Document:

<PAGE>

                                                                   EXHIBIT 10.15

                       ADMINISTRATIVE SERVICES AGREEMENT

     ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement"), dated as of July28,
2000, between Citadel Cinemas, Inc., a Nevada corporation (the "Company"), and
City Cinemas Corporation, a New York corporation (the "Administrator").

                              W I T N E S S E T H
                              -------------------

     WHEREAS, the Company and Sutton Hill Capital, L.L.C., a New York limited
liability company and an affiliate of the Administrator ("Sutton Hill Capital"),
have entered into a certain lease agreement, dated as of the date hereof (as the
same may be amended, restated, modified or supplemented from time to time, the
"Lease Agreement"), pursuant to which the Company has leased certain movie
theatres listed on Exhibit A attached hereto (the "Leased Theatres") from Sutton
Hill Capital;

     WHEREAS, the Company and Sutton Hill Capital have entered into a
Submanagement Agreement, dated as of the date hereof (as the same may be
amended, restated, modified or supplemented from time to time, the
"Submanagement Agreement"), pursuant to which Citadel Cinemas has agreed to
submanage the theatre commonly known as the 86th Street Theatre which is
currently managed by Sutton Hill Capital;

     WHEREAS, the Company and the Administrator have entered into certain
assignment and assumption agreements each dated as of the date hereof
(collectively referred to as the "Assignment and Assumption Agreements"),
pursuant to which the Company has assumed all of the obligations of the
Administrator from and after the date hereof under the management agreements
with respect to the theatres listed on Exhibit B attached hereto (collectively
referred to as the "Managed Theatres");

     WHEREAS, the Company and the Administrator have entered into a Letter
Agreement, dated as of the date hereof (as the same may be amended, restated,
modified, or supplemented from time to time, the "Letter Agreement"), pursuant
to which the Company has agreed to assume all of the obligations from and after
the date hereof of the Administrator with respect to the employees listed on
Exhibit B attached thereto;

     WHEREAS, as part of the consideration for the Company entering into the
Lease Agreement, the Submanagement Agreement, the Assignment and Assumption
Agreements and the Letter Agreement, the Company has requested that the
Administrator, an affiliate of Sutton Hill Capital, provide certain bookkeeping
services for the Company for a period not to exceed two years from the date
hereof; and

     WHEREAS, the Administrator is willing to provide such services as
hereinafter described on the terms and conditions herein set forth;
<PAGE>

     NOW, THEREFORE, the parties hereto, intending to be legally bound and in
consideration of the premises and the mutual covenants herein contained, agree
as follows:

         Intentionally deleted.
         ----------------------

     3.  Bookkeeping Services.  The Administrator hereby agrees to perform the
         --------------------
following services on behalf of the Company and its affiliates (including its
parent Citadel Holding Corporation, a Nevada corporation ("Citadel")):

          (a)  maintain books of account based upon the Administrator's ordinary
     accounting practices at its offices in Los Angeles, California, with
     respect to the theatres listed on Exhibits A and B hereto (hereinafter
     collectively referred to as the "Designated Theatres");

          (b)  make available to properly authorized representatives and agents
          of the Company said books of account during all reasonable business
     hours upon reasonable written notice;

          (c)  furnish the Company with a trial balance, a balance sheet and a
          monthly profit and loss statement in a form normally and customarily
     used by the Administrator and consistent with those currently provided by
     the Administrator within fourteen (14) days after the close of each month.
     The profit and loss statement shall be in a form which shall show all
     receipts and expenses of each Designated Theatre for the preceding month;

          (d)  furnish the Company with preliminary weekly reports of gross
     income within a reasonable period after the close of each week;

          (e)  retain all statements and invoices for the expenses of the
          Designated Theatres which the Administrator receives from the Company
     for a period of at least three (3) years and make available such statements
     to the Company and its agents during all reasonable business hours upon
     reasonable written notice;

          (f)  as soon as practicable, but in any event within forty five (45)
          days of the end of each fiscal year, prepare and furnish to the
     Company a trial balance, a balance sheet, a statement of cash flows and a
     profit and loss statement based upon generally accepted accounting
     principles consistently applied. The profit and loss statement shall show
     the gross income and actual expenses of each Designated Theatre for the
     immediately preceding fiscal year. The Administrator agrees to cooperate
     with the Company's and Citadel's independent public accountants in the
     preparation of their audited financial statements.

          (g)  provide similar information quarterly within twenty-five (25)
          days after the end of each of the first three fiscal quarters of each
          fiscal year;

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<PAGE>

          (h)  deliver such information as may be necessary for the Company to
          file in a  timely manner such income, franchise, payroll (if the
     Administrator is providing payroll services pursuant to clause (i) below)
     or other tax returns of the Company as the Company shall determine is
     required to be filed by applicable law;

          (i)  [omitted]

          (j)  prepare and deliver to the Company for signature checks for
     payment of all expenses with respect to the operation of the Designated
     Theatres as shall have been approved for payment by the Company, such
     checks to be drawn on such bank account or accounts as the Company may
     designate from time to time (and the Company shall provide to the
     Administrator a supply of checks on such account or accounts for this
     purpose); and

          (k)  cooperate with and assist the Company's and Citadel's auditors in
     connection with the audit of the Company to be performed by such auditors
     at the end of each fiscal year of the Company occurring after the date
     hereof and at least three (3) copies of the documents presented to the
     auditors shall be furnished to the Company as soon as available to permit
     Citadel to meet any public reporting requirements as may be applicable to
     it, and in no event later than forty-five (45) days following such fiscal
     year of the Company.

The Administrator may delegate any or all of such duties to its affiliate
Pacific Theatres, Inc. (the "Delegee").

          Term.  This Agreement shall commence on the date hereof and shall
          ----
terminate upon the earlier to occur of (i) the twenty four month anniversary of
the date hereof or (ii) the exercise of the Company's right to terminate this
Agreement.

          The Administrator's Liability; Indemnification.
          ----------------------------------------------

          (a)  Neither the Administrator, the Delegee, nor any of their
     directors, officers, employees or affiliates shall be liable for any loss,
     liability, claim, damage, penalty, judgment or expense arising out of their
     performance of, or failure to perform, any services pursuant to this
     Agreement, except in the case of the gross negligence or willful misconduct
     of the Administrator, the Delegee or any of their directors, officers,
     employees or affiliates, and none of the Administrator, the Delegee, nor
     any of their directors, officers, employees or affiliates shall be liable
     or responsible for any action of the Company or its affiliates, employees,
     directors, officers or employees.

          (b)  The Company shall indemnify and hold harmless the Administrator,
     the Delegee, and their directors, officers, employees and affiliates from
     and against any loss, liability, claim, damage, penalty, judgment or
     expense (including reasonable attorneys'

                                      118
<PAGE>

     fees and expenses) of any nature arising out of the performance or failure
     to perform any services pursuant to this Agreement, except in the case of
     the gross negligence or willful misconduct of the persons indemnified
     hereunder.

          (c)  The Administrator shall indemnify and hold harmless the Company
          and the directors, officers, employees and affiliates of the Company
     from and against any loss, liability, claim, damages, penalty, judgment or
     expense (including reasonable attorneys' fees and expenses) of any nature
     arising out of the gross negligence or willful misconduct of the
     Administrator or the Delegee in the performance of its obligations
     hereunder.

          (d)  The obligations of the parties under this Section 4 shall survive
     any termination of this Agreement, in whole or in part. Neither party shall
     be liable for consequential, punitive or special damages hereunder, whether
     claimed by the other party hereto or any other person or entity.

          Obligation to Supply Information.  The Company shall prepare and
          --------------------------------
supply the Administrator of the Delegee with such information as the
Administrator or the Delegee may from time to time reasonably request in
connection with the performance of its obligations hereunder.

          [Omitted]

          Out-of-Pocket Expenses.  The Administrator shall be entitled to
          ----------------------
recover from the Company all reasonable out-of-pocket expenses actually incurred
by the Administrator or the Delegee in connection with performing its
obligations hereunder upon the presentation of an invoice and reasonable
documentation for the expenses incurred. Notwithstanding anything contained in
the foregoing to the contrary, the Administrator and the Delegee may not make
any expenditures in excess of $15,000 without the consent of the Company.

          Reliance on Information Obtained for or Supplied by the Company and
          -------------------------------------------------------------------
Third Parties.  The Company recognizes that the accuracy and completeness of the
-------------
records maintained and the information supplied by or on behalf of the
Administrator hereunder are, to a large degree, dependent upon the accuracy and
completeness of the information obtained from the Company and other third
parties, including, without limitation, the Company and its affiliates, and the
Administrator shall not be responsible for any inaccuracy in the information so
obtained (including invoices received by the Administrator) or for any
inaccuracy in the records maintained by or on behalf of the Administrator for
the Company or any of its affiliates hereunder which may result therefrom.

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<PAGE>

          Notices.  All notices required under the terms and provisions hereof
          -------
shall be in writing, either delivered by hand, by mail (postage prepaid), or by
telex, telecopier or telegram, and any such notice shall be effective when
received at the address specified below:

               If to the Company:
               Citadel Cinemas, Inc.
               550 South Hope Street
               Suite 1825
               Los Angeles, CA 90071
               Attention: President

               If to the Administrator:
               City Cinemas Corporation
               120 North Robertson Blvd.
               Los Angeles, California 90048
               Attention: General Counsel

or if to either of the foregoing parties, or their successors, at such other
address as such party or successors may designate from time to time by notice
duly given to the other in accordance with the terms of this Section 9.

     4.   Entire Agreement.  This Agreement constitutes the entire agreement
          ----------------
between the parties hereto with respect to the matters covered hereby and
supersedes all prior agreements and understandings between the parties.

          Amendment; Successors; Counterparts.
          -----------------------------------

          (a)  The terms of this Agreement shall not be waived, altered,
          modified, amended or supplemented in any manner whatsoever except by
     written instrument signed by the parties hereto.

          (b)  This Agreement shall be binding upon the parties hereto and their
     respective successors and shall inure to the benefit of the parties hereto
     and their respective successors.

          (c)  This Agreement may be executed in several counterparts, each of
          which shall be deemed an original hereof.

     5.   Captions.  The captions in this Agreement are for convenience of
          --------
reference only and shall not define or limit any of the terms or provisions
hereof.

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             [The Remainder of This Page Intentionally Left Blank]

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     6.   Binding Effect.  This Agreement shall become effective when it shall
          --------------
have been executed by the Company and the Administrator and thereafter shall be
binding upon and inure to the benefit of the parties hereto.

     7.   Assignment.  This Agreement shall not be assigned by the Company or
          ----------
the Administrator without the prior written consent of the other, which consent
can be withheld or denied in the sole and absolute discretion of the party whose
consent is requested.

          Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
          -------------
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.

          Waiver of Jury Trial.  THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND
          --------------------
EXPRESSLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ENFORCING OR DEFENDING ANY RIGHTS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

                                    CITADEL CINEMAS, INC.

                                    By: /s/ Andrzej Matyczynski
                                       ------------------------
                                       Name:  Andrzej Matyczynski
                                       Title: Chief Financial Officer

                                    CITY CINEMAS CORPORATION

                                    By: /s/ James D. Vandever
                                       ----------------------
                                       Name:  James D. Vandever
                                       Title: Secretary

                                      122
<PAGE>

                                   EXHIBIT A

                                LEASED THEATRES

1.   The Village East Cinemas located at 181 Second Avenue, New York, New York
     10003.
2.   The Sutton Theatre located at 205 East 57th Street, New York, New York
     10022.
3.   The Murray Hill Theatre located at 160 East 34th Street, New York, New York
     10016.
4.   Cinemas 1, 2 and 3 located at 1001 Third Avenue, New York, New York 10022.
<PAGE>

                                   EXHIBIT B

                                MANAGED THEATRES

 1.  86th Street Quad Theatre located at 210 East 86th Street, New York, New
     York 10028.
 2.  Eastside Playhouse located at 950 Third Avenue, New York, New York 10022.
 3.  Gotham Theatre located at 969 Third, New York, New York 10022.
 4.  The Angelika Film Center - New York, New York.
 5.  The Angelika Film Center & Cafe - Houston, Texas.
 6.  The St. Anthony Main - Minneapolis, Minnesota.
 7.  The Village East Cinemas located at 181 Second Avenue, New York, New York
     10003.
 8.  The Sutton Theatre located at 205 East 57th Street, New York, New York
     10022.
 9.  The Murray Hill Theatre located at 160 East 34th Street, New York, New York
     10016.
10.  Cinemas 1, 2 and 3 located at 1001 Third Avenue, New York, New York 10022.<PAGE>

                                                                   EXHIBIT 10.16

                            SUBMANAGEMENT AGREEMENT
                            -----------------------

          THIS SUBMANAGEMENT AGREEMENT (the "Agreement") is made and entered
     into as of the 28th day of July, 2000, by and between City Cinemas
     Corporation., a New York corporation ("Manager"), and Citadel Cinemas,
     Inc., a Nevada corporation ("Submanager").

                                   RECITALS
                                   --------

          A. EastSide Exhibition Corp. ("Owner") is the current lessee under the
     lease, dated as of February 20, 1998, between East 86th Street Corp., as
     owner ("Landlord"), and Owner, as Tenant (including any extension,
     replacement or modification thereof, or supplement or amendment thereto,
     the "Lease"), of the premises commonly known as the 86th Street Theatre
     (the "Theatre") located at 210 East 86th Street, New York, New York 10028;

          B. Pursuant to a certain management agreement, dated as of May 19,
     1999, a copy of which is attached hereto as Exhibit A (including any
     extension, replacement or modification thereof, or supplement or amendment
     thereto, the "Management Agreement"), Owner engaged the Manager ("City
     Cinemas") to manage the Theatre;

          C. Submanager is experienced in operating and managing motion picture
     theatres and buying and booking films; and

          D. Manager desires to engage Submanager to submanage the Theatre, and
     Submanager desires to submanage the Theatre, on the terms and conditions
     hereinafter set forth.

          NOW, THEREFORE, in consideration of the above stated premises, the
     mutual covenants and agreements contained herein and other valuable
     consideration, the receipt and sufficiency of which are hereby
     acknowledged, Manager and Submanager agree as follows:

                                   AGREEMENT
                                   ---------

          2   TERM.
              -----

          The term of this Agreement shall commence on the date hereof and
     terminate on the earlier of May 31, 2009 or the expiration of the Lease
     (or, if earlier, the expiration of the Operating Lease (as defined below)
     other than as a result of the exercise of the purchase option provided for
     therein), unless sooner terminated in accordance with the terms herein;
     provided, however, if the Management Agreement is extended, the date of May
     31, 2009 in this sentence shall be deemed deleted and replaced with the
     date of May 31, 2010. Manager shall use commercially reasonable efforts to
     extend the term of the Management Agreement in accordance with the terms
     thereof so that the term hereof extends until May 31, 2010.
<PAGE>

     3        POWERS OF SUBMANAGER.
              ---------------------

     a        Grant and Delegation. Manager hereby grants and delegates to
              --------------------
Submanager the following authority, powers and duties:

     i.       Buying and Booking. To buy and book all motion picture films for
              ------------------
          the Theatre; provided that, prior to paying an advance or a guarantee
          for any film, in excess of $20,000, Submanager shall first obtain
          Manager's consent to the amount, film and release date, which consent
          shall not be unreasonably withheld or delayed; provided, further, that
          Submanager recognizes that Manager, prior to responding to
          Submanager's request for consent as herein provided, must first obtain
          consent from Owner pursuant to the Management Agreement;

     ii.      Maintenance and Repair. To maintain or cause to be maintained the
              ----------------------
          Theatre; to make or cause to be made and supervise minor repairs; to
          purchase supplies required for the operation and maintenance of the
          Theatre, and pay all bills therefor, and to report to Manager any
          conditions in the Theatre requiring the attention of Manager; provided
          that Submanager shall not make any expenditures for maintenance and
          repairs in excess of $6,000 for any one item or $17,500 in any one
          month without first obtaining Manager's approval, except for emergency
          repairs if, in the opinion of Submanager, such repairs are necessary
          to protect the Theatre or its patrons or personnel; provided, further,
          that Submanager recognizes that Manager, prior to responding to
          Submanager's request for consent as herein provided, must first obtain
          consent from Owner pursuant to the Management Agreement;

     iii.     Employees. To provide personnel, in such reasonable numbers as
              ---------
          shall be required for the proper operation and maintenance of the
          Theatre and to supervise, direct and discharge all such personnel; all
          such personnel are the employees of Submanager and not of Manager or
          Owner;

     iv.      Utilities and Service Contracts. To make arrangements for
              -------------------------------
          electricity, gas, fuel, water and telephone service and any and all
          necessary contracts for landscaping, security, elevator maintenance,
          window cleaning, trash and rubbish hauling, pest control, HVAC and
          similar services;

     v.       Taxes. To promptly send to Manager, upon receipt, all notices of
              -----
          assessment or reassessment and tax bills affecting the Theatre;
          provided that Owner will be responsible for the appeal or payment of
          any and all real and personal property taxes and assessments. In no
          event shall Submanager have any obligation for the payment of any
          income and/or estate or other taxes of Manager or Owner;
<PAGE>

     vi.      Licenses and Permits. To acquire and keep in force all licenses
              --------------------
          and permits required for the operation of the Theatre as a motion
          picture theatre with concession and merchandising facilities and
          operations and such uses incidental or accessory thereto;

     vii.     Insurance. To obtain for the benefit of Manager, the Landlord,
              ---------
          Owner and such mortgagees of any of the foregoing parties of which
          Submanager shall have been given written notice the following
          insurance, and to cooperate with the insurance carriers under such
          policies to make, administer and settle any claims thereunder:

              1   Comprehensive general liability insurance (including bodily
          injury and property damage) in an amount not less than a combined
          single limit of Five Million Dollars ($5,000,000), or such greater
          amount as may be required to be maintained under the Lease;

              2   Property damage insurance covering the Theatre and all
          improvements and property, providing "all risk" protection coverage;

              3   Workers' compensation insurance in accordance with and as
          required under the laws of the State of New York; and

              4   Such other insurance or insurance set forth herein at higher
          limits as may be required to be carried by Owner under the terms of
          the Lease or otherwise reasonably agreed upon by Manager and
          Submanager from time to time.

     Submanager shall also be named as an insured under any policy carried under
     this subparagraph (g); at Submanager's option, Submanager may fulfill its
     obligations hereunder by naming Manager, Owner, and Landlord as an
     additional insured(s) under any applicable blanket insurance policy
     Submanager may carry, and charge Manager hereunder the pro rata share of
     such coverage allocable to the Theatre. Notwithstanding anything to the
     contrary contained herein, Submanger must maintain any and all insurance
     that is required to be maintained by Owner under the Lease and name any
     party required to be named thereunder as an additional insured;
<PAGE>

     viii.    Advertising. To advertise the films to be exhibited in the Theatre
              -----------
          in such manner as is customary in the industry. Submanager may combine
          such advertisement of films to be exhibited in other theatres owned or
          operated by Submanager or any affiliate; provided, however, that only
          the prorated cost of such advertisement properly allocable to the
          Theatre shall be charged as expenses of the Theatre;

     ix.      Concessions. To purchase inventory and supplies;
              -----------

     x.       Supervision. To supervise the general operation of the Theatre;
              -----------
          and

     xi.      Payment of Operating Expenses. To incur and pay or cause to be
              -----------------------------
          paid, out of Gross Income and any operating reserve which may be
          established all normal and proper operating expenses of the Theatre
          (except mortgage payments, if any, which shall be paid directly by the
          party liable thereon) incurred or authorized by Submanager in the
          performance of the duties required to be performed by Submanager under
          this Agreement. All such expenses incurred by Submanager, including,
          without limitation, (i) rental under the Lease; (ii) the prorated cost
          of labor (including without limitation the prorated cost of fringe
          benefits, withholdings, payroll accounting and overhead in connection
          with such labor) employed by Submanager and of the equipment of
          Submanager used in connection with and while engaged in the operation,
          maintenance and repair of the Theatre; and (iii) the cost of the items
          and services described in subparts (a) to (i), above, shall be charged
          as expenses of the Theatre. Notwithstanding the foregoing, the
          following expenses incurred by Submanager under this Agreement shall
          not be paid out of Gross Income or the operating reserve, they being
          deemed expenses not properly allocable to the Theatre, but rather
          deemed expenses of Submanager for which Submanager is compensated by
          the Management Fee: (i) expenses for offsite office, administrative,
          and consulting personnel, and (ii) direct or indirect overhead and
          administrative expenses.

     b        Owner's Consent. In any instance when consent of Owner is
              ---------------
required, Manager shall seek such consent, by providing Owner a copy of the
material provided by Submanager and shall advise Submanager of Owner's response.
Submanager acknowledges that notwithstanding anything to the contrary contained
herein, Manager shall not be liable hereunder for acts of Owner in conditioning,
delaying or refusing such consent.

     c        Reservation. All powers not expressly granted to Submanager by
              -----------
this Agreement are reserved by Manager to the extent transferred to Manager
under the Management Agreement, or to Owner to the extent not so transferred to
Manager thereunder.

     4        DUTIES OF SUBMANAGER.
              ---------------------
<PAGE>

     a        Management. Submanager agrees to use reasonable efforts in the
              ----------
exercise of the powers conferred and assumed in Section 2.1 hereof and in the
operation, management and maintenance of the Theatre in accordance with this
Agreement.

     b        Accounting.
              ----------

     i.       Submanager shall maintain books of account based upon its ordinary
          accounting practices at its offices with respect to the Theatre. Said
          books of account shall be available to properly authorized
          representatives and agents of Manager during all reasonable business
          hours upon reasonable notice. Submanager shall furnish Manager with a
          monthly profit and loss statement in a form normally and customarily
          used by Submanager, which form shall show all receipts and estimated
          expenses of the Theatre for the preceding month, and shall furnish
          Manager with weekly reports of "Gross Income" (as hereinafter defined)
          within five (5) business days after the close of each theatre week.
          Submanager shall prepare and furnish, or cause to be prepared and
          furnished, Manager and Landlord such statements with respect to the
          operation of the Theatre as required under the Lease. Submanager shall
          retain all original statements and invoices for the expenses of the
          Theatre for a period of at least two (2) years and such statements
          shall be available to Manager during all reasonable business hours
          upon reasonable notice. Submanager shall make such records available
          to authorized representatives of Owner if Owner so requests.

     ii.      Within fifty (50) days of the end of each calendar year,
          Submanager shall prepare and furnish to Manager a profit and loss
          statement based upon Submanager's ordinary accounting practices which
          shall show the Gross Income and actual expenses of the Theatre for the
          immediately preceding calendar year.

     c        Bank Account.
              ------------
<PAGE>

     i.       Manager shall cause a bank account or bank accounts (hereinafter
          collectively referred to as the "Bank Account") to be opened and
          maintained separately and apart from all other bank accounts of
          Manager and Submanager for the sole purpose of handling transactions
          under this Agreement. Alternatively, as Manager and Submanager may
          elect from time to time, the Bank Account described herein shall mean
          the Bank Account opened pursuant to the Management Agreement. The
          parties hereto may designate from time to time which account is the
          Bank Account for purposes hereof. All receipts from the operation of
          the Theatre shall be deposited in the Bank Account, and all payments
          of costs, expenses and charges to be made by Submanager under this
          Agreement (including the remuneration to be paid Submanager as
          hereinafter provided) shall be paid out of the Bank Account. In the
          event the balance in the Bank Account is insufficient to enable
          Submanager to meet the obligations incurred or accrued pursuant to the
          provisions of this Agreement as they mature, Manager, within three (3)
          days following receipt of a request from Submanager, shall furnish
          such notice of Submanager's need for additional funds to Owner as
          Submanager may reasonably require in order to enable Submanager to
          meet said obligations as they mature. Upon the receipt of any such
          requested funds from Owner, Manager shall remit such funds to
          Submanager. Notwithstanding anything to the contrary contained herein,
          Manager shall have no obligation to advance any sums to Submanager
          other than those received by Owner pursuant to the preceding sentence.
          Submanager shall have the right, but shall not be obligated, to
          advance on behalf of Owner, upon the failure of Owner to timely
          provide such sums to Manager pursuant to the Management Agreement, the
          amounts which Submanager requires for such purposes. Submanager is
          hereby authorized at any time, in the event of such advances by it, to
          withdraw from the Bank Account, after three (3) days notice to
          Manager, sufficient sums to repay itself with interest thereon at the
          fluctuating rate equal to the discount rate announced from time to
          time by the Federal Reserve Bank of New York, plus 400 basis points,
          or the maximum amount allowed by law, whichever is less.

     ii.      All withdrawals from the Bank Account shall be made by checks
          signed by the authorized signatories of Submanager, and Submanager
          will furnish to Manager, within forty (40) days following the
          expiration of each month, a statement of the receipts and expenses of
          the operation of the Theatre during such month.

     iii.     Within forty (40) days following the expiration of each month,
          Submanager shall remit to Manager, from the Bank Account, the excess
          of moneys which were on deposit therein at the expiration of such
          month after deducting the amount required to make the payments herein
          provided to be paid by or to Submanager during such month and
          reasonable reserves for anticipated expenses.
<PAGE>

         d   Notices and Documents. Submanager shall advise Manager promptly of
             ---------------------
the service upon Submanager of any summons, subpoena, or other like legal
document, including any notices, letters or other communications setting out or
claiming an actual or alleged potential liability of Manager, Owner, Landlord or
the Theatre (including all notices from any landlords), and will reasonably
cooperate with Manager in connection with any legal or arbitration proceeding
arising in connection with the Theatre, or its operation. Submanager shall also
notify Manager promptly of (i) any notice of violation or claimed violation of
any governmental requirement; (ii) any material damage to the Theatre; and (iii)
any actual or alleged personal injury or property damage occurring to or
formally claimed by any landlord, third party or employee on or with respect to
the Theatre.

         5   TERMINATION.
             ------------

         a   Default by Submanager. In the event of a breach of the provisions
             ---------------------
of this Agreement by Submanager, Manager shall have the right to give to
Submanager twenty five (25) days' written notice to cure such breach, and in the
event of the failure of Submanager to do so within such period, Manager shall
have the right to thereafter terminate this Agreement upon at least twenty five
(25) days' written notice of such election to terminate, such termination to be
effective following the expiration of such second twenty-five day notice;
provided that, if the breach is of such nature that it cannot be cured within
such twenty five (25) day period, this Agreement shall not be terminable on
account of such breach so long as, within such twenty five (25) day period,
Submanager shall have commenced to cure such breach and shall thereafter
diligently prosecute the cure thereof.

         b   Default by Manager.  In the event of any failure by Owner to
             ------------------
supply any funds required under the Management Agreement, Submanager shall have
the right to fund any deficiency and, if Submanager does so fund, Manager agrees
not to terminate the Management Agreement based on Owner's failure to fund; or
Submanager can elect to terminate hereunder, in which event Manager can respond
to Owner's breach under the Management Agreement in Manager's sole discretion.
In the event of any other breach of the provisions of this Agreement by Manager
or of the Management Agreement by Owner, Submanager shall have the right to give
to Manager twenty five (25) days' written notice to cure, or, as the case may
be, to demand that Owner cure, such breach, and in the event of the failure of
Manager or Owner, as the case may be, to do so within such period, Submanager
shall have the right to thereafter terminate this Agreement upon an additional
twenty five (25) days written notice of such election to terminate, such
termination to be effective following the expiration of such second twenty-five
day notice; provided that, if the breach is of such nature that it cannot be
cured within such twenty five (25) day period, this Agreement shall not be
terminable on account of such breach so long as, within such twenty five (25)
day period, Manager or Owner, as the case may be, shall have commenced to cure
such breach and shall thereafter diligently prosecute the cure thereof.
Submanager will accept Manager's cure of a default by Owner.
<PAGE>

         c   Default under Lease Agreement. Submanager, as tenant, and Sutton
             -----------------------------
Hill Capital, L.L.C., an affliliate of Manager, as landlord, have entered into a
certain lease agreement, dated as of the date hereof (the "Operating Lease"),
relating to certain other theatre properties. Submanager and Manager agree that
the occurrence of an Event of Default under the Operating Lease shall constitute
a default by Submanager of this Agreement and that, upon termination of the
Operating Lease for any reason, this Agreement shall automatically terminate
without notice or demand.

         d   Effect of Termination on Booking.  Notwithstanding the term
             --------------------------------
provided for in Section 1 or the giving of any earlier notice of termination
pursuant to any of Section 4.1, 4.2 or 4.3 above, Submanager shall during the
entire term of this Agreement continue to use its reasonable efforts to book
films for exhibition in the Theatre in accordance with reasonable industry
standards, even though such films may have exhibition dates after the
termination of this Agreement. Manager shall and shall cause Owner to honor all
such booking commitments for the Theatre made prior to the termination of this
Agreement, notwithstanding that such bookings may be for the period after the
effective date of termination of this Agreement.

         e   Delivery of Records; Final Accounting.  Upon termination,
             -------------------------------------
Submanager shall (i) deliver to Manager all books, records and the like
maintained solely in connection with the operation and management of the
Theatre; (ii) render a final accounting to Manager within eighty (80) days after
termination, reflecting the balance of income and expenses of the Theatre, as of
the date of termination; and (iii) deliver to Manager the balance of the Bank
Account.

         f   Right of Termination on Other Remedies. The right to terminate
             --------------------------------------
provided under this Section 4 shall be in addition to, and not in lieu of, any
other rights or remedies which the parties may have under this Agreement, at law
or in equity, including, without limitation, the right to receive specific
performance and/or to obtain damages. Notwithstanding anything contained herein
to the contrary, if the Purchased Assets (as hereinafter defined) are sold,
transferred or otherwise conveyed, this Agreement shall terminate as to all
future obligations of Manager and Submanager; provided, however, that this
Agreement shall not so terminate if such sale, transfer or other conveyance
shall occur prior to the end of the term hereof and Submanager shall not have
received the notice under Section 8.1 hereof of the right to exercise its first
refusal option therein set forth.

         6   COMPENSATION TO SUBMANAGER.
             ---------------------------
<PAGE>

         a   Gross Income Defined. For the purposes of this Agreement, the term
             --------------------
"Gross Income" shall mean: (i) all monies received for admission to the Theatre,
exclusive of admission" taxes or other taxes required by law to be collected
from the patron at the time of the sale of the tickets at the box office or
other place where admissions are sold, and exclusive of all bona fide refunds
made to patrons; (ii) all monies received from sales of food, beverages and
merchandise at the Theatre, exclusive of sales tax required by law to be paid or
collected in connection with such sales; (iii) the gross amount received (less
any applicable taxes) from the use of the Theatre in its entirety by a third
party for the exhibition of films (i.e., a "four wall deal") or for theatrical
                                   ---
performances, lectures, concerts or the like where the party using the Theatre
is entitled to retain the receipts from admissions to such event and pays a flat
fee or percentage of receipts for such use; (iv) the receipts from vending
machines at the Theatre; (v) parking receipts; and (vi) all other monies
received from the operation of the Theatre (including, without limitation,
advertising rebates, commissions, and shrinkage). Admission prices and
classifications shall be determined by Submanager, subject to the approval of
Manager prior to any change, which approval shall not be unreasonably withheld
or delayed; provided, further, that Submanager recognizes that Manager, prior to
responding to Submanager's request for consent as herein provided, must first
obtain consent from Owner pursuant to the Management Agreement.

         b   Management Fee. As compensation to Submanager for the full and
             --------------
faithful performance of its duties under this Agreement, Manager shall pay
Submanager a "Management Fee," as hereinafter defined. As used herein, the term
"Management Fee" shall be an amount equal to six percent (6%) of the Gross
Income of the Theatre collected during the term hereof.

         c   Payment of Management Fee. The Management Fee shall be determined
             -------------------------
and payable weekly. Submanager shall be permitted and is hereby authorized to
deduct weekly its fees, described above, from the Gross Income of the Theatre
and to withdraw and pay itself the same out of the Bank Account.

         d   Grant of Security Interest. As security for the performance by
             --------------------------
Manager of its obligations under this Agreement, Manager hereby grants to
Submanager a security interest in and to Manager's interest in the Bank Account
and agrees to execute and deliver and, where appropriate, acknowledge any such
financing statements or other documents as Submanager may request in order to
evidence and perfect this grant of security interest. Submanager shall have all
of the rights of a secured creditor under the New York Uniform Commercial Code,
as the same may be amended from time to time. Such rights and remedies shall,
however, be in addition to, and not in lieu of, the rights and/or remedies which
Submanager may have at law, in equity or under this Agreement, all such remedies
being cumulative and not exclusive in nature.

         7   ACKNOWLEDGMENT AND OBLIGATIONS OF MANAGER.
             ------------------------------------------
<PAGE>

     a   Operations of Other Theatres by Submanager. Manager specifically
         ------------------------------------------
acknowledges that Submanager and its affiliates own and operate other theatres
in the same area in which the Theatre is located, which are in direct
competition with the Theatre, and nothing herein contained shall in any way
affect the right of Submanager and its affiliates now or in the future to own,
operate, or manage, or book and buy for other theatres for their own account or
for the account of others or to expand or contract their operations.

     b   Limitation on Damages. Manager acknowledges and agrees that in no event
         ---------------------
shall Submanager be liable, under Sections 4.5 and 7 or at law or otherwise, for
punitive damages, consequential damages or any other damages which are not
compensatory damages. Submanager acknowledges and agrees that in no event shall
Manager be liable, under Section 7 or at law or otherwise, for punitive damages,
consequential damages or any other damages which are not compensatory damages.

     c   Right to Cure Defaults under the Management Agreement. Submanager shall
         -----------------------------------------------------
have the right, but not the obligation, to cure any defaults by Manager in the
performance of its obligations under the Management Agreement. Manager shall
promptly deliver to Submanager any notices of default that Manager receives from
Owner under the Management Agreement.

     8   INDEMNIFICATION.
         ----------------

     a   Indemnification by Submanager. To the extent not covered by insurance
         -----------------------------
policies to be obtained in accordance with the provisions of Subparagraph 2.l(g)
hereof, Submanager shall defend, indemnify and hold Manager, Owner and, to the
extent required from Owner pursuant to the Lease with respect to matters for
which the indemnity of Submanager in favor of Owner is provided herein, Landlord
harmless from and against any and all claims, demands, causes of action, loss
and liability to third parties (including all costs and reasonable attorneys'
fees) arising out of or resulting from (i) damage to property, or injury to, or
death of, persons (including the property and person of the parties hereto, and
their agents, subcontractors and employees) occasioned by or in connection with
the willful or grossly negligent acts of Submanager or Submanager's agents,
employees or subcontractors; (ii) breach by Submanager (or Submanager's agents,
employees, or subcontractors) of any of its duties or obligations under this
Agreement (except that Submanager shall have no liability for (a) failure to
take any action under this Agreement that requires Manager's or Owner's prior
approval or authorization if Submanager notified Manager that such action is
necessary and Manager has refused or failed to authorize, or failed to have
obtained Owner's consent to authorize, Submanager to take the same or (b) any
action taken in good faith by Submanager under this Agreement with Manager's
written consent); or (iii) actions taken by Submanager outside the scope of this
Agreement.
<PAGE>

     b   Indemnification by Manager. To the extent not covered by insurance
         --------------------------
policies to be obtained in accordance with the provisions of Subparagraph 2.l(g)
hereof, Manager shall defend, indemnify and hold Submanager harmless from and
against any and all claims, demands, causes of action, loss and liability to
third parties (including all costs and reasonable attorneys' fees) arising out
of or resulting from (i) damage to property, or injury to, or death of, persons
(including the property and person of the parties hereto, and their agents,
subcontractors and employees) occasioned by or in connection with the willful or
grossly negligent acts of Manager or Manager's agents, employees or
subcontractors (including the failure to timely authorize any action under this
Agreement that requires Manager's prior approval or authorization if Submanager
has notified Manager that the same is necessary except that Manager is not
liable for Owner's inaction or refusal to grant consent); (ii) breach by Manager
(or Manager's agents, employees, or subcontractors) of any of its duties or
obligations under this Agreement; and (iii) any act or action by Submanager
pursuant to this Agreement taken in good faith with Manager's prior written
consent as to the act or action in question.

     9   RIGHT OF FIRST REFUSAL.
         -----------------------
<PAGE>

     a   Grant of Right. So long as Submanager is not in breach of any of its
         --------------
obligations hereunder, at any time and from time to time prior to the end of the
term hereof (at which point the rights hereinafter described shall terminate),
in the event Owner receives a bona fide written offer from an unaffiliated third
party and not in a foreclosure proceeding brought by Townhouse Cinemas
Corporation ("Townhouse") or a successor thereto to purchase all or any part of
Owner's interest in the buildings and other improvements (including, without
limitation, the attachments, appliances, equipment, machinery and other affixed
property which would constitute "fixtures" under Section 9-313(1)(a) of the
Uniform Commercial Code) now or hereafter located on the Theatre and all of
Owner's right, title and interest in, to and under the Lease or all or
substantially all of the equity interest in Owner, whether direct or indirect,
subject to whatever right, title or interest any third party (including lenders
to or partners or shareholders of Owner or Owner's Affiliates involved in the
Theatre) may have therein (the "Purchased Assets"), which Owner is willing to
accept in its sole and absolute discretion, and delivers to Manager the term
sheet for the acquisition of the Purchased Assets (the "Term Sheet"), Manager
shall notify Submanager within 5 days of receipt of such Term Sheet and provide
Submanager with a copy thereof. If Submanager elects to exercise its right of
first refusal pursuant to the terms herein, Submanager must give Manager within
twenty (20) days of Submanager's receipt of the Term Sheet an irrevocable offer
to acquire the Purchased Assets on substantially identical terms as those set
forth in the Term Sheet. In order to be effective, Submanager's notice that it
wishes to exercise its right of first refusal with respect to the Purchased
Assets shall be accompanied by a check for 10% of the price thereof, to be used
by Manager as a downpayment for the Purchased Assets and to be held in escrow by
Owner's attorney. If Submanager shall so exercise its rights hereunder, Manager
and Submanager shall promptly and in good faith seek to agree upon and execute
definitive documentation for such purchase within 10 days of Submanager's
delivery of its irrevocable offer, which documentation shall reflect (a) the
respective obligations of the parties hereto with respect to powers and duties
of Submanager hereunder and (b) the fact that the Purchased Assets will be
conveyed pursuant to documentation to be agreed upon and executed by Owner and
Manager. At the closing of the transfer of the Purchased Assets, Manager shall
instruct Owner to deliver title as Submanager shall direct, provided Submanager
complies with its obligation pursuant to its offer to acquire the Purchased
Assets as aforesaid. If Submanager elects not to close on the Purchased Assets
in substantial conformity with the terms set forth in such documentation, or if
Submanager shall in bad faith fail to execute such documentation, Submanager
shall have no further rights pursuant to this paragraph with respect to the
Purchased Assets and Owner shall be entitled to retain the 10% deposit as
liquidated damages. If Submanager shall fail to give notice to Manager that it
wishes to exercise its right of first refusal within such twenty (20) day period
and either (i) Owner sells the Purchased Assets or (ii) Manager elects to
exercise any rights it may have and acquires the Purchased Assets, Submanager's
rights pursuant to this Section 8.1 shall be void and of no further force and
effect. If the Purchased Assets are not sold in substantial conformity with the
offer described in the Term Sheet (including at a price not less than 90% of the
price described therein), Submanager's right of first refusal hereunder shall
continue in effect.

     10  GENERAL PROVISIONS.
         -------------------
<PAGE>

         a   Counterparts. This Agreement may be executed in counterparts, each
             ------------
of which shall be deemed an original, but all of which, taken together, shall
constitute one and the same instrument.

         b   Entire Agreement.
             ----------------

     This Agreement contains the entire agreement between the parties respecting
the subject matter of this Agreement and supersedes all prior understanding and
agreements, whether oral or in writing, between the parties respecting the
subject matter of this Agreement.
<PAGE>

         c   Legal Advice; Neutral Interpretation. Each party has received
             ------------------------------------
independent legal advice from its attorneys with respect to the advisability of
executing this Agreement and the meaning of the provisions hereof. The
provisions of this Agreement shall be construed as to their fair meaning, and
not for or against any party based upon any attribution to such party as the
source of the language in question.

         d   CHOICE OF LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE
             -----------------------------------
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, APPLICABLE TO CONTRACTS ENTIRELY
PERFORMED AND MADE IN NEW YORK. EACH OF THE MANAGER AND SUBMANAGER WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF THE ENGAGEMENT OF
THE SUBMANAGER PURSUANT TO, OR THE PERFORMANCE BY THE SUBMANAGER OF THE SERVICES
CONTEMPLATED BY, THIS AGREEMENT.

         e   Severability. If any term, covenant, condition or provision of this
             ------------
Agreement, or the application thereof to any person or circumstance, shall to
any extent be held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, covenants, conditions or provisions
of this Agreement, or the application thereof to any person or circumstance,
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby.

         f   Waiver of Covenants, Conditions or Remedies. The waiver by one
             -------------------------------------------
party of the performance of any covenant or condition under this Agreement shall
not invalidate this Agreement nor shall it be considered a waiver by it of any
other covenant or condition under this Agreement. The waiver by either or both
parties of the time for performing any act under this Agreement shall not
constitute a waiver of the time for performing any other act or an identical act
required to be performed at a later time. The exercise of any remedy provided in
this Agreement shall not be a waiver of any consistent remedy provided by law,
and the provision in this Agreement for any remedy shall not exclude other
consistent remedies unless they are expressly excluded.

         g   Exhibits. All exhibits to which reference is made in this Agreement
             --------
are deemed incorporated in this Agreement.

         h   Amendment. This Agreement may be amended only by the written
             ---------
agreement of Manager and Submanager. All amendments, changes, revisions and
discharges of this Agreement, in whole or in part, and from time to time, shall
be binding upon the parties despite any lack of legal consideration, so long as
the same shall be in writing and executed by the parties hereto.
<PAGE>

         i   Relationship of Parties. The parties agree that their relationship
             -----------------------
is that of Manager and Submanager, and that nothing contained herein shall
constitute either party as employee or legal representative of the other for any
purpose whatsoever, nor shall this Agreement be deemed to create any form of
business organization, joint venture or partnership between the parties hereto
or as giving Submanager any type of property interest in the Theatre, nor is
either party granted any right or authority to assume or create any obligation
or responsibility on behalf of the other party, except as otherwise provided
herein, nor shall either party be in any way liable to third parties for any
debt of the other.

         j   No Third Party Benefit. This Agreement is intended to benefit only
             ----------------------
the parties hereto and no other person or entity has or shall acquire any rights
hereunder.

         k   Time of the Essence. Time shall be of the essence as to all dates
             -------------------
and times of performance contained herein.

         l   Further Acts. Each party agrees to perform any further acts and to
             ------------
execute, acknowledge and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.

         m   Successors and Assigns. This Agreement shall be binding upon and
             ----------------------
shall inure to the benefit of the successors and assigns of the parties to this
Agreement.

         n   Manner of Giving Notice. All notices and demands which either party
             -----------------------
is required or desires to give to the other shall be given in writing by
personal delivery or by express courier service or by certified mail, return
receipt requested, to the address set forth below for the respective party,
provided that if any party gives notice of a change of name or address, notices
to that party shall thereafter be given as demanded in that notice. All notices
and demands given by personal delivery or by express courier service shall be
effective on the date of delivery; all notices and demands given by mail as set
forth above shall be effective on the fourth business day after mailing.

To Manager:                         With copies to:
-----------                         ---------------

City Cinemas Corporation            Whitman Breed Abbott & Morgan LLP
120 North Robertson  Blvd           200 Park Avenue
 .Los Angeles, CA 90048              New York, NY 10166
                                    Attention: Howard Peskoe

To Submanager:                      With copies to:
--------------                      ---------------

Citadel Cinemas, Inc.               Duane, Morris &  Heckscher LLP
550 South Hope StreetSuite 1825     380 Lexington Avenue
Los Angeles, CA 90071               New York, New York 10168
Facsimile: (213) 239-0548           Attention: Michael Margulis
Attention: President
<PAGE>

         o   No Recourse. No recourse for any claim based hereon or otherwise in
             -----------
respect hereof shall be had against any direct or indirect member of the Manager
or any incorporator, officer, member, Affiliate or director, as such, past,
present or future, of any such direct or indirect member, it being understood
that the Manager is a limited liability company. Nothing contained in this
Section 9.15 shall be construed to limit the exercise or enforcement, in
accordance with the terms of this Agreement and the other documents referred to
herein, of rights and remedies against the Manager or its assets, or any other
Person expressly undertaking obligations in connection with the undertaking
contemplated hereby.
<PAGE>

     IN WITNESS WHEREOF, the parties have caused this instrument to be executed
as of the day and year first above written.

MANAGER:                                  SUBMANAGER:

City Cinemas Corporation,                 Citadel Cinemas, Inc.,
a New York corporation                    a Nevada corporation

By:  /s/ James D. Vandever               By: /s/ Andrzej Matyczynski
     ---------------------------             ----------------------------
Name:  James D. Vandever                 Name:  Andrzej Matyczynski
Title: Secretary                         Title:  Chief Financial Officer

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