CINEMARK USA INC /TX, 10-K, 1997-04-07

CINEMARK USA INC /TX
10-K, 1997-04-07
MOTION PICTURE THEATERS

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THIS DOCUMENT IS A COPY OF THE ANNUAL REPORT ON FORM 10K FILED ON APRIL 1, 1997
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------

For the Fiscal Year Ended December 31, 1996 Commission File Nos. 33-47040
333-11895
CINEMARK USA, INC.
(Exact Name of registrant as Specified in its Charter)

Texas 75-2206284
<S> <C>
(State or Other Jurisdiction of incorporation or (I.R.S. Employer Identification No.)
Organization)

7502 Greenville Avenue
Suite 800
Dallas, Texas 75231-3830
(Address of principal executive offices) (Zip Code)

<FN>
Registrant's Telephone Number, including area code: (214)696-1644

Securities Registered pursuant to Section 12(b) of the Act:

None
(Title of Class)

Securities Registered pursuant to Section 12(g) of the Act:

None
(Title of Class)
</FN>
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No ____.

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

[ X ] [ ________ ]

As of March 27, 1997, 1,500 shares of Class A Common Stock and 184,589
shares of Class B Common Stock (including options to acquire 6,645 shares of
Class B Common Stock exercisable within 60 days of such date) were outstanding.

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Index

Page

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PART I........................................................................................................... 1
Item 1: Business..................................................................................... 1
(a)General Development of Business................................................................ 1
(b)Financial Information About Industry Segments.................................................. 4
(c)Narrative Description of Business.............................................................. 5
Item 2: Properties................................................................................... 11
Item 3: Legal Proceedings............................................................................ 11
Item 4: Submission of Matters to a Vote of Security Holders.......................................... 11

PART II.......................................................................................................... 11
Item 5: Market for Registrant's Common Equity and Related
Stockholder Matters.......................................................................... 11
Item 6: Selected Financial Data...................................................................... 12
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operation........................................................... 14
Item 8: Financial Statements and Supplementary Data.................................................. 21
Item 9: Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................................................................... 21

PART III......................................................................................................... 22
Item 10:Directors and Executive Officers of the Registrant.................................................. 22
Item 11:Executive Compensation.............................................................................. 25
Item 12:Security Ownership of Certain Beneficial Owners and
Management............................................................................................ 28
Item 13:Certain Relationships and Related Transactions...................................................... 30

PART IV.......................................................................................................... 33
Item 14:Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................................................................... 33
(a)Documents filed as part of this Report......................................................... 33
(b)Reports on Form 8-K............................................................................ 33
(c)Exhibits....................................................................................... E-1
(d)Financial Statement Schedules.................................................................. S-1
</TABLE>

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PART I

Item 1: Business.

(a) General Development of Business.

Continued Expansion

Cinemark USA, Inc., a Texas corporation (the "Company"), is the fourth
largest motion picture exhibitor in North America in terms of the number of
screens in operation. The Company was organized in December 1987 to consolidate
theatre operations then controlled by its shareholders. Since its formation, the
Company has increased the number of screens it operates by approximately 369%
from 337 to 1,583 at March 27, 1997 through internal development and
acquisitions. The Company's 1,583 screens are in 180 theatres located in 29
states, Canada, Chile and Mexico, consisting of 1,195 screens in 128 "first run"
theatres and 388 screens in 52 "discount" theatres. Of the Company's 1,583
screens, 1,057 (or 65%) were built by the Company during the 1990's, and, as a
result, the Company believes it operates one of the most modern theatre circuits
in the industry. The Company's revenues have increased from $43.3 million in
1988 to $341.7 million in 1996. Of the screens operated by the Company, 1,242
were built by the Company and 341 were acquired. The Company anticipates that
most of its future growth will come primarily through the development of new
theatres and the addition of screens to existing facilities.

The Company maintains its principal executive offices at 7502 Greenville
Avenue, Suite 800, Dallas, Texas 75231. Its telephone
number at such address is (214) 696-1644.

Senior Subordinated Notes Offering and Senior Note Repurchase

On August 15, 1996, the Company issued $200 million aggregate principal
amount of 9-5/8% Series A Senior Subordinated Notes (the "Series A Notes")
pursuant to Rule 144A (the "Offering"). The net proceeds of the Offering were
used by the Company to (i) repurchase an aggregate $123,370,000 of the Company's
12% Senior Notes due 2001 (the "Senior Notes") and pay premium and consent fees
related thereto pursuant to an Offer to Purchase and Consent Solicitation to
repurchase all of the Company's $125 million principal amount of Senior Notes
and (ii) reduce the Company's indebtedness under the then existing credit
facility. The Company exchanged the Series A Notes in October 1996 for 9-5/8%
Series B Senior Subordinated Notes (the "Senior Subordinated Notes"), which
Senior Subordinated Notes have been registered under the Securities Act of 1933,
as amended.

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New Credit Facility

On December 12, 1996, the Company replaced its existing credit facility
with a reducing revolving credit agreement (the "Credit Facility") through a
group of banks for which Bank of America National Trust and Savings Association
acts as administrative agent (the "Administrative Agent"). The Credit Facility
provides for loans to the Company of up to $225.0 million in the aggregate. The
Credit Facility is a reducing revolving credit facility; therefore, at the end
of each quarter during the calendar year 2000, 2001, 2002 and 2003, the
aggregate commitment shall automatically be reduced by $8,437,500, $11,250,000,
$14,062,500 and $22,500,000 respectively. The Company is required to prepay all
loans outstanding in excess of the aggregate commitment as reduced pursuant to
the terms of the Credit Facility. Borrowings under the Credit Facility are
secured by a pledge of a majority of the issued and outstanding capital stock of
the Company.

Pursuant to the terms of the Credit Facility, funds borrowed currently 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 Margin (as defined in the Credit Facility). As
of March 27, 1997, the interest rate was 6.6%.

Covenants and provisions contained in the Credit Facility restrict, with
certain exceptions, among other things, the Company's or any Restricted
Subsidiary's ability (i) to create or incur any additional liens on any assets,
(ii) to sell assets of the business in excess of $2.0 million in a single
transaction or related series of transactions, or in excess of $5.0 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 direct or indirect
advance, loan or other extension of credit or capital contribution to other
persons or entitles, (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 Senior Notes or Senior Subordinated 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 Company's or any consolidated
Restricted Subsidiary's fiscal year, (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 Bank upon its
property or

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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 of certain covenants and agreements in the
Credit Facility by the Company, (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 twenty days after notice thereof,
(v) default by the Company or its Restricted Subsidiaries under any other
indebtedness (other than the Indenture, the Senior Subordinated Note Indenture
or Swap Contracts (as defined in the Credit Facility)) in the aggregate
principal amount of $1.0 million, (vi) a default under the Indenture or the
Senior Subordinated Note Indenture or the Senior Subordinated Note Indenture and
(vii) certain changes of control and acts of bankruptcy, insolvency or
dissolution.

Sale of 2 Day Video

On October 17, 1996, the Company entered into a Stock Purchase Agreement
(the "Purchase Agreement") pursuant to which the Company sold all of the shares
of Class A Common Stock of 2 Day Video, Inc. owned by the Company for an
aggregate purchase price of $10.1 million. The net proceeds from the sale of the
stock of 2 Day Video, Inc. were used to continue the Company's expansion program
and for general corporate purposes.

Foreign Developments

General

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. In 1992, the Company formed Cinemark International, Inc. (f/k/a
Cinemark II, Inc.) ("Cinemark International") to develop and acquire theatres in
international markets. All of the Company's operations outside of the United
States and Canada will be

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conducted through Cinemark International, an unrestricted subsidiary under the
Company's Indenture governing the Senior Subordinated Notes, and its
subsidiaries.

Cinemark International is introducing state-of-the-art multiplex theatres
to the significantly "under-screened" Latin American markets. Currently,
Cinemark International operates thirteen first-run theatres (127 screens) in
Mexico and Chile with an aggregate of twenty-two theatres (221 screens)
scheduled to open or begin construction in these two countries as well as in
Brazil, Argentina, Peru and Ecuador during the remainder of 1997. Additionally,
Cinemark International operates two discount theatres (24 screens) in Alberta,
Canada. Due to the enormous potential of the international market, Cinemark
International is expanding beyond the Latin American market into Asia. In March
1997, Cinemark International entered into a strategic joint venture with a
Japanese motion picture company to build state-of-the-art multiplex theatres
throughout Japan and surrounding Asian markets. Cinemark International's
strategy will be to continue to form strategic partnerships or joint ventures
with local partners, thereby sharing risk and obtaining valuable market insight.

Mexico

In 1993, Cinemark Mexico (USA), Inc. ("Cinemark Mexico") was formed as an
indirect subsidiary of the Company to pursue new development opportunities in
Mexico through its wholly owned subsidiary, Cinemark de Mexico, S.A. de C.V.
("Cinemark de Mexico"). As of March 27, 1997, Cinemark International and New
Wave Investments AVV, an unaffiliated Aruba corporation owned by Mexican
citizens ("New Wave"), own 95.6% (95.0% on a fully diluted basis, including the
exercise of outstanding warrants) and 4.4% (4.4% on a fully diluted basis,
including the exercise of outstanding warrants), respectively, of the common
stock of Cinemark Mexico. As of March 27, 1997, warrants to purchase 22,222
shares of common stock of Cinemark Mexico are issued and outstanding.

Cinemark International, through its subsidiary Cinemark Mexico, is
developing state-of-the-art multiplex theatres. Cinemark Mexico's operations are
conducted through its subsidiary Cinemark de Mexico. Cinemark Mexico currently
operates eleven theatres (114 screens), with three theatres (35 screens) under
commitment with executed leases.

In September 1996, Cinemark Mexico completed an Exchange Offer and Consent
Solicitation (the "Exchange Offer") to restructure the outstanding Cinemark
Mexico Notes (as hereinafter defined) and to

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issue New Mexico Notes (as hereinafter defined) in exchange for outstanding
warrants to purchase common stock of Cinemark Mexico. In connection with the
Exchange Offer, Cinemark International also amended certain terms of the Mexico
Senior Credit Facility. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operation--Liquidity and Capital Resources."

Chile

In November of 1992, Cinemark International entered into a joint venture
agreement with Conate, S.A., a Chilean movie theatre operator ("Conate"), to
develop state-of-the-art multiplex theatres in Chile. The joint venture provides
for the development of 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. Cinemark
Chile, which is based in Santiago, Chile, currently operates two theatres (13
screens) and plans to begin construction on three theatres (32 screens) during
the remainder of 1997.

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 two discount theatres (24 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
also provides for the licensing of the Company's technology, trademark and name.
The joint venture's business is conducted through Cinemark Argentina, S.A.,
which is 50% owned by Cinemark Argentina Holdings, S.A. The remaining 50% is
owned equally by DASA and Procine. Cinemark International and Conate each own
50% of Cinemark Argentina Holdings, S.A. Cinemark Argentina plans to open its
first theatre (8 screens) in April 1997 and begin construction on three theatres
(27 screens) during 1997.

Brazil

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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 expects to open its first theatre (12 screens) in May 1997. Additionally,
Cinemark Brazil expects to begin construction on six theatres (64 screens)
during 1997.

Peru

In December 1996, Cinemark International and Conate entered into a joint
venture agreement to develop state-of the-art multiplex theatres in Peru. The
joint venture provides for the licensing of the Company's technology, trademark
and name. The joint venture conducts its business through Cinemark del Peru,
S.A., which is 50% owned by Cinemark International and 50% owned by Conate.
Cinemark del Peru, S.A. expects to open one theatre (12 screens) during 1997.

Ecuador

In September 1996, Cinemark International entered into a joint venture
agreement with The Wright Group, a group of prominent Ecuadorian individuals and
companies, to develop state-of-the-art multiplex theatres in Ecuador. The joint
venture agreement provides for the licensing of the Company's technology,
trademark and name. The joint venture conducts its business through Cinemark del
Ecuador, S.A. ("Cinemark Ecuador") which is 60% owned by Cinemark International
and 40% owned by The Wright Group. Cinemark Ecuador expects to open two theatres
(16 screens) during 1997.

Japan

In March 1997, Cinemark International entered into a joint venture
agreement with Shochiku Co., Ltd., a Japanese distributor, exhibitor and
producer of movies ("Shochiku") to develop state-of- the-art multiplex theatres
in Japan. The joint venture will conduct its business through Shochiku Cinemark
Theatres, which is 26.7% owned by Cinemark International, 26.7% owned by
Shochiku, and the remaining 46.6% owned by a consortium of prominent Japanese
companies. Shochiku Cinemark Theatres plans to open its first theatre (7
screens) in March 1997 and plans to begin construction on an additional theatre
(12 screens) during 1997.

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(b) Financial Information About Industry Segments.

The Company is a unitary business as described above and as a result does
not break out its business into industry segments.

General

The Company

The Company is the fourth largest motion picture exhibitor in North America
in terms of the number of screens in operation. At March 27, 1997, the Company
operated 1,583 screens in 180 theatres located in 29 states, Canada, Chile and
Mexico, consisting of 1,195 screens in 128 first run theatres and 388 screens in
52 "discount" theatres. Of the Company's 1,583 screens, 1,057 (or 65%) were
built by the Company during the 1990's, 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 92% of the
Company's screens located in theatres of six or more screens. The Company
believes that its ratio of screens to theatres (8.8 to 1 at March 27, 1997) is
the highest of the five largest theatre circuits in the U.S. and is
approximately 75% higher than the industry average (approximately 5 to 1). From
its fiscal year ended December 31, 1991 through the fiscal year ended December
31, 1996, the Company has increased consolidated revenues approximately 108%
from $164.4 million to $341.7 million and has increased EBITDA approximately
134.2% from $26.0 million to $60.9 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 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

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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 movie going 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.

Revenues for the Company are generated primarily from box office admissions
and theatre concession sales, which accounted for 62% and 34%, respectively, of
fiscal 1996 revenues. The balances of the Company's revenues consist of revenue
collected from video games located in the lobbies of the theatres and on-screen
advertising.

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 undeserved 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
continue focusing on multiplex theatres which enable maximum utilization of
theatre facilities and enhance operating efficiencies, thereby maximizing profit
per square foot. The Company believes a well-designed and operated theatre
represents a natural setting for more than a movie exhibition site, but rather a
family entertainment complex. The Company intends to expand its construction of
larger "megaplex" entertainment centers in major

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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 eight 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.

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 March 27, 1997, approximately 24% of the Company's screens were
discount screens.

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. In March 1997, the Company expanded
its international focus with Cinemark International entering into a joint
venture agreement with a prominent Japanese motion picture company to develop
and operate multiplex theatres in Japan and surrounding Asian markets. 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 currently has theatres under
construction in Brazil, Argentina, Ecuador and Peru.

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Operations

The Company's corporate office, which employed approximately 160
individuals as of March 27, 1997, 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 over 10 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

<PAGE>

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 1997
will have digital soundtracks available as an alternative to the standard stereo
soundtrack. More than 65% 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 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 102 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

<PAGE>

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.

Competition

The Company's theatres compete against both local and national exhibitors.
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.

<PAGE>

Where the Company faces competition, it usually licenses films based on an
allocation process. The Company currently operates in approximately 102 first
run film zones in the U.S. The Company believes that no individual film zone is
material to the Company. 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.

Employees

As of March 27, 1997, the Company had approximately 6,500 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 full-time 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 when readily achievable with current regulations relating
to accommodating the disabled. Management believes that the cost of complying
with the ADA will not be material.

<PAGE>

MAP

<PAGE>

Item 2: Properties.

Of the 1,432 screens operated by the Company in the U.S. at March 27, 1997,
27 theatres (322 screens) were owned, 132 theatres (1,042 screens) were leased
pursuant to building leases, 2 theatres (14 screens) were leased pursuant to
ground leases and 4 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 33 of the Company's theatre
leases (covering 164 screens) have remaining terms (including renewal periods)
of less than 5 years and approximately 38 of the Company's theatre leases
(covering 386 screens) have remaining terms (including renewal periods) 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 which expires on
June 30, 1998. See note 9 of the Company's Notes to the Consolidated Financial
Statements for information with respect to the Company's lease commitments.

As of March 27, 1997, the Company operated 15 theatres (151 screens)
outside of the U.S. with 11 theatres (120 screens) under commitment with
executed leases. Of the 15 theatres operated outside of the U.S., 14 theatres
(139 screens) were leased pursuant to ground or building leases and one theatre
(12 screens) was fee owned. 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.

Item 3: Legal Proceedings.

Tinseltown Litigation

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.

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

<PAGE>

liability with respect to proceedings currently pending is not material in the
aggregate to the Company's consolidated financial position or results of
operations.

Item 4: Submission of Matters to a Vote of Security Holders.

There have not been any matters submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this report through the
solicitation of proxies or otherwise.

PART II

Item 5: Market for Registrant's Common Equity and Related
Stockholder Matters.

There is no established public trading market for the Company's Common
Stock. As of March 27, 1997, there were 27 holders of record of the Company's
Common Stock. The Company has not paid dividends on its Common Stock and does
not expect to pay dividends on its Common Stock in the foreseeable future. The
Subordinated Notes Indenture and the Credit Facility contain restrictions on the
Company's ability to pay dividends on its Common Stock.

<PAGE>

Item 6: Selected Financial 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, 1996. 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, included elsewhere in this report.

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, 1996.

<TABLE>
<CAPTION>
Year Ended December 31,

1992 1993 1994 1995 1996
(In thousands, except theatres, screen and ratio data)
<S> <C> <C> <C> <C> <C>
Income Statement Data (Consolidated):
Revenues $194,652 $239,659 $283,077 $298,559 $341,731
Theatre operating costs 154,825 185,100 218,748 227,719 262,138
General and administrative expenses 10,119 12,162 17,095 19,555 23,486
Depreciation and amortization 9,830 10,939 15,121 15,925 21,799
Operating income 19,878 31,458 32,113 35,361 34,308
Interest expense(1) 12,258 17,102 18,917 19,374 20,376
Income before extraordinary items 5,726 9,720 7,006 13,155 14,616
Net income 5,829 9,720 7,006 13,155 5,230
Earnings per share:
Before extraordinary items 31.93 60.15 43.21 80.32 79.93
Net income 32.51 60.15 43.21 80.32 28.60
Shares outstanding 179 162 162 164 183

Other Financial Data (Consolidated):
Cash flow from (used for)
Operations $23,376 $27,181 $32,665 $36,090 $58,754
Investing activities (35,432) (35,560) (62,876) (80,268) (177,423)
Financing activities 35,509 25,051 13,273 32,031 119,690
Theatre level cash flow(2) 39,827 54,559 64,329 70,840 79,593
EBITDA(3) 32,117 45,508 50,851 55,708 60,902
Ratio of earnings to fixed charges(4) 1.43x 1.61x 1.46x 1.69x 1.65x
Operating Data:
United States (Restricted Group)
Theatres owned (at period end)(5) 147 153 154 150 158
Screens owned (at period end)(5) 1,010 1,084 1,121 1,155 1,339
Total attendance 51,087 59,632 63,401 61,006 63,774
Outside United States (Unrestricted Group)
Theatres owned (at period end)(6) -- -- 4 9 11
Screens owned (at period end)(6) -- -- 42 92 114
Total attendance -- -- 1,407 4,210 8,675
Balance Sheet Data (Consolidated):
Cash and temporary cash investments $29,368 $44,454 $31,056 $13,925 $14,383
Theatre properties and equipment-net 93,952 117,017 155,798 224,482 377,421
Total assets 147,661 189,361 217,185 267,747 432,905
Total long-term debt, including
current portion 130,662 152,787 167,374 198,145 297,206
Shareholders' equity (deficiency) (11,094) (760) 2,732 11,345 57,363
<FN>
- -------------------
</FN>
</TABLE>

<PAGE>

(1) Includes amortization of debt issue cost and debt discount and excludes
capitalized interest of $0.6 million, $1.7 million and $3.9 million in
1994, 1995 and 1996, respectively.

(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) 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 and debt discount and the portion of rental expense
which is deemed to be representative of the interest factor.

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

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

<PAGE>

Item 7: 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 report.

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

<PAGE>

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, 1994, 1995 and 1996 are not directly comparable due to the
effects of new theatre openings, acquired theatres and the impact of the debt
service associated with certain financings undertaken. Theatre closings have had
no significant effect on the operations of the Company. See notes 1 and 3 of the
Company's Notes to the Consolidated Financial Statements.

<PAGE>

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 in the period ended December 31, 1996.

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1994 1995 1996
---- ---- ----
Operating Data (In millions)
<S> <C> <C> <C>
Revenues
Admissions $ 174.5 $ 183.1 $ 211.6
Concessions 95.2 102.1 116.9
Other 13.4 13.4 13.2
---- ---- ----
Total revenues $ 283.1 $ 298.6 $ 341.7
======= ======= =======
Cost of operations
Film rentals $84.0 $89.0 $104.1
Concession supplies 17.5 17.3 18.4
Salaries and wages 39.5 40.6 46.9
Facility leases 29.6 30.9 34.4
Advertising 7.2 7.6 8.5
Utilities and other 40.9 42.3 49.8
---- ---- ----
Total cost of operations $218.7 $227.7 $262.1
====== ====== ======
Operating data as a percentage of total revenues(1):
Revenues
Admissions 61.6% 61.3% 61.9%
Concessions 33.6 34.2 34.2
Other 4.8 4.5 3.9
--- --- ---
Total revenues 100.0 100.0 100.0
Cost of operations
Film rentals(1) 48.1 48.6 49.2
Concession supplies(1) 18.4 16.9 15.8
Salaries and wages 14.0 13.6 13.7
Facility leases 10.5 10.3 10.1
Advertising 2.5 2.5 2.5
Utilities and other 14.4 14.2 14.6
Total cost of operations 77.3 76.3 76.7
General and administrative expenses 6.0 6.6 6.9
Depreciation and amortization 5.3 5.3 6.4
Operating income 11.4 11.8 10.0
Interest expense 6.7 6.4 6.0
Income before income taxes and extraordinary items 5.0 7.8 7.9
Net income 2.5 4.4 1.5

Average screen count (month end
average) 1,131 1,195 1,322
===== ===== =====
Revenues per average screen count $250,289 $249,840 $258,495
======== ======== ========
<FN>

(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.
</FN>
</TABLE>

<PAGE>

Comparison of Years Ended December 31, 1996 and December 31, 1995

Revenues. Revenues in 1996 increased to $341.7 million from $298.6 million,
a 14.5% increase. The increase in revenues is primarily attributable to a 11.1%
increase in attendance resulting from strong industry performance, the first
full year of operations of 130 screens opened in 1995 and the net addition of
206 screens since 1995. The contribution from the new screens opened in 1996 is
not fully reflected in the Company's operations as a majority of the new screens
were not opened until late 1996. Revenues were also positively affected by an
increase in admission and concession revenues per patron of 6.2%. The strong
industry performance and new screen openings contributed to an increase of 3.5%
in the revenues per average screen to $258,495 for 1996 from $249,840 for 1995.

Cost of Operations. Cost of operations, as a percentage of revenue,
increased slightly to 76.7% in 1996 from 76.3% in 1995. The increase as
percentage of revenues resulted from increases during the period in film rentals
as a percentage of admission revenues to 49.2% in 1996 from 48.6% in 1995 and an
increase in utilities and other as a percentage of revenues to 14.6% in 1996
from 14.2% in 1995. This increase was partially offset by a decrease in
concession supplies as a percentage of concession revenues to 15.8% in 1996 from
16.9% in 1995.

General and Administrative Expenses. General and administrative expenses,
as a percentage of revenues, increased to 6.9% in 1996 from 6.6% in 1995.
General and administrative expenses in absolute terms increased to $23.5 million
in 1996 from $19.6 million in 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 and
increases in salaries and wages, travel, and miscellaneous expenses associated
with the Company's international expansion.

Depreciation and Amortization. Depreciation and amortization
increased $5.9 million in 1996 to $21.8 million. in 1995. The
increase includes a $2.4 million charge pursuant to Statement of
Financial Accounting Standards No. 121 (FASB 121). In accordance
with FASB 121, the Company wrote down the assets of certain
theatres to their realizable value which exceeded their carrying
value. Depreciation and amortization before the affect of FASB 121

<PAGE>

increased $3.5 million for 1996. The increase is a result of the net addition of
$163.3 million in theatre property and equipment during 1996, a 56.8% increase
over 1995. 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 15.1% to $24.3 million (including the
capitalization of $3.9 million of interest to properties under construction)
from $21.1 million in 1995 (including capitalized interest of $1.7 million) .
The increase in interest costs incurred during 1996 was due principally to an
increase in average debt outstanding resulting from borrowings under the Credit
Facility and the Senior Subordinated Indenture.

Income Taxes. Income taxes increased to $12.3 million in 1996 compared to
$10.1 million in 1995, a 22.2% increase, resulting primarily from the increase
in income before taxes and permanent differences associated with the sale of
certain assets. The Company's effective rate for 1996 increased to 45.8% from
43.4% in 1995. The effective tax rates reflect the full reserve of the potential
tax benefit associated with the loss incurred by Cinemark Mexico.

Other Gains and Losses. Other gains and losses for 1996 of $11.1 million is
primarily attributable to a gain from the settlement of litigation and the sale
of 2 Day Video, Inc., an 82% subsidiary of the Company.

Extraordinary Items. In the third quarter of 1996, the Company issued $200
million aggregate principle of 9-5/8% Senior Subordinated Notes, a portion of
the proceeds of $193.2 million (net of discount, fees and expenses) were used to
repurchase 98.7% of the Company's $125 million 12% Senior Notes at a price of
$1,098.33 per $1,000 principal amount. As a result, an extraordinary loss of
$9.0 million (net of related tax benefit) was recognized in connection with the
premium paid and the write-off of the unamortized debt issue costs associated
with the Senior Notes repurchased. The remaining loss is attributable to the
refinancing of the Company's bank line of credit during 1996.

<PAGE>

Net Income. Net income before extraordinary items of $14.6 million for 1996
and net income of $13.2 million for 1995 included the consolidated losses of
Cinemark Mexico of $2.6 million (net of minority interest) and $2.7 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.

<PAGE>

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.

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.

Inflation and Foreign Currency

<PAGE>

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, the majority 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 $11.1 million cumulative
unrealized currency translation loss adjustment in shareholders' equity as of
December 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 a reduction in the rate
of expansion initially anticipated by Cinemark Mexico. As of March 27, 1997, the
value of the Mexican peso has depreciated slightly (1%) since the end of 1996.
In 1997, generally accepted accounting principles will require that the U.S.
dollar be used as the functional currency of the Company's Mexican subsidiary
for U.S. reporting purposes. This change will cause devaluations in the peso
during 1997 affecting the Company's investment in Mexico to be charged to
exchange loss rather than to the cumulative adjustment account.

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 $58.8 million in 1996 compared to $36.1 million in 1995 and $32.7
million in 1994.

<PAGE>

The Company's theatres are typically equipped with modern projection and
sound equipment, with approximately 65% of the screens operated by the Company
having been built in the 1990's. Maintenance capital expenditures for all
theatres operated by the Company for 1996 were $6.0 million or approximately
1.8% 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 $177.4 million, $80.3 million and $62.9 million in 1996, 1995,
and 1994, 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 $119.7 million, $32 million and $13.3 million in 1996,
1995, and 1994, respectively. During 1996, the Company opened 17 theatres (237
screens) in the U.S. and Mexico. In addition, as of March 27, 1997, the Company
expects to open 17 theatres (219 screens) in the U.S. during 1997 of which it
has already opened 4 theatres (43 screens) and has 9 theatres (134 screens)
under construction, with another 4 theatres (42 screens) scheduled to begin
construction within the next 90 days. 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 1997 will be approximately $110 million. As of March 27, 1997, the
Company had expended approximately $15.8 million toward the development of these
screens. Actual expenditures for theatre development and acquisitions during
1997 are subject to change based upon the availability of attractive
opportunities for expansion of the Company's theatre circuit.

On August 15, 1996, the Company issued $200 million of Senior Subordinated
Notes due 2008 (the "Subordinated Notes"). The Subordinated Notes bear interest
at the rate of 9-5/8% per annum, payable semi-annually on February 1 and August
1 of each year. The Subordinated Notes were issued at 99.553% of the principal
face amount (a discount of $4.47 per $1,000 principal amount). The net proceeds
to the Company from the issuance of the Subordinated Notes (net of discount,
fees and expenses) were approximately $193.2 million. The proceeds from the
Subordinated Notes were used to repurchase 98.7% of the Company's $125 million
12% Senior Notes due

<PAGE>

2002 ("Senior Notes") pursuant to a tender offer which expired on August 15,
1996. The Senior Notes were purchased at a premium of the $1,098.33 (including a
consent fee of $25) per $1,000 principal amount, plus accrued and unpaid
interest up to the date of repurchase. Excess proceeds were utilized to reduce
borrowings under the Company's Credit Facility and for general corporate
purposes.

On December 12, 1996, the Company replaced its existing credit facility
with the Credit Facility through a group of banks for which Bank of America
National Trust and Savings Association acts as Administrative Agent. The Credit
Facility provides for loans to the Company of up to $225.0 million in the
aggregate. The Credit Facility is a reducing revolving credit facility at the
end of each quarter during the calendar year 2000, 2001, 2002 and 2003,
requiring reductions in the aggregate commitment in the amount of $8,437,500,
$11,250,000, $14,062,500 and $22,500,000, respectively. The Company is required
to prepay all loans outstanding in excess of the aggregate commitment as reduced
pursuant to the terms of the Credit Facility. Borrowings under the Credit
Facility are secured by a pledge of a majority of the issued and outstanding
capital stock of the Company. As of March 27, 1997, the Company had borrowed
$105 million under the Credit Facility. Pursuant to the terms of the Credit
Facility, funds borrowed currently 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 Margin
(as defined in the Credit Facility). As of March 27, 1997, the interest rate was
6.6%.

In 1992, the Company formed Cinemark International to explore theatre
development opportunities outside the United States. As of March 27, 1997, the
Company has contributed $46.0 million to the capital of Cinemark International
to fund theatre development principally in Latin America. Cinemark International
plans to invest up to an additional $50 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 or by debt or equity financing to be provided
by third parties directly to Cinemark International or its subsidiaries.

<PAGE>

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 March 27, 1997, Cinemark
International owned 95.6% (95.0% on a fully diluted basis including the exercise
of the warrants) of the common stock of Cinemark Mexico. The remaining 4.4% was
owned by a corporation controlled by Mexican citizens. At March 27, 1997, the
Company operated eleven theatres (114 screens) and had three theatres (35
screens) under commitment with executed leases which will begin construction
during the remainder of 1997. In 1993 and 1994, Cinemark Mexico, which is the
direct parent of Cinemark de Mexico, issued $22.4 million principal amount of
12% Senior Subordinated Notes due 2003 (the "Cinemark Mexico Old Notes") with
detachable warrants.

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 March 27, 1997, plans to
begin construction on three theatres (32 screens) during the remainder of 1997.
In December 1995, Cinemark entered into a joint venture agreement with Argentine
theatre operators to develop state-of-the-art multiplex theatres in Argentina.
The joint venture's business is conducted through Cinemark Argentina, S.A.,
which is 50% owned by Cinemark Argentina Holdings, S.A. Cinemark International
owns 50% of Cinemark Argentina Holdings, S.A. Cinemark Argentina plans to open
its first theatre (8 screens) in April 1997 and begin construction on three
theatres (27 screens) during 1997. In January 1997, Cinemark International and
its Chilean partner entered into a joint venture agreement to develop state-of
the-art multiplex theatres in Peru. The joint venture conducts its business
through Cinemark del Peru, S.A., which is 50% owned by Cinemark International
and 50% owned by Cinemark's Chilean partner. Cinemark del Peru, S.A. expects to
open one theatre (12 screens) during 1997.

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 open
its first theatre (12 screens) in the second quarter of 1997. Additionally,
Cinemark Brazil expects to begin construction on six theatres (64 screens)
during 1997.

<PAGE>

In September 1996, Cinemark International entered into a joint venture
agreement with a prominent Ecuadorian company to develop state-of-the-art
multiplex theatres in Ecuador. The joint venture conducts its business through
Cinemark del Ecuador, S.A. ("Cinemark Ecuador") which is 60% owned by Cinemark
International. Cinemark Ecuador expects to open two theatres (16 screens) during
1997.

Cinemark Mexico Exchange Offer

As of September 30, 1996, Cinemark Mexico had outstanding (i) $22.4
million aggregate principal amount of Cinemark Mexico Notes and (ii) warrants to
purchase 379,073 shares of common stock of the Company (the "Warrants"). On
September 30, 1996, Cinemark Mexico completed the Exchange Offer pursuant to
which Cinemark Mexico and the holders of all of the Cinemark Mexico Notes
exchanged all of the Cinemark Mexico Notes for a new issuance of the New Mexico
Notes. The form and terms of the New Mexico Notes are identical in all material
respects to the Cinemark Mexico Notes except that interest on the New Mexico
Notes may, on each interest payment date from February 1, 1997 through and
including February 1, 2000, be paid at the option of Cinemark Mexico in cash or
through the issuance of additional notes of the same series (the "Additional
Notes"). If the Company elects to pay accrued interest in Additional Notes in
lieu of cash, interest during the relevant interest period shall accrue at the
rate of 13% per annum. Holders of Warrants to purchase 22,222 shares of Common
Stock of Cinemark Mexico elected not to participate in the Exchange Offer. The
purpose of the Exchange Offer was to exchange New Securities for all outstanding
Cinemark Mexico Notes in order to improve Cinemark Mexico's and Cinemark de
Mexico's financial and operating

<PAGE>

flexibility. The Company exercised its option to pay Additional
Notes for the interest period ended February 1, 1997.

In connection with the Exchange Offer, the Company obtained the consent of
the holders of the Cinemark Mexico Notes to amend the Indenture. The Company
executed that certain Third Supplemental Indenture dated September 30, 1996 (the
"Third Supplemental Indenture") which, among other things, (i) provided for the
issuance of the New Mexico Notes and the Additional Notes and (ii) amended
certain restrictions relating to financial ratios with which the Company must
comply. The Indenture requires Cinemark Mexico to maintain a Cash Flow Coverage
Ratio (as defined in the Indenture) of 2.0 to 1.0 beginning after December 31,
1999.

Simultaneously with the completion of the Exchange Offer, Cinemark
International acquired an additional 2,661,450 shares of Common Stock of
Cinemark Mexico for $10.0 million. On January 9, 1997, New Wave also acquired an
additional 64,032 shares of common stock of Cinemark Mexico for $240,591.

On December 4, 1995, Cinemark International, Cinemark Mexico and Cinemark
de Mexico, S.A. de C.V., entered into that certain Senior Secured Credit
Facility (the "Mexico Senior Credit Facility"). The Mexico Senior Credit
Facility provides for loans by Cinemark II to Cinemark Mexico of up to $10.0
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 are 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, unpaid interest
and fees on the loan shall be paid. Borrowing under the Mexico Senior Credit
Facility is secured by a pledge of all of the assets of Cinemark Mexico.

Simultaneously with the closing of the Exchange Offer, Cinemark
International and Cinemark Mexico agreed to amend the terms of the Mexico Senior
Credit Facility. The amendment (i) provides that if Cinemark Mexico exercises
its options to pay accrued and unpaid interest on the New Mexico Notes through
the issuance of Additional Notes, Cinemark will add accrued and unpaid
indebtedness under the Mexico Senior Credit Facility to principal at the next
two consecutive interest payment dates and (ii) amended certain

<PAGE>

restrictions relating to financial ratios with which the Company
must comply.

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.

Item 8: Financial Statements and Supplementary Data.

The financial statements and supplementary data are listed on the Index
at F-1. Such financial statements and supplementary data are included herein
beginning on page F-3.

Item 9: Changes in and Disagreements on Accounting and Financial
Disclosure.

None.

<PAGE>

PART III

Item 10: Directors and Executive Officers of the Registrant.

The directors and executive officers of the Company are:

<TABLE>
<CAPTION>
Name Age Position

<S> <C> <C>
Lee Roy Mitchell* 60 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 34 Vice President; Treasurer; Chief Financial Officer; Assistant
Secretary; Director
Gary R. Gibbs 52 Vice President-General Counsel; Assistant Secretary; Director
Margaret E. Richards 38 Vice President-Real Estate; Assistant Secretary
Rob Carmony 39 Vice President-Director of Operations
Jerry Brand 51 Vice President-Film Licensing
W. Bryce Anderson*+ 54 Director
Sheldon I. Stein*+ 43 Director
Heriberto Guerra, Jr.+ 47 Director
James A. Stern 46 Director
James L. Singleton+ 41 Director
<FN>
- --------------------------
* Member Audit Committee
+ Member Compensation Committee
</FN>
</TABLE>

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.

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

<PAGE>

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 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.

<PAGE>

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.

Sheldon I. Stein has served as a Director of the Company since
June 1992. Mr. Stein is a Senior Managing Director of Bear,
Stearns & Co. Inc., an investment banking firm, and is in charge of
its Southwest Corporate Finance Department. Mr. Stein is a

<PAGE>

director of Tandycrafts, Inc., Fresh America Corporation, The Men's
Wearhouse, Inc., FirstPlus Financial Group, Inc. and Cellstar
Corporation.

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, 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 Able Body
Corporation, and L.P. Thebault Company.

<PAGE>

Item 11: Executive Compensation.

Summary Compensation Table

<TABLE>
<CAPTION>
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 1996 $294,632 $1,703,357 $120,794(B)
and Chief Executive Officer 1995 267,852 1,733,976 - 120,828(C)
1994 243,513 1,715,290 - 121,086(D)

Alan Stock, President and Chief Operating 1996 $192,500 $83,739 $921,623(F)
Officer 1995 175,000 80,043 - 6,930(E)
1994 125,070 71,729 - 5,541(E)

Jeffrey J. Stedman, Vice President, 1996 $125,000 $102,160 $221,311(G)
Treasurer and Chief Financial Officer 1995 110,000 46,809 - 6,930(E)
1994 82,500 44,461 100 6,746(E)

Margaret E. Richards, Vice President-Real 1996 $100,000 $23,000 - $238,640(H)
Estate and Assistant Secretary 1995 70,000 23,700 - 2,063(E)
1994 60,000 2,971 1,791(E)

Gary R. Gibbs, Vice President 1996 $110,000 $24,136 $264,188(I)
and General Counsel 1995 100,000 26,153 600 6,930(E)
1994 75,000 1,531 5,649(E)

- ------------------------------------------ --------------------------------- ------------ ---------------
<FN>
- ---------------------------
(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 $1,950 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 $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.
(D) 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.
(E) Represents the Company's annual contribution to the Company's 401(k)
savings plan.
(F) Represents a $6,930 annual contribution by the Company to the Company's
401(k) savings plan, $535,402 of compensation relating to the value of
stock options exercised over the exercise price of $1.00 per share, and
$379,291 reimbursement

<PAGE>

for estimated tax obligations incurred upon exercise of stock
options.
(G) Represents a $6,930 annual contribution by the Company to the Company's
401(k) savings plan, $125,485 of compensation relating to the value of
stock options exercised over the exercise price of $1.00 per share, and
$88,896 reimbursement for estimated tax obligations incurred upon
exercise of stock options.
(H) Represents a $7,108 annual contribution by the Company to the Company's
401(k) savings plan, $135,524 of compensation relating to the value of
stock options exercised over the exercise price of $1.00 per share, and
$96,008 reimbursement for estimated tax obligations incurred upon
exercise of stock options.
(I) Represents a $6,930 annual contribution by the Company to the Company's
401(k) savings plan, $150,582 of compensation relating to the value of
stock options exercised over the exercise price of $1.00 per share and
$106,676 reimbursement for estimated tax obligations incurred upon
exercise of stock options.
</FN>
</TABLE>

Options/SAR Grants in Last Fiscal Year

There were no Options/SAR grants to the named Executive Officers for
fiscal year ended December 31, 1996.

<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

Number of Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Name Shares Acquired on Value Realized ($) Options/SARs at Options/SARs at
Exercise (#) FY-End (#) FY-End ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable

<S> <C> <C> <C> <C>
Lee Roy Mitchell -- -- -- --
Alan Stock 320 $535,722 1817/0 (A)
Jeffrey J. Stedman 75 125,560 305/120 (A)
Margaret E. Richards 81 135,605 453/0 (A)
Gary R. Gibbs 90 150,672 510/0 (A)

<FN>
- -------------------------------------------------
(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.
</FN>
</TABLE>

<PAGE>

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 1996). A discretionary
matching contribution is made by the Company annually ($613,213 in 1996). 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 seven 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 1996 base salary was $294,632 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 together with base salary may not exceed $2 million), which
bonus was approximately $1,703,357 for the year ended December 31, 1996, (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. 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.

<PAGE>

Tandy Mitchell's 1996 base salary was $131,769 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

<PAGE>

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 March 27, 1997, there were
outstanding options to purchase 7,842 shares of the Company's Class B Common
Stock.

In April 1996, employees exercised options to purchase 1,509 shares of
Class B Common Stock of the Company. The Company incurred 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 received a current tax benefit 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 GAAP purposes, the Company will recognize the tax
benefit for the deduction arising from the differences in value between the
option and its exercise price as additional paid-in capital(rather than as a
reduction of tax expense).

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

<PAGE>

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.

Item 12: Security Ownership of Certain Beneficial Owners and
Management.

The following table and the accompanying footnotes set forth, as of March
27, 1997, 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 officers and directors as a group:

<TABLE>
<CAPTION>
Number Combined
of Percent
Shares Percent of
Names and Addresses(1) Title of Class (2) of Class Classes
- --------------------------------- --------------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Lee Roy Mitchell(3) Class A Common Stock 1,500 100.0%
7502 Greenville Ave.
Suite 800
Dallas, TX 75231
Class B Common Stock 77,687 42.1% 42.6%

Cypress Merchant Banking Class A Common Stock -- --
Partners, L.P.
65 East 55th St.
New York, NY 10022
Class B Common Stock 78,469 42.5% 42.2%
Cypress Pictures Ltd. Class A Common Stock -- --
c/o W.S. Walker Co.
Second Floor
Caledonian House
Mary St., P.O. Box 265
George Town, Grand Cayman
Cayman Islands
Class B Common Stock 4,079 2.2% *2.2%

The Mitchell Special Class A Common Stock -- --
Trust
7502 Greenville Ave.
Suite 800
Dallas, TX 75231
Class B Common Stock 14,667 8% 7.9%
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 0 *
Jeffrey J. Stedman(6) Class A Common Stock -- --
Class B Common Stock 380 0 *

<PAGE>

Gary R. Gibbs(7) Class A Common Stock -- --
Class B Common Stock 600 0 *
Margaret E. Richards(8) Class A Common Stock -- --
Class B Common Stock 534 0 *
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)
Class B Common Stock 81,778 44.3% 43.9
<FN>

- ---------------------
* 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 March 27, 1997, 1,500 shares of Class A Common Stock and 184,589
shares of Class B Common Stock were issued and outstanding. Includes 6,645
shares of Class B Common Stock issuable upon the exercise of options that
may be exercised within 60 days of the date of this Report.
(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 Report.
(6) Includes 305 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this Report.
(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 Report.
(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 Report.
(9) Includes 3,525 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this Report.
</FN>
</TABLE>

Item 13: Certain Relationships and Related Transactions.

Movie Theatre Investors

The Company manages three theatres (33 screens) for Movie Theatre
Investors, Ltd. 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 1.1% of the limited partnership interests in Movie
Theatre Investors. The Company received $257,360 in management
fees from Movie Theatre Investors in 1996. See "Business -
Management Agreements."

Pursuant to the terms of a trademark license agreement, the Company has
granted Movie Theatre Investors the right, on a royalty

<PAGE>

free basis, to use the Cinemark name and logos in connection with the theatres
for so long as the Company manages the theatres owned by Movie Theatre
Investors.

Movie Theatre Investors has granted the Company a right of first refusal to
match third party offers for the sale of one or more of the theatres owned by
Movie Theatre Investors. The Company has granted Movie Theatre Investors a right
of first refusal to invest in any theatres to be constructed by the Company
within five miles of any theatres owned by Movie Theatre Investors.

Laredo Joint Venture

Effective December 10, 1993, Cinemark II entered into a joint venture
agreement with Lone Star Theatres, Inc., a Texas corporation owned 100% by Mr.
David Roberts, for the purpose of owning, operating and managing "Movies 12", a
12-plex movie theatre located in Laredo, Texas ("Laredo Joint Venture"). Mr.
Roberts is Mr. Mitchell's son-in-law. Effective September 12, 1994, Cinemark II
and Lone Star Theatres, Inc. converted Laredo Joint Venture into a Texas limited
partnership ("Laredo Theatre, Ltd."). Cinemark II was the sole general partner
and owner of 75% of the limited partnership interests in Laredo Theatre, Ltd.
Lone Star Theatres, Inc. owns 25% of the limited partnership interests in Laredo
Theatre, Ltd. On September 13, 1994, Cinemark II transferred its general
partnership interest and limited partnership interests to the Company. The
Company manages the theatre for Laredo Theatre, Ltd. The Company received
$179,821 in management fees from Laredo Theatre, Ltd. in 1996.

Pursuant to the terms of a trademark license agreement, the Company has
granted Laredo Theatre, Ltd. the right, on a royalty fee basis, to use the
Cinemark name and logos in connection with the theatres for so long as the
Company manages the theatres owned by Laredo Theatre, Ltd.

Laredo Theatre, Ltd. has the opportunity to participate in the
development of new theatres or the acquisition of existing theatres
within ten miles of the existing 12-plex owned and operated by
Laredo Theatre, Ltd.

Cinemark Partners II

The Company manages one theatre (17 screens) for Cinemark
Partners II, Ltd. ("Cinemark Partners II"). Cinemark Partners I,

<PAGE>

Inc., a wholly owned subsidiary of the Company, is the sole general
partner of Cinemark Partners II. Mr. Mitchell owns 10.1% and
Cinemark Partners I, Inc. owns 1% of the limited partnership
interests in Cinemark Partners II. The Company received $59,467 in
management fees from Cinemark Partners II in 1996. See "Business--
Management Agreements."

Pursuant to the terms of a trademark license agreement, the Company has
granted Cinemark Partners II the right, on a royalty free basis, to use the
Cinemark name and logos in connection with the theatre for so long as the
Company manages the theatre owned by Cinemark Partners II.

Cinemark Partners II has granted the Company a right of first refusal to
match third party offers for the sale of the theatre owned by Cinemark Partners
II.

Cinemark Alberta

The Company manages two discount theatres (24 screens) for
Cinemark Alberta. Cinemark Holdings Canada, Inc., a wholly owned
subsidiary of Cinemark International, runs 50% of Cinemark Alberta.
The Company received $97,073 in management fees from Cinemark
Alberta in 1996. See "Business-Management Agreements."

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 $450,000 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 Cinemas, Inc. is 100% owned by Mr. Mitchell's
brother.

Shareholders' Agreement

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

<PAGE>

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.

The Shareholders' Agreement further provides that the shareholders agree to
form a new corporation as the parent

<PAGE>

corporation of the Company and to contribute their respective shares for like
shares of this new corporation. The Company is pursuing plans to create such a
holding company.

Investment Banking Services

During 1996, Bear, Stearns & Co. Inc. ("Bear, Stearns") provided
investment banking services to the Company and its subsidiaries.
Sheldon Stein, who is a director of the Company, is the Managing
Director of the Dallas, Texas office of Bear, Stearns.

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.

<PAGE>

PART IV

Item 14: Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.

(a) Documents filed as part of this Report.

1. The financial statements listed in the accompanying Index
beginning on F-1 are filed as a part of this report.

2. The financial statement schedules and related data listed in the
accompanying Index beginning on S-1 are filed as a part of this report.

3. The exhibits listed in the accompanying Index beginning on E-1 are filed
as a part of this report, which exhibits are bound separately.

(b) Reports on Form 8-K.

The following reports on Form 8-K have been filed during the last quarter
of the period covered by this Report:

1. None.

See the accompanying Index beginning on page E-1, which exhibits are bound
separately.

(d) Financial Statement Schedules.

See the accompanying Index beginning on page S-1.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: March 27, 1997 CINEMARK USA, INC.

BY: /s/ Alan W. Stock

Alan W. Stock, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Name Title Date
---- -----
<S> <C> <C>
/s/ Lee Roy Mitchell Chairman of the Board of Directors March 27, 1997
----------------------------------------
and Chief Executive Officer
Lee Roy Mitchell

/s/ Tandy Mitchell Director March 27, 1997

Tandy Mitchell

/s/ Alan W. Stock Director March 27, 1997
----------------------------------------

Alan W. Stock

/s/ Jeffrey J. Stedman Director; Vice President and March 27, 1997
- -----------------------------------------
Treasurer (Chief Financial and
Jeffrey J. Stedman Accounting Officer)

/s/ Gary R. Gibbs Director March 27, 1997
----------------------------------------

Gary R. Gibbs

/s/ W. Bryce Anderson Director March 27, 1997
----------------------------------------

W. Bryce Anderson

/s/ Sheldon I. Stein Director March 27, 1997
- -----------------------------------------

Sheldon I. Stein

<PAGE>

/s/ Heriberto Guerra, Jr. Director March 27, 1997
----------------------------------------

Heriberto Guerra, Jr.

/s/ James A. Stern Director March 27, 1997
----------------------------------------

James A. Stern

/s/ James L. Singleton Director March 27, 1997
- -----------------------------------------

James L. Singleton
</TABLE>

Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants which Have Not Registered Securities Pursuant to
Section 12 of the Act.

No annual report or proxy material has been sent to the Company's
shareholders. An annual report and proxy material may be sent to the Company's
shareholders subsequent to the filing of this Form 10-K. The Company shall
furnish to the Securities and Exchange Commission copies of any annual report or
proxy material that is sent to the Company's shareholders.

<PAGE>

<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS
(ITEMS 8 AND 14 OF FORM 10-K) AND SUPPLEMENTAL SCHEDULES
- ------------------------------------------------------------------------------------------------------------------------------------

Page

<S> <C>
INDEPENDENT AUDITORS' REPORT.............................................................................................. F-2

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES:

Consolidated Balance Sheets, December 31, 1995 and 1996................................................................... F-3

Consolidated Statements of Income for the Years Ended
December 31, 1994, 1995 and 1996................................................................................... F-5

Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1994, 1995 and 1996................................................................................... F-6

Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996................................................................................... F-7

Notes to Consolidated Financial Statements................................................................................ F-8

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

Schedule

A Consolidating Balance Sheet Information, December 31, 1996................................................... S-1

B Consolidating Statement of Operations Information for the Year Ended
December 31, 1996............................................................................................ S-2

C Consolidating Statement of Cash Flows Information for the Year Ended
December 31, 1996............................................................................................ S-3
</TABLE>

<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

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, 1995 and 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. 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, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

At January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," as discussed in Note 1.

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 10, 1997

<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
=========================================================================================================================

ASSETS 1995 1996

<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $13,649,724 $14,081,226
Temporary cash investments 275,126 301,408
Inventories 1,061,580 1,296,323
Co-op advertising and other receivables (Note 12) 4,095,819 8,631,462
Prepaid expenses and other 145,660 2,638,991
----------------------------------------

Total current assets 19,227,909 26,949,410

THEATER PROPERTIES AND EQUIPMENT:
Land 14,335,343 39,734,644
Buildings 62,540,849 143,907,477
Leasehold interests and improvements 50,891,524 69,172,660
Theater furniture and equipment 125,172,486 166,596,341
Theaters under construction 29,218,015 31,431,790
Videocassette rental inventory 5,383,873
----------------------------------------

Total 287,542,090 450,842,912

Less accumulated depreciation and amortization 63,059,873 73,421,992
----------------------------------------

Theater properties and equipment - net 224,482,217 377,420,920

OTHER ASSETS:
Certificates of deposit (Note 9) 1,822,954 1,525,852
Investments in and advances to affiliates (Note 12) 4,275,602 6,049,992
Intangible assets - net (Note 3) 7,718,292 5,417,049
Deferred charges and other - net (Note 4) 10,220,127 15,542,244
----------------------------------------

Total other assets 24,036,975 28,535,137
----------------------------------------

TOTAL $267,747,101 $432,905,467
========================================
<FN>

(Continued)
</FN>
</TABLE>

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

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
=========================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1996

<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term liabilities (Note 5) $377,737 $1,002,313
Accounts payable 14,213,239 24,831,236
Accrued film rentals 6,463,548 9,753,208
Accrued interest 2,826,262 8,267,591
Accrued payrolls 2,139,721 3,094,472
Accrued property taxes and other liabilities 10,522,260 13,022,916
Notes payable to related parties (Note 6) 2,051,642
Income taxes payable (Note 10) 1,648,629
----------------------------------------

Total current liabilities 40,243,038 59,971,736

LONG-TERM LIABILITIES:
Long-term debt, less current portion (Note 5) 196,139,904 296,553,642
Deferred lease expenses 9,811,038 11,580,629
Theater development advance, less current portion 1,125,703 769,657
Deferred income taxes (Note 10) 4,296,211 5,926,609
----------------------------------------

Total long-term liabilities 211,372,856 314,830,537

COMMITMENTS AND CONTINGENCIES (Note 9)

MINORITY INTERESTS IN SUBSIDIARIES (Note 8):
Common shareholders' equity 1,362,033 539,853
Common stock warrants with mandatory redemption
requirements 3,424,132 200,729

SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value; 10,000,000 shares authorized, 3,000 and
1,500 shares issued and
outstanding, respectively 30 15
Class B common stock, no par value; 1,000,000 shares
authorized, 205,570 and 233,176 shares issued, respectively 10,967,419 49,536,710
Additional paid-in capital 6,604,037 9,182,880
Unearned compensation - stock options (2,848,738) (2,434,717)
Retained earnings 27,161,692 32,391,591
Treasury stock, 54,791 and 54,965 Class B shares
at cost, respectively (20,000,000) (20,184,416)
Cumulative foreign currency translation adjustment (10,539,398) (11,129,451)
----------------------------------------

Total shareholders' equity 11,345,042 57,362,612
----------------------------------------

TOTAL $267,747,101 $432,905,467
========================================
<FN>

See notes to consolidated financial statements.
(Concluded)
</FN>
</TABLE>

F - 4
<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
=======================================================================================================================

1994 1995 1996
<S> <C> <C> <C>
REVENUES:
Admissions $174,470,503 $183,100,626 $211,581,569
Concessions 95,159,610 102,077,542 116,943,658
Other (Note 11) 13,446,676 13,380,589 13,205,703
---------------- ----------------- -----------------

Total 283,076,789 298,558,757 341,730,930

COSTS AND EXPENSES:
Cost of operations (Note 11):

Film rentals 83,978,465 88,978,423 104,156,508
Concession supplies 17,562,650 17,277,411 18,431,926
Salaries and wages 39,548,147 40,653,338 46,868,814
Facility leases 29,599,702 30,873,208 34,406,046
Advertising 7,189,436 7,623,475 8,500,631
Utilities and other 40,869,506 42,312,878 49,774,114

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

Total cost of operations 218,747,906 227,718,733 262,138,039

General and administrative expenses 17,094,964 19,554,615 23,486,530
Depreciation and amortization 15,121,120 15,924,794 21,798,673
---------------- ----------------- -----------------

Total 250,963,990 263,198,142 307,423,242
---------------- ----------------- -----------------

OPERATING INCOME 32,112,799 35,360,615 34,307,688

OTHER INCOME (EXPENSE):
Interest expense (Note 11) (18,133,438) (18,549,833) (19,551,655)
Amortization of debt issue cost and discount (783,515) (824,014) (824,743)
Interest Income (Note 11) 1,415,026 1,779,339 1,393,441
Gain (loss) on sale of assets and other (Notes 3 and 9) (512,329) 4,796,727 11,130,996
Equity in income of affiliates (Note 12) 2,709 693,415 362,443
Minority interests in (income) loss of subsidiaries (Note 8) (27,306) 288 144,291
---------------- ----------------- -----------------

Total (18,038,853) (12,104,078) (7,345,227)
---------------- ----------------- -----------------

INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS 14,073,946 23,256,537 26,962,461

INCOME TAXES (Note 10) 7,068,275 10,101,405 12,346,451
---------------- ----------------- -----------------

INCOME BEFORE EXTRAORDINARY ITEMS 7,005,671 13,155,132 14,616,010

EXTRAORDINARY ITEMS (Note 5):
Losses on early extinguishments of debt, net of
income tax benefit of $6,057,922 (9,386,111)
---------------- ----------------- -----------------

NET INCOME $ 7,005,671 $ 13,155,132 $ 5,229,899
================ ================= =================

EARNINGS PER SHARE:
Before extraordinary item $ 43.21 $ 80.32 $ 79.93
================ ================= =================

Net income $ 43.21 $ 80.32 $ 28.60
================ ================= =================

WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 162,113 163,776 182,866
================ ================= =================
<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>

F - 5
<PAGE>

<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Class A Class B
Common Stock Common Stock
------------------------------- ------------------------------

Additional
Shares Shares Paid-In
Issued Amount Issued Amount Capital

<S> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994 3,000 $ 30 205,570 $ 10,967,419 $ 3,205,887

Net income
Unearned compensation from stock
options granted 1,120,000
Amortization of unearned compensation
Foreign currency translation adjustment
--------------- -------------- -------------- -------------- --------------

BALANCE DECEMBER 31, 1994 3,000 30 205,570 10,967,419 4,325,887

Net income
Unearned compensation from stock
options granted 2,278,150
Amortization of unearned compensation
Foreign currency translation adjustment
--------------- -------------- -------------- -------------- --------------

BALANCE DECEMBER 31, 1995 3,000 30 205,570 10,967,419 6,604,037

Net income
Issuance of common stock to Cypress (1,500) (15) 25,393 38,567,078
Unearned compensation from stock options
granted 1,127,117
Unearned compensation from stock options
forfeited (216,282)
Amortization of unearned compensation
Stock options exercised, including tax
benefit 2,213 2,213 897,800
Net effect of exchange of Cinemark Mexico
Senior Notes and conversion of warrants to
Senior Notes, including tax benefit 770,208
Foreign currency translation adjustment
Purchase of treasury stock, 174 Class B
shares,
at cost
--------------- -------------- -------------- -------------- --------------

BALANCE DECEMBER 31, 1996 1,500 $ 15 233,176 $ 49,536,710 $ 9,182,880
=============== ============== ============== ============== ==============
(continued)
F - 6
<PAGE>

Unearned Cumulative
Compensation Retained Treasury Translation
Stock Options Earnings Stock Adjustment Total

BALANCE JANUARY 1, 1994 $ (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 (1,120,000) --
Amortization of unearned compensation 836,081 836,081
Foreign currency translation adjustment (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 (2,278,150) --
Amortization of unearned compensation 1,591,022 1,591,022
Foreign currency translation adjustment (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

Net income 5,229,899 5,229,899
Issuance of common stock to Cypress 38,567,063
Unearned compensation from stock options
granted (1,127,117)
Unearned compensation from stock options
forfeited 151,810 (64,472)
Amortization of unearned compensation 1,389,328 1,389,328
Stock options exercised, including tax
benefit 900,013
Net effect of exchange of Cinemark Mexico
Senior Notes and conversion of warrants to
Senior Notes, including tax benefit 770,208
Foreign currency translation adjustment (590,053) (590,053)
Purchase of treasury stock, 174 Class B
shares,
at cost (184,416) (184,416)
--------------- -------------- -------------- -------------- --------------

BALANCE DECEMBER 31, 1996 $ (2,434,717) $ 32,391,591 $ (20,184,416) $ (11,129,451) $ 57,362,612
=============== ============== ============== ============== ==============

<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>

F - 6 (continued)

<PAGE>

<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
- ------------------------------------------------------------------- ----------------- ----------------- ----------------

1994 1995 1996

<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income 7,005,671 13,155,132 5,229,899
Loss on early extinguishment of debt 15,444,033
Noncash items in net income :
Depreciation 10,860,816 12,716,099 18,633,707
Amortization - intangibles and other assets 4,900,756 3,868,241 3,819,462
Deferred lease expenses 1,366,135 1,051,774 2,199,854
Deferred income tax expense 1,514,177 1,213,034 1,630,398
Debt issued for accrued interest 314,756 184,134 2,006,371
Amortization of debt discount 143,063 164,468 170,247
Amortized compensation - stock options 836,081 1,591,022 1,324,856
(Gain) loss on sale of assets 301,915 (5,196,922) (7,760,774)
Equity in income of affiliates (2,709) (693,415) (362,443)
Minority interest in income (loss) of subsidiaries 27,306 (288) (144,291)

Cash from (used for) operating working capital:
Inventories (16,831) (176,881) (234,743)
Co-op advertising and other receivables (771,681) (1,000,649) (3,902,355)
Prepaid expenses and other (1,007,532) 1,356,167 (2,493,331)
Accounts payable 3,289,736 5,111,906 12,111,884
Accrued liabilities 3,677,829 1,451,003 12,729,888
Income taxes payable 225,205 1,295,074 (1,648,629)
----------------- ----------------- ----------------

Net cash from operating activities 32,664,693 36,089,899 58,754,033

INVESTING ACTIVITIES:
Additions to theater properties and equipment (53,862,918) (89,287,667) (177,953,281)
Sale of theater properties and equipment 10,500 8,022,500 206,537
Proceeds from 2 Day Video Inc. sale 9,439,466
Proceeds from affiliate sale 800,000 781,300
Decrease (increase) in certificates of deposit 797,933 (323,034) 297,102
Decrease (increase) in temporary cash investments (3,981,970) 4,207,280 (26,282)
Increase in investments in and advances to affiliates (3,914,574) (828,065) (1,715,364)
Increase in other assets (1,924,649) (2,859,127) (8,452,094)
----------------- ----------------- ----------------

Net cash used for investing activities (62,875,678) (80,268,113) (177,422,616)

FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes 199,106,000
Retirement of Senior Notes (123,370,000)
Repurchase premium on retired Senior Notes (12,371,954)
Increase in long-term debt 15,890,000 46,000,000 97,510,000
Reductions of long-term debt (233,184) (15,025,359) (77,530,536)
Payment on notes payable to related parties (2,061,556) (2,086,513)
Decrease in theater development advance (321,858) (370,808) (356,046)
Minority investment in subsidiaries, net 102,625 (677,889)
Issuance of common stock to Cypress 38,567,063
Common stock issued for options exercised 900,013
Issuance of subsidiary common stock warrants 1,324,132
----------------- ----------------- ----------------

Net cash from financing activities 13,273,402 32,030,590 119,690,138

FOREIGN CURRENCY TRANSLATION ADJUSTMENT (441,887) (776,726) (590,053)
----------------- ----------------- ----------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,379,470) (12,924,350) 431,502

CASH AND CASH EQUIVALENTS:
Beginning of period 43,953,544 26,574,074 13,649,724
----------------- ----------------- ----------------

End of period $ 26,574,074 $ 13,649,724 $ 14,081,226
================= ================= ================
<FN>

SUPPLEMENTAL INFORMATION (Note 13):

See notes to consolidated financial statements.
</FN>
</TABLE>

F - 7

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

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 29 states and in Mexico at December
31, 1996. The following summarizes theatre transactions during 1994, 1995 and
1996:

<TABLE>
<CAPTION>
Theatres Screens
<S> <C> <C>
Active at January 1, 1994 153 1,084
Acquisitions 2 9
Openings 7 82
Closings/Sales (4) (12)
--------------- --------------
Active at December 31, 1994 158 1,163
Openings 11 130
Sales (10) (46)
--------------- --------------
Active at December 31, 1995 159 1,247
Openings 17 237
Closings/Sales (7) (31)
--------------- --------------
Active at December 31, 1996 169 1,453
=============== ==============
</TABLE>

At December 31, 1996, the Company also manages three theatres (37 screens)
for Movie Theatre Investors, Ltd.; one theatre (17 screens) for Cinemark
Partners II; and two theatres (24 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. (f/k/a Cinemark II, Inc.) and ENT Holdings, Inc. Cinemark International,
Inc. ("Cinemark International") owns 97.1% 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. Cinemark de Mexico includes the operations of
Cinemark del Norte S.A. de C.V. and Servicio Cinemark S.A. de C.V. Cinemark
International owns 100% of Cinemark Empreendimentos e Participacoes, LTDA, a
Brazilian corporation, whose subsidiary will operate in Brazil beginning in
1997. Cinemark International also owns 50% interests in affiliates operating in
Chile, Canada, Argentina and Peru and a 60% interest in an affiliate operating
in Ecuador. ENT Holdings, Inc. ("ENT") owns 100% of Funtime Entertainment, Inc.
The consolidated financial statements also include 2 Day Video, Inc. (2 Day) and
subsidiary, a video rental "superstore" chain through the date of its sale in
October 1996, Entertainment Amusements, Inc., a 50%-owned holding company whose
subsidiary provides video game machines to many of the Company's theatres, and a
50% interest in Brainerd, Ltd, a theatre joint venture. Majority-owned companies
are consolidated; 50% owned companies 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

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

and the 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.

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 $1,745,721 and
$3,928,454 of interest incurred during development and construction and
capitalized in 1995 and 1996, 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.
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. On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of
SFAS No. 121 did not have a material effect on the Company's financial
statements. During the third quarter of 1996 the Company determined that an
impairment charge of $2,381,998 was required for certain theatres.

Intangible Assets represent primarily the excess of cost over the fair
values of the net assets of theatre businesses acquired, less accumulated
amortization ($8,853,793 and $8,616,821 at December 31, 1995 and 1996,
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 that are 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, when applicable, the Class B common shares and options
for Class B common shares (Note 7).

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

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 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 recorded value.

Reclassifications have been made to certain 1994 and 1995 amounts to
conform to 1996 presentation.

2. FOREIGN CURRENCY TRANSLATION

The cumulative foreign currency translation adjustment in shareholders'
equity of $10,539,398 and $11,129,451 at December 31, 1995 and 1996,
respectively, primarily relates to the unrealized adjustments resulting from
translating the financial statements of Cinemark de Mexico. 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, 1996, the total assets of Cinemark
de Mexico were $33,357,719. The Company's other consolidated foreign
subsidiaries were in the development stage and had insignificant translation
adjustments. In 1997, the Company will be required to utilize the U.S. dollar as
the functional currency of Cinemark de Mexico for U.S. reporting purposes due to
Mexico's highly inflationary economy. Thus devaluations in the peso during 1997
that will affect the Company's investment will be charged to exchange loss
rather than to the cumulative adjustment account.

3. ACQUISITIONS AND INVESTMENT ACTIVITY

In September 1996, Cinemark Holdings Canada, Inc., a 100% subsidiary of
Cinemark International and 50% owner of Cinemark Theatres Alberta, Inc.,
contributed an additional $400,000 to assist in funding the construction of an
additional 12 screen theatre in Alberta, Canada. The other 50% owner of Cinemark
Theatres Alberta, Inc. contributed an equal amount.

Cinemark International acquired an additional 2,661,450 shares of common
stock of Cinemark Mexico for $10.0 million for a cumulative interest of 97.1%
(96.5% on a fully diluted basis). Cinemark International sold its 50%
partnership interest in Beaumont Cinema Ventures, Ltd., which operated two
theatres in Texas, for $781,300, resulting in a gain of $547,750 in September
1996. Cinemark International also contributed funding of $1,200,000 to its 100%
owned Brazilian subsidiary, $600,000 to its Argentine affiliate, and $100,000 to
its Peruvian affiliate.

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

In May 1995, ENT 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 were canceled; a $500,000 note
payable by ENT was canceled; and Funtime International, Inc. paid $800,000 cash
and issued notes payable of $200,000 and $600,000 to ENT. Also in connection
with the sale, ENT 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
incurred a loss of approximately $294,000. In May 1996, Funtime International
exercised this option, issuing a note payable to ENT from Entertainment
Technologies, Inc. (parent company of Funtime International) for $400,000; this
resulted in a gain of $48,464 for ENT.

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 October 1996, the Company invested $571,633 in
Brainerd, Ltd., a limited partnership, which will own and operate a theatre.

In August 1995, Cinemark Inversiones, 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 contributed an equal amount.

In October 1996, the Company sold its entire interest in 2 Day (Class A
common stock) for cash of $9,439,466 and a receivable of $633,288, resulting in
a gain of $7 million.

4. DEFERRED CHARGES AND OTHER ASSETS

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

1995 1996
---- ----

<S> <C> <C>
Debt issue costs $ 6,149,523 $ 9,741,136
Noncompete agreements 835,564 758,145
---------------------- ---------------------
Total 6,985,087 10,499,281
Less accumulated amortization 2,662,939 3,345,867
---------------------- ---------------------
Net 4,322,148 7,153,414
Equipment, lease and other deposits 1,067,756 1,064,123
Funtime International, Inc.:
Note receivable, 10% interest, paid in 1996 200,000
$600,000 convertible note receivable - net, due 2005 445,224 445,224
Entertainment Technologies, Inc:
Note receivable, 10% interest, due June 2000 358,269
Construction advances and other 4,184,999 6,521,214
---------------------- ---------------------
Total $ 10,220,127 $ 15,542,244

====================== =====================
</TABLE>

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

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 its maturity date at May
2005. Funtime International, Inc. has granted ENT 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>
1995 1996
---- ----
<S> <C> <C>
Senior Notes due 2002, discussed below $ 125,000,000 $ 1,630,000
Senior Subordinated Notes due 2008, discussed below 199,137,042
Senior Subordinated Notes of Cinemark Mexico due 2003,
less unamortized discount of $2,015,751 at 20,549,249 25,710,900
December 31, 1995, discussed below
Revolving credit line of $225,000,000, discussed below 50,000,000 70,000,000
Other notes payable 618,392 728,013
--------------------------- ---------------------------
Total long-term debt 196,167,641 297,205,955
Less current portion 27,737 652,313
--------------------------- ---------------------------
Long-term debt, less current portion $ 196,139,904 $ 296,553,642
=========================== ===========================
</TABLE>

Senior Notes - In June 1992, the Company completed a public offering of
$125,000,000 senior notes payable ("Senior Notes"). The Senior Notes bear
interest at the rate of 12% per annum, payable semiannually on June 1 and
December 1 of each year. In August 1996, the Company utilized proceeds from a
$200 million issuance of Senior Subordinated Notes, due 2008, to repurchase
$123,370,000 of the Senior Notes at a premium of $1,098.33 per $1,000.00
principal amount. This resulted in a net outstanding balance of $1,630,000 in
Senior Notes at December 31, 1996. An extraordinary loss of $9.0 million, net of
related tax benefit, was recognized in connection with the premium paid and the
write-off of the unamortized debt issue costs ($2,463,560) associated with the
repurchased Senior Notes (Notes 4). The remaining Senior Notes are redeemable at
the option of the Company, in whole or in part, beginning June 1, 1997, ranging
in redemption price from 106% in 1997 to 100% in 2000 and thereafter.

Senior Subordinated Notes - In August 1996, the Company issued
$200,000,000 of Senior Subordinated Notes due 2008 (the "Subordinated Notes").
The Subordinated Notes bear interest at the rate of 9-5/8% per annum, payable
semi-annually on February 1 and August 1 of each year. The Subordinated Notes
were issued at 99.553% of the principal face amount (a discount of $4.47 per
$1,000 principal amount) for an aggregate discount of $894,000. The net proceeds
to the Company from the issuance of the Subordinated Notes (net of

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

discount, fees and expenses) were approximately $193.2 million. The Subordinated
Notes require the Company to maintain a specified interest expense coverage
ratio; restricts the payment of dividends, payment of subordinated debt prior to
maturity and issuance of preferred stock and other indebtedness; and other
restrictive covenants. The Subordinated Notes are redeemable at the option of
the Company, beginning August 2001, ranging in redemption price from 104.8% in
2001 to 100% in 2003 and thereafter. Any outstanding Subordinated Note are due
August 1, 2008.

Senior Subordinated Notes, Mexico - In 1993, Cinemark Mexico issued
$20,400,000 of 12% Senior Subordinated Notes due 2003 (the "Mexican Subordinated
Notes") with detachable warrants (the Warrants) (Note 8). Cinemark de Mexico
guarantees the notes on a senior subordinated basis. The Mexican Subordinated
Notes were issued at a discount of $102.94 per $1,000 note, totaling $2,100,000,
and bear interest at 12% per annum payable semiannually on August 1 and February
1. In 1994, Cinemark Mexico issued an additional $2,000,000 of Mexican
Subordinated Notes due 2003 with the terms governed by the indenture from the
initial

offering of Mexican Subordinated Notes. These notes were issued at a discount of
$55 per $1,000 note, totaling $110,000, and bear interest at 12% per annum
payable semiannually on August 1 and February 1.

The entire $22,400,000 in Mexican Subordinated Notes and $1,971,500 of
accrued interest were exchanged in September 1996 for new senior subordinated
notes (the "New Mexican Notes"). The form and terms are identical in all
material respects to the previous notes except that interest on the New Mexican
Notes may be paid through the issuance of additional notes of the same series at
the option of Cinemark Mexico through and including February 1, 2000. If the
Company elects to pay accrued interest in the form of additional notes, interest
will accrue at 13% during that period. In connection with the exchange, Warrants
(Note 8) for 356,851 shares of common stock were exchanged for $1,339,400 in New
Mexican Notes. As a result of the note exchange and retirement of the Warrants,
a net benefit of $.8 million, including tax benefit, was credited to additional
paid in capital.

The indenture for the New Mexican Notes requires a sinking fund payment of
$6,667,000 on each of August 1, 2001, and August 1, 2002; the amounts are to be
utilized on such respective dates to retire a like face amount of the
outstanding New Mexican Notes. The indenture governing the New Mexican 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.

Reducing, Revolving Credit Facility - In December 1996, the Company
amended its revolving credit line with a reducing, revolving credit facility
(the "Credit Facility") with a group of banks. The Credit Facility provides for
loans of up to $225,000,000 in the aggregate and bears interest at a defined
floating rate, adjusted in accordance with certain financial ratios. The
weighted average interest rate and current interest rate at December 31, 1996,
was 6.75% and 6.53%, respectively.

The Credit Facility is a reducing revolving credit facility, with
commitments automatically reduced each calendar quarter by $8,437,500,
$11,250,000, $14,062,500 and $22,500,000 in calendar year 2000, 2001, 2002 and
2003, respectively. The Company is required to prepay all loans outstanding in
excess of the aggregate commitment as reduced pursuant to the terms of the
Credit Facility. Borrowings are secured by a pledge of a majority of the issued
and outstanding capital stock of the Company, and the credit agreement requires
that the Company maintains certain financial ratios; restricts the payment of
dividends, payment of subordinated debt

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

prior to maturity and issuance of preferred stock and other indebtedness; and
other restrictive covenants. This credit facility amended a new revolving credit
line of $175,000,000 that the Company had entered into on February 1996. The
$175,000,000 credit facility replaced the Company's previous credit facility. An
extraordinary loss of $.4 million, net of related tax benefit, was recognized in
connection with the write-off of debt issue costs related to the Company's
previous credit facility.

Long-term debt at December 31, 1996, matures as follows: $652,313 in 1997;
$6,126 in 1998; $5,895 in 1999; $3,477 in 2000; $6,670,880 in 2001; and
$289,867,264 thereafter.

The estimated fair value of the Company's long-term debt of $296.6 million
at December 31, 1996, was approximately $300.5 million. Such amounts do not
include prepayment penalties which would be incurred upon the early
extinguishment of certain debt issues.

Debt Issue Costs - Debt issue costs of $6,149,523 and $9,741,136, net of
accumulated amortization of $2,010,268 and $2,664,766, related to the
Subordinated Notes, the New Mexican Notes and the Reducing, Revolving Credit
Facility, are included in deferred charges at December 31, 1995 and 1996,
respectively. The 1996 period includes an extraordinary loss recognized in
connection with the writeoff of debt issue costs relating to the Company's prior
bank line of credit and repurchase of Senior Notes.

Theatre Development Advance - The current portion of long-term liabilities
also includes $350,000 at December 31, 1995 and 1996, 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 $769,657 at December 31, 1996,
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>
1995 1996
---- ----
<S> <C> <C>
Note payable to The Peble Corp. (a former shareholder,
bearing interest at 8.5% $ 1,041,147 $ -

Note payable to an officer and shareholder, bearing
interest at 8.5% 1,010,495
----------------------------- --------------------------
$ 2,051,642 $ -
============================= ==========================
</TABLE>

In March 1996, the Company paid the note payable to The Peble Corp. and
the note payable to an officer and shareholder.

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. However they may convert
at their option to Class A common stock. In the event of any

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

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.

In February 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 of Class B Common Stock, including 1,500
shares of Class A Common stock that were exchanged for Class B Common Stock, 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 in
March 1996. The net proceeds from the issuance of stock by the Company were
$38,567,063.

At December 31, 1996, the Company has reserved Class A common stock in the
amount of 178,211 shares for potential conversions of outstanding Class B common
stock and 8,442 shares for potential conversions 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 - Under terms of the Company's stock option plan,
nonquailifed options to purchase up to 10,685 shares of the Company's Class B
common stock may be granted to key employees. At January 1, 1994, 7,608 options
with an exercise price of $1.00 per share were outstanding.

The total options granted in 1994, 1995 and 1996 were 896, 1,381 and 600
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. During 1996, 2213
vested options were exercised and an additional 430 options were forfeited,
accounting for a reduction of 1996 compensation expense of $64,472. At December
31, 1996, 6,110 options were exercisable out of a total of 7,842 outstanding.

Independent Director Stock Options - In 1993, the Company 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"). In 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 expense of $414,000 was immediately
recognized upon this exchange, with unearned compensation expense of $276,000 to
be recognized over the remaining vesting period of 15 months.

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. As a result of the above grants unearned compensation
of $1,120,000, $2,278,150 and $1,127,117 was recorded in 1994, 1995 and 1996,
respectively. Compensation expense under this stock option plan was $836,081,
$1,591,022 and $1,324,856 in 1994, 1995 and 1996, respectively.

The Company applies APB Opinion 25 and related interpretations in
accounting for the Company's stock

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

option plan and Cinemark Mexico's stock option plan, as described below. Had
compensation costs for the Company's stock option plan been determined based on
the fair value at the date of grant for awards under the plan consistent with
the method of Statement of Financial Accounting Standards (SFAS) No. 123,
utilizing the Black-Scholes option pricing model, the effect on income and
earnings per share would not have changed from the amounts presented in the
financial statements. The results are substantially the same pursuant to SFAS
No. 123 as a result of the value of the underlying stock at the date of grant
being significantly higher than the exercise price of the options.

In November 1996, the Company repurchased 174 shares of Class B common
stock as treasury stock.

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>
1995 1996
---- ----
<S> <C> <C>
Cinemark Mexico - 2.93% interest $ 405,634 $ 187,103
Laredo Theatres, Ltd. - 25% interest (owned by a relative
of the majority shareholder) 574,448 362,176
2 Day Video - 16.9% interest (Note 3) 381,951
Cinemark del Ecuador, S.A. - 40% interest (9,426)
-------------------------- -----------------------
Total $ 1,362,033 $ 539,853
========================== =======================
</TABLE>

Common Stock Warrants - In connection with the issuance of the
Subordinated Notes (Note 5), Cinemark Mexico issued Warrants for $2.1 million
which were exercisable into 226,662 shares of Cinemark Mexico's common stock. In
August 1995, Cinemark Mexico sold additional Warrants for $1,324,132 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. In September 1996, 356,851 Warrants
were exchanged for $1,339,400 in New Mexican Notes resulting in a remaining
balance of $200,729 for 22,222 Warrants outstanding (1% of fully diluted
ownership) (Note 5). The remaining 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,
the Company must offer to purchase one-third of the Warrants on each of July 31,
1998, 1999, and 2000, utilizing the appraised value on such dates. At December
31, 1996, Cinemark Mexico has reserved 22,222 shares of common stock for the
potential conversion of the Warrants.

Stock Option 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
and 1996, Cinemark Mexico granted options to purchase 16,704 and 7,500 shares of
common stock, respectively, at an exercise price of $.10 per share to certain
employees, resulting in unearned compensation of $183,292 and $28,180 in 1994
and 1996 respectively. In 1995, 12,528 of the options granted in 1994 were
canceled. The outstanding options vest over a period of six years from the date
of grant and expire ten years from the date of grant. At December 31, 1996, 835
options were exercisable.

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

9. COMMITMENTS AND CONTINGENCIES

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 term. Deferred lease expenses of $9,811,038 and $11,580,629
at December 31, 1995 and 1996, 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, 1994, 1995 and 1996,
totaled $29,916,187, $31,273,367 and $34,841,041 respectively.

Future minimum payments under noncancelable operating leases with initial
or remaining terms in excess of one year at December 31, 1996, are due as
follows:

<TABLE>
<C> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,012,608
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,226,975
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,908,418
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,061,124
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,167,331
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338,542,424
-----------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 502,918,880
=======================
</TABLE>

After December 31, 1996, the Company 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 $139 million for nine theatre facilities in the United States,
three theatres in Mexico and four theatres in Brazil.

Employment Agreements - As of December 31, 1996, the Company has
employment agreements with certain principal officers and a shareholder
providing for total minimum future annual payments as follows:

<TABLE>
<C> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 469,061
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515,967
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567,564
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624,320
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686,752
--------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,863,664
====================
</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

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

and makes contributions as determined annually by the Board of Directors.
Contributions of $427,963, $415,121 and $613,213 were made in 1994, 1995 and
1996, respectively.

Letters of Credit and Collateral - At December 31, 1996, the Company has
outstanding letters of credit of $1,525,852 in connection with property and
liability insurance coverage and certain lease matters. Certificates of deposit
of $1,525,852 are pledged as collateral on the letters of credit.

Litigation Settlement - In April 1996, the Company entered into a
settlement agreement regarding litigation on the development of a proposed
theatre. The Company recognized a gain of $3,667,646 net of expenses, as a
result of the settlement.

10. INCOME TAXES

Income tax expense includes a benefit from the extraordinary loss on early
extinguishment of debt of $6,057,922 and consists of the following:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal - before utilization of credits $ 5,543,239 $ 8,927,814 $ 3,909,114
Utilization of tax credits (987,000) (1,908,821)
State 997,859 1,869,378 749,017
--------------------- ----------------------- ----------------------
Total current expense 5,554,098 8,888,371 4,658,131

Deferred:
Temporary differences 787,177 (466,356) 1,630,398
Reestablished from utilization of
tax credits 727,000 1,679,390
--------------------- ----------------------- ----------------------
Total deferred expense 1,514,177 1,213,034 1,630,398
--------------------- ----------------------- ----------------------
Income tax expense $ 7,068,275 $ 10,101,405 $ 6,288,529
===================== ======================= ======================
</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>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Computed normal tax expense $ 4,925,882 $ 8,139,788 $ 4,031,450
Goodwill amortization, not deductible
for tax purposes 934,044 361,647 363,044
State and local income taxes, net of federal
income tax benefit 711,226 1,151,411 501,887
Foreign subsidiaries losses not utilized
currently 445,872 874,897 997,056
Benefit of net operating loss carryforwards
Computed normal tax expense utilized currently $ (165,329)
Jobs tax credits (260,000) (127,267)
Other - net 476,580 (299,071) 395,092
-------------------- ---------------------- --------------------
$ 7,068,275 $ 10,101,405 $ 6,288,529
==================== ====================== ====================
</TABLE>

The tax effects of significant temporary differences and carryforwards
comprising the net long-term deferred income tax liability at December 31, 1995
and 1996, consist of the following:

1995 1996
---- ----
<S> <C> <C>
Deferred liabilities:
Accelerated tax depreciation $ 11,293,935 $ 15,165,608
Basis difference of assets acquired 324,878 220,610
Other 944,740 473,371
---------------------- --------------------------
Total 12,563,553 15,859,589
Deferred assets:
Deferred lease expense 3,799,182 4,404,794
Section 263(a) inventory adjustment 715,632 1,191,173
Amortization of unearned compensation 1,372,454 1,461,548
Self-insurance accruals 1,118,393 1,233,432
Asset Impairment loss 737,578
Original issue discount 321,429
Deferred gain on sale of interest rate swap 117,909
Tax operating loss carryforward for foreign subsidiaries 1,320,769 2,317,825
Valuation allowance - operating loss carryforward (1,320,769) (2,317,825)
Other expenses, not currently deductible for tax purposes 1,143,772 583,026
---------------------- --------------------------
Total 8,267,342 9,932,980
---------------------- --------------------------
Net long-term deferred income tax liability $ 4,296,211 $ 5,926,609
====================== ==========================
</TABLE>

11. OTHER RELATED PARTY TRANSACTIONS

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

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Facility lease expense - theatre and equipment
leases with shareholder affiliates $ 347,917 $ 306,937 $ 306,238
Interest expense - The Peble Corp. (Note 6) 118,094 83,989 17,457
Interest expense - an officer and shareholder
of the Company (Note 6) 115,149 81,515 17,414
Video game machine income - a subsidiary
of Entertainment Amusements, Inc.(Note 12) 1,157,105 1,394,467 1,745,731
Management fees - Movie Theatre Investors, Ltd. (Note 12)
for property and theatre management services 274,304 300,662 257,360
Management fees - Cinemark Theatres Alberta, Inc. (Note 12)
for property and theatre management services 64,426 74,928 97,073
Management fees - Cinemark Partners II, Ltd. (Note 12)
for property and theatre management services 171,500 59,467
Rental revenue - theatre lease with shareholder affiliate 200,000 250,000
</TABLE>

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:

1995 1996
---- ----
<S> <C> <C>
Cinemark Chile, S.A. - investment, at equity (Note 3) $ 1,775,435 $ 2,225,518
Entertainment Amusements, Inc. - investment,
at equity 831,381 521,926
Cinemark Theatres Alberta, Inc. - investment,
at equity (Note 3) 1,408,228 1,848,316
Brainerd, Ltd. - partnership interest (Note 3) 571,633
Cinemark Argentina, S.A. (Note 3) 606,144
Cinemark del Peru, S.A. (Note 3) 137,586
Movie Theatre Investors, Ltd. - partnership interest 55,869 55,869
Cinemark Partners II, Ltd - partnership interest 83,000 83,000
Other 121,689
--------------------- ------------------------
Total $ 4,275,602 $ 6,049,992
===================== ========================
</TABLE>

<PAGE>

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

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

1995 1996
---- ----
<S> <C> <C>
A subsidiary of Entertainment Amusements, Inc. $ 155,137 $ 264,633
Movie Theatre Investors, Ltd. 394,345 1,090,771
Cinemark Chile, S.A. 62,549 46,654
Cinemark Partners II, Ltd. 614,620 724,404
Related party rent receivable (Note 11) 199,967 449,940
</TABLE>

13. SUPPLEMENTAL CASH FLOW INFORMATION

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

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Interest paid $ 17,477,121 $ 19,864,594 $ 17,928,251
================= ==================== ====================

Income taxes paid $ 5,520,885 $ 7,195,765 $ 4,974,320
================= ==================== ====================

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 for 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
Issued note receivable for sale of Funtime
Pizza Two, Inc. stock and related assets $ 400,000
Issued receivable due from sale of 2 Day Video, Inc. stock 633,288
Issued note payable for purchase of treasury
stock, less related taxes 130,156
Retirement of Cinemark Mexico senior subordinated
notes and issuance of new senior subordinated
notes (Note 5) 22,400,000
Issuance of Cinemark Mexico senior subordinated
notes for redeemed warrants (Notes 5 and 8) 1,339,400
Net effect of exchange of Cinemark Mexico senior
subordinated notes and conversion of warrants to
senior subordinated notes on additional paid-in
capital (Notes 5 and 8) 172,456
</TABLE>

14. JAPANESE JOINT VENTURE

In March 1997, Cinemark International invested $6.5 million into a joint
venture with Shochiku Co., Ltd., a Japanese distributor, exhibitor and producer
of movies ("Shochiku") to develop state-of-the-art multiplex theatres in Japan.
The joint venture will conduct its business through Shochiku Cinemark Theatres,
which is 26.7% owned by Cinemark International, 26.7% owned by Shochiku, and
46.6% owned by a consortium of prominent Japanese companies. Shochiku Cinemark
Theatres opened its first theatre (7 screens) in March 1997 and plans to begin
construction of an additional theatre (12 screens) during 1997.

<PAGE>

<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE A
CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------------------------

Restricted Cinemark Int'l
Group Group
ASSETS Eliminations Consolidated

<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,056,375 $ 11,024,851 $ - $ 14,081,226
Temporary cash investments 301,408 301,408
Inventories 1,187,268 109,055 1,296,323
Other current assets 12,147,847 3,312,533 (4,189,927) 11,270,453
-------------- -------------------------------------------

Total current assets 16,391,490 14,747,847 (4,189,927) 26,949,410

THEATRE PROPERTIES AND EQUIPMENT - Net 350,549,600 26,871,320 377,420,920

OTHER ASSETS:
Certificates of deposit 1,525,852 1,525,852
Investments in and advances to affiliates 14,838,634 4,817,563 (13,606,205) 6,049,992
Intangible assets - net 7,732,399 (2,315,350) 5,417,049
Deferred charges and other - net 11,767,041 3,775,203 15,542,244
-------------- -------------------------------------------

Total other assets 35,863,926 8,592,766 (15,921,555) 28,535,137
-------------- -------------------------------------------

TOTAL $ 402,805,016 $ 50,211,933$ (20,111,482)$ 432,905,467
============== ===========================================

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term liabilities $ 1,002,313 $ - $ - $ 1,002,313
Accounts payable, accrued expenses and other
current liabilities 55,135,724 7,768,671 (3,934,972) 58,969,423
-------------- -------------------------------------------

Total current liabilities 56,138,037 7,768,671 (3,934,972) 59,971,736

LONG-TERM LIABILITIES:
Long term debt, less current portion 270,842,742 25,710,900 296,553,642
Deferred lease expenses 11,248,587 332,042 11,580,629
Other long-term liabilities 769,657 769,657
Deferred income taxes 6,081,205 100,359 (254,955) 5,926,609
-------------- -------------------------------------------

Total long-term liabilities 288,942,191 26,143,301 (254,955) 314,830,537

MINORITY INTERESTS IN SUBSIDIARIES 362,176 378,406 740,582

SHAREHOLDERS' EQUITY:
Common stock 49,536,725 1,000 (1,000) 49,536,725
Additional paid-in capital 9,182,880 31,014,208 (31,014,208) 9,182,880
Unearned compensation - stock options (2,434,717) (2,434,717)
Retained earnings (deficit) 32,391,591 (3,937,978) 3,937,978 32,391,591
Treasury stock (20,184,416) (20,184,416)
Cumulative foreign currency
translation adjustment (11,129,451) (11,155,675) 11,155,675 (11,129,451)
-------------- -------------------------------------------

Total shareholders' equity 57,362,612 15,921,555 (15,921,555) 57,362,612
-------------- -------------------------------------------

TOTAL $ 402,805,016 $ 50,211,933$ (20,111,482)$ 432,905,467
============== ===========================================
<FN>

Note: "Restricted Group" and "Cinemark International Group" are defined in the Indenture (Section 4.02) for the
Senior Notes dated June 10, 1992.
</FN>
</TABLE>

S - 1

<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE B
CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1996

Restricted Cinemark Int'l
Group Group
Eliminations Consolidated

<S> <C> <C> <C> <C>
REVENUES $320,132,158 $22,376,485 ($777,713) $341,730,930

COSTS AND EXPENSES:
Cost of operations 243,847,698 18,290,341 262,138,039
General and administrative expenses 20,631,921 3,632,322 (777,713) 23,486,530
Depreciation and amortization 20,185,109 1,750,432 (136,868) 21,798,673
----------------- ------------------- ------------------ -----------------

Total 284,664,728 23,673,095 (914,581) 307,423,242
----------------- ------------------- ------------------ -----------------

OPERATING INCOME (LOSS) 35,467,430 (1,296,610) 136,868 34,307,688

OTHER INCOME (EXPENSE):
Interest expense (16,570,723) (2,980,932) (19,551,655)
Amortization of debt issue cost and discount (583,270) (241,473) (824,743)
Equity in income (loss) of affiliates (2,391,464) 599,228 2,154,679 362,443
Other income, net 10,942,743 1,581,694 12,524,437
Minority interests in subsidiaries (83,666) 227,957 144,291
----------------- ------------------- ------------------ -----------------

Total (8,686,380) (813,526) 2,154,679 (7,345,227)
----------------- ------------------- ------------------ -----------------

INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 26,781,050 (2,110,136) 2,291,547 26,962,461

INCOME TAXES 12,165,040 181,411 12,346,451
----------------- ------------------- ------------------ -----------------

INCOME (LOSS) BEFORE 14,616,010 (2,291,547) 2,291,547 14,616,010
EXTRAORDINARY ITEMS

EXTRAORDINARY ITEMS:
Loss on early extinguishments of debt, net
of income tax benefit of $6,057,922
(9,386,111) (9,386,111)
----------------- ------------------- ------------------ -----------------

NET INCOME (LOSS) $5,229,899 ($2,291,547) $2,291,547 $5,229,899
================= =================== ================== =================
<FN>

Note: "Restricted Group" and "Cinemark International Group" are defined in the Indenture (Section 4.02) for the Senior Notes
dated June 10, 1992.
</FN>
</TABLE>

S - 2

<PAGE>
<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE C
CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION

YEAR ENDED DECEMBER 31, 1996
================================================================================================================================

Restricted Cinemark Int'l
Group Group Eliminations Consolidated

<S> <C> <C> <C> <C>
OPERATIONS:
Net income (loss) $5,229,899 ($2,839,297) $2,839,297 $5,229,899
Loss on early extinguishment of debt 15,444,033 15,444,033
Noncash items in net income (loss):
Depreciation 16,887,679 1,746,028 18,633,707
Amortization - intangibles and other assets 3,849,658 106,672 (136,868) 3,819,462
Deferred lease expenses 2,069,727 130,127 2,199,854
Deferred income tax expense 1,530,039 100,359 1,630,398
Debt issued for accrued interest 34,871 1,971,500 2,006,371
Amortization of debt discount 31,042 139,205 170,247
Amortized compensation - stock options 1,324,856 1,324,856
Gain on sale of assets (7,527,224) (233,550) (7,760,774)
Equity in (income) loss of affiliates 3,076,082 (599,228) (2,839,297) (362,443)
Minority interest in income (loss) of subsidiaries 83,666 (227,957) (144,291)
Cash used for operating working capital 14,037,692 3,163,176 (638,154) 16,562,714
---------------- ---------------- ---------------------------------

Net cash from operations 56,072,020 3,457,035 (775,022) 58,754,033

INVESTING ACTIVITIES:
Additions to theatre properties and equipment (167,788,339) (10,164,942) (177,953,281)
Sale of theater properties and equipment 206,537 206,537
Proceeds from 2 Day Video Inc. sale 9,439,466 9,439,466
Proceeds from affiliate sale 781,300 781,300
Decrease in certificates of deposit 297,102 297,102
Increase in temporary cash investments (26,282) (26,282)
Increase in investments in and advances to affiliate (10,802,381) (912,983) 10,000,000 (1,715,364)
Decrease (increase) in other assets (9,022,874) 433,912 136,868 (8,452,094)
---------------- ---------------- ---------------------------------

Net cash used for investing activities (177,670,489) (9,888,995) 10,136,868 (177,422,616)

FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes 199,106,000 199,106,000
Retirement of Senior Notes (123,370,000) (123,370,000)
Repurchase premium on retired Senior Notes (12,371,954) (12,371,954)
Increase in long-term debt 97,510,000 97,510,000
Reductions of long-term debt (77,530,536) (77,530,536)
Payment on notes payable to related parties (2,086,513) (638,154) 638,154 (2,086,513)
Decrease in theater developement advance (356,046) (356,046)
Minority investment in subsidiaries, net (677,889) (677,889)
Issuance of common stock to Cypress 38,567,063 38,567,063
Common stock issued for options exercised 900,013 900,013
Cinemark USA investment in Cinemark International 10,000,000 (10,000,000)
---------------- ---------------- ---------------------------------

Net cash from financing activities 119,690,138 9,361,846 (9,361,846) 119,690,138

FOREIGN CURRENCY TRANSLATION ADJUSTMENT (590,053) (590,053)
---------------- ---------------- ---------------------------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,908,331) 2,339,833 0 431,502

CASH AND CASH EQUIVALENTS:
Beginning of period 4,964,706 8,685,018 13,649,724
---------------- ---------------- ---------------------------------

End of period $3,056,375 $11,024,851 $14,081,226
================ ================ =================================
<FN>

Note: "Restricted Group" and "Cinemark International Group" are defined in the
Indenture (Section 4.02) for the Senior Notes dated June 10, 1992.
</FN>
</TABLE>

S - 3

<PAGE>

EXHIBITS

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR

CINEMARK USA, INC.

FOR FISCAL YEAR ENDED
DECEMBER 31, 1996

<PAGE>

<TABLE>
<CAPTION>
Exhibit Index

Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------ ----------- ------------
<S> <C> <C>
3.1(a) Amended and Restated Articles of Incorporation of the Company Exhibit 3.1(a) to the
filed 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 Exhibit 3.1(b) to the
June 27, 1988 merging Gulf Drive-In Theatres, Inc. and Company's
Cinemark of Louisiana, Inc. into the Company Registration
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 Exhibit 3.1(d) to the
dated October 27, 1989 merging Premiere Cinemas Corp. into Company's
the Company 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 Exhibit 3.1(e) to the
dated October 27, 1989 merging Tri-State Entertainment Company's
Incorporated into the Company Registration
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
December 27, 1990 merging Cinema 4, Inc. into the Company 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
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 September 13,
1996.
4.2 Indenture dated August 15, 1996 between the Company and U.S. Exhibit 4.2 to the
Trust Company of Texas, N.A. governing the Subordinated Company's
Notes, with a form of Subordinated Note attached Registration

Statement
(file
333-
11895)
on
Form
S-4
filed
September
13,
1996.

E-1

<PAGE>

Page Number or
Exhibit Incorporation by
Number Description Reference to
4.3(a) Indenture for Senior Notes, with form of Senior Note Exhibit 4.1 to the
attached. Company's Annual
Report (file 33-
47040) on Form 10-K
filed March 31, 1993.
4.3(b) First Supplemental Indenture dated August 9, 1996 to Page ____
Indenture for Senior Notes
10.1(a) 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(b) Amendment to Stock Pledge Agreement dated June 28, 1993 in Exhibit 4.1(c) to the
favor of the Trustee pledging the shares of capital stock of Company's Annual
ENT Holdings, Inc. Report (file 33-
47040) on Form 10-K
filed March 31, 1994
10.1(c) Amendment to Stock Pledge Agreement dated July 12, 1993 in Exhibit 4.1(d) to the
favor of Trustee pledging the shares of capital stock of 2 Company's Annual
Day Video, Inc. Report (file 33-
47040) on Form 10-K
filed March 31, 1994
10.1(d) Amendment to Stock Pledge Agreement dated October 14, 1993 in Exhibit 4.1(e) to the
favor of Trustee pledging the shares of capital stock of Company's Annual
Cinema Management Group, Inc. Report (file 33-
47040) on Form 10-K
filed March 31, 1994
10.1(e) Amendment to Stock Pledge Agreement dated September 13, 1993 Exhibit 4.1(f) to the
in favor of Trustee pledging the limited partnership Company's Annual
interests of Tinseltown Equities, Inc. Report (file 33-
47040) on Form 10-K
filed March 31, 1994
10.1(f) Amendment to Stock Pledge Agreement dated February 8, 1994 in Exhibit 4.1(g) to the
favor of Trustee pledging the shares of capital stock of Company's Annual
Sunnymead Cinema Corp. Report (file 33-
47040) on Form 10-K
filed March 31, 1994
10.1(g) Amendment to Stock Pledge Agreement dated February 8, 1994 in Exhibit 4.1(h) to the
favor of Trustee pledging shares of the capital stock of Company's Annual
Sunnymead Cinema Corp. Report (file 33-
47040) on Form 10-K
filed March 29, 1995
10.1(h) Amendment to Stock Pledge Agreement dated July 26, 1994 in Exhibit 4.1(i) to the
favor of Trustee pledging shares of the capital stock of Company's Annual
Cinemark Partners I, Inc. Report (file 33-
47040) on Form 10-K
filed March 29, 1995
10.1(i) Amendment to Stock Pledge Agreement dated August 4, 1994 in Exhibit 4.1(j) to the
favor of Trustee pledging shares of the capital stock of 2 Company's Annual
Day Video, Inc. Report (file 33-
47040) on Form 10-K
filed March 29, 1995
10.1(j) Amendment to Stock Pledge Agreement dated September 12, 1994 Exhibit 4.1(k) to the
in favor of Trustee pledging the general and limited Company's Annual
partnership interests in Laredo Theatre, Ltd. Report (file 33-
47040) on Form 10-K
filed March 29, 1995

E-2

<PAGE>

Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------ ----------- ------------
10.2 Promissory Note dated September 4, 1987 executed by The Exhibit 10.5 to the
Pebble Group, Ltd. in the original principal amount of Company's
$700,000 payable to Citizens Savings and Loan, and assumed by Registration
the Company. Statement (file 33-
47040) on Form S-1
filed on April 9,
1992.
10.3 Management Agreement dated as of March 1, 1991 between Movie Exhibit 10.6(a) to
Theatre Investors, Ltd. and the Company. the Company's

Registration
Statement
(file
33-
47040)
on
Form
S-1
filed
on
April
9,
1992.
10.4(a) Management Agreement dated as of March 1, 1991 between Movie Exhibit 10.6(b) to
Theatre Investors, Ltd. and the Company. the Company's

Registration
Statement
(file
33-
47040)
on
Form
S-1
filed
on
April
9,
1992.
10.4(b) Management Agreement between the Company and Cinemark II, Exhibit 10.6(c) to
Inc. ("Cinemark II") dated as of June 10, 1992. the Company's Annual

Report
(file
33-
47040)
on
Form
10-K
filed
March
31,
1993.
10.4(c) First Amendment to Management Agreement effective as of Exhibit 10.6(e) to
December 2, 1991 among the Company, Movie Theatre Holdings, the Company's
Inc. and E. William Savage Registration
Statement (file 33-
47040) on Form S-1
filed on April 9,
1992

10.4(d) Management Agreement, dated as of July 28, 1993, between the Exhibit 10.7 to
Company and Cinemark Mexico (USA). Cinemark Mexico
(USA)'s Registration
Statement (file 33-
72114) on Form S-4
filed on November 24,
1994.
10.4(e) Management Agreement, dated as of September 10, 1992, between Exhibit 10.8 to
the Company and Cinemark de Mexico. Cinemark Mexico

(USA)'s
Registration
Statement
(file
33-
72114)
on
Form
S-4
filed
on
November
24,
1994.
10.4(f) Management Agreement dated December 10, 1993 between Laredo Exhibit 10.14(b) to
Joint Venture and the Company. the Company's Annual

Report
(file
33-
47040)
on
form
10-K
filed
March
31,
1994.
10.4(g) Management Agreement dated September 1, 1994 between Cinemark Exhibit 10.4(i) to
Partners II, Ltd. and the Company. the Company's Annual

Report
(file
33-
47040)
on
Form
10-K
filed
March
29,
1995.
10.5 Agreement Regarding Right of First Refusal dated March 28, Exhibit 10.10 to
1991 between the Company and Movie Theatre Investors, Ltd. CUSA's Registration

Statement
(file
33-
47040)
on
Form
S-1
filed
on
April
9,
1992.

E-3

<PAGE>

Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------ ----------- ------------
10.6(a) Employment Agreement dated as of October 17, 1991 between the Exhibit 10.11(a) to
Company and Lee Roy Mitchell. the Company's
Registration
Statement (file 33-
47040) on Form S-1
filed on April 9,
1992.
10.6(b) First Amendment to Employment Agreement dated as of April 7, Exhibit 10.11(b) to
1992 between the Company and Lee Roy Mitchell. the Company's

Registration
Statement
(file
33-
47040)
on
Form
S-1
filed
on
April
9,
1992.
10.6(c) Employment Agreement dated as of October 17, 1991 between the Exhibit 10.11(c) to
Company and Tandy Mitchell. the Company's
Registration
Statement (file 33-
47040) on Form S-1
filed on April 9,
1992.
10.6(d) First Amendment to Employment Agreement dated as of April 7, Exhibit 10.11(d) to
1992 between the Company and Tandy Mitchell. the Company's

Registration
Statement
(file
33-
47040)
on
Form
S-1
filed
on
April
9,
1992.
10.6(e) Second Amendment to Employment Agreement between the Company Exhibit 10.11(e) to
and Lee Roy Mitchell dated as of June 10, 1992. the Company's Annual

Report
(file
33-
47040)
on
Form
10-K
filed
March
31,
1993.
10.7(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.
10.7(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.
10.9(a) License Agreement dated as of July 23, 1990 between the Exhibit 10.18(a) to
Company and Movie Theatre Investors, Ltd. the Company's
Registration
Statement (file 33-
47040) on Form S-1
filed on April 9,
1992.
10.9(b) License Agreement dated December 10, 1993 between Laredo Exhibit 10.14(c) to
Joint Venture and the Company. the Company's Annual
Report (file 33-
47040) on Form 10-K
filed March 31, 1994
10.9(c) License Agreement dated September 1, 1994 between Cinemark Exhibit 10.10(c) to
Partners II, Ltd. and the Company. the Company's Annual

Report
(file
33-
47040)
on
Form
10-K
filed
March
29,
1995.

E-4

<PAGE>

Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------ ----------- ------------
10.10(a) Tax Sharing Agreement between the Company and Cinemark II Exhibit 10.22 to the
dated as of June 10, 1992. Company's Annual
Report (file 33-
47040) on Form 10-K
filed March 31, 1993.
10.10(b) Tax Sharing Agreement dated as of July 28, 1993, between the Exhibit 10.10 to
Company and Cinemark Mexico (USA). Cinemark Mexico

(USA)'s
Registration
Statement
(33-72114)
on
Form
S-4
filed
on
November
24,
1994.
10.11(a) Indemnification Agreement between the Company and Lee Roy Exhibit 10.23(a) to
Mitchell dated as of July 13, 1992. the Company's Annual

Report
(file
33-
47040)
on
Form
10-K
filed
March
31,
1993.
10.11(b) Indemnification Agreement between the Company and Tandy Exhibit 10.23(b) to
Mitchell dated as of July 13, 1992. the Company's Annual

Report
(file
33-
47040)
on
Form
10-K
filed
March
31,
1993.
10.11(c) Indemnification Agreement between the Company and Alan W. Exhibit 10.23(d) to
Stock dated as of July 13, 1992. the Company's Annual

Report
(file
33-
47040)
on
Form
10-K
filed
March
31,
1993.
10.11(d) Indemnification Agreement between the Company and W. Bryce Exhibit 10.23(f) to
Anderson dated as of July 13, 1992. the Company's Annual

Report
(file
33-
47040)
on
Form
10-K
filed
March
31,
1993.
10.11(e) Indemnification Agreement between the Company and Sheldon I. Exhibit 10.23(g) to
Stein dated as of July 13, 1992. the Company's Annual

Report
(file
33-
47040)
on
Form
10-K
filed
March
31,
1993.
10.11(f) Indemnification Agreement between the Company and Heriberto Exhibit 10.13(f) to
Guerra dated as of December 3, 1993 the Company's

Registration
Statement
(file
333-
11895)
on
Form
S-4
filed
September
13,
1996.
10.11(g) Indemnification Agreement between the Company and Gary R. Exhibit 10.13(g) to
Gibbs dated as of July 19, 1995. the Company's

Registration
Statement
(file
333-
11895)
on
Form
S-4
filed
September
13,
1996.
10.12(a) Credit Agreement dated as of December 12, 1996 among the Page ______
Company, the Banks and the Agent.
10.12(b) Pledge Agreement dated as of December 12, 1996 executed by Page ______
the pledgors listed on the signature page thereto for the
benefit of the Agent and the Banks.
10.12(c) Note of the Company dated as of December 12, 1996 in the Page ______
original principal amount of $50,000,000 payable to the order
of Bank of America National Trust and Savings Association
10.12(d) Note of the Company dated as of December 12, 1996 in the Page ______
original principal amount of $35,000,000 payable to the order
of NationsBank of Texas, N.A.

E-5

<PAGE>

Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------ ----------- ------------
10.12(e) Note of the Company dated as of December 12, 1996 in the Page ______
original principal amount of $20,000,000 payable to the order
of First National Bank of Boston
10.12(f) Note of the Company dated as of December 12, 1996 in the Page ______
original principal amount of $15,000,000 payable to the order
of Fleet Bank, N.A.
10.12(g) Note of the Company dated as of December 12, 1996 in the Page ______
original principal amount of $15,000,000 payable to the order
of The Fuji Bank, Limited
10.12(h) Note of the Company dated as of December 12, 1996 in the Page ______
original principal amount of $25,000,000 payable to the order
of Bank of New York
10.12(i) Note of the Company dated as of December 12, 1996 in the Page ______
original principal amount of $25,000,000 payable to the order
of CIBC Inc.
10.12(j) Note of the Company dated as of December 12, 1996 in the Page ______
original principal amount of $20,000,000 payable to the order
of Bank of Nova Scotia
10.12(k) Note of the Company dated as of December 12, 1996 in the Page ______
original principal amount of $20,000,000 payable to the order
of Comerica Bank-Texas
10.13(a) Letter Agreements with directors of the Company regarding Exhibit 10.15 to the
stock options. Company's Annual
Report (file 33-
47040) on Form 10-K
filed March 31, 1993.
10.13(b) Letter Agreements with directors of the Company amending Exhibit 10.15(b) to
stock options the Company's

Registration
Statement
(file
333-
11895)
on
Form
S-4
filed
September
13,
1996.
10.14(a) Indenture, dated as of July 30, 1993, among Cinemark Mexico Exhibit 4.1 to
(USA), Cinemark de Mexico, as Guarantor, and United States Cinemark Mexico
Trust Company of New York, as trustee, relating to the Senior (USA)'s Registration
Subordinated Notes. Statement (file 33-
72114) on Form S-4
filed on November 24,
1994.
10.14(b) First Supplemental Indenture dated May 2, 1994 among Cinemark Exhibit 4.4 to
Mexico (USA), Cinemark de Mexico and United States Trust Cinemark Mexico
Company of New York, as Trustee. (USA)'s Annual Report
(file 33-72114) on
Form 10-K filed March
31, 1994.
10.14(c) Second Supplemental Indenture dated August 30, 1995 among Exhibit 10.16(c) to
Cinemark Mexico (USA), Cinemark de Mexico and United States the Company's
Trust Company of New York, as Trustee Registration

Statement
(file
333-
11895)
on
Form
S-4
filed
September
13,
1996.
10.14(d) Third Supplemental Indenture dated September 30, 1996 among Page ______
Cinemark Mexico (USA), Cinemark de Mexico and United States
Trust Company of New York, as Trustee

E-6

<PAGE>

Page Number or
Exhibit Incorporation by
Number Description Reference to
10.14(e) Purchase Agreement, dated as of July 30, 1993, among Cinemark Exhibit 4.2 to
Mexico (USA), Cinemark de Mexico and each of the purchasers Cinemark Mexico
of the Series A Notes named on the signature pages thereof (USA)'s Registration
(the "Purchasers"). Statement (file 33-
72114) on Form S-4
filed on November 24,
1994.
10.14(f) Registration Rights Agreement, dated as of July 30, 1993, Exhibit 4.3 to
among Cinemark Mexico (USA), Cinemark de Mexico and the Cinemark Mexico
Purchasers of the Series A Notes. (USA)'s Registration

Statement
(file
33-
72114)
on
Form
S-4
filed
on
November
24,
1994.
10.14(g) Warrant Registration Rights Agreement, dated as of July 30, Exhibit 10.1 to
1993, among Cinemark Mexico (USA), Cinemark II, New Wave Cinemark Mexico
Investments A.V.V. ("New Wave") and the purchasers of the (USA)'s Registration
warrants named on the signature pages thereof. Statement (file 33-
72114) on Form S-4
filed on November 24,
1994.
10.14(h) Warrant Certificates. Exhibit 10.2 to
Cinemark Mexico
(USA)'s Registration
Statement (file 33-
72114) on Form S-4
filed on November 24,
1994.
10.14(i) Purchase Agreement dated May 6, 1994 among Cinemark Mexico Exhibit 4.5 to
(USA), Cinemark de Mexico and each of the purchasers of the Cinemark Mexico
Series C Notes named on the registration pages thereto. (USA)'s Annual Report
(file 33-72114) on
Form 10-K filed on
March 31, 1995
10.14(j) Subscription Agreement dated as of December 31, 1994 between Exhibit 10.4(a) to
the Company and Cinemark International. Cinemark Mexico
(USA)'s Annual Report
(file 33-72114) on
Form 10-K filed March
31, 1995
10.14(k) Subscription Agreement dated June 1, 1995 among Cinemark Exhibit 10.16(j) to
Mexico (USA) and Cinemark International the Company's

Registration
Statement
(file
333-
11895)
on
Form
S-4
filed
September
13,
1996.
10.14(l) Purchase Agreement dated August 30, 1995 among Cinemark Exhibit 10.16(k) to
Mexico (USA) and the purchasers thereto the Company's

Registration
Statement
(file
333-
11895)
on
Form
S-4
filed
September
13,
1996.
10.14(m) Warrant Certificates Exhibit 10.16(l) to
the Company's
Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996.

E-7

<PAGE>

Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------ ----------- ------------
10.15 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
10.16 Shareholders' Agreement dated March 12, 1996 among the Exhibit 10.19(b) to
Company, Mr. Mitchell, Cypress Merchant Banking Partners the Company's Annual
L.P., Cypress Pictures Ltd. and Mr. Mitchell and Mr. Don Hart Report (file 33-
as Co-Trustees of certain trusts signatory thereto 47040) on Form 10-K
filed April 1, 1996
10.17 Joint Venture Agreement dated December 31, 1995 among Exhibit 10.20 to the
Cinemark II, 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. Page ______
21 Subsidiaries of the Registrant Page ______
</TABLE>

E-8

<PAGE>

EXHIBIT 4.3(b)

<PAGE>

CINEMARK USA, INC.

and

THE BANK OF NEW YORK,
successor to
NATIONSBANK OF TEXAS, N.A., Trustee

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

First Supplemental Indenture

Dated as of August 9, 1996

Indenture

Dated as of June 10, 1992
--------------------

$125,000,000

12% Senior Notes due June 1, 2002

<PAGE>

FIRST SUPPLEMENTAL INDENTURE

THIS FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of August 9, 1996, is between Cinemark USA, Inc., a Texas corporation
(the "Company"), and The Bank of New York, successor to NationsBank of Texas,
N.A., as trustee (the "Trustee"). All capitalized terms contained but not
defined herein shall have the respective meanings assigned to them in the
Indenture (as defined below), as such Indenture is amended by this Supplemental
Indenture.

RECITALS

A. The Company and the Trustee executed an indenture, dated as of June 10,
1992 (the "Indenture"), relating to the Company's $125 million principal amount
12% Senior Notes due June 1, 2002 (the "Securities").

B. Section 9.02 of the Indenture provides that the Company and the Trustee
may amend the Indenture with the written consent of the Holders of at least a
majority of the aggregate principal amount of the Securities at the time
outstanding.

C. The Company desires to amend certain provisions of the Indenture, as set
forth in Article One hereof.

D. The Company has received and accepted written consents of Holders to the
amendments set forth in this Supplemental Indenture (the "Consents"), which
Consents have not been subsequently revoked, from the Holders of at least a
majority of the aggregate principal amount of the Securities outstanding.

E. All conditions precedent provided for in the Indenture relating to this
Supplemental Indenture have been complied with.

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH, for and
in consideration of the above premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and the Trustee mutually covenant and agree for the equal and
proportionate benefit of all Holders of the Securities as follows:

ARTICLE ONE

Amendment of Indenture

Section 1.01 Waiver of Indenture Provisions. The application of the
provisions of Sections 4.06 through and including 4.23 of the Indenture are
hereby waived to the extent that such provisions might otherwise interfere with
the ability of the Company to enter into agreements contemplated by, and to
consummate, the repurchase offer and the consent solicitation for

<PAGE>

Securities (the "Repurchase Offer"), as set forth in the Company's Offer to
Purchase and Consent Solicitation and the accompanying Consent and Letter of
Transmittal, each dated July 15, 1996, and any amendments, modifications or
supplements thereto (the "Offer to Purchase").

Section 1.02 Amendment of Indenture Provisions. Effective upon the date
of the Company's deposit with The Bank of New York, as depositary for the
Repurchase Offer, of an amount of money sufficient to repurchase all Securities
validly tendered and accepted pursuant to the Offer to Purchase:

(i) Section 1.01 of Article 1 of the Indenture is hereby
amended by deleting the following definitions in their entirety:

"Acquired Indebtedness"
"Asset Disposition"
"Capitalized Lease Obligations"
"Change of Control"
"Consolidated EBITDA"
"Consolidated Interest Expense"
"Consolidated Net Income"
"Consolidated Net Worth"
"EBITDA Ratio"
"Independent Director"
"Interest Rate Protection Agreement"
"Investment"
"Net Proceeds"
"Offer"
"Offer Purchase Date"
"Permitted Investment"
"Purchase Money Obligation"
"Restricted Subsidiary"
"Subsidiary"
"Trade Payables"
"Unrestricted Subsidiary"
"Weighted Average Life"
"Wholly Owned Subsidiary"

(ii) Sections 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23, and 5.01
are hereby amended by deleting all such sections and all references
thereto in their entirety.

(iii) Section 4.03 of Article 4 of the Indenture is hereby
amended and restated in

<PAGE>

its entirety to read as follows:

"Section 4.03 Compliance Certificates. (a) The
Company shall deliver to the Trustee within 60
calendar days after the end of each of the Company's
fiscal quarters (90 calendar days after the end of
the Company's last fiscal quarter of each year) an
Officer's Certificate executed by Officers of the
Company stating whether or not the signers know of
any Default or Event of Default which occurred during
such fiscal quarter. In the case of the Officer's
Certificate delivered within 90 calendar days after
the end of the Company's fiscal year, such
certificate shall contain a certification from the
principal executive officer, principal financial
officer or principal accounting officer of the
Company stating (i) that a review of the activities
of the Company has been made with a view to
determining whether its obligations under the
Indenture have been complied with and (ii) whether
such officer has obtained knowledge of any Default
under the Indenture during the 12-month period ended
on the date of the financial statements. If they do
know of such a Default or Event of Default, the
certificate shall describe any such Default or Event
of Default, and its status including its duration.
The first certificate to be delivered pursuant to
this Section 4.03(a) shall be for the first fiscal
quarter beginning after the execution of this
Indenture.

(b) The Company shall deliver to the Trustee as soon
as possible and in any event within 10 calendar days
after the Company, as the case may be, becomes aware
of the occurrence of each Default or Event of Default
that is continuing, an Officer's Certificate setting
forth the details of such Default or Event of
Default, and the action that the Company proposes to
take with respect thereto."

(iv) Section 6.01 of Article 6 of the Indenture is hereby
amended and restated
in its entirety to read as follows:

"Section 6.01 Events of Default. (a) 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 Securities
when the same becomes due and
payable at maturity, by acceleration
or otherwise, (B) any Sinking Fund
Payment on the required payment date
thereof, or (C) the Redemption Price
on any Redemption Date;

(ii) the Company defaults in the
payment of interest on any

<PAGE>

Security 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 Securities, this Indenture
(other than those referred to in
clauses (i) and (ii) above) or the
Pledge Agreement, and such failure
continues for 30 calendar days after
receipt by the Company of a Notice
of Default;

(iv) (A) the Securities, or any
material provision of this Indenture
or the Pledge Agreement, ceases to
be valid or binding on the Company,
(B) the Pledge Agreement for any
reason after the Initial Issuance
Date ceases to create a valid Lien
on any of the Pledged Stock
purported to be covered thereby in
which the Trustee has a security
interest for the benefit of the
Trustee and the Holders, or any such
Lien ceases to be a perfected first
priority Lien, or (C) the Company or
any of its Subsidiaries initiates
any suit or proceeding challenging
the legality, validity or
enforceability of any of the
foregoing or the attachment,
perfection or priority of any Liens
granted to secure payment and
performance of the Securities;

(b) A Default under clause (iii) of Section
6.01(a) 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 Securities 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 Section 6.01(a)
after receipt of such notice. Any such
notice must specify the Default, demand that
it be remedied and state that such notice is
a "Notice of Default".

(c) Subject to the provisions of Sections
7.01 and 7.02, the Trustee shall not be
charged with knowledge of a Default or an
Event of Default under this Indenture unless
and until written notice thereof has been
given to the Trustee by the Company."

<PAGE>

ARTICLE TWO

Miscellaneous Provisions

Section 2.1 Counterparts. This Supplemental Indenture may be executed
in counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.

Section 2.2 Severability. In the event that any provision in this
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

Section 2.3 Headings. The article and section headings herein are for
convenience only
and shall not affect the construction hereof.

Section 2.4 Successors and Assigns. All the covenants, stipulations,
promises and agreements in this Supplemental Indenture by or on behalf of the
Company or the Trustee shall bind its respective successors and assigns, whether
so expressed or not.

Section 2.5 Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.

Section 2.6 Effect of Supplemental Indenture. Except as amended by this
Supplemental Indenture, the terms and provisions of the Indenture shall remain
in full force and effect, and the Indenture as amended and supplemented by this
Supplemental Indenture is in all respects confirmed and preserved.

Section 2.7 Trustee. The Trustee accepts the modifications of trusts
referenced in the Indenture and effected by this Supplemental Indenture. Without
limiting the generality of the foregoing, the Trustee assumes no responsibility
for the correctness of the recitals herein contained, which shall be taken as
the statements of the Company, and the Trustee shall not be responsible or
accountable in any way whatsoever for or with respect to the validity or
execution or sufficiency of this Supplemental Indenture, and the Trustee makes
no representation with respect thereto.

[The remainder of this page is intentionally left blank.]

<PAGE>

IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Supplemental Indenture on behalf of the respective parties hereto
as of the date first above written.

Attest: CINEMARK USA, INC.

By:
Name: Name:
Title: Title:

Attest: THE BANK OF NEW YORK,
successor to NationsBank of
Texas, N.A., as Trustee

By:
Name: Name:
Title: Title:

<PAGE>

EXHIBIT 10.12(a)

<PAGE>

FIRST AMENDED AND RESTATED
REDUCING REVOLVING CREDIT AGREEMENT

This FIRST AMENDED AND RESTATED REDUCING REVOLVING CREDIT AGREEMENT is
entered into as of December 12, 1996 among CINEMARK USA, Inc., a Texas
corporation (the "Company"), the several financial institutions from time to
time party to this Agreement (collectively, the "Banks"; individually, a
"Bank"), and Bank of America National Trust and Savings Association, as agent
for the Banks (the "Administrative Agent").

RECITAL

The Banks desire to amend and restate the Existing Credit Facility on
the terms and conditions set forth herein by making available to the Company a
reducing revolving credit facility upon the terms and conditions set forth in
this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:

SECTION 1

DEFINITIONS

1.1 Defined Terms. In addition to the terms defined
elsewhere in this Agreement, the following terms have the
following meanings:

"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. Without
limitation, any director, executive officer or beneficial owner of 10% or more
of the voting interest

<PAGE>

of a Person shall for the purposes of this Agreement, be deemed to control the
other Person. In no event shall any Bank be deemed an "Affiliate" of the Company
or of any Subsidiary of the Company.

"Agent-Related Persons" means BofA and any successor agent arising
under Section 9.9, and the Documentation Agent, together with their respective
Affiliates, and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.

"Aggregate Commitment" means the combined Commitments of the Banks in
the amount of $225,000,000, as such amount may be reduced from time to time
pursuant to this Agreement.

"Agreement" means this First Amended and Restated Reducing Revolving
Credit Agreement, as amended, modified, supplemented or waived from time to time
in accordance with the terms hereof.

"Annualized Cash Flow" means, for any period, for the Company and its
Restricted Subsidiaries, Cash Flow for such period plus (a) Proforma Cash Flow
for Annualized Theatres less (b) Cash Flow from Annualized Theatres; provided,
however, that if during the period for which Annualized Cash Flow is being
determined, the Company or any of its Restricted Subsidiaries shall have
acquired any assets identified to the Agent other than assets acquired as a
result of Capital Expenditures made in the ordinary course of business
(including without limitation acquisition by merger or consolidation) or
Disposed of assets, the Cash Flow of the Company and its Restricted Subsidiaries
shall be calculated on a pro forma basis as if such acquisition or disposition
had occurred at the beginning of such period.

"Annualized Theatres" means, for any period, newly constructed
theatres identified to the Agent that have had more than one complete quarter of
operation, but less than four complete quarters of operation (each, an
"Annualized Theatre").

"Applicable Amount" means, subject, with respect to Offshore Rate
Loans, to the provisos immediately following the table, the percentage specified
below applicable to interest rates and the Commitment fee opposite the
applicable ratio of

<PAGE>

Total Indebtedness to Annualized Cash Flow, as set forth in the most recent
certificate received by the Administrative Agent pursuant to Section 4.1(g) or
6.2(a):

Ratio of Total
Indebtedness to
Annualized Cash Offshore Base Commitment
Flow Rate Loans Rate Loans Fee

x 4.50 1.750% 0.50% 0.3750%
4.00 x 4.50 1.500% 0.25% 0.3500%
3.50 x 4.00 1.250% -- 0.3250%
3.00 x 3.50 1.000% -- 0.2750%
2.50 x 3.00 0.750% -- 0.2250%
2.00 x 2.50 0.625% -- 0.2000%
x 2.00 0.500% -- 0.1875%

provided, however, that any time the ratio of Senior Indebtedness to Annualized
Cash Flow is (a) less than 2.50 to 1, but greater than or equal to 1.75 to 1,
the above Applicable Amount for Offshore Rate Loans shall be reduced by 0.125%
per annum, or (b) less than 1.75 to 1, the above Applicable Amount for Offshore
Rate Loans shall be reduced by 0.250% per annum.

The Applicable Amount shall be in effect from the date the most recent
certificate delivered pursuant to Section 4.1(g) or 6.2(a) is received by the
Administrative Agent to but excluding the date the next such certificate is
received; provided, however, that if the Company fails to timely deliver the
next such certificate, the Applicable Amount from date such certificate was due
to but excluding the date such certificate is received by the Administrative
Agent (the "Delinquent Period") shall be the higher of (a) the Applicable Amount
already in effect and (b) the Applicable Amount as set forth in such certificate
when received, retroactively applied to the Delinquent Period.

"Assignee" has the meaning specified in Section
10.8(a).

"Bank" has the meanings specified in the introductory
clause hereto, and any successors to, and permitted assigns of,

<PAGE>

such Banks. Unless the context otherwise clearly requires, "Bank" includes any
such institution, or any Affiliate of such institution, in its capacity as a
counterparty under any Swap Contract.

"Bank Affiliate" means a Person engaged primarily in the business of
commercial banking and that is a Subsidiary of a Bank or of a Person of which a
Bank is a Subsidiary.

"Bankruptcy Code" means the Federal Bankruptcy Reform
Act of 1978 (12 U.S.C. ss. 101, et seq.).

"Base Rate" means the higher of: (a) the rate of interest publicly
announced from time to time by BofA in San Francisco, California, as its
"reference rate." It is a rate set by BofA based upon various factors including
BofA's costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans, which may be priced at,
above, or below such announced rate; and (b) one-half percent per annum above
the Federal Funds Rate. Any change in the reference rate announced by BofA shall
take effect at the opening of business on the day specified in the public
announcement of such change.

"Base Rate Loan" means a Loan that bears interest based on the Base
Rate.

"BofA" means Bank of America National Trust and Savings Association, a
national banking association, and any successors thereto under this Agreement.

"Borrowing" means a borrowing hereunder consisting of Loans made to
the Company on the same day by the Banks pursuant to Section 2.

"Borrowing Date" means the date a Borrowing is made.

"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City or San Francisco are authorized
or required by law to close and, if the applicable Business Day relates to any
Offshore Rate Loan, means such a day on which dealings are carried on in the
applicable offshore dollar interbank market.

<PAGE>

"Capital Expenditures" means, for any period and with respect to any
Person, the aggregate of all expenditures by such Person and its Restricted
Subsidiaries for the acquisition or leasing of fixed or capital assets or
additions to equipment (including replacements, capitalized repairs and
improvements during such period) which should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Restricted Subsidiaries. For
the purpose of this definition, the purchase price of equipment which is
purchased simultaneously with the trade-in of existing equipment owned by such
Person or any of its Restricted Subsidiaries or with insurance proceeds shall be
included in Capital Expenditures only to the extent of the gross amount of such
purchase price less the credit granted by the seller of such equipment for such
equipment being traded in at such time, or the amount of such proceeds, as the
case may be.

"Capital Lease" has the meaning specified in the
definition of Capital Lease Obligations.

"Capital Lease Obligations" means all monetary obligations of the
Company or any of its Restricted Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, is classified as a capital lease
("Capital Lease").

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

"Cash Equivalents" 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

<PAGE>

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 by a depository institution or trust company
incorporated under the laws of the United States of America, any
state thereof or the District of Columbia, Canada or any province
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)
capital, surplus and undivided profits (as of the date of such
institution's most recently published financial statements) in
excess of $100,000,000 and (y) the long-term unsecured debt
obligations (other than such obligations rated on the basis of
the credit of a person or entity other than such institution) of
such institution, at the time of the Company's or any Restricted
Subsidiary's Investment therein or contractual commitment
providing for such Investment, are rated in the highest rating
category of both Standard & Poor's Rating Group ("S&P") and
Moody's Investor 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 $100,000,000;

(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

<PAGE>

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; and

(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 or the District of Columbia,
Canada or any province; 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 $100,000,000 and (2) the
long-term unsecured debt obligations (other than such obligations rated on the
basis of the credit of a person or entity other than such institution) of such
institution, at the time of the Company's or such Restricted Subsidiary's
Investment therein are rated in the highest rating category of both S&P and
Moody's. 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 Majority Banks, 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.

"Cash Flow" means, for any period, for the Company and its Restricted
Subsidiaries on a consolidated basis, or, as applicable, with respect to certain
properties or assets, determined in accordance with GAAP, the sum of (a) net
income (or net loss) plus (b) all amounts treated as expenses for depreciation
and Consolidated Interest Expense (including amortization of debt issue costs)
and the amortization of intangibles of any kind to the extent included in the
determination of such net income (or loss), plus (c) all accrued taxes on or
measured by income to the extent included in the determination of such net
income (or loss) plus (d) increases in deferred lease expense, plus (e) other
non cash items reducing net income, plus (f) compensation expense related to tax
payment plans implemented by the Company from time to time in connection with
the exercise and/or repurchase of stock options or the repurchase of any shares
of common stock issued upon the exercise of any such option which, net of the
related tax benefit, does not exceed $5,000,000 in the aggregate less (g)
decreases in

<PAGE>

deferred lease expense, less (h) interest income; provided, however, that net
income (or loss) shall be computed for these purposes without giving effect to
gains or losses on Dispositions or extraordinary losses or extraordinary gains.

"CERCLA" has the meaning specified in the definition of
"Environmental Laws."

"Change in Control Event" means:

(a) 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 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, (i) the outstanding shares of
common stock of the Company or (ii) the total voting power of all classes of
Capital Stock of the Company entitled to vote generally in the election of
directors; or

(b) 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 (v) the Company, (w) any Restricted
Subsidiary of the Company that is a Wholly Owned Subsidiary, (x) the Mitchell
Family, (y) 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 (z) Cypress
Merchant Banking Partners L.P. or Cypress Pictures Ltd.; 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

<PAGE>

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 transactions.

"Cinemark International" means Cinemark International,
Inc. a Texas corporation and formerly known as Cinemark II, Inc.

"Closing Date" means the date on which all conditions precedent set
forth in Section 4.1 are satisfied or waived by all Banks.

"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.

"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Pledgors upon which a Lien now or
hereafter exists in favor of the Banks, or the Administrative Agent on behalf of
the Banks, whether under this Agreement or under any other documents executed by
any such persons and delivered to the Administrative Agent or the Banks, for the
purpose of securing the Obligations.

"Collateral Documents" means, collectively, (a) the Pledge Agreements
and all other security agreements, and other similar agreements between any
Person and the Administrative Agent now or hereafter delivered to the
Administrative Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable documents) now
or hereafter filed in accordance with the UCC (or comparable law) against any
Person as debtor in favor of the Administrative Agent for the benefit of itself
and the Banks, and (b) any amendments, supplements, modifications, renewals,
replacements, consolidations, substitutions and extensions of any of the
foregoing.

"Commitment", with respect to each Bank, has the
meaning specified in Section 2.1.

"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense paid or due to be paid during such period.

<PAGE>

"Consolidated Interest Expense" means, for any period, gross
consolidated interest expense for the period determined in accordance with GAAP
(including all commissions, discounts, fees and other charges in connection with
standby letters of credit and similar instruments and amortization of debt issue
costs) for the Company and its Restricted Subsidiaries, plus (a) the portion of
the upfront costs and expenses for Swap Contracts of the Company and its
Restricted Subsidiaries (to the extent not included in gross consolidated
interest expense) fairly allocated to such Swap Contracts as expenses for such
period, and (b) capitalized interest of the Company and its Restricted
Subsidiaries for the period.

"Consolidated Tangible Assets" 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.

"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary obligations") of
another Person (other than a Restricted Subsidiary) (the "primary obligor"),
including any obligation of that Person, whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, (d) otherwise to assure or hold harmless the
holder of any such primary obligation against loss in respect thereof, or (e) in
respect of any Swap Contract. The amount of any Contingent Obligation shall be
deemed equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, in the

<PAGE>

case of Contingent Obligations other than in respect of Swap Contracts, if not
stated or if indeterminable, the maximum reasonably anticipated liability in
respect thereof and, in the case of Contingent Obligations in respect of Swap
Contracts, shall be equal to the Swap Termination Value.

"Contractual Obligations" means, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.

"Controlled Group" means the Company and all Persons (whether or not
incorporated) under common control or treated as a single employer with the
Company pursuant to Section 414(b), (c), (m) or (o) of the Code.

"Conversion Date" means any date on which the Company elects to
convert a Base Rate Loan into an Offshore Rate Loan; continue an Offshore Rate
Loan as an Offshore Rate Loan; or convert an Offshore Rate Loan into a Base Rate
Loan.

"Covered Acquisition" means, in respect of any Disposition, (a) the
acquisition or development of theatre properties or other activities incidental
thereto within 360 days of such Disposition, or (b) the entering into a
definitive agreement to acquire or develop theatre properties or other
activities incidental thereto within 360 days of such Disposition, provided that
such acquisition or development is completed within 360 days of such
Disposition.

"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.

"Disposition" means (a) the sale, lease, conveyance or other
disposition of Property, and (b) the sale or transfer by the Company or any
Restricted Subsidiary of the Company of any equity securities issued by any
Restricted Subsidiary of the Company and held by such transferor Person, in
either case, other than to the Company or a Subsidiary.

<PAGE>

"Documentation Agent" means NationsBank of Texas, N.A.

"Dollars", "dollars" and "$" each mean lawful money of
the United States.

"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
United States; and (c) any Bank Affiliate.

"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from Property,
whether or not owned by the Company or any Restricted Subsidiary, or (b) any
other circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.

"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Clean Air Act, the

<PAGE>

Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the
Federal Resource Conservation and Recovery Act, the Toxic Substances Control
Act, the Emergency Planning and Community Right-to-Know Act.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and regulations promulgated thereunder.

"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 414(b), 414(c) or 414(m) of the Code.

"ERISA Event" means (a) a Reportable Event with respect to a Qualified
Plan or a Multiemployer Plan; (b) a withdrawal by the Company or any ERISA
Affiliate from a Qualified Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA); (c) a complete or partial withdrawal by the Company or any ERISA
Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to
terminate, the treatment of a plan amendment as a termination under Section 4041
or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a
Qualified Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure
by the Company or any member of the Controlled Group to make required
contributions to a Qualified Plan or Multiemployer Plan; (f) an event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Qualified Plan or Multiemployer Plan; (g) the imposition of any
liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate;
(h) an application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code with respect to any Plan; (i) a
non-exempt prohibited transaction occurs with respect to any Plan for which the
Company or any Subsidiary of the Company may be directly or indirectly liable;
or (j) a violation of the applicable requirements of Section 404 or 405 of ERISA
or the exclusive benefit rule under Section 401(a) of the Code by any fiduciary
or disqualified person with respect to any Plan for which the Company or any
member of the Controlled Group may be directly or indirectly liable.

<PAGE>

"Event of Default" means any of the events or
circumstances specified in Section 8.1.

"Exchange Act" means the Securities and Exchange Act of 1934, as
amended from time to time, and regulations promulgated thereunder.

"Excess Net Proceeds" has the meaning set forth in
Section 2.8(a).

"Excluded Disposition" means any Disposition consisting
of:

(a) a Disposition of inventory, or used, worn-out or
surplus equipment, all in the ordinary course of business;

(b) the Disposition of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;

(d) a Disposition that is a Permitted Investment or a Restricted
Payment not prohibited by Section 7.10 (to the extent such Permitted Investment
may be deemed to constitute a Restricted Payment or a Disposition);

(e) the Disposition of all or substantially all of the
assets of the Company (which is governed by Section 7.3);

(f) Dispositions of Property or equity securities (other than those of
the type described in clauses (a) through (e) above) in a single transaction or
a related series of transactions having a fair market value of less than
$2,000,000; provided, however, that the fair market value of all such Property
and equity securities disposed of by the Company and its Restricted Subsidiaries
during any 12-month period does not exceed $5,000,000; provided, further, that
if the fair market value of such Property or equity securities exceeds the
foregoing limits, then (i) all Dispositions in such transaction or related

<PAGE>

series of transactions excluded during the immediately preceding 12-month period
by reason of this clause (f) (if the $2,000,000 limit has been exceeded) and/or
(ii) all such Dispositions excluded during the immediately preceding 12-month
period by reason of this clause (f) (if the $5,000,000 limit has been exceeded)
shall thereupon not be deemed Excluded Dispositions, and the Company shall
promptly make any prepayment required by Section 2.8(a) to the extent of any
Excess Net Proceeds from such Dispositions; and

(g) Dispositions of Property or equity securities by a Restricted
Subsidiary to the Company or another Restricted Subsidiary.

"Existing Credit Facility" means that certain Credit Agreement dated
as of February 14, 1996, as amended, among the Company, the banks party thereto
and Bank of America National Trust and Savings Association, as the agent, as
amended to the date hereof.

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

"Federal Funds Rate" means the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day of determination
(or if such day of determination is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by it.

"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.

"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the

<PAGE>

accounting profession), or in such other statements by such other
entity as may be in general use by significant segments of the
U.S. accounting profession, which are applicable to the
circumstances as of the date of determination.

"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

"Guarantor" means any Restricted Subsidiary of the Company entering
into a Subsidiary Guaranty as contemplated by Section 7.4(k).

"Hazardous Materials" means all those substances which are regulated
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.

"Holding Company" means a corporation to be formed as
contemplated by the Recapitalization Agreements.

"Holdings Pledge Agreement" means the Holdings Pledge Agreement
substantially in the form of Exhibit C-2, as amended, supplemented, modified,
renewed and replaced from time to time.

"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables, coupons and gift certificates entered into in the ordinary course of
business pursuant to ordinary terms); (c) all reimbursement obligations with
respect to surety bonds, letters of credit, bankers' acceptances and similar
instruments (in each case, to the extent material or non-contingent); (d) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses

<PAGE>

(but excluding trade accounts payable or similar accrued liabilities arising in
the ordinary course of business); (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to Property acquired by the Person (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property); (f) all
Capital Lease Obligations; (g) all indebtedness referred to in clauses (a)
through (f) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in Property (including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness (provided, however, that the amount of any such Indebtedness which
is non-recourse to such Person shall be the lesser of the fair market value of
the Property subject to the Lien and the amount of the Indebtedness secured);
and (h) all Contingent Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (f) above.

"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors; in each case (a) and (b) undertaken under U.S. Federal, State or
foreign law.

"Interest Payment Date" means, with respect to any Offshore Rate Loan,
the last Business Day of each Interest Period applicable to such Loan; with
respect to any Base Rate Loan, the last Business Day of each calendar quarter;
and with respect to all Loans, the Maturity Date; provided, however, that if any
Interest Period for an Offshore Rate Loan exceeds three months, interest shall
also be paid on the date which falls three, six and nine months, as applicable,
after the beginning of such Interest Period.

"Interest Period" means, with respect to any Offshore
Rate Loan, the period commencing on the Borrowing Date or the

<PAGE>

Conversion Date for such Offshore Rate Loan and ending on the date 1, 2, 3, 6
or, if available to all Banks in their sole discretion, 12 months thereafter, as
selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation; provided that:

(a) if any Interest Period pertaining to an Offshore Rate Loan
would otherwise end on a day which is not a Business Day, that
Interest Period shall be extended to the next succeeding Business Day
unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day;

(b) any Interest Period pertaining to an Offshore Rate Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of the calendar month at the end of such Interest Period;

(d) no Interest Period may be specified that extends beyond the
next Reduction Date unless the sum of the aggregate principal amount
of the Offshore Rate Loans having an Interest Period ending after such
Reduction Date does not exceed the Commitments after giving effect to
any reduction thereto scheduled to be made on such Reduction Date.

"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 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 (a) 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 and (b)
advances to customers in the

<PAGE>

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.

"Lending Office" means, with respect to any Bank, the office or
offices of the Bank specified as its "Lending Office," "Domestic Lending Office"
or "Offshore Lending Office," as the case may be, under its name on Schedule
10.2 hereto, or such other office or offices of the Bank as it may from time to
time specify in writing to the Company and the Administrative Agent.

"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
other) or preference, priority or other security interest or preferential
arrangement of any kind or nature whatsoever (including those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease Obligation, any
financing lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the UCC or any comparable law)
and any contingent or other agreement to provide any of the foregoing, but not
including the interest of a lessor under an Operating Lease.

"Loan" means an extension of credit by a Bank to the Company pursuant
to Section 2, and may be a Base Rate Loan or an Offshore Rate Loan. The
conversion or continuation of any Loan pursuant to Section 2.4 shall not be
deemed to be a new extension of credit, but instead shall be deemed to be the
same Loan.

"Loan Documents" means this Agreement, any Notes, the Collateral
Documents, any Subsidiary Guaranty, all exhibits thereto, all documents
delivered to the Administrative Agent or any Bank in connection therewith and
any Swap Contract between the Company and any of the Banks.

"Majority Banks" means at any time Banks then holding at least 51% of
the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, Banks then having at least 51% of the
Commitments.

<PAGE>

"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.

"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Company or the Company and its
Restricted Subsidiaries taken as a whole; (b) a material impairment of the
ability of the Company to perform under any Loan Document and avoid any Event of
Default; or (c) a material adverse effect upon (i) the legality, validity,
binding effect or enforceability of any Loan Document, or (ii) the perfection or
priority of any Lien granted to the Banks or to the Administrative Agent for the
benefit of the Banks under the Pledge Agreements.

"Material Restricted Subsidiary" means any Restricted Subsidiary (a)
whose assets constitute more than 5% of the consolidated assets of the Company
and its Restricted Subsidiaries or (b) whose cash flow constitutes more than 5%
of the Cash Flow of the Company and its Restricted Subsidiaries.

"Maturity Date" means the earlier to occur of: (a)
December 31, 2003; and (b) the date on which the Aggregate
Commitment shall terminate in accordance with the provisions of
this Agreement.

"Mitchell Family" means (a) 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 (each, a "Mitchell"), (b) any trust or other
arrangement for the benefit of a Mitchell, or (c) any Person or corporation at
least 80% beneficially owned and controlled by one or more Mitchells.

"Mitchell Family Pledge Agreement" means the First Amended and
Restated Mitchell Family Pledge Agreement substantially in the form of Exhibit
C-1, as amended, supplemented, modified, renewed and replaced from time to time.

"Multiemployer Plan" means a "multiemployer plan" (within the meaning
of Section 4001(a)(3) of ERISA) and to which any member of the Controlled Group
makes, is making, or is

<PAGE>

obligated to make contributions or, during the preceding three calendar years,
has made, or been obligated to make, contributions.

"Net Proceeds" means proceeds in cash, checks or other cash equivalent
financial instruments (including Cash Equivalents) as and when received by the
Person making a Disposition, net of: (a) the direct costs relating to such
Disposition, (b) sale, use or other transaction taxes paid or payable as a
result thereof, and (c) amounts applied to the repayment of Indebtedness (other
than the Obligations and the Senior Notes) secured by a Lien permitted under
Section 7.1 on the asset disposed of.

"Note" means a promissory note of the Company payable to the order of
a Bank substantially in the form of Exhibit E hereto evidencing the aggregate
indebtedness of the Company to such Bank resulting from Loans made by such Bank.

"Notice of Assignment and Acceptance" has the meaning
specified in Section 10.8(a).

"Notice of Borrowing" means a notice given by the Company to the
Administrative Agent pursuant to Section 2.3, in substantially the form of
Exhibit A.

"Notice of Conversion/Continuation" means a notice given by the
Company to the Administrative Agent pursuant to Section 2.4, in substantially
the form of Exhibit B.

"Notice of Lien" means any "notice of lien" or similar document
intended to be filed or recorded with any court, registry, recorder's office,
central filing office or other Governmental Authority for the purpose of
evidencing, creating, perfecting or preserving the priority of a Lien securing
obligations owing to a Governmental Authority.

"Obligations" means all Loans, and other Indebtedness, advances,
debts, liabilities, obligations, covenants and duties owing by the Company or
any Guarantor to any of the Banks, the Administrative Agent, or any other Person
required to be indemnified, under any Loan Document, including without
limitation, to any Bank in its capacity as a counterparty under

<PAGE>

any Swap Contract, of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, arising under this
Agreement, under any other Loan Document, whether or not for the payment of
money, whether arising by reason of an extension of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired.

"Offshore Rate" means, for each Interest Period for any Offshore Rate
Loan, an interest rate per annum (rounded upward to the nearest 1/100 of one
percent) determined pursuant to the following formula:

Offshore Rate = LIBOR
1.00 - Eurodollar Reserve Percentage

Where,

"Eurodollar Reserve Percentage" means the maximum reserve
percentage (expressed as a decimal rounded upward to the next 1/100 of
one percent) in effect on the date LIBOR for such Interest Period is
determined (whether or not applicable to any Bank) under regulations
issued from time to time by the Federal Reserve Board for determining
the maximum reserve requirement (including any emergency, supplemental
or other marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as "Eurocurrency Liabilities") having a
term equal to such Interest Period; and

"LIBOR" means the rate of interest per annum (rounded upward
to the nearest 1/32nd of 1%) notified to the Administrative Agent by
BofA as the rate of interest at which dollar deposits in the
approximate amount of the amount of the Loan to be made or continued
as, or converted into, an Offshore Rate Loan by BofA and having a
maturity comparable to such Interest Period would be offered to major
banks in the London interbank market at their request at or about
11:00 a.m. (London time) on the second Business Day

<PAGE>

prior to the commencement of such Interest Period.

The Offshore Rate shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.

"Offshore Rate Loan" means a Loan that bears interest based on the
Offshore Rate.

"Operating Lease" means, as applied to any Person, any lease of
Property which is not a Capital Lease.

"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

"Participant" has the meaning specified in Section
10.8(d).

"Permitted Investment" has the meaning specified in
Section 7.4.

"Permitted Lien" has the meaning specified in Section
7.1.

"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts, provided that each of the following criteria is satisfied: (a) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held or reasonably anticipated by such
Person, or changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view;" (b)
such Swap Contracts do not contain any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party, and (c) a perfected security
interest in such Person's rights and interests to and in such Swap Contracts has
been granted, and exists, in favor of the Administrative Agent, for the benefit
of the Banks, as collateral for the Obligations, documented in a form

<PAGE>

satisfactory to the Administrative Agent.

"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.

"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Company or any member of the Controlled Group sponsors or
maintains or to which the Company or any member of the Controlled Group makes,
is making or is obligated to make contributions, and includes any Multiemployer
Plan or Qualified Plan.

"Pledge Agreement" means, unless the context otherwise requires, the
Mitchell Family Pledge Agreement prior to the Recapitalization Date, and the
Holdings Pledge Agreement thereafter (collectively, the "Pledge Agreements").

"Pledged Collateral" means the Collateral pledged
pursuant to the Pledge Agreements.

"Pledgors" means the Persons from time to time party to the Pledge
Agreements (individually, a "Pledgor").

"Property" means any estate or interest in any kind of property or
asset, whether real, personal or mixed, and whether tangible or intangible.

"Proforma Cash Flow for Annualized Theatres" means, for any period,
the sum of the Proforma Cash Flow for each Annualized Theatre, calculated on an
Annualized Theatre by Annualized Theatre basis in accordance with the formula
set forth in Schedule 1.1.

"Pro Rata Share" means, as to any Bank, the percentage equivalent of
such Bank's Commitment divided by the Aggregate Commitment.

"Purchase Money Obligation" means any Indebtedness secured by a Lien
on assets related to the business of the Company and its Restricted
Subsidiaries, and any additions and accessions thereto, which are purchased or
constructed by the

<PAGE>

Company or any Restricted Subsidiary of the Company at any time after the
Closing Date (excluding the assets of any Person at the time such Person becomes
a Restricted Subsidiary of the Company;) provided that (a) the security
agreement, conditional sales or other title retention contract pursuant to which
the Lien on such assets is created (together, for the purposes of this
definition, the "Security Agreement") shall be entered into within 180 calendar
days after the purchase or substantial completion of the construction of such
assets and shall at all times be confined solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom, (b)
at no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness, and (c) (i) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Security Agreement is entered into exceed 80% of the purchase price to
the Company or any Restricted Subsidiary of the Company of the assets subject
thereto or (ii) the Indebtedness secured thereby shall be with recourse solely
to the assets so purchased or acquired, any additions and accessions thereto and
any proceeds therefrom; provided further, that if the Company or any Restricted
Subsidiary of the Company has entered into a legally binding commitment to
execute a Security Agreement with respect to a specified asset or assets and the
Company or such Restricted Subsidiary executes such Security Agreement within 30
calendar days after the date (for the purposes of this definition, the
"commitment date") on which it entered into such commitment, the Security
Agreement shall be deemed to have been entered into on the commitment date.

"Qualified Plan" means a pension plan (as defined in Section 3(2) of
ERISA) intended to be tax-qualified under Section 401(a) of the Code and which
any member of the Controlled Group sponsors, maintains, or to which it makes, is
making or is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding period covering at least five (5)
plan years, but excluding any Multiemployer Plan.

<PAGE>

"Recapitalization" means the incorporation of the Holding Company and
causing the Holding Company to own 100% of the capital stock of the Company on
the terms and conditions of the Recapitalization Agreements.

"Recapitalization Agreements" means the material documents executed
and to be executed in connection with the Recapitalization.

"Recapitalization Date" means the date on which the Recapitalization
shall have been fully consummated in accordance with the terms and conditions of
the Recapitalization Agreements.

"Reduction Amount" means, with respect to each Reduction Date, the
amount set forth below opposite that Reduction Date (subject to the last
sentence of Section 2.6):

Reduction Date Reduction

March 31, 2000
and the next following
June 30, September 30
and December 31 $ 8,437,500

March 31, 2001
and the next following
June 30, September 30
and December 31 $11,250,000

March 31, 2002
and the next following
June 30, September 30
and December 31 $14,062,500

March 31, 2003
and the next following
June 30, September 30
and December 31 $22,500,000

"Reduction Date" means each date specified in the definition of
"Reduction Amount" on which a reduction in the Commitments is scheduled to occur
pursuant to Section 2.8(b).

<PAGE>

"Reportable Event" means, as to any Plan, (a) any of the events set
forth in Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has been waived
in regulations issued by the PBGC, (b) a withdrawal from a Plan described in
Section 4063 of ERISA, or (c) a cessation of operations described in Section
4062(e) of ERISA.

"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.

"Responsible Officer" means the chief executive officer, chief
operating officer or any vice president of the Company, or any other officer
having substantially the same authority and responsibility; or, with respect to
compliance with financial covenants, the chief financial officer or the
treasurer of the Company, or any other officer having substantially the same
authority and responsibility.

"Restricted Payment" has the meaning specified in
Section 7.10.

"Restricted Subsidiary" means (a) any Subsidiary of the Company in
existence on the Closing Date other than the Existing Unrestricted Subsidiaries,
(b) any Subsidiary of the Company (other than a Subsidiary that is also a
Subsidiary of an Unrestricted Subsidiary) organized or acquired after the
Closing Date, unless such Subsidiary shall have been designated as an
Unrestricted Subsidiary by resolution of the Board of Directors of the Company
as provided in and in compliance with the definition of "Unrestricted
Subsidiary," and (c) any Unrestricted Subsidiary which is designated as a
Restricted Subsidiary by the Board of Directors of the Company; provided that,
immediately after giving effect to the designation referred to in clause (c), 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 Section
4.9(a) of the Senior Subordinated Note Indenture as in effect on the Closing
Date. The Company shall evidence any such designation to the Agent by

<PAGE>

promptly filing with the Agent a certificate signed by a Responsible Officer
certifying that such designation has been made and stating that such designation
complies with the requirements of the immediately preceding sentence.

"SEC" means the Securities and Exchange Commission, or
any successor thereto.

"Senior Indebtedness" means, as of any date of determination, all
Total Indebtedness which is not expressly subordinated to the Obligations on
terms and conditions satisfactory to the Majority Banks.

"Senior Notes" means the 12% Senior Notes Due June 1, 2002 issued
pursuant to the Senior Note Indenture.

"Senior Note Indenture" means that certain Indenture dated as of June
10, 1992 between the Company and The Bank of New York, as successor trustee to
NationsBank of Texas, N.A., as amended from time to time to the date hereof.

"Senior Subordinated Notes" means the 9-5/8% Senior Subordinated Notes
Due August 1, 2008 issued pursuant to the Senior Subordinated Note Indenture.

"Senior Subordinated Note Indenture" means that certain Indenture
dated August 15, 1996 between the Company and United States Trust Company of
Texas, N.A., as trustee, as amended from time to time.

"Shareholders' Agreement" means the Shareholders'
Agreement dated March 12, 1996 among the Company, the Trusts,
Cypress Merchant Banking Partners, L.P. and Cypress Pictures Ltd.

"Solvent" means, as to any Person at any time, that (a) the fair value
of the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code and, in the alternative, for purposes of the
Uniform Fraudulent Transfer Act; (b) the present fair saleable value of the
Property of such Person is not less than the amount that will be required to pay
the probable

<PAGE>

liability of such Person on its debts as they become absolute and matured; (c)
such Person is able to realize upon its Property and pay its debts and other
liabilities (including disputed, contingent and unliquidated liabilities) as
they mature in the normal course of business; (d) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature; and (e) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital.

"Subsidiary" means, with respect to any Person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors 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, (b) any other Person (other than a corporation) in which
such Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof has at least a majority ownership interest and the power to direct the
policies, management and affairs thereof, or (c) upon designation by the
Company, and until designation by the Company to the contrary, a Person, 50% or
more 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 (c) of the immediately preceding sentence to the
Agent by filing with the Administrative Agent within 45 days of such designation
a certificate signed by a Responsible Officer certifying that such designation
has been made.

"Subsidiary Guaranty" means a Subsidiary Guaranty substantially in the
form of Exhibit F, as amended, supplemented, modified, renewed and replaced from
time to time.

"Swap Contract" 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,

<PAGE>

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.

"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include any Bank.)

"Taxes" has the meaning specified in Section 3.1(a).

"Trusts" means The Mitchell Special Trust, The Mitchell Grandchildren
Trust for Crystal Lee Roberts, The Mitchell Grandchildren Trust for Ashley Ann
Lee, The Mitchell Grandchildren Trust for Skyler Kaye Mitchell, The Mitchell
Grandchildren Trust for Lacey Marie Lee and The Mitchell Grandchildren Trust for
Cassie Ann Roberts.

"Total Indebtedness" means, as of any date of determination, (a) all
indebtedness for borrowed money, including purchase money indebtedness, (b) all
reimbursement obligations with respect to surety bonds, letters of credit which
are not cash collateralized, bankers' acceptances and similar instruments; and
(c) all Capital Lease Obligations of the Company and its Restricted
Subsidiaries.

"UCC" means the Uniform Commercial Code as in effect in
any jurisdiction.

"Unfunded Pension Liabilities" means the excess of a
Plan's benefit liabilities under Section 4001(a)(16) of ERISA,

<PAGE>

over the current value of that Plan's assets, determined in accordance with the
assumptions used by the Plan's actuaries for funding the Plan pursuant to
section 412 for the applicable plan year.

"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:"

(a) each of the Existing Unrestricted Subsidiaries;

(b) any Subsidiary of the Company or of a Restricted Subsidiary of the
Company organized or acquired after the Closing Date that is designated
concurrently with its organization or acquisition as an Unrestricted Subsidiary
by resolution of the Board of Directors of the Company;

(d) any Restricted Subsidiary that is designated as an Unrestricted
Subsidiary by resolution of the Board of Directors of the Company; provided that
(i) immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing, and (ii) 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 Section 7.10 or (y) the making of a
Disposition at the time of such designation in an amount equal to the Investment
in such Subsidiary subject to the restrictions contained in Section 7.2.

The Company shall evidence any designation pursuant to clause (b) or
(d) above to the Administrative Agent by filing with the Administrative Agent
within 45 days of such designation a certificate signed by a Responsible Officer
certifying that such designation has been made and, in the case of clause (d),
the related election of the Company in respect thereof.

"Voting Stock" means (a) the Class A Common Stock of

<PAGE>

the Company, par value $.01 per share, and (b) any other shares of capital stock
of the Company issued from time to time, the holders of which are entitled to
vote for the election of one or more directors of the Company's board,
including, in each case, any shares of such stock issued upon the exercise of
any warrants, options or similar rights or upon the conversion of any debt or
equity securities into such stock.

"Wholly-Owned Subsidiary" of any Person means any Subsidiary of such
Person the entire voting share capital of which, other than directors'
qualifying shares if required by applicable law, is owned by such Person (either
directly or indirectly through Wholly-Owned Subsidiaries).

"Withdrawal Liabilities" means, as of any determination date, the
aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA
if the Controlled Group made a complete withdrawal from all Multiemployer Plans
and any increase in contributions pursuant to Section 4243 of ERISA.

1.2 Other Interpretive Provisions.

(a) Defined Terms. Unless otherwise specified herein or therein,
all terms defined in this Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto. The meaning
of defined terms shall be equally applicable to the singular and plural forms of
the defined terms. Terms (including uncapitalized terms) not otherwise defined
herein and that are defined in the UCC shall have the meanings therein
described.

(b) Certain Common Terms. The term "documents"
includes any and all instruments, documents, agreements,
certificates, indentures, notices and other writings, however
evidenced. The term "including" is not limiting and means
"including without limitation."

(c) Performance; Time. Whenever any performance obligation
hereunder (other than a payment obligation) shall be stated to be due or
required to be satisfied on a day other than a Business Day, such performance
shall be made or satisfied on the next succeeding Business Day. In the
computation of periods of time from a specified date to a later specified date,
the word

<PAGE>

"from" means "from and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including." If any provision of
this Agreement refers to any action taken or to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be interpreted to
encompass any and all means, direct or indirect, of taking, or not taking, such
action.

(d) Contracts. Unless otherwise expressly provided herein,
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document.

(e) Laws. References to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.

(f) Captions. The captions and headings of this
Agreement are for convenience of reference only and shall not
affect the interpretation of this Agreement.

(g) Independence of Provisions. The parties acknowledge that this
Agreement and other Loan Documents may use several different limitations, tests
or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.

(h) Accounting Principles. Unless the context otherwise clearly
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.

SECTION 2

THE CREDITS

2.1 Amounts and Terms of Commitments. Each Bank

<PAGE>

severally agrees, on the terms and conditions hereinafter set forth, to make
Loans from time to time on any Business Day during the period from the Closing
Date to the Maturity Date, in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Bank's name in Schedule 2.1 under
the heading "Commitment" (such amount as the same may be reduced pursuant to
Section 2.6 or 2.8 or as a result of one or more assignments pursuant to Section
10.8, such Bank's "Commitment"); provided, however, that, after giving effect to
any Borrowing of Loans, the aggregate principal amount of all outstanding Loans
shall not at any time exceed the Aggregate Commitment; provided, further, that
the aggregate principal amount of the Loans of any Bank shall not at any time
exceed such Bank's Commitment. Within the limits of each Bank's Commitment, and
subject to the other terms and conditions hereof, the Company may borrow under
this Section 2.1, prepay pursuant to Section 2.7 and reborrow pursuant to this
Section 2.1.

2.2 Loan Accounts and Notes. (a) Subject to Section 2.2(b), the Loans
made by each Bank and the fees due hereunder shall be evidenced by one or more
loan accounts or records maintained by such Bank in the ordinary course of
business. The loan accounts or records maintained by the Administrative Agent
and each Bank shall be conclusive absent manifest error of the amount of the
Loans made by the Banks to the Company and the interest and payments thereon and
fees due hereunder. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Company hereunder to
pay any amount owing with respect to the Loans or such fees.

(b) Upon the request of any Bank made through the Administrative
Agent, the Loans made by such Bank may be evidenced by one or more Notes,
instead of loan accounts. Each such Bank may endorse on the schedules annexed to
its Note(s), the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with respect thereto.
Each such Bank is irrevocably authorized by the Company to endorse its Note(s)
and each Bank's record shall be conclusive absent manifest error; provided,
however, that the failure of a Bank to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under any such Note to such Bank.

<PAGE>

2.3 Procedure for Borrowing.

(a) Each Borrowing shall be made upon irrevocable written notice
in the form of a Notice of Borrowing, which notice must be received by the
Administrative Agent prior to 9:00 a.m. (San Francisco time) (i) three Business
Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans;
and (ii) one Business Day prior to the requested Borrowing Date, in the case of
Base Rate Loans, specifying: (i) the amount of the Borrowing, which, in the case
of a borrowing of Offshore Rate Loans, shall be in an aggregate minimum
principal amount of $3,000,000 and any multiple of $500,000 in excess thereof,
and in the case of a borrowing of Base Rate Loans, shall be in an aggregate
minimum principal amount of $1,000,000 and any multiple of $200,000 in excess
thereof; (ii) the requested Borrowing Date, which shall be a Business Day; (iii)
whether the Borrowing is to be comprised of Offshore Rate Loans, Base Rate Loans
or any combination thereof; and (iv) the duration of the Interest Period
applicable to Offshore Rate Loans included in such notice. If the Notice of
Borrowing shall fail to specify the duration of the Interest Period for any
Borrowing comprised of Offshore Rate Loans, such Interest Period shall be one
month; provided, however, that with respect to the Borrowing to be made on the
Closing Date, the Notice of Borrowing shall be delivered to the Administrative
Agent not later than 9:00 a.m. (San Francisco time) one Business Day before the
Closing Date and such Borrowing will consist of Base Rate Loans only; provided,
further, that if so requested by the Administrative Agent, all Borrowings during
the first 60 days following the Closing Date shall have the same Interest Period
and shall be Base Rate or Offshore Rate Loans for Interest Periods no longer
than one month.

(b) Promptly after receipt of a Notice of
Borrowing, the Administrative Agent shall notify each Bank of the
proposed Borrowing. Each Bank shall make available to the
Administrative Agent its Pro Rata Share of the amount (if any) by
which the principal amount of the proposed Borrowing exceeds the
principal amount of the Loans (if any) being converted or
continued on the Borrowing Date, in immediately available funds,
by remitting such funds to: Bank of America National Trust and
Savings Association, ABA No. 121-000-358, Attn: Agency
Administrative Services #5596 For credit to: BANCONTROL Account
No. 12332-14226, Reference: Cinemark USA, Inc., no later than

<PAGE>

11:00 a.m. (San Francisco time) on the Borrowing Date. Upon satisfaction of the
conditions set forth in Section 4.2, the Administrative Agent shall make
available to the Company in like funds on such Borrowing Date the aggregate of
the amounts (if any) so made available by the Banks by causing an amount equal
to such aggregate amount (if any) received by the Administrative Agent to be
credited to the account of the Company as specified by the Company in writing.
If the conditions set forth in Section 4.2 are not satisfied, the Administrative
Agent shall promptly return such funds to the Banks making the same available.

(c) Unless the Majority Banks shall otherwise agree, during the
existence of an Event of Default, the Company may not elect to have a Loan be
made as an Offshore Rate Loan.

2.4 Conversion and Continuation Elections.

(a) The Company may (i) elect to convert on any Business Day, any
Base Rate Loans (or any part thereof in an amount not less than $3,000,000 or an
integral multiple of $500,000 in excess thereof) into Offshore Rate Loans; (ii)
elect to convert on the last day of the Interest Period therefor, any Offshore
Rate Loans (or any part thereof in an amount not less than $1,000,000 or an
integral multiple of $200,000 in excess thereof) into Base Rate Loans; or (iii)
elect to continue, on the last day of the Interest Period therefor, any Offshore
Rate Loans (or any part thereof in an amount not less than $3,000,000 or an
integral multiple of $500,000 in excess thereof); provided, that if the
aggregate amount of Offshore Rate Loans shall have been reduced, by payment,
prepayment, or conversion of part thereof to be less than $3,000,000, Offshore
Rate Loans shall automatically convert into Base Rate Loans.

(b) Each conversion or continuation shall be made upon
irrevocable written notice in the form of a Notice of Conversion/Continuation,
which notice must be received by the Administrative Agent prior to 9:00 a.m.
(San Francisco time) (i) three Business Days in advance of the Conversion Date,
if the Loans are to be converted into or continued as Offshore Rate Loans; and
(ii) one Business Day prior to the Conversion Date, if the Loans are to be
converted into Base Rate Loans, in each case specifying: (A) the proposed
Conversion Date; (B) the aggregate

<PAGE>

amount of Loans to be converted or continued; (C) the nature of the proposed
conversion or continuation; and (D) the duration of the requested Interest
Period.

(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to select a new Interest Period to
be applicable thereto, or if any Event of Default shall then exist, the Company
shall be deemed to have elected to convert such Offshore Rate Loans into Base
Rate Loans effective as of the expiration date of such current Interest Period.

(d) Upon receipt of a Notice of Conversion/ Continuation, the
Administrative Agent will promptly notify each Bank thereof, or, if no timely
notice is provided by the Company, the Administrative Agent will promptly notify
each Bank of the details of any automatic conversion. All conversions and
continuations shall be made pro rata according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Bank.

(e) Unless the Majority Banks shall otherwise agree, during the
existence of an Event of Default, the Company may not elect to have a Loan
converted into or continued as an Offshore Rate Loan.

2.5 Limitation on Interest Periods. Notwithstanding any other
provision contained in this Agreement, after giving effect to any Borrowing or
conversion or continuation of any Loans, there shall not be more than 15
different Interest Periods for Loans in effect without the consent of the
Administrative Agent and the Majority Banks.

2.6 Voluntary Termination or Reduction of Commitments. The Company
may, upon not less than one Business Day's prior written notice to the
Administrative Agent, terminate the Aggregate Commitment or permanently reduce
the Aggregate Commitment by an aggregate minimum amount of $1,000,000 or any
multiple thereof; provided that no such reduction or termination shall be
permitted if, after giving effect thereto and to any prepayments of the Loans
made on the effective date thereof, the then outstanding principal amount of the
Loans would exceed the Aggregate Commitment then in effect and, provided,
further, that

<PAGE>

once reduced in accordance with this Section 2.6, the Aggregate Commitment may
not be increased. Any reduction of the Aggregate Commitment shall be applied to
each Bank's Commitment in accordance with such Bank's Pro Rata Share. All
accrued commitment fees to, but not including the effective date of any
termination of Commitments, shall be paid on the effective date of such
termination. Any voluntary reduction of the Commitment under this Section shall
be applied to reduce the Reduction Amount for the next following Reduction Date
(to the extent of such reduction) and thereafter to subsequent Reduction Dates
(to the extent not previously applied) in the order of their occurrence.

2.7 Optional Prepayments. Subject to Section 3.4, the Company may, at
any time or from time to time, upon written notice, which notice must be
received by the Administrative Agent at least (a) three Business Days prior to
any prepayment of Offshore Rate Loans; and (b) on the Business Day of the
prepayment of any Base Rate Loans, ratably prepay Loans in whole or in part, in
amounts of (i) with respect to Offshore Rate Loans, $500,000 or any multiple
thereof in excess thereof, and (ii) with respect to Base Rate Loans, $200,000 or
any multiple thereof in excess thereof. Such notice of prepayment shall specify
the date and amount of such prepayment and whether such prepayment is of Base
Rate Loans or Offshore Rate Loans, or any combination thereof. Such notice shall
not thereafter be revocable by the Company, and the Administrative Agent will
promptly notify each Bank of such Bank's Pro Rata Share of such prepayment. If
such notice is given by the Company, the Company shall make such prepayment and
the payment amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest in the case of Offshore Rate
Loans to each such date on the amount prepaid and any amounts required pursuant
to Section 3.4.

2.8 Mandatory Prepayments of Loans; Mandatory
Commitment Reductions.

(a) Asset Dispositions. If the Company or any of its Restricted
Subsidiaries shall at any time or from time to time make or agree to make a
Disposition other than an Excluded Disposition, then (i) the Company shall
promptly notify the Administrative Agent of such proposed Disposition (including
a

<PAGE>

calculation of the amount of the estimated Net Proceeds to be received by the
Company in respect thereof) and (ii) to the extent the Net Proceeds of such
Disposition are not used in a Covered Acquisition ("Excess Net Proceeds"), such
Excess Net Proceeds shall be used to prepay the Loans in an amount equal to such
Excess Net Proceeds. Any prepayments required to be made pursuant to this
Section 2.8(a) shall be made on the 361st day in accordance with the definition
of Covered Acquisition, after the date of such Disposition.

(b) Automatic Reduction of Commitment. Subject
to the last sentence of Section 2.6, on each Reduction Date, the
Aggregate Commitment shall automatically be reduced by the
applicable Reduction Amount.

(c) Mandatory Prepayments from Commitment Reductions. The Company
shall prepay all Loans outstanding in excess of the Commitments as from time to
time reduced pursuant to Section 2.6 or 2.8.

(d) General. Any prepayments pursuant to this Section 2.8 shall
be applied first to any Base Rate Loans then outstanding and then to Offshore
Rate Loans with the shortest Interest Periods remaining.

(e) Reduction of Commitments. Upon the making of any mandatory
prepayment under this Section 2.8, the Commitment of each Bank shall
automatically be reduced by an amount equal to such Bank's Pro Rata Share of the
Required Prepayment Amount, effective as of the earlier of the date that any
such prepayment is made or the date by which any such prepayment is due and
payable hereunder. The amount of such Commitment reduction shall be applied to
the reductions of the Aggregate Commitment in the inverse order of their
scheduled occurrence. All accrued commitment fees to, but not including the
effective date of the reduction or termination of Commitments, shall be paid on
the effective date of the reduction or termination. [For purposes of this
Section, "Required Prepayment Amount" means an amount equal to the aggregate
amount by which the Company would be required to prepay the Loans pursuant to
this Section 2.8 if the aggregate principal amount of Loans outstanding
immediately prior to such prepayment exceeded such prepayment amount.]

<PAGE>

2.9 Maturity Date. All principal and accrued and
unpaid interest on all Loans shall be due on the Maturity Date.

2.10 Interest.

(a) Subject to Section 2.10(c) and (d), each Loan shall bear
interest on the outstanding principal amount thereof from the date when made
until it becomes due at a rate per annum equal to the Offshore Rate or the Base
Rate, as the case may be, plus the Applicable Amount.

(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any prepayment
of Offshore Rate Loans pursuant to Section 2.7 and 2.8 for the portion of the
Loans so prepaid and upon payment (including prepayment) in full thereof and,
during the existence of any Event of Default, interest shall be paid on demand.

(c) Subject to Section 2.10(d), during the continuation of any
Event of Default or after acceleration pursuant to Section 8.2, the Company
shall pay interest (after as well as before entry of judgment thereon to the
extent permitted by law) on the principal amount of all Obligations due and
unpaid, at a rate per annum which is determined by adding 2% per annum to the
Applicable Amount then in effect for such Loans and, in the case of Obligations
not subject to an Applicable Amount, at a rate per annum equal to the Base Rate
plus the Applicable Amount plus 2%; provided, however, that, on and after the
expiration of any Interest Period applicable to any Offshore Rate Loan
outstanding on the date of occurrence of such Event of Default or acceleration,
the principal amount of such Loan shall, during the continuation of such Event
of Default or after acceleration, bear interest at a rate per annum equal to the
Base Rate plus the Applicable Amount plus 2%.

(d) It is the intention of the parties hereto to comply with
applicable usury laws (now or hereafter enacted); accordingly, notwithstanding
any provision to the contrary in this Agreement, any Notes, the other Loan
Documents, or any other document relating hereto, in no event shall this
Agreement or any such other document require the payment or permit the
collection of interest in excess of the maximum amount permitted by such

<PAGE>

laws. If for any circumstances whatsoever, fulfillment of any provision of any
Loan Document shall involve transcending the limit of validity prescribed by law
for the collection or charging of interest, then, ipso facto, the obligation to
be fulfilled shall be reduced to the limit of such validity, and if for any such
circumstances a Bank shall ever receive anything of value as interest or deemed
interest by applicable law under this Agreement, any Notes, the other Loan
Documents, or any other document pertaining hereto or otherwise an amount that
would exceed the highest lawful rate, such amount that would be excessive
interest shall be applied to the reduction of the principal amount owing
hereunder and under any Notes or on account of any other indebtedness of the
Company to the Administrative Agent and the Banks, and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
of such indebtedness, such excess shall be refunded to the Company. In
determining whether or not the interest paid or payable with respect to any
indebtedness of the Company to the Administrative Agent and the Banks, under any
specific contingency, exceeds the highest lawful rate, the Company and the
Administrative Agent and the Banks shall, to the maximum extent permitted by
applicable law, (a) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, (c) amortize, prorate, allocate and spread the total amount of
interest throughout the term of such indebtedness so that the actual rate of
interest on account of such indebtedness does not exceed the maximum amount
permitted by applicable law, and/or (d) allocate interest between portions of
such indebtedness to the end that no such portion shall bear interest at a rate
greater than that permitted by applicable law.

For purpose of this Section 2.10(d), the term "applicable law" means
the internal laws of the State of New York, but, to the extent, contrary to the
express intent of the parties, New York law is found to be inapplicable to this
Agreement, then "applicable law" also means that law in effect from time to time
and applicable to this loan transaction which lawfully permits the charging and
collection of the highest permissible, lawful, non-usurious rate of interest on
such loan transaction and this Agreement, and, to the extent controlling, laws
of the United States of America. It is intended that, in the event that,
notwithstanding the parties' express choice of

<PAGE>

New York law to be applicable to this Agreement, if the laws of the State of
Texas are included in determining applicable law, Chapter One ("Chapter One"),
Title 79, Revised Civil Statutes of Texas, 1925, as amended (the "Texas Credit
Code"), shall be included in any such determination, and that, for the purpose
of applying said Chapter One to this Agreement, the highest lawful rate shall be
the "indicated rate ceiling" (as defined in Chapter One). Any Bank may, from
time to time, as to current and future balances, implement any other ceiling
under Chapter One by notice to the Company, if and to the extent, permitted by
Chapter One. The Company expressly agrees, pursuant to Article 15.10(b) of
Chapter Fifteen ("Chapter Fifteen") of the Texas Credit Code, that Chapter
Fifteen shall not apply to this Agreement or to any Loan and that neither this
Agreement nor any Loan shall be governed by or subject to the provision of
Chapter Fifteen in any manner whatsoever.

2.11 Fees.

(a) Arrangement Fee. The Company shall pay to
BofA for its own account an arrangement fee in an amount and at
the time set forth in a letter dated October 24, 1996.

(b) Commitment Fees. The Company shall pay to the Administrative
Agent for the account of each Bank a commitment fee on the average daily unused
portion of such Bank's Commitment, computed on a quarterly basis in arrears on
the last Business Day of each calendar quarter based upon the daily utilization
for that quarter as calculated by the Administrative Agent, at a rate per annum
specified for the Commitment fee in the definition of Applicable Amount. The
Commitment Fee shall be in effect from the date the most recent certificate
delivered pursuant to Section 4.1(g) or 6.2(a) is received by the Administrative
Agent to but excluding the date the next such certificate is received; provided;
however, that if the Company fails to timely deliver the next such certificate,
the Commitment Fee from the date such certificate was due to but excluding the
date such certificate is received by the Administrative Agent (the "Commitment
Delinquent Period") shall be the higher of (a) the Commitment Fee already in
effect and (b) the Commitment Fee as set forth in such certificate when
received, retroactively applied to the Commitment Delinquent Period. Such
commitment fee shall accrue from the Closing Date to the Maturity and shall be

<PAGE>

due and payable quarterly in arrears on the last Business Day of each quarter
commencing December 31, 1996, with the final payment to be made on the Maturity
Date; provided that, in connection with the termination of Commitments pursuant
to Section 2.6 or Section 2.8(a), the accrued commitment fee calculated for the
period ending on such date shall also be paid on the date of the termination.
The commitment fees provided in this Section shall accrue at all times after the
above-mentioned commencement date, including at any time during which one or
more conditions in Section 4 are not met.

(c) Agency Fee. The Company shall pay to the
Administrative Agent for the Administrative Agent's own account
an agency fee in the amount and at the times as agreed upon in
writing between the Company and the Administrative Agent.

2.12 Computation of Fees and Interest.

(a) All computations of interest payable in respect of Base Rate
Loans at all times as the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest under this
Agreement shall be made on the basis of a 360-day year and actual days elapsed,
which results in more interest being paid than if computed on the basis of a
365-day year. Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.

(b) The Administrative Agent will, with reasonable promptness,
notify the Company and the Banks of each determination of an Offshore Rate;
provided that any failure to do so shall not relieve the Company of any
liability hereunder or provide the basis for any claim against the
Administrative Agent. Any change in the interest rate on a Loan resulting from a
change in the Applicable Amount or Eurodollar Reserve Percentage shall become
effective as of the opening of business on the day on which such change in the
Applicable Amount or Eurodollar Reserve Percentage becomes effective. The
Administrative Agent will with reasonable promptness notify the Company and the
Banks of the effective date and the amount of each such change, provided that
any failure to do so shall not relieve the Company of any liability hereunder or
provide the basis for any claim against

<PAGE>

the Administrative Agent.

(c) Any change in the interest rate on a Loan resulting from a
change in the Applicable Amount or Eurodollar Reserve Percentage shall become
effective as of the opening of business on the day on which such change in the
Applicable Amount or Eurodollar Reserve Percentage becomes effective. Each
determination of an interest rate by the Administrative Agent pursuant hereto
shall be conclusive and binding on the Company and the Banks in the absence of
manifest error.

2.13 Payments by the Company.

(a) All payments of principal, interest and fees hereunder shall
be in immediately available funds and delivered to the Administrative Agent for
credit to:

Bank of America National Trust
and Savings Association
Att: Agency Administrative Services #5596
ABA No. 121-000-358
Bancontrol Account No. 12332-14226
Reference: Cinemark USA, Inc.

not later than 11:00 A.M. (San Francisco time) on the date due; funds received
by the Administrative Agent after that time shall be deemed to have been paid by
the Company on the next succeeding Business Day.

(b) Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be; subject to the provisions
set forth in the definition of "Interest Period" herein.

(c) Unless the Administrative Agent shall have received notice
from the Company prior to the date on which any payment is due to the Banks
hereunder that the Company will not make such payment in full as and when
required hereunder, the Administrative Agent may assume that the Company has
made such payment in full to the Administrative Agent on such date in

<PAGE>

immediately available funds and the Administrative Agent may (but shall not be
so required), in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such Bank. If and
to the extent the Company shall not have made such payment in full to the
Administrative Agent, each Bank shall repay to the Administrative Agent on
demand such amount distributed to such Bank, together with interest thereon for
each day from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Administrative Agent, at the Federal Funds
Rate as in effect for each such day.

2.14 Payments by the Banks to the Administrative
Agent.

(a) Unless the Administrative Agent shall have received notice
from a Bank on the Closing Date or, with respect to each Borrowing after the
Closing Date, by 9:30 a.m. (San Francisco time) (i) one Business Day prior to
the date of any proposed Borrowing of Offshore Rate Loans, or (ii) on the date
of any proposed Borrowing of Base Rate Loans that such Bank will not make
available to the Administrative Agent as and when required hereunder for the
account of the Company the amount of that Bank's Pro Rata Share of the
Borrowing, the Administrative Agent may assume that each Bank has made such
amount available to the Administrative Agent in immediately available funds on
the Borrowing date and the Administrative Agent may (but shall not be so
required), in reliance upon such assumption, make available to the Company on
such date a corresponding amount. If and to the extent any Bank shall not have
made its full amount available to the Administrative Agent in immediately
available funds and the Administrative Agent in such circumstances has made
available to the Company such amount, that Bank shall on the next Business Day
following the date of such Borrowing make such amount available to the
Administrative Agent, together with interest at the Federal Funds Rate for and
determined as of each day during such period. A notice of the Administrative
Agent submitted to any Bank with respect to amounts owing under this Section
2.14(a) shall be conclusive, absent manifest error. If such amount is so made
available, such payment to the Administrative Agent shall constitute such Bank's
Loan on the date of Borrowing for all purposes of this Agreement. If such amount
is not made available to the Administrative Agent on the next Business Day
following

<PAGE>

the date of such Borrowing, the Administrative Agent shall notify the Company of
such failure to fund and, upon demand by the Administrative Agent, the Company
shall pay such amount to the Administrative Agent for the Administrative Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Loans comprising such Borrowing.

(b) The failure of any Bank to make any Loan on any date of
borrowing shall not relieve any other Bank of any obligation hereunder to make a
Loan on the date of such borrowing, but no Bank shall be responsible for the
failure of any other Bank to make the Loan to be made by such other Bank on the
date of any Borrowing.

2.15 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata Share of payments on account of
the Loans obtained by all the Banks, such Bank shall forthwith (a) notify the
Administrative Agent of such fact, and (b) purchase from the other Banks such
participations in the Loans made by them as shall be necessary to cause such
purchasing Bank to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from the purchasing Bank, such purchase shall to that extent be
rescinded and each other Bank shall repay to the purchasing Bank the purchase
price paid therefor, together with an amount equal to such paying Bank's Pro
Rata Share (according to the proportion of (i) the amount of such paying Bank's
required repayment to (ii) the total amount so recovered from the purchasing
Bank) of any interest or other amount paid or payable by the purchasing Bank in
respect of the total amount so recovered. The Company agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section 2.15 may,
to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 10.9) with respect to
such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation. The Administrative Agent will keep
records (which shall be conclusive and binding in the absence of

<PAGE>

manifest error) of participations purchased pursuant to this Section 2.15 and
will in each case notify the Banks following any such purchases or repayments.

2.16 Security. All obligations of the Company under this Agreement,
any Notes and all other Loan Documents shall be secured in accordance with the
Pledge Agreements.

SECTION 3

TAXES, YIELD PROTECTION AND ILLEGALITY

3.1 Taxes.

(a) Subject to Section 3.1(g), any and all payments by the
Company to each Bank or the Administrative Agent under this Agreement shall be
made free and clear of, and without deduction or withholding for, any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of each Bank
and the Administrative Agent, such taxes (including income taxes or franchise
taxes) as are imposed on or measured by each Bank's net income by the
jurisdiction under the laws of which such Bank or the Administrative Agent, as
the case may be, is organized or maintains a Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").

(b) In addition, the Company shall pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents (hereinafter referred to as "Other
Taxes").

(c) Subject to Section 3.1(g), the Company shall indemnify and
hold harmless each Bank and the Administrative Agent for the full amount of
Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 3.1) paid by such Bank or the

<PAGE>

Administrative Agent and any liability (including penalties, interest, additions
to tax and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted, provided that, in
the case of penalties, interest, additions to tax and expenses, such Bank or the
Administrative Agent has timely notified the Company after it has been notified
of its liability for such amounts. Payment under this indemnification shall be
made within 30 days from the date the Bank or the Administrative Agent makes
written demand therefor.

(d) If the Company shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Bank or the Administrative Agent, then, subject to Section 3.1(g): (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 3.1) such Bank or the Administrative Agent, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions been made; (ii) the Company shall make such deductions, and (iii) the
Company shall pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law.

(e) Within 30 days after the date of any payment by the Company
of Taxes or Other Taxes, the Company shall furnish to the Administrative Agent
the original or a certified copy of a receipt evidencing payment thereof, or
other evidence of payment satisfactory to the Administrative Agent.

(f) Each Bank which is a foreign person (i.e., a person other
than a United States person for United States Federal income tax purposes)
agrees that: (i) it shall, no later than the Closing Date (or, in the case of a
Bank which becomes a party hereto pursuant to Section 10.8 after the Closing
Date, the date upon which the Bank becomes a party hereto) deliver to the
Company through the Administrative Agent two accurate and complete signed
originals of Internal Revenue Service Form 4224 or any successor thereto ("Form
4224"), or two accurate and complete signed originals of Internal Revenue
Service Form 1001 or any successor thereto ("Form 1001"), as appropriate, in
each case indicating that the Bank is on the date of delivery thereof entitled
to receive payments of principal, interest and fees

<PAGE>

under this Agreement free from withholding of United States Federal income tax;
(ii) if at any time the Bank makes any changes necessitating a new Form 4224 or
Form 1001, it shall with reasonable promptness deliver to the Company through
the Administrative Agent in replacement for, or in addition to, the forms
previously delivered by it hereunder, two accurate and complete signed originals
of Form 4224; or two accurate and complete signed originals of Form 1001, as
appropriate, in each case indicating that the Bank is on the date of delivery
thereof entitled to receive payments of principal, interest and fees under this
Agreement free from withholding of United States Federal income tax; (iii) it
shall, before or promptly after the occurrence of any event (including the
passing of time but excluding any event mentioned in (ii) above) requiring a
change in or renewal of the most recent Form 4224 or Form 1001 previously
delivered by such Bank, deliver to the Company through the Administrative Agent
two accurate and complete original signed copies of Form 4224 or Form 1001 in
replacement for the forms previously delivered by the Bank; and (iv) it shall,
promptly upon the Company's or the Administrative Agent's reasonable request to
that effect, deliver to the Company or the Administrative Agent (as the case may
be) such other forms or similar documentation as may be required from time to
time by any applicable law, treaty, rule or regulation in order to establish
such Bank's tax status for withholding purposes.

(g) The Company will not be required to pay any additional
amounts in respect of United States Federal income tax pursuant to Section
3.1(d) to any Bank for the account of any Lending Office of such Bank or to
indemnify any Bank pursuant to Section 3.1(c): (i) if the obligation to pay such
additional amounts would not have arisen but for a failure by such Bank to
comply with its obligations under Section 3.1(f) in respect of such Lending
Office; (ii) if such Bank shall have delivered to the Company a Form 4224 in
respect of such Lending Office pursuant to Section 3.1(f), and such Bank at any
time shall not be entitled to exemption from deduction or withholding of United
States Federal income tax in respect of payments by the Company hereunder for
the account of such Lending Office for any reason other than a change in United
States law or regulations or in the official interpretation of such law or
regulations by any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law)

<PAGE>

after the date of delivery of such Form 4224; or (iii) if the Bank shall have
delivered to the Company a Form 1001 in respect of such Lending Office pursuant
to Section 3.1(f), and such Bank at any time shall not be entitled to exemption
from deduction or withholding of United States Federal income tax in respect of
payments by the Company hereunder for the account of such Lending Office for any
reason other than a change in United States law or regulations or any applicable
tax treaty or regulations or in the official interpretation of any such law,
treaty or regulations by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) after the date of delivery of such Form 1001.

(h) If, at any time, the Company requests any Bank to deliver any
forms or other documentation pursuant to Section 3.1(f)(iv), then the Company
shall, on demand of such Bank through the Administrative Agent, reimburse such
Bank for any costs and expenses (including expenses of outside legal counsel and
the allocated costs of in-house counsel) reasonably incurred by such Bank in the
preparation or delivery of such forms or other documentation.

(i) If the Company is required to pay additional amounts to any
Bank or the Administrative Agent pursuant to Section 3.1(d), then such Bank
shall use its reasonable best efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by the Company which may thereafter accrue
if such change in the judgment of such Bank is not otherwise disadvantageous to
such Bank.

3.2 Illegality.

(a) If any Bank shall reasonably determine that the introduction
of any Requirement of Law, or any change in any Requirement of Law or in the
interpretation or administration thereof, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Bank or its Lending Office to make Offshore Rate Loans, then, on notice
thereof by the Bank to the Company through the Administrative Agent, the
obligation of that Bank to make Offshore Rate Loans shall be suspended until the
Bank shall have notified the Administrative Agent and the Company that the

<PAGE>

circumstances giving rise to such determination no longer exists.

(b) If a Bank shall determine that it is unlawful to maintain any
Offshore Rate Loan, the Company shall be deemed to have converted in full all
Offshore Rate Loans of that Bank then outstanding into Base Rate Loans either on
the last day of the Interest Period thereof if the Bank may lawfully continue to
maintain such Offshore Rate Loans to such day, or immediately, if the Bank may
not lawfully continue to maintain such Offshore Rate Loans. At the time of
conversion, the Company shall pay all interest accrued thereon, together with
any amounts required to be paid in connection therewith pursuant to Section 3.4.

(c) If the obligation of any Bank to make or maintain Offshore
Rate Loans has been terminated, the Company may elect, by giving notice to the
Bank through the Administrative Agent that all Loans which would otherwise be
made by the Bank as, or converted into, Offshore Rate Loans shall be instead
Base Rate Loans.

(d) Before giving any notice to the Administrative Agent pursuant
to this Section 3.2, the affected Bank shall designate a different Lending
Office with respect to its Offshore Rate Loans if such designation will avoid
the need for giving such notice or making such demand and will not, in the
judgment of the Bank, be illegal or otherwise disadvantageous to the Bank.

3.3 Increased Costs and Reduction of Return. (a) If any Bank shall
reasonably determine that, due to either (i) the introduction of or any change
in or in the interpretation of any law or regulation or (ii) the compliance with
any guideline or request of general applicability from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to such Bank of agreeing to make or making, funding or
maintaining any Offshore Rate Loans (except for changes in the rate of tax on
the overall net income of such Bank imposed by the jurisdiction in which such
Bank's principal executive office or Lending Office is located), then the
Company shall be liable for, and shall from time to time, upon demand therefor
by such Bank (with a copy of such demand to the Administrative Agent), pay to
such Bank, additional amounts as are sufficient to compensate such Bank for such
increased

<PAGE>

costs.

(b) If any Bank shall have reasonably determined that the
introduction of any applicable law, rule, regulation or guideline of general
applicability regarding capital adequacy, or any change therein or any change in
the interpretation or administration thereof by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or compliance by the Bank (or its Lending Office) or any corporation
controlling the Bank, with any request, guideline or directive of general
applicability regarding capital adequacy (whether or not having the force of
law) of any such central bank or other authority issued after the date hereof,
affects or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and (taking into
consideration such Bank's or such corporation's policies with respect to capital
adequacy and such Bank's desired return on capital) determines that the amount
of such Bank's capital is increased as a consequence of its obligations
hereunder, then, upon demand of such Bank, the Company shall immediately pay to
the Bank, from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such increase.

3.4 Funding Losses. The Company agrees to reimburse each Bank and to
hold each Bank harmless from any loss or expense which the Bank may sustain or
incur (excluding the loss of anticipated profits) from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate Loans
hereunder or from fees payable to terminate the deposits from which such funds
were obtained as a consequence of: (a) the failure of the Company to make any
prepayment of principal of any Offshore Rate Loan or to make any payment after
any acceleration thereof; (b) the failure of the Company to borrow or continue
an Offshore Rate Loan or convert a Base Rate Loan to an Offshore Rate Loan after
the Company has given (or is deemed to have given) a Notice of Borrowing or a
Notice of Conversion/ Continuation; (c) the failure of the Company to make any
prepayment of an Offshore Rate Loan after the Company has given a notice in
accordance with Section 2.7; or (d) the prepayment of an Offshore Rate Loan on a
day which is not the last day of the Interest Period with respect thereto.
Solely for purposes of calculating amounts payable by the Company to the Banks
under

<PAGE>

this Section 3.4, each Offshore Rate Loan made by a Bank (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed to
have been funded at the LIBOR (as defined in the definition of "Offshore Rate")
used in determining the Offshore Rate for such Offshore Rate Loan by a matching
deposit or other borrowing in the interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such Offshore Rate Loan is in
fact so funded.

3.5 Inability to Determine Rates. If the Majority Banks shall have
determined that for any reason adequate and reasonable means do not exist for
ascertaining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan or if the Majority Banks advise the Administrative
Agent that the Offshore Rate applicable for any requested Interest Period with
respect to a proposed Offshore Rate Loan does not adequately and fairly reflect
the cost to them of funding such Loan, they shall notify the Administrative
Agent who will forthwith give notice of such determination to the Company and
each Bank. Thereafter, the obligation of the Banks to make Offshore Rate Loans
hereunder shall be suspended until the Administrative Agent upon the instruction
of the Majority Banks revokes such notice in writing. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/
Continuation then submitted by it. If the Company does not revoke such notice
with respect to Loans, the Banks shall make, convert or continue the Loans, as
proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Loans shall be made, converted or continued
as Base Rate Loans instead of Offshore Rate Loans.

3.6 Survival. The agreements and obligations of the Company in this
Section 3 shall survive the payment of all other Obligations. Any claim or
demand by any Bank for reimbursement or compensation under this Section 3 must
be made in writing; provided, however, that no such claim or demand may be made
in respect of any expense, cost, or economic loss incurred or suffered more than
12 months prior to the date of such claim or demand.

SECTION 4

<PAGE>

CONDITIONS PRECEDENT

4.1 Conditions of Initial Loans. The obligation of each Bank to make
its initial Loan hereunder is subject to the condition that the Administrative
Agent shall have received on or before the Closing Date all of the following, in
form and substance satisfactory to the Administrative Agent and each Bank and
(except for the instruments or documents representing Pledged Collateral) in
sufficient copies for each Bank:

(a) Credit Agreement and Notes. This Agreement executed by the
Company, the Administrative Agent and each of the Banks and, if requested by any
Bank pursuant to Section 2.2(b), the Note(s) for such Bank executed by the
Company.

(b) Resolutions; Incumbency.

(i) Copies of the resolutions of the Board of Directors or
the executive committee of the Company approving and authorizing the
execution, delivery and performance by the Company of the Loan
Documents to which it is a party and authorizing the borrowing of the
Loans, certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Company; and

(ii) A certificate of the Secretary or Assistant Secretary
of the Company, certifying the names and true signatures of the
officers of the Company authorized to execute and deliver the Loan
Documents to which they are a party.

(i) The articles or certificate of incorporation of the
Company and each corporate Pledgor as in effect on the Closing Date,
certified by the Secretary of State of the State of incorporation of
the Company as of a recent date and by the Secretary or Assistant
Secretary of the Company as of the Closing Date and the bylaws of the
Company as in effect on the Closing Date, certified by the Secretary
or Assistant

<PAGE>

Secretary of the Company as of the Closing Date; and

(ii) A good standing certificate for the Company from the
Secretary of State of its state of incorporation and each state where
the Company is qualified to do business as a foreign corporation as of
a recent date.

(d) Mitchell Family Pledge Agreement. The Mitchell Family Pledge
Agreement, executed by each Pledgor and the Company, in appropriate form for
recording, where necessary, together with all certificates and instruments
representing the Pledged Collateral and stock transfer powers executed in blank.

(e) Legal Opinions. An opinion of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., counsel to the Company addressed
to the Administrative Agent and the Banks.

(f) Payment of Fees. The Company shall have paid all accrued and
unpaid fees, costs and expenses to the extent then due and payable on the
Closing Date, together with reasonable attorney fees, costs and expenses
(including the allocated cost of Administrative Agent's inhouse counsel and
staff) to the extent invoiced prior to or on the Closing Date, together with
such additional amounts of such fees, costs and expenses as shall constitute
BofA's and the Administrative Agent's reasonable estimate of such reasonable
fees, costs and expenses incurred or to be incurred through the closing
proceedings, provided that such estimate shall not thereafter preclude final
settling of accounts between the Company and the Administrative Agent; including
any such costs, fees and expenses arising under or referenced in Section 2.11.
To the extent not invoiced by the Closing Date, the Company shall pay such fees,
costs and expenses within 30 days of being invoiced therefor.

(g) Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date (i) stating that: (A) the representations and
warranties contained in Section 5 are true and correct in all material respects
on and as of such date, as though made on and as of such date; (B) no Default or
Event of Default exists or would result from the initial Loan; and (C) there has
occurred since December 31, 1995, no event or circumstance that could reasonably
be expected to result in a

<PAGE>

Material Adverse Effect; and (ii) showing in detail the calculations supporting
such statement in respect of Sections 7.2, 7.10(g) and (h) as of the Closing
Date and Sections 7.10(f), 7.12 and 7.13 as of September 30, 1996.

(h) Other Documents. Such other approvals,
opinions or documents as the Administrative Agent or any Bank may
request.

4.2 Conditions to All Borrowings. The obligation of each Bank to make
any Loan to be made by it hereunder (including its initial Loan) is subject to
the satisfaction of the following conditions precedent on the relevant Borrowing
Date:

(a) Notice of Borrowing. The Administrative
Agent shall have received a Notice of Borrowing;

(b) Continuation of Representations and Warranties. The
representations and warranties made by the Company contained in Section 5 shall
be true and correct in all material respects on and as of such Borrowing Date,
both before and after giving effect to such Borrowing, with the same effect as
if made on and as of such Borrowing Date (except to the extent such
representations and warranties relate to an earlier date, in which case they
were true and correct as of such date); and

Each Notice of Borrowing submitted by the Company hereunder shall constitute a
representation and warranty by the Company hereunder that, as of the date of
each such notice and as of each Borrowing Date, the conditions in Section 4.2
are satisfied.

4.3 Conditions Precedent to Becoming a Guarantor. In connection with
any Restricted Subsidiary becoming a Guarantor as contemplated by Section
7.4(k), the Company shall cause to be executed and delivered to the
Administrative Agent (with sufficient copies for all Banks) a Subsidiary
Guaranty, together with documents and opinions of the type referred to in
Sections 4.1(b), (c) and (e) with respect to such Guarantor and such Subsidiary
Guaranty, all in form and substance reasonably satisfactory to the
Administrative Agent and its legal counsel.

<PAGE>

SECTION 5

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to the Administrative Agent and
each Bank that:

5.1 Corporate Existence and Power. The Company and each of its
Restricted Subsidiaries: (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business and execute,
deliver, and perform its obligations under, the Loan Documents; (c) is duly
qualified as a foreign corporation, licensed and in good standing under the laws
of each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification; and (d) is in compliance
with all Requirements of Law; except, in each case referred to in clause (b),
(c) or clause (d), to the extent that the failure to do so could not reasonably
be expected to have a Material Adverse Effect.

5.2 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company, of this Agreement and any other Loan Document to
which the Company is party, have been duly authorized by all necessary corporate
action, and do not and would not be expected to: (a) contravene the terms of any
of the Company's articles of incorporation, bylaws or other organization
documents; (b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any Contractual Obligation
to which the Company is a party or any order, injunction, writ or decree of any
Governmental Authority to which the Company or its Property is subject; or (c)
violate any Requirement of Law.

5.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company of
the Agreement or any other Loan Document or, prior to the consummation of the

<PAGE>

Recapitalization, the Recapitalization Agreements, except for (a) such filings,
recordations and registrations as contemplated by the Pledge Agreements in order
to perfect, continue or enforce the security interests in the Collateral
thereunder, (b) routine corporate filings to maintain the corporate good
standing of the Company and its Restricted Subsidiaries, and (c) with respect to
the Recapitalization Agreements, such approvals, consents, exemptions,
authorizations, notices or filings which will have been obtained or taken prior
to the consummation of the Recapitalization.

5.4 Binding Effect. This Agreement and each other Loan Document to
which the Company or any Pledgor is a party constitute the legal, valid and
binding obligations of the Company and such Pledgor, enforceable against such
Person in accordance with their respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable principles relating
to enforceability.

5.5 Litigation. There are no actions, suits, proceedings, claims or
disputes pending, or to the knowledge of the Company, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Company, or its Restricted Subsidiaries or any of their
respective Properties which: (a) purport to affect or pertain to this Agreement,
or any other Loan Document, or any of the transactions contemplated hereby or
thereby; (b) purport to affect or pertain to the Recapitalization or any other
transaction contemplated in connection with the Recapitalization Agreements and
related documents; or (c) if determined adversely to the Company, or its
Restricted Subsidiaries, could reasonably be expected to have a Material Adverse
Effect. No injunction, writ, temporary restraining order or any order of any
nature has been issued by any court or other Governmental Authority purporting
to enjoin or restrain the execution, delivery and performance of this Agreement
or any other Loan Document, or directing that the transactions provided for
herein or therein not be consummated as herein or therein provided.

5.6 No Default. No Default or Event of Default exists
or would result from the incurring of any Obligations by the
Company or the grant or perfection of the Administrative Agent's

<PAGE>

Liens on the Collateral. Neither the Company nor any of its Restricted
Subsidiaries has received notice or has actual knowledge that it is in default
under or with respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, could reasonably be expected to
have a Material Adverse Effect.

5.7 ERISA Compliance. (a) Schedule 5.7 lists all Plans and separately
identifies Plans intended to be Qualified Plans and Multiemployer Plans. Each
Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or state law, including all requirements under
the Code or ERISA for filing reports (which are true and correct in all material
respects as of the date filed), and benefits have been paid in accordance with
the provisions of the Plan. Each Qualified Plan and Multiemployer Plan has been
determined by the IRS to qualify under Section 401 of the Code, and the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the Code, and to the knowledge of the Company
nothing has occurred which would cause the loss of such qualification or
tax-exempt status.

(b) There is no outstanding liability under Title IV of ERISA with
respect to any Plan maintained or sponsored by the Company or any ERISA
Affiliate, nor with respect to any Plan to which the Company or any ERISA
Affiliate contributes or is obligated to contribute. No Plan subject to Title IV
of ERISA has any Unfunded Pension Liability. No member of the Controlled Group
has ever represented, promised or contracted (whether in oral or written form)
to any current or former employee (either individually or to employees as a
group) that such current or former employee(s) would be provided, at any cost to
any member of the Controlled Group, with life insurance or employee welfare plan
benefits (within the meaning of Section 3(1) of ERISA) following retirement or
termination of employment. To the extent that any member of the Controlled Group
has made any such representation, promise or contract, such member has expressly
reserved the right to amend or terminate such life insurance or employee welfare
plan benefits with respect to claims not yet incurred. Members of the Controlled
Group have complied in all material respects with the notice and continuation
coverage requirements of Section 4980B of the Code.

<PAGE>

(c) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan. There are no pending or, to the knowledge of the
Company, threatened claims, actions or lawsuits, other than routine claims for
benefits in the usual and ordinary course, asserted or instituted against (i)
any Plan maintained or sponsored by the Company or its assets, (ii) any member
of the Controlled Group with respect to any Qualified Plan, or (iii) any
fiduciary with respect to any Plan for which the Company may be directly or
indirectly liable, through indemnification obligations or otherwise.

(d) Neither the Company nor any ERISA Affiliate has incurred nor
reasonably expects to incur (i) any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan or (ii) any liability under Title IV of ERISA (other than premiums due and
not delinquent under Section 4007 of ERISA) with respect to a Plan. Neither the
Company nor any ERISA Affiliate has transferred any Unfunded Pension Liability
to a Person other than the Company or an ERISA Affiliate or otherwise engaged in
a transaction that could be subject to Section 4069 or 4212(c) of ERISA. No
member of the Controlled Group has engaged, directly or indirectly, in a
non-exempt prohibited transaction (as defined in Section 4975 of the Code or
Section 406 of ERISA) in connection with any Plan which could reasonably be
expected to have a Material Adverse Effect.

5.8 Use of Proceeds. The proceeds of the Loans are intended to be and
shall be used solely for the purposes set forth in and permitted by Section
6.11, and are intended to be and shall be used in compliance with Section 7.7.

5.9 Title to Properties. The Company and each of its Restricted
Subsidiaries has good record and marketable (or indefeasible in the State of
Texas) title in fee simple to, or valid leasehold interests in, all real
Property necessary or used in the ordinary conduct of its business, except for
such defects in title as could not, individually or in the aggregate, have a
Material Adverse Effect. As of the Closing Date, the Property of the Company and
its Restricted Subsidiaries is subject to no Liens, other than as permitted by
Section 7.1.

<PAGE>

5.10 Taxes. The Company and its Restricted Subsidiaries have filed all
Federal and other material tax returns and reports required to be filed, and
have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their Properties, income or
assets that are due pursuant to such returns or reports before any such taxes,
assessments, fees or other charges became delinquent or any penalty accrued with
respect thereto, except those which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP and no Notice of Lien has been filed or recorded. There is
no proposed tax assessment against the Company or any of its Restricted
Subsidiaries which could reasonably be expected to, if the assessment were made,
have a Material Adverse Effect.

5.11 Financial Condition.

(a) The audited consolidated financial statements of financial
condition of the Company and its Subsidiaries dated December 31, 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the fiscal year ended on that date: (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; (ii) fairly present the financial condition
of the Company and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and (iii) show all material
indebtedness and other liabilities, direct or contingent of the Company and its
consolidated Subsidiaries as of the date thereof, including liabilities for
taxes, material commitments and Contingent Obligations that are required to be
included on the Company's consolidated financial statements in accordance with
GAAP.

(b) Since December 31, 1995, there has been no event which could
reasonably be expected to have a Material Adverse Effect.

5.12 Environmental Matters.

(a) The on-going operations of the Company and each of its
Restricted Subsidiaries comply in all respects with all Environmental Laws,
except such non-compliance which would

<PAGE>

not (if enforced in accordance with applicable law) result in liability which
could reasonably be expected to have a Material Adverse Effect. The Company and
each of its Restricted Subsidiaries has obtained all licenses, permits,
authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary course operations, all
such Environmental Permits are in good standing, and the Company and each of its
Restricted Subsidiaries is in compliance with all material terms and conditions
of such Environmental Permits.

(b) To the knowledge of the Company, none of the Company, any of
its Restricted Subsidiaries or any of their respective present Property or
operations is subject to any outstanding material written order from or
agreement with any Governmental Authority nor subject to any judicial or
docketed administrative proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Material. There are no Hazardous Materials or
other conditions or circumstances existing with respect to any Property, or
arising from operations prior to the Closing Date, of the Company or any of its
Restricted Subsidiaries that would reasonably be expected to give rise to
Environmental Claims with a potential liability of the Company and its
Restricted Subsidiaries that could reasonably be expected to have a Material
Adverse Effect for any such condition, circumstance or Property. In addition,
(i) neither the Company's nor any of its Restricted Subsidiaries' Properties
have any underground storage tanks (x) that are not properly registered or
permitted under applicable Environmental Laws, or (y) that are leaking or
disposing of Hazardous Materials off-site in an amount that would require
remediation under Environmental Laws, and (ii) to the Company's actual knowledge
the Company and its Restricted Subsidiaries have notified all of their employees
of the existence, if any, of any health hazard arising from the conditions of
their employment and have met all notification requirements under Title III of
CERCLA and all other Environmental Laws.

5.13 Capital Stock; Pledge Agreements. (a) Prior to
the Recapitalization Date:

(i) the issued and outstanding capital stock
of the Company consists of Class A Common Stock and

<PAGE>

Class B Common Stock. Subject to any statutory voting rights, all
presently exercisable voting rights in the Company are vested
exclusively in its outstanding shares of Class A Common Stock, each
share of which is entitled to one vote on every matter to come before
the shareholders. Subject to any contractual limitations applicable to
the holders thereof, each share of Class B Common Stock is convertible
at any time, at the option of the holder thereof, into one share of
Class A Common Stock. To the Company's knowledge, there are no
existing options, warrants, shareholder agreements, calls or
commitments of any character whatsoever relating to any of the Pledged
Collateral other than the Shareholders' Agreement; and

(ii) the Pledged Collateral constitutes all the outstanding
capital stock of the Company owned by the Mitchell Family and not less
than 50% of the Class A Common Stock of the Company issued and
outstanding and a majority of all capital stock of the Company issued
and outstanding. As of the Closing Date, the Pledged Collateral
includes all of the Voting Stock.

(b) From and after the Recapitalization Date, the Pledged
Collateral constitutes all the outstanding capital stock of the Company issued
and outstanding, and there will be no options, warrants, shareholder agreements,
calls or commitments of any character whatsoever relating to any of the Pledged
Collateral.

(c) At all times the provisions of the Pledge Agreements are, or
will be upon execution, effective to create, in favor of the Administrative
Agent for the benefit of the Banks, a legal, valid and enforceable security
interest in all of the Collateral described therein; and the Pledged Collateral
was delivered to the Administrative Agent or its nominee in accordance with the
terms thereof. The Lien of the Pledge Agreement constitutes a perfected, first
priority security interest in all right, title and interest of the Pledgor(s) in
the Collateral described therein, prior and superior to all other Liens and
interests.

5.14 Regulated Entities. None of the Company, any

<PAGE>

Person controlling the Company, or any Subsidiary of the Company, is (a) an
"Investment Company" within the meaning of the Investment Company Act of 1940;
or (b) subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code, or any other Federal or state statute or regulation limiting its
ability to incur Indebtedness.

5.15 No Burdensome Restrictions. Neither the Company nor any of its
Restricted Subsidiaries is a party to or bound by any Contractual Obligation
(other than this Agreement, the Senior Subordinated Note Indenture and the
Senior Note Indenture), or subject to any charter or corporate restriction, or
any Requirement of Law, which could reasonably be expected to have a Material
Adverse Effect.

5.16 Solvency. The Company is Solvent.

5.17 Labor Relations. There are no strikes, lockouts or other labor
disputes against the Company or any of its Restricted Subsidiaries, or, to the
Company's knowledge, threatened against or affecting the Company or any of its
Restricted Subsidiaries, and no significant unfair labor practice complaint is
pending against the Company or any of its Restricted Subsidiaries or, to the
knowledge of the Company, threatened against any of them before any Governmental
Authority, in each case, which could reasonably be expected to have a Material
Adverse Effect.

5.18 Copyrights, Patents, Trademarks and Licenses, etc. The Company or
its Restricted Subsidiaries own or are licensed or otherwise have the right to
use all of the patents, trademarks, service marks, trade names, copyrights,
franchises, authorizations and other rights that are material to the operation
of their respective businesses, without conflict with the rights of any other
Person. To the knowledge of the Company, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed by the Company or any of its Restricted Subsidiaries
infringes upon any rights held by any other Person; no claim or litigation
regarding any of the foregoing is pending or to the knowledge of the Company
threatened, and no patent, invention, device, application,

<PAGE>

principle or any statute, law, rule, regulation, standard or code is to the
knowledge of the Company pending or proposed, which, in either case, could
reasonably be expected to have a Material Adverse Effect.

5.19 Insurance. The Properties of the Company and its Restricted
Subsidiaries are insured with financially sound and reputable insurance
companies or self-insured (including insurance through a related captive
insurance company), in such amounts, with such deductibles and covering such
risks as the Company believes is adequate in character and amount.

5.20 Senior Notes. Each of the documents relating to the Senior Notes
delivered to the Administrative Agent and the Banks by the Company is true,
accurate and complete, and there exist no amendments or modifications thereto,
or waivers thereof, which have not been delivered to the Administrative Agent.

5.21 Senior Subordinated Notes. Each of the documents relating to the
Senior Subordinated Notes delivered to the Administrative Agent and the Banks by
the Company is true, accurate and complete, and there exist no amendments or
modifications thereto, or waivers thereof, which have not been delivered to the
Administrative Agent.

5.22 Swap Obligations. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations. The Company has undertaken its own independent
assessment of its consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks associated with
such matters and has not relied on any swap counterparty or any Affiliate of any
swap counterparty in determining whether to enter into any Swap Contract.

5.23 Full Disclosure. None of the representations or warranties made
by the Company in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in each
report or certificate (including any exhibits to such report or certificate)
furnished by or on behalf of the Company or any of its Restricted Subsidiaries
in connection with the Loan Documents, contains any untrue statement of a
material fact or

<PAGE>

omits any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading.

SECTION 6

AFFIRMATIVE COVENANTS

The Company covenants and agrees that, so long as any Bank shall have
any Commitment hereunder, or any Loan or other Obligation (exclusive of future,
contingent or unliquidated amounts arising under indemnity agreements) shall
remain unpaid or unsatisfied, unless the Majority Banks waive compliance in
writing:

6.1 Financial Statements. The Company shall deliver to the
Administrative Agent (who shall deliver the same to the Banks) in form and
detail satisfactory to the Administrative Agent and the Majority Banks, with
sufficient copies for each Bank:

(a) as soon as available, but not later than 90 days after the
end of each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its consolidated Subsidiaries as at the end of such year and the
related consolidated statements of income, shareholders' equity and cash flows
for such fiscal year, setting forth in each case in comparative form the figures
for the previous year, and accompanied by the report of Deloitte & Touche L.L.P.
or another nationally-recognized independent public accounting firm which report
shall state that such consolidated financial statements present fairly the
financial position for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years except to the extent set forth therein. Such
opinion shall not be qualified or limited because of a restricted or limited
examination by such accountant of any material portion of the Company's or any
consolidated Subsidiary's records; and

(b) as soon as available, but not later than 45 days after the
end of each of the first three fiscal quarters of each year, a copy of the
unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of

<PAGE>

such quarter and the related consolidated statements of income, shareholders'
equity and cash flows for the period commencing on the first day and ending on
the last day of such quarter, and certified by an appropriate Responsible
Officer as fairly presenting, in accordance with GAAP (subject to normal year
end adjustments), the financial position and the results of operations of the
Company and its Subsidiaries.

6.2 Certificates; Other Information. The Company
shall furnish to the Administrative Agent (who shall deliver the
same to the Banks), with sufficient copies for each Bank:

(a) concurrently with the delivery of the financial statements
referred to in Sections 6.1(a) and (b) above, a certificate of a Responsible
Officer (i) stating that, to such officer's knowledge, the Company, during such
period, has observed and performed all of its covenants and other agreements,
and satisfied every condition contained in this Agreement to be observed,
performed or satisfied by it, and that such officer has obtained no knowledge of
any Default or Event of Default except as specified (by applicable Section
reference) in such certificate, and (ii) showing in detail the calculations
supporting such statement in respect of Sections 7.2, 7.4(i), (k) and (p),
7.5(k), 7.10(e), 7.10(f), (g) and (h), 7.12 and 7.13;

(b) as soon as available, but not later than 60 days after the
beginning of each fiscal year an annual operating budget for the Company and its
Restricted Subsidiaries for such fiscal year in a format satisfactory to the
Administrative Agent and the Banks;

(c) promptly after the same are sent, copies of all financial
statements and reports which the Company sends to its shareholders; and promptly
after the same are filed, copies of all financial statements and regular,
periodical or special reports which the Company may make to, or file with, the
Securities and Exchange Commission or any successor or similar Governmental
Authority; and

(d) promptly, such additional business, financial, corporate
affairs and other information as the Administrative Agent, at the request of any
Bank, may from time to time reasonably request.

<PAGE>

6.3 Notices. The Company shall promptly notify the
Administrative Agent (who shall notify the Banks):

(a) of the occurrence of any Default or Event of Default, and of
the occurrence or existence of any event or circumstance that could reasonably
be expected to become a Default or Event of Default;

(b) of (i) any breach or non-performance of, or any default
under, any Contractual Obligation of the Company or any of its Restricted
Subsidiaries which could result in a Material Adverse Effect; (ii) any dispute,
litigation, investigation, proceeding or suspension which may exist at any time
between the Company or any of its Restricted Subsidiaries and any Governmental
Authority which could reasonably be expected to result in a Material Adverse
Effect, and (iii) any dispute, litigation or proceeding in which the relief
sought is an injunction or other stay of the performance of this Agreement or
any Loan Document or the consummation of the Recapitalization;

(c) of the commencement of, or any material development in, any
litigation or proceeding affecting the Company or any Restricted Subsidiary (i)
in which the amount of damages claimed is $2,500,000 (or its equivalent in
another currency or currencies) or more, (ii) in which injunctive or similar
relief is sought, which, with respect to clauses (i) and (ii) of this subsection
(c), if adversely determined, could reasonably be expected to have a Material
Adverse Effect, or (iii) in which the relief sought is an injunction or other
stay of the performance of this Agreement or any Loan Document;

(d) upon, but in no event later than 10 days after, becoming
aware of (in each case only to the extent that the amount involved exceeds
$500,000) (i) any and all enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened against the Company or
any of its Restricted Subsidiaries or any of their respective Properties
pursuant to any applicable Environmental Laws, (ii) any other Environmental
Claims, and (iii) any environmental or similar condition on any real property
adjoining or in the vicinity of the property of the Company or any Restricted
Subsidiary that could reasonably be anticipated to cause such property or any
part thereof to be subject to any restrictions on

<PAGE>

the ownership, occupancy, transferability or use of such property
under any Environmental Laws;

(e) of any of the following ERISA events affecting the Company or
any member of its Controlled Group (but in no event more than 10 days after such
event), together with a copy of any notice with respect to such event that may
be required to be filed with a Governmental Authority and any notice delivered
by a Governmental Authority to the Company or any member or its Controlled Group
with respect to such event: (i) an ERISA Event; (ii) the adoption of any new
Plan that is subject to Title IV of ERISA or Section 412 of the Code by any
member of the Controlled Group; (iii) the adoption of any amendment to a Plan
that is subject to Title IV of ERISA or Section 412 of the Code, if such
amendment results in a material increase in benefits or unfunded liabilities; or
(iv) the commencement of contributions by any member of the Controlled Group to
any Plan that is subject to Title IV of ERISA or Section 412 of the Code;

(f) any Material Adverse Effect subsequent to the date of the
most recent audited financial statements of the Company delivered to the Banks
pursuant to Section 6.1(a);

(g) of any material change in accounting policies
or financial reporting practices by the Company or any of its
Restricted Subsidiaries;

(h) of any labor controversy resulting in or threatening to
result in any strike, work stoppage, boycott, shutdown or other labor disruption
against or involving the Company or any of its Restricted Subsidiaries, which
could reasonably be expected to have a Material Adverse Effect; and

(i) upon the request from time to time of the Administrative
Agent, the Swap Termination Values, together with a description of the method by
which such values were determined, relating to any then-outstanding Swap
Contracts to which the Company or any of its Restricted Subsidiaries is party.

Each notice pursuant to this Section shall be accompanied by a
written statement by a Responsible Officer of the Company setting forth details
of the occurrence referred to therein, and stating what action the Company
proposes to take

<PAGE>

with respect thereto and at what time. Each notice under Section 6.3(a) shall
describe with particularity any and all clauses or provisions of this Agreement
or other Loan Document that have been breached or violated.

6.4 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each of its Restricted Subsidiaries to: (a) preserve and maintain in
full force and effect its corporate existence and good standing under the laws
of its state or jurisdiction of incorporation; provided, that the Company shall
not be required to maintain the existence of any Restricted Subsidiary if the
Board of Directors of the Company determines that the existence of such
Subsidiary is no longer necessary or desirable in the conduct of the Company's
business; (b) preserve and maintain in full force and effect all rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business as presently conducted; (c) use
its reasonable efforts, in the ordinary course of business, to preserve its
business organization and preserve the goodwill and business of the customers,
suppliers and others having material business relations with it; and (d)
preserve or renew all of its registered trademarks, trade names and service
marks, the non-preservation of which could reasonably be expected to have a
Material Adverse Effect.

6.5 Maintenance of Property. The Company shall maintain, and shall
cause each of its Restricted Subsidiaries to maintain, and preserve all its
Property which is used or useful in its business in good working order and
condition, ordinary wear and tear excepted and make all necessary repairs
thereto and renewals and replacements thereof except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.

6.6 Insurance. The Company shall maintain, and shall cause each of its
Restricted Subsidiaries to maintain, with financially sound and reputable
independent insurers or self insurance (including insurance through a related
captive insurance company), insurance with respect to its Properties and
business against loss or damage of the kinds as the Company believes is adequate
in character and amount; including workers' compensation insurance, public
liability and property and

<PAGE>

casualty insurance.

6.7 Payment of Obligations. The Company shall, and shall cause its
Restricted Subsidiaries to, pay and discharge (a) all tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets before any penalty accrues thereon, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Restricted Subsidiary; and
(b) all lawful claims which, if unpaid, would by law become a Lien upon its
Property prior to the time when any penalty or fine shall be incurred with
respect thereto, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Company or such Restricted Subsidiary.

6.8 Compliance with Laws. The Company shall comply, and shall cause
each of its Restricted Subsidiaries to comply, with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist, or where
the failure to so comply could not reasonably be expected to have a Material
Adverse Effect.

6.9 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each of its Restricted Subsidiaries to maintain proper
books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of the Company and
such Restricted Subsidiaries. The Company shall permit, and shall cause each of
its Restricted Subsidiaries to permit, representatives and independent
contractors of the Administrative Agent or any Bank to visit and inspect any of
their respective Properties, to examine their respective corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants at such reasonable times
during normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Company; provided, however,

<PAGE>

when an Event of Default has occurred and is continuing the Administrative Agent
or any Bank may do any of the foregoing at the expense of the Company at any
time during normal business hours and without advance notice.

6.10 Environmental Laws. The Company shall, and shall cause each of
its Restricted Subsidiaries to, conduct its operations and keep and maintain its
Property in compliance with all Environmental Laws, except where the failure
could not reasonably be expected to, individually or in the aggregate, result in
liability in excess of $2,500,000. Upon the written request of the
Administrative Agent or any Bank, the Company shall submit and cause each of its
Restricted Subsidiaries to submit, to the Administrative Agent with sufficient
copies for each Bank, at the Company's sole cost and expense, at reasonable
intervals, a report providing an update of the status of any environmental,
health or safety compliance, hazard or liability issue identified in any notice
or report required pursuant to Section 6.3(d), that could, individually or in
the aggregate, result in liability in excess of $2,500,000.

6.11 Use of Proceeds. The Company shall use the proceeds of the Loans
(a) to refinance the Existing Credit Facility, (b) for the acquisition,
construction and furnishing of theatres in the United States and Canada or other
activities incidental thereto and (c) for working capital and other general
corporate purposes.

6.12 Recapitalization Transaction; Conditions Subsequent. (a) The
Company may, in its sole discretion, effect the Recapitalization at any time;
provided, however, that the Company shall not enter into any Recapitalization
Agreement unless the form and substance thereof have been consented to by the
Majority Banks, which shall not be unreasonably withheld, delayed or
conditional. Thereafter, the Company will consummate any Recapitalization only
in accordance with all the terms and conditions of such Recapitalization
Agreements without waiver of any material terms of any such agreements not
consented to by the Majority Banks, which shall not be unreasonably withheld,
delayed or conditional.

(b) On the Recapitalization Date, the Company
shall deliver, or cause to be delivered, to the Administrative

<PAGE>

Agent all of the following, in form and substance reasonably satisfactory to the
Administrative Agent and in sufficient copies for the Administrative Agent and
each Bank:

(i) Holdings Pledge Agreement. Against the redelivery of all
existing Pledged Collateral, the Holdings Pledge Agreement
substantially in the form of Exhibit C-2 duly executed by the Holding
Company, together with all certificates and instruments representing
all capital stock of the Company and undated stock transfer powers
executed in blank;

(ii) Resolutions; Incumbency.

(A) True and complete copies of the resolutions of the
Board of Directors of the Holding Company approving and
authorizing the execution, delivery and performance by the
Holding Company of the Holdings Pledge Agreement, certified by
the Secretary or an Assistant Secretary of the Holding Company as
of the Recapitalization Date as being in full force and effect
without amendment or modification;

(B) A certificate of the Secretary or Assistant
Secretary of the Holding Company, certifying the names and true
signatures of the officers of the Holding Company authorized to
execute, deliver and perform, as applicable, the Holdings Pledge
Agreement, and all other Loan Documents to which it is a party;
and

(C) A certificate of another officer of the Holding
Company as to the incumbency and specimen signature of the
Secretary or Assistant Secretary, as the case may be, of the
Holding Company.

(iii) Articles of Incorporation; By-laws
and Good Standing. Each of the following documents:

(A) a true and complete copy of the
articles or certificate of incorporation of the

<PAGE>

Holding Company as in effect on the Reorganization Date,
certified by the Secretary of State (or similar applicable
Governmental Authority) of the state of incorporation of the
Holding Company as of a recent date prior to the Reorganization
Date and certified by the Secretary or Assistant Secretary of the
Holding Company as of the Reorganization Date, as being in full
force and effect without amendment or modification, and the
bylaws of the Holding Company as in effect on the
Recapitalization Date, certified by the Secretary or Assistant
Secretary of the Holding Company as of the Reorganization Date as
being in full force and effect without amendment or modification;
and

(B) certificate of existence for the Holding Company
from the Secretary of State (or similar applicable Governmental
Authority) of its state of incorporation as of a recent date
prior to the Reorganization Date.

(iv) Legal Opinions. An opinion of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., counsel to the Company, dated the Reorganization
Date, addressed to the Administrative Agent and the Banks as to the
Holdings Pledge Agreement in form and substance satisfactory to the
Administrative Agent and the Banks.

(v) Approvals. A certificate from a Responsible Officer of
the Holding Company that all material approvals and consents
(including those by shareholders, boards of directors and, to the
extent material, Governmental Authorities), necessary or advisable in
connection with the Recapitalization shall have been duly obtained or
made and remain in effect, with all applicable waiting periods having
expired or having been terminated and without any action having been
taken by any Person or Governmental Authority to enjoin, restrict or
prevent the consummation of the Recapitalization or otherwise to
impose any materially adverse condition upon the consummation of the
Recapitalization or on the operations of the Company (or the successor
to the Company) and its Subsidiaries

<PAGE>

after the consummation of the Recapitalization.

(vi) No Litigation Challenging. A certificate of a
Responsible Officer of the Company to the effect that no legal or
arbitral proceedings shall be pending or, to the knowledge of the
Company, threatened by or before any Governmental Person with respect
to the Recapitalization or the making of any Loan that seeks to
enjoin, restrict or prevent the consummation of the Recapitalization
or the making of any Loan or otherwise to impose materially adverse
conditions upon the consummation of the Recapitalization or the making
of any Loan, or on the operations of the Company and its Restricted
Subsidiaries after the Recapitalization or that could, if adversely
determined, have a Material Adverse Effect.

6.13 Further Assurances. The Company shall ensure that all written
information and reports and certificates (including any exhibits thereto)
furnished to the Administrative Agent or the Banks do not and will not contain
any untrue statement of a material fact and do not and will not omit to state
any material fact or any fact necessary to make the statements contained therein
not misleading in light of the circumstances in which made, and will promptly
disclose to the Administrative Agent and the Banks and correct any defect or
error that may be discovered therein or in any Loan Document or in the
execution, acknowledgement or recordation thereof.

SECTION 7

NEGATIVE COVENANTS

The Company hereby covenants and agrees that, so long as any Bank
shall have any Commitment hereunder, or any Loan or other Obligation (exclusive
of future, contingent or unliquidated amounts arising under indemnity
agreements) shall remain unpaid or unsatisfied, unless the Majority Banks waive
compliance in writing:

7.1 Limitation on Liens. The Company shall not, and

<PAGE>

shall not suffer or permit any of its Restricted Subsidiaries to, directly or
indirectly, make, create, incur, assume or suffer to exist any Lien upon or with
respect to any part of its Property, whether now owned or hereafter acquired,
other than the following (each a "Permitted Lien"):

(a) any Lien (other than Liens on the Collateral) existing on the
Property of the Company or its Restricted Subsidiaries on the Closing Date and
set forth in Schedule 7.5;

(b) any Lien created under any Loan Document;

(c) any Liens now existing or hereafter arising pursuant to the
pledge agreement dated as of June 10, 1992 by the Company to The Bank of New
York, as trustee under the Senior Note Indenture, as amended from time to time;
provided, however, that neither the Senior Note Indenture nor such pledge
agreement may be amended, waived or otherwise modified at any time to permit or
require additional collateral to be pledged to secure the Senior Notes.

(d) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 6.7;

(e) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Restricted
Subsidiary;

(f) Liens (other than any Lien imposed by ERISA in connection
with a proceeding by PBGC other than on the Collateral) consisting of pledges or
deposits required in the ordinary course of business as presently conducted in
connection with workers' compensation, unemployment insurance and other social
security legislation;

(g) Liens (other than Liens on the Collateral) on
the Property of the Company or any of its Restricted Subsidiaries

<PAGE>

securing (i) the performance of bids, trade contracts (other than for borrowed
money), leases, and statutory obligations, (ii) contingent obligations on surety
and appeal bonds, and (iii) other obligations of a like nature; in each case,
incurred in the ordinary course of business provided that all Liens securing
delinquent performance or obligations could not (even if enforced) reasonably be
expected to have a Material Adverse Effect;

(h) any attachment or judgment Lien, unless the judgment it
secures shall not have been discharged within 30 calendar days after the
expiration of any stay or final appeals;

(i) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar encumbrances which, in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect or
materially interfere with the ordinary conduct of the businesses of the Company
and its Restricted Subsidiaries;

(j) Liens securing Purchase Money Obligations not
exceeding $500,000 in the aggregate at any one time;

(k) Liens securing Capital Lease Obligations on assets subject to
such Capital Leases, provided that such Capital Leases are permitted under
Section 7.9(a);

(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the Federal Reserve Board, and (ii) such deposit account is not intended by the
Company or any of its Restricted Subsidiaries to provide collateral to the
depository institution;

(m) 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 Section 7.5(f);

<PAGE>

(n) Liens consisting of pledges of cash collateral or government
securities to secure on a mark-to-market basis Permitted Swap Obligations only,
provided that the aggregate value of such collateral so pledged by the Company
and the Restricted Subsidiaries, together with Indebtedness in respect of
letters of credit securing Swap Contracts outstanding under Section 7.5(f), does
not at any time exceed $5,000,000;

(o) Lien of the trustee under Section 7.7 of the Senior
Subordinated Note Indenture on money or property held or collected by the
trustee thereunder; and

(p) any renewal of or substitution for any Lien permitted by any
of the preceding subsections, including without limitation in connection with
refinancings of any Indebtedness secured by such Liens (including all accrued
interest and any prepayment premium, if any, thereon); provided that the
Indebtedness secured is not increased nor the Lien extended to any additional
assets (other than proceeds and accessions).

7.2 Disposition of Assets. Neither the Company nor
any Restricted Subsidiary shall make any Dispositions except for:

(a) Excluded Dispositions; and

(b) other Dispositions of assets having a value not exceeding
$10,000,000 in any one or a series of related transactions; provided, that (i)
no Event of Default shall exist at the time thereof or shall result from such
Disposition; (ii) at least 90% of the aggregate sales price from such
Disposition shall be paid in cash; and (iii) the Net Proceeds of such
Disposition shall be used for a Covered Acquisition or used to prepay Total
Indebtedness pursuant to Section 2.8(a);

provided, however, that no Disposition shall be for less than the fair market
value of the Property or equity securities being disposed of by the Company or
such Restricted Subsidiary.

7.3 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any of its Restricted Subsidiaries to, merge, consolidate with
or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially

<PAGE>

all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person, except:

(a) any Restricted Subsidiary of the Company may merge (i) with
the Company, provided that the Company shall be the continuing or surviving
corporation, (ii) with any one or more Restricted Subsidiaries of the Company,
(iii) with any other Person provided that such merger is effected in connection
with the Company's or a Restricted Subsidiary's Disposition of its entire
Investment in such Subsidiary pursuant to Section 7.2;

(b) any Restricted Subsidiary of the Company may sell all or
substantially all of its assets (upon voluntary liquidation or otherwise), to
the Company or a Wholly-Owned Restricted Subsidiary of the Company or in
connection with the Company's or a Restricted Subsidiary's Disposition of its
entire Investment in such Subsidiary pursuant to Section 7.2; and

(c) the Company may be party to, and may
consummate, the Recapitalization on the terms and conditions set
forth in the Recapitalization Agreements;

7.4 Investments. The Company shall not purchase or acquire, or suffer
or permit any of its Restricted Subsidiaries to make any Investment in any
Person, including any Affiliate of the Company, except for the following
("Permitted Investments"):

(a) Investments in Cash Equivalents;

(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;

(c) extensions of credit by the Company to any of
its Restricted Subsidiaries or by any of its Restricted
Subsidiaries to another of its Restricted Subsidiaries of the
Company;

(d) any Investment made solely with assets, the
payment or application of which is not restricted by Section
7.10;

(e) equity interests acquired by the Company or

<PAGE>

any Restricted Subsidiary in any Person engaged in the indoor motion picture
exhibition business if (i) such Person's theatres are managed by the Company or
such Restricted Subsidiary, (ii) such equity interest is acquired solely in
exchange for services rendered in connection with the management of such
Person's theatres, and (iii) the Board of Directors of the Company determines
that such acquisition is in the best interest of the Company;

(f) Investments by Restricted Subsidiaries in the
Company;

(g) Investments in the form of consideration for
Property or equity securities sold or otherwise disposed of in
accordance with Section 7.2;

(h) Investments constituting Permitted Swap Obligations or
payments or advances under Swap Contracts relating to Permitted Swap
Obligations;

(i) Investments not exceeding $40,000,000 in the
aggregate in Existing Unrestricted Subsidiaries other than as
otherwise permitted herein;

(j) Bank accounts maintained in any commercial
bank;

(k) $50,000,000 in the aggregate since the Closing Date, valued
at the time made, in (i) Restricted Subsidiaries which 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
and (ii) joint ventures, partnerships and other Persons so long as the Persons
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
making such Investment and all other contemporaneous related transactions,
become a Restricted Subsidiary of the Company; provided that in each case, any
such Person in which such Investments have been made or are to be made may, at
any time, elect to become a Guarantor by entering into a Subsidiary Guaranty and
providing the documents and opinions referred to in Section 4.3, in which case
all Investments made or to be made in

<PAGE>

such Person shall not count against the $50,000,000 limitation
provided in this subsection;

(l) 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;

(m) 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;

(n) repurchases of Senior Subordinated Notes not
exceeding $10,000,000 in the aggregate;

(o) any consolidation or merger of a Restricted Subsidiary that
is a Wholly-Owned Subsidiary of the Company into the Company or a Restricted
Subsidiary that is a Wholly-Owned Subsidiary to the extent otherwise permitted
under the Senior Subordinated Note Indenture;

(p) Investments not exceeding $10,000,000 in the
aggregate; and

(q) Investments permitted as Restricted Payments
under Section 7.10.

7.5 Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any of its Restricted Subsidiaries to, create, incur, assume,
suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:

(a) Indebtedness incurred pursuant to this
Agreement;

(b) endorsements for collection or deposit in the
ordinary course of business as presently conducted; and

<PAGE>

(other than the Senior Subordinated Notes and the Senior Notes) and set forth in
Schedule 7.5, or Subordinated Indebtedness in a principal amount not exceeding
such 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, such
Indebtedness; provided such new Indebtedness does not have a final maturity date
earlier than the Indebtedness being repaid or refunded nor have terms any more
restrictive than the Indebtedness being repaid or refunded;

(d) the Senior Notes and any senior Indebtedness (which may but
need not be secured by the pledge of the stock of Restricted Subsidiaries) or
any unsecured subordinated Indebtedness, all the net proceeds of which are used,
concurrently with the incurrence thereof, to repay, refund, refinance, defease,
repurchase, redeem or otherwise acquire for value in whole or in part the Senior
Notes (including all accrued interest and any prepayment premium, if any,
thereon), requiring no repayment or prepayment of principal prior to the
Maturity Date and having terms (other than pricing) no more materially
restrictive on the Company than the Senior Notes;

(e) the Senior Subordinated Notes and any unsecured subordinated
Indebtedness, all the net proceeds of which are used, concurrently with the
incurrence thereof, to repay, refund, refinance, defease, repurchase, redeem or
otherwise acquire for value in whole or in part the Senior Subordinated Notes
(including all accrued interest and any prepayment premium, if any, thereon),
requiring no repayment or prepayment of principal prior to the Maturity Date and
having terms (other than pricing) no more materially restrictive on the Company
than the Senior Subordinated Notes;

(f) Indebtedness incurred in connection with
leases permitted pursuant to Section 7.9;

(g) Indebtedness in an aggregate principal amount not to exceed
$5,000,000 at any one time outstanding incurred in respect of letters of credit
to secure Swap Contracts (provided that the total amount of Indebtedness
incurred in respect of letters of credit to secure Swap Contracts, when added
together with any cash deposits collateralizing obligations with respect to Swap
Contracts, shall not exceed $5,000,000), or to support

<PAGE>

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 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 Section 7.5), 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 Subsidiary of the Company
or in connection with judgments that do not result in a Default or an Event of
Default;

(h) Indebtedness representing Purchase Money
Obligations in an aggregate principal amount not to exceed
$500,000 at any one time outstanding;

(i) Indebtedness owing to a Restricted Subsidiary
of the Company or to the Company by a Restricted Subsidiary;

(j) Permitted Swap Obligations; and

(k) the Company may incur (but not refinance or refund)
additional unsecured subordinated Indebtedness not exceeding a cumulative
aggregate principal amount of $25,000,000, which Indebtedness has terms (other
than pricing) no more materially restrictive on the Company than this Agreement.

7.6 Transactions with Affiliates. The Company shall not, and shall not
suffer or permit any of its Restricted Subsidiaries to, enter into any
transaction with any Affiliate of the Company or of any such Restricted
Subsidiary, except (a) as expressly permitted by this Agreement, or (b) unless
such transaction is on terms no less favorable to the Company or such Restricted
Subsidiary than would be obtained in a comparable arm's-length transaction with
a Person not an Affiliate of the Company or such Restricted Subsidiary;
provided, however, that transactions between or among the Company and its
Restricted Subsidiaries which are not otherwise prohibited by this Agreement,
transactions permitted under Section 7.10 and any employment agreement entered
into by the Company or its Subsidiaries in the ordinary course of business, in
each case shall not be deemed a transaction with an Affiliate.

<PAGE>

7.7 Use of Proceeds. The Company shall not and shall not suffer or
permit any of its Subsidiaries to use any portion of the Loan, directly or
indirectly, (a) to purchase or carry Margin Stock, (b) to repay or otherwise
refinance indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (c) to extend credit for the purpose of purchasing or carrying any
Margin Stock, or (d) to acquire any security in any transaction that is subject
to Section 13 or 14 of the Exchange Act.

7.8 Compliance with ERISA. The Company shall not, and shall not suffer
or permit any of its Restricted Subsidiaries to, (a) terminate any Plan subject
to Title IV of ERISA so as to result in any material (in the opinion of the
Majority Banks) liability to the Company or any ERISA Affiliate, (b) permit to
exist any ERISA Event or any other event or condition, which presents the risk
of a material (in the opinion of the Majority Banks) liability to any member of
the Controlled Group, (c) make a complete or partial withdrawal (within the
meaning of ERISA Section 4201) from any Multiemployer Plan so as to result in
any material (in the opinion of the Majority Banks) liability to the Company or
any ERISA Affiliate, (d) enter into any new Plan or modify any existing Plan so
as to increase its obligations thereunder which could result in any material (in
the opinion of the Majority Banks) liability to any member of the Controlled
Group, or (e) permit the present value of all nonforfeitable accrued benefits
under any Plan (using the actuarial assumptions utilized by the PBGC upon
termination of a Plan) materially (in the opinion of the Majority Banks) to
exceed the fair market value of Plan assets allocable to such benefits, all
determined as of the most recent valuation date for each such Plan.

7.9 Lease Obligations. The Company shall not, and shall not suffer or
permit any Restricted Subsidiary to, create or suffer to exist any obligations
for the payment of rent for any Property under lease or agreement to lease,
except for:

(a) leases of the Company and its Restricted
Subsidiaries in existence on the Closing Date and any renewal,
extension or refinancing thereof; and

(b) Operating Leases entered into or assumed by
the Company or any of its Restricted Subsidiaries after the

<PAGE>

Closing Date in the ordinary course of business, including without limitation
sale-leaseback transactions.

7.10 Restricted Payments. The Company shall not, and shall not suffer
or permit any of its Restricted Subsidiaries to, (i) declare or make any
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of the capital
stock of the Company or a Restricted Subsidiary, or (ii) purchase, redeem or
otherwise acquire for value any shares of the capital stock of the Company or
any Subsidiary (other than Wholly Owned Subsidiaries of the Company that are
Restricted Subsidiaries) or any warrants, rights or options to acquire such
shares, now or hereafter outstanding or (iii) make any Investment other than a
Permitted Investment or (iv) 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 or any of its
Subsidiaries not otherwise permitted by this Agreement or any Loan Document to
be so paid (each of clauses (i) through (iv) being a "Restricted Payment");
except that the Company and any Restricted Subsidiary of the Company may:

(a) declare and make dividend payments or other distributions
payable solely in its capital stock or in options, warrants or rights to acquire
its capital stock;

(b) declare and make dividends payments or other distributions
from a Wholly-Owned Subsidiary of the Company to the Company or to another
Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary;

(c) make payments of up to $1,500,000 in the aggregate annually
to repurchase capital stock of the Company held by employees of the Company upon
termination of such employment;

(d) purchase, redeem or otherwise acquire shares of its capital
stock or warrants or options to acquire any such shares with the proceeds
received from the substantially concurrent issue of new shares of its capital
stock;

(e) repay but not prepay subordinated

<PAGE>

Indebtedness issued as permitted by Section 7.5(k); provided that immediately
prior to and after giving effect to such repayment, no Default or Event of
Default would exist;

(f) make Restricted Payments solely out of 50% of net income
(less 100% of net losses) of the Company and its Restricted Subsidiaries arising
after December 31, 1995 computed on a cumulative consolidated basis; provided,
however, that immediately prior to and after giving effect to such proposed
payment, no Default or Event of Default would exist;

(g) make Restricted Payments out of the net proceeds received by
the Company from (i) the issuance or sale (other than to a Restricted Subsidiary
of the Company) of (A) Capital Stock of the Company, including any such shares
issued upon exercise of any warrants, options or similar rights subsequent to
the Closing Date, or (B) Indebtedness that is convertible into Capital Stock of
the Company to the extent such Indebtedness is so converted (collectively, the
"Securities"); (ii) capital contributions, and (iii) an amount equal to the net
reduction in investments resulting from payments of principal of indebtedness,
return of capital and other transfers of assets; provided, however, that
immediately prior to and after giving effect to such payment, no Default or
Event of Default would exist;

(h) make additional Restricted Payments in an amount not
exceeding $15,000,000 on a cumulative basis; provided, however, that immediately
prior to and after giving effect to such payment no Default or Event of Default
would exist;

(i) repurchase, refinance or retire outstanding Senior Notes in
an aggregate principal amount not exceeding $5,000,000, together with accrued
interest and prepayment premium, if any, thereon; and

(j) make 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.

Any payments made pursuant to Sections 7.10(a) through (e) shall not be deemed
to be Restricted Payments for the purpose of the computation of Sections
7.10(f), (g), and (h).

<PAGE>

7.11 Prepayments of Senior Notes and Senior Subordinated Notes. Except
as otherwise permitted herein, the Company shall not, and shall not suffer or
permit any of its Restricted Subsidiaries to, prepay the Senior Notes or the
Senior Subordinated Notes.

7.12 Total Indebtedness to Annualized Cash Flow Ratio. The Company
shall not permit at any time its ratio of (a) Total Indebtedness to (b)
Annualized Cash Flow for the four fiscal quarters ending on such date to exceed
the ratio set forth opposite each fiscal quarter set forth below:

Maximum
Fiscal Quarters Ending Ratio

Closing Date through 12/31/97 5.25 to 1
1/1/98 through 6/30/98 5.00 to 1
7/1/98 through 12/31/98 4.75 to 1
1/1/99 through 12/31/99 4.50 to 1
1/1/00 and thereafter 4.00 to 1

7.13 Debt Service Coverage Ratio. The Company shall not permit at the
end of any fiscal quarter its ratio of (a) Annualized Cash Flow for the four
fiscal quarters then ended plus lease expense (excluding deferred lease expense)
for the following four fiscal quarters to (b) the sum of scheduled principal
payments on Total Indebtedness for the following four fiscal quarters plus
Consolidated Cash Interest Expense (based on the principal amount of Total
Indebtedness outstanding as of the end of such fiscal quarter and interest rates
then in effect) for the following four fiscal quarters plus lease expense
(excluding deferred lease expense) for the following four fiscal quarters to be
less than 1.25 to 1.00.

7.14 Change in Business. The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, engage in any material line of business
substantially different from those lines of business carried on by it on the
date hereof.

7.15 Accounting Changes. The Company shall not, and
shall not suffer or permit any of its Restricted Subsidiaries to,
make any significant change in accounting treatment or reporting
practices, except as required by GAAP, or change the fiscal year

<PAGE>

of the Company or of any of its consolidated Restricted
Subsidiaries.

7.16 Limitations on Payments. The Company shall not, and shall not
suffer or permit any of its Restricted Subsidiaries to, agree to any restriction
or limitation on the upstreaming of payments from any Restricted Subsidiary to
the Company other than immaterial amounts in the ordinary course of business.

7.17 Limitation on Negative Pledges. Except for restrictions on
collateral securing Indebtedness permitted to be secured by Section 7.5
contained in instruments governing such Indebtedness, the Company shall not, and
shall not permit any of its Restricted Subsidiaries to, be a party to any
agreement prohibiting, or amend any agreement to prohibit, the creation or
assumption of any Lien in favor of the Administrative Agent and the Banks upon
its properties or assets, whether now owned or hereafter acquired.

SECTION 8

EVENTS OF DEFAULT

8.1 Event of Default. Any of the following shall
constitute an "Event of Default":

(a) Non-Payment. The Company fails to pay, when and as required
to be paid herein, any principal of any Loan, or shall fail to pay within two
Business Days of the due date hereof any interest, fees or other amount payable
hereunder or pursuant to any other Loan Document; or

(b) Representation or Warranty. Any representation or warranty by
the Company made or deemed made herein, in any Loan Document, or which is
contained in any certificate, document or financial or other statement by the
Company or its Responsible Officers, furnished at any time under this Agreement,
or in or under any Loan Document, shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or

<PAGE>

perform or observe any term, covenant or agreement contained in
Sections 7.3, 7.12, 7.13 or 7.17; or

(d) Other Defaults. The Company fails to perform or observe any
other term or covenant contained in Section 6.1 6.2, 6.3, 6.9, 7.1, 7.2, 7.4
through 7.11, inclusive, 7.14, 7.15 or 7.16 and such default shall continue
unremedied for a period of three days, or the Company fails to perform or
observe any other term or covenant contained in this Agreement or any Loan
Document, and such default under other terms or covenants shall continue
unremedied for a period of 20 days after the earlier of (i) the date upon which
a Responsible Officer of the Company knew or should have known of such failure
or (ii) the date upon which written notice thereof is given to the Company by
the Administrative Agent or any Bank; or

(e) Cross-Defaults. (i) The Company or any of its Restricted
Subsidiaries (A) fails to make any payment in respect of any Indebtedness (other
than the Senior Subordinated Note Indenture, the Senior Note Indenture or in
respect of Swap Contracts) having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing to all
creditors under any combined or syndicated credit arrangement) of $1,000,000 or
more when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and such failure continues after the applicable grace or
notice period, if any, specified in the document relating thereto on the date of
such failure; or (B) fails to perform or observe any other condition or
covenant, or any other event shall occur or condition exist, under any agreement
or instrument relating to any such Indebtedness having an aggregate principal
amount of $1,000,000 or more (other than the Senior Subordinated Note Indenture
or the Senior Note Indenture), and such failure continues after the applicable
grace or notice period, if any, specified in the document relating thereto on
the date of such failure if the effect of such failure, event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to
be declared to be due and payable prior to its stated maturity, or any
Contingent Obligation in an amount of $1,000,000 or more to become payable or
cash collateral in respect thereof to be demanded; or

<PAGE>

(ii) there occurs under any Swap Contract an Early Termination Date (as defined
in such Swap Contract) resulting from (A) any event of default under such Swap
Contract as to which the Company or any Restricted Subsidiary is the Defaulting
Party (as defined in such Swap Contract) or (B) any Termination Event (as so
defined) as to which the Company or any Subsidiary is an Affected Party (as so
defined), and, in either event, the Swap Termination Value owed by the Company
or such Subsidiary as a result thereof is greater than $1,000,000; or

(f) Cross-Default to Indentures. The occurrence
and continuance of any Event of Default under, and as defined in,
the Senior Note Indenture, the Senior Subordinated Note Indenture
or any Indebtedness in excess of $1,000,000 refinancing in whole
or in part the Senior Notes; or

(g) Insolvency; Voluntary Proceedings. The Company or any of its
Material Restricted Subsidiaries (i) ceases or fails to be Solvent, or generally
fails to pay, or admits in writing its inability to pay, its debts as they
become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) commences any Insolvency Proceeding with respect to
itself; or (iii) takes any action to effectuate or authorize any of the
foregoing; or

(h) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Material Restricted
Subsidiary of the Company, or any writ, judgment, warrant of attachment,
execution or similar process, is issued or levied against a substantial part of
the Company's or any of its Material Restricted Subsidiaries' Properties, and
any such proceeding or petition shall not be dismissed, or such writ, judgment,
warrant of attachment, execution or similar process shall not be released,
vacated or fully bonded within 60 days after commencement, filing or levy; (ii)
the Company or any of its Material Restricted Subsidiaries admits the material
allegations of a petition against it in any Insolvency Proceeding, or an order
for relief (or similar order under non-U.S. law) is ordered in any Insolvency
Proceeding; or (iii) the Company or any of its Material Restricted Subsidiaries
acquiesces in the appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or other similar Person
for itself or a substantial

<PAGE>

portion of its Property or business;

(i) ERISA. (i) A member of the Controlled Group shall fail to pay
when due, after the expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under a Multiemployer Plan;
(ii) the Company or an ERISA Affiliate shall fail to satisfy its contribution
requirements under Section 412(c)(11) of the Code, whether or not it has sought
a waiver under Section 412(d) of the Code; (iii) in the case of an ERISA Event
involving the withdrawal from a Plan of a "substantial employer" (as defined in
Section 4001(a)(2) or Section 4062(e) of ERISA), the withdrawing employer's
proportionate share of that Plan's Unfunded Pension Liabilities is more than
$1,000,000; (iv) in the case of an ERISA Event involving the complete or partial
withdrawal from a Multiemployer Plan, the withdrawing employer has incurred a
withdrawal liability in an aggregate amount exceeding $1,000,000; (v) in the
case of an ERISA Event not described in clause (iii) or (iv), the Unfunded
Pension Liabilities of the relevant Plan or Plans exceed $1,000,000; (vi) a Plan
that is intended to be qualified under Section 401(a) of the Code shall lose its
qualification, and the loss can reasonably be expected to impose on members of
the Controlled Group liability (for additional taxes, to Plan participants, or
otherwise) in the aggregate amount of $1,000,000 or more; (vii) the commencement
or increase of contributions to, or the adoption of or the amendment of a Plan
by, a member of the Controlled Group shall result in a net increase in unfunded
liabilities to the Controlled Group in excess of $1,000,000; (viii) any member
of the Controlled Group engages in or otherwise becomes liable for a non-exempt
prohibited transaction and the initial tax or additional tax under section 4975
of the Code relating thereto might reasonably be expected to exceed $1,000,000;
(ix) a violation of Section 404 or 405 of ERISA or the exclusive benefit rule
under Section 401(a) of the Code if such violation might reasonably be expected
to expose a member or members of the Controlled Group to monetary liability in
excess of $1,000,000; (x) any member of the Controlled Group is assessed a tax
under Section 4980B of the Code in excess of $1,000,000; or (xi) the occurrence
of any combination of events listed in clauses (iii) through (x) that involves a
potential liability, net increase in aggregate Unfunded Pension Liabilities,
unfunded liabilities, or any combination thereof, in excess of $1,000,000.

<PAGE>

(j) Monetary Judgments. One or more final (non- interlocutory)
judgments, orders or decrees shall be entered against the Company or any of its
Material Restricted Subsidiaries involving in the aggregate a liability (to the
extent not covered by insurance, including insurance through a related captive
insurance company, but excluding self-insurance) as to any single or related
series of transactions, incidents or conditions, of $500,000 or more, and the
same shall remain unsatisfied, unvacated and unstayed pending appeal for a
period of 30 days after the entry thereof; or

(k) Non-Monetary Judgments. Any non-monetary judgment, order or
decree shall be rendered against the Company or any of its Material Restricted
Subsidiaries which does or could reasonably be expected to have a Material
Adverse Effect, and there shall be any period of 10 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or

(l) Collateral. Any material provision of any Collateral Document
shall for any reason cease to be valid and binding on or enforceable against any
Pledgor or any Pledgor shall so state in writing or bring an action to limit its
obligations or liabilities thereunder; or any Collateral Document shall for any
reason (other than pursuant to the terms thereof) cease to create a valid
security interest in the Collateral purported to be covered thereby or such
security interest shall for any reason cease to be a perfected and first
priority security interest, and if, in either case, such cessation is the result
of a change in law, such cessation shall continue for 10 days after the earlier
of (i) the date upon which a Responsible Officer of the Company knew or should
have known of such cessation or (ii) the date upon which written notice thereof
is given to the Company by the Administrative Agent or any Bank; or

(m) Loan Documents. The Loan Agreement, Notes, Subsidiary
Guaranty or Pledge Agreement at any time after its execution and delivery and
for any reason other than the agreement of the Banks or satisfaction in full of
all the Obligations, ceases to be in full force and effect or is declared by a
court of competent jurisdiction to be null and void, invalid or unenforceable in
any respect which, in any such event in the reasonable opinion of the Banks, is
materially adverse to the

<PAGE>

interests of the Banks; or the Company or any Subsidiary Guarantor denies that
it has any or further liability or obligation under any Loan Document, or
purports to revoke, terminate or rescind same; or any Event of Default (as such
term is or may hereafter be specifically defined in any other Loan Document)
occurs under any other Loan Document; or

(n) Adverse Change. There shall occur a Material
Adverse Effect; or

(o) Change of Control.

(i) Prior to the Recapitalization Date: (A) a Change in
Control Event or (B) the failure of the Mitchell Family (1) to own at
least 50% of all issued and outstanding Voting Stock of the Company,
and such default shall continue unremedied for a period of 30 days,
(2) to own a majority of all issued and outstanding Capital Stock of
the Company at all times, or (3) to have designated a majority of the
Board of Directors of the Company, or

(ii) from and after the Recapitalization Date: (A) a Change
in Control Event (excluding the Recapitalization as a Change in
Control Event itself), (B) the failure of the Mitchell Family (1) to
own at least 50% of all Voting Stock of the Holding Company, and such
default shall continue unremedied for a period of 30 days, (2) to own
a majority of all Capital Stock of the Holding Company at all times,
or (3) to have designated a majority of the Board of Directors of the
Holding Company or (C) the failure of the Holding Company to
beneficially own all the outstanding Capital Stock of the Company.

8.2 Remedies. If any Event of Default occurs and is continuing, the
Administrative Agent shall, at the request of, or may, with the consent of, the
Majority Banks, (a) declare the Commitment of each Bank to make Loans to be
terminated, whereupon such Commitments and obligations shall forthwith be
terminated; (b) declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be

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immediately due and payable; without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and remedies available
to it and the Banks under the Loan Documents or applicable law; provided,
however, that upon the occurrence of any event specified in paragraph (g) or (h)
of Section 8.1 above (in the case of clause (i) of paragraph (h) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans shall automatically terminate and the unpaid principal amount of
all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Administrative
Agent or any Bank.

8.3 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.

SECTION 9

THE AGENTS

9.1 Appointment and Authorization. Each Bank hereby irrevocably
appoints, designates and authorizes the Administrative Agent to take such action
on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent. Without limiting
the generality of the foregoing sentence, the use of the

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term "agent" in this Agreement with reference to the Administrative Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties.

9.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.

9.3 Liability of Agents. None of the Agent-Related Persons shall (a)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document (except for its own
gross negligence or willful misconduct), or (b) be responsible in any manner to
any of the Banks for any recital, statement, representation or warranty made by
the Company or any Subsidiary or Affiliate of the Company, or any officer
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document, or for the value of any Collateral or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Company or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the Properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.

9.4 Reliance by Administrative Agent.

(a) The Administrative Agent shall be entitled to

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rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Company), independent accountants and other experts selected by
the Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Banks as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Majority Banks and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all of the Banks.

(b) For purposes of determining compliance with the conditions
specified in Sections 4.1 and 4.2, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be satisfied
with each document or other matter either sent by the Administrative Agent to
such Bank for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Bank, unless an officer of the Administrative Agent responsible for the
transactions contemplated by the Loan Documents shall have received notice from
the Bank prior to the initial Borrowing specifying its objection thereto and
either such objection shall not have been withdrawn by notice to the
Administrative Agent to that effect or the Bank shall not have made available to
the Administrative Agent the Bank's ratable portion of such Borrowing.

9.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Banks,

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unless the Administrative Agent shall have received written notice from a Bank
or the Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Banks. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be requested by
the Majority Banks in accordance with Section 8; provided, however, that unless
and until the Administrative Agent shall have received any such request, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Banks.

9.6 Credit Decision. Each Bank expressly acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it and that no
act by the Administrative Agent hereinafter taken, including any review of the
affairs of the Company and its Subsidiaries shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Bank. Each Bank
represents to the Administrative Agent that it has, independently and without
reliance upon the Administrative Agent and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions contemplated
thereby, and made its own decision to enter into this Agreement and extend
credit to the Company hereunder. Each Bank also represents that it will,
independently and without reliance upon the Administrative Agent and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Banks by the Administrative
Agent, the Administrative Agent shall not have any duty or responsibility to
provide any Bank with any

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credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of the Company which
may come into the possession of any of the Agent-Related Persons.

9.7 Indemnification. Whether or not the transactions contemplated
hereby shall be consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), ratably
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind whatsoever which may at any time (including at any time following the
repayment of the Loans and the termination or resignation of the related
Administrative Agent) be imposed on, incurred by or asserted against any such
Person any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any such Person
under or in connection with any of the foregoing; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from such
Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank shall reimburse the Administrative Agent upon demand for
its ratable share of any costs or out-of-pocket expenses (including fees and
expenses of counsel and the allocated cost of in-house counsel) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of the
Company. Without limiting the generality of the foregoing, if the Internal
Revenue Service or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered, was

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not properly executed, or because such Bank failed to notify the Administrative
Agent of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such Bank
shall indemnify the Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Administrative Agent under this Section, together with all costs
and expenses (including fees and expenses of counsel and the allocated cost of
in-house counsel). The obligation of the Banks in this Section shall survive the
payment of all Obligations hereunder.

9.8 Administrative Agent in Individual Capacity. BofA and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Administrative Agent
hereunder and without notice to or consent of the Banks. With respect to its
Loans, BofA shall have the same rights and powers under this Agreement as any
other Bank and may exercise the same as though it were not the Administrative
Agent, and the terms "Bank" and "Banks" shall include BofA in its individual
capacity.

9.9 Successor Administrative Agent. The Administrative Agent may, and
at the request of the Majority Banks shall, resign as Administrative Agent upon
30 days' notice to the Banks. If the Administrative Agent shall resign as
Administrative Agent under this Agreement, the Majority Banks shall appoint from
among the Banks a successor agent for the Banks which successor agent shall be
approved by the Company. If no successor agent is appointed prior to the
effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Banks and the
Company, a successor agent from among the Banks. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Administrative Agent and the
term "Administrative Agent" shall mean such successor agent and the retiring
Administrative Agent's appointment, powers and duties as Administrative Agent
shall be terminated. After any retiring Administrative Agent's resignation
hereunder as Administrative

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Agent, the provisions of this Section 9 and Sections 10.4 and 10.5 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor agent has accepted
appointment as Administrative Agent by the date which is 30 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Majority Banks appoint a successor
agent as provided for above.

9.10 Collateral Matters.

(a) The Administrative Agent is authorized on behalf of all the
Banks, without the necessity of any notice to or further consent from the Banks,
from time to time to take any action with respect to any Collateral or the
Pledge Agreements which may be necessary to perfect and maintain perfected the
security interest in and Liens upon the Collateral granted pursuant to the
Pledge Agreements. In connection with the Recapitalization, the Administrative
Agent is authorized to release the stock collateral held under the Mitchell
Family Pledge Agreement to the extent necessary, against delivery of the stock
of the Company owned by the Holding Company.

(b) The Banks irrevocably authorize the Administrative Agent, at
its option and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any Collateral (i) upon termination of the Commitments
and payment in full of all Loans and all other Obligations payable under this
Agreement and under any other Loan Document; (ii) constituting Property sold or
to be sold or disposed of as part of or in connection with any Disposition
permitted hereunder; (iii) constituting Property in which the Company or any
Subsidiary of the Company owned no interest at the time the Lien was granted or
at any time thereafter; (iv) constituting Property leased to the Company or any
Subsidiary of the Company under a lease which has expired or been terminated in
a transaction permitted under this Agreement or is about to expire and which has
not been, and is not intended by the Company or such Subsidiary to be, renewed
or extended; (v) consisting of an instrument evidencing Indebtedness or other
debt instrument, if

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the indebtedness evidenced thereby has been paid in full; or (vi) if approved,
authorized or ratified in writing by the Majority Banks or all the Banks, as the
case may be, subject to Section 10.1(f). Upon request by the Administrative
Agent at any time, the Banks will confirm in writing the Administrative Agent's
authority to release particular types or items of Collateral pursuant to this
Section 9.10(b).

(c) Each Bank agrees with and in favor of each other (which
agreement shall not be for the benefit of the Company or any of its
Subsidiaries) that the Company's obligation to such Bank under this Agreement
and the other Loan Documents is not and shall not be secured by any real
property collateral now or hereafter acquired by such Bank.

9.11 Documentation Agent. The Bank identified on the facing page or
signature pages of this Agreement as the "Documentation Agent" shall not have
any right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Banks as such. Without limiting the
foregoing, the Documentation Agent shall not have or be deemed to have any
fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied, and will not rely, on the Documentation Agent in deciding to enter into
this Agreement or in taking or not taking action hereunder.

SECTION 10

MISCELLANEOUS

10.1 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Banks, the Company and acknowledged by the
Administrative Agent, and then such waiver shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Banks, the Company and acknowledged by the Administrative
Agent, do any of the following: (a) increase or extend the Commitment of any
Bank (or reinstate any Commitment terminated pursuant to Section

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8.2(a)) or subject any Bank to any additional obligations hereunder or under any
Loan Document; (b) postpone or delay any date fixed for any payment of
principal, interest, fees or other amounts due to the Banks (or any of them)
hereunder or under any Loan Document (other than Swap Contracts); (c) reduce the
principal of, or the rate of interest specified herein on any Loan, or of any
fees or other amounts payable hereunder or under any Loan Document; (d) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Loans which shall be required for the Banks or any of them to take any
action hereunder or under any Loan Document; (e) amend this Section 11.1 or
Section 2.15; or (f) discharge any Guarantor or Pledgor, or release any part of
the Collateral except as permitted by Section 6.12; provided further, that no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Majority Banks or all the Banks, as the
case may be, affect the rights or duties of the Administrative Agent under this
Agreement or any other Loan Document.

10.2 Notices. All notices, requests and other communications provided
for hereunder shall be in writing (including telegraphic, telex, facsimile
transmission or cable communication) and mailed, telegraphed, telexed,
transmitted or delivered, if to the Company to its address specified on Schedule
10.2 hereto; if to any Bank, to its Domestic Lending Office specified on
Schedule 10.2 hereto; and if to the Administrative Agent, to its address
specified on Schedule 10.2 hereto; or, as to the Company or the Administrative
Agent, to such other address as shall be designated by such party in a written
notice to the other parties, and as to each other party at such other address as
shall be designated by such party in a written notice to the Company and the
Administrative Agent. All such notices and communications shall be effective
when delivered for overnight delivery, delivered to the telegraph company,
transmitted by telecopier and confirmed by telephone, transmitted by telex and
confirmed by telex answerback or delivered to the cable company, as applicable,
or if delivered, upon delivery, except that written notices pursuant to Section
2 shall not be effective until received by the Administrative Agent.

10.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the
Administrative Agent or any Bank, any right, remedy, power or

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privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.

10.4 Costs and Expenses. The Company shall, whether
or not the transactions contemplated hereby shall be consummated:

(a) reimburse BofA (including in its capacity as Administrative
Agent) on demand for all reasonable costs and expenses incurred in connection
with the development, syndication, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to, this
Agreement, any Loan Document and any other documents prepared in connection
herewith or therewith, and the consummation of the transactions contemplated
hereby and thereby, including the reasonable costs and expenses of counsel to
BofA (including in its capacity as Administrative Agent) (and the allocated cost
of internal counsel) with respect thereto;

(b) reimburse each Bank and the Administrative Agent on demand
for all reasonable costs and expenses incurred by them in connection with the
enforcement or preservation of any rights (including in connection with any
"workout" or restructuring regarding the Loans) under this Agreement, any Loan
Document, and any such other documents, including fees and out-of-pocket
expenses of counsel (and the allocated cost of internal counsel) to the
Administrative Agent and to each of the Banks; and

(c) reimburse the Administrative Agent on demand for all
reasonable appraisal, audit, search and filing fees, incurred or sustained by
the Administrative Agent in connection with the matters referred to under
paragraphs (a) and (b) above.

10.5 General Indemnity. The Company shall pay, indemnify, and hold
each Bank, the Administrative Agent and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including reasonable fees and

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out-of-pocket expenses of counsel and the allocated cost of internal counsel) of
any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement and any other Loan
Documents, or the transactions contemplated hereby and thereby, and with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to this Agreement or the Loans, or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Company shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities (i) arising from the gross
negligence or willful misconduct of such Indemnified Person (ii) with respect to
judicial proceedings commenced against such Indemnified Person by any holder of
the debt or equity securities of such Indemnified Person based solely on the
rights afforded such holder in its capacity as such, and (iii) with respect to
judicial proceedings commenced solely against such Indemnified Person by another
Bank, Assignee or Participant to the extent based on a cause of action against
such Indemnified Person and not the Company or any Restricted Subsidiary. The
obligations in this Section 10.5 shall survive payment of all other Obligations.
The Company shall have the right to undertake, conduct and control through
counsel of its own choosing (which counsel shall be acceptable to the
Indemnified Persons acting reasonably) and at the sole expense of the Company,
the conduct and settlement of any Indemnified Liabilities, and the Indemnified
Person shall cooperate with the Company in connection therewith; provided that
the Company shall permit the Indemnified Person to participate in such conduct
and settlement through counsel chosen by the Indemnified Person, but the fees
and expenses of such counsel shall be borne by the Indemnified Person.
Notwithstanding the foregoing, the Indemnified Person shall have the right to
employ its own counsel, and the reasonable fees and expenses of such counsel
shall be at the Company's costs and expense if the interests of the Company and
the Indemnified Person become adverse in any such claim or course of action;
provided, however, the Company, in such event, shall only be liable for the
reasonable legal expenses of one counsel for all of such Indemnified Persons.
The Company shall not be liable for any settlement of any claim or action
effected without its prior written consent, such consent not to be unreasonably
withheld. All amounts owing under this

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Section 10.5 shall be paid within 30 days after demand.

10.6 Marshalling; Payments Set Aside. Neither the Administrative Agent
nor the Banks shall be under any obligation to marshall any assets in favor of
the Company or any other Person or against or in payment of any or all of the
Obligations. To the extent that the Company makes a payment or payments to the
Administrative Agent or the Banks, or the Administrative Agent or the Banks
enforce their Liens or exercise their rights of set-off, and such payment or
payments or the proceeds of such enforcement or set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party in connection
with any Insolvency Proceeding, or otherwise, then to the extent of such
recovery the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or set-off had not occurred.

10.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent and each Bank.

10.8 Assignments, Participations, etc.

(a) Any Bank may, with the prior written consent of the Company
at all times other than during the existence of an Event of Default, and the
Administrative Agent, which consents shall not be unreasonably withheld, at any
time assign and delegate to one or more Eligible Assignees (provided that no
written consent of the Company or the Administrative Agent shall be required in
connection with any assignment and delegation by a Bank to a Bank Affiliate of
such Bank) (each an "Assignee") all, or any ratable part of all, of the Loans,
the Commitments and the other rights and obligations of such Bank hereunder, in
a minimum amount of $10,000,000 and multiples of $1,000,000 in excess thereof;
provided, however, that (i) the Company and the Administrative Agent may
continue to deal solely and directly with such Bank in connection with the
interest so assigned to an Assignee until (A) written notice of such assignment,
together

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with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Company and the Administrative Agent by
such Bank and the Assignee; (B) such Bank and its Assignee shall have delivered
to the Company and the Administrative Agent a Notice of Assignment and
Acceptance in the form of Exhibit D ("Notice of Assignment and Acceptance")
together with any Note or Notes subject to such assignment and (C) the assignor
Bank or Assignee has paid to the Administrative Agent a processing fee in the
amount of $2,500.

(b) From and after the date that the Administrative Agent
notifies the assignor Bank that it has received an executed Notice of Assignment
and Acceptance and payment of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Notice of
Assignment and Acceptance, shall have the rights and obligations of a Bank under
the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Notice of Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan Documents.

(c) Within five Business Days after its receipt of notice by the
Administrative Agent that it has received an executed Notice of Assignment and
Acceptance and payment of the processing fee, the Company shall, upon the
request of the Assignee made through the Administrative Agent, execute and
deliver to the Administrative Agent, one or more new Notes evidencing such
Assignee's assigned Loans and Commitment and, if the assignor Bank had
previously requested one or more Notes and has retained a portion of its Loans
and its Commitment, replacement Notes in the principal amount of the Loans
retained by the assignor Bank (such Notes to be in exchange for, but not in
payment of, the Notes held by such Bank). Immediately upon each Assignee's
making its processing fee payment under the Notice of Assignment and Acceptance,
this Agreement, shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Commitments arising therefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Bank pro tanto.

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(d) Any Bank may at any time sell to one or more commercial banks
or other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company and the
Administrative Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
shall have rights to approve any amendment to, or any consent or waiver with
respect to, this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of the Banks as
described in the first proviso to Section 10.1. In the case of any such
participation, the Participant shall be entitled to the benefit of Sections 3.1,
3.3 and 10.5 as though it were also a Bank hereunder, and if amounts outstanding
under this Agreement are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Bank under this Agreement.

(e) Notwithstanding any other provision contained in this
Agreement or any other Loan Document to the contrary, any Bank may assign all or
any portion of the Loans or Notes held by it to any Federal Reserve Bank or the
United States Treasury as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank, provided that any payment in respect of
such assigned Loans or Notes made by the Company to or for the account of the
assigning or pledging Bank in accordance with the terms of this Agreement shall
satisfy the Company's obligations hereunder in respect to such assigned Loans or
Notes to the extent of such payment. No such assignment shall release the
assigning Bank from its obligations hereunder.

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10.9 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists, each Bank is authorized at any
time and from time to time, without prior notice to the Company, any such notice
being waived by the Company to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held by, and other indebtedness at any time owing to, such
Bank to or for the credit or the account of the Company against any and all
Obligations owing to such Bank, now or hereafter existing, irrespective of
whether or not the Administrative Agent or such Bank shall have made demand
under this Agreement or any Loan Document and although such Obligations may be
contingent or unmatured. Each Bank agrees promptly to notify the Company and the
Administrative Agent after any such set-off and application made by such Bank;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Bank under this
Section 10.9 are in addition to the other rights and remedies (including other
rights of set-off) which the Bank may have.

10.10 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Administrative Agent in writing of any changes in the address to
which notices to the Bank should be directed, of addresses of its Lending
Offices, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.

10.11 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement in any number of separate counterparts, each of
which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Administrative Agent.

10.12 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.

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10.13 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks and the
Administrative Agent, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents. Neither the Administrative Agent nor any Bank shall
have any obligation to any Person not a party to this Agreement or other Loan
Documents.

10.14 Time. Time is of the essence as to each term or
provision of this Agreement and each of the other Loan Documents.

10.15 Governing Law and Jurisdiction.

(a) THIS AGREEMENT AND ANY NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT
THE ADMINISTRATIVE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.

(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
AND ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE
ADMINISTRATIVE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
COMPANY, THE ADMINISTRATIVE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE ADMINISTRATIVE AGENT
AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.

10.16 WAIVER OF JURY TRIAL. THE COMPANY, THE BANKS AND THE
ADMINISTRATIVE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY

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ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE
ADMINISTRATIVE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

10.17 NOTICE OF CLAIMS; CLAIMS BAR. THE COMPANY HEREBY AGREES THAT IT
SHALL GIVE PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT
HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST THE ADMINISTRATIVE AGENT OR ANY
BANK, WHETHER SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR TO THE LOANS (OR THE
COLLATERAL THEREFOR), OR ANY ACT OR OMISSION TO ACT BY THE ADMINISTRATIVE AGENT
OR ANY BANK WITH RESPECT HERETO OR THERETO, AND THAT IF IT SHALL FAIL TO GIVE
SUCH PROMPT NOTICE TO THE ADMINISTRATIVE AGENT WITH REGARD TO ANY SUCH CLAIM OR
CAUSE OF ACTION, IT SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED
FROM BRINGING OR ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY SUIT, ACTION OR
PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL AGENCY.

10.18 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Administrative Agent, and supersedes all prior or
contemporaneous Agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof, except for the fees
described in the term sheet referenced in Section 2.11.

10.19 Interpretation. This Agreement is the result of negotiations
between and has been reviewed by counsel to the Administrative Agent, the
Company and other parties, and is the product of all parties hereto.
Accordingly, this Agreement and the other Loan Documents shall not be construed
against the Banks or the Administrative Agent merely because of the
Administrative

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Agent's or Banks' involvement in the preparation of such documents and
agreements.

10.20 Amendment and Restatement of Existing Credit Facility. This
Agreement amends and restates the Existing Credit Facility and the related
promissory notes as of the date hereof, and advances outstanding under the
Existing Credit Facility and such promissory notes shall be deemed Loans
continuing and outstanding hereunder. In order to permit all advances
outstanding under the Existing Credit Facility and the promissory notes (the
"Continuing Loans") to be continued ratably by all Banks in accordance with
their respective Pro Rata Share under this Agreement, the Company shall be
deemed to have requested, pursuant to Section 2.4, that all loans outstanding
under the Existing Credit Facility be converted into Base Rate Loans hereunder
made by all Banks in accordance with their respective Pro Rata Share on the
Closing Date. The Company shall pay accrued interest on the portion of each
Continuing Loan so converted, together with amounts required to be paid under
Section 3.4.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.

CINEMARK USA, INC.

By:
Title:

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BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent

By:
David Price
Vice President

120

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BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank

By:
Madeline Lee
Vice President

121

<PAGE>

NATIONSBANK OF TEXAS, N.A.,
as Documentation Agent and a Bank

By:
Name:
Title:

122

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CIBC INC.

By:
Name:
Title:

123

<PAGE>

THE BANK OF NEW YORK

By:
Name:
Title:

124

<PAGE>

THE FIRST NATIONAL BANK OF BOSTON

By:
Name:
Title:

125

<PAGE>

COMERICA BANK - TEXAS

By:
Name:
Title:

126

<PAGE>

FLEET BANK, N.A.

By:
Name:
Title:

127

<PAGE>

THE FUJI BANK, LIMITED

By:
Name:
Title:

128

<PAGE>

BANK OF NOVA SCOTIA

By:
Name:
Title:

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FIRST AMENDED AND RESTATED
REDUCING REVOLVING CREDIT AGREEMENT

Dated as of December 12, 1996

among

CINEMARK USA, INC.

BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Administrative Agent

NATIONSBANK OF TEXAS, N.A.
as Documentation Agent

and

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

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TABLE OF CONTENTS

Section Page

SECTION 1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . 1
1.2 Other Interpretive Provisions. . . . . . . . . . . 28

SECTION 2
THE CREDITS. . . . . . . . . . . . . . . . . . . . . . . . . 29
2.1 Amounts and Terms of Commitments . . . . . . . . . 29
2.2 Loan Accounts and Notes. . . . . . . . . . . . . . 30
2.3 Procedure for Borrowing. . . . . . . . . . . . . . 30
2.4 Conversion and Continuation Elections. . . . . . . 31
2.5 Limitation on Interest Periods . . . . . . . . . . 32
2.6 Voluntary Termination or Reduction of
Commitments. . . . . . . . . . . . . . . . . . . . 33
2.7 Optional Prepayments . . . . . . . . . . . . . . . 33
2.8 Mandatory Prepayments of Loans; Mandatory
Commitment Reductions. . . . . . . . . . . . . . . 34
(a) Asset Dispositions. . . . . . . . . . . . . 34
(b) Automatic Reduction of Commitment . . . . . 34
(c) Mandatory Prepayments . . . . . . . . . . . 34
(d) General . . . . . . . . . . . . . . . . . . 34
(e) Reduction of Commitments. . . . . . . . . . 34
2.9 Maturity Date. . . . . . . . . . . . . . . . . . . 35
2.10 Interest. . . . . . . . . . . . . . . . . . . . . 35
2.11 Fees. . . . . . . . . . . . . . . . . . . . . . . 37
2.12 Computation of Fees and Interest. . . . . . . . . 38
2.13 Payments by the Company . . . . . . . . . . . . . 38
2.14 Payments by the Banks to the Administrative
Agent . . . . . . . . . . . . . . . . . . . . . . 39
2.15 Sharing of Payments, Etc. . . . . . . . . . . . . 40
2.16 Security. . . . . . . . . . . . . . . . . . . . . 41

SECTION 3
TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . 41
3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . 41
3.2 Illegality . . . . . . . . . . . . . . . . . . . . 44
3.3 Increased Costs and Reduction of Return. . . . . . 45

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3.4 Funding Losses . . . . . . . . . . . . . . . . . . 45
3.5 Inability to Determine Rates . . . . . . . . . . . 46
3.6 Survival . . . . . . . . . . . . . . . . . . . . . 46

SECTION 4
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 47
4.1 Conditions of Initial Loans. . . . . . . . . . . . 47
4.2 Conditions to All Borrowings. . . . . . . . . . . 49
4.3 Conditions Precedent to Becoming a Guarantor . . . 49

SECTION 5
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 49
5.1 Corporate Existence and Power. . . . . . . . . . . 49
5.2 Corporate Authorization; No Contravention. . . . . 50
5.3 Governmental Authorization . . . . . . . . . . . . 50
5.4 Binding Effect . . . . . . . . . . . . . . . . . . 50
5.5 Litigation . . . . . . . . . . . . . . . . . . . . 50
5.6 No Default . . . . . . . . . . . . . . . . . . . . 51
5.7 ERISA Compliance . . . . . . . . . . . . . . . . . 51
5.8 Use of Proceeds. . . . . . . . . . . . . . . . . . 52
5.9 Title to Properties. . . . . . . . . . . . . . . . 53
5.10 Taxes . . . . . . . . . . . . . . . . . . . . . . 53
5.11 Financial Condition . . . . . . . . . . . . . . . 53
5.12 Environmental Matters . . . . . . . . . . . . . . 54
5.13 Capital Stock; Pledge Agreements. . . . . . . . . 54
5.14 Regulated Entities. . . . . . . . . . . . . . . . 55
5.15 No Burdensome Restrictions. . . . . . . . . . . . 56
5.16 Solvency. . . . . . . . . . . . . . . . . . . . . 56
5.17 Labor Relations . . . . . . . . . . . . . . . . . 56
5.18 Copyrights, Patents, Trademarks and Licenses,
etc.. . . . . . . . . . . . . . . . . . . . . . . 56
5.19 Insurance . . . . . . . . . . . . . . . . . . . . 56
5.20 Senior Notes. . . . . . . . . . . . . . . . . . . 56
5.22 Swap Obligations. . . . . . . . . . . . . . . . . 57
5.23 Full Disclosure . . . . . . . . . . . . . . . . . 57

SECTION 6
AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . 57
6.1 Financial Statements . . . . . . . . . . . . . . . 57
6.2 Certificates; Other Information. . . . . . . . . . 58
6.3 Notices. . . . . . . . . . . . . . . . . . . . . . 59
6.4 Preservation of Corporate Existence, Etc . . . . . 61
6.5 Maintenance of Property. . . . . . . . . . . . . . 61

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6.6 Insurance. . . . . . . . . . . . . . . . . . . . . 61
6.7 Payment of Obligations . . . . . . . . . . . . . . 61
6.8 Compliance with Laws . . . . . . . . . . . . . . . 62
6.9 Inspection of Property and Books and Records . . . 62
6.10 Environmental Laws. . . . . . . . . . . . . . . . 62
6.11 Use of Proceeds . . . . . . . . . . . . . . . . . 63
(i) Holdings Pledge Agreement . . . . . . . . . 63
(ii) Resolutions; Incumbency . . . . . . . . . . 63
(iii) Articles of Incorporation; By-laws and
Good Standing . . . . . . . . . . . . . . . 64
(iv) Legal Opinions. . . . . . . . . . . . . . . 65
(v) Approvals . . . . . . . . . . . . . . . . . 65
(vi) No Litigation Challenging . . . . . . . . . 65
6.13 Further Assurances. . . . . . . . . . . . . . . . 65

SECTION 7
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 66
7.1 Limitation on Liens. . . . . . . . . . . . . . . . 66
7.2 Disposition of Assets. . . . . . . . . . . . . . . 68
7.3 Consolidations and Mergers . . . . . . . . . . . . 68
7.4 Investments. . . . . . . . . . . . . . . . . . . . 69
7.5 Limitation on Indebtedness . . . . . . . . . . . . 71
7.6 Transactions with Affiliates . . . . . . . . . . . 73
7.7 Use of Proceeds. . . . . . . . . . . . . . . . . . 73
7.8 Compliance with ERISA. . . . . . . . . . . . . . . 73
7.9 Lease Obligations. . . . . . . . . . . . . . . . . 73
7.10 Restricted Payments . . . . . . . . . . . . . . . 74
7.11 Prepayments of Senior Notes and Senior
Subordinated Notes. . . . . . . . . . . . . . . . 75
7.12 Total Indebtedness to Annualized Cash Flow
Ratio . . . . . . . . . . . . . . . . . . . . . . 76
7.13 Debt Service Coverage Ratio . . . . . . . . . . . 76
7.14 Change in Business. . . . . . . . . . . . . . . . 76
7.15 Accounting Changes. . . . . . . . . . . . . . . . 76
7.16 Limitations on Payments . . . . . . . . . . . . . 76
7.17 Limitation on Negative Pledges. . . . . . . . . . 76

SECTION 8
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 77
8.1 Event of Default . . . . . . . . . . . . . . . . . 77
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . 81
8.3 Rights Not Exclusive . . . . . . . . . . . . . . . 82

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SECTION 9
THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.1 Appointment and Authorization. . . . . . . . . . . 82
9.2 Delegation of Duties . . . . . . . . . . . . . . . 82
9.3 Liability of Agents. . . . . . . . . . . . . . . . 83
9.4 Reliance by Administrative Agent . . . . . . . . . 83
9.5 Notice of Default. . . . . . . . . . . . . . . . . 84
9.6 Credit Decision. . . . . . . . . . . . . . . . . . 84
9.7 Indemnification. . . . . . . . . . . . . . . . . . 85
9.8 Administrative Agent in Individual Capacity. . . . 86
9.9 Successor Administrative Agent . . . . . . . . . . 86
9.10 Collateral Matters. . . . . . . . . . . . . . . . 87
9.11 Documentation Agent . . . . . . . . . . . . . . . 88

SECTION 10
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 88
10.1 Amendments and Waivers. . . . . . . . . . . . . . 88
10.2 Notices . . . . . . . . . . . . . . . . . . . . . 89
10.3 No Waiver; Cumulative Remedies. . . . . . . . . . 89
10.4 Costs and Expenses. . . . . . . . . . . . . . . . 89
10.5 General Indemnity . . . . . . . . . . . . . . . . 90
10.6 Marshalling; Payments Set Aside . . . . . . . . . 91
10.7 Successors and Assigns. . . . . . . . . . . . . . 91
10.8 Assignments, Participations, etc. . . . . . . . . 91
10.9 Set-off . . . . . . . . . . . . . . . . . . . . . 94
10.10 Notification of Addresses, Lending Offices,
Etc. . . . . . . . . . . . . . . . . . . . . . . 94
10.11 Counterparts . . . . . . . . . . . . . . . . . . 94
10.12 Severability . . . . . . . . . . . . . . . . . . 94
10.13 No Third Parties Benefited . . . . . . . . . . . 94
10.14 Time . . . . . . . . . . . . . . . . . . . . . . 95
10.15 Governing Law and Jurisdiction . . . . . . . . . 95
10.16 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . 95
10.17 NOTICE OF CLAIMS; CLAIMS BAR . . . . . . . . . . 96
10.18 Entire Agreement . . . . . . . . . . . . . . . . 96
10.19 Interpretation . . . . . . . . . . . . . . . . . 96
10.20 Amendment and Restatement of Existing Credit
Facility . . . . . . . . . . . . . . . . . . . . 96

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EXHIBITS

A Form of Notice of Borrowing B Form of Notice of Conversion/Continuation
C-1 Mitchell Family Pledge Agreement C-2 Form of Holdings Pledge Agreement
D Form of Notice of Assignment and Acceptance E Form of Note F Form of
Subsidiary Guaranty

SCHEDULES

1.1 Proforma Cash Flow for Annualized Theatres
2.1 Commitments
5.7 ERISA Plans
7.5 Existing Liens and Indebtedness
10.2 Addresses for Domestic and Offshore Lending Offices
and Notices

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EXHIBIT 10.12(b)

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FIRST AMENDED AND RESTATED
MITCHELL FAMILY PLEDGE AGREEMENT

THIS FIRST AMENDED AND RESTATED MITCHELL FAMILY PLEDGE AGREEMENT (this
"Agreement"), dated as of December 12, 1996, is executed by CINEMARK USA, INC.,
a Texas corporation (the "Company") and the undersigned pledgors (each a
"Pledgor" and collectively, the "Pledgors") for the benefit of BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION as agent (in such capacity herein called
the "Administrative Agent") for itself and each Bank (as hereinafter defined) in
its capacity as a lender under the Credit Agreement referred to below and as a
counterparty under any Swap Contract (the Administrative Agent and each Bank in
such capacities are referred to herein collectively as the "Secured Parties"),
and amends and restates the Pledge Agreement dated as of February 14, 1996
executed by the Pledgors in favor of the Administrative Agent.

RECITALS

A. Concurrently herewith, the Company, the banks signatories thereto
(such banks, and other banks from time to time signatory thereto and banks from
time to time purchasing a participation in a signatory bank's interest therein,
together with any Affiliate of any bank in its capacity as a counterparty under
any Swap Contract, collectively, the "Banks" and individually a "Bank") and the
Administrative Agent are entering into a First Amended and Restated Credit
Agreement dated as of even date herewith (as amended, supplemented, restated or
otherwise modified from time to time, the "Credit Agreement"), subject to and
upon the condition among others, that the Pledgors execute this Agreement in
favor of the Secured Parties. The Credit Agreement amends and restates the
Existing Credit Facility.

B. From time to time a Bank, in its capacity as a

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counterparty, may enter into one or more Swap Contracts with the Company, and
the parties hereto desire that the obligations of the Company under any such
Swap Contracts be secured hereby.

C. It is a condition precedent to the making of the Credit Extensions
by the Banks under the Credit Agreement that the Pledgors shall have granted the
security interest contemplated by this Agreement and the Secured Parties are
relying on the undertakings of the Pledgors and the Company contained herein.

D. Terms defined and the rules of construction in the
Credit Agreement have, unless the context otherwise requires, the
same meanings in this Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

1. Grant of Security Interest.

(a) As security for the payment or performance when due (whether at
stated maturity, by acceleration or otherwise) of the Obligations to any Secured
Party, now existing or hereafter arising, each Pledgor hereby pledges, assigns
and transfers to the Administrative Agent for purposes of security and for the
equal benefit of the Secured Parties, and hereby grants to the Administrative
Agent for the equal benefit of the Secured Parties, a lien on, and security
interest in, all of such Pledgor's right, title and interest in, to and under
the following, whether now or hereafter existing and whether now owned or
hereafter acquired (collectively, the "Collateral"):

(i) all shares opposite such Pledgor's name, as set
forth on Schedule 1 (collectively, the "Pledged Shares");

(ii) all additional shares of stock of the Company from
time to time acquired by such Pledgor in any manner;

(iii) the certificates representing the shares referred
to in paragraphs (i) and (ii) above; and

(iv) all dividends, cash, instruments and other
property or proceeds from time to time received, receivable

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or otherwise distributed in respect of or in exchange for any or all of the
shares referred to in paragraphs (i) and (ii) above (all of the foregoing
being the "Proceeds"); provided, however, that so long as no Event of
Default has occurred and is continuing, each Pledgor may receive free and
clear of any security interest under this Agreement any cash dividends paid
in respect of the Pledged Shares.

(b) All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of the Administrative
Agent pursuant hereto and shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed undated instruments of transfer or
assignment in blank, all in form and substance satisfactory to the
Administrative Agent. If an Event of Default has occurred and is continuing, the
Administrative Agent shall have the right, at any time in its discretion and
without notice to any Pledgor, to transfer to or to register in its name or any
of its nominees any or all of the Collateral, subject only to the revocable
rights specified in Section 6(a). In addition, if an Event of Default has
occurred and is continuing, the Administrative Agent shall have the right at any
time to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.

(c) Notwithstanding anything contained in this Agreement to the
contrary, and except for the obligation of each Pledgor to deliver the
Collateral owned by such Pledgor to the Secured Parties pursuant to the
provisions hereof, in no event shall any Pledgor have any personal liability
with respect to the Obligations or any obligations, debt or other liabilities
that may arise under this Agreement and Secured Parties recourse against such
Pledgor shall be limited solely to the Collateral owned by such Pledgor.

2. Security for Obligations. This Agreement secures, in accordance
with the provisions hereof, the payment by the Company of all of the Obligations
to any Secured Party under any Loan Document, including under any Swap Contract,
and all obligations of the Company and each Pledgor under this Agreement, in
each case now existing or hereafter arising. The Collateral shall secure the
Obligations owing to the Secured Parties equally and ratably.

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3. Representations and Warranties. The Company and
each Pledgor severally represents and warrants as to himself or
itself as follows:

(a) The chief place of business and chief executive office of such
Pledgor and the office where such Pledgor keeps its records concerning the
Collateral (hereinafter, "Records") is located at the address for notices for
such Pledgor as provided in Section 19(g).

(b) The Pledged Shares owned by such Pledgor have been duly authorized
and validly issued and are fully paid and nonassessable.

(c) To the knowledge of Pledgor the Pledged Shares constitute at least
the percentage of the issued and outstanding shares of stock or equity interests
of the Company as of the Closing Date as disclosed on Schedule 1 attached
hereto. There are no existing options, warrants, shareholder agreements, calls
or commitments of any character whatsoever relating to any of the Pledged Shares
owned by such Pledgor except as listed on Schedule 3.

(d) No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral owned by such Pledgor is on
file in any recording office, except as may have been filed pursuant to this
Agreement.

(e) Such Pledgor is lawfully possessed of ownership of the Collateral
owned by such Pledgor which exists on the date hereof, and has full power and
lawful authority to grant the Liens in and on the Collateral hereunder.

(f) This Agreement creates in favor of the Administrative Agent, for
the equal benefit of the Secured Parties, a valid and enforceable Lien on the
Pledged Shares owned by such Pledgor, subject to no Liens, securing the payment
and performance of the Obligations, and all filings and other actions necessary
to perfect such Lien with the priority described herein and in Section 5.13(a)
of the Credit Agreement have been duly made or taken.

(g) The Company and any such Pledgor which is a

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corporation is duly organized and existing under the laws of the state of its
incorporation, and is properly licensed and in good standing in, and where
necessary to maintain its rights and privileges has complied with the fictitious
name statute of, every jurisdiction in which it is doing business, except where
the failure to be licensed or be in good standing or comply with any such
statute will not have a material adverse effect on the ability of the Company or
such Pledgor to perform its obligations hereunder or under any instrument or
agreement required hereunder.

(h) If such Pledgor is a trust (a "Trust"), it is evidenced by those
certain trust agreement(s) described on Schedule 4 relating to such Trust, and a
true and correct copy of such trust agreement, and all amendments thereto, has
been delivered to the Administrative Agent. Such Trust is irrevocable. The
trustee of such trust is duly authorized under the terms of such trust agreement
to from time to time execute and deliver, reaffirm and/or renew, this Agreement.
This Agreement is being executed and delivered for a proper trust purpose.

(i) The execution, delivery and performance of this Agreement and any
instrument or agreement required hereunder are within the corporate or trust
power of the Company and such Pledgor, as the case may be, have been duly
authorized by, and are not in conflict with the terms of any charter, by-laws,
trust instrument or other organization papers, as applicable, of, the Company
and such Pledgor.

(j) No approval, consent, exemption or other action by, or notice to
or filing with, any governmental authority is necessary in connection with the
execution, delivery, performance or enforcement by the Company or such Pledgor
of this Agreement or any instrument or agreement required hereunder, except as
may have been obtained and certified copies of which have been delivered to
Administrative Agent.

(k) There is no law, rule or regulation, nor is there any judgment,
decree or order of any court or governmental authority binding on the Company or
such Pledgor, which would be contravened by the execution, delivery, performance
or enforcement by the Company or such Pledgor of this Agreement or

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any instrument or agreement required hereunder.

(l) This Agreement is a legal, valid and binding agreement of the
Company and such Pledgor, enforceable against the Company and such Pledgor in
accordance with its terms, and any instrument or agreement required hereunder,
when executed and delivered, will be similarly legal, valid, binding and
enforceable, except where enforceability thereof may be limited by applicable
law relating to bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally or by the application of general
principles of equity.

(m) There is no action, suit or proceeding pending against, or to the
knowledge of the Company or such Pledgor, threatened against or affecting the
Company or such Pledgor, before any court or arbitrator or any governmental
body, agency or official which in any manner draws into question the validity or
enforceability of this Agreement.

(n) The execution, delivery and performance by the Company and such
Pledgor of this Agreement do not and would not be expected to conflict with or
result in any breach or contravention of, or the creation of any Lien under, any
document evidencing any Contractual Obligation to which the Company or such
Pledgor is a party.

4. Further Assurances; Supplements.

(a) The Company and each Pledgor agree that from time to time, at the
expense of such Person, it will promptly execute and deliver all further
instruments and documents, and take all further action that may be necessary or
desirable, or that the Administrative Agent may reasonably request, in order to
perfect the Liens granted or purported to be granted hereby or to enable the
Administrative Agent to exercise and enforce its rights and remedies hereunder.
Without limiting the generality of the foregoing, the Company and each Pledgor
will execute and deliver to Administrative Agent such financing or continuation
statements, or amendments thereto, and such other instruments, endorsements or
notices, as may be necessary or desirable, or as the Administrative Agent may
reasonably request, in order to perfect and preserve the Liens granted or
purported to be granted hereby.

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(b) The Company and each Pledgor hereby authorize the Administrative
Agent to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature of
such Pledgor where permitted by law.

(c) The Company or each Pledgor shall pay all filing, registration and
recording fees or refiling, re-registration and re-recording fees, and all
expenses, incident to its execution and acknowledgement of this Agreement, any
agreement supplemental hereto and any instruments of further assurance, and all
federal, state, county and municipal stamp taxes and other taxes, duties,
imposts, assessments and charges arising out of or in connection with its
execution and delivery of this Agreement, any agreement supplemental hereto and
any instruments of further assurance.

(d) Each Pledgor shall warrant and defend title to the Collateral
against the claims and demands of all Persons (other than the Secured Parties or
any Person claiming by or through any Secured Party) whomsoever.

(e) Each Pledgor shall, upon obtaining any additional shares of the
Company or any other securities constituting Collateral, and the Company shall,
when required to do so by Section 18 hereof, cause the owner of such shares of
the Company to, promptly deliver to the Administrative Agent a duly executed
Pledge Agreement Supplement in substantially the form of Schedule 2 hereto (a
"Pledge Agreement Supplement") identifying the additional shares which are being
pledged. Each Pledgor hereby authorizes the Administrative Agent to attach each
Pledge Agreement Supplement to this Agreement and agrees that all shares listed
on any Pledge Agreement Supplement delivered to the Administrative Agent shall
for all purposes hereunder constitute Collateral. Upon any person pledging
shares hereunder, such person shall be deemed a Pledgor hereunder.

5. Covenants of Pledgors and Company.

(a) Each Pledgor shall pay, before any fine, penalty, interest or cost
attaches thereto, all taxes, assessments and other governmental or
non-governmental charges or levies now or hereafter assessed or levied against
its Pledged Shares or upon the Liens provided for herein as well as pay, or
cause to be

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paid, all claims for labor, materials or supplies which, if unpaid, might by law
become a Lien (other than a Permitted Lien) thereon, and will retain copies of,
and, upon request, permit the Administrative Agent or any other Secured Party to
examine, receipts showing payment of any of the foregoing; provided, that no
Pledgor shall be required to pay any such tax, assessment, charge or levy, the
validity of which is being contested in good faith by appropriate proceedings.

(b) Each Pledgor shall give the Administrative Agent at least 30 days'
prior written notice before it changes the location of its chief executive
office or the office where it keeps the Records and shall at the expense of such
Pledgor execute and deliver such instruments and documents as required to
maintain a prior perfected security interest and as reasonably requested by the
Administrative Agent. Each Pledgor will hold and preserve all Records and will,
upon reasonable request by the Administrative Agent or any Secured party at any
time during normal business hours, permit the Administrative Agent or any
Secured Party to inspect and make abstracts from such Records.

(d) No Pledgor shall create or suffer to exist any Lien upon or with
respect to any of the Collateral except for the security interest created by
this Agreement or the Credit Agreement, and will defend the right, title and
interest of the Administrative Agent in and to such Pledgor's rights to the
Collateral against the claims and demands of all Persons whatsoever.

(e) Each Pledgor will, upon becoming aware of such event, notify the
Administrative Agent promptly, in reasonable detail, (i) of any material claim
made or asserted against the Collateral by any Person; (ii) of any event which
could reasonably be expected to have a material adverse effect on the value of
the Collateral; (iii) of any event which could reasonably be expected to have a
material adverse effect on the ability of the Administrative Agent to dispose of
the Collateral or the rights and remedies of the Administrative Agent; and (iv)
of the occurrence of any other event which would have a material adverse effect
on the Collateral or on the security interest

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created hereunder.

(f) Each Pledgor agrees that it will use its best efforts to cause the
Company not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares except: (i) to a Pledgor, (ii) any stock
options issued to employees of the Company and any shares of capital stock of
the Company issuable upon the exercise of such options, and (iii) shares of
common stock of the Company not exceeding 15% of the shares of common stock of
the Company outstanding on the date of issuance after giving effect to such
issuance.

(g) Each Pledgor which is a trust agrees to immediately notify the
Administrative Agent if: (a) its Trust is revoked or terminated; (b) its Trust
is amended, in which case such Pledgor agrees to also provide the Administrative
Agent with correct copies of the amendment(s); or (c) one or more trustee(s)
change, in which case such Pledgor also agrees to provide the Administrative
Agent with signature exemplars of any new trustee(s).

(h) The Company will not issue any Voting Stock except in compliance
with Section 18.

6. Voting Rights, Dividends, Etc.

(a) So long as no Event of Default shall have occurred and be
continuing (and, in the case of paragraph (i) below, so long as written notice
has not been given by the Administrative Agent to any Pledgor):

(i) each Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or any Loan Documents;

(ii) each Pledgor shall be entitled to receive and retain free
and clear of any security interest under this Agreement any and all
dividends paid in respect of the Collateral, other than any and all:

(A) instruments and other property received,

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receivable or otherwise distributed in exchange for, any
Collateral,

(B) dividends and other distributions paid or payable in cash in
respect of any Collateral in connection with a partial or total liquidation
or dissolution or in connection with a reduction of capital, capital
surplus or paid-in-surplus, and

(C) cash paid, payable or otherwise distributed in redemption of,
or in exchange for, any Collateral all of which shall be, and all of which
shall be forthwith delivered to the Administrative Agent to hold as,
Collateral and shall, if received by each Pledgor, be received in trust for
the benefit of the Administrative Agent, be segregated from the other
property or funds of each Pledgor, and be forthwith delivered to the
Administrative Agent as Collateral in the same form as so received (with
any necessary endorsement).

(iii) The Administrative Agent shall execute and deliver (or
cause to be executed and delivered) to each Pledgor all such proxies and
other instruments as each Pledgor may reasonably request for the purpose of
enabling each Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends which it is authorized to receive and retain pursuant to
paragraph (ii) above.

(b) If an Event of Default has occurred and is
continuing:

(i) All rights of each Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant
to Section 6(a)(i) above shall cease upon written notice thereof from the
Administrative Agent, and all such rights shall thereupon become vested in
the Administrative Agent who shall thereupon have the sole right to
exercise such voting and other consensual rights.

(ii) All rights of each Pledgor to receive the
dividends which it would otherwise be authorized to receive

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and retain pursuant to Section 6(a)(ii) above shall cease, and all such
rights shall thereupon become vested in the Administrative Agent who shall
thereupon have the sole right to receive and hold as Collateral such
dividends.

(iii) All dividends which are received by any Pledgor contrary to
the provisions of Section 6(a)(ii) shall be received in trust for the
benefit of the Administrative Agent, shall be segregated from other funds
of each Pledgor and shall be forthwith paid over to the Administrative
Agent as Collateral in the same form as so received (with any necessary
endorsement).

(c) In order to permit the Administrative Agent to exercise the voting
and other rights which it may be entitled to exercise pursuant to Section
6(a)(i) above, and to receive all dividends and distributions which it may be
entitled to receive under Section 6(a)(ii) above, each Pledgor shall, if
necessary, upon written notice from the Administrative Agent, from time to time
during the continuance of an Event of Default execute and deliver to the
Administrative Agent appropriate dividend payment orders and other instruments
as the Administrative Agent may reasonably request.

7. Administrative Agent Appointed Attorney-in-Fact. The Company and
each Pledgor hereby irrevocably appoints the Administrative Agent the Company's
and such Pledgor's attorney-in-fact (which appointment as attorney-in-fact shall
be coupled with an interest), with full authority to act in the place and stead
of the Company and such Pledgor and in the name of the Company and such Pledgor
or otherwise, from time to time if an Event of Default has occurred and is
continuing or to the extent contemplated by Section 8 hereof in the
Administrative Agent's discretion to take any action and to execute any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, to
ask, demand, collect, sue for, recover, compound, receive and give acquittance
and receipts for moneys due and to become due under or in connection with the
Collateral, to receive, enforce Section 18, indorse and collect any drafts or
other instruments, documents and chattel paper in connection therewith, and to
file any claims or take any action or institute any proceedings which the
Administrative Agent may deem to be

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necessary or desirable for the collection thereof or to enforce compliance with
the terms and conditions of the Assigned Agreements or this Agreement.
Notwithstanding the foregoing, the Administrative Agent shall not be obligated
to exercise any right or duty as attorney-in-fact, and shall have no duties to
the Assignor in connection therewith.

8. Administrative Agent May Perform.

(a) If the Company or any Pledgor fails to perform or comply with any
of its agreements contained herein, the Administrative Agent may, as provided
for by the terms of this Agreement, itself perform or comply, or otherwise cause
performance or compliance, with such Agreement. The reasonable expenses of the
Administrative Agent incurred in connection with such performance or compliance
shall be payable by the Company and each Pledgor to the Administrative Agent and
shall constitute Obligations secured hereby; provided, that the payment to the
Administrative Agent shall be made solely through the application of proceeds in
accordance with Section 9(a) hereof. The Administrative Agent agrees to notify
the Company and the Pledgors promptly after incurring any expenses pursuant to
this Section 8; provided, however, that the failure to provide such notice shall
not affect the Administrative Agent's right to reimbursement from the Company
and each Pledgor.

(b) The Administrative Agent shall use reasonable care with respect to
the Collateral in its possession or under its control. Except as set forth in
the preceding sentence, the Administrative Agent shall not have any duty as to
any Collateral in its possession or control or in the possession or control of
any agent or nominee of it or as to any income thereon or as to the preservation
of rights against parties or any other rights pertaining thereto.

9. Rights and Remedies.

(a) If (i) an Event of Default shall have occurred and be continuing
and (ii) any of the Obligations shall have been declared to be, or shall have
become, due and payable, then, in addition to any other rights and remedies
provided for herein or which may otherwise be available, the Administrative
Agent may, without any further demand, advertisement or notice (except as

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expressly provided for below in this Section 9(a)), exercise all the rights and
remedies of a secured party under the Uniform Commercial Code of the State of
New York (the "UCC") (whether or not the UCC applies to the affected
Collateral), and in addition: (i) may apply the moneys, if any, then held by it
as part of the Collateral, for the following purposes and in the following
order:

(1) first, to the payment of (A) all costs and expenses relating to
the sale of the Collateral and collection of amounts owing hereunder,
including reasonable attorneys' fees and disbursements and the just
compensation of the Administrative Agent for services rendered in
connection therewith or in connection with any proceeding to sell if a sale
is not completed, and (B) all charges, expenses and advances incurred or
made by the Administrative Agent in order to protect the Lien of this
Agreement or the security afforded hereby, together with interest at the
rate specified in Section 2.10(c) of the Credit Agreement;

(2) second, to the payment in full of all of the Obligations owed to
the Secured Parties hereunder or under any Loan Document (to be paid to the
Secured Parties in accordance with the aggregate outstanding amounts of
such Obligations owed to each Secured Party); and

(3) third, the balance, if any, shall be paid to each Pledgor or to
such other Person as shall be lawfully entitled to receive such surplus (as
determined by a court of competent jurisdiction, if such procedure is
available under applicable law);

and (ii) if there shall be no such moneys or the moneys so applied shall be
insufficient to satisfy in full all Obligations, may sell the Collateral, or any
part thereof, as hereinafter provided in this Section 9(a) and otherwise to the
fullest extent permitted by law. The Collateral may be sold in one or more
sales, at public or private sale, conducted by any officer or agent of, or
auctioneer or attorney for, the Administrative Agent, at the Administrative
Agent's place of business or elsewhere, for cash, upon credit or for other
property, for immediate or future delivery, and at such price or prices and on
such terms as the Administrative Agent shall deem appropriate.

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The Administrative Agent or any other Secured Party may be the purchaser of any
or all of the Collateral so sold at a public sale and, to the extent permitted
by law, at a private sale and thereafter hold the same, absolutely free from any
right or claim of whatsoever kind, and, the obligations of each Pledgor to such
purchaser may be applied as a credit against the purchase price. The
Administrative Agent, may, in its sole discretion (in the case of Collateral
consisting of securities) or if commercially reasonable (in the case of all
other Collateral), at any such sale restrict the prospective bidders or
purchasers as to their number, nature of business and investment intention. Upon
any public or private sale the Administrative Agent shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser (including the Administrative Agent or any other Secured Party)
at any such sale shall hold the Collateral so sold, absolutely free from any
claim or right of whatsoever kind, including any equity or right of redemption,
of each Pledgor, and each Pledgor hereby specifically waives, to the full extent
it may lawfully do so, all rights of redemption, stay or appraisal which it has
or may have under any rule of law or statute now existing or hereafter adopted.
The Administrative Agent shall give each Pledgor at least ten days' notice
(which each Pledgor agrees is reasonable notification within the meaning of
Section 9-504(3) of the UCC) of any such public or private sale. Any public sale
shall be held at such time or times within ordinary business hours as the
Administrative Agent shall fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels. The
Administrative Agent shall not be obligated to make any sale pursuant to any
such notice. The Administrative Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for such sale, and any such
sale may be made at any time or place to which the same may be so adjourned
without further notice or publication. In case of any sale of all or any part of
the Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Administrative Agent until the full selling price is paid by the
purchaser thereof, but neither the Administrative Agent nor any other Secured
Party shall incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold, and, in case of any such failure, such
Collateral may again be sold pursuant to the

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provisions hereof.

(b) Instead of exercising the power of sale provided in Section 9(a)
hereof, the Administrative Agent may proceed by a suit or suits at law or in
equity to foreclose the security interest under this Agreement and sell the
Collateral or any portion thereof under a judgment or decree of a court or
courts of competent jurisdiction.

(c) The Administrative Agent as attorney-in-fact pursuant to Section 7
hereof may, in the name and stead of the Company and each Pledgor, make and
execute all conveyances, assignments and transfers of the Collateral sold
pursuant to Section 9(a) or Section 9(b) hereof, and the Company hereby ratifies
and confirms all that the Administrative Agent, as said attorney-in-fact, shall
do by virtue hereof. Nevertheless, the Company and each Pledgor shall, if so
requested by the Administrative Agent, ratify and confirm any sale or sales by
executing and delivering to the Administrative Agent, or to such purchaser or
purchasers, all such instruments as may, in the reasonable judgment of the
Administrative Agent, be advisable for the purpose.

(d) The receipt by the Administrative Agent of the purchase money paid
at any sale made by it shall be a sufficient discharge therefor to any purchaser
of the Collateral, or any portion thereof, sold as aforesaid; and no such
purchaser (or the representatives or assigns of such purchaser), after paying
such purchase money and receiving such receipt, shall be bound to see to the
application of such purchase money or any part thereof or in any manner
whatsoever be answerable for any loss, misapplication or nonapplication of any
such purchase money, or any part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.

(e) The Administrative Agent shall incur no liability as a result of
the sale of the Collateral, or any part thereof, at any private sale conducted
in a commercially reasonable manner. The Company and each Pledgor hereby waives,
to the full extent permitted by applicable law, any claims against the
Administrative Agent and/or any Secured Party arising by reason of the fact that
the price at which the Collateral, or any part thereof, may have been sold at a
private sale was less than the

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price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Administrative Agent accepts
the first offer received which the Administrative Agent in good faith deems to
be commercially reasonable under the circumstances and does not offer the
Collateral to more than one offeree. To the fullest extent permitted by law, the
Company and each Pledgor shall have the burden of proving that any such sale of
the Collateral was conducted in a commercially unreasonable manner.

(f) Each and every right and remedy of the Administrative Agent shall,
to the extent permitted by law, be cumulative and shall be in addition to any
other remedy given hereunder or under the Credit Agreement or now or hereafter
existing at law or in equity or by statute.

(g) The Administrative Agent may participate in any recapitalization,
reclassification, reorganization, consolidation, redemption, stock split,
merger, or liquidation of the Company, and in connection therewith deposit or
surrender control of the Collateral, accept money or other property in exchange
for the Collateral, and take such action as deemed proper by the Administrative
Agent in connection therewith, and any other money or property received in
exchange for the Collateral shall be applied to satisfy the Obligations or held
by the Administrative Agent thereafter as Collateral pursuant to the provisions
hereof.

10. Sales of Pledged Shares.

(a) If, at any time during the continuance of an Event of Default, the
Administrative Agent in its sole discretion determines that in connection with
any actual or contemplated exercise of its rights to sell the whole or any part
of the Collateral hereunder, it is necessary or advisable to effect a public
registration of all or part of the Collateral pursuant to the Securities Act of
1933, as from time to time amended (or any similar statute then in effect) (the
"Securities Act"), the Company shall:

(i) prepare and file with the Securities and Exchange Commission (the
"SEC") a registration statement with respect to the Collateral and use its
reasonable best efforts to

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cause such registration statement to become and remain
effective;

(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to the sale
or other disposition of the Collateral covered by such registration
statement whenever the Administrative Agent shall desire to sell or
otherwise dispose of the Collateral;

(iii) furnish to the Administrative Agent such numbers of copies of a
prospectus and a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the
Administrative Agent may request in order to facilitate the public sale or
other disposition of the Collateral by the Administrative Agent;

(iv) use its reasonable best efforts to register or qualify the
Collateral covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States
of America as the Administrative Agent shall request, and do such other
reasonable acts and things as may be required of it to enable the
Administrative Agent to consummate the public sale or other disposition in
such jurisdictions of the Collateral by the Administrative Agent;

(v) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable an earnings statement
which shall satisfy the provisions of the Securities Act; and

(vi) do or cause to be done all such other acts as may be necessary to
make such sale of the Collateral or any part thereof valid and binding and
in compliance with applicable law.

(b) The Company and each Pledgor recognizes that, by
reason of the aforementioned requirements and certain

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prohibitions contained in the Securities Act and applicable state securities
laws, the Administrative Agent may, at its option, elect not to require the
Company and each Pledgor to register all or any part of the Collateral and may
therefore be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire such securities for their own account, for investment, and not with a
view to the distribution or resale thereof. The Company and each Pledgor
acknowledges and agrees that any such sale may result in prices and other terms
less favorable to the seller than if such sale were a public sale without such
restrictions and, notwithstanding such circumstances, agrees that any such sale
conducted in good faith shall be deemed to have been made in a commercially
reasonable manner. The Administrative Agent shall be under no obligation to
delay the sale of any of the Pledged Shares for the period of time necessary to
permit the Company or any Pledgor to register such securities for public sale
under the Securities Act, or under applicable state securities laws, even if the
Company or such Pledgor would agree to do so.

(c) If the Administrative Agent determines to exercise its right to
sell any or all of the Collateral, upon written request, the Company and each
Pledgor shall and shall cause, each of its Subsidiaries to, from time to time,
furnish to the Administrative Agent all such information as the Administrative
Agent may request in order to determine the number of shares and other
instruments included in the Collateral which may be sold by the Administrative
Agent as exempt transactions under the Securities Act and rules of the SEC
thereunder, as the same are from time to time in effect.

11. Continuing Assignment and Security Interest;
Transfer of Notes. This Agreement shall create a continuing
assignment of and security interest in the Collateral and shall
(a) remain in full force and effect until payment in full of the
Obligations and all other amounts owing to each Secured Party
under any Loan Documents and the termination or expiration of the
Commitments, (b) be binding upon the Company and each Pledgor,
its successors and assigns and (c) inure, together with the
rights and remedies of the Administrative Agent hereunder, to the
benefit of the Administrative Agent and the Secured Parties and
their respective successors, transferees and assigns. Without

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limiting the generality of the foregoing, any Bank may assign or otherwise
transfer its rights and obligations under any Loan Document to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the benefits in respect thereof granted to such Bank herein or otherwise,
all as provided in, and to the extent set forth in, the Loan Documents. Neither
the Company nor any Pledgor may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent. Upon the payment in full of the Obligations and
termination of the commitments (exclusive of future, contingent or unliquidated
amounts arising under indemnity agreements), the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to each
Pledgor. Upon any such termination, the Administrative Agent will, at each
Pledgor's expense, execute and deliver to each Pledgor such documents as each
Pledgor shall reasonably request to evidence such termination.

12. No Notices, etc. No Secured Party shall be under any duty or
obligation whatsoever (a) to make or give any presentments, demands for
performances, notices of nonperformance, protests, notices of protest or notices
of dishonor in connection with any Obligations or evidences of Obligations held
by Secured Parties as Collateral, or in connection with any Obligation or
evidences of Obligations which constitute in whole or in part the Obligations
secured hereunder, or (b) to give the Company or any Pledgor notice of, or to
exercise any subscription rights or privileges, any rights or privileges to
exchange, convert or redeem or any other rights or privileges relating to or
affecting any Collateral held by Secured Parties.

13. Delivery of Collateral. Secured Parties may at any time cause the
Administrative Agent to deliver the Collateral or any part thereof to Pledgors
and the receipt of Pledgors shall be a complete and full acquittance for the
Collateral so delivered, and Secured Parties shall thereafter be discharged from
any liability or responsibility therefor.

14. Primary Obligation. The Company and each Pledgor
acknowledges and agrees that each is directly and primarily
liable to the Secured Parties with respect to its obligations
under this Agreement, that its obligations under this Agreement

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are independent of Company's obligations under the Credit Agreement, and that a
separate action or actions may be brought and prosecuted against the Company or
any Pledgor to enforce this Agreement, whether or not action is brought against
Company or any other Pledgor or whether or not the Company or any other Pledgor
is joined in any such action or actions. The Company and each Pledgor
acknowledges and agrees that any release which may be given by the Secured
Parties to the Company or any other Pledgor shall not release the Company or any
Pledgor from its obligations under this Agreement.

15. Waivers. The obligations of the Company and each Pledgor under
this Agreement shall not be affected, modified or impaired as a result of the
occurrence from time to time of any of the following, whether or not with notice
to or the consent of the Company or any Pledgor; (a) the compromise, settlement,
change, modification, amendment (whether material or otherwise) or partial
termination of any or all of the Obligations under any Loan Document; (b) the
failure to give notice to the Company or any Pledgor of the occurrence of any
default under the terms and provisions of any Loan Document; (c) the waiver of
the payment, performance or observance of any of Company's Obligations under any
Loan Document; (d) the taking or omitting to take any actions referred to in any
Loan Document; (e) any failure, omission or delay on the part of the Secured
Parties to enforce, assert or exercise any right, power or remedy conferred in
this Agreement, any Loan Document or any other indulgence or similar act on the
part of the Secured Parties in compliance with applicable law; or (f) the
voluntary or involuntary liquidation, dissolution, sale or other disposition of
all or substantially all of the assets, marshalling or assets, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors or readjustment
of, or other similar proceedings which affect, Company or any of the assets of
the Company, or any allegation of invalidity or contest of the validity of this
Agreement in any such proceeding. The Company and each Pledgor waives any right
to require any Secured Party to (a) proceed against any person, (b) proceed
against or exhaust any Collateral, (c) pursue any other remedy in such Secured
Party's power. The Company and each Pledgor hereby waives: (i) any and all
rights to require the Secured Parties to prosecute or to seek to enforce any
remedies against Company or any other party liable to the Secured Parties with
respect to Company's obligations under any Loan Document or to otherwise

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mitigate the Company's or any Pledgors's obligations under this Agreement; (ii)
any right to assert against the Secured Parties with respect to the Company's or
Pledgors's obligations under this Agreement any defense (legal or equitable),
set-off, counterclaim, or claim which Pledgors may now or at any time hereafter
have against the Secured Parties, Company or any other party liable to the
Secured Parties in any way or manner under any Loan Document; (iii) all
defenses, counterclaims and off-sets of any kind or nature, arising directly or
indirectly from the present or future lack of perfection, sufficiency, validity
or enforceability of any Loan Document; and (iv) all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of default in connection with any Loan Document, notice of
acceptance of this Agreement and notice of the existence, creation or incurring
of new or additional Obligations under any Loan Document, and all other notices
or formalities to which Pledgors may be entitled with respect to any Loan
Document.

16. No Subrogation. Each Pledgor hereby agrees that unless and until
all Obligations (exclusive of future, contingent or unliquidated amounts arising
under indemnity agreements) have been paid in full to the Secured Parties, it
shall not have any rights of subrogation, reimbursement or contribution against
Company arising as a result of the performance of this Agreement, and shall not
seek to assert or enforce any such rights. Each Pledgor acknowledges that the
exercise by the Secured Parties of certain rights and remedies contained in any
Loan Document may affect or eliminate such Pledgors's right of subrogation, if
any, against Company arising as a result of its performance of this Agreement
and that such Pledgor may therefore incur a partially or totally nonreimbursable
liability hereunder, and each Pledgor hereby agrees that the Secured Parties may
in its sole discretion exercise any such right or remedy.

17. Attorneys Fees.

(a) The Company agrees to pay to each Secured Party the amount of
any and all expenses, including expenses incurred by the Administrative Agent,
and the reasonable fees and expenses of its counsel (including, without
limitation, the allocated cost of in-house counsel) and of any experts, which
such Secured Party may incur in connection with (i) the custody

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or preservation of, or the sale of, collection from, or other realization upon,
any of the Collateral; (ii) the exercise or enforcement of any of the rights of
any Secured Party hereunder; or (iii) the failure by the Company or any Pledgor
to perform or observe any of the provisions hereof; provided that the payment of
such sums shall be made to the Secured Parties solely through the application of
proceeds in accordance with Section 9(a) hereof.

(b) The Company agrees to indemnify and hold each Secured Party
harmless from and against any taxes, liabilities, claims and damages, including
attorney's fees and disbursements (including, without limitation, the allocated
cost of in-house counsel), and other expenses incurred or arising by reason of
the taking or the failure to take action by any Secured Party in respect of any
transaction effected under this Agreement or in connection with the Lien
provided for herein, including, without limitation, any taxes payable with
respect to the Collateral or in connection with any transaction contemplated by
this Agreement and any and all costs, losses, liabilities, claims, damages or
expenses incurred by any Secured Party arising out of any investigation,
litigation or other proceeding related to this Agreement or any transaction
contemplated hereby, except for the gross negligence and willful misconduct of
such Secured Party; provided, that such indemnification shall be made to the
Secured Parties solely through the application of proceeds in accordance with
Section 9(a) hereof.

18. Future Voting Stock. If (i) The Peble Corp. or The Pebble Group,
Ltd., converts any of its Class B Common Stock into Voting Stock, and at such
time that certain Voting Proxy defined in Section 5.13(c) of the Credit
Agreement is no longer in effect, or (ii) any other shareholder converts any of
its Class B Common Stock into Voting Stock, the Mitchell Family shall, within 30
days, in the aggregate, convert a sufficient number of its shares of Class B
Common Stock into Voting Stock so as to hold not less than a majority of the
Voting Stock pledged hereunder. The Pledgors represent and warrant that there
are no restrictions on the Mitchell Family converting its Class B Common Stock
into Voting Stock at any time, and covenant not to agree,

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directly or indirectly, to any such restrictions.

19. Miscellaneous.

(a) Headings used in this Agreement are for convenience of
reference only and do not constitute part of this Agreement for any purpose.

(b) No failure on the part of the Administrative Agent or any of
its agents to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Administrative Agent or
any of its agents of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.

(c) If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, the other provisions
hereof shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Administrative Agent and the Banks in order
to carry out the intentions of the parties hereto as nearly as may be possible
and the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.

(d) The Administrative Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.

(e) The agreements of the parties hereto are solely for the
benefit of the Secured Parties, and no Person (other than the parties hereto and
the Secured Parties) shall have any rights hereunder.

(f) No amendment or waiver of any provision of this Agreement nor
consent to any departure by the Company or any Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by the
Administrative Agent, the

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Company and each Pledgor, and then such waiver or consent shall be effective
only in the specific instance and for the specified purpose for which given.

(g) All notices, requests, demands, waivers or other
communications to or upon the respective parties hereto shall be in writing
delivered in person, by mail postage prepaid, by nationally recognized overnight
courier or by telecopy and shall be deemed to have been duly given or made when
received, if mailed or delivered by courier, or when personally delivered or
transmitted by telecopy, addressed to the party to which such notice, request,
demand, waiver or other communication is required or permitted to be given or
made hereunder at, if to the Pledgors or the Company, the address for the
Company set forth in Schedule 10.2 to the Credit Agreement and if to the
Administrative Agent, the address set forth for the Administrative Agent in the
Credit Agreement, or such other address of which such party shall have notified
in writing the party giving such notice.

20. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, AND EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, ARE GOVERNED BY THE LAW OF ANY JURISDICTION OTHER THAN
THE STATE OF NEW YORK. TERMS USED IN ARTICLE 9 OF THE UCC ARE USED HEREIN AS
THEREIN DEFINED.

21. Waiver of Jury Trial. EACH PARTY HERETO WAIVES THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH PARTY HERETO AGREES THAT ANY SUCH CLAIM
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR

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MODIFICATIONS
TO THIS AGREEMENT.

22. Consent to Amendment and Restatement. The Pledgors hereby consent
to the amendment and restatement of the Existing Credit Facility on the terms
and conditions of the Credit Agreement and represent and warrant to the
Administrative Agent and the Banks that there is no defense, counterclaim or
offset of any type or nature under this Agreement, and that this Agreement is in
full force and effect as to them after giving effect hereto and thereto.

161

<PAGE>

IN WITNESS WHEREOF, the parties hereto, by their officers duly
authorized, have caused this Agreement to be duly executed and delivered as of
the day and year first above written.

CINEMARK USA, INC.

By:
Title:

PLEDGORS:

LEE ROY MITCHELL

TANDY MITCHELL, SPOUSE OF
LEE ROY MITCHELL

MITCHELL SPECIAL TRUST
MITCHELL GRANDCHILDREN
TRUST FOR CRYSTAL LEE
ROBERTS
MITCHELL GRANDCHILDREN
TRUST FOR CASSIE ANN
ROBERTS
MITCHELL GRANDCHILDREN
TRUST FOR LASEY MARIE LEE
MITCHELL GRANDCHILDREN
TRUST FOR ASHLEY ANN LEE
MITCHELL GRANDCHILDREN
TRUST FOR SKYLER KAYE
MITCHELL

By:
Trustee

Agreed to:

162

<PAGE>

BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Administrative Agent

By:
David Price
Vice President

163

<PAGE>

SCHEDULE 1
TO
FIRST AMENDED AND RESTATED MITCHELL PLEDGE AGREEMENT

Attached to and forming a part of that certain First Amended and Restated
Mitchell Family Pledge Agreement dated as of December 12, 1996 made by the
Company and the Pledgors named therein to Bank of America National Trust and
Savings Association, as Administrative Agent

% of Total
Outstanding
No. of Capital Stock
Pledgors Cert. No. Class Shares in Class

Lee Roy Mitchell 38 A 1,500 .835%

Lee Roy Mitchell 31 B 3,854 2.145%

Mitchell Special Trust 32 B 14,667 8.165%

Mitchell Grandchildren
Trust for Crystal Lee
Roberts 33 B 254 .141%

Mitchell Grandchildren
Trust for Cassie Ann
Roberts 34 B 254 .141%

Mitchell Grandchildren
Trust for Lasey Marie Lee 35 B 254 .141%

Mitchell Grandchildren
Trust for Ashley Ann Lee 36 B 254 .141%

Mitchell Grandchildren
Trust for Skyler Kaye
Mitchell 37 B 254 .141%

Lee Roy Mitchell 43 B 73,833 41.101%

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TOTAL CLASS A COMMON STOCK PLEDGED: 1,500
TOTAL CLASS B COMMON STOCK PLEDGED: 93,624

165

<PAGE>

SCHEDULE 2
TO
FIRST AMENDED AND RESTATED MITCHELL FAMILY PLEDGE AGREEMENT

PLEDGE AGREEMENT SUPPLEMENT

This Pledge Agreement Supplement, dated as of , is delivered pursuant
to Section 4 of the Pledge Agreement
referred to below. The undersigned hereby agrees that this Pledge Agreement
Supplement may be attached to the First Amended and Restated Mitchell Family
Pledge Agreement, dated as of December 12, 1996 (the "Pledge Agreement", the
terms defined therein and not otherwise defined herein being used as therein
defined), made by the Company and the Pledgors to Bank of America National Trust
and Savings Association as Administrative Agent for its benefit and the benefit
of the Secured Parties and that the shares listed on this Pledge Agreement
Supplement shall be and become part of the Collateral referred to in the Pledge
Agreement and shall secure all Obligations.

The undersigned agrees that the securities listed below shall for all
purposes constitute Collateral and shall be subject to the security interest
created by the Pledge Agreement.

The undersigned hereby certifies that the representations and
warranties set forth in Section 3 of the Pledge Agreement are true and correct
as to the Collateral listed herein on and as of the date hereof.

[For new Pledgors only : The undersigned agrees to become a party to
the Pledge Agreement as a Pledgor thereunder and agrees to be bound thereby as
if a signatory thereto. The notice address for new Pledgors is set forth
underneath the signature below.]

[PLEDGOR]

By:
Title:

Address (new Pledgors only):

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<PAGE>

Class Stock Percentage Number
Stock of Certificate of Par of
Issuer Stock No(s). Ownership Value Shares

167

<PAGE>

SCHEDULE 3
TO
FIRST AMENDED AND RESTATED MITCHELL PLEDGE AGREEMENT

1. Shareholders' Agreement dated March 12, 1996 among the
Company, the Pledgor, Cypress Merchant Banking Partners,
L.P. and Cypress Pictures Ltd.

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<PAGE>

SCHEDULE 4
TO
FIRST AMENDED AND RESTATED MITCHELL PLEDGE AGREEMENT

TRUST AGREEMENTS

1. The Mitchell Special Trust

2. The Mitchell Grandchildren's Trust for Crystal Lee Roberts

3. The Mitchell Grandchildren's Trust for Cassie Ann Roberts

4. The Mitchell Grandchildren's Trust for Lasey Marie Lee

5. The Mitchell Grandchildren's Trust for Ashley Ann Lee

6. The Mitchell Grandchildren's Trust for Skyler Kaye Mitchell

169

<PAGE>

EXHIBIT 10.12(c)

170

<PAGE>

NOTE

$50,000,000 December 12, 1996

FOR VALUE RECEIVED, the undersigned CINEMARK USA, INC. (the "Company")
promises to pay to the order of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Bank") on the Maturity Date the principal amount of
$50,000,000 or, if less, the unpaid principal amount of Loans owing to the Bank
pursuant to that certain First Amended and Restated Credit Agreement dated as of
December 12, 1996, among the Company, the Banks which are from time to time
parties thereto and Bank of America National Trust and Savings Association, as
Administrative Agent (in such capacity, the "Administrative Agent") (as amended,
restated, extended or otherwise modified from time to time, the "Credit
Agreement").

The Company also promises to pay interest on the unpaid principal amount
hereof until maturity (whether by acceleration or otherwise), and also to pay
interest after maturity on amounts not paid when due and until paid in full, at
the rates per annum and on the dates specified in the Credit Agreement.

This Note is one of the Notes referred to in the Credit Agreement, to
which reference is made for a statement of the terms and conditions on which the
Company is permitted and required to make prepayments and repayments of
principal of the Loans evidenced by this Note and on which such Loans may be
declared to be immediately due and payable.

All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of Bank of America National Trust and Savings Association, ABA No.
121-000-358, for credit to: BANCONTROL Account No. 12332-14226, Reference:
Cinemark USA, Inc., or at such other place as shall be designated in writing for
such purpose in accordance with the terms of the Credit Agreement.

The principal amount, interest periods, the interest rates applicable,
maturity and each payment of interest and principal of the Loans shall be
recorded and endorsed on the grid attached to this Note; provided, however, that
the failure by the Bank to make any

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<PAGE>

such recordation or endorsement shall not limit or otherwise affect the
obligations of the Company hereunder or under the Credit Agreement, nor the
validity of any payment made by the Company. In any event, the Bank's records
shall be conclusive evidence, absent manifest error, of any Loan, interest
periods, rates of interests, maturities and payments thereunder.

This Note is one of the notes described in the Credit Agreement and the
Bank, or any holder hereof, is entitled to all the rights, including
acceleration rights, remedies, security, benefits and privileges provided for in
the Credit Agreement. Terms not defined herein have the meanings assigned to
them in the Credit Agreement. This Note amends and restates the prior notes
given by the Company to any Bank party to the Credit Agreement dated as of
February 14, 1996, among the Company, the banks party thereto and Bank of
America National Trust and Savings Association, as agent. All amounts evidenced
thereby are deemed evidenced hereby.

The Company hereby promises to pay all out-of-pocket expenses and
reasonable attorneys' fees (including any allocated fees and costs of in-house
legal staff) incurred in the collection or enforcement of this Note.

The Company hereby waives notice of default, presentment, demand for
payment, protest and any notice of nonpayment or dishonor.

THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.

CINEMARK USA, INC.

By:

Title:

172

<PAGE>

EXHIBIT 10.12(d)

173

<PAGE>

NOTE

$35,000,000 December 12, 1996

FOR VALUE RECEIVED, the undersigned CINEMARK USA, INC. (the "Company")
promises to pay to the order of NATIONSBANK OF TEXAS, N.A. (the "Bank") on the
Maturity Date the principal amount of $35,000,000 or, if less, the unpaid
principal amount of Loans owing to the Bank pursuant to that certain First
Amended and Restated Credit Agreement dated as of December 12, 1996, among the
Company, the Banks which are from time to time parties thereto and Bank of
America National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") (as amended, restated, extended or
otherwise modified from time to time, the "Credit Agreement").

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<PAGE>

the obligations of the Company hereunder or under the Credit Agreement, nor the
validity of any payment made by the Company. In any event, the Bank's records
shall be conclusive evidence, absent manifest error, of any Loan, interest
periods, rates of interests, maturities and payments thereunder.

The Company hereby waives notice of default, presentment, demand for
payment, protest and any notice of nonpayment or dishonor.

THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.

CINEMARK USA, INC.

By:

Title:

175

<PAGE>

EXHIBIT 10.12(e)

176

<PAGE>

NOTE

$20,000,000 December 12, 1996

FOR VALUE RECEIVED, the undersigned CINEMARK USA, INC. (the "Company")
promises to pay to the order of THE FIRST NATIONAL BANK OF BOSTON (the "Bank")
on the Maturity Date the principal amount of $20,000,000 or, if less, the unpaid
principal amount of Loans owing to the Bank pursuant to that certain First
Amended and Restated Credit Agreement dated as of December 12, 1996, among the
Company, the Banks which are from time to time parties thereto and Bank of
America National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") (as amended, restated, extended or
otherwise modified from time to time, the "Credit Agreement").

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<PAGE>

The Company hereby waives notice of default, presentment, demand for
payment, protest and any notice of nonpayment or dishonor.

THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.

CINEMARK USA, INC.

By:

Title:

178

<PAGE>

EXHIBIT 10.12(f)

179

<PAGE>

NOTE

$15,000,000 December 12, 1996

FOR VALUE RECEIVED, the undersigned CINEMARK USA, INC. (the "Company")
promises to pay to the order of FLEET BANK, N.A. (the "Bank") on the Maturity
Date the principal amount of $15,000,000 or, if less, the unpaid principal
amount of Loans owing to the Bank pursuant to that certain First Amended and
Restated Credit Agreement dated as of December 12, 1996, among the Company, the
Banks which are from time to time parties thereto and Bank of America National
Trust and Savings Association, as Administrative Agent (in such capacity, the
"Administrative Agent") (as amended, restated, extended or otherwise modified
from time to time, the "Credit Agreement").

180

<PAGE>

The Company hereby waives notice of default, presentment, demand for
payment, protest and any notice of nonpayment or dishonor.

THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.

CINEMARK USA, INC.

By:

Title:

181

<PAGE>

EXHIBIT 10.12(g)

182

<PAGE>

NOTE

$15,000,000 December 12, 1996

FOR VALUE RECEIVED, the undersigned CINEMARK USA, INC. (the "Company")
promises to pay to the order of THE FUJI BANK, LIMITED (the "Bank") on the
Maturity Date the principal amount of $15,000,000 or, if less, the unpaid
principal amount of Loans owing to the Bank pursuant to that certain First
Amended and Restated Credit Agreement dated as of December 12, 1996, among the
Company, the Banks which are from time to time parties thereto and Bank of
America National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") (as amended, restated, extended or
otherwise modified from time to time, the "Credit Agreement").

183

<PAGE>

The Company hereby waives notice of default, presentment, demand for
payment, protest and any notice of nonpayment or dishonor.

THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.

CINEMARK USA, INC.

By:

Title:

184

<PAGE>

EXHIBIT 10.12(h)

185

<PAGE>

NOTE

$25,000,000 December 12, 1996

FOR VALUE RECEIVED, the undersigned CINEMARK USA, INC. (the "Company")
promises to pay to the order of THE BANK OF NEW YORK (the "Bank") on the
Maturity Date the principal amount of $25,000,000 or, if less, the unpaid
principal amount of Loans owing to the Bank pursuant to that certain First
Amended and Restated Credit Agreement dated as of December 12, 1996, among the
Company, the Banks which are from time to time parties thereto and Bank of
America National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") (as amended, restated, extended or
otherwise modified from time to time, the "Credit Agreement").

186

<PAGE>

The Company hereby waives notice of default, presentment, demand for
payment, protest and any notice of nonpayment or dishonor.

THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.

CINEMARK USA, INC.

By:

Title:

187

<PAGE>

EXHIBIT 10.12(i)

188

<PAGE>

NOTE

$25,000,000 December 12, 1996

FOR VALUE RECEIVED, the undersigned CINEMARK USA, INC. (the "Company")
promises to pay to the order of CIBC INC. (the "Bank") on the Maturity Date the
principal amount of $25,000,000 or, if less, the unpaid principal amount of
Loans owing to the Bank pursuant to that certain First Amended and Restated
Credit Agreement dated as of December 12, 1996, among the Company, the Banks
which are from time to time parties thereto and Bank of America National Trust
and Savings Association, as Administrative Agent (in such capacity, the
"Administrative Agent") (as amended, restated, extended or otherwise modified
from time to time, the "Credit Agreement").

189

<PAGE>

The Company hereby waives notice of default, presentment, demand for
payment, protest and any notice of nonpayment or dishonor.

THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.

CINEMARK USA, INC.

By:

Title:

190

<PAGE>

EXHIBIT 10.12(j)

191

<PAGE>

NOTE

$20,000,000 December 12, 1996

FOR VALUE RECEIVED, the undersigned CINEMARK USA, INC. (the "Company")
promises to pay to the order of THE BANK OF NOVA SCOTIA (the "Bank") on the
Maturity Date the principal amount of $20,000,000 or, if less, the unpaid
principal amount of Loans owing to the Bank pursuant to that certain First
Amended and Restated Credit Agreement dated as of December 12, 1996, among the
Company, the Banks which are from time to time parties thereto and Bank of
America National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") (as amended, restated, extended or
otherwise modified from time to time, the "Credit Agreement").

192

<PAGE>

The Company hereby waives notice of default, presentment, demand for
payment, protest and any notice of nonpayment or dishonor.

THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.

CINEMARK USA, INC.

By:

Title:

193

<PAGE>

EXHIBIT 10.12(k)

194

<PAGE>

NOTE

$20,000,000 December 12, 1996

FOR VALUE RECEIVED, the undersigned CINEMARK USA, INC. (the "Company")
promises to pay to the order of COMERICA BANK - TEXAS (the "Bank") on the
Maturity Date the principal amount of $20,000,000 or, if less, the unpaid
principal amount of Loans owing to the Bank pursuant to that certain First
Amended and Restated Credit Agreement dated as of December 12, 1996, among the
Company, the Banks which are from time to time parties thereto and Bank of
America National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") (as amended, restated, extended or
otherwise modified from time to time, the "Credit Agreement").

195

<PAGE>

The Company hereby waives notice of default, presentment, demand for
payment, protest and any notice of nonpayment or dishonor.

THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.

CINEMARK USA, INC.

By:

Title:

196

<PAGE>

197

<PAGE>

EXHIBIT 10.14(d)

198

<PAGE>

==============================================================================

CINEMARK MEXICO (USA), INC.
Issuer,

CINEMARK DE MEXICO, S.A. de C.V.
Guarantor

AND

UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee

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

THIRD SUPPLEMENTAL INDENTURE

Dated as of September 30, 1996

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

12% Senior Subordinated PIK Notes
due 2003

==============================================================================

<PAGE>

THIRD SUPPLEMENTAL INDENTURE

THIS THIRD SUPPLEMENTAL INDENTURE (the "Third Supplemental
Indenture"), dated as of September 30, 1996, among Cinemark Mexico (USA), Inc.,
a Texas corporation (the "Issuer"), Cinemark de Mexico, S.A. de C.V., a Mexican
corporation (the "Guarantor"), and United States Trust Company of New York, as
Trustee (the "Trustee").

RECITALS

A. Issuer, Guarantor and the Trustee executed an indenture, dated
as of July 30, 1993 (the "Original Indenture"), relating to the Issuer's 12%
Senior Subordinated Notes due 2003 (the "Securities"), which was amended by (i)
the First Supplemental Indenture dated as of May 2, 1994 (the "First
Supplemental Indenture") and (ii) the Second Supplemental Indenture dated as of
August 30, 1995 (the "Second Supplemental Indenture") (the original Indenture as
amended by the First Supplemental Indenture and the Second Supplemental
Indenture is hereinafter referred to as the "Indenture").

B. Issuer and Guarantor, with the consent of holders of more than
50% of the aggregate principal amount of the Securities outstanding, exclusive
of any Securities owned by Issuer, Guarantor or their respective affiliates,
desire to amend and/or restate certain Sections of the Indenture in connection
with the creation of a new Series D of the Securities and the increase of the
maximum original principal amount of Securities that may be issued,
authenticated and delivered under the Indenture.

C. The holders of all of the aggregate principal amount of the
Securities outstanding, exclusive of the Securities owned, if any, by Issuer,
Guarantor or their respective affiliates, desire to exchange (the "Exchange")
their respective Securities for new promissory notes (the "Exchange Notes"). The
Exchange Notes shall contain provisions permitting the Issuer to elect, for the
period through and including February 1, 2000, to pay all accrued and unpaid
interest on each interest payment date by issuing additional notes of the same
series (the "Additional Securities") in an aggregate principal amount equal to
the interest that would have been payable during such period assuming the
principal on the applicable Securities accrued interest for such period at an
interest rate equal to 13% per annum.

D. Issuer and Guarantor, with the consent of holders of all of the
aggregate principal amount of the Securities now outstanding, exclusive of any
Securities owned by Issuer, Guarantor and their respective affiliates, desire to
amend and/or restate certain Sections of the Indenture in connection with the
Exchange.

E. All conditions precedent provided for in the Indenture relating
to this Third Supplemental Indenture have been complied with. Capitalized items
used herein shall have the meanings assigned to them in the Indenture unless
otherwise defined herein.

- 1 -

<PAGE>

NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE
WITNESSETH, that for and in consideration of the premises and of the covenants
contained herein, the Issuer and Guarantor hereby covenant and agree with the
Trustee, for the equal benefit of all the present and future holders of the
Securities without preference, priority or distinction of any of the Securities
over any of the others by reason of priority in time of issuance, negotiation or
maturity thereof, or otherwise, and for the benefit of the Trustee and its
successors and assigns, as follows:

ARTICLE I
AMENDMENTS TO INDENTURE

1.1 Amendment to Recitals. The first
paragraph of THE
RECITALS OF THE COMPANY is hereby amended and restated in its entirety as
follows:

The Company has duly authorized
the creation of an
issue of up to $39,272,900 aggregate original principal amount of
its (a) 12% Series A Senior Subordinated Notes due 2003 (the
"Series A Securities"), (b) 12% Senior Subordinated Notes due 2003
(the "Series B Securities"), 12% Series C Senior Subordinated
Notes due 2003 (the "Series C Securities"), (d) 12% Series D
Senior Subordinated Notes due 2003 (the "Series D Securities" and,
collectively with the Series A Securities, the Series B Securities
and the Series C Securities, the "Securities") of substantially
the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and
delivery of this Indenture.

1.2 Amendments to Section 1.1
-------------------------

(a) Definition of
"Accreted Value". The
definition of "Accreted Value" in Section 1.1 of the Indenture is hereby amended
and rested in its entirety to read as follows:

"Accreted Value
as of any date
from and after September 30, 1996, shall mean the aggregate
principal amount of any Securities Outstanding.

(b) Definitions. The
following definitions are
hereby added after the definition of "Additional Interest" in Section 1.1 of the
Indenture.

"Additional
Securities" means the
Additional Series A Securities, the Additional Series B
Securities, the Additional Series C Securities or the Additional
Series D Securities, as applicable.

"Additional Serie
A Securities" means the

- 2 -

<PAGE>

additional Series A Securities issued on an Interest Payment Date in lieu of
making a cash interest payment on the Series A Securities pursuant to Section
2.2.

"Additional Serie
B Securities" means the
additional Series B Securities issued on an Interest Payment Date in lieu of
making a cash interest payment on the Series B Securities pursuant to Section
2.2.

"Additional Serie
C Securities" means the
additional Series C Securities issued on an Interest Payment Date in lieu of
making a cash interest payment on the Series C Securities pursuant to Section
2.2.

"Additional Serie
D Securities" means the
additional Series D Securities issued on an Interest Payment Date in lieu of
making a cash interest payment on the Series D Securities pursuant to Section
2.2.

(c) Definition of
"Credit Agreement". The
first sentence of the definition of Credit Agreement shall be amended and
restated to read as follows:

"Credit Agreement" means any
credit
agreement or agreements which the Company or any Subsidiary shall
enter into which provide credit facilities to the Company or such
Subsidiary and their Subsidiaries in an aggregate original
principal amount not to exceed $10,000,000, plus any accrued
interest (including accrued interest added to such principal
amount outstanding), penalties, reimbursements or indemnity
accounts, fees accruing thereon, and interest accruing on or after
the filing of any petition in bankruptcy or for reorganization
relating to the Company or such Subsidiary, whether or not such
claim for post-election interest is allowed in such proceeding."

(d) Definition of
"Fractional Additional
Securities". The following is hereby added after the definition of "Expiration
Date" in Section
1.1 of the Indenture:

"Fractional
Additional Securities" means
Additional Securities the principal amount of which would be less than $100.00.

(e) Definition of
"Securities". The definition
of "Securities" in Section 1.1 of the Indenture is hereby amended and restated
in its entirety as
follows:

- 3 -

<PAGE>

"Securities" means
the Series A Securities,
the Series B Securities, the Series C Securities and the Series D Securities
designated as such in the first paragraph of the RECITALS OF THE COMPANY,
including the Additional Securities issued with respect to each series of such
Securities.

(f) Definition of
"Series D Securities". The
following is hereby added after the definition of "Series C Securities" in
Section 1.1 of the Indenture.

"Series D
Securities" means the Series D
Securities designated as such in the first paragraph of the
RECITALS OF THE COMPANY.

1.3 Amendment to Section 2.2.

(a) The following is hereby
added after the sixth
paragraph of Section 2.2 of the Indenture:

"If Series D Securities, then
insert 12% Series D Senior
Subordinated PIK Notes due 2003.

(b) The seventh paragraph of
Section 2.2 of the
Indenture is hereby amended and restated in its entirety as follows:

"Cinemark Mexico (USA), Inc., a
corporation duly
organized and existing under the laws of Texas (herein called the
"Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby
promises to pay to ______________________________, or registered
assigns, the principal of this Security in an amount equal to the
sum of $__________ Dollars on August 1, 2003, and to pay interest
on the unpaid principal amount from the most recent date to which
interest has been paid or, if no interest has been paid, from the
date of the original issuance hereof, at the rate of 12% per annum
until the principal hereof is paid or made available for payment
and at the rate of 12% per annum on any overdue principal and
premium and on any overdue installment of interest (but not to
exceed the maximum rate permitted by applicable law) until paid as
specified on the reverse hereof. The Company shall pay interest
semi-annually on August 1 and February 1 of each year, commencing
February 1, 1997 or if any such day is not a Business Day, on the
next succeeding Business Day (each an "Interest Payment Date"). On
any Interest Payment Date through and including February 1, 2000,
the Company may, at its option, by giving the Holder of such
Security and the Trustee notice of its election not less than 5
days nor more than 45 days prior to the

- 4 -

<PAGE>

record date for the related Interest Payment Date, pay interest on
the Security either in cash (at the rate specified above) or
through the issuance of Additional Securities in an aggregate
principal amount equal to the amount of interest that would have
been payable if such Security had accrued interest during the
relevant interest period at the rate of 13% per annum. The
interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be
paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, which shall be the July
15th or January 15th (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record
Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at
the close of business on a Special Record Date for payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to Holders of Securities not less than 10 days
prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and
upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. On each such Interest Payment
Date when the Company elects to issue Additional Securities, the
Trustee shall, upon the Company's order, authenticate and deliver
Additional Securities for original issuance to the Holder of this
Security on the relevant record date, as shown by the records of
the Security Register, in the aggregate principal amount required
to pay such interest; provided, however, that in lieu of the
issuance of any Additional Securities as set forth above, the
Company shall pay the holder of a Fractional Additional Security
an amount in cash equal to the Fractional Additional Security. Any
Additional Securities so issued shall be dated the applicable
Interest Payment Date, shall bear interest from and after such
date, shall mature on August 1, 2003 and shall be governed by, and
subject to the terms, provisions and conditions of, such Indenture
and shall have the same rights and benefits as this Security."

1.4 Amendment to Section 2.3. (a
The first paragraph of
Section 2.3 of the Indenture is hereby amended and restated in its entirety as
follows:

This Security is one of a duly
authorized issue of
Securities of the Company designated as its [If Series A
Securities, then insert -- 12% Series A Senior Subordinated PIK
Notes due 2003 (the "Series A Securities") issued under an
Indenture, dated as of July 30, 1993, as amended (herein called
the "Indenture"), between the Company and the United States Trust
Company of New York, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture),
together with the 12% Series B Senior Subordinated PIK Notes due
2003 of the Company (the "Series B Securities"), the 12% Series C

- 5 -

<PAGE>

Senior Subordinated PIK Notes due 2003 (the "Series C Securities")
and the 12% Series D Senior Subordinated PIK Notes due 2003 (the
"Series D Securities", and collectively with the Series A
Securities, the Series B Securities and the Series C Securities,
the "Securities").] [If Series B Securities, then insert --
12%Series B Senior Subordinated PIK Notes due 2003 (the "Series B
Securities") issued under an Indenture, dated as of July 30, 1993,
as amended (hereinafter called the "Indenture"), between the
Company and the United States Trust Company of New York, as
Trustee (herein called the "Trustee"), which term includes any
trustee under the Indenture), together with the 12% Series A
Senior Subordinated PIK Notes due 2003 of the Company (the "Series
A Securities"), the 12% Series C Senior Subordinated PIK Note due
2003 of the Company (the "Series C Securities"), and the 12%
Series D Senior Subordinated PIK Notes due 2003 of the Company
(the "Series D Securities", and collectively with the Series A
Securities, Series B Securities and Series C Securities, the
"Securities").] [If Series C Securities, then insert -- 12% Series
C Senior Subordinated PIK Notes due 2003 (the "Series C
Securities") issued under an Indenture, dated as of July 30, 1993,
as amended (herein called the "Indenture"), between the Company
and the United States Trust Company of New York, as Trustee
(herein called the "Trustee", which term includes any successor
trustee under the Indenture), together with the 12% Series A
Senior Subordinated PIK Notes due 2003 of the Company (the "Series
A Securities"), the 12% Series B Senior Subordinated PIK Notes due
2003 of the Company (the "Series B Securities") and the 12% Series
D Senior Subordinated PIK Notes due 2003 (the "Series D
Securities", and collectively with the Series A Securities, the
Series B Securities and the Series C Securities, the
"Securities").] [If Series D Securities, then insert -- 12% Series
D Senior Subordinated PIK Notes due 2003 (the "Series D
Securities") issued under an Indenture, dated as of July 30, 1993,
as amended (herein called the "Indenture"), between the Company
and the United States Trust Company of New York, as Trustee
(herein called the "Trustee", which term includes any successor or
trustee under the Indenture), together with the 12% Series A
Senior Subordinated PIK Notes due 2003 of the Company (the "Series
A Securities"), the 12% Series B Senior Subordinated PIK Notes due
2003 of the Company (the "Series B Securities") and the 12% Series
C Senior Subordinated PIK Notes due 2003 of the Company (the
"Series C Securities", and collectively with the Series A
Securities, the Series B Securities and the Series D Securities,
the "Securities").] The Securities are limited in aggregate
original principal amount of up to $39,272,900. Reference is
hereby made to the Indenture and all indentures supplemental
thereto for a statement of the respective rights, limitations of
rights, duties and immunities thereunder of the Company, the
Trustee, the holders of the Senior Debt and the Holders of the
Securities and of the terms upon which the Securities are, and are
to be, authenticated and delivered.

(b) The last sentence
of the seventh paragraph

- 6 -

<PAGE>

of Section 2.3 of the Indenture is hereby amended and restated in its entiret
as follows:

Each of the Series
A Securities, the Series
B Securities, the Series C Securities and the Series D Securities shall rank
pari passu.

Unless the contex
otherwise requires, the
Series A Securities, the Series B Securities, the Series C
Securities and the Series D Securities shall constitute one series
for all purposes under the Indenture, including without
limitation, amendments, waivers, approvals, redemptions and Offers
to Purchase (except, in the case of redemptions and Offers to
Purchase, for any differences required as a result of the Series C
Securities and the Series D Securities having a different Accreted
Value from the Series A Securities and the Series B Securities).

(d) The fourteenth paragraph of
Section 2.3 of the
Indenture is hereby amended and restated in its entirety as follows:

"The Securities
shall be issued only in
registered form without coupons and only in denominations of
$1,000 and any integral multiple thereof; provided, however, the
Series D Securities and the Additional Securities may be issued in
denominations of $100 and any integral multiple thereof."

1.5 Amendment to Section 3.1. (a)
The first paragraph of
Section 3.1 of the Indenture is hereby amended and restated in its entirety as
follows:

The aggregate original principal
amount of Securities
(including Additional Securities) which may be authenticated and
delivered under this Indenture is limited to $39,272,900.00 (the
Series A Securities are limited to an aggregate original principal
amount, (including Additional Series A Securities) of $662,600.00,
the Series B Securities are limited to an aggregate original
principal amount (including Additional Series B Securities) of
$33,129,100.00, the Series C Securities are limited to an
aggregate original principal amount (including Additional Series C
Securities) of $3,313,000.00 and the Series D Securities are
limited to an aggregate original principal amount (including
Additional Series D Securities) of $2,168,200.00), except for
Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Sections 3.4, 3.5, 3.6, 9.6 or 11.8 or in connection
with an Offer to Purchase pursuant to Sections 10.11, 10.13 and
10.18. Subject to such exceptions (i) the maximum aggregate
original principal amount of Securities which may be

- 7 -

<PAGE>

authenticated and delivered under this Indenture other than as
Additional Securities shall be limited to $23,822,800.00
(consisting of $400,000 of Series A Securities, $20,000,000 of
Series B Securities, $2,000,000 of Series C Securities and
$1,422,800.00 of Series D Securities), and (ii) the maximum
aggregate original principal amount of Additional Securities which
may be authenticated and delivered under this indenture is limited
to $15,450,100.00 (consisting of $262,600.00 of Additional Series
A Securities, $13,129,100.00 of Additional Series B Securities,
$1,313,000.00 of Additional Series C Securities, and $745,400.00
of Additional Series D Securities).

(b) The third
paragraph of Section 3.1 of the
Indenture is hereby deleted.

The Series A
Securities shall be known and
designated as the "12% Series A Senior Subordinated PIK Notes due
2003" of the Company, the Series B Securities shall be known and
designated as the "12% Series B Senior Subordinated PIK Notes due
2003" of the Company, the Series C Securities shall be known and
designated as the "12% Series C Senior Subordinated PIK Notes due
2003" of the Company and the Series D Securities shall be known
and designated as the "12% Series D Senior Subordinated PIK Notes
due 2003" of the Company. The Stated Maturity of the Securities
shall be August 1, 2003. The Securities shall bear interest on the
unpaid principal amount of such Securities at the rate of 12% per
annum, payable semi-annually on August 1 and February 1,
commencing February 1, 1997 in the case of the Series A
Securities, the Series B Securities, the Series C Securities, and
the Series D Securities, until the principal thereof is paid or
made available for payment; provided, however, on any Interest
Payment Date through and including February 1, 2000, the Company
may, at its option, by giving the holder of this Security and the
Trustee notice of its election not less than 5 days nor more than
45 days prior to the record date for the related Interest Payment
Date, pay interest on the Security, in lieu of payment of interest
on the Security in cash, through the issuance of Additional
Securities, in an aggregate principal amount equal to the amount
of the interest that would have been payable if such Note had
accrued interest during the relevant interest period at the rate
of 13% per annum. Additional Securities may only be issued in lieu
of payment of interest in cash on Securities. Additional
Securities issued in lieu of payment of interest in cash on Series
A Securities shall constitute additional Series A Securities;
Additional Securities issued in lieu of payment of interest in
cash on Series B Securities shall constitute additional Series B
Securities; Additional Securities issued in lieu of payment of
interest in cash on Series C Securities shall constitute
additional Series C Securities; and Additional Securities

- 8 -

<PAGE>

issued in lieu of payment of interest in cash on Series D
Securities shall constitute additional Series D Securities.

(d) The eighth
paragraph of Section 3.1 of the
Indenture is hereby amended and restated in its entirety as follows:

The Securities
shall be subordinated in right
of payment to Senior Debt as provided in Article XII and the
Series A Securities, the Series B Securities, the Series C
Securities and the Series D Securities shall rank pari passu.

(e) The tenth
paragraph of Section 3.1 of the
Indenture is hereby amended and restated in its entirety as follows:

Unless the
context otherwise requires, the
Series A Securities, the Series B Securities, the Series C
Securities and the Series D Securities (including all Additional
Securities constituting Securities of each such series) shall
constitute one series for all purposes under the Indenture,
including without limitation, amendments, waivers, approvals,
redemptions and Offers to Purchase (except, in the case of
redemptions and Offers to Purchase, for any differences required
as a result of the Series C Securities and the Series D Securities
having a different Accreted Value from the Series A Securities and
the Series B Securities).

1.6 Amendment to Section 3.2
Section 3.2 is hereby
amended and restated in its entirety to read as follows:

1.7 Amendment to Section 3.5. The
last sentence of the
first paragraph of Section 3.5 of the Indenture is hereby amended and restated
in its entirety as
follows:

Such Security Register shall
distinguish between Series
A Securities, Series B Securities, Series C Securities and Series
D Securities.

1.8 Amendment to Section 10.8(b)
Section 10.8(b) is
hereby amended and restated to read in its entirety as follows:

- 9 -

<PAGE>

Limitation on Consolidated Debt.

(b) After
September 30, 1996, the Company
and its Subsidiaries may Incur
Debt, if, at the date of and
giving effect to the incurrence
of such Debt, the Pro Forma Cash
Flow Coverage Ratio is equal to
or greater than 2.0 to 1.0.
Notwithstanding the foregoing
sentence, the Company or any
Subsidiary may Incur Permitted
Debt without regard to the
foregoing limitation.

1.9 Amendment to Section 10.13. The
first paragraph of
Section 10.13 is hereby amended and restated in its entirety to read as follows:

"At the end of any two
consecutive fiscal quarters
during the periods after December
31, 1999, the Cash Flow Coverage
of the Company for such two
fiscal quarters then ending shall
equal or exceed a ratio of 2.0 to
1.0.

1.10 Amendment to Section 11.1. The
last paragraph of
Section 11.1 of the Indenture is hereby amended and restated in its entirety as
follows:

Subject to Section 3.1, the
Series A Securities, the
Series B Securities, the Series C Securities and the Series D
Securities shall be treated as one class for all purposes under
this Indenture, including, without limitation, redemptions
hereunder.

ARTICLE II

Previously Authenticated Notes

To the extent that Series A Securities, Series B Securities and
Series C Securities have been authenticated by the Trustee prior to the date of
this Third Supplemental Indenture, such Securities shall continue to be valid
and binding obligations of the Company notwithstanding the fact that such
Securities do not contain the revised language provided for in Section 1.4 of
this Third Supplemental Indenture. After the date of this Third Supplemental
Indenture if any previously authenticated Securities are presented to the
Trustee for transfer or exchange, any new Series A Securities, Series B
Securities or Series C Securities authenticated by the Trustee as a result of
such transfer or exchange may be in the form prescribed by the Original
Indenture; provided that such Securities contain a legend substantially similar
to the following:

- 10 -

<PAGE>

Pursuant to the terms of a Third Supplemental Indenture among the
Company, the Guarantor and the Trustee, an additional Series D has
been authorized, which Series D Securities shall rank pari passu
with the Series A Securities, the Series B Securities and the
Series C Securities. Generally, all four series of Securities
shall constitute one series for all purposes under the Indenture,
including without limitation, amendments, waivers, approvals,
redemptions and Offers to Purchase. A copy of the Third
Supplemental Indenture is available upon request from the Company.

ARTICLE III

Miscellaneous Provisions

3.1 Counterparts. This Third Supplemental Indenture may be
executed in counterparts, each of which when so executed shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same instrument.

3.2 Severability. In the event that any provision in this Third
Supplemental Indenture shall be held to be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.

3.3 Headings. The article and
section headings are for
convenience only and shall not affect the construction hereof.

3.4 Successors and Assigns. Any covenants and agreements in this
Third Supplemental Indenture by Issuer shall bind its successors and assigns,
whether so expressed or not.

3.5 GOVERNING LAW. THIS THIRD SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

3.6 Effect of Third Supplemental
Indenture. Except as
amended by this Third Supplemental Indenture, the terms and provisions of the
Indenture shall
remain in full force and effect.

3.7 Trustee. The Trustee accepts the modifications of the Trust
effected by this Third Supplemental Indenture, but only upon the terms and
conditions set forth in the Indenture. Without limiting the generality of the
foregoing, the Trustee assumes no responsibility for the correctness of the
recitals herein contained, which shall be

- 11 -

<PAGE>

taken as the statements of Issuer, and the Trustee shall not be responsible or
accountable in any way whatsoever for or with respect to the validity or
execution or sufficiency of this Third Supplemental Indenture and the Trustee
makes no representation with respect thereto.

[SIGNATURES ON NEXT PAGE]

- 12 -

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be executed by their duly authorized representative as
of the date hereof.

<TABLE>
<CAPTION>
ATTEST:
CINEMARK MEXICO (USA), INC.

<S> <C>
_______________________________ By:______________________________________

Printed Name:____________________________

Title:____________________________________

ATTEST:
CINEMARK DE MEXICO, S.A. de C.V.

_______________________________ By:______________________________________

Printed Name:____________________________

Title:____________________________________

ATTEST:
UNITED STATES TRUST COMPANY OF

NEW YORK

_______________________________ By:______________________________________

Printed Name:____________________________

Title:____________________________________
</TABLE>

- 13 -

<PAGE>

STATE OF TEXAS

COUNTY OF DALLAS

BEFORE ME, the undersigned Notar
Public in and for
said State and County, on this day personally appeared
- ------------------------------------------------,
______________________________________ of Cinemark Mexico (USA), Inc., known to
me to be the person and officer whose name is subscribed to the foregoing
instrument, and acknowledged to me that the same was the act of the said
Cinemark Mexico (USA), Inc., and that he executed the same as the act of such
corporation for the purposes and consideration therein expressed and in the
capacity therein stated.

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

Notary Public, State of Texas

Printed Name:__________________________

My Commission Expires:

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

STATE OF TEXAS

COUNTY OF DALLAS

BEFORE ME, the undersigned Notary Public in and for said State and County,
on this day personally appeared
- ------------------------------------------------,
______________________________________ of Cinemark de Mexico, S.A. de C.V.,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that the same was the act of the
said Cinemark de Mexico, S.A. de C.V., and that he executed the same as the act
of such corporation for the purposes and consideration therein expressed and in
the capacity therein stated.

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

- 14 -

<PAGE>

Notary Public, State of Texas

Printed Name:___________________

My Commission Expires:

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

STATE OF TEXAS

COUNTY OF DALLAS

BEFORE ME, the undersigned Notary
Public in and for
said State and County, on this day personally appeared
- ------------------------------------------------,
______________________________________ of United States Trust Company of New
York, known to me to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that the same was the act of the
said United States Trust Company of New York, and that he executed the same as
the act of such corporation for the purposes and consideration therein expressed
and in the capacity therein stated.

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

Notary Public, State of Texas

Printed Name:___________________

My Commission Expires:

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

- 15 -

<PAGE>

EXHIBIT 12

- 16 -

<PAGE>

<TABLE>
<CAPTION>
CINEMARK USA, INC. AND SUBSIDIARIES

EARNINGS TO FIXED COMPUTATION OF CHARGES
December December December
1996 1995 1994
<S> <C> <C> <C>
COMPUTATION OF EARNINGS:

REGISTRANT'S PRETAX INCOME FROM
CONTINUING 26,962,461 23,256,537 14,073,947
OPERATIONS
CAPITALIZED INTEREST (3,865,246) (1,726,155) (560,185)
TOTAL EARNINGS 23,097,215 21,530,38213,513,762

COMPUTATION OF FIXED CHARGES:

INTEREST EXPENSE 19,551,655 18,549,833 18,133,438
CAPITALIZED INTEREST 3,928,454 1,745,720 565,610
AMORTIZATION OF DEBT 824,014 824,014 783,515
ISSUE COST
INTEREST FACTOR IN 11,468,682 10,291,069 9,866,567
RENTAL EXPENSE (1/3
RENT EXPENSE)

TOTAL FIXED CHARGES 35,772,805 31,410,636 29,349,130

TOTAL EARNINGS AND 58,870,020 52,941,018 42,862,892
FIXED CHARGES

RATIO OF EARNINGS TO 1.65 1.69 1.50
FIXED CHARGES
(continued)

- 17 -

<PAGE>

CINEMARK USA, INC.
AND SUBSIDIARIES

EARNINGS TO FIXED
COMPUTATION OF
CHARGES
December December
1993 1992
COMPUTATION OF
EARNINGS:

REGISTRANT'S PRETAX
INCOME FROM
CONTINUING 15,890,531 8,700,634
OPERATIONS
CAPITALIZED INTEREST 5,425 5,425
TOTAL EARNINGS 15,895,956 8,706,059

COMPUTATION OF FIXED
CHARGES:

INTEREST EXPENSE 16,573,409 11,888,863
CAPITALIZED INTEREST
AMORTIZATION OF DEBT 528,724 369,140
ISSUE COST
INTEREST FACTOR IN 9,089,838 7,922,237
RENTAL EXPENSE (1/3
RENT EXPENSE)

TOTAL FIXED CHARGES 26,191,971 20,180,240

TOTAL EARNINGS AND
FIXED CHARGES 42,087,927 28,886,299

RATIO OF EARNINGS TO 1.61 1.43
FIXED CHARGES
(completed)
</TABLE>

- 18 -

<PAGE>

- 19 -

<PAGE>

EXHIBIT 21

- 20 -

<PAGE>

SUBSIDIARIES OF CINEMARK USA, INC.

Cinemark Corporation, a Texas corporation

Sunnymead Cinema Corp., a California corporation

Cinemark Properties, Inc., a Texas corporation

Cinemark Transportation, Inc., a Texas corporation

Trans Texas Cinema, Inc., a Texas corporation

Missouri City Central 6, Inc., a Texas corporation

Cinemark International, Inc., a Texas corporation

2 Day Video, Inc., a Texas corporation
(1/96 - 10/96)

2 Day Video of Georgia, Inc., a Georgia corporation
(1/96 - 10/96)

ENT Holdings, Inc., a Texas corporation

Funtime Entertainment, Inc., a Texas corporation

Funtime Pizza Two Corporation, a Texas corporation
(1/1/96 - 5/96)

Funtime Pizza Three Corporation, a Texas corporation

Funtime Pizza Four Corporation, a Texas corporation

Cinemark Mexico (USA), Inc., a Texas corporation

Cinemark de Mexico, S.A. de C.V., a Mexican corporation

Inversiones Cinemark, S.A., a Chilean corporation

Cinemark Chile, S.A., a Chilean corporation

Tinseltown Equities, Inc., a Texas corporation

- 21 -

<PAGE>

Cinema Management Group, Inc., a Texas corporation

Cinemark Theatres Ontario, Inc., a Canadian corporation

Entertainment Amusement Enterprises, Inc., a Texas corporation

Cinemark Partners I, Inc., a Texas corporation

Cinemark Holdings Canada, Inc., a Canadian corporation

Cinemark Alberta, Inc., a Canadian corporation

Laredo Theatre, Ltd., a Texas limited partnership

Skillman Cinema, Ltd., a Texas limited partnership

Cinemark Argentina, S.A., an Argentine corporation

Cinemark LTDA, a Brazilian corporation

Cinemark Empreendimentos e. Participacoes LTDA, a Brazilian corporation

Servicios Cinemark, S.A. de C.V., a Mexican corporation

Cinemark del Norte, S.A. de C.V., a Mexican corporation

Cinemark Theatres Canada, Inc., a Canadian corporation

Cinemark del Ecuador, an Ecuadorian corporation

Cinemark del Peru, a Peruvian corporation

- 22 -

<PAGE>

EXHIBIT 23.1

- 23 -

<PAGE>

- 24 -

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CINEMARK
USA, INC. AND SUBSIDIARIES DECEMBER 31, 1996, FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 14,081,226
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,296,323
<CURRENT-ASSETS> 26,949,410
<PP&E> 450,842,912
<DEPRECIATION> 73,421,992
<TOTAL-ASSETS> 432,905,467
<CURRENT-LIABILITIES> 59,971,736
<BONDS> 226,477,942
0
0
<COMMON> 49,536,725
<OTHER-SE> 7,825,887
<TOTAL-LIABILITY-AND-EQUITY> 432,905,467
<SALES> 341,730,930
<TOTAL-REVENUES> 341,730,930
<CGS> 0
<TOTAL-COSTS> 283,936,712
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,376,398
<INCOME-PRETAX> 26,962,461
<INCOME-TAX> 12,346,451
<INCOME-CONTINUING> 14,616,010
<DISCONTINUED> 0
<EXTRAORDINARY> (9,386,111)
<CHANGES> 0
<NET-INCOME> 5,229,899
<EPS-PRIMARY> 0
<EPS-DILUTED> 28.60

</TABLE>