indebtedness);
(iii) Indebtedness represented by property, liability and workers' compensation
insurance, performance bonds (which may be in the form of letters of credit)
for construction contracts let by the Company and its Restricted Subsidiaries
in the ordinary course of business (provided that to the extent that such
performance bonds secure Indebtedness, such Indebtedness is otherwise permitted
under this covenant), surety bonds and appeal bonds (which, in each case, may
be in the form of letters of credit) required in the ordinary course of
business or in connection with the enforcement of rights or claims of the
Company or any Restricted Subsidiary of the Company or in connection with
judgments that do not result in a Default or an Event of Default; (iv)
Indebtedness of the Company evidenced by the Notes and the Indenture; (v)
Indebtedness owing to a Wholly Owned Subsidiary of the Company that is a
Restricted Subsidiary or to the Company; (vi) Acquired Indebtedness, provided
that such Indebtedness if incurred by the Company would be in compliance with
the first paragraph of this covenant; (vii) Indebtedness issued in exchange
for, or the proceeds of which are used to repay or refund or refinance or
discharge or otherwise retire for value, Indebtedness of the Company or any of
its Restricted Subsidiaries permitted under clauses (iv) and (vi) above, clause
(viii) below and the first paragraph under this covenant ("Refinancing
Indebtedness" ) in a principal amount not to exceed the principal amount of the
Indebtedness so refinanced plus any premium and accrued interest plus customary
fees, expenses and costs related to the incurrence of such Refinancing
Indebtedness, provided that with respect to any Refinancing Indebtedness which
refinances Indebtedness which ranks junior in right of payment to the Notes,
(A) such Refinancing Indebtedness is subordinated in right of payment at least
to the same extent as the Indebtedness to be refunded or refinanced if such
Indebtedness had remained outstanding and (B) the Refinancing Indebtedness has
a Weighted Average Life and Stated Maturity that are equal to or greater than
those of the Indebtedness to be repaid or refunded or refinanced or discharged
or otherwise retired for value at the time of such incurrence; (viii)
Indebtedness outstanding on the Initial Issuance Date; (ix) Indebtedness of the
Company or a Restricted Subsidiary of the Company to an Unrestricted Subsidiary
for money borrowed, provided that such Indebtedness is subordinated in right of
payment to the Notes and the Weighted Average Life of such Indebtedness is
greater than the Weighted Average Life of the Notes; and (x) $25 million.

Limitation on Liens. The Indenture provides that the Company shall not,
and shall not permit any of the Restricted Subsidiaries of the Company to,
create, incur, assume or suffer to exist any Lien upon any of its property or
assets (including assets acquired after the Initial Issuance Date), except for
(i) Liens incurred after the Initial Issuance Date securing Indebtedness of the
Company that ranks pari passu or junior in right of payment to the Notes, if
the Notes are secured equally and ratably with such Indebtedness, (ii) Liens
outstanding on the Initial Issuance Date, (iii) Liens for taxes, assessments,
governmental charges or claims not yet delinquent or which are being contested
in good faith by appropriate proceedings, provided, that adequate reserves with
respect thereto are maintained on the books of the Company or its Restricted
Subsidiaries, as the case may be, in conformity with GAAP, (iv) Landlords',
carriers', warehousemen's, mechanics', materialmen's, repairmen's or the like
Liens arising by contract or statute in the ordinary course of business and
with respect to amounts which are not yet delinquent or are being contested in
good faith by appropriate proceedings, (v) pledges or deposits made in the
ordinary course of business (A) in connection with leases, performance bonds
and similar obligations, or (B) in connection with workers' compensation,
unemployment insurance and other social security legislation, (vi) easements,
rights-of-way, restrictions, minor

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defects or irregularities in title and other similar encumbrances which, in the
aggregate, do not materially detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the business of
the Company or such Restricted Subsidiary, (vii) any attachment or judgment
Lien that does not constitute an Event of Default, (viii) Liens securing
Acquired Indebtedness, provided that such Liens attach solely to the acquired
assets or the assets of the acquired entity and do not extend to or cover any
other assets of the Company or any of its Restricted Subsidiaries, (ix) Liens
to secure Senior Indebtedness, (x) Liens in favor of the Trustee for its own
benefit and for the benefit of the Securityholders, (xi) any interest or title
of a lessor pursuant to a lease constituting a Capitalized Lease Obligation,
(xii) Liens on accounts receivable and inventory or cash deposits
collateralizing reimbursement obligations with respect to letters of credit, in
either case securing Indebtedness permitted to be incurred under clause (i)
under the second paragraph under the "Limitation on Indebtedness" covenant,
(xiii) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory or regulatory obligations, banker's acceptances, surety
and appeal bonds, government contracts, performance and return-of-money bonds
and other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (xiv)
Liens (including extensions and renewals thereof) upon real or personal
property acquired after the Initial Issuance Date; provided that (a) such Lien
is created solely for the purpose of securing Indebtedness incurred, in
accordance with the "Limitation on Indebtedness" covenant, (1) to finance the
cost (including the cost of improvement or construction) of the item of
property or assets subject thereto and such Lien is created prior to, at the
time of or within six months after the later of the acquisition, the completion
of construction or the commencement of full operation of such property or (2)
to refinance any Indebtedness previously so secured, (b) the principal amount
of the Indebtedness secured by such Lien does not exceed 100% of such cost and
(c) any such Lien shall not extend to or cover any property or assets other
than such item of property or assets and any improvements on such item; (xv)
leases or subleases granted to others that do not materially interfere with the
ordinary course of business of the Company and its Restricted Subsidiaries,
taken as a whole; (xvi) Liens encumbering property or assets under construction
arising from progress or partial payments by a customer of the Company or its
Restricted Subsidiaries relating to such property or assets; (xvii) any
interest or title of a lessor in the property subject to any Capitalized Lease
Obligation or operating lease; (xviii) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xix) Liens on property
of, or on shares of stock or Indebtedness of, any Person existing at the time
such Person becomes, or becomes a part of, any Restricted Subsidiary, provided
that such Liens do not extend to or cover any property or assets of the Company
or any Restricted Subsidiary other than the property or assets acquired; (xx)
Liens in favor of the Company or any Restricted Subsidiary; (xxi) Liens in
favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (xxii)
Liens encumbering deposits securing Indebtedness under Hedging Obligations;
(xxiii) Liens arising out of conditional sale, title retention, consignment or
similar arrangements for the sale of goods entered into by the Company or any
of its Restricted Subsidiaries in the ordinary course of business in accordance
with the past practices of the Company and its Restricted Subsidiaries; (xxiv)
Liens on or sales of receivables; (xxv) the rights of film distributors under
film licensing contracts entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business on a basis customary in the
movie exhibition industry; and (xxvi) any renewal of or substitution for any
Liens permitted by any of the preceding clauses, provided that the Indebtedness
secured is not increased (other than by any premium and accrued interest, plus
customary fees, expenses and costs related to such renewal or substitution of
Liens or the incurrence of any related refinancing of Indebtedness) nor the
Liens extended to any additional assets (other than proceeds and accessions).
This covenant does not authorize the incurrence of any Indebtedness not
otherwise permitted by the "Limitation on Indebtedness" covenant.

Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company shall not, and shall not
permit any of the Restricted Subsidiaries of the Company to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction on the ability of such Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock, or pay any Indebtedness owed to the Company or any of its Restricted

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Subsidiaries, (ii) make any Investment in the Company or any of its Restricted
Subsidiaries, (iii) transfer any of its properties or assets to the Company or
any of its Restricted Subsidiaries or (iv) guarantee any Indebtedness of the
Company or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (A) applicable law, (B) any
instrument governing Acquired Indebtedness permitted to be incurred under the
"Limitation on Indebtedness" covenant which encumbrances or restrictions are
not applicable to any Person or the properties or assets of any Person, other
than the Person so acquired or its Subsidiaries, or the property or assets of
the Person so acquired or its Subsidiaries, (C) any restrictions existing under
agreements in effect on the Initial Issuance Date, (D) any restrictions with
respect to a Restricted Subsidiary imposed pursuant to an agreement which has
been entered into for the sale or disposition of all or substantially all the
Capital Stock or assets of such Restricted Subsidiary, provided, that such
disposition is permitted pursuant to the "Limitation on Asset Sales" covenant,
(E) any agreement governing Indebtedness otherwise permitted under the
Indenture restricting the sale or other disposition of property securing such
Indebtedness if such agreement does not expressly restrict the ability of a
Restricted Subsidiary to pay dividends or to make distributions, loans or
advances, (F) the issuance of preferred stock by a Restricted Subsidiary or the
payment of dividends thereon in accordance with the terms thereof, provided
that issuance of such preferred stock is permitted pursuant to the "Limitation
on Indebtedness" covenant and the terms of such preferred stock do not
expressly restrict the ability of a Restricted Subsidiary to pay dividends or
make any other distributions on its Capital Stock (other than requirements to
pay dividends or liquidation preferences on such preferred stock prior to
paying any dividends or making any other distributions on such other Capital
Stock), (G) the Indenture, (H) the Credit Facility and other Senior
Indebtedness, (I) supermajority voting requirements existing under corporate
charters, bylaws, stockholders agreements and the like; (J) in the case of
clause (iii) of this covenant, agreements (1) that restrict in a customary
manner the subletting, pledging, assignment or transfer of any property or
asset that is a lease, license, conveyance or contract or similar property or
asset, or (2) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by the Indenture,
including, without limitation, transfer restrictions on any specific properties
or assets that are subject to a sale agreement otherwise permitted pursuant to
the "Limitation on Asset Sales" covenant; or (K) existing under any agreement
which refinances or replaces any of the agreements in the preceding clauses;
provided, that the terms and conditions of any such restrictions are not
materially less favorable to the Holders than those contained in the agreements
refinanced or replaced. Nothing contained in this "Limitation on Dividend and
Other Payment Restrictions Affecting Restricted Subsidiaries" covenant shall
prevent the Company or any Restricted Subsidiary from (1) creating, incurring,
assuming or suffering to exist any Liens otherwise permitted in the "Limitation
on Liens" covenant or (2) restricting the sale or other disposition of property
or assets of the Company or any of its Restricted Subsidiaries that secure
Indebtedness of the Company or any of its Restricted Subsidiaries.

Limitation on Layering Debt. The Indenture provides that the Company will
not incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Indebtedness of the Company but senior in any respect in right of payment to
the Notes.

Limitation on Transactions With Affiliates. The Indenture provides that
the Company shall not, and shall not permit any Restricted Subsidiary of the
Company to, directly of indirectly, enter into any transaction (including
without limitation the purchase, sale, lease or exchange of any property or the
rendering of any service) with a Person that, immediately prior to such
transaction, was an Affiliate (an "Affiliate Transaction"), unless such
transaction is on terms no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained in a comparable arms' length
transaction with an entity that is not an Affiliate; provided that continued
performance under agreements as in effect on the Initial Issuance Date and
described in the Offering Memorandum, or consummation, on the terms described
in the Offering Memorandum, of transactions described herein that are not
consummated prior to the Initial Issuance Date (and renewals and extensions of
such agreements and transactions on terms not materially less favorable to

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the Holders than the terms of such original agreements and transactions), shall
not be subject to such limitation.

In addition, the Company shall not, and shall not permit any of the
Restricted Subsidiaries of the Company to, enter into (i) an Affiliate
Transaction involving or having an expected value of more than $2 million
unless such transaction shall have been approved in good faith by resolution of
the Board of Directors of the Company and such resolution provides that such
Affiliate Transaction complies with the requirements of this covenant or (ii)
an Affiliate Transaction involving or having an expected value of more than $15
million, unless the Company has received an opinion of a nationally recognized
independent investment banking firm, accounting firm, appraisal firm or other
experts of nationally recognized standing if, in each case, such firm is
regularly engaged to render opinions of such type, to the effect that the
transaction is fair to the Company (or, if the Company is not a party to such
Affiliate Transaction, then to such Restricted Subsidiary) from a financial
point of view.

Notwithstanding anything to the contrary contained in the Indenture, the
foregoing provisions shall not apply to (i) transactions between the Company
and a Wholly Owned Subsidiary of the Company that is a Restricted Subsidiary or
between Wholly Owned Subsidiaries of the Company that are Restricted
Subsidiaries, (ii) payments required to be made to the Company by Cinemark
International or by any Subsidiary of Cinemark International under the Cinemark
International Management Agreement or under a Subsidiary management agreement,
as the case may be, (iii) payments pursuant to any tax sharing agreement or
arrangement among the Company and its Subsidiaries, (iv) transactions with any
current or former employee, officer or director of the Company or any of its
Restricted Subsidiaries pursuant to reasonable employee benefit plans or
compensation arrangements or agreements entered into in the ordinary course of
business on or prior to the Initial Issuance Date, or amended or created
thereafter with the approval of the Board of Directors of the Company, (v)
transactions with any employee of the Company pursuant to which the Company
purchases or otherwise acquires Capital Stock of the Company from such employee
as permitted under the "Limitation on Restricted Payments" covenant, or (vi)
transactions constituting (A) a Restricted Payment not prohibited by the
"Limitation on Restricted Payments" covenant and not constituting a Permitted
Investment, or (B) an investment not constituting an "Investment" by reason of
a specific exclusion from such definition.

Limitation on Asset Sales. The Indenture provides that the Company shall
not, and shall not permit any of the Restricted Subsidiaries of the Company to,
make any Asset Disposition, unless (i) the consideration received from such
Asset Disposition is at least equal to the Fair Market Value of the Capital
Stock, property or other assets sold, (ii) at least 75% of the consideration
received from such Asset Disposition is in the form of cash, Temporary Cash
Investments or Marketable Equity Securities (the "75% Test" ), provided that
the amount of any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) of the Company
or such Restricted Subsidiary which are assumed by the transferee, cancelled or
satisfied in any Asset Disposition (other than liabilities that are incurred in
connection with or in anticipation of such Asset Disposition) as a credit
against the purchase price therefor shall be deemed to be cash to the extent of
the amount so credited for purposes of the 75% Test, and (iii) the Company
applies, or causes its Restricted Subsidiaries to apply, 100% of the Net
Proceeds from any Asset Disposition to an offer (a "Net Proceeds Offer") to
purchase Notes outstanding having a Net Proceeds Offer Price (as defined below)
at least equal to such Net Proceeds, such Net Proceeds Offer to commence on a
date not later than 360 calendar days after the date of such Asset Disposition
at a purchase price (the "Net Proceeds Offer Price") equal to 100% of the
principal amount thereof, plus accrued interest to the closing date of the Net
Proceeds Offer (the "Net Proceeds Purchase Date"), except to the extent that
such Net Proceeds have been applied either to the permanent repayment of
principal and interest on Senior Indebtedness or Indebtedness of the Restricted
Subsidiary of the Company that made such Asset Disposition or to the purchase
of assets or businesses in the same line of business as the Company and its
Restricted Subsidiaries or assets incidental thereto. Notwithstanding anything
to the contrary in this covenant, the Company will not be required to make

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a Net Proceeds Offer with respect to any Net Proceeds from Asset Dispositions
until the aggregate amount of Net Proceeds from Asset Dispositions in any
period of 12 consecutive months which are not applied either to the permanent
repayment of principal and interest on Indebtedness (as described above) or to
the purchase of assets or businesses as described above exceeds $10 million.
For purposes of this covenant, the principal amount of Notes for which a Net
Proceeds Offer shall be made is referred to as the "Net Proceeds Offer Amount."
To the extent required by any pari passu Indebtedness, and provided there is a
permanent reduction in the principal amount of such pari passu Indebtedness,
the Company shall simultaneously with the Net Proceeds Offer make an offer to
purchase such pari passu Indebtedness (a "Pari Passu Offer") in an amount (the
"Pari Passu Offer Amount") equal to the Net Proceeds Offer Amount, as
determined above, multiplied by a fraction, the numerator of which is the
outstanding principal amount of such pari passu Indebtedness and the
denominator of which is the sum of the outstanding principal amount of the
Notes and such pari passu Indebtedness, in which case the Net Proceeds Offer
Amount shall be correspondingly reduced by such Pari Passu Offer Amount.

The Company may credit against its obligation to make a Net Proceeds Offer
pursuant to the immediately preceding paragraph up to $2 million aggregate
principal amount of Notes, at 100% of the principal amount thereof, which have
been acquired by the Company and surrendered for cancellation after the making
of the Net Proceeds Offer and which have not been used as a credit against or
acquired pursuant to any prior obligation to make an offer to purchase Notes
pursuant to the provisions set forth under "-- Redemption at the Option of
Holders -- Change of Control" or this covenant.

Upon notice of a Net Proceeds Offer provided to the Trustee by the Company,
notice of such Net Proceeds Offer shall be mailed by the Trustee (at the
Company's expense) not less than 30 calendar days nor more than 60 calendar
days before the Net Proceeds Purchase Date to each Holder of Notes at such
Holder's last registered address appearing in the Register. The Company shall
provide the Trustee with copies of all materials to be delivered with such
notice. The notice shall contain all instructions and material necessary to
enable such Holders to tender Notes pursuant to the Net Proceeds Offer. If
Notes in a principal amount in excess of the Net Proceeds Offer Amount are
surrendered pursuant to the Net Proceeds Offer, the Company shall purchase
Notes on a pro rata basis (with such adjustments as may be deemed appropriate
by the Company so that only Notes in denominations of $1,000 or integral
multiples of $1,000 shall be acquired).

The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Net Proceeds Offer.

On the Net Proceeds Purchase Date, the Company shall (i) accept for payment
Notes or portions thereof validly tendered pursuant to the Net Proceeds Offer
(on a pro rata basis if required), (ii) deposit with the Paying Agent money in
immediately available funds, sufficient to pay the purchase price of all Notes
or portions thereof so accepted, and (iii) deliver to the Trustee Notes so
accepted together with an Officer's Certificate stating the Notes or portions
thereof accepted for payment by the Company. If the Company complies with its
obligations set forth in the immediately preceding sentence, whether or not a
Default or Event of Default has occurred and is continuing on the Net Proceeds
Purchase Date, the Paying Agent shall as promptly as practicable mail to each
Holder of Notes so accepted payment in an amount equal to the purchase price,
and the Company shall execute and the Trustee shall as promptly as practicable
authenticate and mail or deliver to such Holder a new Note equal in principal
amount to any unpurchased portion of the Note surrendered. Any Notes not so
accepted shall be as promptly as practicable mailed or delivered by the Company
to the Holders thereof. The Company shall publicly announce the results of the
Net Proceeds Offer on or as promptly as practicable after the Net Proceeds
Purchase Date. For purposes of this covenant, the Trustee shall act as the
Paying Agent.

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Notwithstanding anything to the contrary contained in the Indenture, the
Company or any of its Restricted Subsidiaries may engage in transactions in
which theatre properties will be transferred in exchange for one or more other
theatre properties; provided that if the Fair Market Value of the theatre
properties to be transferred by the Company or such Restricted Subsidiary, plus
the Fair Market Value of any other consideration paid or credited by the
Company or such Restricted Subsidiary (the "Transaction Value") exceeds $2
million, such transaction shall require approval of the Board of Directors of
the Company. In addition, each such transaction shall be valued at an amount
equal to all consideration received by the Company or such Restricted
Subsidiary in such transaction, other than the theatre properties received
pursuant to such exchange ("Other Consideration") for purposes of determining
whether an Asset Disposition has occurred. If the Other Consideration is of an
amount and character such that such transaction constituted an Asset
Disposition, then the first paragraph of this "Limitation on Asset Sales"
covenant shall be applicable to any Net Proceeds of such Other Consideration.

Covenant with Respect to Cinemark International and its Subsidiaries. The
Indenture provides that the Company shall cause Cinemark International and its
Subsidiaries on a consolidated basis to be engaged principally in the
acquisition, construction and operation of indoor motion picture theatres and
other activities incidental thereto outside the United States and Canada.

Consolidation or Merger. The Indenture provides that the Company shall not
consolidate with or merge with or into or sell, assign or lease all or
substantially all of the properties and assets of the Company and its
Restricted Subsidiaries, taken as a whole, to any Person (other than the
Company or a Wholly Owned Subsidiary of the Company that is a Restricted
Subsidiary), or permit any Person (other than a Wholly Owned Subsidiary of the
Company that is a Restricted Subsidiary) to merge with or into the Company
unless: (i) the Company shall be the continuing Person, or the Person formed by
such consolidation or into which the Company is merged or to which the
properties and assets of the Company and its Restricted Subsidiaries taken as a
whole are transferred (the "surviving entity") shall be a corporation organized
and existing under the laws of the United States or any state thereof or the
District of Columbia and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture, and the
Indenture shall remain in full force and effect, and (ii) immediately before
and immediately after giving effect to such transaction, no Event of Default
and no Default shall have occurred and be continuing, (iii) unless the
applicable transaction involves the merger of a Restricted Subsidiary of the
Company into the Company, the Company or, in the case of a consolidation or
merger in which the Company is not the continuing Person, the surviving entity,
after giving pro forma effect to such transaction could incur $1.00 of
additional Indebtedness (assuming a market rate of interest with respect to
such additional Indebtedness) under the first paragraph under the "Limitation
on Indebtedness" covenant, and (iv) unless the applicable transaction involves
the merger of a Restricted Subsidiary of the Company into the Company,
immediately after giving effect to such transaction, the Consolidated Net Worth
of the Company, or, in the case of a consolidation or merger in which the
Company is not the continuing Person, the surviving entity, shall be equal to
or greater than the Consolidated Net Worth of the Company immediately before
such transaction.

Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole in accordance with the foregoing, the successor corporation formed by
such consolidation or into which the Company is merged or to which such
transfer is made, shall succeed to, and be substituted for, and may exercise
every right and power of the Company under the Indenture with the same effect
as if such successor corporation had been named as the Company therein; and
thereafter, if the Company is dissolved following a transfer of all or
substantially all of its assets in accordance with the Indenture, the Company
shall be discharged and released from all obligations and covenants under the
Indenture and the Notes. The Trustee shall enter into a supplemental indenture
to evidence the succession and substitution of such successor Person and such
discharge and release of the Company.

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DEFAULTS AND REMEDIES

Under the Indenture, an "Event of Default" occurs if one of the following
shall have occurred and be continuing: (i) the Company defaults in the payment
of (A) the principal of (or premium, if any, on) any Notes when the same
becomes due and payable at maturity, by acceleration or otherwise, (B) the
redemption price on any redemption date, or (C) the Change of Control Offer
Price or the Net Proceeds Offer Price on the applicable Offer Purchase Date
relating to such Offer; (ii) the Company defaults in the payment of interest on
any Note when the same becomes due and payable, which default continues for a
period of 30 calendar days; (iii) the Company or any Subsidiary of the Company
fails to comply with any of its covenants or agreements in the Notes or the
Indenture (other than those referred to in clauses (i) and (ii) above) and such
failure continues for 45 calendar days after receipt by the Company of a Notice
of Default specifying such Default; (iv) an event of default on any other
Indebtedness for borrowed money of the Company or any of its Restricted
Subsidiaries having an aggregate amount outstanding in excess of $5 million
which default (A) is caused by a failure to pay when due (after giving effect
to any grace periods) any principal, premium, if any, or interest on such
Indebtedness or (B) has caused the holders thereof to declare such Indebtedness
due and payable in advance of its scheduled maturity; (v) the Company or any
Significant Subsidiary of the Company pursuant to or within the meaning of any
Bankruptcy Law: (A) commences a voluntary case or proceeding, (B) consents to
the entry of an order for relief against it in an involuntary case or
proceeding, (C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, (D) makes a general assignment for the
benefit of its creditors, or (E) admits in writing its inability to pay its
debts generally as they become due; (vi) a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law that: (A) is for relief
against the Company or any Significant Subsidiary of the Company in an
involuntary case or proceeding, (B) appoints a Custodian of the Company or any
Significant Subsidiary of the Company or for all or substantially all of its
respective properties, or (C) orders the liquidation of the Company or any
Significant Subsidiary of the Company; and in each case the order or decree
remains unstayed and in effect for 60 calendar days, or (vii) final
non-appealable judgments for the payment of money which in the aggregate exceed
$5 million (net of applicable insurance coverage which is acknowledged in
writing by the insurer) shall be rendered against the Company or any
Significant Subsidiary of the Company by a court and shall remain unstayed or
undischarged for a period of 60 calendar days.

A Default under clause (iii) of the immediately preceding paragraph is not
an Event of Default until the Trustee notifies the Company, or the Holders of
at least 25% in aggregate principal amount of the Notes at the time outstanding
notify the Company and the Trustee, of the Default and the Company does not
cure such Default within the time specified in clause (iii) of the immediately
preceding paragraph after receipt of such notice. If any Event of Default under
clauses (i), (ii), (iii), (iv) or (vii) of the immediately preceding paragraph
occurs and is continuing, then the Holders of at least 25% in aggregate
principal amount of the Notes may declare principal of the Notes and accrued
interest immediately due and payable. If any Event of Default under clauses (v)
or (vi) of the immediately preceding paragraph occurs, all principal and
interest on the Notes will immediately become due and payable. If an Event of
Default occurs and is continuing, the Trustee may pursue any available remedy
by proceeding at law or in equity to collect any payment due, or to enforce the
performance of any provision, under the Notes or the Indenture. The Trustee may
withhold from holders of the Notes notice of any continuing Default or Event of
Default (except under clauses (i) or (ii) of the immediately preceding
paragraph) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Trustee and to the Company, may rescind
an acceleration (except an acceleration due to a default in payment of the
principal of or interest on any of the Notes) upon conditions provided in the
Indenture. Except to enforce the right to receive payments of principal of, or
premium and interest on, the Notes when due, no Holder of a Note may pursue any
remedy with respect to the Indenture or the Notes unless (i) the Holder has
given to the Trustee written notice of a continuing Event of Default, (ii)
Holders of at least 25% in aggregate principal amount of the Notes issued under
the Indenture then outstanding have made a written request to the Trustee to
pursue the remedy, (iii) such Holders have offered to provide the Trustee
indemnity reasonably satisfactory

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to the Trustee against any loss, liability or expense, (iv) the Trustee has not
complied with the request within 60 calendar days after receipt of the request
and the offer of indemnity, and (v) during such 60-day period, the Holders of a
majority in aggregate principal amount of the Notes then outstanding have not
given the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request. The Holders of a majority in aggregate principal
amount of the Notes then outstanding under the Indenture may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on it. However, the Trustee
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines may be unduly prejudicial to the rights of another
Holder or that involves the Trustee in personal liability. The Trustee may take
any other action deemed proper by the Trustee which is not inconsistent with
such direction. Any money collected by the Trustee in respect to the Notes
shall be paid out first, to the Trustee for any amounts owed to it under the
Indenture, second, to the Holders for amounts due and unpaid on the Notes, and
finally, if there is any balance remaining, to the Company.

Notwithstanding the foregoing, if an Event of Default specified in clause
(iv) above shall have occurred and be continuing, such Event of Default and any
consequential acceleration shall be automatically rescinded if (i) the
Indebtedness that is the subject of such Event of Default has been repaid, or
(ii) if the default relating to such Indebtedness is waived or cured and if
such Indebtedness has been accelerated, then the holders thereof have rescinded
their declaration of acceleration in respect of such Indebtedness.

Under the Indenture, an officer of the Company is required to certify to
the Trustee in each fiscal quarter whether or not he knows of any Default or
Event of Default that occurred during the prior fiscal quarter and, if
applicable, describe such Default or Event of Default and the status thereof.
In addition, for each fiscal year, the Company's independent certified public
accountants are to provide a report, in connection with their audit
examination, as to compliance by the Company with certain covenants as they
relate to accounting matters.

REPORTS

The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Trustee and the Holders of Notes (i) all quarterly
and annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were required
to file such forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that describes the financial
position and results of operations of the Company and its Subsidiaries and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such information
available to prospective investors upon request.

The Company shall include an unaudited consolidating balance sheet and
related statements of income and cash flows for the Company and its
Subsidiaries, separately identifying the Restricted Group and the Unrestricted
Group, in all reports containing the consolidated financial statements (which
in the case of annual reports shall be audited) of the Company and its
consolidated Subsidiaries which are required to be delivered by the Company to
the Securityholders pursuant to the Indenture, including the Company's Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q.

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PAYMENTS FOR CONSENT

The Indenture prohibits the Company and any of its Subsidiaries from,
directly or indirectly, paying or causing to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any terms or provisions of
the Notes unless such consideration is offered to be paid or agreed to be paid
to all Holders of the Notes which so consent, waive or agree to amend in the
time frame set forth in solicitation documents relating to such consent, waiver
or agreement.

SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE

The Indenture will be discharged and cancelled upon the delivery by the
Company to the Trustee for cancellation of all the Notes or upon irrevocable
deposit with the Trustee, within not more than one year prior to the maturity
of the Notes, or when the Notes are to be called for redemption within one year
under arrangements satisfactory to the Trustee, of funds sufficient for the
payment or redemption of all the Notes. In addition, the Indenture will provide
that the Company, subject to certain conditions specified below, may at any
time (i) defease and be discharged from its obligations in respect of the Notes
("Legal Defeasance") (except for certain obligations to register the transfer,
substitution or exchange of Notes, to replace stolen, lost or mutilated Notes
and to maintain an office or agency and the rights, obligations and immunities
of the Trustee) or (ii) defease and be discharged from its obligations with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment)
described under "-- Defaults and Remedies" will no longer constitute an Event
of Default with respect to the Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance, the
Company must irrevocably deposit, or caused to be deposited, with the Trustee
(or another trustee satisfying the requirements of the Indenture), in trust for
such purpose, (i) money in an amount, (ii) U.S. Government Obligations which
through the payment of principal and interest in accordance with their terms
will provide money in an amount, or (iii) a combination thereof, sufficient in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
the principal of, premium, if any, and interest on the outstanding Notes at
maturity or upon redemption, together with all other amounts payable by the
Company under the Indenture. Such Legal Defeasance or Covenant Defeasance will
become effective 91 days after such deposit if and only if (i) no Default or
Event of Default with respect to the Notes has occurred and is continuing
immediately prior to the time of such deposit, (ii) no Default or Event of
Default under clauses (v) and (vi) of the definition of the term "Event of
Default" shall have occurred at any time in the period ending on the 91st day
after the date of such deposit and shall be continuing on such 91st day, (iii)
such defeasance does not result in a breach or violation of, or constitute a
default under, any other agreement or instrument to which the Company is a
party or by which it is bound (and, in furtherance of such condition, no
Default or Event of Default shall result under the Indenture due to the
incurrence of Indebtedness to fund such deposit and the entering into of
customary documentation in connection therewith, even though such documentation
may contain provisions that would otherwise give rise to a Default or Event of
Default), and (iv) the Company has delivered to the Trustee (A)(1) in the case
of Legal Defeasance, an Opinion of Counsel to the effect that (x) there has
been published by the Internal Revenue Service a ruling or (y) since the date
of the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred, or (2) in the case of Covenant Defeasance, an
Opinion of Counsel to the effect that the Holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be

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subject to federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; and (B) an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent relating to such defeasance have been
complied with. Notwithstanding the foregoing, the Company's obligations to pay
principal, premium, if any, and interest, if any, on the Notes shall continue
until the Internal Revenue Service ruling or Opinion of Counsel referred to in
clause (iv)(A) above is provided without regard to and without reliance upon
such obligations continuing to be obligations of the Company.

TRANSFER AND EXCHANGE

A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, neither the Registrar nor the Company is
required to transfer or exchange any Note for a period of 15 days before (i) a
selection of Notes to be redeemed, (ii) an interest payment date, or (iii) the
mailing of notice of a Net Proceeds Offer or a Change of Control Offer.

The registered Holder of a Note will be treated as the owner of such Note
for all purposes.

AMENDMENT, SUPPLEMENT AND WAIVER

Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).

Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the
Notes, (iii) reduce the rate of or change the time for payment of interest on
any Note, (iv) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest on, the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of, premium, if any, or interest on, the Notes,
(vii) waive a redemption payment with respect to any Note or (viii) make any
change in the foregoing amendment and waiver provisions. In addition, any
amendment to the provisions of the Indenture relating to subordination will
require the consent of the Holders of at least 66-2/3% in aggregate principal
amount of the Notes then outstanding if such amendment would adversely affect
the rights of Holders of the Notes.

Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.

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CONCERNING THE TRUSTEE

The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.

The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.

BOOK-ENTRY, DELIVERY AND FORM

Series B Notes to be resold as set forth herein will initially be issued in
the form of one Global Note (the "Global Note"). The Global Note will be
deposited on the date of the closing of the Exchange Offer (the "Closing Date")
with, or on behalf of, The Depository Trust Company (the "Depositary") and
registered in the name of Cede & Co., as nominee of the Depositary (such
nominee being referred to herein as the "Global Note Holder"). Notes that are
issued as described below under "--Certificated Securities" will be issued in
the form of registered definitive certificates (the "Certificated Securities").
Upon the transfer of Certificated Securities, such Certificated Securities may,
unless the Global Note has previously been exchanged for Certificated
Securities, be exchanged for an interest in the Global Note representing the
principal amount of Notes being transferred.

The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants ") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depositary's system
is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants" or the "Depositary's
Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Persons who are not
Participants may beneficially own securities held by or on behalf of the
Depositary only through the Depositary's Participants or the Depositary's
Indirect Participants.

The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants that have tendered Series A Notes with portions of the
principal amount of the Global Note and (ii) ownership of the Series B Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Series B Notes evidenced by the
Global Note will be limited to such extent.

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So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole holder under the Indenture of
any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by
the Global Note will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Accordingly,
beneficial owners of an interest in the Global Note must rely upon procedures
of the Global Note Holder, and if such Person is not a Participant, on the
procedures of the Participant through which such Person owns its interest, to
exercise any rights and fulfill any obligations of a holder under the
Indenture. No beneficial owner of a beneficial interest in the Global Note will
be able to transfer that interest except in accordance with the Global Note
Holder's procedures in addition to those provided by the Indenture. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.

Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons
in whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of Notes. The Company
believes, however, that it is currently the policy of the Depositary to
immediately credit the accounts of the relevant Participants with such
payments, in amounts proportionate to their respective holdings of beneficial
interests in the relevant security as shown on the records of the Depositary.
Payments by the Depositary's Participants and the Depositary's Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Depositary's Participants or the Depositary's Indirect Participants.

Certificated Securities. Subject to certain conditions, any person having
a beneficial interest in the Global Note may, upon request to the Trustee,
exchange such beneficial interest for Notes in the form of Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). All such certificated
Notes would be subject to the legend requirements described herein under
"Notice to Investors." In addition, if (i) the Company notifies the Trustee in
writing that the Depositary is no longer willing or able to act as a depositary
and the Company is unable to locate a qualified successor within 90 days or, if
at any time the Depositary ceases to be a "clearing agency" registered under
the Exchange Act, or (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Notes in the form of
Certificated Securities under the Indenture, then, upon surrender by the Global
Note Holder of its Global Note, Notes in such form will be issued to each
person that the Global Note Holder and the Depositary identify as being the
beneficial owner of the related Notes.

Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.

Same Day Settlement and Payment. The Indenture requires that payments in
respect of the Notes represented by the Global Note (including principal,
premium, if any, and interest) be made by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. With
respect to any Certificated Securities, the Company will make all payments of
principal, premium, if any, and interest, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. Secondary trading in long-term notes and debentures of corporate
issuers is generally settled in clearing-house or next-day funds. In

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contrast, the Notes represented by the Global Note are expected to be eligible
to trade in the PORTAL Market and to trade in the Depositary's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
Notes will, therefore, be required by the Depositary to be settled in
immediately available funds. The Company expects that secondary trading in any
Certificated Securities will also be settled in immediately available funds.

Exchange Offer; Registration Rights

The Company and the Initial Purchasers entered into the Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, the Company agrees to
use its best efforts to file with the Commission the Exchange Offer
Registration Statement on the appropriate form under the Securities Act, with
respect to the Series B Notes. The Series B Notes will be substantially
identical to the Series A Notes, except that the Series B Notes will not
contain terms with respect to transfer restrictions (other than as might be
imposed by state securities laws) or provide for the payment of Liquidated
Damages. Upon the effectiveness of the Exchange Offer Registration Statement,
the Company will offer to the Holders of Transfer Restricted Securities (as
defined below) pursuant to the Exchange Offer who are able to make certain
representations the opportunity to exchange their Transfer Restricted
Securities for an equal principal amount of Series B Notes. Interest on each
Series B Note will accrue from the most recent interest payment date on which
interest on the Series A Notes shall have been paid, or if no interest shall
yet have been paid on the Series A Notes, from the date of original issuance of
the Series A Notes. If (i) the Company is not required to file the Exchange
Offer Registration Statement or not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Transfer Restricted Securities notifies the
Company within the specified time period that (A) it is prohibited by a change
in applicable law or Commission policy from participating in the Exchange Offer
or (B) it may not resell the Series B Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales, the Company will use its best efforts to file with
the Commission a Shelf Registration Statement to cover resales of the Series A
Notes by the Holders thereof who satisfy certain conditions relating to the
provision of information in connection with the Shelf Registration Statement.
The Company will use its best efforts to cause the applicable registration
statement to be declared effective by the Commission within the period
specified below. For purposes of the foregoing, "Transfer Restricted
Securities" means each Note until (i) the date on which such Note, if a Series
A Note, has been exchanged by a person for an Series B Note in the Exchange
Offer and entitled to be resold to the public by such person without complying
with the prospectus delivery requirements of the Securities Act, (ii) following
exchange by a broker-dealer in the Exchange Offer of a Series A Note for a
Series B Note, the date on which such Series B Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement, (iii)
the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement, (iv) the date on which such Note may be distributed to the public
pursuant to Rule 144 under the Securities Act, or (v) the date such Note ceases
to be outstanding.

The Registration Rights Agreement provides that (i) the Company will use
its best efforts to file an Exchange Offer Registration Statement with the
Commission on or prior to 30 days after the Closing Date, (ii) the Company will
use its best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 90 days after the Closing Date,
(iii) unless the Exchange Offer would not be permissible by applicable law or
Commission policy, the Company will commence the Exchange Offer and use its
best efforts to issue on or prior to 30 days after the date on which the
Exchange Offer Registration Statement was declared effective by the Commission,
Series B Notes in exchange for all Series A Notes tendered prior thereto in the
Exchange Offer and (iv) if obligated to file the Shelf Registration Statement,
the Company will use its best efforts to file the Shelf Registration Statement
with the Commission on or prior to 30 days after such filing obligation arises
(and in any event within 120 days after the Closing Date) and to

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cause the Shelf Registration to be declared effective by the Commission on or
prior to 90 days after such obligation arises. If applicable, the Company will
use its best efforts to keep the Shelf Registration Statement effective for a
period of three years after the Closing Date, subject to certain exceptions.

If (a) the Company fails to file any of the Registration Statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such Registration Statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself immediately declared effective (each such
event, a "Registration Default"), then the Company will be required to pay
liquidated damages ("Liquidated Damages") to each Holder of Series A Notes on
each interest payment date. Liquidated Damages shall accrue from and after the
date of each Registration Default, and continuing thereafter until such
Registration Default has been cured or waived, at a rate equal to one-quarter
of one percent (0.25%) per annum of the principal amount of the Series A Notes
during the first 90-day period immediately following the occurrence of the
first such Registration Default, which rate shall increase by an additional
one-quarter of one percent (0.25%) per annum during each subsequent 90-day
period, up to a maximum rate equal to two percent (2%) per annum. Liquidated
Damages accrued as of any interest payment date will be payable on such date.

Holders of Series A Notes will be required to make certain representations
to the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer, including that (i) it is not an Affiliate of
the Company, (ii) any Series B Notes to be received by it were acquired in the
ordinary course of business, and (iii) at the time of commencement of the
Exchange Offer, it had no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Series B Notes.
Holders may also be required to make such representations as may be required to
permit offers and sales of the Series A Notes under state securities laws. Each
Holder of Series A Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Series A Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material federal income tax consequences
of holding and disposing of the Series B Notes. This summary is based upon
provisions of the Internal Revenue Code of 1986, as amended, and regulations,
rulings and judicial decisions thereunder as of the date hereof, all of which
are subject to change (possibly on a retroactive basis). This summary does not
discuss all aspects of federal income taxation that may be relevant to
investors in light of their personal investment circumstances or to certain
types of holders subject to special treatment under the federal income tax laws
(for example, dealers in securities, tax-exempt organizations, insurance
companies, real estate trusts, regulated investment companies, individual
retirement accounts and other tax deferred accounts, and foreign taxpayers),
and does not discuss the consequences to a holder under state, local or foreign
tax laws. Prospective investors are advised to consult their own tax advisors
regarding the federal, state, local and other tax considerations of holding,
converting and disposing of the Series B Notes.

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EXCHANGE

An exchange of Series A Notes for Series B Notes should be treated as a
"non-event" for federal income tax purposes because the Series B Notes should
not be considered to differ materially in kind or extent from the Series A
Notes. As a result, no material federal income tax consequences should result
to holders exchanging Series A Notes for Series B Notes.

STATED INTEREST

The Series A Notes were not, and the Series B Notes will not be, issued at
an "original issue discount" for federal tax purposes. Accordingly, all
interest payments on a Note will be includible in a holder's income in
accordance with such holder's method of accounting for tax purposes. A cash
basis holder will include interest in income when received (or when made
available for receipt, if earlier). An accrual basis holder will generally
include interest in income when all events necessary to establish the right to
receive such interest have occurred.

SALE, EXCHANGE OR RETIREMENT OF NOTES

Upon the sale, exchange or retirement (including redemption) of a Series B
Note, a holder of a Series B Note generally will recognize gain or loss in an
amount equal to the difference between the amount of cash and the fair market
value of any property received on the sale, exchange or retirement of the
Series B Note (other than in respect of accrued and unpaid interest on the
Series B Note, which such amounts are treated as ordinary interest income) and
such holder's adjusted tax basis in the Series B Note. If a holder holds the
Series B Note as a capital asset, such gain or loss will be capital gain or
loss, except to the extent of any accrued market discount (see "Market
Discount" below), and will be long-term capital gain or loss if the Series B
Note has been held for more than one year at the time of sale, exchange or
retirement.

MARKET DISCOUNT

If a U.S. holder purchased a Series A Note for an amount that is less than
its stated redemption price at maturity, the amount of the difference will be
treated as "market discount" for federal income tax purposes, unless such
difference is less than a specified de minimis amount. In general, a Series A
Note in the hands of an original holder is not a market discount bond unless
the original holder's adjusted tax basis in the Series A Note is less than the
issue price. Under the de minimis exception, there is no market discount if the
excess of the stated redemption price at maturity of the Series A Note over the
holder's tax basis therein is less than 0.25% of the stated redemption price at
maturity of the Series A Note multiplied by the number of complete years after
the acquisition date to the maturity date of the Series A Note. Market discount
generally will accrue ratably during the period for the date of acquisition to
the maturity date of the Series A Note, unless the holder elects to accrue such
discount on the basis of the constant interest method.

A holder in whose hands a Series A Note is a market discount bond generally
will be required to treat as ordinary income any gain recognized on the sale,
exchange, redemption or other disposition (excluding involuntary conversion) of
the Series A Note to the extent of accrued market discount. A holder of a
Series A Note acquired at market discount also may be required to defer the
deduction of all or a portion of the interest on any indebtedness incurred or
maintained to purchase or carry the Series A Note until it is disposed of in a
taxable transaction, unless, as described more fully in the next paragraph, the
holder elects to include market discounts into income as it accrues.

A holder of a Series A Note acquired at a market discount may elect to
include market discount in income as it accrues, in which case the foregoing
rules would not apply. This election would apply to all market discount bonds
acquired by the electing holder on or after the first day of the first taxable
year to which the election applies. The election may be revoked only with the
consent of the Internal Revenue Service.

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AMORTIZABLE BOND PREMIUM

If a subsequent holder purchases a Series A Note for an amount that exceeds
its stated redemption price at maturity, such holder may elect to offset,
against interest income on the Series A Note, the amount of such excess
purchase price as "amortizable bond premium" (computed under a constant
interest rate method) over the remaining term of the Series A Note, with
corresponding adjustments to such holder's basis in the Series A Note. This
election would apply to all taxable debt instruments held by such holder at the
beginning of the first day of the first taxable year to which the election
applies and to all taxable debt instruments thereafter acquired. The election
may be revoked only with the consent of the Internal Revenue Service.

BACKUP WITHHOLDING AND INFORMATION REPORTING

In general, information reporting requirements will apply to interest
payments on the Series B Notes and to the proceeds of the disposition of a
Series B Note made to holders other than certain exempt recipients (such as
corporations). A 31 percent backup withholding tax will apply to such payments
only if the holder (i) fails to furnish its social security or other taxpayer
identification number ("TIN") within a reasonable time after the request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly
interest or dividends, or (iv) fails, under certain circumstances, to provide a
certified statement, signed under penalty of perjury, that the TIN provided is
its correct number and that it is not subject to backup withholding. Any amount
withheld from a payment to a holder under backup withholding rules is allowable
as a refund or as a credit against such holder's federal income tax liability,
provided that the required information is furnished to the Internal Revenue
Service. Holders of Series B Notes should consult their tax advisors as to
their qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.

DESCRIPTION OF CERTAIN DEBT INSTRUMENTS

OLD INDENTURE

The Company is a party to an Indenture dated June 10, 1992 (the "Old
Indenture") with The Bank of New York, as successor to NationsBank of Texas,
N.A., as trustee (the "Old Trustee"), governing the Company's $125 million
principal amount of Old Notes. The Old Notes are senior obligations of the
Company and are secured by the pledge (which may not be released without the
consent of all holders of the Old Notes) of all of the capital stock of the
Restricted Subsidiaries (as defined in the Old Indenture) of the Company (the
"Pledge Agreement"). Additionally, the Old Notes have the benefit of a negative
pledge clause which requires the Company to equally and ratably secure the Old
Notes upon the incurrence by the Company of any other secured debt, subject to
certain limitations and exceptions. Interest on the Old Notes is payable
semi-annually on June 1 and December 1 of each year.

On August 15, 1996, the Company consummated an Offer to Purchase and
Consent Solicitation ("Repurchase Offer") pursuant to which the Company
purchased for cash $123,370,000 aggregate principal amount of Old Notes for a
cash purchase price equal to $1,079.33 per $1,000 principal amount of Old
Notes, plus accrued and unpaid interest through but excluding August 15, 1996.
Additionally, holders of the Old Notes repurchased consented to amending the
Old Indenture to remove certain restrictive covenants contained in the Old
Indenture (the "Amendments"). In connection therewith, the Company paid each
holder of Old Notes repurchased a cash consent fee equal to $25.00 per $1,000
principal amount of Old Notes. Holders of Old Notes that were not repurchased
pursuant to the Repurchase Offer for any reason are no longer entitled to the
benefits of certain of the restrictive covenants and other provisions in the
Old Indenture as currently in effect that were modified or eliminated by the
Amendments.

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CREDIT FACILITY

On February 14, 1996, the Company replaced its existing bank line of credit
with the Credit Facility, which has a final maturity of 2003 and provides for
borrowing availability of up to $175 million in the aggregate. Any amounts
borrowed by the Company under the Credit Facility prior to February 13, 1999
will be borrowed on a revolving basis. On February 13, 1999, any outstanding
revolving loans will be converted into a term loan. In addition, subject to the
conditions contained therein and to the limitation on the incurrence of
indebtedness under the Indenture and to the conditions set forth in the Credit
Facility, on February 13, 1999, the Company may borrow as a term loan the
difference between $175 million and the outstanding balance under the Credit
Facility (provided that such balance is less than $175 million). The term loan
will be payable quarterly beginning June 30, 1999, with 11.25%, 18.75%, 23.75%
and 36.25% of the initial principal amount of the term loan as of February 13,
1999 due in 1999, 2000, 2001 and 2002, respectively. Any remaining principal
amount of the term loans is due and payable February 13, 2003. Borrowings under
the Credit Facility are secured by a pledge of the issued and outstanding
capital stock of the Company owned by Mr. Mitchell and his affiliates.

Pursuant to the terms of the Credit Facility, funds borrowed bear interest
at a rate per annum equal to the Offshore Rate (as defined in the Credit
Facility) or the Base Rate (as defined in the Credit Facility), as the case may
be, plus the Applicable Amount (as defined in the Credit Facility). As of
August 31, 1996, outstanding borrowings under the Credit Facility aggregated
$16 million and the effective interest rate on such borrowings was 6.5%.

Covenants and certain other provisions contained in the Credit Facility
restrict, among other things, the Company's or any Restricted Subsidiary's
ability, with certain exceptions, (i) to create or incur any liens on any
assets, (ii) to sell assets of the business in excess of $2 million in a single
transaction or related series of transactions, or in excess of $5 million in
any 12 month period, (iii) to engage in mergers, consolidations or conveyances
of all or substantially all of its assets, (iv) to make any investment in any
other person or entity, (v) to incur additional indebtedness, (vi) to enter
into certain transactions with affiliates, (vii) to invest in margin stock,
(viii) to enter into capital leases, (ix) to declare or pay dividends or make
other distributions, (x) to prepay the Old Notes, (xi) to engage in a material
line of business substantially different from the line of business currently
conducted, (xii) to make significant changes in accounting treatment or
reporting practices or change the fiscal year of the Company or any
consolidated Restricted Subsidiary, (xiii) to restrict the ability of any
Restricted Subsidiary to make payments to the Company, or (xiv) to restrict the
ability of the Company to create or assume a lien in favor of the lender upon
its property or assets. The Credit Facility also requires the Company to
maintain specified financial ratios.

Events of default under the Credit Facility include, among other things:
(i) any failure of the Company to pay principal thereunder when due, or to pay
interest or any other amount due within two business days after the due date,
(ii) material inaccuracy of any representation or warranty given by the Company
in the Credit Facility, (iii) breach by the Company of certain terms, covenants
or agreements in the Credit Facility, (iv) the continuance of a default by the
Company in the performance of or compliance with specific terms or covenants in
the Credit Facility for a period of three days or other terms or covenants in
the Credit Facility or other loan documents for a period of twenty days after
the earlier of (A) the date an executive officer of the Company knew or should
have known of such default or (B) notice thereof, (v) default by the Company or
its Restricted Subsidiaries under any other indebtedness (other than the Old
Indenture) in the aggregate principal amount of $1 million, (vi) a default
under the Old Indenture or any indebtedness in excess of $1 million and (vii)
certain changes of control and acts of bankruptcy, insolvency or dissolution.

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CINEMARK MEXICO INDENTURE

On June 30, 1993, Cinemark Mexico entered into an Indenture among Cinemark
de Mexico, as guarantor, and U.S. Trust Company of New York, as trustee (the
"Cinemark Mexico Indenture"), governing Cinemark Mexico's $20.4 million 12%
Series A Senior Subordinated Notes due 2003 (the "Mexico Series A Notes"). On
March 28, 1994, Cinemark Mexico completed an exchange offer pursuant to which
the holders of $20 million principal amount of Mexico Series A Notes received
$20 million principal amount of 12% Series B Senior Subordinated Notes (the
"Mexico Series B Notes") which are registered under the Securities Act, in
exchange for their Mexico Series A Notes. On May 6, 1994, Cinemark Mexico
issued an additional $2 million of 12% Series C Senior Subordinated Notes due
2003 (the "Mexico Series C Notes") which are also governed by the terms of the
Cinemark Mexico Indenture. The Mexico Series A Notes, Mexico Series B Notes and
Mexico Series C Notes are collectively referred to elsewhere in this Prospectus
as the 12% Senior Subordinated Notes due 2003 of Cinemark Mexico. The Mexico
Series A, Mexico Series B and Mexico Series C Notes each bear interest at 12%
per annum payable semi-annually on August 1 and February 1 of each year.
Cinemark Mexico is required to make a sinking fund payment of $6,667,000 on
each of August 1, 2001 and August 1, 2002, which amounts are to be utilized on
such respective dates to retire a like face amount of the outstanding Mexico
Series A, Mexico Series B and Mexico Series C Notes. The Mexico Series A,
Mexico Series B and Mexico Series C Notes are general unsecured obligations of
Cinemark Mexico but are guaranteed by Cinemark de Mexico. Additionally, the
Cinemark Mexico Indenture permits Cinemark Mexico to incur senior debt of up to
$10 million pursuant to credit facilities. On August 30, 1995, Cinemark Mexico,
Cinemark de Mexico and U.S. Trust Company of New York entered into a Second
Supplemental Agreement which among other things extended for two years the time
period under which Cinemark Mexico must meet certain debt coverage ratios.

Covenants and certain other provisions contained in the Cinemark Mexico
Indenture restrict, with certain exceptions, among other things, the ability of
Cinemark Mexico or its subsidiaries (i) to make certain restricted payments,
(ii) to make certain investments, (iii) to incur additional indebtedness, other
than $10 million in senior debt pursuant to credit facilities, unless certain
financial tests are met, (iv) to create or incur any additional liens on any
assets, (v) to be engaged in activities other than the acquisition,
construction and operation of indoor motion picture theatres in Mexico, (vi) to
enter into certain transactions with affiliates and (vii) to enter into any
transactions involving the merger of Cinemark Mexico or the sale of all or
substantially all of its assets. The Cinemark Mexico Indenture also requires
Cinemark Mexico to maintain specified financial ratios.

Events of Default under the Cinemark Mexico Indenture include (i) any
failure of Cinemark Mexico to pay principal when due or to pay interest when
due, which failure remains unremedied for thirty days after the due date, (ii)
breach by Cinemark Mexico of certain covenants and agreements in the Cinemark
Mexico Indenture, (iii) the Cinemark de Mexico guaranty ceases to be in full
force and effect or Cinemark de Mexico denies or disaffirms its obligations
under the guaranty, (iv) a default under any other indebtedness of Cinemark
Mexico in an amount exceeding $1 million, which indebtedness is accelerated,
(v) certain acts of bankruptcy, insolvency or dissolution and (vi) final
judgments for payment of money against Cinemark Mexico or its subsidiaries
which in the aggregate exceed $1 million.

In July 1996, Cinemark Mexico reached a non-binding agreement in principle
with the institutional holder (the "Majority Holder") of $22.0 million of the
aggregate $22.4 million principal amount of Cinemark Mexico 12% Senior
Subordinated Notes pursuant to which Cinemark Mexico and the Majority Holder
agreed to the exchange of all Cinemark Mexico 12% Senior Subordinated Notes
owned by the Majority Holder, and accrued unpaid interest from February 1, 1996
to the date of such exchange, for the New Mexico Notes. The New Mexico Notes
provide that, at Cinemark Mexico's option, all accrued and unpaid interest for
each interest period through and including February 1, 2000 may be paid by
issuing additional notes of the same series on each interest payment date or
may be paid in cash. During such period, the New Mexico Notes will bear
interest at a rate of 13% per annum for each interest payment paid-in-kind or
at a rate of 12% per annum if paid in cash. The agreement in principle also
provided that Cinemark Mexico will issue approximately $1.3

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million of a new series of notes, on substantially similar terms as the New
Mexico Notes, in exchange for all of the issued and outstanding warrants to
purchase shares of common stock of Cinemark Mexico owned by the Majority
Holder.

Cinemark Mexico and the Majority Holder elected to pursue the exchange of
the Cinemark Mexico 12% Senior Subordinated Notes for the New Mexico Notes in
order to provide for additional cash liquidity to fund capital investments in
the Cinemark Mexico business and to take full advantage of the opportunities
Cinemark Mexico currently believes exist in the Mexican motion picture
exhibition industry. In this connection, Cinemark International has agreed to
make an additional $10 million investment in common stock of Cinemark Mexico
when the New Mexico Notes are issued.

As a result of the agreement in principle, Cinemark Mexico did not make the
approximately $1.3 million cash interest payment on the Cinemark Mexico 12%
Senior Subordinated Notes otherwise due on August 1, 1996. The Majority Holder
has agreed to postpone the interest payment date to September 30, 1996 pending
negotiation of definitive documentation to effectuate the terms of the
non-binding agreement in principle. However, there can be no assurance that any
such documentation will be successfully negotiated, approved or executed. In
such event, and if Cinemark Mexico fails to make the interest payment, an event
of default under the Cinemark Mexico Indenture could result, which event of
default would have a material adverse effect on Cinemark Mexico if the maturity
of the Cinemark Mexico Notes is accelerated. Because Cinemark Mexico is an
Unrestricted Subsidiary, acceleration of the Cinemark Mexico 12% Senior
Subordinated Notes would not be an Event of Default under the Indenture, the
Company's Credit Facility or any other of the Company's existing debt
instruments.

The Company intends to negotiate with the holders of the remaining
$400,000 principal amount of the Cinemark Mexico 12% Senior Subordinated Notes
to effectuate an exchange offer on similar terms to the agreement in principle
reached with the Majority Holder.

MEXICO CREDIT FACILITY

On December 4, 1995, Cinemark International and Cinemark Mexico entered
into a Senior Secured Credit Facility (the "Mexico Senior Credit Facility").
The Mexico Senior Credit Facility provides for loans by Cinemark International
to Cinemark Mexico of up to $10 million in the aggregate at an interest rate of
12% per annum. Any amounts borrowed by Cinemark Mexico under the Mexico Senior
Credit Facility will be borrowed on a term loan basis. The loans will be
payable as follows: (i) all accrued and unpaid interest shall be payable on the
first anniversary of the initial loan and quarterly thereafter on January 15,
April 15, July 15 and October 15 and (ii) on December 31, 2001, all unpaid
principal, accrued but unpaid interest and fees on the loans shall be paid.
Borrowing under the Mexico Senior Credit Facility is secured by a pledge of
substantially all of the assets of Cinemark Mexico.

Conditions and provisions in the Mexico Senior Credit Facility restrict,
among other things, Cinemark Mexico and Cinemark de Mexico's ability, with
certain exceptions, to (i) create, incur or assume indebtedness, (ii) create or
incur any additional liens, (iii) engage in mergers, consolidations or
acquisitions or convey all or substantially all of its assets, (iv) change the
manager operating the theatres owned by Cinemark de Mexico under present
management agreements or (v) make investments other than specified permitted
investments. The Mexico Senior Credit Facility also requires Cinemark Mexico to
maintain specified financial ratios.

Events of default under the Mexico Senior Credit Facility include, among
other things: (i) any failure of Cinemark Mexico or Cinemark de Mexico to pay
principal when due or pay interest within five days after the due date, (ii)
breach of certain covenants and agreements in the Mexico Senior Credit
Facility, (iii) material inaccuracy of any representation or warranty given by
Cinemark Mexico in the Mexico Senior Credit Facility, (iv) certain acts of
bankruptcy, insolvency or dissolution, (v) default by Cinemark Mexico or

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Cinemark de Mexico on any other indebtedness, (vi) Cinemark International not
having a valid first priority perfected security interest in the collateral,
(vii) change of control of Cinemark Mexico, (viii) judgments against Cinemark
Mexico or Cinemark de Mexico which in the aggregate exceed $100,000 and (ix)
default by Cinemark Mexico or Cinemark de Mexico under the Cinemark Mexico
Indenture.

The Mexico Senior Credit Facility permits Cinemark Mexico to re-lend any
funds borrowed to Cinemark de Mexico to finance construction of uncompleted
locations, the acquisition and installment of furniture, fixtures and equipment
at such locations and for general corporate purposes and working capital. Funds
borrowed by Cinemark de Mexico bear interest at the rate of 14.12% and are
secured by a pledge of all of the assets of Cinemark de Mexico.

PLAN OF DISTRIBUTION

Each broker-dealer that receives Series B Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Series B Notes received in
exchange for Series A Notes where such Series A Notes were acquired as a result
of market-making activities or other trading activities. The Company has
agreed that, for a period of twelve months after the effective date of this
Prospectus, it will make this Prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale.

The Company will not receive any proceeds from any sale of Series B Notes
by broker-dealers. Series B Notes received by broker-dealers for their own
accounts pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Series B Notes or a combination of such
methods of resale, at market prices at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Series B Notes. Any
broker-dealer that resells Series B Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Series B Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Series B Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.

For a period of twelve months after the effective date of this Prospectus,
the Company will promptly send additional copies of this Prospectus and any
amendment to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed, in connection with the
Exchange Offer, to indemnify the holders of Series A Notes against certain
liabilities, including liabilities under the Securities Act.

By acceptance of the Exchange Offer, each broker-dealer that receives
Series B Notes pursuant to the Exchange Offer hereby agrees to notify the
Company prior to using the Prospectus in connection with the sale or transfer
of Series B Notes, and acknowledges and agrees that, upon receipt of notice
from the Company of the happening of any event which makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not
misleading (which notice the Company agrees to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct

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such misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such broker-dealer.

LEGAL MATTERS

Certain legal matters in connection with the Series B Notes exchanged
hereby will be passed upon for the Company by Michael D. Cavalier, Associate
General Counsel of the Company.

EXPERTS

The consolidated financial statements of the Company as of December 31,
1994 and 1995 and for each of the three years in the period ended December 31,
1995 included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

95
<PAGE> 97
CINEMARK USA, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES

<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES:

Consolidated Balance Sheets, December 31, 1994 and 1995, and June 30, 1996 (Unaudited) . . . . . . F-4

Consolidated Statements of Income for the Years Ended December 31, 1993, 1994 and 1995,
and the Six Months Ended June 30, 1995 and 1996 (Unaudited) . . . . . . . . . . . . . . . . . F-6

Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1993,
1994 and 1995, and the Six Months Ended June 30, 1996 (Unaudited) . . . . . . . . . . . . . . F-7

Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995, and the Six Months Ended June 30, 1995 and 1996 (Unaudited) . . . . . . . . . . . . . . F-8

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9

SUPPLEMENTAL SCHEDULES REQUIRED BY THE INDENTURE
(SECTION 4.02) FOR THE SENIOR NOTES:

Schedule
- --------

A Consolidating Balance Sheet Information, December 31, 1995 . . . . . . . . . . . . . . . S-1

B Consolidating Statement of Operations Information for the Year Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2

C Consolidating Statement of Cash Flows Information for the Year Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3

D Consolidating Balance Sheet Information, June 30, 1996 (Unaudited) . . . . . . . . . . . S-4

E Consolidating Statement of Operations Information for the Six Months Ended
June 30, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5

F Consolidating Statement of Cash Flows Information for the Six Months Ended
June 30, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
</TABLE>

F-1
<PAGE> 98
[THIS PAGE INTENTIONALLY LEFT BLANK]

F-2
<PAGE> 99
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Cinemark USA, Inc.:

We have audited the accompanying consolidated balance sheets of Cinemark
USA, Inc. and subsidiaries as of December 31, 1994 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Cinemark USA, Inc. and
subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

Our audits were conducted for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The supplemental
schedules of certain consolidating information listed in the index on page F-1
are presented for the purpose of additional analysis of the basic consolidated
financial statements rather than to present the financial position, results of
operations and cash flows of the individual companies, and are not a required
part of the basic consolidated financial statements. These schedules are the
responsibility of the Company's management. Such schedules have been subjected
to the auditing procedures applied in our audits of the basic consolidated
financial statements and, in our opinion, are fairly stated in all material
respects when considered in relation to the basic consolidated financial
statements taken as a whole.

DELOITTE & TOUCHE LLP

Dallas, Texas
March 12, 1996

F-3
<PAGE> 100
CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
December 31,
------------------------------- June 30,
1994 1995 1996
--------------- -------------- ----------------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . $ 26,574,074 $ 13,649,724 $ 6,840,264
Temporary cash investments . . . . . . . . . . . . . . 4,482,406 275,126 282,026
Inventories . . . . . . . . . . . . . . . . . . . . . 884,699 1,061,580 1,439,056
Co-op advertising and other receivables (Note 12) . . 3,095,170 4,095,819 4,772,575
Prepaid expenses and other . . . . . . . . . . . . . . 1,501,827 145,660 864,803
--------------- -------------- ----------------
Total current assets . . . . . . . . . . . . . . . 36,538,176 19,227,909 14,198,724

THEATER PROPERTIES AND EQUIPMENT
(Note 5):
Land . . . . . . . . . . . . . . . . . . . . . . . . 13,179,022 14,335,343 27,740,906
Buildings . . . . . . . . . . . . . . . . . . . . . . 36,168,701 62,540,849 78,624,578
Leasehold interests and improvements . . . . . . . . . 38,031,373 50,891,524 61,355,948
Theater furniture and equipment . . . . . . . . . . . 106,180,998 125,172,486 133,910,512
Videocassette rental inventory . . . . . . . . . . . . 4,518,408 5,383,873 6,094,198
Theaters under construction . . . . . . . . . . . . . 9,928,425 29,218,015 49,559,303
--------------- -------------- ----------------
Total . . . . . . . . . . . . . . . . . . . . . . 208,006,927 287,542,090 357,285,445

Less accumulated depreciation and amortization . . . . 52,208,428 63,059,873 69,722,268
--------------- -------------- ----------------
Theater properties and equipment -- net . . . . . 155,798,499 224,482,217 287,563,177

OTHER ASSETS:
Certificates of deposit (Note 9) . . . . . . . . . . . 1,499,920 1,822,954 1,821,867
Investments in and advances to affiliates (Note 12) . . 5,340,380 4,275,602 4,858,155
Intangible assets -- net (Note 3) . . . . . . . . . . . 9,834,805 7,718,292 7,227,012
Deferred charges and other -- net (Note 4) . . . . . . 8,173,082 10,220,127 10,437,528
--------------- -------------- ----------------
Total other assets . . . . . . . . . . . . . . . . 24,848,187 24,036,975 24,344,562

--------------- -------------- ----------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . $ 217,184,862 $ 267,747,101 $ 326,106,463
=============== ============== ================
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 101
LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
December 31,
------------------------------- June 30,
1994 1995 1996
--------------- -------------- ----------------
(Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term liabilities (Note 5) . . $ 375,359 $ 377,737 $ 379,009
Accounts payable . . . . . . . . . . . . . . . . . . . 9,101,333 14,213,239 18,571,397
Accrued film rentals . . . . . . . . . . . . . . . . . 7,193,998 6,463,548 10,758,737
Accrued interest . . . . . . . . . . . . . . . . . . . 2,635,433 2,826,262 2,594,581
Accrued payrolls . . . . . . . . . . . . . . . . . . . 1,923,868 2,139,721 3,131,091
Accrued property taxes and other liabilities . . . . . 8,821,824 10,596,595 8,962,420
Notes payable to related parties (Note 6) . . . . . . 2,051,642
Income taxes payable (Note 10) . . . . . . . . . . . . 353,555 1,648,629
--------------- -------------- ----------------
Total current liabilities . . . . . . . . . . . . 30,405,370 40,317,373 44,397,235

LONG-TERM LIABILITIES:
Long-term debt, less current portion (Note 5) . . . . 164,928,838 196,065,569 202,641,863
Deferred lease expenses (Note 9) . . . . . . . . . . . 8,759,264 9,811,038 10,513,953
Notes payable to related parties (Note 6) . . . . . . 2,419,700
Theatre development advance, less current portion
(Note 5) . . . . . . . . . . . . . . . . . . . . . 1,496,511 1,125,703 769,657
Deferred income taxes (Note 10) . . . . . . . . . . . 3,083,177 4,296,211 4,965,363
--------------- -------------- ----------------
Total long-term liabilities . . . . . . . . . . . 180,687,490 211,298,521 218,890,836
COMMITMENTS (Note 9)

MINORITY INTERESTS IN SUBSIDIARIES
(Note 8):
Common shareholders' equity . . . . . . . . . . . . . 1,259,696 1,362,033 1,315,455
Common stock warrants with mandatory redemption
requirements . . . . . . . . . . . . . . . . . . . 2,100,000 3,424,132 3,424,132

SHAREHOLDERS' EQUITY (Notes 2, 5, 7 and 14):
Class A common stock, $.01 par value; 10,000,000
shares authorized, 3,000, 3,000 and 1,500 shares
issued and outstanding at December 31, 1994 and
1995, and June 30, 1996, respectively . . . . . . . 30 30 15
Class B common stock, no par value; 1,000,000 shares
authorized, 205,570, 205,570 and 230,963 shares
issued at December 31, 1994 and 1995, and
June 30, 1996, respectively . . . . . . . . . . . . 10,967,419 10,967,419 49,529,943
Additional paid-in capital . . . . . . . . . . . . . . 4,325,887 6,604,037 7,099,320
Unearned compensation -- stock options . . . . . . . . (2,161,610) (2,848,738) (2,084,957)
Retained earnings . . . . . . . . . . . . . . . . . . 14,006,560 27,161,692 33,990,662
Treasury stock, 54,791 Class B shares at cost . . . . (20,000,000) (20,000,000) (20,000,000)
Cumulative foreign currency translation adjustment . . (4,405,980) (10,539,398) (10,456,178)
--------------- -------------- ----------------
Total shareholders' equity . . . . . . . . . . . . 2,732,306 11,345,042 58,078,805
--------------- -------------- ----------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . $ 217,184,862 $ 267,747,101 $ 326,106,463
=============== ============== ================
</TABLE>

F-5
<PAGE> 102
CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
----------------------------------------- ---------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Admissions . . . . . . . . . . . . . . . . . . . . $146,959,396 $174,470,503 $183,100,626 $ 82,828,127 $ 97,408,274

Concessions . . . . . . . . . . . . . . . . . . . 83,288,842 95,159,610 102,077,542 46,376,295 53,506,210
Other (Note 11) . . . . . . . . . . . . . . . . . 9,410,654 13,446,676 13,380,589 7,009,400 7,389,162
------------ ------------ ------------ ------------ ------------
Total . . . . . . . . . . . . . . . . . . . . 239,658,892 283,076,789 298,558,757 136,213,822 158,303,646
COSTS AND EXPENSES:
Cost of operations (Note 11):
Film rentals . . . . . . . . . . . . . . . . . . 70,333,865 83,978,465 88,978,423 39,100,278 46,915,669
Concession supplies . . . . . . . . . . . . . . . 15,269,929 17,562,650 17,277,411 8,433,308 9,023,970
Salaries and wages . . . . . . . . . . . . . . . 33,980,789 39,548,147 40,653,338 20,021,665 21,263,603
Facility leases . . . . . . . . . . . . . . . . . 27,269,513 29,599,702 30,873,208 15,274,992 15,943,730
Advertising . . . . . . . . . . . . . . . . . . . 6,068,810 7,189,436 7,623,475 3,497,573 4,172,706
Utilities and other . . . . . . . . . . . . . . . 32,177,059 40,869,506 42,312,878 19,015,615 22,960,389
------------ ------------ ------------ ------------ ------------
Total cost of operations . . . . . . . . . . 185,099,965 218,747,906 227,718,733 105,343,431 120,280,067
General and administrative expenses (Note 9) . . . 12,162,112 17,094,964 19,554,615 9,140,515 11,399,523
Depreciation and amortization . . . . . . . . . . 10,938,830 15,121,120 15,924,794 7,104,874 8,671,525
------------ ------------ ------------ ------------ ------------
Total . . . . . . . . . . . . . . . . . . . . 208,200,907 250,963,990 263,198,142 121,588,820 140,351,115
------------ ------------ ------------ ------------ ------------

OPERATING INCOME . . . . . . . . . . . . . . . . . 31,457,985 32,112,799 35,360,615 14,625,002 17,952,531
OTHER INCOME (EXPENSE):
Interest expense (Note 11) . . . . . . . . . . . . (16,573,409) (18,133,438) (18,549,833) (9,906,075) (9,351,787)
Amortization of debt issue cost and discount . . . (528,724) (783,515) (824,014) (409,366) (414,824)
Interest income (Note 11) . . . . . . . . . . . . 1,317,014 1,415,026 1,779,339 931,296 307,799
Gain (loss) on sale of theatres and other . . . . (145,329) (512,329) 4,796,727 (584,200) 3,647,372
Equity in income of affiliates (Note 12) . . . . . 305,532 2,709 693,415 266,125 401,499
Minority interests in subsidiaries (Note 8) . . . 57,462 (27,306) 288 (67,941) 46,578
------------ ------------ ------------ ------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . (15,567,454) (18,038,853) (12,104,078) (9,770,161) (5,363,363)
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . 15,890,531 14,073,946 23,256,537 4,854,841 12,589,168
INCOME TAXES (Note 10) . . . . . . . . . . . . . . 6,170,477 7,068,275 10,101,405 2,217,027 5,425,513
------------ ------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM . . . . . . . . . 9,720,054 7,005,671 13,155,132 2,637,814 7,163,655
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of
income tax benefit of $273,834 . . . . . . . . . . (334,685)
------------ ------------ ------------ ------------ ------------

NET INCOME . . . . . . . . . . . . . . . . . . . . $ 9,720,054 $ 7,005,671 $ 13,155,132 $ 2,637,814 $ 6,828,970
============ ============ ============ ============ ============
EARNINGS PER SHARE:
Before extraordinary item . . . . . . . . . . . . $ 60.15 $ 43.21 $ 80.32 $ 16.16 $ 40.06
============ ============ ============ ============ ============

Net income . . . . . . . . . . . . . . . . . . . . $ 60.15 $ 43.21 $ 80.32 $ 16.16 $ 38.19
============ ============ ============ ============ ============

WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . . 161,584 162,113 163,776 163,279 178,820
============ ============ ============ ============ ============
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 103
CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock
-------------------- ----------------------
Additional
Shares Shares Paid-In
Issued Amount Issued Amount Capital
---------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 . . . . . . . . . . 3,000 $ 30 205,570 $10,967,419 $ 2,931,970

Capital contributions by
minority shareholders in subsidiaries . 254,403
Net income . . . . . . . . . . . . . . . .
Unearned compensation on
stock options forfeited (Note 7) . . . . (424,436)
Unearned compensation from
stock options granted (Note 7) . . . . . 443,950
Amortization of unearned
compensation (Note 7) . . . . . . . . .
Foreign currency translation
adjustment (Note 2) . . . . . . . . . .
------- ------ ------- ----------- -----------
BALANCE, DECEMBER 31, 1993 . . . . . . . . . 3,000 30 205,570 10,967,419 3,205,887
Net income . . . . . . . . . . . . . . . .
Unearned compensation from
stock options granted (Note 7) . . . . . 1,120,000
Amortization of unearned
compensation (Note 7) . . . . . . . . .
Foreign currency translation
adjustment (Note 2) . . . . . . . . . .
------- ------ ------- ----------- -----------
BALANCE, DECEMBER 31, 1994 . . . . . . . . . 3,000 30 205,570 10,967,419 4,325,887
Net income . . . . . . . . . . . . . . . .
Unearned compensation from
stock options granted (Note 7) . . . . . 2,278,150
Amortization of unearned
compensation (Note 7) . . . . . . . . .
Foreign currency translation
adjustment (Note 2) . . . . . . . . . .
------- ------ ------- ----------- -----------
BALANCE, DECEMBER 31, 1995 . . . . . . . . . 3,000 30 205,570 10,967,419 6,604,037
Conversion of Class A to
Class B common stock . . . . . . . . . . (1,500) (15) 1,500 15
Common stock issuance . . . . . . . . . . 23,893 38,561,000
Net income . . . . . . . . . . . . . . . .
Unearned compensation from
stock options granted . . . . . . . . .
Stock options exercised . . . . . . . . . 1,509 1,509 636,106
Stock options forfeited . . . . . . . . . (140,823)
Foreign currency translation
adjustment . . . . . . . . . . . . . . .
------- ------ ------- ----------- -----------
BALANCE, JUNE 30, 1996
(UNAUDITED) . . . . . . . . . . . . . . . 1,500 $ 15 232,472 $49,529,943 $ 7,099,320
======= ====== ======= =========== ===========
<CAPTION>
Unearned Retained Cumulative
Compensation Earnings Treasury Translation
Stock Options (Deficit) Stock Adjustment Total
------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 . . . . . . . . . . $(2,274,004) (2,719,165) $(20,000,000) $ $(11,093,750)

Capital contributions by
minority shareholders in subsidiaries . 254,403
Net income . . . . . . . . . . . . . . . . 9,720,054 9,720,054
Unearned compensation on
stock options forfeited (Note 7) . . . . 310,987 (113,449)
Unearned compensation from
stock options granted (Note 7) . . . . . (443,950) --
Amortization of unearned
compensation (Note 7) . . . . . . . . . 529,276 529,276
Foreign currency translation
adjustment (Note 2) . . . . . . . . . . (56,080) (56,080)
------------ ---------- ------------ ----------- ------------
BALANCE, DECEMBER 31, 1993 . . . . . . . . . (1,877,691) 7,000,889 (20,000,000) (56,080) (759,546)
Net income . . . . . . . . . . . . . . . . 7,005,671 7,005,671
Unearned compensation from
stock options granted (Note 7) . . . . . (1,120,000) --
Amortization of unearned
compensation (Note 7) . . . . . . . . . 836,081 836,081
Foreign currency translation
adjustment (Note 2) . . . . . . . . . . (4,349,900) (4,349,900)
------------ ---------- ------------ ----------- ------------
BALANCE, DECEMBER 31, 1994 . . . . . . . . . (2,161,610) 14,006,560 (20,000,000) (4,405,980) 2,732,306
Net income . . . . . . . . . . . . . . . . 13,155,132 13,155,132
Unearned compensation from
stock options granted (Note 7) . . . . . (2,278,150) --
Amortization of unearned
compensation (Note 7) . . . . . . . . . 1,591,022 1,591,022
Foreign currency translation
adjustment (Note 2) . . . . . . . . . . (6,133,418) (6,133,418)
------------ ---------- ------------ ----------- ------------
BALANCE, DECEMBER 31, 1995 . . . . . . . . . (2,848,738) 27,161,692 (20,000,000) (10,539,398) 11,345,042
Conversion of Class A to
Class B common stock . . . . . . . . . . --
Common stock issuance . . . . . . . . . . 38,561,000
Net income . . . . . . . . . . . . . . . . 6,828,970 6,828,970
Unearned compensation from
stock options granted . . . . . . . . . 651,215 651,215
Stock options exercised . . . . . . . . . 637,615
Stock options forfeited . . . . . . . . . 112,566 (28,257)
Foreign currency translation
adjustment . . . . . . . . . . . . . . . 83,220 83,220
------------ ---------- ------------ ----------- ------------
BALANCE, JUNE 30, 1996
(UNAUDITED) . . . . . . . . . . . . . . . $(2,084,957) 33,990,662 $(20,000,000) (10,456,178) $ 58,078,805
============ ========== ============ =========== ============
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE> 104
CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . $ 9,720,054 $ 7,005,671 $ 13,155,132 $ 2,637,814 $ 6,828,970
Loss on early extinguishment of debt . . . . . . . 608,519
Noncash items in net income:
Depreciation . . . . . . . . . . . . . . . . . . 9,262,986 10,860,816 12,716,099 6,425,255 7,164,166
Amortization -- intangibles and other assets . . 2,213,330 4,900,756 3,868,241 1,009,392 1,831,059
Deferred lease expenses . . . . . . . . . . . . . 1,678,763 1,366,135 1,051,774 783,510 702,915
Deferred income tax expense . . . . . . . . . . . 1,569,000 1,514,177 1,213,034 669,152
Debt issued for accrued interest . . . . . . . . 418,607 314,756 184,134 80,340 34,871
Amortization of debt discount . . . . . . . . . . 51,718 143,063 164,468 79,593 91,124
Amortized compensation -- stock options . . . . . 415,827 836,081 1,591,022 569,701 622,958
(Gain) loss on sale of assets . . . . . . . . . . 145,329 301,915 (5,196,922) 289,171
Equity in income of affiliates . . . . . . . . . (305,532) (2,709) (693,415) (266,125) (401,499)
Minority interest in income (loss) . . . . . . . (57,462) 27,306 (288) 67,941 (46,578)
Cash from (used for) operating working capital:
Inventories . . . . . . . . . . . . . . . . . . . 49,606 (16,831) (176,881) (177,131) (377,476)
Co-op advertising and other receivables . . . . . (520,965) (771,681) (1,000,649) (1,738,853) (676,756)
Prepaid expenses and other . . . . . . . . . . . (340,668) (1,007,532) 1,356,167 66,135 (719,143)
Refundable income taxes . . . . . . . . . . . . . 686,828
Accounts payable . . . . . . . . . . . . . . . . (824,034) 3,289,736 5,111,906 (1,647,674) 4,358,158
Accrued liabilities . . . . . . . . . . . . . . . 3,120,909 3,677,829 1,451,003 162,659 3,420,703
Income taxes payable . . . . . . . . . . . . . . (103,626) 225,205 1,295,074 (295,440) (1,648,629)
------------ ------------ ------------ ------------ -----------
Net cash from operating
activities . . . . . . . . . . . . . . . . . . . 27,180,670 32,664,693 36,089,899 8,046,288 22,462,514
------------ ------------ ------------ ------------ -----------
INVESTING ACTIVITIES:
Additions to theatre properties and equipment . . (30,703,810) (53,862,918) (89,287,667) (30,228,643) (70,245,126)
Sale of theatre properties and equipment . . . . . 149,794 10,500 8,022,500
Decrease (increase) in certificates of deposit . . (1,830,501) 797,933 (323,034) (287,261) 1,087
Decrease (increase) in temporary cash
investments . . . . . . . . . . . . . . . . . . . 1,529,437 (3,981,970) 4,207,280 1,169,907 (6,900)
Decrease (increase) in investments in and advances
to affiliates . . . . . . . . . . . . . . . . . . (769,029) (3,914,574) (828,065) 2,254,470 (181,054)
Proceeds of Funtime International sale . . . . . . 800,000
Increase in other assets . . . . . . . . . . . . . (3,131,114) (1,924,649) (2,859,127) (1,309,517) (2,165,699)
Purchase of additional 2 Day Video, Inc.
stock . . . . . . . . . . . . . . . . . . . . . . (804,581)
------------ ------------ ------------ ------------ -----------
Net cash used for investing activities . . . . (35,559,804) (62,875,678) (80,268,113) (28,401,044) (72,597,692)
------------ ------------ ------------ ------------ -----------
FINANCING ACTIVITIES:
Increases in long-term debt . . . . . . . . . . . 23,510,000 15,890,000 46,000,000 14,000,000 43,500,000
Reductions of long-term debt . . . . . . . . . . . (54,660) (233,184) (15,025,359) (4,012,395) (37,013,558)
Payment on notes payable to related parties . . . (1,800,000) (2,061,556) (533,563) (2,086,513)
Decrease in theatre development advance . . . . . (81,631) (321,858) (370,808) (370,808) (356,046)
Minority investment in subsidiaries, net . . . . . 1,376,961 102,625
Net proceeds from common stock issuance . . . . . 38,562,509
Increase in additional paid-in capital . . . . . . 302,625 636,106
Issuance of subsidiary common stock
warrants . . . . . . . . . . . . . . . . . . . . 2,100,000 1,324,132
------------ ------------ ------------ ------------ -----------
Net cash from financing activities . . . . . . . 25,050,670 13,273,402 32,030,590 9,385,859 43,242,498
------------ ------------ ------------ ------------ -----------
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT . . . . . . . . . . . . . . . . . . . . (56,080) (441,887) (776,726) (1,647,800) 83,220
------------ ------------ ------------ ------------ -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . 16,615,456 (17,379,470) (12,924,350) (12,616,697) (6,809,460)
CASH AND CASH EQUIVALENTS:
Beginning of period . . . . . . . . . . . . . . . 27,338,088 43,953,544 26,574,074 26,574,074 13,649,724
------------ ------------ ------------ ------------ -----------
End of period . . . . . . . . . . . . . . . . . . $ 43,953,544 $ 26,574,074 $ 13,649,724 $ 13,957,377 $ 6,840,264
============ ============ ============ ============ ===========
</TABLE>

SUPPLEMENTAL INFORMATION (Note 13)

See notes to consolidated financial statements.

F-8
<PAGE> 105
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

Business -- Cinemark USA, Inc. (the Company) and its subsidiaries own or
lease and operate motion picture theatres in 28 states and in Mexico at
December 31, 1995. The following summarizes theatre transactions during 1993,
1994 and 1995:

<TABLE>
<CAPTION>
Theaters Screens
--------- ----------
<S> <C> <C>
Active at January 1, 1993 . . . . . . . . . . . . . . . 147 1,006
Acquisitions--1993 . . . . . . . . . . . . . . . . . 2 10
Openings--1993 . . . . . . . . . . . . . . . . . . . 8 88
Closings/sales--1993 . . . . . . . . . . . . . . . . (4) (20)
--------- ----------
Active at December 31, 1993 . . . . . . . . . . . . . . 153 1,084
Acquisitions--1994 . . . . . . . . . . . . . . . . . 2 9
Openings--1994 . . . . . . . . . . . . . . . . . . . 7 82
Closings/sales--1994 . . . . . . . . . . . . . . . . (4) (12)
--------- ----------
Active at December 31, 1994 . . . . . . . . . . . . . . 158 1,163
Openings--1995 . . . . . . . . . . . . . . . . . . . 11 130
Sales--1995 . . . . . . . . . . . . . . . . . . . . . (10) (46)
--------- ----------
Active at December 31, 1995 . . . . . . . . . . . . . . 159 1,247
========= ==========
</TABLE>

At December 31, 1995, the Company also manages three theatres (37 screens)
for Movie Theatre Investors, Ltd., one theatre (17 screens) for Cinemark
Partners II, and one theatre (12 screens) for Cinemark Theatres Alberta, Inc.,
a Canadian corporation, all related parties (Notes 11 and 12).

Consolidated Financial Statements include the accounts of Cinemark USA,
Inc. and its wholly owned subsidiaries, which include Cinemark International,
Inc. and ENT Holdings, Inc. Cinemark International, Inc. owns 91.45% of
Cinemark Mexico (USA), Inc. (Cinemark Mexico), which owns 99.9% of Cinemark de
Mexico S.A. de C.V. (Cinemark de Mexico), a Mexican corporation, and 50%
interests in affiliates operating in Chile and Canada. ENT Holdings, Inc. owns
100% of Funtime Entertainment, Inc. The financial statements also include 2 Day
Video, Inc. (2 Day) and subsidiary, an 83.1%- owned video rental "superstore"
chain, and Entertainment Amusements, Inc., a 50%-owned holding company whose
subsidiary provides video game machines to many of the Company's theatres.
Majority-owned companies are consolidated; 50%-owned and minority investments
are accounted for under the equity method (Note 12). The results of all of
these subsidiaries and affiliates are included in the financial statements
effective with their formation or from their dates of acquisition. Significant
intercompany balances and transactions are eliminated in the consolidation.

Basis of Presentation -- In preparing the financial statements, management
is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the financial statements and
revenues and expenses for the period. Actual results could differ significantly
from those estimates. The estimates most susceptible to significant change are
those used in determining the valuation of certain accrued liabilities and
valuation of the investments in operations located in foreign countries.
Although some variability is inherent in these estimates, management believes
the amounts provided are adequate. The devaluation of the Mexican peso and the
resultant economic uncertainties in Mexico create certain business risks for
the Company's investment in Mexico.

F-9
<PAGE> 106
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Revenues are recognized when admissions and concessions sales are received
at the theatres. Film rental costs are accrued based on the applicable box
office receipts and the terms of the film licenses.

Cash and Cash Equivalents consist of operating funds held in financial
institutions, petty cash held by the theatres and highly liquid investments
with original maturities of three months or less when purchased.

Temporary Cash Investments consist primarily of time deposits and
government securities which are classified as available for sale and are stated
at amortized cost which approximates market.

Inventories of concession products are stated at the lower of cost
(first-in, first-out method) or market.

Theatre Properties and Equipment are stated at cost less accumulated
depreciation and amortization. Property additions include $565,610 and
$1,745,721 of interest, which was incurred during development and construction,
and capitalized in 1994 and 1995, respectively. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets as
follows: buildings -- 18 to 40 years, theatre furniture and equipment -- 5 to
15 years and videocassette rental inventory -- one to two years. Leasehold
interests and improvements are amortized using the straight-line method over
the lesser of the lease period or the estimated useful lives of the leasehold
improvements.

Intangible Assets represent primarily the excess of cost over the fair
values of the net assets of theatre businesses acquired, less accumulated
amortization ($7,873,970 and $8,853,793 at December 31, 1994 and 1995,
respectively). For financial reporting purposes, these goodwill amounts are
being amortized primarily over 10 to 20 years, which approximate the remaining
lease terms of the businesses acquired.

Deferred Charges and Other Assets, as applicable, are amortized using the
straight-line method over the primary financing terms ended June 2000 to August
2003, for debt issue costs, and over the three- to eight-year terms of the
noncompete agreements.

Deferred Income Taxes are provided under the liability method for temporary
differences between revenue and expenses recognized for tax return and
financial reporting purposes.

Earnings Per Share are computed using the weighted average number of shares
of Class A common stock and common stock equivalents outstanding during each
period, including, as applicable, the Class B common shares and options for
Class B common shares (Note 7).

Fair Values of Financial Instruments are estimated by the Company using
available market information and other valuation methodologies in accordance
with Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
About Fair Value of Financial Instruments." The estimated fair value amounts
for specific groups of financial instruments are presented in Note 5. Values
are based on available market quotes or on estimates using a discounted cash
flow approach based on the interest rates currently available for similar debt.
The fair value of financial instruments for which estimated fair value amounts
are not specifically presented are estimated to approximate the related book
value.

Accounting for Stock-Based Compensation -- In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which will be effective for the Company beginning January 1,
1996. SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based

F-10
<PAGE> 107
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

on the fair value of the equity instrument awarded. Companies are permitted,
however, to continue to apply APB Opinion No. 25, which recognizes compensation
cost based on the intrinsic value of the equity instrument awarded. The Company
will continue to apply APB Opinion No. 25 to its stock-based compensation
awards to employees and will disclose the required pro forma effect on net
income and earnings per share.

Unaudited Interim Financial Information as of June 30, 1996, and for the
six months ended June 30, 1995 and 1996, reflect, in the opinion of the
management of the Company, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation. Operating results for the six
months ended June 30, 1995 and 1996, are not necessarily indicative of the
results to be achieved for the full year.

Reclassifications have been made to certain 1993 and 1994 amounts to
conform to 1995 presentation.

2. FOREIGN CURRENCY TRANSLATION

Cumulative foreign currency translation adjustment in shareholders' equity
of $4,405,980 and $10,539,398 at December 31, 1994 and 1995, respectively,
reflects the unrealized adjustments resulting from translating the financial
statements of Cinemark de Mexico, the Company's only consolidated subsidiary
with foreign operations. The functional currency of Cinemark de Mexico is the
peso. Accordingly, assets and liabilities of Cinemark de Mexico are translated
to U.S. dollars at year-end exchange rates. Income and expense items are
translated at the average rates prevailing during the year. Changes in
exchange rates which affect cash flows and the related payables are recognized
as realized transaction gains and losses in the determination of net income. At
December 31, 1995, the total assets of Cinemark de Mexico were $23,850,156.

3. ACQUISITIONS AND INVESTMENT ACTIVITY

In May 1995, ENT Holdings, Inc. sold its 50% ownership in Funtime
International, Inc., an international pizza and video arcade restaurant
developer, to the other shareholders of Funtime International, Inc. In
connection with this sale, a $2,000,000 note and related interest due to ENT
Holdings, Inc. was canceled, a $500,000 note payable by ENT Holdings, Inc. was
canceled, and Funtime International, Inc. paid $800,000 cash and issued notes
payable of $200,000 and $600,000 to ENT Holdings, Inc. (Note 4). Also in
connection with the sale, ENT Holdings, Inc. granted Funtime International,
Inc. a 12-month option to purchase the assets of the Company's remaining
Funtime Pizza restaurant and other related equipment for $400,000. As a result
of this transaction, ENT Holdings, Inc. incurred a loss of approximately
$294,000.

In connection with a litigation settlement in 1994 with former owners of
Funtime Pizza and current shareholders of Funtime International, Inc., ENT
Holdings, Inc. purchased the remaining 20% (resulting in 100% total) interest
in the outstanding shares of Funtime Entertainment, Inc. (successor to Funtime
Pizza), a pizza and video arcade restaurant operation in the United States.
Also, in 1994 and 1995, the Company wrote off, as amortization expense,
$1,507,217 and $323,249, respectively, of goodwill and $351,361 and $92,389,
respectively, of noncompete agreements related to the closing of certain
Funtime Pizza restaurants acquired in 1992.

In August 1995, Cinemark Inversions, Inc., a 100%-owned subsidiary of
Cinemark International and 50% owner of Cinemark Chile, contributed an
additional $500,000 to Cinemark Chile to fund theatre construction. The other
50% owner of Cinemark Chile also contributed an equal amount.

F-11
<PAGE> 108
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In 1994, the Company converted a note receivable due from 2 Day Video, Inc.
with an unpaid balance of $490,000, into equity of 2 Day, increasing the
Company's total interest to 83.1%. This acquisition was accounted for by the
purchase method, with the total acquisition costs allocated to the identifiable
assets acquired and liabilities assumed at their fair values.

4. DEFERRED CHARGES AND OTHER ASSETS

Deferred charges and other assets at December 31 consist of the following:

<TABLE>
<CAPTION>
1994 1995
------------ -------------
<S> <C> <C>
Debt issue costs (Note 5) . . . . . . . . . . . . . . . $ 6,119,523 $ 6,149,523
Noncompete agreements (Note 3) . . . . . . . . . . . . . 835,564 835,564
------------ -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . 6,955,087 6,985,087
Less accumulated amortization . . . . . . . . . . . . . 1,876,171 2,662,939
------------ -------------
Net . . . . . . . . . . . . . . . . . . . . . . . . . 5,078,916 4,322,148
Equipment, lease and other deposits . . . . . . . . . . 665,018 1,089,166
Funtime International, Inc. (Note 3):
Note receivable, 10% interest, due 1996,
discussed below . . . . . . . . . . . . . . . . . . 200,000
$600,000 convertible note receivable -- net, due
2005, discussed below . . . . . . . . . . . . . . . 445,224
Construction advances and other . . . . . . . . . . . . 2,429,148 4,163,589
------------ -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 8,173,082 $ 10,220,127
============ =============
</TABLE>

The $200,000 note receivable from Funtime International, Inc., due in May
1996 and bearing interest at 10%, is personally guaranteed by shareholders of
Funtime International, Inc. (Note 3).

The $600,000 convertible note receivable from Funtime International, Inc.,
discounted to $445,224 for imputed interest, is non-interest-bearing through
May 2000 and bears interest at 10% from June 2000 through May 2005 (maturity
date). In addition, ENT Holdings, Inc. has granted Funtime International, Inc.
the option to pay off this note receivable in May 1996 for $391,706, and
Funtime International, Inc. has granted ENT Holdings, Inc. the option anytime
after May 16, 2000, to convert the entire unpaid principal of this note
receivable and any unpaid interest into a 15% interest in Funtime
International, Inc. (Note 3).

5. LONG-TERM DEBT AND THEATRE DEVELOPMENT ADVANCE

Long-term debt at December 31 consists of the following:

<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Senior Notes due 2002, discussed below . . . . . . . . . . . $ 125,000,000 $ 125,000,000
Senior Subordinated Notes of Cinemark Mexico due 2003 --
less unamortized discount of $2,015,219 and $1,850,751,
respectively, discussed below . . . . . . . . . . . . . . 20,384,781 20,549,249
Revolving credit line of $75,000,000, discussed below . . . 19,000,000 50,000,000
Note payable, bearing interest at 9%, payable in monthly
installments of principal and interest of $6,298,
with the balance due in 1997, collateralized by
certain equipment, land and building . . . . . . . . . . 569,416 544,057
-------------- --------------
Total long-term debt . . . . . . . . . . . . . . . . . 164,954,197 196,093,306
Less current portion . . . . . . . . . . . . . . . . . 25,359 27,737
-------------- --------------
Long-term debt, less current portion . . . . . . . . . $ 164,928,838 $ 196,065,569
============== ==============
</TABLE>

F-12
<PAGE> 109
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Senior Notes -- In June 1992, the Company completed a public offering (the
Offering) of $125,000,000 senior notes payable (Senior Notes), which are
collateralized by the outstanding common stock of certain "restricted"
subsidiaries of the Company. The Company is required to equally and ratably
secure the Senior Notes upon incurrence by the Company of other secured debt,
subject to limitations and exceptions. The Senior Notes require the Company to
maintain a specified interest expense coverage ratio; restrict the payment of
dividends, payment of subordinated debt prior to maturity and issuance of
preferred stock and other indebtedness; and have other restrictive covenants.

The Senior Notes are redeemable at the option of the Company, in whole or
in part, beginning June 1, 1997, ranging in redemption price of 106% in 1997 to
100% in 2000 and thereafter. A sinking fund requirement provides for the
redemption of $31,250,000 on each of June 1, 2000, and June 1, 2001. The final
payment of $62,500,000 is due June 1, 2002. The Senior Notes bear interest at
the rate of 12% per annum, payable semiannually on June 1 and December 1 of
each year.

Senior Subordinated Notes -- In 1993, Cinemark Mexico issued $20,400,000 of
12% Senior Subordinated Notes due 2003 (the Subordinated Notes), with
detachable warrants (the Warrants) (Note 8). Cinemark de Mexico guarantees the
notes on a senior subordinated basis. The Subordinated Notes were issued at a
discount of $102.94 per $1,000 note, totaling $2,100,000, and bear interest at
12% (effective rate 13.93%) per annum payable semiannually on August 1 and
February 1.

In 1994, Cinemark Mexico issued an additional $2,000,000 of Subordinated
Notes due 2003 with the terms governed by the indenture from the initial
offering of Subordinated Notes. These notes were issued at a discount of $55
per $1,000 note, totaling $110,000, and bear interest at 12% (effective rate
13.03%) per annum payable semiannually on August 1 and February 1.

A sinking fund payment of $6,667,000 is required on each of August 1, 2001,
and August 1, 2002, which amounts are to be utilized on such respective dates
to retire a like face amount of the outstanding Subordinated Notes. The
indenture governing the Subordinated Notes restricts the ability of Cinemark
Mexico and Cinemark de Mexico to, among other things, pay dividends; make
investments; incur additional indebtedness; redeem stock; use proceeds of asset
disposals; create liens; engage in transactions with affiliates; and to merge,
consolidate or sell all or substantially all the assets of the companies.

Revolving Credit Line -- On February 14, 1996, the Company replaced the
Revolving Credit Line with a revolving and term credit agreement (the "Credit
Facility") with a group of banks. The Credit Facility provides for loans to the
Company of up to $175,000,000 in the aggregate and bears interest at a defined
floating rate, adjusted in accordance with certain financial ratios. The
effective interest rate at December 31, 1995, was 7%. Any amounts borrowed by
the Company under the Credit Facility prior to February 13, 1999, will be
borrowed on a revolving loan basis. On February 13, 1999, any outstanding
revolving loans will be

F-13
<PAGE> 110
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

converted into term loans. In addition, subject to the limitation on the
occurrence of indebtedness under the Indenture, on February 13, 1999, the
Company may borrow as a term loan the difference between $175,000,000 and the
outstanding revolving loans. The term loans will be payable quarterly beginning
June 30, 1999, with 11.25%, 18.75%, 23.75% and 36.25% of the initial principal
amount of the term loans due in 1999, 2000, 2001 and 2002, respectively. Any
remaining principal amount of the term loans is due and payable February 13,
2003. The Credit Facility is secured by a pledge of all of the issued and
outstanding capital stock of the Company owned by the majority shareholder and
affiliates; requires the Company to maintain certain financial ratios;
restricts the payment of dividends, payment of subordinated debt prior to
maturity and issuance of preferred stock and other indebtedness; and has other
restricting covenants.

Long-term debt at December 31, 1995, matures as follows: $27,737 in 1996,
$516,320 in 1997, $0 in 1998, $5,625,000 in 1999, $9,375,000 in 2000 and
$180,549,249 thereafter. Also see Note 14.

The estimated fair value of the Company's long-term debt of $196.1 million
book value at December 31, 1995, was approximately $208.6 million. Such amounts
do not include prepayment penalties which would be incurred upon the early
extinguishment of certain debt issues. The weighted average interest rate on
long-term debt at December 31, 1995, was 11.1%.

Debt Issue Costs -- Debt issue costs of $6,119,523 and $6,149,523, net of
accumulated amortization of $1,350,723 and $2,010,268, related to the Senior
Notes, Senior Subordinated Notes and Revolving Credit Line, are included in
deferred charges at December 31, 1994 and 1995, respectively (Note 4).

Theatre Development Advance -- The current portion of long-term liabilities
also includes $350,000 at December 31, 1994 and 1995, for the estimated amount
to be payable in the following year on a theatre development advance. The
remaining long-term portion of this advance of $1,125,703 at December 31, 1995,
will be repayable based on the future operations of a theatre opened in 1992.

6. NOTES PAYABLE TO RELATED PARTIES

Notes payable to related parties at December 31 consist of the following:

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Note payable to The Peble Corp. (a shareholder
of the Company) bearing interest at 8.5% . . . . . . . . $ 957,158 $ 1,041,147
Note payable to an officer and shareholder,
bearing interest at 8.5% . . . . . . . . . . . . . . . . 928,980 1,010,495
Note payable to former owners of Funtime Pizza,
bearing interest at 10%, canceled in 1995 (Note 3) . . . 533,562
------------ ------------
$ 2,419,700 $ 2,051,642
============ ============
</TABLE>

The Company expects to prepay in March 1996 the note payable to The Peble
Corp. and the note payable to an officer and shareholder. The notes are
classified as current liabilities at December 31, 1995.

F-14
<PAGE> 111
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1995, these notes are subordinated to the Senior Notes and
include $565,633 and $697,575 of accrued interest at December 31, 1994 and
1995, respectively.

7. CAPITAL STOCK

Common and Preferred Stocks -- Class A common shareholders have exclusive
voting rights. Class B common shareholders have no voting rights, except upon
any proposed amendments to the articles of incorporation, but may convert at
their option to Class A common stock. In the event of any liquidation, the
Class A and Class B shareholders will be entitled to their pro rata share of
assets remaining after any preferred shareholders have received their
preferential amounts based on their respective shares held.

At December 31, 1995, the Company has reserved Class A common stock in the
amount of 150,779 shares for potential conversions of outstanding Class B
common stock and 10,485 shares for potential conversion of Class B common stock
issuable under the stock option plan. The Company has 1,000,000 shares of
preferred stock, $1.00 par value, authorized with none issued or outstanding.

Stock Option Plan -- In 1991, the Company adopted a nonqualified stock
option plan under which key employees may be granted options to purchase up to
10,685 shares of the Company's Class B common stock. In 1991, the Company
granted options to purchase 8,276 shares of the Class B common stock at an
exercise price of $1.00 per share. In 1993, 1,201 of these options were
forfeited, and the Company granted additional options to purchase 533 shares of
the Class B common stock at an exercise price of $1.00 per share. The amortized
portion of unearned compensation of $113,449 relating to options which were
forfeited in 1993 was accounted for as a reduction of 1993 compensation
expense.

In 1993, the Company also granted options to purchase 900 shares of Class B
common stock at an exercise price equal to fair value at the date of grant
($833.34 per share) to three directors of the Company. In April 1995, the
Company canceled these options and granted options to purchase 600 shares of
Class B common stock at an exercise price of $1.00 per share to the same
directors, resulting in unearned compensation of $690,000. Total compensation
expense of $414,000 was immediately recognized upon this exchange, with
compensation expense of $276,000 to be recognized over the remaining vesting
period of 15 months.

The total options granted in 1994 and 1995, including the 600 options
described above, were 896 and 1,981 shares, respectively, of the Class B common
stock at an exercise price of $1.00 per share. All options vest and are
exercisable over a period of five years from the date of grant and expire ten
years from date of grant (also see Note 14). At December 31, 1995, 6,383
options are exercisable out of a total of 10,485 outstanding.

The excess of the estimated fair market value of the stock at the dates of
the grant over the exercise price of the options are accounted for as
additional paid-in capital and as unearned compensation, which is amortized to
operations over the vesting period. Compensation expense under this stock
option plan was $415,827, $836,081 and $1,591,022 in 1993, 1994 and 1995,
respectively.

F-15
<PAGE> 112
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. MINORITY INTERESTS IN SUBSIDIARIES

Common Shareholders' Equity -- Minority ownership interests in subsidiaries
and affiliates of the Company are as follows at December 31:

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Cinemark Mexico -- 8.55% interest . . . . . . . . . . . $ 318,654 $ 405,634
Laredo Theater Joint Venture -- 25% interest (owned by a
relative of the majority shareholder) . . . . . . . . 586,958 574,448
2 Day Video -- 16.9% interest . . . . . . . . . . . . . 354,084 381,951
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 1,259,696 $ 1,362,033
============ ============
</TABLE>

In 1993, Cinemark Mexico issued 83,251 shares of common stock for
$1,000,000 to an unaffiliated Aruba corporation controlled by Mexican
nationals. In June 1995, Cinemark Mexico issued an additional 34,793 shares of
common stock for $302,625 to the same corporation for a cumulative 8.55% (6.7%
on a fully diluted basis) interest in Cinemark Mexico at December 31, 1995.

Common Stock Warrants -- In connection with the issuance of the
Subordinated Notes (Note 5), Cinemark Mexico issued warrants for $2.1 million,
which are exercisable into 226,662 shares of Cinemark Mexico's common stock. In
August 1995, Cinemark Mexico sold additional warrants for $1,324,132, which are
exercisable into 152,411 shares, which when aggregated with the previously
purchased warrants convert to 20% of the ownership on a fully diluted basis at
December 31, 1995, of Cinemark Mexico's common stock. The warrants are
exercisable at $.001 per share subject to the following terms and expire on
August 1, 2003. At any time after January 31, 1998, Cinemark Mexico may redeem
the warrants in whole or in part at their appraised value. If the warrants have
not been redeemed by August 1, 1998, Cinemark Mexico must offer to purchase
one-third of the warrants on each July 31, 1998, 1999 and 2000, utilizing the
appraised value on such dates. At December 31, 1995, Cinemark Mexico has
reserved 379,073 shares of common stock for the potential conversion of the
warrants.

Stock Options Plan -- Cinemark Mexico has a nonqualified stock option plan
under which key employees may be granted options to purchase up to 100,000
shares of Cinemark Mexico's common stock. The exercise price and terms of the
options are discretionary and determined when the options are granted. In 1994,
Cinemark Mexico granted options to purchase 16,704 shares of common stock at an
exercise price of $.10 per share to certain employees, resulting in unearned
compensation of $183,292. In 1995, 12,528 of these options were canceled due to
termination of the option holders. The remaining options vest over a period of
five years from the date of grant and expire ten years from the date of grant.
At December 31, 1995, no options were exercisable.

9. LEASES AND OTHER COMMITMENTS

Leases -- The Company conducts a significant part of its theatre operations
in leased premises under noncancelable operating leases with terms of 5 to 30
years. In addition to the minimum annual lease payment, most of these leases
provide for contingent rentals based on operating results and require the
payment of taxes, insurance and other costs applicable to the property.
Generally, these leases include renewal options for various periods at
stipulated rates. Some leases also provide for escalating rent payments
throughout the lease

F-16
<PAGE> 113
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

term. Deferred lease expenses of $8,759,264 and $9,811,038 at December 31, 1994
and 1995, respectively, have been provided to account for lease expenses on a
straight-line basis, where lease payments are not made on such basis. Rent
expense for the years ended December 31, 1993, 1994 and 1995, totaled
$27,600,313, $29,916,187 and $31,273,367, respectively.

Future minimum payments under noncancelable operating leases with initial
or remaining terms in excess of one year at December 31, 1995, are due as
follows:

<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . $ 30,186,726
1997 . . . . . . . . . . . . . . . . . . . . . . . 29,831,403
1998 . . . . . . . . . . . . . . . . . . . . . . . 29,130,629
1999 . . . . . . . . . . . . . . . . . . . . . . . 28,911,474
2000 . . . . . . . . . . . . . . . . . . . . . . . 27,930,207
Thereafter . . . . . . . . . . . . . . . . . . . . 287,005,711
--------------
Total . . . . . . . . . . . . . . . . . . . . . . $ 432,996,150
==============
</TABLE>

As of March 12, 1996, the Company had entered into other lease agreements
that are contingent on the lessors' obtaining financing and completing
construction of theatre facilities. Upon satisfaction of the contingency, the
agreements will require future minimum lease payments over 15 to 25 years
estimated to be $106 million for 12 theatre facilities in the United States and
$9 million for two theatres in Mexico.

Employment Agreements -- As of December 31, 1995, the Company has
employment agreements with certain principal officers and a shareholder
providing for total minimum future annual payments as follows:

<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . $ 426,419
1997 . . . . . . . . . . . . . . . . . . . . . . . 469,061
1998 . . . . . . . . . . . . . . . . . . . . . . . 515,967
1999 . . . . . . . . . . . . . . . . . . . . . . . 567,564
2000 . . . . . . . . . . . . . . . . . . . . . . . 624,320
Thereafter . . . . . . . . . . . . . . . . . . . . 686,752
--------------
Total . . . . . . . . . . . . . . . . . . . . . . $ 3,290,083
==============
</TABLE>

These employment agreements terminate on the earlier of death, permanent
disability or December 31, 2001.

Retirement Savings Plan -- The Company has a 401(k) profit sharing plan for
the benefit of all employees and makes contributions as determined annually by
the Board of Directors. Contributions of $432,141, $427,963 and $415,121 were
made in 1993, 1994 and 1995, respectively.

Letters of Credit and Collateral -- At December 31, 1995, the Company has
outstanding letters of credit of $1,822,954 in connection with property and
liability insurance coverage and certain lease matters. Certificates of deposit
of $1,822,954 are pledged as collateral on the letters of credit.

F-17
<PAGE> 114
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. INCOME TAXES

Income tax expense consists of the following:

<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Current:
Federal -- before utilization of credits $ 4,965,865 $ 5,543,239 $ 8,927,814
Utilization of tax credits . . . . . . . (1,049,000) (987,000) (1,908,821)
State . . . . . . . . . . . . . . . . . . 684,612 997,859 1,869,378
-------------- -------------- ---------------
Total current expense . . . . . . . . . 4,601,477 5,554,098 8,888,371

Deferred:
Current temporary differences . . . . . . 757,000 787,177 (466,356)
Reestablished from utilization of
tax credits . . . . . . . . . . . . . . 1,049,000 727,000 1,679,390
Jobs tax credits . . . . . . . . . . . . (237,000)
-------------- -------------- ---------------
Total deferred expense . . . . . . . . 1,569,000 1,514,177 1,213,034
-------------- -------------- ---------------
Income tax expense . . . . . . . . . . $ 6,170,477 $ 7,068,275 $ 10,101,405
============== ============== ===============
</TABLE>

A reconciliation between income tax expense and taxes computed by applying
the applicable statutory federal income tax rate to income before income taxes
follows:

<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Computed normal tax expense . . . . . . . . $ 5,541,574 $ 4,925,882 $ 8,139,788
Goodwill amortization, not deductible for
tax purposes . . . . . . . . . . . . . . 443,213 934,044 361,647
State and local income taxes, net of federal
income tax benefit . . . . . . . . . . . 444,997 711,226 1,151,411
Foreign subsidiaries losses not utilized
currently . . . . . . . . . . . . . . . . 445,872 874,897
Benefit of net operating loss carryforwards
utilized currently . . . . . . . . . . . (165,329)
Jobs tax credits . . . . . . . . . . . . . . (237,000) (260,000) (127,267)
Other -- net . . . . . . . . . . . . . . . . (22,307) 476,580 (299,071)
-------------- -------------- ---------------
$ 6,170,477 $ 7,068,275 $ 10,101,405
============== ============== ===============
</TABLE>

F-18
<PAGE> 115
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of significant temporary differences and carryforwards
comprising the net long-term deferred income tax liability at December 31, 1994
and 1995, consist of the following:

<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Deferred liabilities:
Accelerated tax depreciation . . . . . . . . . . . . . $ 9,407,993 $ 11,293,935
Basis difference of assets acquired . . . . . . . . . . 660,624 324,878
Other . . . . . . . . . . . . . . . . . . . . . . . . . 556,299 944,740
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . 10,624,916 12,563,553
Deferred assets:
Deferred lease expense . . . . . . . . . . . . . . . . 3,458,268 3,799,182
Section 263(a) inventory adjustment . . . . . . . . . . 654,028 715,632
Amortization of unearned compensation . . . . . . . . . 742,175 1,372,454
Self-insurance accruals . . . . . . . . . . . . . . . . 244,070 1,118,393
Deferred gain on sale of interest rate swap . . . . . . 220,028 117,909
Tax net operating loss carryforward for
foreign subsidiaries . . . . . . . . . . . . . . . . 445,872 1,320,769
Valuation allowance -- operating loss carryforward . . (445,872) (1,320,769)
Other expenses, not currently deductible for
tax purposes . . . . . . . . . . . . . . . . . . . . 814,994 1,143,772
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . 6,133,563 8,267,342
------------- -------------
Net deferred tax liability . . . . . . . . . . . . . . 4,491,353 4,296,211
AMT credit carryforwards . . . . . . . . . . . . . . . (1,408,176)
------------- -------------
Net long-term deferred income tax liability . . . . . . $ 3,083,177 $ 4,296,211
============= =============
</TABLE>

F-19
<PAGE> 116
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. OTHER RELATED PARTY TRANSACTIONS

Transactions with related companies are included in the Company's financial
statements as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------- ------------
<S> <C> <C> <C>
Facility lease expense -- for theatre and
equipment leases with shareholder affiliates . . . $ 359,755 $ 347,917 $ 306,937
Interest expense to The Peble Corp.
(Note 6) . . . . . . . . . . . . . . . . . . . . . 275,550 118,094 83,989
Interest expense -- to an officer and
shareholder of the Company (Note 6) . . . . . . . . 143,056 115,149 81,515
Interest expense -- to former owners of
Funtime Pizza and current shareholders
of Funtime International, Inc. (Note 3) . . . . . . 33,562 18,630
Interest income -- from Funtime International,
Inc. (Notes 3, 4 and 12) . . . . . . . . . . . . . 165,388 96,870
Video game machine income -- from a subsidiary
of Entertainment Amusements, Inc.
(Note 12) . . . . . . . . . . . . . . . . . . . . . 1,131,460 1,157,105 1,394,467
Management fees -- from Movie Theatre Investors,
Ltd. (Note 12) for property and theater
management services . . . . . . . . . . . . . . . . 371,540 274,304 300,662
Management fees -- from Cinemark Theatres Alberta,
Inc. (Note 12) for property and theater
management services . . . . . . . . . . . . . . . . 64,426 74,928
Management fees -- from Cinemark Partners II, Ltd.
(Note 12) for property and theater management
services . . . . . . . . . . . . . . . . . . . . . 171,500
</TABLE>

In 1994, Cinemark Properties, Inc. purchased land in Indiana from an
officer and shareholder of the Company for $550,000. This land was previously
leased, as the Company owns and maintains an operating theatre on the site.

The majority shareholder and certain employees of the Company own a
minority portion of both Cinemark Partners II, Ltd. and Movie Theatre
Investors, Ltd.

The Company leases a theatre facility to a relative of the Company's
majority shareholder.

12. INVESTMENTS IN AND ADVANCES TO AFFILIATES

The Company has the following investments and advances to affiliates at
December 31:

F-20
<PAGE> 117
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Cinemark Chile, S.A. -- investment, at equity
(Note 3) . . . . . . . . . . . . . . . . . . . . . . . . $ 1,020,758 $ 1,775,435
Entertainment Amusements, Inc. -- investment,
at equity . . . . . . . . . . . . . . . . . . . . . . . . 586,472 831,381
Movie Theater Investors, Ltd. -- partnership interest . . . 55,869 55,869
Cinemark Theatres Alberta, Inc. -- investment,
at equity . . . . . . . . . . . . . . . . . . . . . . . . 1,321,380 1,408,228
Cinemark Partners II, Ltd. -- partnership interest . . . . . 83,000 83,000
Beaumont Cinema Ventures, Ltd. -- partnership interest . . . 82,665 121,689
Funtime International Inc. (Note 3):
Investment, at equity . . . . . . . . . . . . . . . . . . 24,848
Note and interest receivable, 12% interest . . . . . . . 2,165,388
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,340,380 $ 4,275,602
============ ============
</TABLE>

Other receivables at December 31 include amounts due from the following:

<TABLE>
<CAPTION>
1994 1995
------------- ------------
<S> <C> <C>
A subsidiary of Entertainment Amusements, Inc. . . . . . . . $ 175,284 $ 155,137
Movie Theater Investors, Ltd. . . . . . . . . . . . . . . . 268,573 394,345
Cinemark Chile, S.A. . . . . . . . . . . . . . . . . . . . . 149,761 62,549
Cinemark Partners II, Ltd. . . . . . . . . . . . . . . . . . 453,466 614,620
Related party rent receivable (Note 11) . . . . . . . . . . 199,967
</TABLE>

13. SUPPLEMENTAL CASH FLOW INFORMATION

The following is provided as supplemental information to the consolidated
statement of cash flows:

<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------- -------------
<S> <C> <C> <C>
Interest paid . . . . . . . . . . . . . . . . . . $ 15,082,112 $ 17,477,121 $ 19,864,594
============ ============= =============

Income taxes paid . . . . . . . . . . . . . . . . $ 4,018,275 $ 5,520,885 $ 7,195,765
============ ============= =============

Noncash investing and financing activities:
Note issued for stock of Funtime
Entertainment, Inc. . . . . . . . . . . . . . $ -- $ 500,000 $ --
Canceled note payable and accrued interest due to
former owners of Funtime Pizza
(Notes 3 and 6) . . . . . . . . . . . . . . . . 552,192
Canceled investment, note receivable and accrued
interest due from Funtime International, Inc.
(Notes 3 and 4) . . . . . . . . . . . . . . . . 2,291,837
Issued note receivable due from Funtime
International, Inc. (Notes 3 and 4) . . . . . . 445,224
</TABLE>

F-21
<PAGE> 118
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. CYPRESS INVESTMENT TRANSACTION

On February 20, 1996, the Company entered into a Securities Purchase
Agreement (the "Purchase Agreement") pursuant to which the Company issued to
Cypress Merchant Banking Partners L.P. and Cypress Pictures Ltd. (collectively,
"Cypress") an aggregate 23,893 shares of Class B Common Stock for an aggregate
purchase price of $41.0 million. As part of the Purchase Agreement, existing
shareholders sold an additional 58,655 shares to Cypress for a total purchase
price of approximately $98.2 million. The closing of the issuance and sale of
common stock of the Company to Cypress occurred on March 12, 1996. The net
proceeds from the issuance of stock by the Company will be used to continue the
Company's expansion program and for general corporate purposes.

15. SUBSEQUENT EVENT (UNAUDITED)

Effective April 19, 1996, the Company entered into a Settlement Agreement
and Release ending litigation that the Company filed against the City of Dallas
for rejecting the development plan of a proposed theatre. The City of Dallas
paid the Company $5 million in monetary damages, and the Company agreed to
dismiss all claims against the defendants. An Agreed Final Order of the
District Court was issued on April 23, 1996, dismissing the litigation with
prejudice. As a result of the settlement, the Company will recognize a gain of
approximately $2.0 million, net of taxes and attorney's fee, in the second
quarter of 1996.

In April 1996, the Company incurred additional compensation expense of
$1.8 million resulting from the payment of a cash bonus to key employees to
reimburse them for the taxes due upon the exercise of nonqualified stock
options. The Company will receive a current tax benefit approximately equal to
the total cash bonus paid, as a result of being allowed a tax deduction for the
value of the bonus and the difference between the value and exercise price of
the nonqualified options. For generally accepted accounting principles purposes
the Company will recognize the tax benefit for the deduction arising from the
difference in value between the option and its exercise price as additional
paid-in capital (rather than as a reduction of tax expense).

On July 15, 1996, the Company commenced an offer to purchase and consent
solicitation (the "Repurchase Offer") to repurchase all of the $125,000,000
principal amount of the Company's 12% Senior Notes due 2001 (the "Old Notes")
and amend the indenture pursuant to which the Old Notes were issued. The
holders of an aggregate principal amount of $123,370,000 of Old Notes tendered
their Old notes and delivered consents pursuant to the Repurchase Offer. On
August 15, 1996, the Company issued $200 million aggregate principal amount of
Series A Notes pursuant to the Series A Offering with covenants and provisions
similar to the Old Notes. The net proceeds of the Series A Offering were used
by the Company to (i) repurchase an aggregate of $123,370,000 principal amount
of Old Notes and pay premium and consents payments related thereto pursuant to
the Repurchase Offer and (ii) reduce the Company's indebtedness under the
Credit Facility.

F-22
<PAGE> 119
CINEMARK USA, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE A
CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 1995

ASSETS

<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
GROUP GROUP ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and equivalents . . . . . . . . . . . $ 4,964,706 $ 8,685,018 $ -- $ 13,649,724
Temporary cash investments . . . . . . . . 275,126 275,126
Other current assets . . . . . . . . . . . 4,695,109 1,246,104 (638,154) 5,303,059
------------ ------------ ------------ ------------
Total current assets . . . . . . . . 9,659,815 10,206,248 (638,154) 19,227,909
THEATRE PROPERTIES AND
EQUIPMENT -- Net . . . . . . . . . . . . . 206,029,811 18,452,406 224,482,217
OTHER ASSETS:
Certificate of deposit . . . . . . . . . . 1,822,954 1,822,954
Investments in and advances
to affiliate . . . . . . . . . . . . . 6,550,979 3,305,352 (5,580,729) 4,275,602
Intangible assets -- net . . . . . . . . . 10,170,510 (2,452,218) 7,718,292
Deferred charges and other -- net . . . . 5,904,340 4,315,787 10,220,127
------------ ------------ ------------ ------------
Total other assets . . . . . . . . . 24,448,783 7,621,139 (8,032,947) 24,036,975
------------ ------------ ------------ ------------
TOTAL . . . . . . . . . . . . . . . . . . . . $240,138,409 $ 36,279,793 $ (8,671,101) $267,747,101
============ ============ ============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term
liabilities . . . . . . . . . . . . . . $ 377,737 $ -- $ -- $ 377,737
Accounts payable and accrued
liabilities . . . . . . . . . . . . . . 33,296,603 2,942,762 36,239,365
Notes payable to related parties . . . . . 2,051,642 2,051,642
Income taxes payable . . . . . . . . . . . 1,563,629 85,000 1,648,629
------------ ------------ ------------ ------------
Total current liabilities . . . . . . 37,289,611 3,027,762 -- 40,317,373
LONG TERM LIABILITIES:
Long-term debt, less current portion . . . 175,516,320 21,187,403 (638,154) 196,065,569
Deferred lease expenses . . . . . . . . . 9,609,123 201,915 9,811,038
Other long-term liabilities . . . . . . . 1,125,703 1,125,703
Deferred income taxes . . . . . . . . . . 4,296,211 4,296,211
------------ ------------ ------------ ------------
Total long-term liabilities . . . . . 190,547,357 21,389,318 (638,154) 211,298,521
MINORITY INTERESTS IN
SUBSIDIARIES . . . . . . . . . . . . . . . 956,399 3,829,766 4,786,165
SHAREHOLDERS' EQUITY:
Common stock . . . . . . . . . . . . . . . 10,967,449 1,000 (1,000) 10,967,449
Additional paid-in capital . . . . . . . . 6,604,037 20,244,000 (20,244,000) 6,604,037
Unearned compensation -- stock options . . (2,848,738) (2,848,738)
Retained earnings . . . . . . . . . . . . 27,161,692 (1,646,431) 1,646,431 27,161,692
Treasury stock . . . . . . . . . . . . . . (20,000,000) (20,000,000)
Cumulative foreign currency translation
adjustment . . . . . . . . . . . . . . (10,539,398) (10,565,622) 10,565,622 (10,539,398)
------------ ------------ ------------ ------------
Total shareholders' equity . . . . . 11,345,042 8,032,947 (8,032,947) 11,345,042
------------ ------------ ------------ ------------
TOTAL . . . . . . . . . . . . . . . . . . . . $240,138,409 $ 36,279,793 $ (8,671,101) $267,747,101
============ ============ ============ ============
</TABLE>

- ---------------

Note: "Restricted Group" means the Company and its Restricted Subsidiaries
(as defined in the Indenture) and "Unrestricted Group" means the
Unrestricted Subsidiaries of the Company (as defined in the Indenture).

S-1
<PAGE> 120
CINEMARK USA, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE B
CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
GROUP GROUP ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . $286,872,540 $ 12,264,616 $ (578,399) $298,558,757
COSTS AND EXPENSES:
Cost of operations . . . . . . . . . . . . 217,256,785 10,461,948 227,718,733
General and administrative expenses . . . 18,221,118 1,911,896 (578,399) 19,554,615
Depreciation and amortization . . . . . . 15,329,030 732,632 (136,868) 15,924,794
------------ ------------ ------------ ------------
Total . . . . . . . . . . . . . . . . 250,806,933 13,106,476 (715,267) 263,198,142
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) . . . . . . . . . . . 36,065,607 (841,860) 136,868 35,360,615
OTHER INCOME (EXPENSE):
Interest expense . . . . . . . . . . . . . ( 16,028,856) ( 2,520,977) (18,549,833)
Amortization of debt issue cost and debt
discount . . . . . . . . . . . . . . . (560,304) (263,710) (824,014)
Equity in income (loss) of affiliates . . ( 1,681,075) 438,389 1,936,101 693,415
Other income, net . . . . . . . . . . . . 5,252,926 1,323,140 6,576,066
Minority interest in (income) loss . . . . (215,357) 215,645 288
------------ ------------ ------------ ------------
Total . . . . . . . . . . . . . . . . (13,232,666) (807,513) 1,936,101 (12,104,078)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAXES . . . . . . . . . . . . . . . . . . 22,832,941 (1,649,373) 2,072,969 23,256,537
INCOME TAXES EXPENSE . . . . . . . . . . . . 9,677,809 423,596 10,101,405
------------ ------------ ------------ ------------
NET INCOME (LOSS) . . . . . . . . . . . . . . $ 13,155,132 $ (2,072,969) $ 2,072,969 $ 13,155,132
============ ============ ============ ============
</TABLE>

- ---------------

S-2
<PAGE> 121
CINEMARK USA, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE C
CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
GROUP GROUP ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net income (loss) . . . . . . . . . . . . $ 13,155,132 $ (2,072,969) $ 2,072,969 $ 13,155,132
Noncash items in net income (loss):
Depreciation . . . . . . . . . . . . . 11,995,363 720,736 12,716,099
Amortization--intangibles and
other assets . . . . . . . . . . . . 3,893,971 111,138 (136,868) 3,868,241
Deferred lease expenses . . . . . . . . 932,436 119,338 1,051,774
Deferred income tax expense . . . . . . 1,213,034 1,213,034
Debt issued for accrued interest . . . 184,134 184,134
Amortization of debt discount . . . . . 164,468 164,468
Amortized compensation--
stock options . . . . . . . . . . . . 1,591,022 1,591,022
Gain on sale of assets . . . . . . . . (5,196,922) (5,196,922)
Equity in (income) loss of affiliate . 1,817,943 (438,389) (2,072,969) (693,415)
Minority interest in income (loss) . . 215,357 (215,645) (288)
Cash from operating working capital . . . 4,149,971 3,248,495 638,154 8,036,620
------------ ------------ ------------ ------------
Net cash from operations . . . . . . 33,951,441 1,637,172 501,286 36,089,899
------------ ------------ ------------ ------------
INVESTING ACTIVITIES:
Additions to theatre properties and
equipment . . . . . . . . . . . . . . . (72,911,361) (16,376,306) (89,287,667)
Sale of theatre properties and
equipment . . . . . . . . . . . . . . . 8,022,500 8,022,500
Increase in certificate of deposit . . . . (323,034) (323,034)
Decrease (increase) in temporary cash
investments . . . . . . . . . . . . . . (100,000) 4,307,280 4,207,280
Decrease in advances to affiliate . . . . (385,906) (442,159) (828,065)
Proceeds of Funtime International sale . . 800,000 800,000
Increase in other assets . . . . . . . . . (1,527,637) (1,468,358) 136,868 (2,859,127)
------------ ------------ ------------ ------------
Net cash used for investing
activities . . . . . . . . . . . . . (66,425,438) (13,979,543) 136,868 (80,268,113)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES:
Increases in long-term debt . . . . . . . 46,000,000 46,000,000
Reductions of long-term debt . . . . . . . (15,025,359) (15,025,359)
Increase in related party notes payable . 638,154 (638,154) --
Payment on theatre development
advance . . . . . . . . . . . . . . . . (370,808) (370,808)
Minority investment in subsidiaries . . . (200,000) 302,625 102,625
Issuance of subsidiary common stock
warrants . . . . . . . . . . . . . . . 1,324,132 1,324,132
------------ ------------ ------------ ------------
Net cash from financing
activities . . . . . . . . . . . . . 30,403,833 2,264,911 (638,154) 32,030,590
------------ ------------ ------------ ------------
FOREIGN CURRENCY
TRANSLATION ADJUSTMENT . . . . . . . . . . (776,726) (776,726)
------------ ------------ ------------ ------------
DECREASE IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . (2,070,164) (10,854,186) (12,924,350)
CASH AND CASH EQUIVALENTS:
Beginning of year . . . . . . . . . . . . 7,034,870 19,539,204 26,574,074
------------ ------------ ------------ ------------
End of year . . . . . . . . . . . . . . . $ 4,964,706 $ 8,685,018 $ $ 13,649,724
============ ============ ============ ============
</TABLE>

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S-3
<PAGE> 122
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE D
CONSOLIDATING BALANCE SHEET INFORMATION
JUNE 30, 1996
(UNAUDITED)

ASSETS

OTHER ASSETS:
Certificates of deposit . . . . . . . . . 1,821,867 1,821,867
Investments in and advances
to affiliates . . . . . . . . . . . . . 5,654,477 3,812,905 (4,609,227) 4,858,155
Intangible assets -- net . . . . . . . . . 9,610,796 (2,383,784) 7,227,012
Deferred charges and
other -- net . . . . . . . . . . . . . 5,487,381 4,950,147 10,437,528
------------ ------------ ------------ ------------
Total other assets . . . . . . . . . 22,574,521 8,763,052 (6,993,011) 24,344,562
------------ ------------ ------------ ------------
TOTAL . . . . . . . . . . . . . . . . . $298,152,247 $ 36,402,458 $ (8,448,242) $326,106,463
============ ============ ============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term
liabilities . . . . . . . . . . . . . . $ 379,009 $ -- $ -- $ 379,009
Accounts payable and accrued . . . . . . . 40,622,753 3,395,473 44,018,226
liabilities . . . . . . . . . . . . . . 292,346 (292,346)
------------ ------------ ------------ ------------
Income taxes payable
Total current liabilities . . . . . . 41,001,762 3,687,819 (292,346) 44,397,235
LONG-TERM LIABILITIES:
Long-term debt, less
current portion . . . . . . . . . . . . 182,001,490 20,640,373 202,641,863
Deferred lease expenses . . . . . . . . . 10,273,418 240,535 10,513,953
Other long-term liabilities . . . . . . . 769,657 1,162,885 (1,162,885) 769,657
Deferred income taxes . . . . . . . . . . 4,965,363 4,965,363
------------ ------------ ------------ ------------
Total long-term liabilities . . . . . 198,009,928 22,043,793 (1,162,885) 218,890,836
MINORITY INTERESTS IN
SUBSIDIARIES . . . . . . . . . . . . . . . 1,061,752 3,677,835 4,739,587
SHAREHOLDERS' EQUITY:
Common stock . . . . . . . . . . . . . . . 49,529,958 1,000 (1,000) 49,529,958
Additional paid-in capital . . . . . . . . 7,099,320 20,244,000 (20,244,000) 7,099,320
Unearned compensation --
stock options . . . . . . . . . . . . . (2,084,957) (2,084,957)
Retained earnings . . . . . . . . . . . . 33,990,662 (2,769,587) 2,769,587 33,990,662
Treasury stock . . . . . . . . . . . . . . (20,000,000) (20,000,000)
Cumulative foreign currency translation
adjustment . . . . . . . . . . . . . . (10,456,178) (10,482,402) 10,482,402 (10,456,178)
------------ ------------ ------------ ------------
Total shareholders' equity . . . . . 58,078,805 6,993,011 (6,993,011) 58,078,805
------------ ------------ ------------ ------------
TOTAL . . . . . . . . . . . . . . . . . . . . $298,152,247 $ 36,402,458 $ (8,448,242) $326,106,463
============ ============ ============ ============
</TABLE>

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S-4
<PAGE> 123
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE E
CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
GROUP GROUP ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . $149,648,165 $ 9,100,414 $ (444,933) $158,303,646
COSTS AND EXPENSES:
Cost of operations . . . . . . . . . . . . 112,682,565 7,597,502 120,280,067
General and administrative expenses . . . 10,909,555 934,901 (444,933) 11,399,523
Depreciation and amortization . . . . . . 8,239,896 500,063 (68,434) 8,671,525
------------ ------------ ------------ ------------
Total . . . . . . . . . . . . . . . . 131,832,016 9,032,466 (513,367) 140,351,115
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) . . . . . . . . . . . 17,816,149 67,948 68,434 17,952,531
OTHER INCOME (EXPENSE):
Interest expense . . . . . . . . . . . . . (8,007,787) (1,344,000) (9,351,787)
Amortization of debt issue cost
and debt discount . . . . . . . . . . . (274,079) (140,745) (414,824)
Equity in income (loss) of affiliates . . (910,776) 257,553 1,054,722 401,499
Other income, net . . . . . . . . . . . . 3,863,668 91,503 3,955,171
Minority interest in (income) loss . . . . (105,353) 151,931 46,578
------------ ------------ ------------ ------------
Total . . . . . . . . . . . . . . . . (5,434,327) (983,758) 1,054,722 (5,363,363)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM . . . . . . . . . . 12,381,822 (915,810) 1,123,156 12,589,168
INCOME TAXES EXPENSE . . . . . . . . . . . . 5,218,167 207,346 5,425,513
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM . . . . . . . . . . . . 7,163,655 (1,123,156) 1,123,156 7,163,655
EXTRAORDINARY ITEM:
Loss on early extinguishment of
debt, net of income tax
benefit of $273,834 . . . . . . . . . . (334,685) (334,685)
------------ ------------ ------------ ------------
NET INCOME (LOSS) . . . . . . . . . . . . . . $ 6,828,970 $ (1,123,156) $ 1,123,156 $ 6,828,970
============ ============ ============ ============
</TABLE>

- ---------------

S-5
<PAGE> 124
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE F
CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
GROUP GROUP ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net income (loss) . . . . . . . . . . . . $ 6,828,970 $ (1,123,156) $ 1,123,156 $ 6,828,970
Loss on early extinguishment of debt . . . 608,519 608,519
Noncash items in net income (loss):
Depreciation . . . . . . . . . . . . . 6,665,319 498,847 7,164,166
Amortization -- intangibles and
other assets . . . . . . . . . . . . 1,848,656 50,837 (68,434) 1,831,059
Deferred lease expenses . . . . . . . . 664,295 38,620 702,915
Deferred income tax expense . . . . . . 669,152 669,152
Debt issued for accrued interest . . . 34,871 34,871
Amortization of debt discount . . . . . 91,124 91,124
Amortized compensation --
stock options . . . . . . . . . . . . 622,958 622,958
Equity in (income) loss
of affiliate . . . . . . . . . . . . 979,210 (257,553) (1,123,156) (401,499)
Minority interest in
income (loss) . . . . . . . . . . . . 105,353 (151,931) (46,578)
Cash used for operating working
capital . . . . . . . . . . . . . . . . 4,266,546 (434,420) 524,731 4,356,857
------------ ------------ ------------ ------------
Net cash from (used for)
operations . . . . . . . . . . . 23,293,849 (1,287,632) 456,297 22,462,514
============ ============ ============ ============
INVESTING ACTIVITIES:
Additions to theater properties
and equipment . . . . . . . . . . . . . (64,511,974) (5,733,152) (70,245,126)
Decrease in certificate of deposit . . . . 1,087 1,087
Increase in temporary cash
investments . . . . . . . . . . . . . . (6,900) (6,900)
Decrease (increase) in advances
to affiliate . . . . . . . . . . . . . 68,946 (250,000) (181,054)
Increase in other assets . . . . . . . . . (1,548,936) (685,197) 68,434 (2,165,699)
------------ ------------ ------------ ------------
Net cash used for investing
activities . . . . . . . . . . . (65,990,877) (6,675,249) 68,434 (72,597,692)
============ ============ ============ ============
FINANCING ACTIVITIES:
Increases in long-term debt . . . . . . . 43,500,000 43,500,000
Reductions of long-term debt . . . . . . . (37,013,558) (37,013,558)
Increase (decrease) in related party
notes payable . . . . . . . . . . . . . (2,086,513) 524,731 (524,731) (2,086,513)
Payment on theater development
advance . . . . . . . . . . . . . . . . (356,046) (356,046)
Net proceeds from common stock
issuance . . . . . . . . . . . . . . . 38,562,509 38,562,509
Decrease in additional paid-in
capital . . . . . . . . . . . . . . . . 636,106 636,106
------------ ------------ ------------ ------------
Net cash from financing
activities . . . . . . . . . . . 43,242,498 524,731 (524,731) 43,242,498
============ ============ ============ ============
FOREIGN CURRENCY
TRANSLATION ADJUSTMENT . . . . . . . . . . 83,220 83,220
------------ ------------ ------------ ------------
DECREASE IN CASH AND
CASH EQUIVALENTS: . . . . . . . . . . . . 545,470 (7,354,930) 0 (6,809,460)
CASH AND CASH EQUIVALENTS:
Beginning of period . . . . . . . . . . . 4,964,706 8,685,018 13,649,724
------------ ------------ ------------ ------------
End of period . . . . . . . . . . . . . . $ 5,510,176 $ 1,330,088 $ 6,840,264
============ ============ ============ ============
</TABLE>

- ---------------

S-6
<PAGE> 125
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

The Company is empowered by Art. 2.02-1 of the Texas Business Corporation
Act, subject to the procedures and limitations stated therein, to indemnify any
person who was, is or is threatened to be made a named defendant or respondent
in a proceeding because the person is or was a director or officer against
judgments, penalties (including excise and similar taxes), fines, settlements
and reasonable expenses (including court costs and attorneys' fees) actually
incurred by the person in connection with the proceeding. The Company is
required by Art. 2.02-1 to indemnify a director or officer against reasonable
expenses (including court costs and attorneys' fees) incurred by him in
connection with a proceeding in which he is a named defendant or respondent
because he is or was a director or officer if he has been wholly successful, on
the merits or otherwise, in the defense of the proceeding. The statute
provides that indemnification pursuant to its provisions is not exclusive of
other rights of indemnification to which a person may be entitled under any
bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise. The articles and bylaws of the Company provide for indemnification
by the Company of its directors and officers to the fullest extent permitted by
the Texas Business Corporation Act. In addition, the Company has, pursuant to
Article 1302-7.06 of the Texas Miscellaneous Corporation Laws Act, provided in
its articles of incorporation that, to the fullest extent permitted by
applicable law, a director of the Company shall not be liable to the Company or
its shareholders for monetary damages for an act or omission in a director's
capacity as director of the Company.

The Company has obtained an insurance policy providing for indemnification
of officers and directors of the Company and certain other persons against
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions. The Company has entered into separate
indemnification agreements with each of its directors which may require the
Company, among other things, to indemnify such directors against certain
liabilities that may arise by reason of their status or service as directors to
the maximum extent permitted under Texas law.

Section 9 of Mr. Mitchell's Employment Agreement and Section 7 of Mrs.
Mitchell's Employment Agreement with the Company provide that the Company shall
indemnify and hold harmless Mr. and Mrs. Mitchell from and against any claims,
damages, expenses (including, but not limited to, attorneys' fees and other
expenses), judgments, fines and amounts paid in settlement incurred by either
of them in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
any action by or in the right of the Company) to which either of them is a
party or is threatened to be made a party by reason of or arising out of the
performance by them or the Company of any provision of their respective
Employment Agreement, provided that they acted in good faith and in a manner
they reasonably believed to be in, or not opposed to, the best interest of the
Company. Mr. and Mrs. Mitchell are entitled to select counsel of their own
choosing to defend any such action or proceeding and the Company shall pay all
fees and expenses in connection with such defense. Such expenses shall be paid
by the Company in advance of the final disposition of any such action or
proceeding if so requested by them.

II-1
<PAGE> 126
Item 21. Exhibits and Financial Statement Schedules

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
**1 Purchase Agreement dated August 12, 1996 between the Company and
Bear, Stearns & Co. Inc., Goldman Sachs & Co. Inc. and Morgan
Stanley & Co. Incorporated

**3.1(a) Amended and Restated Articles of Incorporation of the Company
filed with the Texas Secretary of State on June 3, 1992

**3.1(b) Articles of Merger filed with the Texas Secretary of State on
June 27, 1988 merging Gulf Drive-In Theatres, Inc. and Cinemark
of Louisiana, Inc. into the Company

**3.1(c) Articles of Merger filed with the Texas Secretary of State dated
October 27, 1989 merging Premiere Cinemas Corp. into the Company

**3.1(d) Articles of Merger filed with the Texas Secretary of State dated
October 27, 1989 merging Tri-State Entertainment Incorporated
into the Company

**3.1(e) Articles of Merger filed with the Texas Secretary of State on
December 27, 1990 merging Cinema 4, Inc. into the Company

**3.1(f) Articles of Merger filed with the Texas Secretary of State on
December 27, 1990 merging Cinema 4, Inc. into the Company

**3.2(a) Bylaws of the Company, as amended

**3.2(b) Amendment to Bylaws of the Company dated March 12, 1996

**4.1 Indenture dated August 15, 1996 between the Company and U.S.
Trust Company of Texas, N.A. governing the Notes, with a form
of Old Note attached

**4.2 Exchange Registration Rights Agreement dated August 15, 1996
between the Company and Bear, Stearns & Co. Inc., Goldman Sachs
& Co. Inc. and Morgan Stanley & Co. Incorporated

*5 Opinion of the Company concerning the legality of the New Notes

**10.1(a) Indenture for Old Notes, with form of Old Note attached.

**10.1(b) Stock Pledge Agreement.

**10.1(c) Amendment to Stock Pledge Agreement dated June 28, 1993 in favor
of the Trustee pledging the shares of capital stock of ENT
Holdings, Inc.

**10.1(d) Amendment to Stock Pledge Agreement dated July 12, 1993 in favor
of Trustee pledging the shares of capital stock of 2 Day Video,
Inc.

**10.1(e) Amendment to Stock Pledge Agreement dated October 14, 1993 in
favor of Trustee pledging the shares of capital stock of Cinema
Management Group, Inc.

**10.1(f) Amendment to Stock Pledge Agreement dated September 13, 1993 in
favor of Trustee pledging the limited partnership interests of
Tinseltown Equities, Inc.
</TABLE>

II-2
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
**10.1(g) Amendment to Stock Pledge Agreement dated February 8, 1994 in
favor of Trustee pledging the shares of capital stock of
Sunnymead Cinema Corp.

**10.1(h) Amendment to Stock Pledge Agreement dated February 8, 1994 in
favor of Trustee pledging shares of the capital stock of
Sunnymead Cinema Corp.

**10.1(i) Amendment to Stock Pledge Agreement dated July 26, 1994 in favor
of Trustee pledging shares of the capital stock of Cinemark
Partners I, Inc.

**10.1(j) Amendment to Stock Pledge Agreement dated August 4, 1994 in
favor of Trustee pledging shares of the capital stock of 2 Day
Video, Inc.

**10.1(k) Amendment to Stock Pledge Agreement dated September 12, 1994 in
favor of Trustee pledging the general and limited partnership
interests in Laredo Theatre, Ltd.

**10.2 Promissory Note of 2 Day Video, Inc. dated August 21, 1995 in
the original principal amount of $500,000 payable to the Company

**10.3 Promissory Note of 2 Day Video dated February 7, 1996 in the
original principal amount of $450,000 payable to the Company

**10.4 Promissory Note dated September 4, 1987 executed by The Pebble
Group, Ltd. in the original principal amount of $700,000 payable
to Citizens Savings and Loan, and assumed by the Company.

**10.5 Management Agreement dated as of March 1, 1991 between Movie
Theatre Investors, Ltd. and the Company.

**10.6(a) Management Agreement dated as of March 1, 1991 between Movie
Theatre Investors, Ltd. and the Company.

**10.6(b) Management Agreement between the Company and Cinemark II, Inc.
("Cinemark II") dated as of June 10, 1992.

**10.6(c) First Amendment to Management Agreement effective as of December
2, 1991 among the Company, Movie Theatre Holdings, Inc. and E.
William Savage

**10.6(d) Management Agreement, dated as of July 28, 1993, between the
Company and Cinemark Mexico (USA).

**10.6(e) Management Agreement, dated as of September 10, 1992, between
the Company and Cinemark de Mexico.

**10.6(f) Management Agreement dated December 10, 1993 between Laredo
Joint Venture and the Company.

**10.6(g) Management Agreement dated September 1, 1994 between Cinemark
Partners II, Ltd. and the Company.

**10.7 Agreement Regarding Right of First Refusal dated March 28, 1991
between the Company and Movie Theatre Investors, Ltd.
</TABLE>

II-3
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
**10.8(a) Employment Agreement dated as of October 17, 1991 between the
Company and Lee Roy Mitchell.

**10.8(b) First Amendment to Employment Agreement dated as of April 7,
1992 between the Company and Lee Roy Mitchell.

**10.8(c) Employment Agreement dated as of October 17, 1991 between the
Company and Tandy Mitchell.

**10.8(d) First Amendment to Employment Agreement dated as of April 7,
1992 between the Company and Tandy Mitchell.

**10.8(e) Second Amendment to Employment Agreement between the Company and
Lee Roy Mitchell dated as of June 10, 1992.

**10.9(a) 1991 Nonqualified Stock Option Plan of Cinemark USA, Inc.

**10.9(b) Cinemark Mexico Nonqualified Stock Option Plan.

**10.10 Cinemark USA, Inc. 401(k) Profit Sharing Plan and Trust
established January 1, 1989.

**10.11(a) License Agreement as of July 23, 1990 between the Company and
Movie Theatre Investors, Ltd.

**10.11(b) License Agreement dated December 10, 1993 between Laredo Joint
Venture and the Company.

**10.12(a) Tax Sharing Agreement between the Company and Cinemark II dated
as of June 10, 1992.

**10.12(b) Tax Sharing Agreement dated as of July 28, 1993, between the
Company and Cinemark Mexico (USA).

**10.12(c) License Agreement dated September 1, 1994 between Cinemark
Partners II, Ltd. and the Company.

**10.13(a) Indemnification Agreement between the Company and Lee Roy
Mitchell dated as of July 13, 1992.

**10.13(b) Indemnification Agreement between the Company and Tandy Mitchell
dated as of July 13, 1992.

**10.13(d) Indemnification Agreement between the Company and Alan W. Stock
dated as of July 13, 1992.

**10.13(f) Indemnification Agreement between the Company and W. Bryce
Anderson dated as of July 13, 1992.

**10.13(g) Indemnification Agreement between the Company and Sheldon I.
Stein dated as of July 13, 1992.

**10.13(h) Indemnification Agreement between the Company and Heriberto
Guerra dated as of December 3, 1993
</TABLE>

II-4
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
**10.13(i) Indemnification Agreement between the Company and Gary R. Gibbs
dated as of July 19, 1995.

**10.14(a) Credit Agreement dated as of February 14, 1996 among the Banks
and the Agent.

**10.14(b) Pledge Agreement dated as of February 14, 1996 executed by the
pledgors listed on the signature page thereto for the benefit of
the Agent and the Banks.

**10.14(c) First Amendment to Pledge Agreement dated as of March 29, 1996
executed by the pledgors listed on the signature page thereto
for the benefit of the Agent and the Banks

**10.14(d) Note of the Company dated as of February 14, 1996 in the
original principal amount of $35,000,000 payable to the order of
NationsBank of Texas, N.A.

**10.14(e) Note of the Company dated as of February 14, 1996 in the
original principal amount of $25,000,000 payable to the order of
CIBC, Inc.

**10.14(f) Note of the Company dated as of February 14, 1996 in the
original principal amount of $25,000,000 payable to the order of
The Bank of New York.

**10.14(g) Note of the Company dated as of February 14, 1996 in the
original principal amount of $10,000,000 payable to the order of
Comerica Bank-Texas

**10.14(h) Note of the Company dated as of February 14, 1996 in the
original principal amount of $20,000,000 payable to the order of
First National Bank of Boston

**10.14(i) Note of the Company dated as of February 14, 1996 in the
original principal amount of $15,000,000 payable to the order of
Natwest Bank

**10.15(a) Letter Agreements with directors of the Company regarding stock
options.

**10.15(b) Letter Agreements with directors of the Company amending stock
options

**10.16(a) Indenture, dated as of July 30, 1993, among Cinemark Mexico
(USA), Cinemark de Mexico, as Guarantor, and United States Trust
Company of New York, as trustee, relating to the Senior
Subordinated Notes.

**10.16(b) First Supplemental Indenture dated May 2, 1994 among Cinemark
Mexico (USA), Cinemark de Mexico and United States Trust Company
of New York, as Trustee.

**10.16(c) Second Supplemental Indenture dated August 30, 1995 among
Cinemark Mexico (USA), Cinemark de Mexico and United States
Trust Company of New York, as Trustee

**10.16(d) Purchase Agreement, dated as of July 30, 1993, among Cinemark
Mexico (USA), Cinemark de Mexico and each of the purchasers of
the Series A Notes named on the signature pages thereof (the
"Purchasers").

**10.16(e) Registration Rights Agreement, dated as of July 30, 1993, among
Cinemark Mexico (USA), Cinemark de Mexico and the Purchasers of
the Series A Notes.

**10.16(f) Warrant Registration Rights Agreement, dated as of July 30,
1993, among Cinemark Mexico (USA), Cinemark II, New Wave
Investments A.V.V. ("New Wave") and the purchasers of the
warrants named on the signature pages thereof.
</TABLE>

II-5
<PAGE> 130
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
**10.16(g) Warrant Certificates.

**10.16(h) Purchase Agreement dated May 6, 1994 among Cinemark Mexico
(USA), Cinemark de Mexico and each of the purchasers of the
Series C Notes named on the registration pages thereto.

**10.16(i) Subscription Agreement dated as of December 31, 1994 between the
Company and Cinemark International.

**10.16(j) Subscription Agreement dated June 1, 1995 among Cinemark Mexico
(USA) and Cinemark International

**10.16(k) Purchase Agreement dated August 30, 1995 among Cinemark Mexico
(USA) and the purchasers thereto

**10.16(l) Warrant Certificates

**10.17 Senior Secured Credit Agreement dated December 4, 1995 among
Cinemark II, Cinemark Mexico (USA) and Cinemark de Mexico

**10.18(a) Security Purchase Agreement dated February 20, 1996 among the
Company, Cypress Merchant Banking Partners L.P., Cypress
Pictures Ltd., The Broadhead Limited Partnership and T&LRM
Family Limited Partnership

**10.18(b) Shareholders' Agreement dated March 12, 1996 among the Company,
Mr. Mitchell, Cypress Merchant Banking Partners L.P., Cypress
Pictures Ltd. and Mr. Mitchell and Mr. Don Hart as Co-Trustees
of certain trusts signatory thereto

**10.19 Joint Venture Agreement dated December 31, 1995 among Cinemark
II, Inc., D'Alimenti S.A. and Prodecine S.A.

**12 Calculation of Earnings to Fixed Charges.

**21 Subsidiaries of the Registrant

*23.1 Consent of Deloitte & Touche LLP, Independent Auditors

*23.2 Consent of Michael D. Cavalier, Associate General Counsel of the
Company (included in Exhibit 5.1)

24 Power of Attorney (set forth on page II-14)

*25 T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of Texas,
N.A. relating to the Series B Notes
</TABLE>

- ---------------
*Filed herewith
**Incorporated by Reference

(b) Financial Statement Schedules

All of the Financial Statement Schedules have been omitted because they
are not applicable or not required or the required information is
included in the Financial Statements or notes thereto.

II-6
<PAGE> 131
Item 22. Undertakings

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.

The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
Company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-7
<PAGE> 132
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registration has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Dallas,
State of Texas, on October 9, 1996.

CINEMARK USA, INC.

By: /s/ ALAN W. STOCK
------------------------------------
Name: Alan W. Stock
----------------------------------
Title: President
---------------------------------

The undersigned directors and officers of Cinemark USA, Inc. hereby
constitute Lee Roy Mitchell and Jeffrey J. Stedman and each of them, with full
power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in-fact with full power to
execute in our name and behalf in the capacities indicated below any and all
amendments (including post-effective amendments and amendments thereto) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission and hereby ratify and confirm all that such attorneys-in-fact, or
either of them, or their substitutes shall lawfully do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>

/s/ LEE ROY MITCHELL Chairman of the October 9, 1996
- --------------------------------------- Board of Directors
Lee Roy Mitchell and Chief Executive Officer
(Principal Executive Officer)

/s/ TANDY MITCHELL* Director, Executive Vice October 9, 1996
- --------------------------------------- President and Secretary
Tandy Mitchell

/s/ ALAN W. STOCK*
- ---------------------------------------
Alan W. Stock Director October 9, 1996

/s/ JEFFREY J. STEDMAN Vice President (Principal October 9, 1996
- --------------------------------------- Financial Officer)
Jeffrey J. Stedman

</TABLE>

II-8
<PAGE> 133
<TABLE>
<S> <C> <C>
/s/ GARY R. GIBBS* Director October 9, 1996
- ----------------------------------------
Gary R. Gibbs

/s/ W. BRYCE ANDERSON* Director October 9, 1996
- ----------------------------------------
W. Bryce Anderson

/s/ SHELDON I. STEIN* Director October 9, 1996
- ----------------------------------------
Sheldon I. Stein

/s/ HERIBERTO GUERRA, JR.* Director October 9, 1996
---------------------------------------
Heriberto Guerra, Jr.

/s/ JAMES L. SINGLETON* Director October 9, 1996
- ----------------------------------------
James L. Singleton

/s/ JAMES A. STERN* Director October 9, 1996
- ----------------------------------------
James A. Stern

*By: /s/ LEE ROY MITCHELL
----------------------------------
Lee Roy Mitchell
Attorney-in-fact

</TABLE>

II-9
<PAGE> 134
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION TO OR MAKE ANY
REPRESENTATIONS NOT IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CINEMARK
USA, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE SERIES B NOTES
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SERIES B NOTES TO ANYONE IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN A CHANGE IN THE INFORMATION SET FORTH IN THIS PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Selected Consolidated Financial
and Operating Data . . . . . . . . . . . . . . . . . . . . . . . . 28
Management's Discussion
and Analysis of Financial
Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 54
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 57
Description of Series B Notes . . . . . . . . . . . . . . . . . . . . . 59
Federal Income Tax
Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Description of Certain
Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . 90
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 94
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . F-1
Independent Auditors Report . . . . . . . . . . . . . . . . . . . . . . F-3
</TABLE>

$200,000,000

[CINEMARK USA, INC. LOGO] Cinemark USA, Inc.

Offer to Exchange its 9-5/8% Series B Senior Subordinated Notes Due 2008 which
have been registered under the Securities Act for any and all of its outstanding
9-5/8% Series A Senior Subordinated Notes due 2008

. . . . .

--------------

PROSPECTUS

--------------

October 9, 1996

<PAGE> 135

EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

1 Purchase Agreement dated August 12, 1996 between the Company and Exhibit 1 to the Company's
Bear, Stearns & Co. Inc., Goldman Sachs & Co. Inc. and Morgan Registration Statement
Stanley & Co. Incorporated (file 333-11895) on Form S-4
filed on September 13, 1996

3.1(a) Amended and Restated Articles of Incorporation of the Company filed Exhibit 3.1(a) to the
with the Texas Secretary of State on June 3, 1992 Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993

3.1(b) Articles of Merger filed with the Texas Secretary of State on June Exhibit 3.1(b) to the
27, 1988 merging Gulf Drive-In Theatres, Inc. and Cinemark of Company's Registration
Louisiana, Inc. into the Company Statement (file 33-47040) on
Form S-1 filed on April 9,
1992

3.1(c) Articles of Merger filed with the Texas Secretary of State dated Exhibit 3.1(d) to the
October 27, 1989 merging Premiere Cinemas Corp. into the Company Company's Registration
Statement (file 33-47040) on
Form S-1 filed on April 9,
1992

3.1(d) Articles of Merger filed with the Texas Secretary of State dated Exhibit 3.1(e) to the
October 27, 1989 merging Tri-State Entertainment Incorporated into Company's Registration
the Company Statement (file 33-47040) on
Form S-1 filed on April 9,
1992

3.1(e) Articles of Merger filed with the Texas Secretary of State on Exhibit 3.1(f) to the Company
December 27, 1990 merging Cinema 4, Inc. into the Company s Registration Statement
(file 33-47040) on form S-1
filed on April 9, 1992

3.1(f) Articles of Merger filed with the Texas Secretary of State on Exhibit 3.1(f) to the
December 27, 1990 merging Cinema 4, Inc. into the Company Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993

3.2(a) Bylaws of the Company, as amended Exhibit 3.2 to the Company's
Registration Statement (file
33-47040) on Form S-1 filed
on April 9, 1992
</TABLE>

E-1
<PAGE> 136
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

3.2(b) Amendment to Bylaws of the Company dated March 12, 1996 Exhibit 3.2(b) to the Company's
Registration Statement
(file 333-11895) on Form S-4
filed on September 13, 1996

4.2 Indenture dated August 15, 1996 between the Company and U.S. Trust Exhibit 4.2 to the Company's
Company of Texas, N.A. governing the Notes, with a form of Old Note Registration Statement
attached (file 333-11895) on Form S-4
filed on September 13, 1996

4.3 Exchange Registration Rights Agreement dated August 15, 1996 between Exhibit 4.3 to the Company's
the Company and Bear, Stearns & Co. Inc., Goldman Sachs & Co. Inc. Registration Statement
and Morgan Stanley & Co. Incorporated (file 333-11895) on Form S-4
filed on September 13, 1996

5 Opinion of Michael D. Cavalier, Associate General Counsel of the Page ______
Company concerning the legality of the New Notes

10.1(a) Indenture for Old Notes, with form of Old Note attached. Exhibit 4.1 to the Company's
Annual Report (file 33-47040)
on Form 10-K filed March 31,
1993.

10.1(b) Stock Pledge Agreement. Exhibit 4.1(b) to the
Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.1(c) Amendment to Stock Pledge Agreement dated June 28, 1993 in favor of Exhibit 4.1(c) to the
the Trustee pledging the shares of capital stock of ENT Holdings, Company's Annual Report (file
Inc. 33-47040) on Form 10-K filed
March 31, 1994

10.1(d) Amendment to Stock Pledge Agreement dated July 12, 1993 in favor of Exhibit 4.1(d) to the
Trustee pledging the shares of capital stock of 2 Day Video, Inc. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1994

10.1(e) Amendment to Stock Pledge Agreement dated October 14, 1993 in favor Exhibit 4.1(e) to the
of Trustee pledging the shares of capital stock of Cinema Management Company's Annual Report (file
Group, Inc. 33-47040) on Form 10-K filed
March 31, 1994

10.1(f) Amendment to Stock Pledge Agreement dated September 13, 1993 in Exhibit 4.1(f) to the
favor of Trustee pledging the limited partnership interests of Company's Annual Report (file
Tinseltown Equities, Inc. 33-47040) on Form 10-K filed
March 31, 1994
</TABLE>

E-2
<PAGE> 137
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

10.1(g) Amendment to Stock Pledge Agreement dated February 8, 1994 in favor Exhibit 4.1(g) to the
of Trustee pledging the shares of capital stock of Sunnymead Cinema Company's Annual Report (file
Corp. 33-47040) on Form 10-K filed
March 31, 1994

10.1(h) Amendment to Stock Pledge Agreement dated February 8, 1994 in favor Exhibit 4.1(h) to the
of Trustee pledging shares of the capital stock of Sunnymead Cinema Company's Annual Report (file
Corp. 33-47040) on Form 10-K filed
March 29, 1995

10.1(i) Amendment to Stock Pledge Agreement dated July 26, 1994 in favor of Exhibit 4.1(i) to the
Trustee pledging shares of the capital stock of Cinemark Partners I, Company's Annual Report (file
Inc. 33-47040) on Form 10-K filed
March 29, 1995

10.1(j) Amendment to Stock Pledge Agreement dated August 4, 1994 in favor of Exhibit 4.1(j) to the
Trustee pledging shares of the capital stock of 2 Day Video, Inc. Company's Annual Report (file
33-47040) on Form 10-K filed
March 29, 1995

10.1(k) Amendment to Stock Pledge Agreement dated September 12, 1994 in Exhibit 4.1(k) to the
favor of Trustee pledging the general and limited partnership Company's Annual Report (file
interests in Laredo Theatre, Ltd. 33-47040) on Form 10-K filed
March 29, 1995

10.2 Promissory Note of 2 Day Video, Inc. dated August 21, 1995 in the Exhibit 10.2 on the Company's
original principal amount of $500,000 payable to the Company Registration Statement
(file 333-11895) on Form S-4
filed on September 13, 1996

10.3 Promissory Note of 2 Day Video dated February 7, 1996 in the Exhibit 10.3 on the Company's
original principal amount of $450,000 payable to the Company Registration Statement
(file 333-11895) on Form S-4
filed on September 13, 1996

10.4 Promissory Note dated September 4, 1987 executed by The Pebble Exhibit 10.5 to the Company's
Group, Ltd. in the original principal amount of $700,000 payable to Registration Statement (file
Citizens Savings and Loan, and assumed by the Company. 33-47040) on Form S-1 filed
on April 9, 1992.

10.5 Management Agreement dated as of March 1, 1991 between Movie Theatre Exhibit 10.6(a) to the
Investors, Ltd. and the Company. Company's Registration
Statement (file 33-47040) on
Form S-1 filed on April 9,
1992.
</TABLE>

E-3
<PAGE> 138
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

10.6(a) Management Agreement dated as of March 1, 1991 between Movie Theatre Exhibit 10.6(b) to the
Investors, Ltd. and the Company. Company's Registration
Statement (file 33-47040) on
Form S-1 filed on April 9,
1992.

10.6(b) Management Agreement between the Company and Cinemark II, Inc. Exhibit 10.6(c) to the
("Cinemark II") dated as of June 10, 1992. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.6(c) First Amendment to Management Agreement effective as of December 2, Exhibit 10.6(e) to the
1991 among the Company, Movie Theatre Holdings, Inc. and E. William Company's Registration
Savage Statement (file 33-47040) on
Form S-1 filed on April 9,
1992

10.6(d) Management Agreement, dated as of July 28, 1993, between the Company Exhibit 10.7 to Cinemark
and Cinemark Mexico (USA). Mexico (USA)'s Registration
Statement (file 33-72114) on
Form S-4 filed on November
24, 1994.

10.6(e) Management Agreement, dated as of September 10, 1992, between the Exhibit 10.8 to Cinemark
Company and Cinemark de Mexico. Mexico (USA)'s Registration
Statement (file 33-72114) on
Form S-4 filed on November
24, 1994.

10.6(f) Management Agreement dated December 10, 1993 between Laredo Joint Exhibit 10.14(b) to the
Venture and the Company. Company's Annual Report (file
33-47040) on form 10-K filed
March 31, 1994.

10.6(g) Management Agreement dated September 1, 1994 between Cinemark Exhibit 10.4(i) to the
Partners II, Ltd. and the Company. Company's Annual Report (file
33-47040) on Form 10-K filed
March 29, 1995.
</TABLE>

E-4
<PAGE> 139
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

10.7 Agreement Regarding Right of First Refusal dated March 28, 1991 Exhibit 10.10 to CUSA's
between the Company and Movie Theatre Investors, Ltd. Registration Statement (file
33-47040) on Form S-1 filed
on April 9, 1992.

10.8(a) Employment Agreement dated as of October 17, 1991 between the Exhibit 10.11(a) to the
Company and Lee Roy Mitchell. Company's Registration
Statement (file 33-47040) on
Form S-1 filed on April 9,
1992.

10.8(b) First Amendment to Employment Agreement dated as of April 7, 1992 Exhibit 10.11(b) to the
between the Company and Lee Roy Mitchell. Company's Registration
Statement (file 33-47040) on
Form S-1 filed on April 9,
1992.

10.8(c) Employment Agreement dated as of October 17, 1991 between the Exhibit 10.11(c) to the
Company and Tandy Mitchell. Company's Registration
Statement (file 33-47040) on
Form S-1 filed on April 9,
1992.

10.8(d) First Amendment to Employment Agreement dated as of April 7, 1992 Exhibit 10.11(d) to the
between the Company and Tandy Mitchell. Company's Registration
Statement (file 33-47040) on
Form S-1 filed on April 9,
1992.

10.8(e) Second Amendment to Employment Agreement between the Company and Lee Exhibit 10.11(e) to the
Roy Mitchell dated as of June 10, 1992. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.9(a) 1991 Nonqualified Stock Option Plan of Cinemark USA, Inc. Exhibit 10.14 to the
Company's Registration
Statement (file 33-47040) on
Form S-1 filed on April 9,
1992.
</TABLE>

E-5
<PAGE> 140
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

10.9(b) Cinemark Mexico Nonqualified Stock Option Plan. Exhibit 10.9 to Cinemark
Mexico (USA)'s Registration
Statement (file 33-72114) on
Form S-4 filed on November
24, 1994.

10.10 Cinemark USA, Inc. 401(k) Profit Sharing Plan and Trust established Exhibit 10.15 to Amendment
January 1, 1989. No. 1 to the Company's
Registration Statement (file
33-47040) on Form S-1 filed
on May 13, 1992.

10.11(a) License Agreement dated as of July 23, 1990 between the Company and Exhibit 10.18(a) to the
Movie Theatre Investors, Ltd. Company's Registration
Statement (file 33-47040) on
Form S-1 filed on April 9,
1992.

10.11(b) License Agreement dated December 10, 1993 between Laredo Joint Exhibit 10.14(c) to the
Venture and the Company. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1994

10.11(c) License Agreement dated September 1, 1994 between Cinemark Partners Exhibit 10.10(c) to the
II, Ltd. and the Company. Company's Annual Report (file
33-47040) on Form 10-K filed
March 29, 1995.

10.12(a) Tax Sharing Agreement between the Company and Cinemark II dated as Exhibit 10.22 to the
of June 10, 1992. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.12(b) Tax Sharing Agreement dated as of July 28, 1993, between the Company Exhibit 10.10 to Cinemark
and Cinemark Mexico (USA). Mexico (USA)'s Registration
Statement (33-72114) on Form
S-4 filed on November 24,
1994.
</TABLE>

E-6
<PAGE> 141
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

10.13(a) Indemnification Agreement between the Company and Lee Roy Mitchell Exhibit 10.23(a) to the
dated as of July 13, 1992. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.13(b) Indemnification Agreement between the Company and Tandy Mitchell Exhibit 10.23(b) to the
dated as of July 13, 1992. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.13(c) Indemnification Agreement between the Company and Alan W. Stock Exhibit 10.23(d) to the
dated as of July 13, 1992. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.13(d) Indemnification Agreement between the Company and W. Bryce Anderson Exhibit 10.23(f) to the
dated as of July 13, 1992. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.13(e) Indemnification Agreement between the Company and Sheldon I. Stein Exhibit 10.23(g) to the
dated as of July 13, 1992. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.13(f) Indemnification Agreement between the Company and Heriberto Guerra Exhibit 10.13(f) to the Company's
dated as of December 3, 1993 Registration Statement (333-11895)
on Form S-4 filed on
September 13, 1996

10.13(g) Indemnification Agreement between the Company and Gary R. Gibbs Exhibit 10.13(g) to the Company's
dated as of July 19, 1995. Registration Statement (333-11895)
on Form S-4 filed on
September 13, 1996

10.14(a) Credit Agreement dated as of February 14, 1996 among the Banks and Exhibit 10.13(a) to Company's
the Agent. Annual Report (file 33-47040)
on Form 10-K filed April 1,
1996

10.14(b) Pledge Agreement dated as of February 14, 1996 executed by the Exhibit 10.13(b) to Company's
pledgors listed on the signature page thereto for the benefit of the Annual Report (file 33-47040)
Agent and the Banks. on Form 10-K filed April 1,
1996

10.14(c) First Amendment to Pledge Agreement dated as of March 29, 1996 Exhibit 10.14(c) to the Company's
executed by the pledgors listed on the signature page thereto for Registration Statement (333-11895)
the benefit of the Agent and the Banks on Form S-4 filed on
September 13, 1996

</TABLE>

E-7
<PAGE> 142
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

10.14(d) Note of the Company dated as of February 14, 1996 in the original Exhibit 10.13(c) to Company's
principal amount of $35,000,000 payable to the order of NationsBank Annual Report (file 33-47040)
of Texas, N.A. on Form 10-K filed April 1,
1996

10.14(e) Note of the Company dated as of February 14, 1996 in the original Exhibit 10.13(d) to Company's
principal amount of $25,000,000 payable to the order of CIBC, Inc. Annual Report (file 33-47040)
on Form 10-K filed April 1,
1996

10.14(f) Note of the Company dated as of February 14, 1996 in the original Exhibit 10.13(e) to Company's
principal amount of $25,000,000 payable to the order of The Bank of Annual Report (file 33-47040)
New York. on Form 10-K filed April 1,
1996

10.14(g) Note of the Company dated as of February 14, 1996 in the original Exhibit 10.13(f) to Company's
principal amount of $10,000,000 payable to the order of Comerica Annual Report (file 33-47040)
Bank-Texas on Form 10-K filed April 1,
1996

10.14(h) Note of the Company dated as of February 14, 1996 in the original Exhibit 10.13(g) to Company's
principal amount of $20,000,000 payable to the order of First Annual Report (file 33-47040)
National Bank of Boston on Form 10-K filed April 1,
1996

10.14(i) Note of the Company dated as of February 14, 1996 in the original Exhibit 10.13(h) to Company's
principal amount of $15,000,000 payable to the order of Natwest Bank Annual Report (file 33-47040)
on Form 10-K filed April 1,
1996

10.15(a) Letter Agreements with directors of the Company regarding stock Exhibit 10.15 to the
options. Company's Annual Report (file
33-47040) on Form 10-K filed
March 31, 1993.

10.15(b) Letter Agreements with directors of the Company amending stock Exhibit 10.15(b) to the Company's
options Registration Statement (333-11895)
on Form S-4 filed on
September 13, 1996.

10.16(a) Indenture, dated as of July 30, 1993, among Cinemark Mexico (USA), Exhibit 4.1 to Cinemark
Cinemark de Mexico, as Guarantor, and United States Trust Company of Mexico (USA)'s Registration
New York, as trustee, relating to the Senior Subordinated Notes. Statement (file 33-72114) on
Form S-4 filed on November
24, 1994.
</TABLE>

E-8
<PAGE> 143
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

10.16(b) First Supplemental Indenture dated May 2, 1994 among Cinemark Mexico Exhibit 4.4 to Cinemark
(USA), Cinemark de Mexico and United States Trust Company of New Mexico (USA)'s Annual Report
York, as Trustee. (file 33-72114) on Form 10-K
filed March 31, 1994.

10.16(c) Second Supplemental Indenture dated August 30, 1995 among Cinemark Exhibit 10.16(c) to the
Mexico (USA), Cinemark de Mexico and United States Trust Company of Company's Registration
New York, as Trustee Statement (333-11895) on
Form S-4 filed on
September 13, 1996.

10.16(d) Purchase Agreement, dated as of July 30, 1993, among Cinemark Mexico Exhibit 4.2 to Cinemark
(USA), Cinemark de Mexico and each of the purchasers of the Series A Mexico (USA)'s Registration
Notes named on the signature pages thereof (the "Purchasers"). Statement (file 33-72114) on
Form S-4 filed on November
24, 1994.

10.16(e) Registration Rights Agreement, dated as of July 30, 1993, among Exhibit 4.3 to Cinemark
Cinemark Mexico (USA), Cinemark de Mexico and the Purchasers of the Mexico (USA)'s Registration
Series A Notes. Statement (file 33-72114) on
Form S-4 filed on November
24, 1994.

10.16(f) Warrant Registration Rights Agreement, dated as of July 30, 1993, Exhibit 10.1 to Cinemark
among Cinemark Mexico (USA), Cinemark II, New Wave Investments Mexico (USA)'s Registration
A.V.V. ("New Wave") and the purchasers of the warrants named on the Statement (file 33-72114) on
signature pages thereof. Form S-4 filed on November
24, 1994.

10.16(g) Warrant Certificates. Exhibit 10.2 to Cinemark
Mexico (USA)'s Registration
Statement (file 33-72114) on
Form S-4 filed on November
24, 1994.

10.16(h) Purchase Agreement dated May 6, 1994 among Cinemark Mexico (USA), Exhibit 4.5 to Cinemark
Cinemark de Mexico and each of the purchasers of the Series C Notes Mexico (USA)'s Annual Report
named on the registration pages thereto. (file 33-72114) on Form 10-K
filed on March 31, 1995
</TABLE>

E-9
<PAGE> 144
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C> <C>

10.16(i) Subscription Agreement dated as of December 31, 1994 between the Exhibit 10.4(a) to Cinemark
Company and Cinemark International. Mexico (USA)'s Annual Report
(file 33-72114) on Form 10-K
filed March 31, 1995

10.16(j) Subscription Agreement dated June 1, 1995 among Cinemark Mexico Exhibit 10.16(j) to the Company's
(USA) and Cinemark International Registration Statement (333-11895)
on Form S-4 filed on
September 13, 1996.

10.16(k) Purchase Agreement dated August 30, 1995 among Cinemark Mexico (USA) Exhibit10.16(k) to the Company's
and the purchasers thereto Registration Statement (333-11895)
on Form S-4 filed on
September 13, 1996.

10.16(l) Warrant Certificates Exhibit 10.16(l) to the Company's
Registration Statement (333-11895)
on Form S-4 filed on
September 13, 1996.

10.17 Senior Secured Credit Agreement dated December 4, 1995 among Exhibit 10.18 to the
Cinemark II, Cinemark Mexico (USA) and Cinemark de Mexico Company's Annual Report (file
33-47040) on Form 10-K filed
April 1, 1996

10.18(a) Security Purchase Agreement dated February 20, 1996 among the Exhibit 10.19(a) to the
Company, Cypress Merchant Banking Partners L.P., Cypress Pictures Company's Annual Report (file
Ltd., The Broadhead Limited Partnership and T&LRM Family Limited 33-47040) on Form 10-K filed
Partnership April 1, 1996

10.18(b) Shareholders' Agreement dated March 12, 1996 among the Company, Mr. Exhibit 10.19(b) to the
Mitchell, Cypress Merchant Banking Partners L.P., Cypress Pictures Company's Annual Report (file
Ltd. and Mr. Mitchell and Mr. Don Hart as Co-Trustees of certain 33-47040) on Form 10-K filed
trusts signatory thereto April 1, 1996

10.19 Joint Venture Agreement dated December 31, 1995 among Cinemark II, Exhibit 10.20 to the
Inc., D'Alimenti S.A. and Prodecine S.A. Company's Annual Report (file
33-47040) on Form 10-K filed
April 1, 1996

12 Calculation of Earnings to Fixed Charges. Exhibit 12 to the Company's
Registration Statement (333-11895)
on Form S-4 filed on
September 13, 1996.

21 Subsidiaries of the Registrant Exhibit 21 to the Company's
Registration Statement (333-11895)
on Form S-4 filed on
September 13, 1996.

23.1 Consent of Deloitte & Touche LLP, Independent Auditors Page _______

23.2 Consent of Michael N. Cavalier, Associate General Counsel of the
Company (included in Exhibit 5.1)

24 Power of Attorney (set forth on page II-14)
</TABLE>

E-10
<PAGE> 145
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION
NUMBER DESCRIPTION BY REFERENCE TO
- ------ ----------- ---------------
<S> <C>

25 Form of T-1 Statement of Eligibility and Qualification under the Page ___
Trust Indenture Act of 1939 of United States Trust Company of Texas,
N.A. relating to the Series B Notes
</TABLE>

- ----------------------

***To be filed by amendment

E-11

<PAGE> 1
October 9, 1996

Cinemark USA, Inc.
7502 Greenville Ave., Suite 800
Dallas, Texas 75231-3830

Ladies and Gentlemen:

I am the Associate General Counsel of Cinemark USA, Inc., a Texas
corporation (the "Issuer"), in connection with the proposed exchange by the
Issuer of an aggregate of $200,000,000 principal amount of the Issuer's 12%
Series B Senior Subordinated Notes due 2008 (the "New Notes"), of the Issuer,
for an aggregate of $200,000,000 principal amount of the Issuer's 12% Series A
Senior Subordinated Notes due 2003 (the "Old Notes"). The Old Notes were, and
the New Notes will be, issued pursuant to the Indenture dated as of August 15,
1996 (the "Indenture") amoung the Issuer and United States Trust Company of
Texas, N.A., as trustee (the "Trustee"). In connection with the exchange offer,
the Issuer has filed with the Securities and Exchange Commission a registration
statement on Form S-4 File No. 333-11895 (the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"). Unless otherwise
defined herein, capitalized terms used in this opinion shall have the meanings
set forth in the Indenture or the Accord identified in the following paragraph.

This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The law covered by the opinions
expressed herein is limited to the federal laws of the United States and the
laws of the State of Texas.

In preparing this Opinion Letter, I have examined the Indenture, which
includes the form of the New Notes, which has been filed as an exhibit to the
Registration Statement. In addition, I have examined originals or photostatic,
certified or conformed copies of all such agreements, documents, instruments,
corporate records, certificates of public officials, public records and
certificates of officers of the Issuers as I have deemed necessary or
appropriate in the circumstances. In addition to the assumptions set forth in
Section 4 of the Accord, I have relied upon factual representations made to me
by the Issuer.

<PAGE> 2
Cinemark USA, Inc.
October 9, 1996
Page 2

Based upon such examination and review, I am of the opinion that the
New Notes proposed to be exchanged by the Issuer have been duly authorized for
issuance and, subject to the Registration Statement becoming effective under
the Securities Act and to compliance with any applicable state securities laws,
the New Notes, when executed by the Issuer, authenticated by the Trustee and
delivered in exchange for Old Notes in accordance with the provisions of the
Indenture and the Registration Statement, will be valid and legally binding
obligations of the Issuer enforceable in accordance with their terms.

The foregoing Opinions are subject to the following qualifications,
exceptions, assumptions and limitations:

A. The General Qualifications apply to the opinions set forth
above (the Remedies Opinion). In addition to the General Qualifications, we
express no opinion as to the enforceability of any provisions contained in the
New Notes purporting to (i) allow the acceleration of the maturity of any
indebtedness or the exercise of any other rights without notice to the person
or entity signatory thereto or bound thereby; (ii) restrict access to legal or
equitable remedies (including, without limitation, proper jurisdiction and
venue); (iii) establish evidentiary standards; (iv) waive the benefits of any
statute of limitation or any applicable bankruptcy, insolvency or usury law or
stay or extension law or waive any rights under any applicable statutes or
rules hereafter enacted or promulgated; or (v) preserve and maintain a
guarantor's liability despite the fact that the guaranteed debt is
unenforceable due to illegality. In addition, the enforceability of the rights
to indemnification contained in the Indenture may be limited by Federal or New
York State laws or the policies underlying such laws. We note that the Trust
Indenture Act provides that certain provisions of the Trust Indenture Act are
automatically included in the Indenture unless expressly excluded. To the
extent that the Indenture does not expressly exclude or waive such provisions
of the Trust Indenture Act, such provisions may supersede or override similar
provisions in the Indenture.

B. I have assumed, with your consent, for purposes of expressing
the opinion above, that the laws of the State of New York would be the same as
the laws of the State of Texas.

I hereby consent to the filing of this opinion as Exhibit 5.1 to
Amendment No. 1 to the Registration Statement.

Very truly yours,

/s/ MICHAEL CAVALIER

Michael Cavalier
Associate General Counsel

MC/cw

<PAGE> 1
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 1 to Registration Statement No.
333-11895 of Cinemark USA, Inc. on Form S-4 of our report dated March 12, 1996
appearing in the Prospectus for $200,000,000 9-5/8% Series B Senior Subordinated
Notes due 2008, which is part of such Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Dallas, Texas

October 9, 1996

<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS
TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)_________

U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)

75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)

2001 Ross Ave, Suite 2700 75201
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)

Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Ave, Suite 2700
Dallas, Texas 75201
(214) 740-4222
(Name, address and telephone number of agent for service)

Cinemark USA , Inc.
(Exact name of obligor as specified in its charter)

Texas 77-2206284
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)

7502 Greenville Avenue, Suite 800
Dallas, Texas 75231
(Address of principal executive offices) (Zip Code)

9-5/8% Senior Subordinated Notes due 2008
(Title of the indenture securities)
<PAGE> 2
GENERAL

1. General Information.

Furnish the following information as to the Trustee:

(a) Name and address of each examining or supervising authority to
which it is subject.

Federal Reserve Bank of Dallas (11th District),
Dallas, Texas (Board of Governors of the
Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency,
Dallas, Texas

(b) Whether it is authorized to exercise corporate trust powers.

The Trustee is authorized to exercise corporate trust
powers.

2. Affiliations with Obligor and Underwriters.

If the obligor or any underwriter for the obligor is an affiliate of
the Trustee, describe each such affiliation.

None.

3. Voting Securities of the Trustee.

Furnish the following information as to each class of voting
securities of the Trustee:

As of July 31,1996

<TABLE>
<CAPTION>
================================================================================================
Col A. Col B.
Title of Class Amount Outstanding
- ------------------------------------------------------------------------------------------------
<S> <C>
Capital Stock - par value $100 per share 5,000 shares
================================================================================================
</TABLE>

4. Trusteeships under Other Indentures.

Not Applicable

5. Interlocking Directorates and Similar Relationships with the Obligor
or Underwriters. Not Applicable
<PAGE> 3
6. Voting Securities of the Trustee Owned by the Obligor or its
Officials.

Not Applicable

7. Voting Securities of the Trustee Owned by Underwriters or their
Officials.

Not Applicable

8. Securities of the Obligor Owned or Held by the Trustee.

Not Applicable

9. Securities of Underwriters Owned or Held by the Trustee.

Not Applicable

10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.

Not Applicable

11. Ownership or Holdings by the Trustee of any Securities of a Person
Owning 50 Percent or More of the Voting Securities of the Obligor.

Not Applicable

12. Indebtedness of the Obligor to the Trustee.

Not Applicable

13. Defaults by the Obligor.

Not Applicable

14. Affiliations with the Underwriters.

Not Applicable

15. Foreign Trustee.

Not Applicable

16. List of Exhibits.

T-1.1 - A copy of the Articles of Association of U.S. Trust
Company of Texas, N.A.; incorporated herein by reference
to Exhibit T-1.1 filed with Form T-1 Statement,
Registration No. 22-21897.
<PAGE> 4
16. (con't.)

T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to
Exhibit T-1.2 filed with Form T-1 Statement, Registration
No. 22-21897.

T-1.3 - A copy of the authorization of the Trustee to exercise
corporate trust powers; incorporated herein by reference
to Exhibit T-1.3 filed with Form T-1 Statement,
Registration No. 22-21897.

T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas,
N.A., as amended to date; incorporated herein by
reference to Exhibit T-1.4 filed with Form T-1 Statement,
Registration No. 22-21897.

T-1.6 - The consent of the Trustee required by Section 321(b) of
the Trust Indenture Act of 1939.

T-1.7 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.

NOTE

As of July 31,1996 the Trustee had 5,000 shares of Capital Stock outstanding,
all of which are owned by U.S. T.L.P.O. Corp. As of July 31,1996 U.S.
T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all of which are
owned by U.S. Trust Corporation. U.S. Trust Corporation had outstanding
_9,778,128__ shares of $5 par value Common Stock as of _July31,1996____.

The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.

Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10
and 11, the answers to said Items are based upon incomplete information. Items
2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by
an amendment to this Form T-1.

In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the
Trustee disclaims responsibility for the accuracy or completeness of such
information.

<PAGE> 5
SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee,
U.S Trust Company of Texas, N.A., a national banking association organized
under the laws of the United States of America, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
5th day of August, 1996.

U.S. Trust Company
of Texas, N.A., Trustee

By: /s/ Bill Barber
----------------------------------
Bill Barber
Vice President
<PAGE> 6
Exhibit T-1.6

CONSENT OF TRUSTEE

Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of Cinemark USA, Inc.
9-5/8% Senior Subordinated Notes due 2008, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefore.

U.S. Trust Company of Texas, N.A.

By: /s/ Bill Barber
----------------------------------
Bill Barber
Vice President
<PAGE> 7
TRUST PERMIT

COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS

Southwestern District
1600 Lincoln Plaza
500 N. Akard
Dallas, Texas 75201-3394

WHEREAS, - U.S.Trust Company of Texas, National Association, located in Dallas,
Texas,being a national banking association, being organized under the statutes
OF the United States, has made application for authority to act as fiduciary;

AND WHEREAS, applicable provisions of the statutes OF the United States
authorize the grant of such authority;

NOW THEREFORE, I certify that the said association is authorized to act in all
fiduciary capacities permitted BY such statutes.

IN TESTIMONY WHEREOF, witness MY signature and seal of the Office this Sixth
day OF August, 1991.

/s/ Edward M. Graves

Edward M. Graves
Director for Analysis

CHARTER NUMBER 18782
BY-LAWS
U.S. TRUST CDMPANY OF TEXAS N. A.
<PAGE> 8

ARTICLE I

MEETING OF SHAREHOLDERS

Section 1.1. Annual Meeting. The regular annual meeting of the
shareholders for the election of directors and the transaction of whatever
business may properly come before the meeting, shall be held at such time,
within six months after the close of the Corporation's fiscal year, and place
as the Board of Directors may designate. Notice of such meeting shall be
mailed, postage prepaid, at least ten days prior to the date thereof, addressed
to each shareholder at his address appearing on the books of the Corporation.
If from any cause, an election of directors is not made on the said day, the
Board of Directors shall order the election to be held on some subsequent day,
as soon thereafter as practicable, according to the provisions of law; and
notice thereof shall be given in the manner herein provided for the annual
meeting.

Section 1.2. Special Meetings. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at any time by the Board of Directors or by any one or more
shareholders owning, in the aggregate, not less than ten (10) percent of the
stock of the Corporation. Every such special meeting, unless otherwise
provided by law, shall be called by mailing, postage prepaid, not less than ten
days prior to the date fixed for such meeting, to each stockholder at his
address appearing on the books of the Corporation, a notice stating the purpose
of the meeting.

Section 1.3. Nominations for Director. Nominations for election
to the Board of Directors may be made by the Board of Directors or by any
stockholder of any outstanding class of capital stock of the Corporation
entitled to vote for the election of directors.

Section 1.4. Proxies. Shareholders may vote at any meeting of
the shareholders by proxies duly authorized in writing, but no officer or
employee of this Corporation shall act as proxy. Proxies shall be valid only
for one meeting, to be specified therein, and any adjournments of such meeting.
Proxies shall be dated and shall be filed with the records of the meeting.
<PAGE> 9

Section 1.5. Quorum. A majority of the outstanding capital
stock, represented in person or by proxy, shall constitute a quorum at any
meeting of shareholders, unless otherwise provided by law; but less than a
quorum may adjourn any meeting, from time to time, and the meeting may be held,
as adjourned, without further notice. A majority of the votes cast shall
decide every question or matter submitted to the shareholders at any meeting,
unless otherwise provided by law. Shareholders may participate in said meeting
by means of a conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence at a meeting.

Section 1.6. Action Without a Meeting . Any action required by
law, these By-laws, or the Articles of Incorporation or the Corporation to be
taken at any annual or special meeting of shareholders of the Corporation, or
any action which may be taken at any annual or special meeting of such
shareholders, may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of all outstanding stock entitled to vote thereon.

ARTICLE II

Directors

Section 2.1. Board of Directors. The Board of Directors shall
have the power to manage and administer the business and affairs of the
Corporation. Except as expressly limited by law, all corporate powers of the
Corporation shall be vested in and may be exercised by said Board of Directors.

Section 2.2. Numbers. The Board of Directors shall consist of
not less than five nor more than twenty- five persons, the exact number within
such minimum and maximum limits to be fixed and determined from time to time by
resolution of a majority of the full Board of Directors or by resolution of the
shareholders at any meeting thereof; provided, however, that a majority of the
full Board of Directors may not increase the number of directors to a number
which exceeds by more than two the number of directors last elected by
shareholders.

Section 2.3. Organization Meeting. The Secretary, upon receiving the result of
any election, shall notify the directors-elect of their election and of the
time at which they are required to meet a the Main Office of the corporation
for the purpose of filing their affidavits accepting such directorship, as
required by law, organizing the new Board of Directors and electing and
appointing officers of the Corporation for the succeeding year. Such meeting
shall be held on the
<PAGE> 10
day of the election or as soon thereafter as practicable, and, in any event,
within thirty days thereof. If, at the time fixed for such meeting, there
shall not be a quorum present, the directors present may adjourn the meeting,
from time to time, until a quorum is obtained.

Section 2.4. Regular Meeting. At least one regular meeting of the
Board of Directors shall be held in the months of January, February, March,
April, May, June, July, September, October and November upon notice. Written
notice of the time and place of such regular meetings of the Board of Directors
shall be given to each Director by either personal delivery, telegram,
facsimile transmission, or any other form of electronic communication, unless
prohibited by law, at least two (2) days before the meeting or by notice mailed
to the Director at least five (5) days before each meeting. One or more
representatives designated by the sole shareholder shall receive prior notice
of, and an invitation to attend, any meeting of the Board of Directors.

Section 2.5. Special Meetings. Special meetings of the Board of
Directors may be called by the President of the Corporation, or at the request
of two or more directors. Each member of the Board of Directors shall be given
notice stating the time and place, by telegram, letter, facsimile transmission
or other electronic communication, or in person, of each such special meeting.

Section 2.6. Quorum. A majority of the directors shall constitute
a quorum at any meeting, except when otherwise provided by law; but a lesser
number may adjourn any meeting from time to time, and the meeting may be held,
as adjourned, without further notice. Members of the Board of Directors or any
committee thereof may participate in a meeting of such Board or committee by
means of a conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.

Section 2.7. Vacancies. When any vacancy occurs among the
directors, the remaining members of the Board of Directors, in accordance with
the laws of the State of Texas, may appoint a director to fill such vacancy at
any regular meeting of the Board of Directors, or at a special meeting for that
purpose.

Section 2.8. Action Without a Meeting. Any action required to be
taken at a meeting of the Board of Directors of the Corporation, or any action
which may be taken at a meeting of the Board of Directors or a committee
thereof, may be taken without a meeting if a consent in writing, setting forth
the action so to be taken, signed by all of the directors, or all the members
of the committee, as the case may be, is filed in the minutes of the
proceedings of the Board of Directors or of the committee. Such consent shall
have the same effect as a unanimous vote.
<PAGE> 11

ARTICLE III

Committees of the Board

Section 3.1. Examining Committee. The Board of Directors shall
annually appoint a committee of two or more directors, which shall, at least
once during each calendar year and within fifteen months of the last such
examination make suitable examinations of the affairs of the Corporation, or
cause suitable examinations to be made by examiners responsible only to the
Board of Directors, to ascertain whether the Corporation is in sound financial
condition, whether internal controls and procedures are being maintained, and
shall recommend to the Board of Directors such changes in the manner of
conducting the affairs of the Corporation as shall be deemed advisable. Such
reports shall state the results of such examinations in writing to the Board of
Directors at the next regular meeting thereafter.

Section 3.2. Executive Committee. There shall be an Executive
Committee composed of two or more directors which shall have and may exercise
all the authority of the Board of Directors when the Board of directors is not
in session, except that such committee shall not have the authority to:

(a) approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders;

(b) designate candidates for the oitice of director, for purposes
of proxy solicitation or otherwise;

(d) amend the By-Laws; or

(e) authorize or approve the issuance or sale of, or any
contract to issue or sell, shares;

except that the Board of Directors, having provided general
authorization for the issuance or sale of shares, or any contract
therefore, may, pursuant to a general formula or method specified
by the Board of Directors, by resolution or by adoption of a
stock option or other plan, authorize the Executive Committee to
fix the terms of any contract for the sale of the shares and to
fix the terms upon which such share may be issued or sold,
provided however thnotice Executive Committee shall secure the
consent or approval of U.S. Trust
<PAGE> 12
Corporation on behalf of the sole shareholder of the Corporation
evidenced by (i) a resolution of its Board of Directors or (ii)
written approval of its Chairman or President to such action.

The Executive Committee shall keep minutes of its meetings, and
such minutes be submitted at the next regular meeting of the Board of
Directors at which a quorum is present, and any action taken by the Board of
Directors which respect thereto shall be entered in the minutes of the Board of
Directors.

The Executive Committee shall meet at least once in each calendar month in
which a regular meeting of the Board of Directors is not scheduled.

ARTICLE V

Officers and Employees

Section 4.1 Chairman of the Board. The Board of Directors shall
appoint one of its members to be Chairman of the Board of Directors to serve at
the pleasure of the Board of Directors. Such person shall preside at all
meetings of the Board of Directors. The Chairman of the Board of Directors
shall supervise the carrying out of the policies adopted or approved by the
Board of Directors; shall have general executive powers, as well as the
specific powers conferred by these By-laws; shall also have and may execise
such further powers and duties as from time to time may be conferred upon or
assigned by the Board of Directors.

Section 4.2. President. The Board of Directors shall appoint one
of its members to be President of the Corporation. In the absence of the
Chairman, the President shall preside at any meeting of the Board of
Directors.exerciseeresident shall have general executive powers, and shall have
and may exercise any and all other powers and duties pertaining by law,
regulation or practice to the Office of President, or imposed by these By-Laws.
The President shall also have and may exercise such further powers and duties
as from time to time may be conferred or assigned by the Board of Directors.

Section 4.3. Vice President. The Board of Directors may appoint
one or more Vice Presidents. Each Vice President shall have such powers and
duties as may be assigned by the Board of Directors. One Vice President shall
be designated by the Board of Directors, in the absence of the President, to
perform all the duties of the President.

Section 4.4. Secretary. The Board of Directors shall appoint a
Secretary, Cashier, or other designated officer who shall be Secretary of the
Board of Directors and of the Corporation, and shall keep accurate minutes of
all meetings. The Secretary shall attend to the
<PAGE> 13
giving of all notice required by these By-Laws to be given; shall be custodian
of the corporate seal, records, documents and papers of the Corporation; shall
provide for the keeping of proper records of all transactions of the
Corporation; shall have and may exercise any and all other powers and duties
pertaining by law, regulation or practice, to the Offices of Secretary or
Cashier, or imposed by these By-Laws; and shall also perform such other duties
as may be assigned form time to time by the Board of Directors.

Section 4.5. Other Officers. The Board of Directors may appoint
one or more Assistant Vice Presidents, one or more Trust Officers, one or more
Assistant Secretaries, one or more Assistant Cashiers, one or more Managers and
Assistant Managers of Branches and such other officers and attorneys which from
time to time may appear to the Board of Directors to be required or desirable
to transact the business of the Corporation. Such officers shall respectively
exercise such powers and perform such duties as pertain to their several
offices, or as may be conferred upon, or assigned to them by the Board of
Directors, the Chairman of the Board of Directors, or the President.

Section 4.6. Tenure of Office. The President and all other
officers shall hold office for the current year for which the Board of
Directors was elected, unless they shall resign, become disqualified, or be
removed; and any vacancy occurring in the Office of the President shall be
filled promptly by the Board of Directors.

<PAGE> 14
ARTICLE V

Section 5.1. Trust Department. There shall be a department of
the Corporation known as the Trust Department which shall perform the fiduciary
responsibilities of the Corporation.

Section 5.2. Trust Officer. There shall be a Trust Officer of
this Corporation whose duties shall be to manage, supervise and direct all the
activities of the Trust Department. Such person shall do or cause to be done
all things necessary or proper in carrying on the business of the Trust
Department in accordance with provisions of law and applicable regulations; and
shall act pursuant to opinions of counsel where such opinion is deemed
necessary. Opinions of counsel shall be retained on file in connection with
all important matters pertaining to fiduciary activities. The Trust Officer
shall be responsible for all assets and documents held by the Corporation in
connection with fiduciary matters.

The Board of Directors may appoint such other officers of the
Trust Department as it may deem necessary, with such duties as may be assigned.

Section 5.3. Trust Investment Committee. There shall be a Trust
investment Committee of this Corporation composed of two or more members, who
shall be capable and experienced officers or directors of the Corporation. All
investments of funds held in a fiduciary capacity shall be made, retained or
disposed of only with the approval of the Trust Investment Committee, and the
Committee shall keep minutes of all its meetings, showing the disposition of
all matters it considers and passes upon. The Committee shall, promptly after
the acceptance of an account for which the Corporation has investment
responsibilities, review the assets thereof, to determine the advisability of
retaining or disposing of such assets. The Committee shall conduct a similar
review at least once during each calendar year thereafter.

The Trust Investment Committee or any sub-committee thereof shall additionally
exercise the Department's fiduciary authority over matters such as
discretionary distributions, account overdrafts, acceptance of new accounts,
closing of accounts, exceptions or changes to the published fee schedules, and
all other matters which require a high degree of corporate discretion.

A report of all investment reviews and other Committee actions
shall be noted in the minutes of the Committee.

Section 5.4. Trust Department Files. There shall be maintained
in the Trust Department files containing all fiduciary
<PAGE> 15
records necessary to assure that its fiduciary responsibilities have been
properly undertaken and discharged.

Section 5.5. Trust Investments. Funds held in a fiduciary
capacity shall be invested in accordance with the instrument establishing the
fiduciary relationship and permissible by law.

ARTICLE VI

Stock and Stock Certificates

Section 6.1. Transfers. Shares of stock shall be transferable on
the books of the Corporation, and a transfer book shall be kept in which all
transfers of stock shall be recorded. Every person becoming a shareholder by
such transfer shall, in proportion to his shares, succeed to all rights of the
prior holder of such shares.

Section 6.2. Stock Certificates. Certificates of stock shall
bear the signature of the Chairman (which may be engraved, printed, or
impressed), and shall be signed manually or by facsimile process by the
Secretary, Assistant Secretary, Cashier, Assistant Cashier, or any other
officer appointed by the Board of Directors for that purpose, to be known as an
Authorized Officer, and the seal of the Corporation shall be engraven thereon.
Each certificate shall recite on its face that the stock represented thereby is
transferable only upon the books of the Corporation properly endorsed.

ARTICLE VII

Corporate Seal

Section 7.1 The President, the Cashier, the Secretary or any
Assistant Cashier or Assistant Secretary, or other officer thereunto designated
by the Board of Directors, shall have the authority to affix the corporate seal
to any document requiring such seal, and to attest the same. Such seal shall
be substantially in the following form:

<PAGE> 16
Impression
of
Seal

ARTICLE VIII

Miscellaneous Provisions
Section 8.1. Fiscal Year. The Fiscal Year of the Corporation
shall be the calendar year.

Section 8.2. Execution of Instruments. All agreements,
indentures, mortgages, deeds, conveyances, transfers, certificates,
declarations, receipts, discharges, releases, satisfactions, settlements,
petitions, schedules, accounts, affidavits, bonds, undertakings, proxies and
other instruments or documents may be signed, executed, acknowledged, verified,
delivered or accepted on behalf of the Corporation by the Chairman of the
Board, or the President, or any Vice President, or the Secretary, or the
Cashier, or, if in connection with exercise of fiduciary powers of the
Corporation, by any of said officers or by any Trust Officer. Any such
instruments may also be executed, acknowledged, verified, delivered or accepted
on behalf of the Corporation in such other manner and by such other officers or
agents as the Board of Directors may from time to time direct. The provisions
of this Section 8.2 are supplementary to any other provision of these By-laws.

Section 8.3. Records. The Articles of Incorporation, the By-laws
and the proceedings of all meetings of the shareholders, the Board of
Directors, and standing committees of the Board shall be recorded in
appropriate minute books provided for the purpose. The minutes of each meeting
shall be signed by the Secretary, Cashier or other Officer appointed to act as
Secretary of the meeting.

ARTICLE IX

By-laws

Section 9.1. Inspection. A copy of the By-laws, with all
amendments thereto, shall at all times be kept in a convenient place at the
Main Office of the Corporation, and shall be open for inspection to all
shareholders, during business hours.

Section 9.2. Amendments. The By-laws may be amended, altered, or
repealed, at any regular or special meeting of the Board of Directors, by a
vote of a majority of the total number of the Directors.

ARTICLE X

Section 10.1. Idemnified Person. To the extent permitted and in
the manner prescribed by law, the Corporation shall indemnify any person
("indemnified person") made or threatened to be made a party to any action,
suit or proceeding, whether civil or criminal, by reason of the fact that he,
his testator or intestate, is or was a director, advisory board member or
officer of the Corporation or served any other corporation of any type or kind,
domestic or foreign, or any partnership, joint venture, trust, employee benefit
plan or other enterprise in any capacity at the request of the Corporation,
against judgements, fines, amounts paid in settlement and reasonable expenses
(which the Corporation may advance), including attorney's fees, actually and
necessarily incurred as a result of such action, suit or proceeding, or any
appeal therein. The foregoing right of indemnification shall not be exclusive
of any other right to which any such person may be entitled but shall not apply
in the event of misconduct or gross negligence of the proposed indemnified
person.
<PAGE> 17
EXHIBIT T-1.6

CONSENT OF TRUSTEE

Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, and in connection with the proposed issue of Cinemark USA,
Inc. 9-5/8% Senior Subordinated Notes due 2008, we hereby consent that reports
of examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.

U.S. Trust Company of Texas, N.A.

By: /s/ Bill Barber
----------------------------------
Bill Barber
Vice President
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C> <C> <C>
U.S. TRUST CO. OF TEXAS, N.A. CELL DATE: 06/30/96 STATE #: 486797 FFIEC 034
2001 ROSS AVENUE VENDOR ID: D CERT #: 33217 PAGE RC-1
DALLAS, TX 75201 TRANSIT #: 11101766
</TABLE>

CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1996

ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE
QUARTER.

<TABLE>
<S> <C> <C> <C>
Schedule RC - Balance Sheet

C100
Dollar Amounts in Thousands
ASSETS RCON
1. Cash and balances due from depository institutions:
a. Noninterest-bearing balances and currency and coin(1,2) . . . . . . . . . . . . . 0081 348 1.a
b. Interest bearing balances(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0071 199 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) . . . . . . . . . . . 1754 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D) . . . . . . . . . . 1773 9,098 2.b
3. Federal funds sold and securiites purchased under agreements to resell:
a. Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0276 0 3.a
b. Securities purchased under agreements to resell . . . . . . . . . . . . . . . . 0277 0 3.b
RCON
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) . 2122 33,342 4.a
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . 3123 481 4.b
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . 3128 0 4.c
d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a RCON
minus 4.b and 4.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2125 32,861 4.d
5. Trading assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3545 0 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . 2145 720 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . . 2150 0 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . 2155 0 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . . . . . 2143 0 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . . . . . . . . . 2160 1,653 11.
12. a. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . . . . . . . . 2170 44,879 12a
b. Losses deferred pursuant to 12 U.S.C. 1823(j) . . . . . . . . . . . . . . . . . . 0306 0 12b
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823(j) (sum of Items 12.a
and 12.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0307 44,879 12c
</TABLE>

- ---------------
(1) Includes cash items in process of collection and unposted debits.
(2) The amount reported in this item must be greater than or equal to the sum
of Schedule RC-M, items 3a and 3b.
(3) Includes time certificates of deposit not held for trading.
(4) Report "term federal funds sold" in Schedule RC, Item 4a, "Loans and
leases, net of unearned income", and in Schedule RC-C, part I.
(5) Report securities purchased under agreements to resell that involve the
receipt of immediately available funds and mature in one business day or
roll over under a continuing contract in Schedule RE, Item 3a, "Federal
funds sold."
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C> <C> <C>
U.S. TRUST CO. OF TEXAS, N.A. CELL DATE: 06/30/96 STATE #: 486797 FFIEC 034
2001 ROSS AVENUE VENDOR ID: D CERT #: 33217 PAGE RC-2
DALLAS, TX 75201 TRANSIT #: 11101766
</TABLE>

Schedule RC -- Continued

<TABLE>

Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES
RCON
13. Deposits: ----
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E . . . . . 2200 19,179 13.a
RCON
----
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . . . . . . 6631 6,865 13.a.1
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . 6636 12,314 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Interest-bearing
RCON
----
14. Federal funds purchased and securities sold under agreements to repurchase:
a. Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0278 0 14.a
b. Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . 0279 0 14.b
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . 2840 0 15.a
b. Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3548 0 15.b
16. Other borrowed money:
a. With remaining maturity of one year or less . . . . . . . . . . . . . . . . . . . 2332 0 16.a
b. With remaining maturity of more than one year . . . . . . . . . . . . . . . . . . 2333 6,000 16.b
17. Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . 2910 0 17.
18. Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . 2920 0 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . 3200 0 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . 2930 678 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . . . . . . . . . . . . 2948 25,857 21.
22. Limited-life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . 3838 7,000 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3230 500 24.
25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . 3839 8,384 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . 3632 3,140 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities . . . . . . 8434 2 26.b
27. Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . 3210
28. a. Total equity capital (sum of items 23 through 27) . . . . . . . . . . . . . . . . 3210 19,022 28.
b. Losses deferred pursuant to 12 U.S.C. 1823(j) . . . . . . . . . . . . . . . . . . 0906 0 28.b
c. Total equity capital and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 28.a and 28.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3559 19,022 28.c
29. Total liabilities, limited-life preferred stock, equity capital, and losses
deferred pursuant to 12 U.S.C. 1823(j) (sum of items 21, 22, and 28.c) . . . . . . . 2257 44,879 29.

MEMORANDUM
To be reported only with the March Report of Condition.
RCON
----
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the bank
by independent external auditors as of any date during 1995 . . . . . . . . . . . . . 6724 N/A M.1
</TABLE>

1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm
which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated
holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work

(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Report "term federal funds purchased" in Schedule RC, item 16, "Other
borrowed money."
(3) Report securities sold under agreements to repurchase that involve the
receipt of immediately available funds and mature in one business day or
roll over under a continuing contract in Schedule RC, item 14.a, "Federal
funds purchased."