Document:

<PAGE>
                                                                     EXHIBIT 4.2

                                   INDENTURE

                          VESTIN GROUP INC., AS OBLIGOR
                          UNSECURED, SUBORDINATED NOTES

                                  $500,000,000

                         U.S. BANK NATIONAL ASSOCIATION,

                                   AS TRUSTEE

                           DATED AS OF MARCH ___, 2003

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                                TABLE OF CONTENTS

<TABLE>
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                                                                                         PAGE

<S>               <C>                                                                    <C>
ARTICLE 1         DEFINITIONS AND INCORPORATION BY REFERENCE................................1

        Section 1.1       Definitions.......................................................1

        Section 1.2       Other Definitions.................................................4

        Section 1.3       Incorporation by Reference of Trust Indenture Act.................4

        Section 1.4       Rules of Construction.............................................4

ARTICLE 2         THE NOTES.................................................................5

        Section 2.1       Unlimited Amount; Accounts; Interest; Maturity....................5

        Section 2.2       Transaction Statement.............................................6

        Section 2.3       Registrar and Paying Agent........................................6

        Section 2.4       Paying Agent to Hold Money in Trust...............................7

        Section 2.5       Noteholder Lists..................................................7

        Section 2.6       Transfer and Exchange.............................................7

        Section 2.7       Payment of Principal and Interest; Principal and Interest
                          Rights Preserved..................................................8

        Section 2.8       Right of Set-Off In Certain Circumstances.........................9

        Section 2.9       Outstanding Notes.................................................9

        Section 2.10      Treasury Notes...................................................10

        Section 2.11      Defaulted Interest...............................................10

        Section 2.12      Book Entry Registration..........................................10

        Section 2.13      Initial and Periodic Statements..................................11

ARTICLE 3         REDEMPTION...............................................................11

ARTICLE 4         COVENANTS................................................................11

        Section 4.1       Payment of Notes.................................................11

        Section 4.2       Maintenance of Office or Agency..................................12

        Section 4.3       SEC Reports and Other Reports....................................12

        Section 4.4       Compliance Certificate...........................................13

        Section 4.5       Stay, Extension and Usury Laws...................................14

        Section 4.6       Liquidation......................................................14

ARTICLE 5         SUCCESSORS...............................................................14

        Section 5.1       When the Company May Merge, etc..................................14
</TABLE>

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                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
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<S>               <C>                                                                    <C>
        Section 5.2       Successor Corporation Substituted................................15

ARTICLE 6         DEFAULTS AND REMEDIES....................................................15

        Section 6.1       Events of Default................................................15

        Section 6.2       Acceleration.....................................................16

        Section 6.3       Other Remedies...................................................16

        Section 6.4       Waiver of Past Defaults..........................................17

        Section 6.5       Control by Majority..............................................17

        Section 6.6       Limitation on Suits..............................................17

        Section 6.7       Rights of Holders to Receive Payment.............................18

        Section 6.8       Collection Suit by Trustee.......................................18

        Section 6.9       Trustee May File Proofs of Claim.................................18

        Section 6.10      Priorities.......................................................19

        Section 6.11      Undertaking for Costs............................................19

ARTICLE 7         TRUSTEE..................................................................19

        Section 7.1       Duties of Trustee................................................19

        Section 7.2       Rights of Trustee................................................21

        Section 7.3       Individual Rights of Trustee.....................................21

        Section 7.4       Trustee's Disclaimer.............................................21

        Section 7.5       Notice of Defaults...............................................22

        Section 7.6       Reports by Trustee to Holders....................................22

        Section 7.7       Compensation and Indemnity.......................................22

        Section 7.8       Replacement of Trustee...........................................23

        Section 7.9       Successor Trustee by Merger, etc.................................24

        Section 7.10      Eligibility; Disqualification....................................24

        Section 7.11      Preferential Collection of Claims Against Company................24

ARTICLE 8         DISCHARGE OF INDENTURE...................................................25

        Section 8.1       Termination of Company's Obligations.............................25

        Section 8.2       Application of Trust Money.......................................26

        Section 8.3       Repayment to Company.............................................26

        Section 8.4       Reinstatement....................................................26
</TABLE>

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                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
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<S>               <C>                                                                    <C>
ARTICLE 9         AMENDMENTS...............................................................27

        Section 9.1       Without Consent of Holders.......................................27

        Section 9.2       With Consent of Holders..........................................27

        Section 9.3       Compliance with Trust Indenture Act..............................28

        Section 9.4       Revocation and Effect of Consents................................28

        Section 9.5       Notation on or Exchange of Notes.................................29

        Section 9.6       Trustee to Sign Amendments, etc..................................29

ARTICLE 10        SUBORDINATION............................................................29

        Section 10.1      Agreement to Subordinate.........................................29

        Section 10.2      Liquidation; Dissolution; Bankruptcy.............................29

        Section 10.3      Default of Senior Debt...........................................30

        Section 10.4      When Distribution Must Be Paid Over..............................31

        Section 10.5      Notice by Company................................................31

        Section 10.6      Subrogation......................................................31

        Section 10.7      Relative Rights..................................................32

        Section 10.8      Subordination May Not Be Impaired by the Company or Holders
                          of Senior Debt...................................................32

        Section 10.9      Distribution or Notice to Representative.........................33

        Section 10.10     Rights of Trustee and Paying Agent...............................33

        Section 10.11     Authorization to Effect Subordination............................34

        Section 10.12     Article Applicable to Paying Agent...............................34

        Section 10.13     Miscellaneous....................................................34

ARTICLE 11        MISCELLANEOUS............................................................35

        Section 11.1      Trust Indenture Act Controls.....................................35

        Section 11.2      Notices..........................................................35

        Section 11.3      Communication by Holders with Other Holders......................36

        Section 11.4      Certificate and Opinion as to Conditions Precedent...............36

        Section 11.5      Statements Required in Certificate or Opinion....................36

        Section 11.6      Rules by Trustee and Agents......................................37

        Section 11.7      Legal Holidays...................................................37
</TABLE>

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                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                         PAGE
<S>               <C>                                                                    <C>
        Section 11.8      No Recourse Against Others.......................................37

        Section 11.9      Duplicate Originals..............................................37

        Section 11.10     Governing Law....................................................37

        Section 11.11     No Adverse Interpretation of Other Agreements....................38

        Section 11.12     Successors.......................................................38

        Section 11.13     Severability.....................................................38

        Section 11.14     Counterpart Originals............................................38

        Section 11.15     Table of Contents, Headings, etc.................................38
</TABLE>

                                      -iv-

<PAGE>

      INDENTURE dated as of March ___, 2003, by Vestin Group, Inc., a Delaware
corporation (the "Company"), and U.S. Bank National Association, as trustee
(the "Trustee").

      The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the unsecured,
subordinated Notes of the Company issued pursuant to the Company's registration
statement on Form SB-2 declared effective by the Securities and Exchange
Commission on or about March ___, 2003 (collectively, the "securities"):

                                   ARTICLE 1

                          DEFINITIONS AND INCORPORATION

                                  BY REFERENCE

      SECTION 1.1 DEFINITIONS.

      "Account" means the record of beneficial ownership of a Note maintained by
the Company.

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

      "Agent" means any Registrar, Paying Agent or co-registrar of the Notes.

      "Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.

      "Business Day" means any day other than a Legal Holiday.

      "Company" means Vestin Group, Inc., unless and until replaced by a
successor in accordance with Article 5 hereof and thereafter means such
successor.

      "Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is originally dated, located at 1 California Street, Suite 2550, San
Francisco, California 94111, Attention: Raafat Sarkis, Corporate Trust
Services.

      "Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

                                      -1-
<PAGE>

      "Fiscal Year" means initially a December 31 year end.

      "GAAP" means, as of any date, generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession, which are in effect from time to time.

      "Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.

      "Holder" or "Noteholder" means a Person in whose name a Note is
registered.

      "Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including capital
lease obligations) or representing any hedging obligations, except any such
balance that constitutes an accrued expense or a trade payable, if and to the
extent any of the foregoing indebtedness (other than letters of credit and
hedging obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and also includes, to the extent not
otherwise included, (a) the Guarantee of items that would be included within
this definition, and (b) liability for items that would arise by operation of a
Person's status as a general partner of a partnership.

      "Indenture" means, this Indenture as amended or supplemented from time to
time.

      "Interest Accrual Date" means with respect to any Note, the date the
Company accepts funds for the purchase of the Note if such funds are received by
3:00 p.m. (PST) on a Business Day, or if such funds are not so received, on the
next Business Day.

      "Interest Accrual Period" means, as to each Note, the period from the
later of the Interest Accrual Date of such Note or the day after the last
Payment Date upon which an interest payment was made until the following Payment
Date during which interest accrues on each Note with respect to any Payment
Date.

      "Notes" or "Note" means the Company's unsecured subordinated note(s)
issued under this Indenture.

      "Issue Date" means, with respect to any Note, the date on which such Note
is initially registered on the books and records of the Registrar.

      "Maturity Date" means, with respect to any Note, the date on which the
principal of such Note becomes due and payable as therein provided.

                                      -2-
<PAGE>

      "Maturity Record Date" means, with respect to any Note, as of 11:59 p.m.
of the date fifteen days prior to the Maturity Date or Redemption Date
applicable to such Note.

      "Obligations" means any principal, interest (including Post-Petition
Interest), penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.

      "Officer" means the Chief Executive Officer of the Company, the President
of the Company, or the Chief Financial Officer of the Company.

      "Officers' Certificate" means a certificate signed by two Officers, one of
whom must be the principal executive officer, principal operating officer,
principal financial officer or principal accounting officer of the Company.

      "Opinion of Counsel" means an opinion from legal counsel to the Company.

      "Payment Date" means the last day of each calendar month or such other
date as determined by the Holder and the Company or if such day is not a
Business Day, the Business Day immediately following such day and, with respect
to a specific Note, the Maturity Date or Redemption Date of such Note.

      "Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

      "Post-Petition Interest" means interest accruing after the commencement of
any bankruptcy or insolvency case or proceeding with respect to the Company or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, at the rate applicable to such Indebtedness,
whether or not such interest is an allowable claim in any such proceeding.

      "Redemption Date" has the meaning given in Article 3 hereof.

      "Redemption Price" means, with respect to any Note to be redeemed, the
principal amount of such Note plus the interest accrued but unpaid during the
Interest Accrual Period up to the Redemption Date for such security.

      "Regular Record Date" means, with respect to each Payment Date, as of
11:59 p.m. of the date fifteen days prior to such Payment Date.

      "Responsible Officer" when used with respect to the Trustee, means any
officer in its Corporate Trust Office, or any other assistant officer of the
Trustee in its Corporate Trust Office customarily performing functions similar
to those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of his
or her knowledge of and familiarity with the particular subject.

      "SEC" means the U.S. Securities and Exchange Commission.

                                      -3-
<PAGE>

      "Senior Debt" means any Indebtedness (whether outstanding on the date
hereof or thereafter created) incurred by the Company in connection with
borrowings by the Company (including its subsidiaries) whether such Indebtedness
is or is not specifically designated by the Company as being "Senior Debt" in
its defining instruments.

      "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.

      "Trustee" means U.S. Bank National Association, until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.

      "U.S. Government Obligations" means direct obligations of the United
States of America, or any agency or instrumentality thereof for the payment of
which the full faith and credit of the United States of America is pledged.

      SECTION 1.2 OTHER DEFINITIONS.

<TABLE>
<CAPTION>
                      Term                                   Defined in Section
                     <S>                                     <C>
                     "Bankruptcy Law"                               6.1
                     "Custodian"                                    6.1
                     "Event of Default"                             6.1
                     "Legal Holiday"                               11.7
                     "Paying Agent"                                 2.3
                     "Registrar"                                    2.3
</TABLE>

      SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.

      Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:

      "indenture securities" means the Notes;
      "indenture security holder" means a Noteholder;
      "indenture to be qualified" means this Indenture;
      "indenture trustee" or "institutional trustee" means the Trustee;
      "obligor" on the Notes means the Company or any successor obligor upon the
      Notes.

      All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.

      SECTION 1.4 RULES OF CONSTRUCTION.

      Unless the context otherwise requires:

                                      -4-
<PAGE>

      1. a term has the meaning assigned to it;

      2. an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;

      3. references to GAAP, as of any date, shall mean GAAP in effect in the
United States as of such date;

      4. "or" is not exclusive,

      5. words in the singular include the plural, and in the plural include the
singular; and

      6. provisions apply to successive events and transactions.

                                   ARTICLE 2

                                   THE NOTES

      SECTION 2.1 UNLIMITED AMOUNT; ACCOUNTS; INTEREST; MATURITY.

      The outstanding aggregate principal amount of Notes outstanding at any
time is limited to $500 million, provided, however, that the Company and the
Trustee may, without the consent of any Holder, increase such aggregate
principal amount of Notes which may be outstanding at any time. The Notes may be
subject to notations, legends or endorsements required by law, stock exchange
rule, agreements to which the Company is subject or usage.

      Except as provided in Section 2.12 hereof, each Note shall not be
evidenced by a promissory note. The record of beneficial ownership of the Notes
shall be maintained and updated by the Company through the establishment and
maintenance of Accounts. Each Note shall be in such denominations as may be
designated from time to time by the Company but in no event in an original
denomination less than $1,000. Separate purchases may not be cumulated to
satisfy the minimum denomination requirements. Each Note shall have a term of
not less than three months and not greater than 120 months as shall be
designated by the Company from time to time. The Note shall be redeemable by the
Company upon 90 days written notice to the Holder thereof. Such redemption
notice shall state the date of the redemption.

      Each Note shall bear interest from and commencing on its Interest Accrual
Date at such rate of interest as the Company shall determine from time to time;
provided, however, that the interest rate will be fixed for the term of the
Notes upon issuance, subject to change upon extension.

      Interest on a Note will compound daily and the Holder thereof may elect to
have interest paid monthly or upon maturity, which election must be made prior
to the Issue Date.

      The Company will give each Holder of a Note (existing as of the applicable
Maturity Record Date) a written renewal notice at approximately twenty (20) but
not less than fifteen (15) days prior to the Maturity Date of the Note held by

      The Company will give each Holder of a Note (existing as of the applicable
Maturity Record Date) a written renewal notice at approximately twenty (20) but
not less than fifteen (15) days prior to the Maturity Date of the Note held by
such Holder. This renewal notice will

                                      -5-
<PAGE>
remind such Holder of the pending maturity of the Note and will indicate that
the automatic extension provision described in the next paragraph will take
effect unless the Holder completes the renewal form, included with the renewal
notice, and returns it to the Company within seven days after the Maturity Date
indicating the Holder's intention to either have the Note redeemed or to change
the term of the maturing Note. The renewal notice will specify the new rate
applicable to the renewal term and will include a copy of the current supplement
to the prospectus related to such Note, which lists all of the rates applicable
to each term offered at the Holder's maturity date in the event the Holder
elects to select an alternative term upon the maturity of the Note. The renewal
notice will indicate that the Holder should have previously received a copy of
the updated prospectus, if applicable, and where the Holder can get another copy
of the prospectus. If the Holder does not return the renewal form, a second
renewal notice will be sent to the Holder advising the Holder of the automatic
renewal and indicating that the Holder has seven days from the Maturity Date to
notify the Company if the Holder does not want the Note to be automatically
renewed.

      The Note will automatically renew for an identical term at the rate
specified in the renewal notice unless the Holder completes and returns the
renewal form to the Company within seven days after the Maturity Date indicating
that the Holder wishes to either have the Note redeemed or convert the Note to
an alternative term.

      Until either the Company or the Holder terminate or redeem the Note, or
the Holder elects a new term, the Note will continue to renew as described
herein. Interest shall continue to accrue from the first day of such renewed
term. Such Note, as renewed, will continue in all its provisions, including
provisions relating to payment, except that the interest rate payable during any
renewed term shall be the interest rate which is being offered by the Company on
similar debt securities as of the renewal date. If similar Notes are not then
being issued, the interest rate upon renewal will be the rate specified by the
Company on or before the Maturity Date of such Note, or the Note's current rate
if no such rate is specified.

      If, at least seven (7) days prior to the Maturity Date of the Note, the
Company gives notice to a Holder of the Company's intention to repay a Note at
maturity, no interest will accrue after the Maturity Date for such Note.
Otherwise, if a Holder requests repayment within seven days after the Maturity
Date, the Company will pay interest on the Note during the period after the
Note's Maturity Date and prior to redemption at the lower of (i) the lowest
interest rate then being paid on Notes being offered by the Company to the
general public or (ii) the rate being paid on such Note immediately prior to
its maturity.

      The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and to the extent applicable,
the Company and the Trustee, by their execution and delivery of this Indenture,
and the Holders by accepting the Notes, expressly agree to such terms and
provisions and to be bound thereby. In case of a conflict, the provisions of
this Indenture shall control.

      SECTION 2.2 TRANSACTION STATEMENT.

      A Note shall not be validly issued until a transaction statement executed
by a duly authorized officer of the Company is sent to the purchaser or
transferee thereof and an Account is established by the Company in the name of
such purchaser or transferee.

      SECTION 2.3 REGISTRAR AND PAYING AGENT.

      The Company shall maintain (i) an office or agency where Notes (if
evidenced by a certificate) may be presented for registration of transfer or for
exchange ("Registrar") and (ii) an office or agency where Notes (if evidenced by
a certificate) may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar, and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar

                                      -6-
<PAGE>

without prior notice to any Noteholder; provided that the Company shall promptly
notify the Noteholders of the name and address of any Agent not a party to this
Indenture. The Company may act as Paying Agent and/or Registrar. In the event
the Company uses any Agent other than the Company or the Trustee, the Company
shall enter into an appropriate agency agreement with such Agent, which
agreement shall incorporate the applicable provisions of the TIA. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such, and shall be entitled to
appropriate compensation in accordance with Section 7.7 hereof.

      The Company shall be the initial Registrar and Paying Agent. The Company
initially appoints Trustee as agent for service of notices and demands in
connection with the Notes. The Company shall act as Registrar and Paying Agent
until such time as the Company gives the Trustee written notice to the contrary.

      SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.

      Prior to each due date of the principal or interest on any Note, the
Company shall deposit with the Paying Agent sufficient funds to pay principal,
premium, if any, and interest then so becoming due and payable in cash. The
Company shall require each Paying Agent other than the Trustee to agree in
writing that the Paying Agent will hold in trust for the benefit of Noteholders
or the Trustee all money held by the Paying Agent for the payment of principal
or interest on the Notes, and will notify the Trustee promptly in writing of any
default by the Company in making any such payment. While any such default
continues, the Trustee shall require a Paying Agent (if other than the Company)
to pay all money held by it to the Trustee. The Company at any time may require
a Paying Agent to pay all money held by it to the Trustee. Upon payment to the
Trustee, the Paying Agent (if other than the Company) shall have no further
liability for the money delivered to the Trustee. If the Company acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Noteholders all money held by it as Paying Agent. The Company shall notify
the Trustee in writing at least 5 days before the Payment Date of the name and
address of the Paying Agent if a person other than the Company is named Paying
Agent at any time or from time to time.

      SECTION 2.5 NOTEHOLDER LISTS.

      The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders and shall otherwise comply with Section 312(a) of the TIA. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee each
quarter during the term of this Indenture and at such other times as the Trustee
may request in writing, a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Noteholders, and the
aggregate principal amount outstanding and the Company shall otherwise comply
with Section 312(a) of the TIA.

                                      -7-
<PAGE>

      SECTION 2.6 TRANSFER AND EXCHANGE.

            (a) The Notes are not negotiable instruments and cannot be
transferred without the prior written consent of the Company (which consent
shall not be unreasonably withheld). Requests to the Registrar for the transfer
of the Accounts maintained for the benefit of the Holders of the Notes shall be:

                (i) made to the Registrar in writing on a form supplied by the
                    Company;

                (ii) duly executed by the current holder of the Account, as
                    reflected on the Company's records as of the date of receipt
                    of such transfer request, or his attorney duly authorized in
                    writing;

                (iii) accompanied by the written consent of the Company to the
                    transfer; and

                (iv) if requested by the Company, an opinion of Holder's counsel
                    (which counsel shall be reasonably acceptable to the
                    Company) that the transfer does not violate any applicable
                    securities laws and/or a signature guarantee.

Upon transfer of a Note, the Company will provide the new registered owner of
the Note with an initial transaction statement which will evidence the transfer
of the account on the Company's records.

            (b) Obligations with respect to Transfers and Exchanges of Notes.

                (i) The Company may assess service charges to a Holder for any
                    registration or transfer or exchange, and the Company may
                    require payment of a sum sufficient to cover any transfer
                    tax or similar governmental charge payable in connection
                    therewith (other than any such transfer taxes or similar
                    governmental charge payable upon exchange pursuant to
                    Section 9.5 hereof).

                (ii) The Company shall treat the individual or entity listed on
                    each Account maintained by the Company as the absolute owner
                    of the Note represented thereby for purposes of receiving
                    payments thereon and for all other purposes whatsoever.

        SECTION 2.7 PAYMENT OF PRINCIPAL AND INTEREST; PRINCIPAL AND INTEREST
                    RIGHTS PRESERVED.

            (a) Each Note shall accrue interest at the rate specified for such
Note and such interest shall be payable on each Payment Date following the Issue
Date for such Note,

                                      -8-
<PAGE>

until the principal thereof becomes due and payable. Any installment of interest
payable on a Note that is caused to be punctually paid or duly provided for by
the Company on the applicable Payment Date shall be paid to the Holder in whose
name such Note is registered in the Note Register on the applicable Regular
Record Date by check mailed to such Holder's address as it appears in the Note
Register on such Regular Record Date. The payment of any interest payable in
connection with the payment of any principal payable with respect to such Note
on a Maturity Date shall be payable as provided below. Any funds with respect to
which such checks were issued which remain uncollected shall be held in
accordance with Section 8.3 hereof. Any installment of interest not punctually
paid or duly provided for shall be payable in the manner and to the Holders
specified in Section 2.13 hereof.

            (b) Each of the Notes shall have stated maturities of principal as
shall be indicated in each such Note. The principal of each Note shall be paid
in full no later than the Maturity Date thereof unless the term of such Note is
extended pursuant to Section 2.1 hereof or such Note becomes due and payable at
an earlier date by acceleration, redemption or otherwise.

        Interest on each Note shall be due and payable on each Payment Date at
the interest rate applicable to such Note for the Interest Accrual Period
related to such Note and such Payment Date.

        Notwithstanding any of the foregoing provisions with respect to payments
of principal of and interest on the Notes, if the Notes have become or been
declared due and payable following an Event of Default, then payments of
principal of and interest on the Notes shall be made in accordance with Article
6 hereof.

        The principal payment made on any Note on any Maturity Date (or the
Redemption Price of any Note required to be redeemed), and any accrued interest
thereon, shall be payable on or after the Maturity Date or Redemption Date
therefor at the office or agency of the Company maintained by it for such
purpose pursuant to Section 2.3 hereof or at the office of any Paying Agent for
such Note.

            (c) All computations of interest due with respect to any Note shall
be made, unless otherwise specified in the Note, based upon the actual number of
days (e.g., 365 or 366) in the applicable year.

        SECTION 2.8 RIGHT OF SET-OFF IN CERTAIN CIRCUMSTANCES.

        Subject to the conditions of applicable law, if the holder of a Note is
a borrower or guarantor on a loan, lease or other obligation owned by one of the
Company's affiliates or subsidiaries, including, but not limited to Vestin
Mortgage, Inc., Vestin Fund I, LLC and Vestin Fund II, LLC and that obligation
becomes delinquent or otherwise in default, the Company reserves the right to
set-off principal and interest payments due on the Notes against all sums due by
the holder of the affiliate or subsidiary pursuant to the set-off terms
contained in the loan, lease, other indebtedness or the guarantee. If the
Company elects to exercise its right of set-off, the Note shall automatically be
deemed redeemed as of the date of set-off without regard to any notice period
otherwise applicable to redemption by the Company.

                                      -9-
<PAGE>

        SECTION 2.9 OUTSTANDING NOTES.

        The Notes outstanding at any time are the outstanding balances of all
Accounts representing the Notes maintained by the Company or such other entity
as the Company designated as Registrar.

        If the principal amount of any Note is considered paid under Section 4.1
hereof, it ceases to be outstanding and interest on it ceases to accrue.

        Subject to Section 2.10 hereof, a Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Note.

        SECTION 2.10 TREASURY NOTES.

        In determining whether the holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any Affiliate of the Company shall be considered as though not
outstanding, except that for purposes of determining whether the Trustee shall
be protected in relying on any such direction, waiver or consent, only Notes
that a Responsible Officer of the Trustee actually knows to be so owned shall be
so disregarded.

        SECTION 2.11 DEFAULTED INTEREST.

        If the Company defaults in a payment of interest on any Note, it shall
pay the defaulted interest plus, to the extent lawful, any interest payable on
the defaulted interest, to the Holder of such Note on a subsequent special
record date, which date shall be at the earliest practicable date but in all
events at least 5 Business Days prior to the payment date, in each case at the
rate provided in the Note. The Company shall, with written notification to the
Trustee, fix or cause to be fixed each such special record date and payment
date. At least 15 days before any such special record date, the Company (or the
Trustee, in the name of and at the expense of the Company) shall mail to
Noteholder(s) a notice that states the special record date, the related payment
date and the amount of such interest to be paid.

        SECTION 2.12 BOOK ENTRY REGISTRATION.

        The Registrar shall maintain a book entry registration and transfer
system through the establishment of Accounts for the benefit of Holders of Notes
as the sole method of recording the ownership and transfer of ownership
interests in such Notes. The registered owners of the Accounts established by
the Company in connection with the purchase or transfer of the Notes shall be
deemed to be the Holders of the Notes outstanding for all purposes under this
Indenture. The Company shall promptly notify the Registrar of the acceptance of
a subscriber's order to purchase a Note and the Registrar shall credit its
book-entry registration and transfer system to the Account of each Note
purchaser, the principal amount of such Note owned of record by the purchaser.
The total amount of any principal and/or interest (which shall be paid in the
form of additional notes) due and payable to book entry owners of the Accounts
maintained by the Company as provided in this Indenture shall be credited to
such Accounts by the Company within the time frames provided in this Indenture.
The Trustee shall review the book entry

                                      -10-
<PAGE>

registration and transfer system as it deems necessary to ensure the Company's
compliance with the terms of the Indenture.

        Book-entry accounts representing interests in the Notes shall not be
exchangeable for Notes in denominations of $1,000 and any amount in excess
thereof and fully registered in the names as the Company directs unless (a) the
Company at its option advises the Trustee in writing of its election to
terminate the book-entry system, or (b) after the occurrence of any Event of
Default, Holders of a majority of the Notes then outstanding advise the Trustee
in writing that the continuation of the book-entry system is no longer in the
best interests of such Holders and the Trustee notifies all Holders of the Notes
of such event and the availability of definitive notes to the Holders of Notes
requesting such notes in definitive form.

        SECTION 2.13 INITIAL AND PERIODIC STATEMENTS.

        (1) The Company shall provide initial transaction statements to initial
purchasers, registered owners, registered pledgees, former registered owners and
former pledgees, within two business days of the purchase, transfer or pledge of
a Note.

        (2) The Company shall send each Holder of a Note (and each registered
pledgee) via U.S. mail not later than twenty days after each quarter end in the
case of Notes in which such Holder had an outstanding balance in such holder's
Account, a statement which indicates as of the calendar month end preceding the
mailing: (a) the balance of such Account; (b) interest credited; (c) withdrawals
made, if any; and (d) the interest rate paid on such Account during the
preceding calendar month. The Company shall provide additional statements as the
holders or registered pledgees of the Notes may reasonably request from time to
time. The Company may charge such holders or pledgees requesting such statements
a fee to cover the charges incurred by the Company in providing such additional
statements.

                                   ARTICLE 3

                                   REDEMPTION

        The Company may redeem, in whole or in part, any Note prior to the
scheduled Maturity Date of the Note upon 90 days written notice to the Holder
thereof listed on the records maintained by the Company. In addition, except as
provided in this Article, the Company shall have no mandatory redemption or
sinking fund obligations with respect to any of the Notes.

        The Company, may offer, in its sole discretion, certain Holders of
Notes, the ability to extend the maturity of an existing Note through the
redemption of the current note and the issuance of a new note. This redemption
option shall not be subject to the 90 day notice of redemption described in this
section.

                                      -11-
<PAGE>

                                    ARTICLE 4

                                    COVENANTS

        SECTION 4.1 PAYMENT OF NOTES.

        The Company shall duly pay the principal of and interest on each Note on
the dates and in the manner provided in the prospectus related to such Notes.
Principal and interest (to the extent such interest is paid in cash) shall be
considered paid on the date due if the Paying Agent, if other than the Company,
holds at least one Business Day before that date money deposited by the Company
in immediately available funds and designated for and sufficient to pay all
principal and interest then due; provided, however, that principal and interest
shall not be considered paid within the meaning of this Section 4.1 if money is
held by the Paying Agent for the benefit of holders of Senior Debt pursuant to
the provisions of Article 10 hereof. The Company shall cause such Paying Agent
to return to the Company, no later than 5 days following the date of payment,
any money (including accrued interest) that exceeds such amount of principal and
interest paid on the Notes in accordance with this Section 4.1.

        To the extent lawful, the Company shall pay interest (including
Post-Petition Interest in any proceeding under any Bankruptcy Law) on overdue
principal at the rate borne by the Notes, compounded semi-annually; it shall pay
interest (including Post-Petition Interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate, compounded semi-annually.

        SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.

        The Company will maintain an office or agency (which may be an office of
the Trustee, Registrar or coregistrar) where Notes (if evidenced by a
certificate) may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.

        The Company may also from time to time designate one or more other
offices or agencies where the Notes (if evidenced by a certificate) may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency.

        The Company hereby designates its office at 2901 El Camino, Las Vegas,
Nevada, 89102 as one such office or agency of the Company in accordance with
Section 2.3.

        SECTION 4.3 SEC REPORTS AND OTHER REPORTS.

            (a) The Company shall file with the Trustee, within 15 days after
filing with the SEC, copies of the annual reports and of the information,
documents, and other

                                      -12-
<PAGE>

reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) that the Company is required to file with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the Company is not
subject to the requirements of such Section 13 or 15(d) of the Exchange Act, the
Company shall continue to file with the SEC and the Trustee on the same timely
basis such reports, information and other documents as it would file if it were
subject to the requirements of Section 13 or 15(d) of the Exchange Act. The
Company shall also comply with the provisions of Section 314(a) of the TIA.
Notwithstanding anything contrary herein the Trustee shall have no duty to
review such documents for purposes of determining compliance with any provisions
of the Indenture.

            (b) So long as any of the Notes remain outstanding, the Company
shall cause an annual report to stockholders and each quarterly or other
financial report furnished by it generally to stockholders to be filed with the
Trustee at the time of such mailing or furnishing to stockholders. If the
Company is not required to furnish annual or quarterly reports to its
stockholders pursuant to the Exchange Act, the Company shall cause its financial
statements, including any notes thereto (and, with respect to annual reports, an
auditors' report by the Company's certified independent accountants) and a
"Management's Discussion and Analysis of Financial Condition or Plan of
Operations," comparable to that which would have been required to appear in
annual or quarterly reports filed under Section 13 or 15(d) of the Exchange Act
to be so filed with the Trustee within 120 days after the end of each of the
Company's fiscal years and within 60 days after the end of each of the first
three quarters of each such fiscal year.

            (c) Whether or not required by the rules and regulations of the SEC,
the Company shall file a copy of all such information with the SEC for public
availability and make such information available to investors who request it in
writing.

        SECTION 4.4 COMPLIANCE CERTIFICATE.

            (a) The Company shall deliver to the Trustee, within 120 days after
the end of each Fiscal Year, an Officers' Certificate stating that a review of
the activities of the Company during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
each has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to his/her knowledge each has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he/she may have
knowledge and what action each is taking or proposes to take with respect
thereto) and that to his/her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes are prohibited or if such event has occurred, a
description of the event and what action each is taking or proposes to take with
respect thereto.

            (b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.3 above shall be accompanied by a
written statement of the Company's independent public accountants that in making
the examination necessary for certification of

                                      -13-
<PAGE>

such financial statements nothing has come to their attention which would lead
them to believe that the Company has violated the provisions of Section 4.1 of
this Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.

            (c) The Company will, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.

        SECTION 4.5 STAY, EXTENSION AND USURY LAWS.

        The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all beneficial advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.

        SECTION 4.6 LIQUIDATION.

        The Board of Directors or the stockholders of the Company may not adopt
a plan of liquidation that provides for, contemplates or the effectuation of
which is preceded by (a) the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company otherwise than substantially
as an entirety (Section 5.1 of this Indenture being the Section hereof which
governs any such sale, lease, conveyance or other disposition substantially as
an entirety) and (b) the distribution of all or substantially all of the
proceeds of such sale, lease, conveyance or other disposition and of the
remaining assets of the Company to the holders of capital stock of the Company,
unless the Company, prior to making any liquidating distribution pursuant to
such plan, makes provision for the satisfaction of the Company's Obligations
hereunder and under the Notes as to the payment of principal and interest.

                                   ARTICLE 5

                                   SUCCESSORS

        SECTION 5.1 WHEN THE COMPANY MAY MERGE, ETC.

        The Company may not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to another corporation, Person or
entity unless (a) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state

                                      -14-
<PAGE>

thereof or the District of Columbia; (b) the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
entity or Person to which such sale, assignment, transfer, lease, conveyance or
other disposition will have been made assumes all the obligations of the Company
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Notes and this Indenture; and (c) immediately after such
transaction no Default or Event of Default exists.

        The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture. The Trustee shall be entitled to
conclusively rely upon such Officers' Certificate and Opinion of Counsel.

        SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED.

        Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.1, the successor corporation formed by such
consolidation or into or with which the Company, is merged or to which such
sale, lease, conveyance or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person has been named
as the Company herein; provided, however, that the Company shall not be released
or discharged from the obligation to pay the principal of or interest on the
Notes.

                                   ARTICLE 6

                              DEFAULTS AND REMEDIES

        SECTION 6.1 EVENTS OF DEFAULT.

        An "Event of Default" occurs if:

                                (1) the Company defaults in the payment of
                        interest on a Note when the same becomes due and payable
                        and the Default continues for a period of 30 days,
                        whether or not such payment is prohibited by the
                        provisions of Article 10 hereof;

                                (2) the Company defaults in the payment of the
                        principal of any Note when the same becomes due and
                        payable at maturity and the Default continues for a
                        period of 30 days, whether or not such payment is
                        prohibited by the provisions of Article 10 hereof;

                                (3) the Company fails to observe or perform any
                        covenant, condition or agreement on the part of the
                        Company to be observed or performed pursuant to Section
                        4.6 or 5.1 hereof;

                                      -15-
<PAGE>

                                (4) the Company fails to comply with any of its
                        other agreements or covenants in, or provisions of, the
                        Notes or this Indenture and the Default continues for
                        the period and after the notice specified below;

                                (5) the Company pursuant to or within the
                        meaning of any Bankruptcy Law (a) commences a voluntary
                        case; (b) consents to the entry of an order for relief
                        against it in an involuntary case; (c) consents to the
                        appointment of a Custodian of it or for all or
                        substantially all of its property; (d) makes a general
                        assignment for the benefit of its creditors; or (e)
                        admits in writing its inability to pay debts as the same
                        become due; or

                                (6) a court of competent jurisdiction enters an
                        order or decree under any Bankruptcy Law that (a) is for
                        relief against the Company in an involuntary case; (b)
                        appoints a Custodian of the Company or for all or
                        substantially all of its property; or (c) orders the
                        liquidation of the Company, and the order or decree
                        remains unstayed and in effect for 120 consecutive days.

        The term "Bankruptcy Law" means Title II, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.

        A Default under clause (3) or (4) of Section 6.1 is not an Event of
Default until the Trustee or the Holders of at least a majority in principal
amount of the then outstanding Notes notify the Company of the Default and the
Company does not cure the Default or such Default is not waived within 60 days
after receipt of the notice. The notice must specify the Default, demand that it
be remedied and state that the notice is a "Notice of Default."

        SECTION 6.2 ACCELERATION.

        If an Event of Default (other than an Event of Default specified in
clauses (5) or (6) of Section 6.1) occurs and is continuing, the Trustee by
notice to the Company or the Holders of at least a majority in principal amount
of the then outstanding Notes by written notice to the Company and the Trustee
may declare the unpaid principal of and any accrued interest on all the Notes to
be due and payable. Upon such declaration the principal and interest shall be
due and payable immediately; provided, however, that if any Indebtedness or
Obligation is outstanding pursuant to the Senior Debt, upon a declaration of
acceleration by the Holders, all principal and interest under this Indenture
shall be due and payable upon the earlier of (x) the day which is 5 Business
Days after the receipt by each of the Company and the holders of Senior Debt of
such written notice of acceleration or (y) the date of acceleration of any
Indebtedness under any Senior Debt. If an Event of Default specified in clause
(5) or (6) of Section 6.1 occurs, such an amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of a majority in principal amount of the
then outstanding Notes by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing

                                      -16-
<PAGE>

Events of Default (except nonpayment of principal or interest that has become
due solely because of the acceleration) have been cured or waived.

        SECTION 6.3 OTHER REMEDIES.

        If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal or interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.

        The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Noteholder in exercising any right or remedy accruing upon
an Event of Default shall not impair the right or remedy or constitute a waiver
of or acquiescence in the Event of Default. All remedies are cumulative to the
extent permitted by law.

        SECTION 6.4 WAIVER OF PAST DEFAULTS.

        Holders of a majority in principal amount of the then outstanding Notes
by notice to the Trustee may waive an existing Default or Event of Default and
its consequences except a continuing Default or Event of Default in the payment
of the principal of or interest on any Note held by a non-consenting Holder.
Upon actual receipt of any such notice of waiver by a Responsible Officer of the
Trustee, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.

        SECTION 6.5 CONTROL BY MAJORITY.

        The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it, provided, that indemnification for the Trustee's fees and expenses, in a
form reasonably satisfactory to the Trustee, shall have been provided. However,
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of other Noteholders, or that may involve the Trustee in personal liability.

        SECTION 6.6 LIMITATION ON SUITS.

        A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:

                                (1) the Holder gives to the Trustee written
                        notice of a continuing Event of Default;

                                (2) the Holders of at least a majority in
                        principal amount of the then outstanding Notes make a
                        written request to the Trustee to pursue the remedy;

                                      -17-
<PAGE>

                                (3) such Holder or Holders offer and, if
                        requested, provide to the Trustee indemnity satisfactory
                        to the Trustee against any loss, liability or expense;

                                (4) the Trustee does not comply with the request
                        within 60 days after receipt of the request and the
                        offer and, if requested, the provision of indemnity; and

                                (5) during such 60 day period the Holders of a
                        majority in principal amount of the then outstanding
                        Notes do not give the Trustee a direction inconsistent
                        with the request.

        A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.

        SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.

        Notwithstanding any other provision of this Indenture, but subject to
Article 10 hereof, the right of any Holder of a Note to receive payment of
principal and interest on the Note, on or after the respective due dates
expressed in the Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of the Holder.

        SECTION 6.8 COLLECTION SUIT BY TRUSTEE.

        If an Event of Default specified in Section 6.1 (1) or (2) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on the Notes and interest on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.

        SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.

        The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7 hereof

                                      -18-
<PAGE>

out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties which
the Holders of the Notes may be entitled to receive in such proceeding whether
in liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.

        If the Trustee does not file a proper claim or proof of debt in the form
required in any such proceeding prior to 30 days before the expiration of the
time to file such claims or proofs, then any holder of Senior Debt shall have
the right to demand, sue for, collect and receive the payments and distributions
in respect of the Notes which are required to be paid or delivered to the
holders of Senior Debt as provided in Article 10 hereof and to file and prove
all claims therefor and to take all such other action in the name of the Holders
or otherwise, as such holder of Senior Debt may determine to be necessary or
appropriate for the enforcement of the provisions of Article 10.

        SECTION 6.10 PRIORITIES.

        If the Trustee collects any money pursuant to this Article, it shall,
subject to the provisions of Article 10 hereof, pay out the money in the
following order:

        First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7, including payment of all compensation, expenses and liabilities
incurred, and all advances made, if any, by the Trustee and the costs and
expenses of collection;

        Second: to Holders of Senior Debt to the extent required by Article 10
hereof;

        Third: to Holders for amounts due and unpaid on the Notes for principal
and interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for principal and interest,
respectively; and

        Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.

        The Trustee may fix a record date and payment date for any payment to
Holders.

        SECTION 6.11 UNDERTAKING FOR COSTS.

        In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.

                                      -19-
<PAGE>

                                   ARTICLE 7

                                    TRUSTEE

        SECTION 7.1 DUTIES OF TRUSTEE.

            (a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.

            (b) Except during the continuance of an Event of Default:

                                (1) The duties of the Trustee shall be
                        determined solely by the express provisions of this
                        Indenture and the Trustee need perform only those duties
                        that are specifically set forth in this Indenture and no
                        others, and no implied covenants or obligations shall be
                        read into this Indenture against the Trustee.

                                (2) In the absence of bad faith on its part, the
                        Trustee may conclusively rely, as to the truth of the
                        statements and the correctness of the opinions expressed
                        therein, upon resolutions, statements, reports,
                        documents, orders, certificates, opinions or other
                        instruments furnished to the Trustee by the Company and
                        conforming to the requirements of this Indenture.
                        However, in the case of any of the above that are
                        specifically required to be furnished to the Trustee
                        pursuant to this Indenture, the Trustee shall examine
                        them to determine whether they substantially conform to
                        the requirements of this Indenture.

            (c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

                                (1) This paragraph does not limit the effect of
                        paragraph (2) of this Section.

                                (2) The Trustee shall not be liable for any
                        error of judgment made in good faith by a Responsible
                        Officer, unless it is proved that the Trustee was
                        negligent in ascertaining the pertinent facts.

                                (3) The Trustee shall not be liable with respect
                        to any action it takes or omits to take in good faith in
                        accordance with a direction received by it pursuant to
                        Section 6.5.

            (d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section.

                                      -20-
<PAGE>

            (e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.

            (f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.

        SECTION 7.2 RIGHTS OF TRUSTEE.

            (a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented to it by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document. The Trustee shall have no duty to inquire as to the performance of the
Issuers' covenants in Article 4. In addition, the Trustee shall not be deemed to
have knowledge of any Default or any Event of Default except any Default or
Event of Default of which the Trustee shall have received written notification
or obtained actual knowledge.

            (b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.

            (c) The Trustee may act through agents, attorneys, custodians or
nominees and shall not be responsible for the misconduct or negligence or the
supervision of any agents, attorneys, custodians or nominees appointed by it
with due care.

            (d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.

            (e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.

            (f) The Trustee shall not be deemed to have notice of an Event of
Default for any purpose under this Indenture unless notified of such Event of
Default by the Company, the Paying Agent (if other than the Company) or a Holder
of the Notes.

        SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.

        The Trustee may become the owner or pledgee of Notes and may otherwise
deal with the Company or an Affiliate of the Company with the same rights it
would have if it were not

                                      -21-
<PAGE>

Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11.

        SECTION 7.4 TRUSTEE'S DISCLAIMER.

        The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision hereof,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.

        SECTION 7.5 NOTICE OF DEFAULTS.

        If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
a notice of the Default or Event of Default within 90 days after it occurs. At
least 5 Business Days prior to the mailing of any notice to Holders under this
Section 7.5, the Trustee shall provide the Company with notice of its intent to
mail such notice. Except in the case of a Default or Event of Default in payment
on any Note, the Trustee may withhold the notice if and so long as the
Responsible Officer of the Trustee in good faith determines that withholding the
notice would have no material adverse effect on the Holders.

        SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.

        Within 60 days after December 31 of each fiscal year, commencing
December 31, 2003, the Trustee shall mail to Holders a brief report dated as of
such reporting date that complies with Section 313(a) of the TIA (but if no
event described in Section 313(a) of the TIA has occurred within the 12 months
preceding the reporting date, no report need be prepared or transmitted). The
Trustee also shall comply with Section 313(b) of the TIA. The Trustee shall also
transmit by mail all reports as required by Section 313(c) of the TIA.

        Commencing at the time this Indenture is qualified under the TIA, a copy
of each report mailed to Holders under this Section 7.6 (at the time of its
mailing to Holders) shall be filed with the SEC and each stock exchange, if any,
on which the Notes are listed. The Company shall promptly notify the Trustee
when the Notes are listed on any stock exchange.

        SECTION 7.7 COMPENSATION AND INDEMNITY.

        The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and its performance of the
duties and services required hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.

                                      -22-
<PAGE>

        The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, except that the
Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through its own negligence or bad faith. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder, except to the extent the Company is
prejudiced thereby. The Company shall defend the claim and the Trustee shall
reasonably cooperate in such defense. The Trustee may have separate counsel and
the Company shall pay the reasonable fees and expenses of one such counsel. The
Company need not pay for any settlement made without its consent, which consent
shall not be unreasonably withheld.

        The obligations of the Company under this Section 7.7 shall survive the
satisfaction and discharge of this Indenture.

        To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on the
Notes. Such lien shall survive the satisfaction and discharge of this Indenture.

        When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

        SECTION 7.8 REPLACEMENT OF TRUSTEE.

        A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.

        The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if.

                                (1) the Trustee fails to comply with Section
                        7.10;

                                (2) the Trustee is adjudged a bankrupt or an
                        insolvent or an order for relief is entered with respect
                        to the Trustee under any Bankruptcy Law;

                                (3) a Custodian or public officer takes charge
                        of the Trustee or its property;

                                (4) the Trustee becomes incapable of acting as
                        Trustee under this Indenture, or

                                      -23-
<PAGE>

                                (5) the Company so elects, provided such
                        replacement Trustee is qualified under the TIA.

        If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
different successor Trustee to replace the successor Trustee appointed by the
Company.

        If a successor Trustee does not take office within 30 days after notice
that the Trustee has resigned or has been removed, the Company or the Trustee or
the Holders of at least a majority in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.

        If the Trustee after written request by any Holder who has been a Holder
for at least 6 months fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.

        A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to all Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the lien provided for in
Section 7.7. Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 hereof shall continue for the
benefit of the retiring Trustee.

        SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.

        If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee, provided, however, that such successor Trustee meets all the
eligibility requirements of Section 7.10 below.

        SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.

        There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state or territory thereof or of the District of Columbia
authorized under such laws to exercise corporate trustee power, shall be subject
to supervision or examination by Federal, state, territorial or District of
Columbia authority and shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.

        This Indenture shall always have a Trustee who satisfies the
requirements of Section 310(a)(1) and (2) of the TIA. The Trustee is subject to
Section 310(b) of the TIA.

                                      -24-
<PAGE>

        SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

        The Trustee is subject to Section 311(a) of the TIA, excluding any
creditor relationship listed in Section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to Section 311(a) of the TIA to the
extent indicated therein.

                                   ARTICLE 8

                             DISCHARGE OF INDENTURE

        SECTION 8.1 TERMINATION OF COMPANY'S OBLIGATIONS.

        This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.7 and 8.4, and the Company's and the
Trustee's obligations under Section 8.3 shall survive) when all outstanding
Notes have been paid in full and the Company has paid all sums payable by the
Company hereunder. In addition, the Company may terminate all of its obligations
under this Indenture if:

                                (1) the Company irrevocably deposits in trust
                        with the Trustee or at the option of the Trustee, with a
                        trustee reasonably satisfactory to the Trustee and the
                        Company under the terms of an irrevocable trust
                        agreement in form and substance satisfactory to the
                        Trustee, money or U.S. Government Obligations sufficient
                        (as certified by an independent public accountant
                        designated by the Company) to pay principal and interest
                        on the Notes to maturity or redemption, as the case may
                        be, and to pay all other sums payable by it hereunder,
                        provided that (i) the trustee of the irrevocable trust
                        shall have been irrevocably instructed to pay such money
                        or the proceeds of such U.S. Government Obligations to
                        the Trustee and (ii) the Trustee shall have been
                        irrevocably instructed to apply such money or the
                        proceeds of such U.S. Government Obligations to the
                        payment of said principal and interest with respect to
                        the Notes;

                                (2) the Company delivers to the Trustee an
                        Officers' Certificate stating that all conditions
                        precedent to satisfaction and discharge of this
                        Indenture have been complied with; and

                                (3) no Event of Default or event (including such
                        deposit) which, with notice or lapse of time, or both,
                        would become an Event of Default with respect to the
                        Notes shall have occurred and be continuing on the date
                        of such deposit.

Then, this Indenture shall cease to be of further effect (except as provided in
this paragraph), and the Trustee, on demand of the Company, shall execute proper
instruments acknowledging confirmation of and discharge under this Indenture.
The Company may make the deposit only if Article 10 hereof does not prohibit
such payment. However, the Company's obligations in Sections 2.3, 2.4, 2.5, 2.6,
2.7, 2.8, 4.1, 4.2, 4.3, 7.7, 7.8, 8.3 and 8.4 and the Trustee's obligations in
Section 8.3 shall survive until the Notes are no longer outstanding. Thereafter,

                                      -25-
<PAGE>

only the Company's obligations in Section 7.7 and 8.4 and the Company's and the
Trustee's obligations in Section 8.3 shall survive.

        After such irrevocable deposit made pursuant to this Section 8.1 and
satisfaction of the other conditions set forth herein, the Trustee upon written
request shall acknowledge in writing the discharge of the Company's obligations
under this Indenture except for those surviving obligations specified above.

        In order to have money available on a payment date to pay principal or
interest on the Notes, the U.S. Government Obligations shall be payable as to
principal or interest at least one Business Day before such payment date in such
amounts as will provide the necessary money. U.S. Government Obligations shall
not be callable at the issuer's option.

        SECTION 8.2 APPLICATION OF TRUST MONEY.

        The Trustee or a trustee satisfactory to the Trustee and the Company
shall hold in trust money or U.S. Government Obligations deposited with it
pursuant to Section 8.1. It shall apply the deposited money and the money from
U.S. Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal and interest on the Notes.

        SECTION 8.3 REPAYMENT TO COMPANY.

        The Trustee shall promptly pay, or cause the Paying Agent to promptly
pay, to the Company upon written request any excess money or securities held by
them at any time.

        The Trustee shall pay, or cause the Paying Agent to pay, to the Company
upon written request any money held by them for the payment of principal or
interest that remains unclaimed for two years after the date upon which such
payment shall have become due; provided, however, that the Company shall have
either caused notice of such payment to be mailed to each Holder entitled
thereto no less than 30 days prior to such repayment or within such period shall
have published such notice in a newspaper of widespread circulation published in
the City of Las Vegas. After payment to the Company, Holders entitled to the
money must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another Person, and all liability
of the Trustee and such Paying Agent with respect to such money shall cease.

        SECTION 8.4 REINSTATEMENT.

        If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.2 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.1 until such
time as the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 8.2; provided, however, that
if the Company has made any payment of interest on or principal of any Notes
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to

                                      -26-
<PAGE>

receive such payment, as long as no money is owed to the Trustee by the Company,
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.

                                   ARTICLE 9

                                   AMENDMENTS

        SECTION 9.1 WITHOUT CONSENT OF HOLDERS.

        The Company and the Trustee may amend this Indenture or the Notes
without the consent of any Holder:

                                (1) to cure any ambiguity, defect or
                        inconsistency;

                                (2) to comply with Section 5.1;

                                (3) to provide for additional uncertificated
                        Notes or certificated Notes (if applicable);

                                (4) to make any change that does not adversely
                        affect the legal rights hereunder of any Holder,
                        including but not limited to an increase in the
                        aggregate dollar amount of Notes which may be
                        outstanding under this Indenture;

                                (5) to comply with any requirements of the SEC
                        in connection with the qualification of this Indenture
                        under the TIA; and

                                (6) make any other change that may be required,
                        provided that such change does not have a material
                        adverse effect on the Noteholders.

        SECTION 9.2 WITH CONSENT OF HOLDERS.

        The Company and the Trustee may amend this Indenture or the Notes with
the written consent of the Holders of at least a majority in principal amount of
the then outstanding Notes. The Holders of a majority in principal of the then
outstanding Notes may also waive any existing default or compliance with any
provision of this Indenture or the Notes. However, without the consent of the
Holder of each Note affected, an amendment or waiver under this Section may not
(with respect to any Note held by a nonconsenting Holder):

                                (1) reduce the principal amount of outstanding
                        Notes;

                                (2) reduce the rate of or change the time for
                        payment of interest, including default interest, on any
                        Note;

                                (3) reduce the principal of or change the fixed
                        maturity of any Note or alter the redemption provisions
                        or the price at which

                                      -27-
<PAGE>

                        the Company shall offer to purchase such Note pursuant
                        to Article 3 hereof;

                                (4) make any Note payable in money other than
                        that stated in the prospectus (or related supplement)
                        with respect to such Note;

                                (5) make any change in Section 6.4 or 6.7 hereof
                        or in this sentence of this Section 9.2;

                                (6) make any change in Article 10 that adversely
                        affects the rights of any Holders; or

                                (7) waive a Default or Event of Default in the
                        payment of principal of, or interest on, or redemption
                        payment with respect to, any Note (except a rescission
                        of acceleration of the Notes by the Holders of at least
                        a majority in aggregate principal amount of the Notes
                        and a waiver of the payment default that resulted from
                        such acceleration).

        It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.

        After an amendment or waiver under this Section becomes effective, the
Company shall mail to the Holders of each Note affected thereby a notice briefly
describing the amendment or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture or waiver. Subject to Sections
6.4 and 6.7 hereof, the Holders of a majority in principal amount of the Notes
then outstanding may waive compliance in a particular instance by the Company
with any provision of this Indenture or the Notes.

        SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.

        If at the time this Indenture shall be qualified under the TIA, every
amendment to this Indenture or the Notes shall be set forth in a supplemental
indenture that complies with the TIA as then in effect.

        SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.

        Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. An amendment or waiver becomes effective in accordance with its terms and
thereafter binds every Holder.

        The Company may fix a record date for determining which Holders must
consent to such amendment or waivers. If the Company fixes a record date, the
record date shall be fixed at 30

                                      -28-
<PAGE>

days prior to the first solicitation of such consent or the date of the most
recent list of Holders furnished to the Trustee prior to such solicitation
pursuant to Section 2.5.

        SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES.

        The Trustee may place an appropriate notation about an amendment or
waiver on any Note, if certificated, or any Account statement.

        Failure to make the any notation or issue a new note shall not affect
the validity and effect of such amendment or waiver.

        SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.

        The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article if, in the Trustee's reasonable discretion,
the amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign it.
In signing or refusing to sign such amendment or supplemental indenture, the
Trustee shall be entitled to receive, if requested, an indemnity reasonably
satisfactory to it and to receive and, subject to Section 7.1, shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
(or written advice of counsel) as conclusive evidence that such amendment or
supplemental indenture is authorized or permitted by this Indenture, that it is
not inconsistent herewith, and that it will be valid and binding upon the
Company in accordance with its terms. The Company may not sign an amendment or
supplemental indenture until its Board of Directors approves it.

                                   ARTICLE 10

                                  SUBORDINATION

        SECTION 10.1 AGREEMENT TO SUBORDINATE.

        The Company agrees, and each Holder by accepting a Note consents and
agrees, that the Indebtedness evidenced by the Notes and the payment of the
principal of and interest on the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article, to the prior payment in
full, in cash, cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt, of all Obligations due in respect of Senior Debt of the
Company whether outstanding on the date hereof or hereafter incurred, and that
the subordination is for the benefit of the holders of Senior Debt.

        For purposes of this Article, a payment or distribution on account of
the Notes may consist of cash, property or securities, by set-off or otherwise,
and a payment or distribution on account of any of the Notes shall include,
without limitation, any redemption, purchase or other acquisition of the Notes.

        SECTION 10.2 LIQUIDATION; DISSOLUTION; BANKRUPTCY.

            (a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
(i) any dissolution or

                                      -29-
<PAGE>

winding-up or total or partial liquidation or reorganization of the Company
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy or (ii) any bankruptcy or insolvency case or proceeding or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its assets, or (iii) any
assignment for the benefit of creditors or any other marshaling of assets of the
Company, all obligations due, or to become due, in respect of Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) shall first interfeasibly be paid in
full, or provision shall have been made for such payment, in cash, cash
equivalents or otherwise in a manner satisfactory to the holders of Senior Debt,
before any payment is made on account of the principal of, or interest on the
Notes, except that Holders may receive securities that are subordinated to at
least the same extent as the Notes are to (x) Senior Debt and (y) any securities
issued in exchange for Senior Debt. Upon any such dissolution winding-up,
liquidation or reorganization, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Notes or the Trustee under this Indenture would be
entitled, except for the provisions hereof, shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders of the Notes or by the
Trustee under this Indenture if received by them, directly to the holders of
Senior Debt (pro rata to such holders on the basis of the amounts of Senior Debt
held by such holders) or their Representative or Representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Debt may have been issued, as their interests may appear, for application to the
payment of Senior Debt remaining unpaid until all such Senior Debt has been
indefeasibly paid in full, or provisions shall have been made for such payment,
in cash, cash equivalents or otherwise in a manner satisfactory to the holders
of Senior Debt, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of Senior Debt.

            (b) For purposes of this Article, the words "cash, property or
securities" shall not be deemed to include securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment which
are subordinated, to at least the same extent as the Notes, to the payment of
all Senior Debt then outstanding or to the payment of all securities issued in
exchange therefor to the holders of Senior Debt at the time outstanding. The
consolidation of the Company with, or the merger of the Company with or into,
another corporation or the liquidation or dissolution of the Company following
the conveyance or transfer of its property as an entirety, or substantially as
an entirety, to another corporation upon the terms and conditions provided in
Article 5 shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such other corporation shall,
as part of such consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article 5.

        SECTION 10.3 DEFAULT OF SENIOR DEBT.

            (a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior Debt, or
any amount owing from time to time under or in respect of Senior Debt or in the
event that any nonpayment event of default with respect to any Senior Debt shall
have occurred and be continuing and shall have resulted in such Senior Debt
becoming or being declared due and payable prior to the date

                                      -30-
<PAGE>

on which it would otherwise have become due and payable, or (b) in the event
that any other nonpayment event of default with respect to any Senior Debt shall
have occurred and be continuing permitting the holders of such Senior Debt (or a
trustee on behalf of the holders thereof) to declare such Senior Debt due and
payable prior to the date on which it would otherwise have become due and
payable, then the Company shall make no payment, direct or indirect (including
any payment which may be payable by reason of the payment of any other
Indebtedness of the Company being subordinated to the payment of the Notes)
(other than securities that are subordinated to at least the same extent as the
Notes are to (x) Senior Debt and (y) any securities issued in exchange for
Senior Debt) unless and until such event of default shall have been cured or
waived or shall have ceased to exist or such acceleration shall have been
rescinded or annulled

        SECTION 10.4 WHEN DISTRIBUTION MUST BE PAID OVER.

        If the Trustee or any Holder receives any payment with respect to the
Notes, whether in cash property or securities (other than securities that are
subordinated to at least the same extent of the Notes are to (x) Senior Debt and
(y) any securities issued in exchange for Senior Debt at a time when such
payment is prohibited by this Article), such payment shall be held by the
Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith
over and delivered to, the holders of Senior Debt (pro rata to such holders on
the basis of the amount of Senior Debt held by such holders) for application to
the payment of all Obligations with respect to Senior Debt remaining unpaid to
the extent necessary to pay such Obligations in full, in cash, cash equivalents
or otherwise in a manner satisfactory to the holders of Senior Debt, in
accordance with the terms of such Senior Debt, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.

        With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article, and no implied covenants or obligations with respect to
the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article, except if such payment is made as a result
of the willful misconduct or gross negligence of the Trustee.

        SECTION 10.5 NOTICE BY COMPANY.

        The Company shall promptly notify the Trustee and the Paying Agent in
writing of any facts known to the Company that would cause a payment of any
Obligations with respect to the Company to violate this Article, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Debt provided in this Article.

        SECTION 10.6 SUBROGATION.

        After all Senior Debt is paid in full, in cash, cash equivalents or
otherwise in a manner satisfactory to the holders of such Senior Debt, and until
the Notes are paid in full, Holders shall be subrogated (equally and ratably
with all other Indebtedness pari passu with the Notes) to the

                                      -31-
<PAGE>

rights of holders of Senior Debt to receive distributions applicable to Senior
Debt to the extent that distributions otherwise payable to the Holders have been
applied to the payment of Senior Debt. A distribution made under this Article to
holders of Senior Debt which otherwise would have been made to Holders is not,
as between the Company and Holders, a payment by the Company on the Senior Debt.

        SECTION 10.7 RELATIVE RIGHTS.

        This Article defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:

                                (1) impair, as between the Company and Holders,
                        the obligations of the Company, which are absolute and
                        unconditional, to pay principal of and interest on the
                        Notes in accordance with their terms;

                                (2) affect the relative rights of Holders and
                        creditors of the Company other than their rights in
                        relation to holders of Senior Debt; or

                                (3) prevent the Trustee or any Holder from
                        exercising its available remedies upon a Default or
                        Event of Default, subject to the rights of holders and
                        owners of Senior Debt to receive distributions and
                        payments otherwise payable to Holders.

        If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.

        SECTION 10.8 SUBORDINATION MAY NOT BE IMPAIRED BY THE COMPANY OR HOLDERS
                     OF SENIOR DEBT.

        No right of any present or future holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes and the Obligations
related thereto shall be prejudiced or impaired by any act or failure to act by
any such holder or by the Company, the Trustee or any Agent or by the failure of
the Company to comply with this Indenture, regardless of any knowledge thereof
which any such holder may have or otherwise be charged with.

        Without limiting the effect of the preceding paragraph, any holder of
Senior Debt may at any time and from time to time without the consent of or
notice to any other holder or to the Trustee, without impairing or releasing any
of the rights of any holder of Senior Debt under this Indenture, upon or without
any terms or conditions and in whole or in part:

            (a) change the manner, place or term of payment, or change or extend
the time of payment of, renew or alter any Senior Debt or any other liability of
the Company to such holder, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the provisions of this Article
shall apply to the Notes as so changed, extended, renewed or altered;

                                      -32-
<PAGE>

            (b) notwithstanding the provisions of Section 5.1 hereof, sell,
exchange, release, surrender, realize upon or otherwise deal with in any manner
and in any order any property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, any Senior Debt or any other liability of the
Company to such holder or any other liabilities incurred directly or indirectly
in respect thereof or hereof or any offset thereagainst;

            (c) exercise or refrain from exercising any rights or remedies
against the Company or others or otherwise act or refrain from acting or, for
any reason, fail to file, record or otherwise perfect any security interest in
or lien on any property of the Company or any other Person; and

            (d) settle or compromise any Senior Debt or any other liability of
the Company to such holder, or any security therefor, or any liability incurred
directly or indirectly in respect thereof.

        All rights and interests under this Indenture of any holder of Senior
Debt and all agreements and obligations of the Trustee, the Holders, and the
Company under Article 6 and under this Article shall remain in full force and
effect irrespective of (i) any lack of validity or enforceability of any
agreement or instrument relating to any Senior Debt or (ii) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Trustee, any Holder, or the Company.

        Any holder of Senior Debt hereby authorized to demand specific
performance of the provisions of this Article, whether or not the Company shall
have complied with any of the provisions of this Article applicable to it, at
any time when the Trustee or any Holder shall have failed to comply with any of
these provisions. The Trustee and the Holders irrevocably waive any defense
based on the adequacy of a remedy at law that might be asserted as a bar to such
remedy of specific performance.

        SECTION 10.9 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.

        Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
representative.

        Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending
or upon any certificate of any representative of any holder of Senior Debt or of
the liquidating trustee or agent or other Person making any distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Debt and other indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article.

        SECTION 10.10 RIGHTS OF TRUSTEE AND PAYING AGENT.

        Notwithstanding the provisions of this Article or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts which would

                                      -33-
<PAGE>

prohibit the making of any payment or distribution by the Trustee, or the taking
of any action by the Trustee, and the Trustee may continue, or the Company may
continue to cause the Paying Agent, to make payments on the Notes unless it
shall have received at its Corporate Trust Office at least 5 Business Days prior
to the date of such payment written notice of facts that would cause the payment
of any Obligations with respect to the Notes to violate this Article, which
notice, unless specified by a holder of Senior Debt as such, shall not be deemed
to be a Payment Notice. The Trustee may conclusively rely on such notice. Only
the Company or a holder of Senior Debt may give the notice. Nothing in this
Article shall apply to amounts due to, or impair the claims of, or payments to,
the Trustee under or pursuant to Section 7.7 hereof.

        The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.

        SECTION 10.11 AUTHORIZATION TO EFFECT SUBORDINATION.

        Each Holder of a Note by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate, as between the holders of Senior Debt and the Holders, the
subordination as provided in this Article, and appoints the Trustee his
attorney-in-fact for any and all such purposes.

        SECTION 10.12 ARTICLE APPLICABLE TO PAYING AGENT.

        In case at any time any Paying Agent (other than the Trustee or the
Company) shall have been appointed by the Company and be then acting hereunder,
the term "Trustee" as used in this Article shall in such case (unless the
context otherwise requires) be construed as extending to and including such
Paying Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee.

        SECTION 10.13 MISCELLANEOUS.

            (a) The agreements contained in this Article shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Senior Debt is rescinded or must otherwise be returned by any holder
of Senior Debt upon the insolvency, bankruptcy or reorganization of the Company
or otherwise, all as though such payment had not been made.

            (b) The Trustee shall notify all holders of Senior Debt (of whose
identity the Trustee has received reasonable advance written notice) of the
existence of any Default or Event of Default under Section 6.1 promptly after a
Responsible Officer of the Trustee actually becomes aware thereof; provided,
however, that at least 5 Business Days prior to the notification of any holder
of Senior Debt under this Section 10.13, the Trustee shall provide the Company
with notice of its intent to provide such notification, provided further,
however, that no defect in the form or delivery of the Trustee's notice to the
Company shall preclude the timely notice by the Trustee to the holders of Senior
Debt.

                                      -34-
<PAGE>

                                   ARTICLE 11

                                  MISCELLANEOUS

        SECTION 11.1 TRUST INDENTURE ACT CONTROLS.

        If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by Section 318(c) of the TIA, the imposed duties shall
control.

        SECTION 11.2 NOTICES.

        Any notice, instruction, direction, request or other communication by
the Company, the Trustee or any other holder of Senior Debt to the others is
duly given if in writing and delivered in person or mailed by first-class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:

        If to the Company:

              VESTIN GROUP, INC.
              2901 El Camino
              Las Vegas, Nevada  89102
              Attention:  Ira Levine
                          Executive Vice President of Legal and Corporate
                          Affairs and Secretary
              Telecopier: (702) 362-4767

        With a copy to:

              SQUIRE, SANDERS & DEMPSEY L.L.P.
              801 South Figueroa Street, 14th Floor
              Los Angeles, California  90017-5554
              Attention:  Hillel T. Cohn
              Telecopier: (213) 623-4581

        If to the Trustee:

              U.S. BANK NATIONAL ASSOCIATION
              1 California Street
              Suite 2550
              San Francisco, California 94111
              Attention: Raafat Sarkis, Corporate Trust Services
              Telecopier: (415) 273-4590

        If to a holder of Senior Debt, such address as such holder of Senior
Debt shall have provided in writing to the Company and the Trustee.

                                      -35-
<PAGE>

        The Company, the Trustee or a holder of Senior Debt by notice to the
Company and the Trustee may designate additional or different addresses for
subsequent notices or communications.

        All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; 5 Business Days after being deposited in the mail, postage prepaid,
if mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.

        Any notice or communication to a Holder shall be mailed by first-class
mail, certified or registered, return receipt requested, to his address shown on
the register kept by the Registrar. Failure to mail a notice or communication to
a Holder or any defect in it shall not affect its sufficiency with respect to
other Holders.

        If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.

        If the Company mails a notice or communication to Holders, it shall mail
a copy to the Trustee and each Agent at the same time.

        SECTION 11.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.

        Holders may communicate pursuant to Section 312(b) of the TIA with other
Holders with respect to their rights under this Indenture or the Notes. The
Trustee is subject to Section 312(b) of the TIA. The Company, the Trustee, the
Registrar and anyone else shall have the protection of Section 312(c) of the
TIA.

        SECTION 11.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.

        Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:

                                (1) an Officers' Certificate in form and
                        substance reasonably satisfactory to the Trustee (which
                        shall include the statements set forth in Section 11.5)
                        stating that, in the opinion of the signers, all
                        conditions precedent and covenants, if any, provided for
                        in this Indenture relating to the proposed action have
                        been complied with; and

                                (2) an Opinion of Counsel in form and substance
                        reasonably satisfactory to the Trustee (which shall
                        include the statements set forth in Section 11.5)
                        stating that, in the opinion of such counsel, all such
                        conditions precedent and covenants have been complied
                        with.

                                      -36-
<PAGE>

        SECTION 11.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.

        Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to Section 314(a)(4) of the TIA) shall include:

                                (1) a statement that the Person making such
                        certificate or opinion has read such covenant or
                        condition;

                                (2) a brief statement as to the nature and scope
                        of the examination or investigation upon which the
                        statements or opinions contained in such certificate or
                        opinion are based;

                                (3) a statement that, in the opinion of such
                        Person, he/she has made such examination or
                        investigation as is necessary to enable him/her to
                        express an informed opinion whether such covenant or
                        condition has been complied with; and

                                (4) a statement whether, in the opinion of such
                        Person, such condition or covenant has been complied
                        with.

        SECTION 11.6 RULES BY TRUSTEE AND AGENTS.

        The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Company may cause the Registrar or Paying Agent to make reasonable
rules and set reasonable requirements for its functions.

        SECTION 11.7 LEGAL HOLIDAYS.

        A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the State of Nevada or the City of Las Vegas or at a place of
payment are authorized or obligated by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.

        SECTION 11.8 NO RECOURSE AGAINST OTHERS.

        No director, officer, employee, agent, manager or stockholder of the
Company as such, shall have any liability for any obligations of the Company
under the Notes or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability.

        SECTION 11.9 DUPLICATE ORIGINALS.

        The parties may sign any number of copies of this Indenture. One signed
copy is enough to prove this Indenture.

                                      -37-
<PAGE>

        SECTION 11.10 GOVERNING LAW.

        THE INTERNAL LAW OF THE STATE OF DELAWARE SHALL GOVERN THIS INDENTURE
AND THE SECURITIES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.

        SECTION 11.11 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.

        This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.

        SECTION 11.12 SUCCESSORS.

        All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successor.

        SECTION 11.13 SEVERABILITY.

        In case any provision in this Indenture or in the Notes 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 11.14 COUNTERPART ORIGINALS.

        The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.

        SECTION 11.15 TABLE OF CONTENTS, HEADINGS, ETC.

        The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions thereof.

                                      -38-
<PAGE>

                                   SIGNATURES

        IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, as of the day and year first written above.

                                       VESTIN GROUP, INC.
                    (SEAL)             By:
                                          --------------------------------------
                                          --------------------------------------
                                       Name: Michael V. Shustek
                                       Title: Chairman and Chief Executive
                                              Officer
Attest:

                                       U.S. BANK NATIONAL ASSOCIATION, as
                                       Trustee
                                       By:
                                          --------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                           SIGNATURE PAGE TO INDENTURE

                                      -39-<PAGE>
                                                                   EXHIBIT 10.40

                              AMENDED AND RESTATED
                                 LEASE AGREEMENT

                            Dated as of July 28, 2000
                             As amended and restated
                             As of January 29, 2002

                                     BETWEEN

                          SUTTON HILL CAPITAL, L.L.C.,

                                  as Landlord,

                                       and

                             CITADEL CINEMAS, INC.,

                                    as Tenant

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                       Page
                                                                                       ----
<S>                                                                                     <C>
SECTION 1.   DEFINITIONS...........................................................      2
SECTION 2.   REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS.....................     19
SECTION 3.   LEASE OF THEATRE PROPERTIES...........................................     27
SECTION 4.   RESERVED..............................................................     27
SECTION 5.   OBLIGATIONS...........................................................     27
SECTION 6.   INITIAL TERM; RENEWAL TERM............................................     31
SECTION 7.   RENT AND OTHER PAYMENTS...............................................     31
SECTION 8.   RESTRICTED USE; COMPLIANCE WITH LAWS..................................     32
SECTION 9.   MAINTENANCE, IMPROVEMENT, REPAIR AND DEVELOPMENT
             OF THEATRE IMPROVEMENTS AND EQUIPMENT.................................     39
SECTION 10.  INSURANCE.............................................................     46
SECTION 11.  INDEMNITIES...........................................................     51
SECTION 12.  TENANT'S RIGHTS OF PURCHASE AND RENEWAL...............................     56
SECTION 13.  UTILITY SERVICES......................................................     59
SECTION 14.  LEASE EXPIRATION......................................................     60
SECTION 15.  LOSS OF OR DAMAGE TO THEATRE IMPROVEMENTS OR EQUIPMENT................     61
SECTION 16.  CONDEMNATION AND DEDICATION OF THEATRE PROPERTY; EASEMENTS............     63
SECTION 17.  ASSIGNMENT AND SUBLETTING.............................................     66
SECTION 18.  EVENTS OF DEFAULT.....................................................     68
SECTION 19.  RIGHTS UPON DEFAULT...................................................     70
SECTION 20.  LANDLORD'S LIEN.......................................................     73
SECTION 21.  SUBORDINATION AND ATTORNMENT..........................................     74
SECTION 22.  RIGHT TO PERFORM FOR TENANT...........................................     75
SECTION 23.  PERMITTED CONTESTS....................................................     75
SECTION 24.  PLEDGE BY LANDLORD....................................................     77
SECTION 25.  NOTICES AND REQUESTS..................................................     77
SECTION 26.  COVENANT OF QUIET ENJOYMENT...........................................     79
SECTION 27.  LEASEHOLD INTERESTS...................................................     79
SECTION 28.  MISCELLANEOUS.........................................................     80
SECTION 29.  CONSENTS..............................................................     85
SECTION 30.  NO RECOURSE...........................................................     85
SECTION 31.  NO MERGER.............................................................     86
SECTION 32.  EQUIPMENT TO BE PERSONAL PROPERTY.....................................     86
SECTION 33.  MERGER, CONSOLIDATION OR SALE OF ASSETS...............................     86
SECTION 34.  SUCCESSORS AND ASSIGNS................................................     86
</TABLE>

                                       i
<PAGE>

Exhibit A -  Theatre Properties
Exhibit B -  [Omitted]
Exhibit C -  Liens and Encumbrances; Contracts
Exhibit D -  Equipment
Exhibit E -  Option to Purchase and Agreement of Purchase and Sale and Escrow
             Instructions
Exhibit F -  Form of Contract of Sale for Property and Equipment and Related
             Interests

Schedule 2.3(d) - Litigation
Schedule 2.3(m) - Notices of Violations of Law
Schedule 2.3(n) - Writings Regarding Structural Defects

                                       ii
<PAGE>

                              AMENDED AND RESTATED
                                 LEASE AGREEMENT

      The Lease Agreement, dated as of July 28, 2000 (as the same may be
amended, restated, modified or supplemented from time to time, this "Lease"),
between Sutton Hill Capital, L.L.C., a New York limited liability company having
an office at 120 North Robertson Boulevard, Los Angeles, California 90048, as
landlord (together with its successors, legal representatives and assigns, the
"Landlord"), and Citadel Cinemas, Inc., a Nevada corporation having an office at
550 South Hope Street, Suite 1825, Los Angeles, CA 90071, as tenant (together
with its successors, legal representatives and assigns, the "Tenant") is hereby
amended and restated as of this 29th day of January 2002.

                              W I T N E S S E T H:

      WHEREAS, the Landlord owns certain leasehold interests pursuant to the
Site Leases (hereinafter defined), which together comprise three (3) parcels of
land located in New York City commonly known as (i) the Village East Cinemas
located at 181 Second Avenue, New York, New York 10003, (ii) the Sutton Theatre
located at 205 East 57th Street, New York, New York 10022, and (iii) Cinemas 1,
2 and 3 located at 1001 Third Avenue, New York, New York 10022, which properties
are more fully described on Exhibit A attached hereto and incorporated herein by
this reference (individually, a "Leased Site" and collectively, the "Leased
Sites");

      WHEREAS, the Landlord also owns, or owns a leasehold estate in, the
Theatre Improvements, and owns or leases the Equipment (each as hereinafter
defined), on or at such Leased Sites; and

      WHEREAS, the parties wish to provide herein for the subleasing of the
Leased Sites and the leasing or subleasing, as the case may be, of the Theatre
Improvements and Equipment thereon and therein by the Landlord to the Tenant
pursuant to the terms and provisions herein set forth.

      WHEREAS, effective January 29, 2002, the Tenant and the Landlord agreed to
release from the coverage of this lease that certain real property located at
160 East 34th Street, New York, New York 10022, commonly known as the Murray
Hill Theater and have hereby amended this Lease to reflect the release of that
property.

      NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Landlord and the Tenant hereby agree as follows:

<PAGE>

            SECTION 1. DEFINITIONS.

      1.1 Defined Terms.

      Each term defined in this Section 1 shall, when used in this Lease, have
the meaning indicated:

      "Acquisition Cost" means thirty four million Dollars ($34,000,000) or such
other amount determined in accordance with Section 12 and paragraph (c) of
Section 16, provided that the Acquisition Cost shall be subject to adjustment as
provided herein.

      "Acquisition Cost Adjustment" has the meaning set forth in section 12(d).

      "Actual Knowledge" means, with respect to the Landlord, the information,
material or other represented item is actually known by James J. Cotter, Sr.,
Michael R. Forman, Michael Conroy or, with respect to representations and
warranties as of the date hereof, Robert Smerling.

      "Additional Insureds" has the meaning set forth in paragraph (e) of
Section 10 hereof.

      "Additional Rent" has the meaning set forth in paragraph (b) of Section 7
hereof.

      "Affected Premise" has the meaning set forth in paragraph (i) of Section 9
hereof.

      "Affiliate" of any Person means any other Person controlling, controlled
by or under direct or indirect common control with such Person. For the purposes
of this definition, "control," when used with respect to any specified Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have the meanings
correlative to the foregoing. Notwithstanding the foregoing: (a) the Landlord
and its Affiliates (the "Landlord's Affiliates") shall not include Citadel,
Reading, and their respective Subsidiaries; (b) Citadel, Reading, and their
respective Subsidiaries (including the Tenant), on the one hand, and the
Landlord and the Landlord's Affiliates, on the other hand, shall not be
considered Affiliates of each other; and (c) none of Nationwide or any of its
Affiliates shall be considered an Affiliate of any of Citadel, Reading, or any
of their respective Subsidiaries or the Landlord or any of its Affiliates.

      "Applicable Rent Amount" means (a) for any calendar month (or part
thereof) in the period beginning January 29 and ending on the day prior to July
28, 2002, $210,375, and (b) for any calendar month (or part thereof) thereafter,
the multiplier (as hereinafter defined) for the lease year in which such month
occurs multiplied by the Applicable Rent Amount as in effect during the prior
lease year, in each case, subject to such further adjustments as are provided in
this Lease; provided that, if the Borrower under the Loan Agreement gives a
Notice of Borrowing (as defined in the Loan Agreement) and fails to satisfy all
of the conditions to the Loan (as defined in the Loan Agreement) provided for in
such Notice of Borrowing, or if such Borrower reduces the Commitment (as defined
in the Loan Agreement) or at its option prepays any Loan, then the multiplier
for each lease year after

<PAGE>

the year in which such failure, reduction, or repayment occurs shall be (x) if
there is no Loan then outstanding and no unused Commitment, one and (y) whenever
following any such failure, reduction or repayment there is any Loan then
outstanding or unused Commitment (or both), further reduced by a fraction, the
numerator of which is the sum of (A) the principal amount of Loans then
outstanding and (B) the amount of the available Commitment and the denominator
of which is $18,000,000. For purposes of the foregoing, (i) a "lease year" means
each period beginning on the Effective Date or an anniversary thereof and ending
on the day prior to the next anniversary thereof, and (ii) the "multiplier"
means one plus 62% of a fraction, the numerator of which is the Consumer
Price Index in effect for the month of March preceding the anniversary date
in question minus the Consumer Price Index in effect for the month of March
in the prior year and the denominator of which is the Consumer Price Index in
effect for the month of March in the prior year, provided that (A) except as
provided in the following clause (B), the multiplier for any lease year shall
not be greater than 1.0372 nor less than 1.0186 and (B) the multiplier for
the third lease year shall be such as would have been in effect had the
multiplier for the second lease year been applied to determine the Applicable
Rent Amount for the second lease year.

      "Appraisal Procedure" means the following procedure whereby an independent
appraiser shall be appointed by the Landlord and the Tenant to determine (i) the
amount of wear and tear in excess of that attributable to normal use of the
Theatre Improvements and Equipment to which the provisions of paragraph (b) of
Section 14 apply, (ii) the Renewal Rental Rate of the Theatre Properties,
including all Elements thereof (as then constituted), during the Renewal Term,
if such determination is required under paragraph (i) of Section 12 hereof,
(iii) the reduction in Basic Rent as provided in paragraph (d) of Section 15
hereof or paragraph (d) of Section 16, (iv) a deficiency in the Tenant's
insurance coverage as described in paragraph (c) of Section 15 hereof, or (v)
the amount of the deficiency as provided in paragraph (c) of Section 19 hereof.
If the amount of such excess wear and tear, the Renewal Rental Rate, a reduction
in Basic Rent or either such deficiency is required to be determined pursuant to
the above mentioned sections, either Landlord or Tenant may request the
appointment of an appraiser to make such determination. If no such appraiser is
appointed by the Landlord and the Tenant, acting jointly, within ten (10) days
of the written request of either the Landlord or the Tenant that an appraiser be
appointed, either the Landlord or the Tenant may request the American
Arbitration Association in New York to appoint an independent appraiser within
fifteen (15) days after such request. Such appraiser shall have at least 10
years' experience in the business of appraising or leasing retail and similar
space in the Borough of Manhattan, City of New York. Within ten (10) days after
the appointment of the appraiser, each of the Landlord and the Tenant shall
submit to the appraiser, with a copy delivered to the other, its proposal as to
the amount of wear and tear in excess of that attributable to normal use, the
Renewal Rental Rate, a reduction or either deficiency, as the case may be,
together with any information the submitting party believes appropriate to
support its proposal. The appraiser shall be directed to select, as the amount
of such excess wear and tear, the Renewal Rental Rate, a reduction or either
deficiency, as the case may be, in accordance with the standards set forth in
paragraph (b) of Section 14, paragraph (i) of Section 12, paragraph (d) of
Section 15 or Section 16 (as applicable), or paragraph (c) of Section 19,
respectively, either the amount proposed by Tenant or the amount proposed by
Landlord, and report such determination to Landlord and Tenant, as soon as
practicable and in any case within fifteen (15)

                                       3
<PAGE>

days after the receipt or expiration of the time for such submissions. The
appraiser shall not and shall have no authority to modify either proposal or
make any determination other than to select one of such proposals. Upon delivery
of the appraiser's report, the amount determined by the appraiser as such excess
wear and tear, Renewal Rental Rate, a reduction or either deficiency, as the
case may be, shall be final. The party whose proposal is not selected shall pay
all fees and expenses of the appraiser and the American Arbitration Association,
and each party shall pay its own expenses in connection with such proceeding.

      "Assignment of Option Agreement" means the Assignment of Option Agreement
between Sutton Hill Associates and the Landlord, pursuant to which the option to
purchase the fee properties underlying the Sutton Theatre has been assigned to
the Landlord, as the same may be amended, restated, modified or supplemented
from time to time.

      "Bankruptcy Event" means the occurrence of any of the following:

            (a) The entry of a decree or order for relief in respect of the
      Landlord by a Court having jurisdiction in the premises, or the
      appointment of a receiver, liquidator, assignee, custodian, trustee,
      sequestrator (or other similar official) of the Landlord or of any
      substantial part of its property, or ordering the winding up or
      liquidation of its affairs, in an involuntary case under the Federal
      bankruptcy laws, as now or hereafter constituted, or any other applicable
      Federal or state bankruptcy, insolvency or other similar law; or the
      commencement against the Landlord of an involuntary case under the Federal
      bankruptcy laws, as now or hereafter constituted, or any other applicable
      Federal or state bankruptcy, insolvency or other similar law, and the
      continuance of any such case unstayed and in effect for a period of sixty
      (60) days; or

            (b) The commencement by the Landlord of a voluntary case under the
      Federal bankruptcy laws, as now or hereafter constituted, or any other
      applicable Federal or state bankruptcy, insolvency or other similar law,
      or the consent by it to the entry of an order for relief in an involuntary
      case under any such law or the consent by it to the appointment of or
      taking possession by a receiver, liquidator, assignee, custodian, trustee,
      sequestrator (or other similar official) of the Landlord or of any
      substantial part of its property, or the making by it of a general
      assignment for the benefit of creditors, or the failure of the Landlord
      generally to pay its debts as such debts become due or the taking of any
      action in furtherance of any of the foregoing; provided, however, that, if
      any of the events described in clauses (a) and (b) of this definition
      shall arise or occur affecting Landlord as a result of any Tenant Event,
      such an event (as so described) shall not constitute a Bankruptcy Event
      hereunder.

      "Basic Rent" means, with respect to the Theatre Properties, commencing on
the Effective Date:

                                       4
<PAGE>

            (a)(i) for each full calendar month during the Initial Term, an
      amount equal to the Applicable Rent Amount for such month or such other
      amount determined in accordance with paragraph (d) of Section 16, and

            (ii) for any partial calendar month during the Initial Term, an
      amount computed by multiplying the following

                  (A) an amount equal to the Applicable Rent Amount for such
            month or, if then applicable, such other amount determined in
            accordance with paragraph (d) of Section 16, and

                  (B) a fraction having a numerator equal to the number of days
            the Theatre Properties are under lease during such partial month and
            a denominator equal to the number of days in such month; and

            (b)(i) for each full calendar month during the Renewal Term, an
amount determined pursuant to the terms of paragraph (i) of Section 12 of this
Lease or such other amount determined in accordance with paragraph (d) of
Section 15 or paragraph (d) of Section 16, and

            (ii) for any partial calendar month during the Renewal Term, an
      amount computed by multiplying the following:

                  (A) an amount determined pursuant to the terms of paragraph
            (i) of Section 12 of this Lease or, if then applicable, such other
            amount determined in accordance with paragraph (d) of Section 15 or
            paragraph (d) of Section 16, and

                  (B) a fraction having a numerator equal to the number of days
            the Theatre Properties are under lease during such partial month and
            a denominator equal to the number of days in such month.

      "Basic Rent Payment Date" means the first day of each calendar month
during the Initial Term or Renewal Term, if any, or, if such day is not a
Business Day, the next succeeding Business Day.

      "Business" means the business operated by the Landlord and its Affiliates
at the Theatre Properties prior to the date hereof.

      "Business Day" means any day other than a Saturday, Sunday or other day on
which banking institutions in the State of New York are authorized by law to
close.

      "Business Sale" means the sale by the Parent (whether by sale of one or
more Subsidiaries, sale of assets, merger involving one or more Subsidiaries or
otherwise) of all or substantially all of

                                       5
<PAGE>

its United States (excluding Puerto Rico) movie theatre business, including sale
of its interest in the Theatre Properties or the direct or indirect ownership
interest in the Tenant.

      "Capital Expenditures" means all expenditures of the Tenant (other than
expenditures made with the proceeds of casualty insurance or condemnation
awards) for fixed or capital assets made with respect to any Theatre Property or
Element thereof which, in accordance with GAAP, would be classified as capital
expenditures.

      "Casualty Payment Date" has the meaning set forth in paragraph (a) of
Section 15 hereof.

      "Citadel" means Citadel Holding Corporation, a Nevada corporation (an
Affiliate of the Tenant), now known as Reading International, Inc. and its
successors.

      "Code" means the Internal Revenue Code of 1986, as heretofore and
hereafter amended from time to time, or any successor code as in effect from
time to time.

      "Commercial Mediation Rules" means the Commercial Mediation Rules of the
American Arbitration Association, as in effect from time to time.

      "Consent" has the meaning set forth in paragraph (a) of Section 29 hereof.

      "Constructed Improvements" has the meaning set forth in paragraph (i) of
Section 9 hereof.

      "Consumer Price Index" means the Consumer Price Index for all Urban
Consumer Wage and Clerical Workers based upon the New York-Northern New
Jersey-Long Island area for All Items, published by the United States Department
of Labor, Bureau of Labor Statistics, or a successor substitute index, and if in
any year the 1982-84 average of one hundred (100) is no longer used as the basis
of calculation, then, for the purposes of this Section, the Consumer Price Index
for such year shall be recalculated as though such 1982-84 average of one
hundred (100) were still the basis of calculation of the Consumer Price Index
for such year. In the event such Consumer Price Index (or a successor substitute
index) is not available, a reliable government or other non-partisan publication
evaluating the information theretofore used in determining the Consumer Price
Index shall be used to reflect the increase in the cost of living for the same
area.

      "Contaminant" means any pollutant, substance, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, PCBs, or any hazardous or toxic constituent thereof defined in
or regulated under Environmental Requirements.

      "Contract" shall mean any contract, agreement, indenture, loan or credit
agreement, receivable sales or financing agreement, capital note, mortgage,
security agreement, bond or note (or any guarantee of any of the foregoing).

                                       6
<PAGE>

      "Deposit Amount" shall mean the amount of one million Dollars ($1,000,000)
deposited by Reading, which has assigned its rights therein to Citadel, on
behalf of Tenant with Landlord or an Affiliate.

      "Dollars" or "$" shall mean the lawful currency of the United States of
America.

      "Element" of a Theatre Property means any of (or any combination of) the
Leased Site, Theatre Improvements or Equipment at or relating to or comprising a
portion of a Theatre Property.

      "Effective Date" means July 28, 2000.

      "Environmental Damages" means all claims, judgments, damages (including
punitive damages), losses, penalties, fines, interest, fees, liabilities
(including strict liability), taxes, obligations, encumbrances, liens, costs and
expenses (including, without limitation, costs and expenses of investigation and
defense of any claim, whether or not such claim is ultimately defeated, and of
any good faith settlement or judgment), of whatever kind or nature, contingent
or otherwise, matured or unmatured, foreseeable or unforeseeable, including,
without limitation, reasonable attorneys' fees and disbursements and
consultants' fees, any of which are incurred at any time as a result of the
existence of Contaminants at any location or noncompliance with Environmental
Requirements, including, without limitation:

            (a) Damages for personal injury or threatened personal injury
      (including sickness, disease or death), or injury or threatened injury to
      property or natural resources, foreseeable or unforeseeable, including,
      without limitation, the cost of demolition and rebuilding of any
      improvements on real property;

            (b) Reasonable fees incurred for the services of attorneys,
      consultants, contractors, doctors, experts, laboratories and all other
      reasonable costs incurred in connection with any damages as described in
      subparagraph (a) of this definition, and the investigation or remediation
      of Contaminants or the suspected presence of Contaminants or the violation
      or threatened violation of Environmental Requirements, including, but not
      limited to, the preparation of any feasibility studies or reports or the
      performance of any investigation, cleanup, treatment, remediation,
      removal, response, abatement, containment, closure, storage, disposal,
      transport, restoration or monitoring work required by any federal, state,
      local or foreign governmental agency or political subdivision, or
      otherwise expended in connection with such conditions, and including,
      without limitation, any reasonable attorneys' fees, costs and expenses
      incurred in enforcing this Lease or collecting any sums due hereunder or
      thereunder; and

            (c) Liability to any third person or Governmental Authority to
      indemnify such person or Governmental Authority for costs expended in
      connection with the items referenced in subparagraphs (a) and (b) of this
      definition.

                                       7
<PAGE>

      "Environmental Matters" means any matter, fact or situation relating to or
arising from (a) any violation or alleged violation of an Environmental
Requirement, (b) any release or threatened release of any Contaminant on, under
or from the Property or Equipment or the presence of any Contaminant which has
come to be located on, from or under a Theatre Property or Element thereof from
another location, or (c) any injury to human health or safety or the environment
by reason of the matters described in clauses (a) and (b).

      "Environmental Event" has the meaning set forth in paragraph (e) of
Section 2.2 hereof.

      "Environmental Requirements" means all federal, state, local and foreign
laws, statutes, codes, ordinances, rules, regulations, directives, binding
policies, permits or orders relating to or addressing the environment or human
health, including, but not limited to, any law, statute, code, ordinance, rule,
regulation, directive, binding policy, permit, authorization or order.

      "Equipment" means all personal property located at or used primarily in
connection with any of the Theatre Properties and all related appliances,
appurtenances, accessions, furnishings, materials and parts leased by the
Landlord to the Tenant as provided herein, including, without limitation, the
property described in Exhibit D attached hereto and made a part hereof, and
including all replacements and subsequent replacements of such related
appliances, appurtenances, accessions, furnishings, materials and parts, but not
including inventory and supplies.

      "Event of Default" has the meaning set forth in Section 18 hereof.

      "Event of Loss" means, with respect to any Theatre Property, the Taking of
all or a substantial portion of the Theatre Property for an indefinite period or
a period in excess of 180 days by any Governmental Authority such that the
remainder is not sufficient to permit operation of such Theatre Property on a
commercially feasible basis. A loss of a "substantial portion" of a Theatre
Property shall be deemed to occur if, in the reasonable judgment of the Landlord
and the Tenant, after such event, (i) the Tenant will not be able to perform its
obligations under this Lease or (ii) a material diminution in the value, utility
or remaining economic useful life of such Theatre Property has occurred.

      "Exercise Notice" has the meaning set forth in Section 12(b) hereof.

      "Fee Option Agreement" means the agreement, dated as of July 28, 200 0,
between Fee Sub and the Landlord as amended and restated as of January 29, 2002,
as the same may be amended, modified, supplemented or restated from time to
time.

      "Fee Property(ies)" means any and all parcels of land together with all
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 such parcels of land subleased hereunder and
all

                                       8
<PAGE>

respective easements, rights and appurtenances relating to such parcels of land,
buildings and improvements.

      "Fee Sub" means Citadel Realty, Inc., a Nevada corporation, and its
successors and assigns.

      "Financing Agreement" means each credit agreement, loan agreement and each
other agreement or arrangement which has been or hereafter is entered into
between the Landlord and a lender or lenders to the Landlord (or a note or notes
made and delivered by the Landlord) related to the financing of any Theatre
Property or otherwise secured by one or more Theatre Properties or Elements
thereof or a Lien on the equity interests in Landlord, as any of the same may be
amended, restated, modified or supplemented from time to time and shall include,
without limitation, the Nationwide Agreement.

      "Funding Date" means the date on which

            (a) the Commitment (as defined in the Loan Agreement) has been fully
      funded; and

            (b) (i) none of James J. Cotter, Michael R. Forman, or their
      respective successors or assigns shall have been required to provide a
      guaranty as provided in Section 2.8(b)(v) of the Loan Agreement, or (ii)
      any obligations of the Lender or its Affiliates for which they have given
      any such guaranty shall have been repaid in full, or (iii) all such
      guaranties shall have been released by the parties holding the obligations
      so guaranteed.

      "GAAP" means generally accepted accounting principles in the United
States, applied on a consistent basis.

      "Governmental Action" has the meaning set forth in paragraph (h) of
Section 2.1 hereof.

      "Governmental Authority" means any agency, department, court or other
administrative, legislative or regulatory authority of any federal, state, local
or foreign governmental body.

      "Indebtedness" means for any Person, without duplication (a) all
indebtedness or other obligations of such Person for borrowed money and all
indebtedness of such Person with respect to any other items (other than income
taxes payable, deferred taxes, deferred credits and accounts payable), which
would, in accordance with GAAP, be classified as a liability on the balance
sheet of such Person, (b) all obligations of such Person to pay the deferred
purchase price of property or services, including any such obligations created
under or arising out of any conditional sale or other title retention agreement,
(c) all obligations of such Person (contingent or otherwise) under reimbursement
or similar agreements with respect to the issuance of letters of credit, (d) all
indebtedness or other obligations of such Person under or in respect of any
swap, cap, collar or other financial hedging arrangement, (e) all indebtedness
or other obligations of any other Person of the type specified in clause (a),
(b), (c) or (d) above, the payment or collection of which such Person has

                                       9
<PAGE>

guaranteed (except by reason of endorsement for collection in the ordinary
course of business) or in respect of which such Person is liable, contingently
or otherwise, including, without limitation, liable by way of agreement to
purchase products or securities, to provide funds for payment, to maintain
working capital or other balance sheet conditions or otherwise to assure a
creditor against loss, and (f) all indebtedness or other obligations of any
other Person of the type specified in clause (a), (b), (c), (d), or (e) 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, without limitation, accounts and contract rights) owned by such
Person, whether or not such Person has assumed or becomes liable for the payment
of such indebtedness or obligations.

      "Indemnified Person" has the meaning set forth in paragraph (c) of Section
11 hereof.

      "Indemnifying Person" has the meaning set forth in paragraph (c) of
Section 11 hereof.

      "Initial Term" has the meaning set forth in paragraph (a) of Section 6
hereof.

      "Institutional Lender" means a savings and loan association, a savings
bank, a commercial bank or trust company or an insurance company organized under
the laws of the United States or any state thereof or organized under the laws
of any other jurisdiction and licensed or registered to do business in the
United States or any state thereof or a federal, state or municipal employees'
welfare pension or retirement fund or system, provided that, in any such case,
such lender is subject to or submits to service of process within the State of
New York, has total assets of at least $1 billion and is acting in its own
interest and capacity or as a fiduciary or trustee for any of the following; a
real estate investment trust sponsored by an entity which otherwise qualifies as
an institutional lender or one which is publicly traded on a recognized
securities exchange, an educational, major religious or charitable institution,
a so-called "REMIC" or mortgage trust, or a trustee acting for the benefit of
the holders of debt securities issued in transactions registered under the
Securities Act of 1933 (as amended), or exempt from such registrations pursuant
to Rule 144A thereunder, or an investment banking firm or other similar
financial institution; provided, however, that no Institutional Lender shall be
an Affiliate of Tenant. For purposes of this Lease, an Institutional Lender may
comprise two or more entities qualifying under this definition.

      "Insurance Requirements" means all insurance required to be obtained with
respect to the Theatre Properties pursuant to Section 10 hereof and all terms of
any insurance policy covering or applicable to the Theatre Properties, all
requirements of the issuer of any such policy, all statutory requirements and
all orders, rules, regulations and other requirements of any Governmental
Authority related to insurance applicable to the Theatre Properties.

      "Landlord" means Sutton Hill Capital, L.L.C. or any successor or
successors to all of its rights and obligations as Landlord hereunder and, for
purposes of Section 11(a) hereof, shall include any partnership (general or
limited), corporation, limited liability company, trust, individual or other
entity which computes its liability for income or other taxes on a consolidated
basis with the

                                       10
<PAGE>

Landlord or the income of which for purposes of such taxes is, or may be,
determined or affected directly or indirectly by the income of the Landlord or
its successor or successors.

      "Landlord Act" means an event or occurrence resulting from the gross
negligence or willful misconduct of the Landlord or any of its Affiliates or the
agents, officers, directors, employees or contractors of Landlord or any such
Affiliate, except that the failure of the Landlord or any such Affiliate to
exercise any of its rights or remedies hereunder or under any Other Lease
Document or to enforce or seek to enforce any of the provisions hereof shall not
constitute gross negligence or willful misconduct.

      "Landlord Environmental Obligation" means an Environmental Event which
occurred during the two-year period ending on the date hereof, of which Landlord
had Actual Knowledge prior to the date hereof and which has not been disclosed
on Schedule 2.3(m) hereof.

      "Landlord Indemnified Person" has the meaning set forth in paragraph (a)
of Section 11 hereof.

      "Landlord Legal Requirement Obligation" means a Legal Requirement Event
which occurred during the two-year period ending on the date hereof, of which
Landlord had Actual Knowledge prior to the date hereof and which has not been
disclosed on Schedule 2.3(m) hereof.

      "Landlord Permitted Lien" means any Lien of the type described in clause
(b) (other than a Landlord Legal Requirement Obligation), (c), (d), (g), (h),
(i) or (j) of the definition of "Permitted Lien" in this Section 1.1 (including
in the case of Liens described in clauses (h), (i) and (j), Liens securing
increases in the amount outstanding or encompassing additional property
interests of Landlord and its Affiliates) so long as, in the cases of Liens
described in clauses (h), (i) and (j), the rights of the Tenant hereunder,
including the Purchase Option at the Acquisition Cost (subject to the terms
hereof), and the rights of FeeSub pursuant to the Fee Option Agreement (subject
to the terms thereof), are recognized by the holder of such Lien, such other and
additional matters affecting Landlord's interests in the Theatre Properties as
may be approved in writing by Tenant, extensions of any of the foregoing and
Liens arising from a Tenant Event.

      "Lease Guaranty" means the lease guaranty agreement, dated as of the date
hereof, by and between Citadel and the Landlord, as the same may be amended,
restated, modified or supplemented from time to time.

      "Lease Term" means the Initial Term plus the Renewal Term, if exercised.

      "Lease Termination Date" means, for all the Theatre Properties, either (i)
the last day of the Initial Term (if the Lease has not been renewed pursuant to
the terms of paragraph (i) of Section 12 hereof), or (ii) if the Lease has been
renewed pursuant to the terms of paragraph (i) of Section 12 hereof, the last
day of the Renewal Term, except that the Lease Termination Date as to any
Theatre Property may be determined pursuant to Article 15 hereof.

                                       11
<PAGE>

      "Leased Site" means Landlord's interest under any Site Lease.

      "Legal Requirement Event" has the meaning set forth in clause (i) of
paragraph (d) of Section 8 hereof.

      "Legal Requirements" means all laws, judgments, decrees, ordinances and
regulations and any other governmental rules, orders and determinations and all
requirements having the force of law, now or hereinafter enacted, made or
issued, whether or not presently contemplated, (including without limitation the
Americans with Disabilities Act, 42 U.S.C. Sections 12181 et seq., and local and
state laws of similar impact or effect and rules, regulations and (to the extent
Tenant receives notice and a copy thereof) orders issued under any thereof) and
all existing recorded agreements, covenants, conditions and restrictions (or any
such of which Tenant has notice), applicable to any Theatre Property and/or the
construction, ownership, operation or use thereof, including, without
limitation, compliance with all requirements of labor laws and Environmental
Requirements, compliance with which is required at any time from the date hereof
through the Lease Termination Date (or thereafter as herein set forth), if any,
whether or not such compliance shall require structural, unforeseen or
extraordinary changes to a Theatre Property or the operation, occupancy or use
thereof.

      "License of Intangibles" means that certain License of Intangibles dated
as of the date hereof between the Landlord and the Tenant, as the same may be
amended, restated, modified or supplemented from time to time.

      "Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), or other security agreement
of any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).

      "Loan Agreement" means the Citadel Standby Credit Facility, dated the date
hereof, between Landlord, as "Borrower" thereunder, and Citadel, as "Lender"
thereunder.

      "Losses" has the meaning set forth in paragraph (a) of Section 11 hereof.

      "Material Adverse Landlord Effect" means a material adverse effect on the
rights or interest of the Tenant under this Lease or any Site Lease resulting
solely from an action or omission of Landlord, or an event or condition relating
to Landlord, excluding any action (including the initiation of legal
proceedings) to enforce the provisions of this Lease against the Tenant.

      "Material Adverse Property Effect" means a material adverse effect on (a)
the operation, maintenance, leasing, ownership, use or value of a Theatre
Property or material Elements thereof,

                                       12
<PAGE>

(b) the business, assets, properties, financial condition or operations of the
Tenant, or (c) the rights or interests of the Landlord under this Lease or the
landlord's interest under any Site Lease.

      "Minimum Net Worth Requirement" shall be satisfied with respect to any
Person at any date if the net worth (as determined in accordance with GAAP) of
such Person, as of the end of the fiscal year of such Person ending on or
immediately prior to such date, shall exceed $100,000,000, as evidenced by
financial statements audited by a nationally recognized independent accounting
firm.

      "Nationwide" means Nationwide Theatres Corp., a California corporation,
and its successors and assigns.

      "Nationwide Agreement" means the agreements, documents and instruments
evidencing or securing the Nationwide Indebtedness, as any thereof may be
amended, restated, modified or supplemented from time to time.

      "Notice of Termination" has the meaning set forth in paragraph (a) of
Section 19 hereof.

      "Option Fee" means the amount of five million Dollars ($5,000,000).

      "Other Lease Documents" means the License of Intangibles and the
Sub-Management Agreement.

      "Parcel" or "Parcel of Property" means the real estate underlying a
specific Leased Site or Sites.

      "Parent" shall mean Citadel, so long as Citadel or an Affiliate is the
Tenant hereunder, and, if neither Citadel nor an Affiliate of Citadel is the
Tenant hereunder, either any parent entity or other Affiliate of the Tenant
which has guaranteed the obligations of Tenant hereunder or, if there is no such
parent entity, then Tenant.

      "Payment Account" means such account designated by Landlord from time to
time as the "Payment Account" for purposes of the Lease.

      "Permitted Assigns" means parties to whom the interest of the Tenant
hereunder may be transferred and assigned as described in Section 17 hereof,
including the transferee or successor to the interest of Tenant as a result of a
Permitted Sale (including for this purpose a subletting).

      "Permitted Contest" has the meaning set forth in paragraph (a) of Section
23 hereof.

      "Permitted Investments" means the following investments: (a) direct or
guaranteed obligations of the United States of America or agencies thereof
backed by the full faith and credit of the United States of America, (b)
certificates of deposit and bankers' acceptances which mature within one year
from the date of purchase and which are issued by a bank organized or doing

                                       13
<PAGE>

business under the laws of the United States of America or one of the states
thereof whose long-term debt obligations are at the time of purchase rated "AA"
or higher by S&P or the equivalent by Moody's, (c) repurchase agreements with
such banks, fully secured by direct obligations of the United States of America
or agencies thereof backed by the full faith and credit of the United States of
America, (d) commercial paper issued by a corporation which at the time of
purchase is rated "A-1" or higher by S&P or "P-1" by Moody's, and (e) shares in
money market funds whose investments are limited to securities described in
clauses (a) to (d).

      "Permitted Liens" means the following Liens and other matters affecting
the title of any Parcel of Property, Theatre Improvements or Unit of Equipment:
(a) Liens securing the payment of taxes, assessments and other governmental
charges or levies which are either not delinquent or, if delinquent, are being
contested by the Tenant in good faith as a Permitted Contest; (b) existing and
future Legal Requirements, zoning and planning restrictions, subdivision and
platting restrictions, easements, rights-of-way, licenses, reservations,
covenants, conditions, waivers, or restrictions on the use of any Theatre
Property, (c) encroachments or irregularities of title none of which materially
impairs the intended use or value of the affected Theatre Property for its
intended purpose; (d) the Liens created pursuant to the Nationwide Agreement;
(e) leases and licenses in effect with respect to any Theatre Property which are
permitted by this Lease; (f) mechanics' and materialmen's liens incurred in good
faith relating to and securing obligations not exceeding an aggregate amount of
$50,000 per Theatre Property prior to the Funding Date, or $100,000 per Theatre
Property from and after the Funding Date, and which in either case are the
subject of a Permitted Contest; (g) exceptions to the title of any Theatre
Property as set forth in the title insurance policy delivered to the Tenant
hereunder or in connection herewith; (h) Liens in favor of the lender under any
Financing Agreement; (i) existing Liens listed on Exhibit C attached hereto; (j)
extensions, renewals and replacements of Liens described in paragraphs (d), (h)
and (i) hereof provided that such extension, renewal or replacement Lien is
limited to the property covered by the Lien so extended, renewed or replaced and
does not secure any Indebtedness or amount that is in excess of that secured
immediately prior to such extension or renewal; (k) any of the Liens granted by,
or arising from actions of, the Landlord; and (l) such other or additional
matters as may be approved in writing by the Landlord, such approval not to be
unreasonably withheld.

      "Permitted Sale" means any transfer of the estate of Tenant to all or a
material portion of the Theatre Properties to a direct or indirect Affiliate of
Tenant, or subletting of all or substantially all of a Theatre Property or
Equipment for all or substantially all the remaining Lease Term or as otherwise
provided in Section 17 hereof.

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

      "Pledgee" means each Person to which any part of the Landlord's interest
under this Lease or in any Parcel of Property, Theatre Improvement or Unit of
Equipment shall at the time have been pledged by the Landlord in accordance with
Section 24 of this Lease.

                                       14
<PAGE>

      "Properly Contested" (including grammatical alternatives thereof) means
(a) in the case of any Indebtedness of the Tenant (including any Taxes) that is
not paid as and when due or payable by reason of the Tenants' bona fide dispute
concerning its liability to pay same or concerning the amount thereof, (i) such
Indebtedness is being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; (ii) if the Indebtedness results
from, or is determined by the entry, rendition or issuance against the Tenant or
any of its assets of, a judgment, writ, order or decree, execution on such
judgment, writ, order or decree is stayed pending a timely appeal or other
judicial review; and (iii) if such contest is abandoned, settled or determined
adversely (in whole or in part) to Tenant, Tenant forthwith pays such
Indebtedness and all penalties, interest and other amounts due in connection
therewith; and (b) in the case of any other obligation of Tenant, (i) compliance
with or performance of such obligation is being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted; (ii) the
lack of performance or compliance therewith will not have a Material Adverse
Property Effect or compliance therewith or performance thereof has been stayed
or permissibly deferred; (iii) there is no material risk of criminal liability
against the Landlord, the Tenant or the applicable Site Landlord for such
failure of performance or compliance; (iv) such lack of performance or
compliance therewith will not constitute a default under the applicable Site
Lease; and (v) if such contest is abandoned, settled or determined adversely to
Tenant, Tenant thereafter promptly and with reasonable diligence effects such
required compliance or performance.

      "Purchase Option" has the meaning set forth in paragraph (a) of Section 12
hereof.

      "Purchase Option Closing Date" means the date set in accordance with
paragraph (b) of Section 12 for the consummation of the purchase of the
Purchased Assets pursuant to the Tenant's exercise of the Purchase Option.

      "Purchased Assets" has the meaning set forth in paragraph (a) of Section
12 hereof.

      "Reading" means Reading Entertainment, Inc., a Nevada corporation, now
known as Reading Holdings, Inc. and its successors.

      "Reimbursement Rate" means 11.25% per annum.

      "Release" means the release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migrating into the indoor
or outdoor environment of any Contaminant through or in the air, soil, surface
water, groundwater, or any structure.

      "Remedial Action" means actions required or otherwise undertaken by a
Governmental Authority, or which are appropriate as a matter of prudent business
practice and commercial reasonableness, to (a) in the case of any Environmental
Event, (i) clean up, remove, treat or in any other way address Contaminants in
the indoor or outdoor environment; (ii) prevent the Release or threat of Release
or minimize the further Release of Contaminants; or (iii) investigate and
determine

                                       15
<PAGE>

if a remedial response is needed, and to design such a response and
post-remedial investigation, monitoring, operation, maintenance and care and (b)
in the case of any other Legal Requirement, investigate and cure (or Properly
Contest and, if unsuccessful, cure) the applicable condition, or comply
therewith (including following a Proper Contest).

      "Renewal Rental Rate" has the meaning set forth in paragraph (h) of
Section 12 hereof.

      "Renewal Term" has the meaning set forth in paragraph (b) of Section 6
hereof.

      "Securities Acts" means the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the rules and regulations under
each thereof.

      "Site Landlord" means the landlord under any Site Lease, as in existence
at any time.

      "Site Leases" means each of:

            (a) that certain Indenture of Lease dated as of January 31, 1987
      between Senyar Holding Company, as landlord, and M-Square Theaters, Inc.,
      as tenant, covering premises at 181-189 Second Avenue, New York, New York
      10003, containing the Village East Theatre, as amended by that certain
      First Amendment to Lease, dated as of June 15, 1989, between Senyar
      Holding Company and M-Square Theaters, Inc., and the letter regarding
      notices, dated December 20, 1993 from Senyar Holding Company to M-Square
      Theatres, Inc.;

            (b) the ground lease dated February 9, 1961 between Andrew C. Mayer,
      et al., as landlord, and Turtle Bay Theatre Corporation, as tenant,
      covering premises at 1001, 1003, 1005 and 1007 Third Avenue, New York, New
      York 10022, containing Cinemas 1, 2 and 3, the tenant's interest therein
      having been assigned to (i) Sutcin Holding Corp. pursuant to that
      Assignment & Assumption of Lease dated December 31, 1984 between Cinema 5
      Ltd., as successor in liquidation to Turtle Bay Theatre Corporation, and
      Sutcin Holding Corp., and (ii) Sutton Hill Associates pursuant to that
      Agreement of Purchase and Sale and related Assignment of Lease, each dated
      July 3, 1986 between Sutcin Holding Corp. and Sutton Hill Associates; and

            (c) that certain Ground Lease dated as of August 16, 1985, between
      Sutcin Holding Corp., as landlord, and Sutton Hill Associates, as tenant,
      covering the premises at 205 East 57th Street, New York, New York 10022,
      containing the Sutton Theatre, as amended by (i) the First Addendum to
      Ground Lease, dated as of January 1, 1992, between Sutcin Holding Corp.
      and Sutton Hill Associates, (ii) the Second Addendum to Ground Lease,
      dated as of January 1, 1995, between Sutcin Holding Corp. and Sutton Hill
      Associates, (iii) the Third Addendum to Ground Lease, dated as of July 1,
      1996, between Nationwide (successor-in-interest to Sutcin Holding Corp.)
      and Sutton Hill Associates, (iv) the Fourth Addendum to Ground Lease,
      dated July 28, 200 0, between Nationwide and

                                       16
<PAGE>

      Sutton Hill Associates; and (v) the Fifth Addendum to Ground Lease, dated
      as of January 29, 2002 between Nationwide and Sutton Hill Associates.

the tenant's interest in each of the foregoing Site Leases having been assigned
to Landlord pursuant to the Site Lease Assignment.

      "Site Lease Assignment" means the assignment of the Site Leases, dated
July 28, 2000, between Sutton Hill Associates and Landlord.

      "Sub-Management Agreement" means the Sub-Management Agreement, dated as of
the date hereof, between the Landlord and the Tenant, as the same may be
amended, restated, modified and supplemented from time to time.

      "Subsidiary" of any Person shall mean any corporation, partnership,
limited liability company, joint venture, trust or estate of which (or in which)
more than 50% of

            (a) the outstanding capital stock having voting power to elect a
      majority of the board of directors of such corporation (irrespective of
      whether at the time capital stock of any other class or classes of such
      corporation shall or might have voting power upon the occurrence of any
      contingency),

            (b) the interest in the capital or profits of such partnership or
      joint venture, or

            (c) the beneficial interest of such trust or estate is at the time
      directly or indirectly owned by such Person, by such Person and one or
      more of its Subsidiaries or by one or more of such Person's Subsidiaries.

      "Suitable Replacement" means a Person to become Tenant hereunder, or an
Affiliate (including a Subsidiary) of which will become Tenant hereunder
provided such Person will execute and deliver a Lease Guaranty for the
liabilities and obligations of such Affiliate as tenant hereunder, who or which
has, on or about the date information about such Person is to be provided to the
Landlord pursuant to Section 17 hereof, a net worth no less than one hundred
fifty million dollars ($150,000,000) and management and operating experience
(both in terms of personnel and business operating history) in the Business
(including in a major metropolitan area in the United States) comparable to
Reading as of the date hereof or otherwise reasonably acceptable to Landlord;
provided, that Reading shall in all events be a Suitable Replacement.

      "Sutton Option" means the right of Sutton Hill Associates to purchase the
fee interest underlying the Sutton Theatre, leased to the Landlord pursuant to
one of the Site Leases, on the terms and subject to the conditions set forth in
the Option to Purchase and Agreement of Purchase and Sale and Escrow
Instructions, made and entered into as of August 16, 1985 by and between Sutcin
Holding Corp. and Sutton Hill Associates, as amended by the First Addendum to
Option to Purchase and Agreement of Purchase and Sale and Escrow Instructions,
dated as of January 1, 1992, between

                                       17
<PAGE>

Sutcin Holding Corp. and Sutton Hill Associates, the Second Addendum to Option
to Purchase and Agreement of Purchase and Sale and Escrow Instructions, dated as
July 1, 1996, between Nationwide Theaters Corp. (successor-in-interest to Sutcin
Holding Corp.) and Sutton Hill Associates, the Third Addendum to Option to
Purchase and Agreement of Purchase and Sale and Escrow Instructions, dated as of
July 28, 2000 between Nationwide and Sutton Hill Associates, and the Fourth
Addendum to Option to Purchase and Agreement of Purchase and Sale and Escrow
Instructions, dated January 29, 2002, copies of all of which are attached as
Exhibit E hereto, and which has been assigned to the Landlord pursuant to the
terms of the Assignment of Option Agreement.

      "Taking" or "Taken" has the meaning set forth in paragraph (a) of Section
16 hereof.

      "Taking Payment Date" has the meaning set forth in paragraph (c) of
Section 16 hereof.

      "Taking Proceeds" has the meaning set forth in paragraph (c) of Section 16
hereof.

      "Tenant" has the meaning set forth in the first paragraph of this Lease.

      "Tenant Event" shall mean an event arising from or attributable to an
action or inaction of, or a condition or event relating to, Tenant or any of its
Affiliates (or the agents, officers, directors or employees of the Tenant or any
such Affiliate), or initiated by Tenant or any of its Affiliates (or any such
Person), unless such action, inaction, or event was or resulted from an action
by Tenant or any of its Affiliates to enforce any rights or remedies under the
Lease or any other Contract or Applicable Law so long as such action so to
enforce was initiated in good faith.

      "Tenant Indemnified Person" has the meaning set forth in paragraph (b) of
Section 11 hereof.

      "Theatre Improvements" means all 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
a Parcel of Property.

      "Theatre Properties" means the interest of the Landlord in the Leased
Sites, the Theatre Improvements and the Equipment, and a "Theatre Property"
means the cumulative interest of Landlord in any one of the Theatre Properties;
provided, that such terms shall also refer to the physical location of the
applicable Parcel or Parcels, and the Improvements and Equipment located
thereon, in connection with covenants, indemnities, and similar matters relating
to activities at, on, over, or under or involving such Parcel or Parcels.

      "Threshold Amount" has the meaning set forth in paragraph (c) of Section
11 hereof.

      "Unit", when referring to the personal property leased under this Lease,
means a particular item of Equipment, as the context requires.

                                       18
<PAGE>

      1.2 Other Definitional Provisions.

            (a All terms defined in this Lease shall have their defined meanings
when used in any certificate or other document made or delivered pursuant
hereto.

            (b The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Lease shall refer to this agreement as a whole and not
to any particular provision of this Lease, and section, subsection, paragraph,
schedule and exhibit references are to this Lease unless otherwise specified.
The meanings given to terms defined herein shall be equally applicable to both
the singular and plural forms of such terms.

            SECTION 2. REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS.

      2.1 Representations and Warranties of the Tenant. The Tenant represents
and warrants to the Landlord that, as of the date hereof:

            (a Corporate Matters. The Tenant (i) has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of Nevada, (ii) has full power, authority and legal right to own and
operate its properties and to conduct its business as presently conducted and to
execute, deliver and perform its obligations under this Lease and the Other
Lease Documents, and (iii) is or will be timely duly qualified to do business as
a foreign corporation in good standing in the State of New York.

            (b Binding Agreement. Each of this Lease and each Other Lease
Document has been duly authorized, executed and delivered by the Tenant and,
assuming the due authorization, execution and delivery thereof by the Landlord,
constitutes a legal, valid and binding obligation of the Tenant, enforceable
according to its terms, except as the enforceability of this Lease and each such
Other Lease Document may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium, or laws affecting creditors' rights
generally and by general principles of equity.

            (c Compliance with Other Instruments. The execution, delivery and
performance by the Tenant of this Lease and the Other Lease Documents will not
result in any violation of any term of the certificate of incorporation or the
by-laws of the Tenant, do not require stockholder approval or the approval or
consent of any trustee or holders of Indebtedness of the Tenant except such as
have been obtained prior to the date hereof and will not conflict with or result
in a breach of any terms or provisions of, or constitute a default under, any
Lien, or result in the creation or imposition of any Lien (other than a
Permitted Lien), upon any property or assets of the Tenant under any indenture,
mortgage or other agreement or instrument to which the Tenant is a party or by
which it or any of its property is bound, or any existing applicable law, rule,
regulation, license, judgment, order or decree of any government, governmental
body or court having jurisdiction over the Tenant or any of its activities or
properties.

                                       19
<PAGE>

            (d Litigation. There is no action, suit, proceeding or investigation
at law or in equity by or before any court, governmental body, agency,
commission or other tribunal now pending or, to Tenant's knowledge, threatened
in writing against or affecting the Tenant or any Affiliate which questions the
enforceability of this Lease or the Other Lease Documents.

            (e Financial Statements. The Tenant has furnished to the Landlord
copies of Citadel's Annual Report on Form 10-K for the year ended December 31,
2001 and Quarterly Report on Form 10-Q for the period ended March 31, 2002. The
financial statements contained in such documents fairly present the financial
position, results of operations and consolidated statements of cash flows of
Citadel as of the dates and for the periods indicated therein in all material
respects and have been prepared in accordance with GAAP, and there has been no
material adverse change in Citadel's business or financial results since the end
of the period covered by the latest financial statements included in such
reports, except as may be disclosed in such reports.

            (f Brokerage. There are no claims for brokerage commissions or
finder's fees for persons engaged by the Tenant or any Affiliate in connection
with this Lease. Neither the Tenant nor any Affiliate has dealt with any agent
or broker in connection with this Lease or the Theatre Properties and the Lease
was not brought about or procured through the use, negotiation or
instrumentality of any agent or broker acting on behalf of Tenant or any
Affiliate.

            (g Condition of Theatre Improvements and Equipment. Except as
expressly set forth herein, neither the Landlord nor any Affiliate, nor anyone
acting on behalf of any such party, has made any representation or warranty of
any kind whatsoever, express or implied, as to the safety, title, condition,
quality, quantity, fitness for use, merchantability, conformity to
specification, or any other characteristic, of any of the Leased Sites, the
Theatre Improvements or the Equipment, and the Tenant has entered into this
Lease on the basis of its own judgment and accepts the Theatre Properties,
including each Element thereof, "as is" and in the condition existing on the
Effective Date.

            (h Governmental Consents. There are no consents, permits, licenses,
orders, authorizations, approvals, waivers, extensions or variances of, or
notices to or registrations or filings with (each a "Governmental Action") any
Governmental Authority which are or will be required to be obtained by the
Tenant or any Affiliate in connection with the valid execution, delivery and
performance of this Lease or the Other Lease Documents except such Governmental
Actions (A) as have been duly obtained, given or accomplished, with true copies
thereof delivered to the Landlord, or (B) as may be required by applicable law
not now in effect.

            (i Status of Tenant. All of the Tenant's common stock is owned
beneficially and of record by Citadel or a direct or indirect wholly-owned
subsidiary of Citadel.

      2.2 Certain Covenants of Tenant. Tenant covenants to and with Landlord
during the Lease Term and until the indefeasible payment of all amounts owing
hereunder:

                                       20
<PAGE>

            (a Corporate Existence. The Tenant or its assigns will at all times
be (i) a validly existing corporation or other business entity in good standing
under the laws of its jurisdiction of organization and (ii) if required, duly
qualified to do business in good standing in the State of New York.

            (b Delivery of Information. The Tenant shall deliver to the Landlord
(i) promptly upon their becoming available, and in any event not more than 120
days after the end of each fiscal year of Tenant, copies of Tenant's respective
annual financial statement and promptly upon their becoming available, and in
any event not more than 60 days after the end of each fiscal quarter of Tenant
(other than the last fiscal quarter of each year), copies of Tenant's quarterly
unaudited financial statements, prepared in accordance with GAAP, and (ii)
promptly upon request, such other information with respect to the Tenant's
properties, assets, or litigation as the Landlord shall reasonably request;
provided that financial statements of Parent may be supplied in lieu of the
financial statements of Tenant.

            (c Capital Expenditures. Tenant will not make any Capital
Expenditures with respect to any Theatre Improvements or Equipment other than
Capital Expenditures that will not have a Material Adverse Property Effect.

            (d Liens. The Tenant will not create, incur, assume or permit to
exist any Lien on any Theatre Property or Element thereof, except Permitted
Liens.

            (e Environmental Event.

                  (i The Tenant shall promptly, but in any case within five (5)
      Business Days of the Tenant becoming aware of such event, notify the
      Landlord if, after the Effective Date, (A) any environmental event has
      occurred or any environmental condition is discovered in, on, beneath,
      from or involving any Parcel, Theatre Improvements or Equipment
      (including, but not limited to, the presence (in quantities in excess of
      legally permissible amounts), emission or release of Contaminants or the
      violations of any applicable Environmental Requirements) that could
      reasonably be expected to result in penalties or other liabilities
      (including costs to alleviate or remediate) in excess of $100,000, or (B)
      the Tenant has received notification that it, any Parcel, Theatre
      Improvements or Equipment is the subject of a proceeding that could
      reasonably be expected to result in any ordered Remedial Action or other
      liability related to an environmental event or condition, the cost of
      which liability is reasonably expected to exceed $100,000 (each of the
      events or occurrences described in clause (A) or (B), regardless of the
      amount of penalty, liability or cost to remediate, an "Environmental
      Event").

                  (ii Following the receipt of a notice pursuant to subparagraph
      (i) above, unless such Environmental Event is a Landlord Environmental
      Obligation, Landlord in its sole discretion may require the Tenant to
      conduct, or cause to be conducted, an

                                       21
<PAGE>

      environmental audit of the affected Parcel, Theatre Improvements or
      Equipment, the scope of which audit shall be limited to confirming the
      magnitude and anticipated cost of the liability resulting from the
      Environmental Event, and to provide a copy of an environmental
      consultant's report on its audit to the Landlord.

                  (iii In any case, if an Environmental Event arises during the
      Lease Term or (regardless of when it arose) is otherwise not exclusively a
      Landlord Environmental Obligation, the Tenant shall immediately initiate,
      or cause to be initiated at no cost to the Landlord, such actions as may
      be necessary to comply in all material respects with all applicable
      Environmental Requirements and to alleviate any significant risk to human
      health or the environment if the same arises from a condition on or in
      respect of the affected Parcel, Theatre Improvements or Equipment, whether
      existing prior to, on or after the date of this Lease. Once the Tenant
      commences such actions, the Tenant shall thereafter diligently and
      expeditiously proceed to comply materially and in a timely manner with all
      Environmental Requirements and to eliminate any significant risk to human
      health or the environment and shall, at the request of the Landlord,
      during the Lease Term give periodic progress reports on Tenant's
      compliance efforts and actions.

                  (iv If an Environmental Event is a Landlord Environmental
      Obligation, the Tenant shall have no responsibility to cure or remediate
      such Environmental Event. If an Environmental Event is a Landlord
      Environmental Obligation, Tenant shall notify Landlord that such
      Environmental Event has occurred or exists and Tenant, in its discretion,
      but in any case at the sole expense of the Landlord, may initiate or
      require the Landlord to initiate and otherwise take the actions described
      in paragraph (iii) of this Section 2.2(e), in the same manner as would
      have been applicable to the Tenant had such Environmental Event not been a
      Landlord Environmental Obligation; provided, however, that the Tenant
      shall not initiate any action described in this sentence (except in cases
      of imminent danger to persons or property) unless the Tenant has notified
      the Landlord that an Environmental Event has occurred which is a Landlord
      Environmental Obligation and the Landlord has failed to advise the Tenant
      within thirty days following receipt of such notice of the Landlord's
      planned response thereto, which may include Properly Contesting such claim
      (and has failed after reasonable notice to proceed with reasonable
      diligence in implementing such response), or has advised the Tenant that
      Landlord does not intend to respond thereto. Whether or not Landlord
      otherwise responds to the Tenant's notice or the Event in question,
      Landlord reserves the right and option to contest that such Event is in
      fact a Landlord's Environmental Obligation hereunder.

            (f Site Leases. The Tenant agrees to pay or cause to be paid to each
Site Landlord, on or before the first Business Day of each calendar month
throughout the Lease Term, all fixed or base rent to be due under the respective
Site Leases for such calendar month and to pay as and when due and payable
pursuant thereto all additional rent and other charges payable pursuant to the
respective Site Leases (excluding only amounts (i) payable to the extent
resulting from a Landlord Act as lessee thereunder or the breach by Landlord of
any obligation thereunder which was

                                       22
<PAGE>

not the result of a Tenant Event, or (ii) which relates to a period prior to
commencement of the Lease Term and which has not been assumed by or become the
obligation of Tenant pursuant hereto). If Tenant attempts to make payment
directly to a Site Landlord and such payment is rejected because Tenant is not
such Site Landlord's tenant, Tenant shall provide funds to Landlord to enable it
to pay, and Landlord agrees that, upon receipt of such funds (and provided funds
owing to it are also paid), it shall pay, sums due to the applicable Site
Landlord.

            (g Payment of Taxes. The Tenant agrees to pay or cause to be paid,
on or within thirty (30) Business Days after the Effective Date, all New York
City and New York State real estate transfer taxes, imposed by reason of the
execution and delivery of this Lease, the creation or granting of the estate
demised hereby or the recording hereof or of a memorandum hereof, and to provide
to Landlord, promptly following Landlord's written request therefor, reasonable
evidence of the payment of such taxes.

      2.3 Landlord Representations and Warranties. The Landlord represents and
warrants to the Tenant that, as of the date hereof:

            (a) Corporate Matters. The Landlord (i) has been duly organized and
is validly existing as a limited liability company in good standing under the
laws of the State of New York, and (ii) has full power, authority and legal
right to own and operate its properties and to conduct its business as presently
conducted and to execute, deliver and perform its obligations under this Lease
and those of the Other Lease Documents to which it is a party.

            (b) Binding Agreement. Each of this Lease and those of the Other
Lease Documents to which it is a party has been duly authorized, executed and
delivered by the Landlord and, assuming the due authorization, execution and
delivery thereof by the Tenant, constitutes a legal, valid and binding
obligation of the Landlord, enforceable according to its terms, except as the
enforceability of this Lease and each such Other Lease Document may be limited
by the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditors' rights generally and by general
principles of equity.

            (c) Compliance with Other Instruments. The execution, delivery and
performance by the Landlord of this Lease and those of the Other Lease Documents
to which it is a party will not result in any violation of any term of the
certificate of formation or operating agreement of the Landlord, do not require
approval of the members of Landlord or the approval or consent of any trustee or
holders of Indebtedness of the Landlord except such as have been obtained prior
to the date hereof and will not conflict with or result in a breach of any terms
or provisions of, or constitute a default under, or result in the creation or
imposition of, any Lien (other than a Landlord Permitted Lien) upon any property
or assets of Landlord under any indenture, mortgage or other agreement or
instrument to which the Landlord is a party or by which it or any of its
property is bound (including, without limitation, the Site Leases), or, to the
Landlord's Actual Knowledge, any existing applicable law, rule, regulation,
license, judgment, order or decree of any government, governmental body or court
having jurisdiction over the Landlord or any of its activities or properties.
Landlord has

                                       23
<PAGE>

delivered to Tenant copies of any consents obtained from any Site Landlord or
other Person in connection with the execution and delivery by Landlord or any of
its Affiliates, as applicable, of this Lease and the Other Lease Documents.

            (d) Litigation. Except as listed on Schedule 2.3(d) hereto, to the
Actual Knowledge of the Landlord, neither the Landlord nor any Affiliate of the
Landlord has received written notice of (i) any action, suit, proceeding or
investigation at law or in equity by or before any court, governmental body,
agency, commission or other tribunal now pending or, to the Landlord's Actual
Knowledge, threatened in writing against or affecting the Landlord or any
Affiliate or any rights of the Landlord which question the enforceability of
this Lease or the Other Lease Documents or which, if adversely determined, could
reasonably be expected to have a Material Adverse Landlord Effect or (ii) any
action, suit, proceeding or investigation at law or in equity by or before any
court, governmental body, agency, commission or other tribunal pending or, to
the Landlord's Actual Knowledge, threatened in writing against the Landlord or
its Affiliates by Nationwide or any of its Affiliates or, as of the date of this
Lease, any other Person that, if adversely determined against the Landlord or
any of its Affiliates, could be reasonably expected to question the validity of
this Lease or any of the Other Lease Documents to which Landlord or any of its
Affiliates, as the case may be, is (or may become) a party.

            (e) Brokerage. There are no claims for brokerage commissions or
finder's fees for persons engaged by the Landlord or any Affiliate in connection
with this Lease. Neither the Landlord nor any Affiliate has dealt with any agent
or broker in connection with this Lease and this Lease was not brought about or
procured through the use, negotiation or instrumentality of any agent or broker
acting on behalf of the Landlord or any Affiliate.

            (f) Status of Landlord. The only member of the Landlord is Sutton
Hill Associates, its successors and assigns.

            (g) Site Leases. The Site Leases consist of the documents identified
in the definition of "Site Leases". Landlord has made available to Citadel and
Tenant true and complete copies of the Site Leases. The Site Leases have not
been amended or modified except as set forth in the documents identified in the
definition of "Site Leases". There are no options to purchase or rights of first
refusal or offer or similar rights relating to any of the Theatre Properties
other than the Sutton Option. Landlord is the holder of the tenant's or lessee's
interest under each Site Lease, which has been validly transferred to Tenant
pursuant to the Site Lease Assignment, and is in possession of the property
demised under each Site Lease and, to the Actual Knowledge of Landlord, no other
Person has any interest as tenant or lessee in or to said Site Lease or any
rights to possession or occupancy of any portion of the property demised under
any Site Lease except as described on Exhibit C hereto. There are no security
deposits under any of the Site Leases. Landlord's interest in each Site Lease is
not subject to any Lien except as set forth in Exhibit C. Each of the Site
Leases is in full force and effect. Landlord (or a predecessor), as tenant under
the Site Leases, has substantially performed all of its material covenants and
material obligations thereunder. Neither Landlord nor any Affiliate has received
or delivered any written notice under any of the Site Leases

                                       24
<PAGE>

of any default or breach, and Landlord has no Actual Knowledge of any material
breach or default of any of the Site Leases, which in either case remains
uncured.

            (h) Sutton Option. The Sutton Option is evidenced by the documents
identified in the definition of "Sutton Option." Landlord has made available to
Citadel and Tenant true and complete copies of such documents. The Sutton Option
has not been amended or modified except as set forth in such documents. Landlord
is the holder of the right to exercise the Sutton Option, which has been validly
transferred to Landlord pursuant to the Assignment of Option Agreement.
Landlord's interest in the Sutton Option is not subject to any Lien except as
set forth in Exhibit C. The Sutton Option is in full force and effect in
accordance with its terms.

            (i) Equipment. Landlord has good title to all of the Equipment
except for equipment described on Exhibit C as leased by Landlord, subject to no
Lien other than as set forth on Exhibit C. As to any Equipment leased by
Landlord, Landlord has made available to Tenant a true and complete copy of each
document listed on Exhibit C hereto as comprising the applicable lease, and such
list is complete. Landlord (or a predecessor) has substantially performed all of
its material covenants and material obligations under the documents set forth on
Exhibit C. Neither Landlord nor any Affiliate has received or delivered any
written notice under any of such documents of any default or breach, and
Landlord has no Actual Knowledge of any material breach or default of any
thereof, which in either case remains uncured.

            (j) Nature of the Landlord's Business. The Landlord has not engaged
in any business other than as contemplated by this Lease.

            (k) Other Contracts. To the Actual Knowledge of the Landlord, except
for the Site Leases, leases of Equipment and other Contracts disclosed on
Exhibit C hereto, the Sutton Option, agreements with the Tenant's Affiliates,
and other Contracts none of which involves payments in excess of $25,000 now
committed to be made thereunder or which are cancelable without penalty on
thirty (30) days notice, there are no Contracts, oral or written, express or
implied, to which Landlord or any Affiliate is a party which (i) relate to the
Theatre Properties or (ii) are necessary for the operation of the Theatre
Properties in substantially the manner as they have been operated by Landlord
and its Affiliates.

            (l) Taxes. The Landlord has filed, or caused to be filed, all
required tax returns with respect to Taxes, or has filed for extensions of time
for the filing thereof, and has paid all applicable Taxes other than Taxes not
yet due or which may be paid hereafter without penalty, except for (a) filings
or payments as to which the failure to file would not have a Material Adverse
Landlord Effect, (b) Taxes which are being Properly Contested by the Landlord,
and (c) Taxes which are required to be paid or discharged by the Tenant or any
of its Affiliates under the terms of this Lease or any of the Other Lease
Documents. On or before the date when finally determined to be due, Landlord has
filed or caused to be filed all tax returns which are required to be filed by
it, and has paid all taxes shown to be due and payable on said returns or on any
assessments made against it

                                       25
<PAGE>

or any of its assets and properties and has paid all other taxes, fees or other
charges imposed on it by any Governmental Authority.

            (m) Compliance with Laws. To the Actual Knowledge of the Landlord,
neither the Landlord nor any Affiliate of the Landlord has, within the two year
period ending on July 28, 2000, received written notification that it or any
Theatre Property (or Material Element of any thereof) is not in material
compliance with the requirements of all Applicable Laws or alleging a violation
of Applicable Law, nor during such period have there been any proceedings
(including meetings between the persons listed in the definition of Actual
Knowledge and representatives of government agencies) or material correspondence
concerning any such notification received prior to such two-year period, except
those (i) the non-compliance with which would not, either singly or in the
aggregate, reasonably be expected to result in a Material Adverse Landlord
Effect or (ii) which have been substantially cured or (iii) which have been
listed on Schedule 2.3(m) hereof, true and complete copies of which
notifications or correspondence have been delivered to the Tenant or
descriptions of which meetings and, if not delivered as aforesaid, notifications
and correspondence are set forth on said Schedule 2.3(m).

            (n) Theatre Improvements. To the Actual Knowledge of the Landlord,
neither the Landlord nor any Affiliate of the Landlord has, within the two-year
period ending on July 28, 2000, received any written report, written notice
(including from any Governmental Authority) or other written materials
disclosing or alleging material structural defects in any of the buildings or
other material fixtures and improvements comprising part of the Theatre
Improvements, except as disclosed on Schedule 2.3(n) hereof; and a true and
complete copy of all such reports, notices and other materials so disclosed
either have been delivered to the Tenant or made available for its review.

      2.4 Certain Covenants of Landlord. The Landlord covenants to the Tenant
during the Lease Term (except that paragraph (b) shall only apply during the
Initial Term):

            (a) Corporate Existence. Landlord will at all times be (i) a validly
existing corporation or other business entity in good standing under the laws of
its jurisdiction of organization and (ii) if required, duly qualified to do
business in good standing in the State of New York.

            (b) Liens. The Landlord will not create, incur, assume or permit to
exist any Lien on any of the Theatre Property, Theatre Improvements or Unit of
Equipment, except Landlord Permitted Liens.

            (c) Site Leases. The Landlord will promptly deliver to Tenant any
notices Landlord receives under any Site Lease or any other communication from
or on behalf of any Site Landlord. Landlord will deliver to any Site Landlord
any notice reasonably requested by Tenant, provided such notice does not
adversely affect Landlord's rights under the respective Site Lease. To the
extent any obligation of Landlord under any Site Lease, by reason of the nature
of such obligation, cannot be delegated to Tenant, Landlord (at the expense of
Tenant) shall comply with such obligation. Landlord shall not take any action
which causes a default or breach under any of the

                                       26
<PAGE>

Site Leases, but neither the failure by Landlord to elect to perform any
obligation of Tenant hereunder nor the enforcement or lack of enforcement by
Landlord of its rights and remedies pursuant to this Lease shall constitute a
violation of this covenant or entitle Tenant to any rights or claims, regardless
of the consequence. Landlord shall not enter into any modification, supplement,
or other instrument of, to or with respect to any Site Lease (except as may be
specifically required by the terms of a Site Lease (although Landlord will
endeavor to provide Tenant notice of any such required modification thereof or
supplement thereto) and except that, during the Renewal Term, Landlord may enter
into any such instrument if the terms thereof do not materially affect the
rights or obligations of the parties to the respective Site Lease during the
Renewal Term). During the Term, Landlord shall exercise any renewal options
under a Site Lease on a timely basis to the extent relating to a term thereunder
which includes a part of the Term hereof.

            (d) Notices. If the Landlord shall receive any written notice from a
Governmental Authority or other Person (other than the Tenant) which relates to
the leasing, operation of or at, or use of any Theatre Property or Element
thereof during the Lease Term, Landlord shall promptly deliver a copy of such
notice to Tenant.

            (e) Payment of Taxes and Other Obligations. The Landlord agrees to
pay or cause to be paid, on or before the date which is the date when payment
thereof is finally due, all sales taxes, transfer taxes, transfer gains taxes
and all other similar taxes arising from the execution and delivery of this
Lease and the Other Lease Documents, except for the amounts to be paid by Tenant
as provided in subparagraph (g) of Section 2.2 hereof. The Landlord shall pay
all of its general administrative expenses, including expenses in administering
this Lease, except where the Tenant is specifically obligated to reimburse such
expenses by this Lease.

            SECTION 3. LEASE OF THEATRE PROPERTIES.

      Subject to the terms and conditions hereof, from and after July 28, 2000
("Effective Date") and during the Lease Term, the Landlord does hereby lease the
Theatre Properties to the Tenant and the rights and obligations of the Landlord
and the Tenant shall be governed by this Lease.

            SECTION 4. RESERVED.

            SECTION 5. OBLIGATIONS.

      (a) Except as provided in paragraph (b) of this Section 5 or in Section 7
of this Lease:

                  (i The obligations of the Tenant to pay all amounts payable
      pursuant to this Lease (including specifically and without limitation
      amounts payable pursuant to Sections 7 and 12 hereof) shall be absolute
      and unconditional under any and all circumstances of any character
      (including, without limitation, the circumstances set forth in

                                       27
<PAGE>

      clauses A through H below), and such amounts shall be paid without, and
      Tenant hereby waives, notice, demand, defense, setoff, deduction or
      counterclaim and without abatement, suspension, deferment, diminution or
      reduction of any kind whatsoever, except as herein expressly otherwise
      provided. The obligation of the Tenant to lease and pay Basic Rent and
      Additional Rent and any other amounts due hereunder for the Theatre
      Properties pursuant to this Lease is without any warranty or
      representation, express or implied, as to any matter whatsoever on the
      part of the Landlord or any Affiliate, or anyone acting on behalf of any
      of them.

                  (ii EXCEPT AS SPECIFICALLY PROVIDED HEREIN OR IN ANY OTHER
      LEASE DOCUMENT, NEITHER THE LANDLORD NOR ANY AFFILIATE, NOR ANYONE ACTING
      ON BEHALF OF ANY OF THEM, MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND
      WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, AS TO THE
      SAFETY, TITLE, CONDITION, QUALITY, QUANTITY, FITNESS FOR USE,
      MERCHANTABILITY, CONFORMITY TO SPECIFICATION, OR ANY OTHER CHARACTERISTIC,
      OF ANY THEATRE PROPERTY OR ELEMENT THEREOF OR OF ANY PARCEL, THEATRE
      IMPROVEMENTS OR EQUIPMENT, OR AS TO WHETHER ANY THEATRE PROPERTY OR
      ELEMENT THEREOF OR OF ANY PARCEL, THEATRE IMPROVEMENTS OR EQUIPMENT, OR
      THE OWNERSHIP, USE, OCCUPANCY OR POSSESSION THEREOF COMPLIES WITH ANY
      LAWS, RULES, REGULATIONS OR REQUIREMENTS OF ANY KIND OR COMPLIES WITH ANY
      SITE LEASE OR OTHER AGREEMENT, LEASE DOCUMENT OR INSTRUMENT APPLICABLE TO
      ANY THEREOF.

                  (iii EXCEPT AS SPECIFICALLY PROVIDED HEREIN OR IN ANY OTHER
      LEASE DOCUMENT, AS BETWEEN THE TENANT AND THE LANDLORD, ANY ASSIGNEE OR
      ANY INDEMNIFIED PERSON, THE TENANT ASSUMES ALL RISKS, INCLUDING, WITHOUT
      LIMITATION, ANY RELATING TO:

                  (A) THE SAFETY, TITLE, CONDITION, QUALITY, FITNESS FOR USE,
            MERCHANTABILITY, CONFORMITY TO SPECIFICATION, OR ANY OTHER QUALITY
            OR CHARACTERISTIC OF ANY THEATRE PROPERTY OR ELEMENT THEREOF OR OF
            ANY PARCEL, THEATRE IMPROVEMENTS OR EQUIPMENT, LATENT OR NOT;

                  (B) EXCEPT AS OTHERWISE SET FORTH IN THIS LEASE, ANY SET-OFF,
            COUNTERCLAIM, RECOUPMENT, ABATEMENT, DEFENSE OR OTHER RIGHT WHICH
            THE TENANT MAY HAVE AGAINST THE LANDLORD OR ANY INDEMNIFIED PERSON
            FOR ANY REASON WHATSOEVER ARISING OUT OF THIS OR ANY OTHER
            TRANSACTION OR MATTER;

                                       28
<PAGE>

                  (C) ANY DEFECT IN TITLE OR OWNERSHIP OF ANY THEATRE PROPERTY
            OR ELEMENT THEREOF OR OF ANY PARCEL, THEATRE IMPROVEMENTS OR
            EQUIPMENT, OR ANY TITLE ENCUMBRANCE NOW OR HEREAFTER EXISTING WITH
            RESPECT TO ANY OF THE FOREGOING;

                  (D) ANY FAILURE OR DELAY IN DELIVERY OF ANY UTILITY SERVICE OR
            ANY LOSS, THEFT OR DESTRUCTION OF, OR DAMAGE TO, IN WHOLE OR IN
            PART, ANY THEATRE PROPERTY OR ELEMENT THEREOF, OR OF ANY PARCEL,
            THEATRE IMPROVEMENTS OR EQUIPMENT, OR CESSATION OF THE USE OR
            POSSESSION OF ANY THEATRE PROPERTY OR ELEMENT THEREOF, OR OF ANY
            PARCEL, THEATRE IMPROVEMENTS OR EQUIPMENT, BY THE TENANT FOR ANY
            REASON WHATSOEVER AND OF WHATEVER DURATION, OR ANY CONDEMNATION,
            CONFISCATION, REQUISITION, SEIZURE, PURCHASE, TAKING OR FORFEITURE,
            IN WHOLE OR IN PART, OF ANY THEATRE PROPERTY OR ELEMENT THEREOF, OR
            OF ANY PARCEL, THEATRE IMPROVEMENTS OR EQUIPMENT;

                  (E) ANY INABILITY OR ILLEGALITY WITH RESPECT TO THE USE,
            OWNERSHIP, OCCUPANCY OR POSSESSION OF ANY THEATRE PROPERTY OR
            ELEMENT THEREOF, OR OF ANY PARCEL, THEATRE IMPROVEMENTS OR
            EQUIPMENT, BY THE TENANT;

                  (F) ANY INSOLVENCY, BANKRUPTCY, REORGANIZATION OR SIMILAR
            PROCEEDING BY OR AGAINST THE TENANT OR THE LANDLORD;

                  (G) ANY FAILURE TO OBTAIN, OR EXPIRATION, SUSPENSION OR OTHER
            TERMINATION OF, OR INTERRUPTION TO, ANY REQUIRED LICENSES, PERMITS,
            CONSENTS, AUTHORIZATIONS, APPROVALS OR OTHER LEGAL REQUIREMENTS; OR

                  (H) ANY OTHER CIRCUMSTANCE OR HAPPENING WHATSOEVER, WHETHER OR
            NOT SIMILAR TO ANY OF THE FOREGOING,

      IN EACH CASE UNLESS, AND THEN ONLY TO THE EXTENT, CAUSED BY A LANDLORD ACT
      (EXCLUDING, HOWEVER, ANY SUCH ACT OF AN AGENT, OFFICER, DIRECTOR, EMPLOYEE
      OR CONTRACTOR OF LANDLORD OR ANY OF ITS AFFILIATES IF SUCH PERSON IS ALSO
      AN AGENT, OFFICER, DIRECTOR, EMPLOYEE OR CONTRACTOR OF TENANT OR ANY OF
      ITS AFFILIATES, PROVIDED, HOWEVER, THAT JAMES J. COTTER SHALL NOT BE
      CONSIDERED AN AGENT, OFFICER, DIRECTOR OR EMPLOYEE OF TENANT WHEN ACTING
      IN

                                       29
<PAGE>

      HIS CAPACITY AS OPERATING MANAGER OF, OR PARTNER IN THE MEMBER OF,
      LANDLORD).

                  THE TENANT HEREBY WAIVES, TO THE EXTENT PERMITTED BY
      APPLICABLE LAW, ANY AND ALL RIGHTS WHICH IT MAY NOW HAVE OR WHICH AT ANY
      TIME HEREAFTER MAY BE CONFERRED UPON IT, BY STATUTE OR OTHERWISE, TO
      TERMINATE, CANCEL, QUIT, RESCIND OR SURRENDER THIS LEASE EXCEPT IN
      ACCORDANCE WITH THE EXPRESS TERMS HEREOF.

            (b) The Tenant may offset, against its obligations to pay Basic Rent
or the Acquisition Cost if Tenant shall exercise the Purchase Option, any
amounts actually paid by Tenant which represent sums then due and owing by
Landlord under a Financing Agreement or (to the extent payable solely by
Landlord and not the obligation of Tenant pursuant to the terms hereof) any Site
Lease, regardless of any assignment of this Lease or any such other instrument
by Landlord; provided that, with respect to payments due under the Nationwide
Agreement, the Tenant will not make any such payments to Nationwide unless the
Tenant has received written notice from Nationwide that such payment has not
been made; provided, further, that (i) the Tenant may request in writing that
Nationwide confirm that payment has been made by the Landlord to Nationwide, the
absence of a response within ten (10) Business Days following such request being
deemed written notice that such payment was not made, and (ii) after the second
such failure by the Landlord to make payment to Nationwide during the Initial
Term, the Tenant shall not be obligated to await receipt of notice (or deemed
notice) that payment had not been made, or expiration of the applicable grace or
cure period, before it is authorized at its election to pay Nationwide as
aforesaid. Tenant may exercise this right by notice to Landlord at the time any
such payment by Tenant is due and from time to time; provided, however, that
Tenant shall have provided to Landlord not less than five (5) Business Days'
prior written notice of Tenant's intention to exercise its rights pursuant to
this paragraph (b), delineating in such notice the amount(s), origin of, and
obligations against which such claim or right is asserted and shall promptly
after exercising such right provide to the Landlord reasonable evidence of the
amount paid and the recipient thereof.

            (c) The Landlord and the Tenant hereby declare that it is their
mutual intent that the relationship between the Landlord and the Tenant under
this Lease shall be that of landlord and tenant only. Title to and ownership of
the Theatre Properties, including Landlord's interest in each Element of any
thereof, shall at all times remain in the Landlord and at no time become vested
in the Tenant except in accordance with the express provisions of this Lease.
The Tenant does not hereby acquire any right, equity, title or interest in or to
any Theatre Property or Element thereof except pursuant to the express terms
hereof. Each of the Landlord and the Tenant agrees that it will not file any
Federal, state or local income tax returns during the term of this Lease that
are inconsistent with the intention of the Landlord and the Tenant expressed in
this paragraph (c) of this Section 5.

                                       30
<PAGE>

            SECTION 6. INITIAL TERM; RENEWAL TERM.

            (a The "Initial Term" shall commence on the Effective Date and shall
continue until May 31, 2010, unless terminated earlier pursuant to the express
provisions of this Lease.

            (b In the event that this Lease is renewed pursuant to the terms of
Section 12 hereof, the "Renewal Term" shall commence on the day following the
last day of the Initial Term and shall continue for one hundred twenty (120)
calendar months, unless terminated earlier pursuant to the express provisions of
this Lease.

            SECTION 7. RENT AND OTHER PAYMENTS.

            (a) The Tenant hereby agrees to pay the Landlord on each Basic Rent
Payment Date, in immediately available funds, as provided in paragraph (d) of
this Section 7, Basic Rent for the calendar month (or part thereof) in which
such Basic Rent Payment Date falls. If the Effective Date of the Initial Term or
the first day of the Renewal Term occurs on a day other than the first day of a
calendar month, or if the expiration date of the Lease Term occurs on a day
other than the last day of the calendar month, then the Basic Rent for the
fractional month will be prorated as provided in the definition thereof.

            (b) The Tenant hereby agrees to pay as additional rent ("Additional
Rent"), at such time or times as is required pursuant to the terms of this
Lease, all amounts (other than Basic Rent) payable hereunder, including, without
limitation, all amounts payable by Tenant to any Indemnified Person pursuant to
Section 11 hereof or to any Site Landlord.

            (c) If Tenant fails to pay any amount due to a Site Landlord as
required of Tenant under paragraph (f) of Section 2.2 hereof or fails to pay an
installment of Basic Rent within five (5) days following the applicable Basic
Rent Payment Date, then without prejudice to the full exercise by the Landlord
of its rights under Sections 18, 19 and 22 hereof, the Tenant at Landlord's
option shall pay to the Landlord, on demand, to the extent legally enforceable,
an amount computed by multiplying (A) all sums not paid by the Tenant to the
Landlord as provided in this Lease, or to such Site Landlord, on or before such
payments are due (including Basic Rent), by (B) three (3%) percent. This
administrative charge is intended to compensate the Landlord for its additional
administrative costs only which result from the Tenant's failure to pay such
amounts on or before the respective dates such payments are due and for
Landlord's efforts in billing Tenant and arranging to credit sums collected from
Tenant to the party entitled thereto (including the landlord under Site Leases),
and has been agreed upon by the Landlord and the Tenant, after negotiation, as a
reasonable estimate of the additional administrative costs that will be incurred
by the Landlord as a result of the Tenant's failure. The actual cost in each
instance is extremely difficult, if not impossible, to determine. This late
payment charge will constitute liquidated damages with respect to such
administrative costs and will be paid to the Landlord together with such unpaid
amounts. The payment of this late payment charge will not constitute a waiver by
the Landlord of any default by the Tenant under this Lease.

                                       31
<PAGE>

            (d) Basic Rent and Additional Rent and any other amount payable by
the Tenant to (i) the Landlord shall be paid such that immediately available
funds in the full amount due are available on the date due, to the account of
the Landlord designated as the Payment Account or (ii) if to any other Person,
then as the instrument providing for such payment may direct.

            (e) Notwithstanding the foregoing, to the extent any amount is
payable by Tenant to Landlord on any date and, on such date, any amount is
payable or past due by Landlord under a Financing Agreement, the Tenant may,
subject to compliance with the provisions of Section 5(b) hereof, pay the amount
so due to the lender under such Financing Agreement, and any such payment shall
be deemed made on behalf of Landlord and effective as a payment of Basic Rent
hereunder to the same extent as if such payment had been made to Landlord.
Tenant shall pay any balance to Landlord as otherwise provided herein.

            SECTION 8. RESTRICTED USE; COMPLIANCE WITH LAWS.

            (a) So long as no Event of Default shall have occurred and be
continuing, the Tenant may use the Theatre Properties during the Initial Term or
Renewal Term, if any, for the operation of motion picture theaters and related
uses consistent with the manner of use by Landlord and its Affiliates prior to
the date hereof (or, in the case of the Village East Theatre Property, live
theatre productions) or such other use as is permitted in accordance with
Section 9 hereof. Notwithstanding any other provision of this Lease to the
contrary, the Tenant will not do or permit any act or thing which would or
likely could, in any material respect, violate the Site Lease applicable to the
affected Theatre Property or impair, other than normal wear and tear arising out
of the proper and normal use thereof, the value or usefulness of the Theatre
Properties or any of them or any material Element of any of them.

            (b) The Tenant shall promptly and duly execute, deliver, file and
record, at the Tenant's expense, all such documents, statements, filings and
registrations, and take such further action, as the Landlord or any Pledgee
shall from time to time reasonably request (including installation of such signs
or other markings as shall be required by any applicable Legal Requirement) in
each case in order to establish, perfect and maintain the Landlord's title to
and interest in the Theatre Properties and in each Element thereof, and any
Pledgee's interest in this Lease or any Theatre Property or Element thereof as
against the Tenant or any third party in any applicable jurisdiction. Equipment,
machinery, apparatus, fixtures, structures and installations and other items of
personal property may be substituted for portions of the Theatre Improvements
and Equipment if (subject to the terms of paragraph (i) of Section 9 hereof)
such substitution is consistent with prudent business practices and could not
reasonably be expected to adversely affect the Tenant's ability to perform its
obligations under this Lease nor result in a Material Adverse Property Effect.
As equipment, machinery, apparatus, fixtures, structures and installations are
added to, or substituted for, any Element of a Theatre Property, title to such
substitute equipment, machinery, apparatus, fixtures, structures and
installations shall automatically be transferred to and vested in the Landlord
and such equipment, machinery, apparatus, fixtures, structures and installations
shall become a part of the Theatre Property and shall be subject to this Lease
and title to the existing equipment,

                                       32
<PAGE>

machinery, apparatus, fixtures, structures and installations which are being
substituted for shall be released by the Landlord to the Tenant.

      The Tenant may, after notice to the Landlord and at the Tenant's own cost
and expense, change the place of principal location of any Equipment; provided,
that prior notice shall not be required in the case of Equipment used for
transportation, but in such event the Tenant shall notify the Landlord of the
change of the principal location of such transportation Equipment not later than
thirty (30) days after such change is made; and provided, further, that no such
notice is required for the change of location of Equipment from one Theatre
Property to another. Notwithstanding the foregoing, no change of location shall
be undertaken if the Landlord reasonably believes that its ownership of such
Equipment or any Landlord Permitted Lien then in existence would be adversely
affected or that any Legal Requirements would be violated (other than any Legal
Requirements, the non-compliance with which, individually or in the aggregate,
(A) will not place the Landlord in any danger of civil liability for which the
Landlord is not adequately bonded against or indemnified (the Tenant's
obligations under Section 11 of this Lease shall be deemed to be adequate
indemnification if no Event of Default exists and if such civil liability is
reasonably likely to be less than $50,000 per Theatre Property or Unit of
Equipment or $100,000 in the aggregate prior to the Funding Date, or $500,000
per Theatre Property or Unit of Equipment and $1,000,000 in the aggregate from
and after the Funding Date) or subject the Landlord or any Site Landlord to any
criminal liability as a result of a failure to comply therewith and (B) will not
result in a material diminution in the fair market value of any Theatre
Improvements or Unit of Equipment). Tenant will return to its original location
any Equipment moved from a Theatre Property if the Site Landlord of the Theatre
Property from which the Equipment was removed asserts in writing that such
removal constitutes a default under its Site Lease. At the request of the
Landlord made in conjunction with the creation or extension of a Landlord
Permitted Lien in favor of a lender under any Financing Agreement, the Tenant
shall advise the Landlord in writing where all Equipment leased hereunder as of
the date of request is principally located; provided that, absent an Event of
Default hereunder, Landlord shall not make such request more frequently than
once in any 24 consecutive months of the Term.

            (c) The Tenant shall use every precaution consistent with prudent
business practices to prevent loss or damage to each Theatre Property, the
Theatre Improvements and each material Unit of Equipment and to prevent injury
to third persons or property of third persons. The Tenant shall cooperate fully
with the Landlord and any Additional Insured and all insurance companies
providing insurance pursuant to Section 10 hereof in the investigation and
defense of any claims or suits arising from the ownership, operation, occupancy
or use of any Theatre Improvements or Unit of Equipment, or ownership, use or
occupancy of any Parcel of Property; provided, that nothing contained in this
paragraph (c) shall be construed as imposing on the Landlord any duty to
investigate or defend against any such claim or suit. The Tenant shall comply
and shall cause all Persons using or operating any Unit of Equipment or Theatre
Improvements or using or occupying any Parcel of Property or Theatre
Improvements to comply with all Insurance Requirements and Legal Requirements
applicable to such Parcel of Property, Theatre Improvements and Unit of
Equipment and to the acquiring, titling, registering, leasing, insuring, using,
occupying, operating and disposing of any Parcel of Property, Theatre
Improvements or Unit of Equipment, and the

                                       33
<PAGE>

licensing of operators thereof, except that Tenant may, if it Properly Contests
compliance with a Legal Requirement, defer compliance therewith so long as such
noncompliance, individually or in the aggregate, (A) will not place the Landlord
in any danger of civil liability for which the Landlord is not adequately bonded
against or indemnified (the Tenant's obligations under Section 11 of this Lease
shall be deemed to be adequate indemnification if no Event of Default exists and
if such civil liability is reasonably likely to be less than $50,000 per Parcel
of Property, Theatre Improvements or Unit of Equipment and $100,000 in the
aggregate prior to the Funding Date or $500,000 per Parcel of Property, Theatre
Improvements or Unit of Equipment and $1,000,000 in the aggregate from and after
the Funding Date) or subject the Landlord or any Site Landlord to any criminal
liability as a result of a failure to comply therewith, and (B) will not result
in a material diminution in the fair market value of any Parcel of Property,
Theatre Improvements or Unit of Equipment. Notwithstanding the foregoing
exception in the final clauses of the preceding sentence, the Tenant will be
obligated to comply with any Legal Requirement compliance with which is
otherwise the obligation of the Tenant hereunder if a Site Landlord asserts in
writing that such non-compliance constitutes a default under its Site Lease.

            (d)   (i) The Tenant shall promptly, but in any case within five (5)
Business Days of the Tenant becoming aware of such event, notify the Landlord
if, after the Effective Date, (A) any event has occurred or any condition (other
than an Environmental Event) is discovered in, on, beneath or involving any
Theatre Improvements or Equipment that could reasonably be expected to result in
penalties or other liabilities (including costs to alleviate or remediate) in
excess of $100,000, or (B) the Tenant has received notification that it, a
Theatre Property or any Element thereof is the subject of a proceeding (other
than an Environmental Event) that could reasonably be expected to result in any
ordered Remedial Action or other liability related to such Legal Requirement,
the cost of which liability is reasonably expected to exceed $100,000 (each of
the events or occurrences described in clause (A) or (B), regardless of the
amount of penalty, liability or cost to remediate, a "Legal Requirement Event").

                  (ii) Following the receipt of a notice pursuant to
      subparagraph (i) above, unless such Legal Requirement Event is a Landlord
      Legal Requirement Obligation, Landlord in its sole discretion may require
      the Tenant to conduct, or cause to be conducted, an investigation of the
      affected Theatre Improvements or Equipment, the scope of which
      investigation shall be limited to confirming the magnitude and anticipated
      cost of the liability resulting from the Legal Requirement Event, and to
      provide a copy of such investigation to the Landlord.

                  (iii) In any case, if a Legal Requirement Event arises during
      the Lease Term or (regardless of when it arose) is otherwise not
      exclusively a Landlord Legal Requirement Obligation, the Tenant shall
      immediately initiate, or cause to be initiated at no cost to the Landlord,
      such actions as may be necessary to comply in all material respects with
      all applicable Legal Requirements and to alleviate any significant risk to
      human health or property if the same arises from a condition on or in
      respect of the Theatre Improvements or Equipment or any part thereof,
      whether existing prior to, on or after the date of this Lease.

                                       34
<PAGE>

      Once the Tenant commences such actions, the Tenant shall thereafter
      diligently and expeditiously proceed to comply materially and in a timely
      manner with all Legal Requirements and to eliminate any significant risk
      to human health or property and shall, at the request of the Landlord,
      during the Lease Term give periodic progress reports on Tenant's
      compliance efforts and actions.

                  (iv) If a Legal Requirement Event is a Landlord Legal
      Requirement Obligation, the Tenant shall have no responsibility to cure
      such Legal Requirement Event. If a Legal Requirement Event is a Landlord
      Legal Requirement Obligation, Tenant shall notify Landlord that such Legal
      Requirement Event has occurred or exists and Tenant, in its discretion,
      but in any case at the sole expense of the Landlord, may initiate or
      require the Landlord to initiate and otherwise take the actions described
      in subparagraph (iii) of this Section 8(d), in the same manner as would
      have been applicable to the Tenant had such Legal Requirement Event not
      been a Landlord Legal Requirement Obligation; provided, however, that the
      Tenant shall not initiate any action described in this sentence (except in
      cases of imminent danger to persons or property) unless the Tenant has
      notified the Landlord that a Legal Requirement Event has occurred which is
      a Landlord Legal Requirement Obligation and the Landlord has failed to
      advise the Tenant within thirty days following receipt of such notice of
      the Landlord's planned response thereto, which may include Properly
      Contesting such claim (or has failed after reasonable notice to proceed
      with reasonable diligence in implementing such response), or has advised
      the Tenant that Landlord does not intend to respond thereto. Whether or
      not Landlord otherwise responds to the Tenant's notice or the Event in
      question, Landlord reserves the right and option to contest that such
      Event is in fact a Landlord's Legal Requirement Obligation hereunder.

                  (v) The provisions of this paragraph (d) shall not apply with
      respect to Environmental Events covered by paragraph (e) of Section 2.2
      hereof.

            (e) The Landlord or any authorized representative (including
representatives of or on behalf of any Pledgee) may during reasonable business
hours, upon reasonable notice and subject to such safety precautions as the
Tenant may reasonably impose, from time to time inspect any Theatre Improvements
or material Units of Equipment therein and deeds, registration certificates,
certificates of title and related documents covering the Theatre Properties and
Elements thereof wherever the same may be located, but the Landlord shall have
no duty to make any such inspection. The Landlord may recover from the Tenant as
Additional Rent the reasonable costs and expenses associated with any such
inspection which are incurred following the occurrence and during the
continuation of any Event of Default.

            (f) The Tenant shall not, without the prior written consent of the
Landlord, permit, or suffer to exist, any Lien on any Theatre Property or any
Element thereof, including mechanics' liens, other than Permitted Liens or those
Liens placed thereon by, or arising from, the Landlord's own actions or which
are subject to a Permitted Contest. Nothing contained in this Lease shall be
construed as constituting the consent or request of the Landlord, express or
implied, to or for

                                       35
<PAGE>

the performance by any contractor, laborer, materialman or vendor of any labor
or services or for the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to such Parcel or Theatre
Improvements or any part thereof. Notice is hereby given that the Landlord will
not be liable for any labor, services or materials furnished or to be furnished
to the Tenant, or to anyone holding any such Theatre Property or any Element
thereof through or under the Tenant, and that no mechanics' or other liens for
any such labor, services or materials shall attach to or affect the interest of
the Landlord in and to any such Theatre Property.

            (g) If any Lien of any kind or charge of any kind or any judgment,
decree or order of any court or other Governmental Authority (including, without
limitation, any state or local tax lien affecting any Theatre Property or
Element thereof), whether or not valid, shall be entered which shall constitute
a Lien on the affected Theatre Property or Element which is not a Permitted Lien
or the subject of a Permitted Contest, the Tenant shall, upon obtaining
knowledge thereof or upon receipt of notice to that effect from the Landlord,
promptly take such action as may be necessary to cause the removal of such Lien.

            (h) The Tenant shall comply with all Legal Requirements pursuant to
which it is necessary that a Unit of Equipment or any component thereof be
labeled to provide notice of the Landlord's or any Pledgee's interest in such
Unit of Equipment.

            (i) Notwithstanding anything to the contrary herein or in any Other
Lease Document, Tenant and every successor and assignee of Tenant is hereby
given the right in addition to any other rights herein granted, without
Landlord's prior written consent, to mortgage its interest in this Lease as to
all, but not less than all, of the Theatre Properties, under one or more
leasehold mortgages for the benefit of an Institutional Lender and/or under one
or more purchase money leasehold mortgages in connection with any Permitted Sale
of such interest, and assign this Lease, as collateral security for such
leasehold mortgages, upon the condition that all rights acquired under such
leasehold mortgages shall be subject and subordinate to all of the provisions of
this Lease, and to all rights and interests of Landlord herein and in and to the
Theatre Properties. If Tenant and/or Tenant's successors and assignees shall
mortgage this leasehold, and if the holder of any of such leasehold mortgages
shall send to Landlord a true copy of such holder's mortgage, together with
written notice specifying the name and address of the mortgagee and the
pertinent recording data with respect to such mortgage, Landlord agrees that so
long as such leasehold mortgage shall remain unsatisfied of record or until
written notice of satisfaction is given by the holder to Landlord, the following
provisions shall apply (in respect of such mortgage and of any other mortgages
which also comply with the above):

                  (i) There shall be no cancellation or surrender of the Lease
      or modification hereof by joint action of Landlord and Tenant without the
      prior consent in writing of the leasehold mortgagee.

                  (ii) Landlord shall, upon serving Tenant with any notice of a
      default, send a copy of such notice to the holder of such leasehold
      mortgage, and no such notice shall be

                                       36
<PAGE>

      effective or duly given for purposes of this Lease unless and until a copy
      thereof is sent to such holder, setting forth the information required by
      the last sentence of this paragraph, and then such notice shall be
      effective from the date sent. The leasehold mortgagee shall thereupon have
      the same period, after such notice was sent, to remedy or cause to be
      remedied the defaults complained of as Tenant has hereunder for such
      default, and Landlord shall accept such performance by or at the
      instigation of such leasehold mortgagee as if the same had been done by
      Tenant. Each notice of default given by Landlord will state the amounts of
      Basic Rent and Additional Rent and other payments herein provided for then
      in default.

                  (iii) Anything herein contained to the contrary
      notwithstanding, if any default shall occur which, pursuant to any
      provision of this Lease, entitles Landlord to terminate this Lease, and
      if, before the expiration of the thirtieth (30th) day following the date
      Landlord's notice terminating this Lease shall have been properly sent or
      delivered to such leasehold mortgagee in the manner provided for notices
      herein, such leasehold mortgagee or its nominee or designee shall have
      paid to Landlord (for payment by Landlord to other parties then owed such
      sum if not owing to Landlord) all Basic Rent and Additional Rent and other
      payments herein provided for and then in default (except any payment due
      in respect of accelerated rent or liquidated damages), and shall have
      notified Landlord that such leasehold mortgagee agrees to comply or to
      commence the work of complying with all of the other requirements of this
      Lease, if any are then in default, and shall prosecute the same to
      completion with reasonable diligence, and shall continue to pay all Basic
      Rent and Additional Rent due and payable hereunder and otherwise to comply
      (or cause to be complied with) all other obligations of Tenant hereunder
      which are reasonably susceptible of being complied with by a leasehold
      mortgagee prior to its acquisition or sale of Tenant's interest hereunder,
      then in such event Landlord shall not be entitled to terminate this Lease
      and any notice of termination theretofore given shall be void and of no
      effect.

                  (iv) If Landlord shall elect to terminate this Lease by reason
      of any default of Tenant, the leasehold mortgagee or its nominee or
      designee shall not only have the right to nullify any notice of
      termination by agreeing to cure such default as aforesaid, but shall also
      have the separate right to postpone and extend the specified date for the
      termination of this Lease as fixed by Landlord in its notice of
      termination for a period of not more than 60 days, provided that such
      leasehold mortgagee shall together with such notice cure all existing
      monetary defaults (except any payment due in respect of accelerated rent
      or liquidated damages) and prosecute with reasonable diligence the curing
      of any other defaults which are reasonably susceptible of being cured by
      the leasehold mortgagee prior to its acquisition or sale of Tenant's
      interest herein and meanwhile pay or cause to be paid the Basic Rent and
      any Additional Rent as and when the same become due and otherwise comply
      (or cause to be complied with) all other obligations of Tenant hereunder
      which are reasonably susceptible of being complied with by a leasehold
      mortgagee prior to its acquisition or sale of Tenant's interest hereunder;
      provided, further, that the leasehold mortgagee or its nominee or designee
      shall forthwith take steps to acquire or sell Tenant's interest in this
      Lease by foreclosure of

                                       37
<PAGE>

      the leasehold mortgage or otherwise and shall prosecute the same to
      completion with reasonable diligence. If at the end of said 60-day period
      the leasehold mortgagee or its nominee or designee shall be actively
      engaged in steps to acquire or sell Tenant's interest herein and shall
      have provided to Landlord notice of such mortgagee's actions, and paid all
      Basic Rent and Additional Rent as aforesaid, together with such notice,
      the specified date for termination of this Lease shall be further extended
      for such period as shall be reasonably necessary to complete such steps
      with reasonable diligence, and in the case of the cure of non-monetary
      defaults, such additional time subsequent to the completion of such steps
      to acquire or sell Tenant's interest herein as shall be reasonably
      necessary to accomplish same with reasonable diligence provided that the
      mortgagee shall otherwise comply with all other provisions of this Lease.
      If Tenant's interest is acquired or sold as aforesaid by foreclosure of
      the leasehold mortgage or otherwise during said 60-day period as same may
      be extended as aforesaid, the intended termination of this Lease by
      Landlord under the aforesaid notice will be automatically nullified and
      this Lease will continue as if said notice of termination had never been
      given. Notwithstanding any provision hereof, there shall be no extension
      of the Lease Term.

                  (v) In the event of termination of this Lease on account of
      any default by Tenant or on account of any other matter or occurrence
      whatsoever, Landlord will promptly notify the leasehold mortgagee of such
      termination and the amount of the sums then due to Landlord under this
      Lease (except any payment due in respect of accelerated rent or liquidated
      damages), and Landlord will enter into a new lease of the Theatre
      Properties with the leasehold mortgagee or its nominee or designee for the
      remainder of the Lease Term, effective as of the date of such termination,
      at the Basic Rent and Additional Rent and upon the terms, provisions,
      covenants and agreements as herein contained and subject only to the
      rights, if any, of any parties then in possession of any Element of the
      Theatre Properties, provided:

                        (A) Said leasehold mortgagee or its nominee or designee
            shall make written request upon Landlord for such new lease within
            30 days after the leasehold mortgagee receives the notice from
            Landlord of such termination and such written request is accompanied
            by said leasehold mortgagee's payment of all sums then due to
            Landlord under this Lease (except any payment due in respect of
            accelerated rent or liquidated damages).

                        (B) Said leasehold mortgagee or its nominee or designee
            shall agree in writing to perform and observe all covenants herein
            contained on Tenant's part to be performed as applied to such
            leasehold mortgagee or its nominee or designee and shall further
            remedy any other conditions which Tenant under the terminated lease
            was obligated to perform.

                                       38
<PAGE>

                        (C) The leasehold mortgagee or its nominee or designee
            as tenant under such new lease shall have the same right, title and
            interest in and to the Theatre Properties as Tenant had under the
            terminated lease.

      If more than one leasehold mortgagee makes written request upon Landlord
      in accordance with the provisions hereof for a new lease, the new lease
      shall be delivered pursuant to the request of the leasehold mortgagee
      whose leasehold mortgage is prior in lien among those who made the
      request, and the written request of any leasehold mortgagee whose
      leasehold mortgage is subordinate in lien shall be void and of no force or
      effect.

                  (vi) The leasehold mortgagee shall be given written notice of
      any arbitration or other proceedings by or between the parties hereto, and
      shall have the right to intervene therein and be made a party to any
      arbitration or other proceedings, and the parties hereto do hereby consent
      to such intervention. In any event, the leasehold mortgagee shall receive
      notice of, and a copy of, any award or decision made in said arbitration
      or other proceedings, whether the leasehold mortgagee intervened or became
      a party or elected not to do either.

                  (vii) Nothing in this paragraph (i) shall relieve, affect,
      limit or impair in any way Tenant's obligations pursuant to Section 11
      hereof.

                  (viii) Any provision of this paragraph (i) of Section 8 to the
      contrary notwithstanding, Landlord provides no assurance that, during the
      pendency of any proceedings or other actions in respect of a default by
      Tenant under this Lease or in respect of a default by Tenant under any
      such leasehold mortgage, Landlord will perform, and Tenant acknowledges
      that Landlord has no obligation to perform, any of the obligations under
      the Site Leases which, pursuant to the terms of this Lease, are to be
      performed by Tenant, except that Landlord will apply monies received from
      or on behalf of Tenant or a leasehold mortgagee to pay sums due to a Site
      Landlord for the intended purpose (provided that sums due Landlord
      hereunder are also paid as and when due as aforesaid).

            SECTION 9. MAINTENANCE, IMPROVEMENT, REPAIR AND DEVELOPMENT OF
                      THEATRE IMPROVEMENTS AND EQUIPMENT.

            (a) Upon the request of the Tenant, the Landlord will, so long as no
Event of Default shall have occurred and be continuing, make available to the
Tenant any and all rights the Landlord may have under any vendor's or
manufacturer's warranties or undertakings with respect to any Theatre
Improvements or Equipment. The Tenant shall not violate the terms of and shall
preserve and keep in effect any such warranty and undertaking.

            (b) The Tenant shall pay all costs, expenses, fees and charges
(including, without limitation, charges of any community or condominium regime
to which any Parcel of Property is subject) incurred in connection with the
ownership, use, operation or occupancy of any Parcel of

                                       39
<PAGE>

Property or Theatre Improvements during the Lease Term or the ownership, use or
operation during the Lease Term of any Unit of Equipment or Theatre
Improvements. The Tenant shall at all times during the Lease Term operate and
maintain the Theatre Improvements and the Equipment in accordance with prudent
industry standards for similarly situated theatre operations (including, in the
case of the Village East Theatre Property, live theatre) in Manhattan. Except as
otherwise provided in Section 15 or 16 hereof, the Tenant shall at all times
during the Lease Term, at its own expense, and subject to reasonable wear and
tear, maintain the Theatre Improvements and the Equipment in good and safe
operating order, repair, condition and appearance. The foregoing undertaking to
maintain the Theatre Improvements and Equipment in good repair shall apply
regardless of the cause necessitating repair and regardless of whether the
Tenant has possession thereof, and as between the Landlord and the Tenant all
risks of damage to the Theatre Properties during the Lease Term are assumed by
the Tenant. With respect to any Theatre Improvements and Equipment, the
undertaking to maintain in good and safe repair shall include, without
limitation, all interior and exterior repairs and replacements, whether
structural or nonstructural, foreseen or unforeseen, ordinary or extraordinary
and all common area maintenance including, without limitation, removal of dirt,
snow, ice, rubbish and other obstructions and maintenance of sidewalks and
landscaping. Notwithstanding the foregoing, the obligation to repair shall not
include any obligation to take any action which a Site Landlord is required to
take pursuant to the applicable Site Lease. The Tenant hereby agrees to defend,
indemnify and hold harmless the Landlord and any Pledgee, each Site Landlord and
its mortgagee(s) from and against all costs, expenses, claims, losses, damages,
fines or penalties, including reasonable counsel fees, arising out of or due to
the Tenant's failure to fulfill its obligations under this paragraph (b).

            (c) With respect to any Parcel of Property, Theatre Improvements or
Unit of Equipment, during the Lease Term the Tenant shall pay (except to the
extent a Site Landlord is required to pay the same pursuant to the respective
Site Lease, and except as provided in paragraph (e) of Section 2.4 hereof) the
following (collectively, "Taxes"): (i) all taxes, assessments, levies, fees,
water and sewer rents and charges, and all other governmental charges, general
and special, ordinary and extraordinary, foreseen and unforeseen, which are, at
any time, imposed or levied upon or assessed against (A) any such Element or the
Parcel or Theatre Improvements or Equipment of which such Element is a part, (B)
any Basic Rent, any Additional Rent or any other sum payable hereunder or (C)
this Lease, the leasehold estate hereby created, or which arises in respect of
the ownership, operation, occupancy, possession or use of any such Element,
Parcel, Theatre Improvements or Equipment, including without limitation
Equipment leases and contracts; (ii) all gross receipts or similar taxes (i.e.,
taxes based upon gross income which fail to take into account all customary
deductions (e.g., ordinary operating expenses, depreciation and interest)
relating to any such Element) imposed or levied upon, assessed against or
measured by any Basic Rent, or any Additional Rent or other sum payable
hereunder; (iii) all sales, value added, use and similar taxes at any time
levied, assessed or payable on account of the acquisition, leasing or use of any
such Element, Parcel or Theatre Improvements of which any such Element forms a
part; and (iv) all charges of utilities and communications services serving any
such Element, Parcel or Theatre Improvements of which any such Element forms a
part. The Tenant shall not be required to pay any franchise, estate,
inheritance, transfer, income or similar tax of the Landlord (other than any tax

                                       40
<PAGE>

referred to in clause (ii) above) unless such tax is imposed, levied or assessed
in substitution for any other tax, assessment, charge or levy which the Tenant
is required to pay pursuant to this paragraph (c); provided, however, that, if,
at any time during the term of this Lease, the method of taxation shall be
altered such that, in lieu of or as a substitute for any item included above as
Taxes to be paid by Tenant (including in lieu of increases in any such Taxes),
there shall be levied, assessed or imposed on the Landlord a capital levy or
other tax directly on the rents received from any such Element, Parcel or
Theatre Improvements of which any such Element forms a part, or upon the value
of any such Element or any present or any future improvement or improvements on
any such Element or the Parcel or Theatre Improvements of which such Element is
a part, then all such substitute taxes, assessments, levies or charges, or the
part thereof so measured or based, shall be included in Taxes to be paid by the
Tenant, but only to the extent that such taxes would be payable if the property
affected were the only property of the Landlord or (to the extent so required
pursuant to the applicable Site Lease) the applicable Site Landlord, as the case
may be, and the Tenant shall pay and discharge the same as herein provided. The
Tenant will furnish to the Landlord, promptly after demand therefor, proof of
payment of all items referred to above which are payable by the Tenant. If any
such assessments may legally be paid in installments, the Tenant may pay such
assessment in installments; in such event, the Tenant shall be liable only for
installments which become due and payable during the Lease Term. Taxes for the
first and last year of the Lease Term shall be prorated between Landlord and
Tenant. Tenant shall have the right to Properly Contest all Taxes by appropriate
legal proceedings, or in such other manner as may be reasonably suitable (and,
if legal proceedings are instituted, Tenant shall conduct such proceedings
promptly, with counsel of its choice, at Tenant's sole cost and expense, in its
name, or, if necessary, in the name of Landlord, and Landlord shall execute all
documents necessary to accomplish the foregoing). If at any time there shall be
any rebates or refunds of Taxes paid by Tenant pursuant to the provisions of
this Lease, such rebates or refunds shall belong to Tenant, subject to proration
with respect to rebates or refunds relating to the year in which the Lease Term
commences or ends. Any refunds received by Landlord relating to any tax year
which encompasses any portion of the Lease Term shall be deemed trust funds and
shall be promptly paid over to Tenant, subject to proration with respect to
rebates or refunds relating to the year in which the Lease Term commences or
ends. The provisions of this Section shall survive the expiration of the term of
this Lease.

            (d) The Tenant may make alterations to any Equipment without the
prior consent of the Landlord, provided that such alterations do not impair the
value or utility of such Equipment. Any improvements or additions to any
Equipment shall, as and when made or performed, become and remain the property
of the Landlord.

            (e) So long as no Event of Default shall have occurred and be
continuing, the Tenant may, at its expense, make additions to and alterations to
any Parcel of Property or Theatre Improvements; provided, that upon completion
of such additions or alterations (i) neither the fair market value of the
affected Theatre Improvements or Parcel shall be lessened thereby nor the
condition of such affected Theatre Improvements or Parcel impaired below the
value, utility or condition thereof immediately prior to such action (assuming
such affected Theatre Improvements or Parcel was then of a condition and repair
required to be maintained pursuant to paragraph (b) of this

                                       41
<PAGE>

Section 9), (ii) such additions or alterations shall not result in a change of
use of such affected Theatre Improvements or Parcel (except as permitted by
paragraph (i) of this Section 9), (iii) such work shall be completed in good and
workmanlike manner and in compliance with all applicable Legal Requirements and
Insurance Requirements and (iv) no exterior walls of any building or other
improvement constituting a part of the affected Theatre Improvements shall be
demolished unless the Tenant has made adequate provision according to nationally
recognized sound and prudent engineering and architectural standards to preserve
and maintain the structural integrity of the affected Theatre Improvements and
for the restoration of such Theatre Improvements to a structurally sound
architectural whole. Any and all such additions and alterations shall be and
remain part of the affected Theatre Improvements and shall be subject to this
Lease. Notwithstanding anything contained herein to the contrary, the Tenant
shall not perform any addition or alteration to any Theatre Improvements,
including Equipment therein, which would have an estimated cost in excess of
$250,000 in the aggregate for any Theatre Property prior to the Funding Date or
$500,000 in the aggregate for any Theatre Property from and after the Funding
Date, without the Landlord's prior written consent, not to be unreasonably
withheld or delayed in any event, except that no such consent shall be required
for (x) any additions or alterations to upgrade seating or sound, projection,
computer, or concessions equipment or any other alterations or (y) for any
addition or alteration undertaken after the Funding Date in accordance with the
procedures set forth in Section 9(f) below as if the Theatre Property in
question were the "Affected Premises" described therein.

            (f) In the event the Tenant decides in its sole discretion to
develop any of the Parcels of Property (such Parcels of Property chosen for
development to be hereinafter referred to as the "Affected Premises"), whether
for purposes provided in or other than that contemplated in Paragraph (a) of
Section 8, the Tenant shall comply with all of the following conditions set
forth in this paragraph (f) of this Section 9 (as well as applicable
requirements of the affected Site Lease) before the Tenant begins construction
of the improvements on the Affected Premises (the "Constructed Improvements"),
and before any building materials are delivered to the Affected Premises by the
Tenant or under the Tenant's authority:

                  (i) Plans and Specifications. (x) Insofar as it is the
      intention of the Landlord and the Tenant that all improvements within the
      Affected Premises be constructed, installed, erected, operated and
      maintained so that the Constructed Improvements shall be aesthetically and
      architecturally harmonious, all Constructed Improvements within the
      Affected Premises, including initial construction and any major
      alterations, additions, exterior remodeling or reconstruction of any
      Constructed Improvements following the initial construction thereof, shall
      be performed only in accordance with approved plans for such work as
      provided herein.

                  (y) Prior to the commencement of the construction and/or
      installation of any Constructed Improvements whatsoever on the Affected
      Premises or any part thereof by the Tenant, the Tenant shall deliver to
      the Landlord detailed plans through and including construction drawings
      (the "Plans") of scaled elevations, exterior design concepts, material
      selection and color for the exterior surfaces of the proposed Constructed
      Improvements

                                       42
<PAGE>

      (which Plans shall include a grading plan and/or a utility plan, to the
      extent applicable). The Landlord shall in writing either approve or
      disapprove the Plans within twenty (20) days of the receipt thereof, such
      approval not to be unreasonably withheld. If the Landlord fails to approve
      or disapprove the Plans in accordance with the terms of this Lease within
      such twenty (20) day period, the Plans shall be deemed approved. Upon
      submission of any disapproval, the Landlord shall inform the Tenant in
      writing in reasonable detail (the "Plan Disapproval Notice") of the
      reasons for disapproval and the required changes to the Plans.

      If there is a dispute between the Landlord and the Tenant regarding
      acceptable, revised Plans, and such dispute cannot be settled by the
      Landlord and the Tenant through good faith negotiation, the parties agree
      to submit such dispute to mediation in New York under the Commercial
      Mediation Rules, or, alternatively, to submit such dispute to such
      mediator or mediation counsel as to which the parties may otherwise agree
      and with each party to share equally the costs of said mediation, before
      resort to arbitration, litigation or other dispute resolution procedure.

                  (ii) Construction Contracts. With respect to any Constructed
      Improvements which the Tenant may elect to construct, the Tenant shall
      submit to the Landlord, for its prior approval, not to be unreasonably
      withheld or delayed, the name of and information regarding the proposed
      contractor for such work and a copy of the final construction contracts
      relating thereto, which submission shall occur prior to the commencement
      of any significant construction work pursuant to any such construction
      contracts.

                  (iii) Builder's Risk and Other Insurance. Prior to commencing
      construction of any of the Constructed Improvements, the Tenant shall have
      obtained (and delivered insurance certificates therefor to the Landlord)
      all insurance coverage required under Section 10 of this Lease, including
      course of construction insurance coverage for all risk of loss, which
      shall be maintained at one hundred percent (100%) of the completed value
      based on the insurable portion of the work including materials at the
      project site, stored off the project site, or in transit. The Tenant shall
      include the interests of the Landlord, the applicable Site Landlord, their
      respective mortgagees, and subcontractors in the work and shall insure
      against the perils of physical loss or damage. Nothing in this
      subparagraph (iii), however, shall be construed to relieve the Tenant of
      full responsibility for loss of or damage to materials not yet
      incorporated in the work or the Tenant's or its contractors' tools and
      equipment used to perform the work, whether on the project site or
      elsewhere, or to relieve the Tenant of any other responsibility under this
      Lease. Without limiting any other obligations of Tenant set forth in
      Section 11 hereof, if the Landlord is damaged by the failure of the Tenant
      to purchase or maintain such insurance, the Tenant shall bear all losses
      attributable thereto and indemnify the Landlord therefrom.

                  (iv) Construction of Constructed Improvements. All Constructed
      Improvements shall be constructed in a good and workmanlike manner using
      materials of

                                       43
<PAGE>

      good quality and in substantial compliance with the Plans, and shall
      materially comply with all applicable Legal Requirements.

                  (v) Completion of Constructed Improvements and Other Work;
      Quality and Compliance with Legal Requirements. The Tenant covenants and
      agrees that the Constructed Improvements to be constructed on the Affected
      Premises, and all other construction thereon, when undertaken, while in
      progress and as completed: (i) will comply with all Legal Requirements,
      including, without limitation, all laws and ordinances necessary to permit
      the development and completion of the Constructed Improvements; (ii) will
      be entirely on the Affected Premises and will not encroach upon the land
      of others (unless pursuant to rights, in writing or by prescription, to so
      encroach); (iii) will be wholly within any enforceable building
      restriction lines, however established, and will not violate any
      enforceable use restriction or any applicable easement, license, covenant,
      condition or restriction of record; and (iv) will comply in all material
      respects with the Plans approved for such Constructed Improvements and all
      provisions of this Lease. All work performed on the Affected Premises
      pursuant to this Lease, or authorized by this Lease, shall be done in a
      good and workmanlike manner.

                  (vi) Construction Cost. The Tenant shall bear all of the costs
      of developing the Affected Premises and constructing the Constructed
      Improvements.

                  (vii) Mechanic's, Materialman's, Contractor's, or
      Subcontractor's Liens. The Tenant shall provide the Landlord with not less
      than twenty (20) days' prior written notice of the commencement of any
      major alterations on the Affected Premises and the Landlord shall have the
      right to enter upon the Affected Premises to post customary notices of
      non-responsibility with respect thereto. Subject to the Tenant's right to
      Properly Contest as hereinafter provided, at all times during the Lease
      Term, the Tenant shall keep the Affected Premises, including all Theatre
      Improvements and Equipment now or hereafter comprising or located on the
      Affected Premises, free and clear of all Liens, other than Permitted Liens
      or those Liens placed thereon by, or arising from, the Landlord's own
      actions.

                  (viii) Ownership of Constructed Improvements. Notwithstanding
      anything that is or appears to be to the contrary herein, any and all
      Constructed Improvements erected on the Affected Premises as permitted by
      this Lease, as well as any and all alterations or additions thereto or any
      other Improvements or fixtures on the Affected Premises, shall be owned by
      the Tenant until the expiration of the Lease Term or sooner termination of
      this Lease. Upon the expiration or sooner termination of this Lease, all
      Constructed Improvements and all alterations, additions or improvements
      thereto that are made to or placed on the Affected Premises by the Tenant
      or any other person (other than trade fixtures and items of personal
      property) shall be considered part of the real property of the Affected
      Premises and shall remain on the Affected Premises and become at no cost
      to the Landlord the property of the Landlord (or the Site Landlord, as
      applicable). Except as otherwise

                                       44
<PAGE>

      expressly provided in this Lease, any non-disturbance agreement approved
      by the Landlord, any easement approved by the Landlord, or any written
      instrument executed by the Landlord which expressly states that the
      Landlord is waiving its rights to receive such Constructed Improvements
      free and clear of all other claims, said Constructed Improvements shall
      become the property of the Landlord (or the Site Landlord, as applicable)
      free and clear of any and all rights to possession and all claims to or
      against them by the Tenant or any third person or entity, but nothing
      herein shall obligate Landlord to execute and deliver any such agreement,
      easement or instrument.

                  (ix) Right of Access. The Landlord and its authorized
      representatives shall have the right during normal construction hours,
      upon not less than twenty-four (24) hours' oral or written notice to the
      Tenant (except that in the case of an emergency, the existence of which
      shall be determined by the Landlord in its reasonable discretion, no
      advance notice shall be required) to enter upon the Affected Premises
      without charges or fees for the purpose of inspecting the work being
      performed in constructing the Constructed Improvements in a manner so as
      to cause minimal interference with the work being performed; provided,
      however, that upon the Tenant's request, the Landlord and such authorized
      representatives shall present and identify themselves at the Tenant's
      construction office, be accompanied by a representative of the Tenant
      while on the Affected Premises and obey the Tenant's or the contractor's
      safety rules and regulations.

                  (x) Governmental Consents. If requested by the Landlord in
      writing, the Tenant covenants and agrees to deliver to the Landlord from
      time to time promptly upon request conformed copies (and certified copies
      of all recorded instruments) of any consents, permits, licenses, orders,
      authorizations, approvals, waivers, extensions or variances of, or notices
      to or registrations or filings with any Governmental Authority which are
      or will be required in connection with the construction, alteration or
      reconstruction or use for their intended purposes following completion of
      the Constructed Improvements in accordance with the terms of this
      paragraph (f) of this Section 9. In no event shall the Tenant commence the
      construction, alteration or reconstruction of the Constructed Improvements
      until such time as the Tenant shall have obtained all such necessary
      consents, permits, licenses, orders, authorizations, approvals, waivers,
      extensions or variances of, or notices or registrations or filings for the
      entirety of the contemplated work (excluding those which are obtainable
      during commencement of such work or on its completion, provided that, as
      to these, Tenant will obtain or make them as and when required during such
      work or upon completion, as the case may be).

                  (xi) Cooperation. Subject to the provisions of this paragraph
      (f) of this Section 9, Landlord shall reasonably cooperate with Tenant, at
      the sole cost and expense of Tenant, in the development of any Affected
      Premises.

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<PAGE>

            (g) The Tenant has obtained or will obtain prior to the time
      required and shall maintain in full force and effect all operating
      licenses, if any, relating to each Theatre Property and Element thereof
      which are required for the operation thereof for the purposes permitted in
      this Lease.

            SECTION 10. INSURANCE.

            (a) Public Liability Insurance. The Tenant will carry at its own
cost and expense public liability insurance relating to the Theatre Properties
on an occurrence basis (i) in amounts which are not less than the public
liability insurance applicable to similar properties owned, leased or held by
the corporations engaged in the same or a similar business, similarly situated
in Manhattan; provided, that in no event shall the minimum single limit of such
insurance be less than $10,000,000 per occurrence, (ii) of the types usually
carried by Persons engaged in the same or a similar business, similarly situated
in Manhattan, and owning or operating similar properties and which cover risks
of the kind customarily insured against by such Persons, and (iii) which are
maintained in effect with insurers of recognized responsibility rated "Very
Good" or better by Best's Key Rating Guide. The insurance required by this
paragraph (a) may be subject to such deductibles and the Tenant may self-insure
with respect to the required coverage only to the extent approved in writing by
the Landlord; provided, that no such approval shall be required for up to
$100,000 of deductible or self-insurance so long as Tenant or a guarantor of
Tenant's obligations under this Lease meets the Minimum Net Worth Requirement,
or $10,000 of deductible or self-insurance, at all other times.

            (b) Insurance Against Loss or Damage to Equipment. The Tenant will
maintain in effect with insurers of recognized responsibility rated "Very Good"
or better by Best's Key Rating Guide, at its own expense, all-risk physical
damage insurance with respect to all Equipment, which is of the type usually
carried by Persons engaged in the same or similar business, similarly situated
with Parent, and owning or operating similar equipment and which cover risk of
the kind customarily insured against by such Persons, and in the amount of the
insurable value thereof. The insurance required by this paragraph (b) may be
subject to such deductibles and the Tenant may self-insure with respect to the
required coverage only to the extent approved by the Landlord; provided, that no
such approval shall be required for up to $100,000 of deductibles or
self-insurance so long as Tenant or a guarantor of Tenant's obligations under
this Lease meets the Minimum Net Worth Requirement, or $10,000 of deductible or
self-insurance, at all other times.

            (c) Business Interruption Insurance. The Tenant will maintain, at
its expense, business interruption insurance covering 90% of continuing normal
operating expenses excluding ordinary or non-continuing payroll but including
lease obligations with respect to the Theatre Properties, arising from loss
required to be insured by clause (d)(i) of this Section 10. The maximum
deductible shall be no greater than $100,000 per occurrence so long as Tenant or
a guarantor of Tenant's obligations under this Lease meets the Minimum Net Worth
Requirement, or $10,000 of deductible or self-insurance, at all other times.
Such insurance shall also (i) insure for a period of 12 months that portion of
fixed expenses and lease obligations not earned arising from an insured loss or
occurrence with respect to the Theatre Properties, and (ii) include
extraordinary expenses incurred after an insured loss to make temporary repairs
and expedite the permanent repair of the damaged

                                       46
<PAGE>

property in excess of the business interruption loss even if such expense does
not reduce the business interruption loss in an amount not less than $100,000,
so long as Tenant or a guarantor of Tenant's obligations under this Lease meets
the Minimum Net Worth Requirement, or $10,000 of deductible or self-insurance,
at all other times.

            (d) Insurance with respect to the Theatre Properties. The Tenant
will maintain, at its expense, or cause to be maintained at no expense to
Landlord, insurance of the following character, on each Theatre Property:

                  (i) All risk insurance or its equivalent (excluding flood and
      earthquake coverage) coverage against losses by fire and lightning and
      other risks for the full insurable replacement value of each Theatre
      Property, with agreed amount endorsement or endorsements providing
      equivalent protection, including loss by windstorm, hail, explosion, riot
      (including riot attending a strike), civil commotion, aircraft, vehicles,
      smoke damage, and vandalism and malicious mischief, in amounts not less
      than the full insurable replacement value of all buildings and other
      improvements on each Theatre Property. The term "full insurable
      replacement value" as used herein means the actual replacement cost,
      including coverage for up to at least 10% of the direct physical loss for
      the costs of debris removal, but excluding the cost of constructing
      foundation and footings, to the extent Tenant can document such amounts.

                  (ii) Workers' compensation insurance as required by the laws
      of the states where each Theatre Property is located.

                  (iii) Explosion insurance in respect of any boilers and
      similar apparatus located on each Parcel in the minimum amount of $250,000
      or in such greater amounts as are then customary for property similar in
      use to each Parcel.

                  (iv) Such other insurance, in such amounts and against such
      risks, as is customarily maintained by operators of similar properties for
      businesses similar to that conducted by the Tenant.

                  (v) Liquor liability insurance with respect to any Theatre
      Property if required pursuant to the applicable Site Lease or if any
      alcoholic beverage is offered for sale or served at such Theatre Property.

                  (vi) Compliance with laws coverage.

            The insurance required under this paragraph (d) shall be maintained
      in effect with insurers of recognized responsibility rated "Very Good" or
      better by Best's Key Rating Guide and licensed to do business in the
      States where each Theatre Property is located. Such insurance may provide
      for such deductibles and the Tenant may self-insure with respect to the
      required coverage only to the extent approved in writing by the Landlord;
      provided, that no such approval shall be required for up to $100,000 of
      deductibles or self-insurance, so

                                       47
<PAGE>

      long as Tenant or a guarantor of Tenant's obligations under this Lease
      meets the Minimum Net Worth Requirement, or $10,000 of deductible or
      self-insurance, at all other times.

            Insurance claims by reason of damage or destruction affecting any
      Theatre Property shall be adjusted by the Tenant, subject to the approval
      of the Landlord, which approval the Landlord agrees not to unreasonably
      withhold or delay.

            (e) Additional Insureds; Notice. Any policy of insurance carried in
accordance with this Section 10 and any policy taken out in substitution or
replacement for any such policy (i) shall name the Landlord, each Site Landlord
and the mortgagee of Landlord and each Site Landlord (so long as Tenant has been
provided written notice as to the name and other required information relating
to any such mortgagee), as additional insureds (the "Additional Insureds"), as
their respective interests may appear (but without imposing upon any such Person
any obligation imposed on the insured, including, without limitation, the
liability to pay the premium for any such policy), (ii) with respect to
insurance carried in accordance with the preceding paragraphs (b), (d)(i),
(d)(iv) and (d)(v), shall name as loss payee, as their interests may appear, the
Landlord, or as otherwise may be specifically required pursuant to a Site Lease
or the Landlord's or any Site Landlord's mortgage, (iii) with respect to
insurance carried in accordance with the preceding paragraphs (b) and (d), shall
provide that as against the Landlord and all other Additional Insureds the
insurers shall waive any rights of subrogation and (iv) shall provide that, if
the insurers cancel such insurance for any reason whatsoever, such cancellation
shall not be effective as to the Landlord and all other Additional Insureds for
thirty (30) days after receipt by such parties of written notice by such
insurers of such cancellation. Each liability policy (A) shall be primary
without right of contribution from any other insurance which is carried by the
Landlord with respect to its interest as such in a Theatre Property or Element
thereof and (B) shall expressly provide that all of the provisions thereof,
except the limits of liability, shall operate in the same manner as if there
were a separate policy covering each insured.

            (f) Intentionally omitted.

            (g) Application of Insurance Proceeds. As between the Landlord and
the Tenant, and subject to the provisions of the applicable Site Lease, the
insurance proceeds of any property damage loss to any Element of a Theatre
Property will be held in an escrow account, with an escrow agent and under terms
reasonably acceptable to Landlord and Tenant and applied in payment (or to
reimburse the Tenant) for repairs or replacement in accordance with the terms of
paragraph (b) of Section 15 hereof; provided, however, that in the event that
any insurance payments received pursuant to this paragraph (g) are less than
$1,000,000 prior to the Funding Date and $2,000,000 thereafter, such payments
shall be paid to the Tenant to be applied to repair or replace in accordance
with Section 15 hereof. The Tenant shall be entitled (i) to receive the amounts
so deposited against certificates, lien waivers, invoices or bills reasonably
satisfactory to the Landlord, delivered to the Landlord from time to time as
such work or repair progresses, and (ii) to direct the investment of the amounts
so deposited as provided in paragraph (h) of this Section 10. To the extent that
the cost of such work or repair shall exceed the amount of the proceeds, the
Tenant shall make adequate provisions for the payment thereof, which provisions
shall be reasonably acceptable to the Landlord

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<PAGE>

and such sums provided by the Tenant will be applied prior to insurance
proceeds. So long as the Lease Term has not expired or if the Purchase Option is
exercised, any moneys remaining in the aforesaid account or unused by the Tenant
for repairs after final payment in full for repairs has been made shall be paid
to Landlord; provided, however, that, during the Initial Term, any such moneys
shall be treated as "Taking Proceeds," to be applied or with the consequence as
provided in paragraphs (c)(ii) and (d)(i) of Section 16 hereof.

            (h) Investment. Any amounts deposited into escrow pursuant to
paragraph (g) of this Section 10 shall be invested, at the Tenant's instruction,
in any Permitted Investments. Any interest earned on the investments of such
funds shall be deposited in escrow and be a part of the fund for disposition as
provided in paragraph (g) above. The Landlord shall not be liable for any loss
resulting from the liquidation of each and every such investment and the Tenant
shall bear the risk of such loss, if any.

            (i) Application in Default. Any amount referred to in paragraph (g)
or (h) of this Section 10 which is payable to the Tenant shall not be payable to
the Tenant or, if it has been previously paid to the Tenant, shall not be
retained by the Tenant, if at the time of such payment an Event of Default shall
have occurred and be continuing. In such event, all such amounts shall be paid
to and held by the Landlord as security for the obligations of the Tenant
hereunder or, at the Landlord's option, applied by the Landlord toward payment
of any of such obligations of the Tenant at the time due hereunder as the
Landlord may elect. At such time as there shall not be continuing any Event of
Default or at the closing of the Purchase Option (whether or not there then
exists an Event of Default other than an Event of Default described in Section
18(f)), all such amounts at the time held by the Landlord in excess of the
amount, if any, which the Landlord shall have elected to apply as above provided
shall be paid to the Tenant. If the Lease Term shall terminate or expire when
sums are held pursuant to paragraph (g) or (h), such sums shall be paid over to
the Landlord free of claim thereto or rights therein of the Tenant.

            (j) Certificates, etc. On or before the Effective Date, and annually
on or before the anniversary of the date of this Lease upon the request of the
Landlord, the Tenant will furnish to the Landlord certificates of an independent
insurance broker reasonably satisfactory to the Landlord or other evidence
reasonably acceptable to the Landlord certifying that the insurance then carried
and maintained with respect to each Theatre Property complies with the terms
hereof. The Tenant will not operate in violation of any policy or negate or
limit coverages.

            (k) Use or Operation of Theatre Properties. The Tenant covenants
that it will not use or operate any Unit of Equipment or use or occupy any
Theatre Property or permit the use or occupancy of any Theatre Property or the
use or operation of any Unit of Equipment at a time when the insurance required
by this Section 10 is not in force with respect to such Theatre Property or Unit
of Equipment.

            (l) Prosecution of Claims. With respect to any insurance maintained
by Tenant, the Tenant may, so long as no Event of Default shall have occurred
and be continuing, at its own cost

                                       49
<PAGE>

and expense, prosecute any claim against any insurer or contest any settlement
proposed by any insurer, and the Tenant may, so long as no Event of Default
shall have occurred and be continuing, bring any such prosecution or contest in
the name of the Landlord, the Tenant, or both, and the Landlord will join
therein at the Tenant's request; provided that the Tenant shall indemnify the
Landlord against any losses, costs or expenses (including reasonable attorneys'
fees) which the Landlord may incur in connection with such prosecution or
contest whether or not it is at the request of the Tenant. During the
continuance of an Event of Default, the Landlord may prosecute or contest such
claim as aforesaid, in its name or in the name of the Tenant, as the Landlord
may determine, but in any event at the cost and expense of the Tenant.

            (m) Reports. The Tenant will advise the Landlord promptly of any
default in the payment of any premium and of any other act or omission on the
part of the Tenant which may invalidate or render unenforceable, in whole or in
part, any insurance being maintained by the Tenant pursuant to the terms of this
Section 10.

            (n) Failure to Maintain Insurance. In the event the Tenant fails to
maintain the full insurance coverage required by this Section 10, the Landlord,
upon 30 days' prior notice (unless the aforementioned insurance would lapse
within such period, in which event notice should be given as soon as reasonably
possible and shall run for a shorter notice period as applicable) to the Tenant
of any such failure, may (but shall not be obligated to) take out the required
policies of insurance and pay the premiums on the same. The Tenant shall be
obligated to reimburse all sums expended by the Landlord (with interest at the
Reimbursement Rate from the date incurred by Landlord to the date repaid by
Tenant) in connection with the Landlord's expenditures on insurance made
pursuant to this Section 10(n).

            (o) No Duty of Landlord to Verify or Review. No provision of this
Section 10, or any provision of this Lease, shall impose on the Landlord any
duty or obligation to verify the existence or adequacy of the insurance coverage
maintained by the Tenant, nor shall the Landlord be responsible for any
representations or warranties made by or on behalf of the Tenant to any
insurance company or underwriter. Any failure on the part of the Landlord to
pursue or obtain the evidence of insurance required by this Lease from the
Tenant and/or failure of the Landlord to point out any non-compliance of such
evidence of insurance shall not constitute a waiver of any of the insurance
requirements in this Lease or render the Landlord liable to the Tenant or others
by reason of the Tenant's non-compliance.

            (p) Insurance under Site Leases. Notwithstanding anything contained
herein to the contrary, the Tenant shall be obligated to maintain insurance with
respect to any Theatre Property of the type and in amounts not less than that
required under the applicable Site Lease. To the extent any of the provisions of
a Site Lease concerning insurance, or insurance proceeds or the application
thereof, require greater coverage than, or are otherwise inconsistent with, the
provisions of this Lease, the provisions of the Site Lease shall control as to
the applicable Theatre Property and the parties shall be relieved of any
inconsistent obligations hereunder; provided, however, that the fact

                                       50
<PAGE>

that a Site Lease may mandate lesser amounts or fewer types of coverage shall
not be considered an inconsistency and in such event the provisions of this
Lease shall control.

            (q) Insurance by Parent. Any insurance to be provided by Tenant
hereunder may be provided by blanket or umbrella policies of Parent or any of
its Affiliates covering the property to be insured hereunder and other property
of Parent or any of its Affiliates provided that the coverage with respect to
the Theatre Properties shall not be reduced or otherwise affected thereby and
the protections afforded thereby shall be determined as if the Theatre
Properties were the only properties thereunder.

            SECTION 11. INDEMNITIES.

            (a) Indemnification. The Tenant shall, and hereby does, indemnify,
defend, protect and hold harmless Landlord, any Pledgee, each Site Landlord, any
mortgagee of a Leased Site or of the Site Landlord's interest therein, and any
successor or successors and each Affiliate of each of the foregoing parties, and
their respective officers, directors, incorporators, shareholders, partners,
members, employees, agents and servants (each of the foregoing a "Landlord
Indemnified Person") from and against all liabilities (including, without
limitation, Environmental Damages and strict liability in tort), losses,
obligations, claims (including, without limitation, Environmental Damages and
strict liability in tort and claims for commissions and other compensation made
by any agent or agents or any broker or brokers), damages (including, without
limitation, consequential damages), penalties, causes of actions, suits, costs
and expenses (including, without limitation, reasonable attorneys' and
accountants' fees and expenses) and judgments of any nature ("Losses") relating
to or arising out of:

                  (i) The assertion of any claim or demand based upon any
      infringement or alleged infringement of any patent or other right, by or
      in respect of any Theatre Improvements or Unit of Equipment; provided,
      however, that upon request of the Tenant, the Landlord will make available
      to the Tenant the rights under any similar indemnification arising from
      any manufacturer's or vendor's warranties or undertakings with respect to
      any Theatre Improvements or Unit of Equipment;

                  (ii) Any failure or delay of Tenant in paying any Taxes
      required to be paid by Tenant pursuant to paragraph (c) of Section 9
      hereof;

                  (iii) Any violation, breach or default by the Tenant of this
      Lease or any Site Lease to the extent of obligations of Tenant thereunder
      as herein described, or any violation or alleged violation by the Tenant
      of any contracts or agreements to which the Tenant is a party or by which
      it is bound or of any laws, rules, regulations, orders, writs,
      injunctions, decrees, consents, approvals, exemptions, authorizations,
      licenses and withholdings of objection, of any Governmental Authority and
      all other Legal Requirements with respect to the Theatre Properties and
      Elements thereof;

                                       51
<PAGE>

                  (iv) (A) The use or occupancy of the Theatre Properties or any
      Element of any thereof by the Tenant or any Person claiming under the
      Tenant; (B) any activity, work, or thing done or permitted by the Tenant
      in or about any Theatre Improvements or Equipment; (C) any acts,
      omissions, or negligence of the Tenant, or any Person claiming under the
      Tenant, or the employees, agents, contractors, invitees or visitors of the
      Tenant or any such Person; (D) any breach, violation, or nonperformance by
      the Tenant, or any Person claiming under the Tenant, or the employees,
      agents, contractors, invitees, or visitors of the Tenant or any such
      Person, of any term, covenant or provision of this Lease, any Site Lease
      to the extent the performance of obligations thereunder has become an
      obligation of the Tenant pursuant to the terms hereof or any law,
      ordinance or governmental requirement of any kind; or (E) any injury or
      damage to the Person, property, or business of the Tenant, its employees,
      agents, contractors, invitees, visitors or any other Person entering upon
      any Theatre Improvements, including without limitation any and all of the
      foregoing arising from and after the date the membership interest in
      Landlord is foreclosed upon or otherwise transferred, whether or not this
      Lease is then in effect;

                  (v) Liabilities or obligations of the Tenant or any Affiliate
      of the Tenant to the extent based on facts, activities, omissions or
      circumstances existing or occurring as of, from or after the Effective
      Date, including without limitation liabilities or obligations to
      customers, suppliers, employees and agents, or otherwise arising from
      operation of the Business from and after the Effective Date or otherwise
      assumed by the Tenant or made the responsibility of the Tenant pursuant to
      the terms of this Lease;

                  (vi) The loss of a Site Lease based on acts or omissions of
      Tenant in violation of such Site Lease; or

                  (vii) To the extent arising from or relating to this Lease or
      the other elements of the transactions entered into between Landlord or
      any of its Affiliates, on the one hand, and Tenant or any of its
      Affiliates, on the other hand, on or as of the date hereof: (A)
      insufficient or inadequate disclosure by Tenant or any of its Affiliates
      under any Applicable Law relating to proxies, (B) failure by Tenant or any
      of its Affiliates to follow proper procedures and other matters relating
      to the fact that the Tenant is owned by a Person the shares of which are
      traded publicly or (C) alleged breaches of fiduciary duty by Tenant or any
      of its Affiliates or the existence of conflict of interest; provided,
      however, that, with respect to claims or liability arising under clause
      (C), Tenant shall not be obligated to indemnify Landlord to the extent the
      claimant has been successful in such claim on the merits; provided,
      further, that the Tenant shall have no obligations for indemnity under
      this clause (vii) with respect to actual losses or damages ultimately and
      finally determined and adjudged to be payable to the extent based on a
      breach by the Landlord of its obligations hereunder or for which Messrs.
      Michael R. Forman and James J. Cotter are obligated to indemnify Citadel
      pursuant to Section 8.12 of a certain Merger Agreement, dated July 28,
      2000, among Citadel, a wholly-owned subsidiary of Citadel, Off Broadway
      Investments, Inc., and Messrs. Cotter and Forman; provided, that Tenant
      shall not be obligated to indemnify any Landlord

                                       52
<PAGE>

      Indemnified Person against Losses to the extent Landlord is responsible to
      indemnify the Tenant Indemnified Persons as provided in paragraph (b) of
      this Section 11 with respect to the matter from which such Losses arose.

            (b) The Landlord shall, and hereby does, indemnify, defend, protect
and hold harmless the Tenant, Parent, any successor or successors to either of
them, and any Affiliate of each of the foregoing parties, and their respective
officers, directors, incorporators, shareholders, partners, members, employees,
agents and servants (each of the foregoing a "Tenant Indemnified Person") from
and against all Losses relating to or arising out of:

                  (i) Liabilities or obligations of Landlord or any Affiliate of
      Landlord to the extent based on facts, activities, omissions or
      circumstances existing prior to the Effective Date, including without
      limitation liabilities or obligations to customers, suppliers, employees,
      and agents, arising from the operation of the Business prior to the
      Effective Date, except, subject to paragraph (ii) of this Section 11(b),
      for liabilities expressly assumed by Tenant by this Lease or for which
      Tenant is responsible pursuant to the terms hereof or thereof;

                  (ii) Any breach of any representation or warranty made by
      Landlord under this Lease;

                  (iii) Any breach of any covenant or agreement of Landlord or
      any Affiliate under this Lease or, except to the extent assumed by the
      Tenant hereunder or the responsibility of the Tenant pursuant to the terms
      hereof, under a Site Lease, to the extent causing a Material Adverse
      Landlord Effect; or

                  (iv) Taxes, assessments, levies, fees, water and sewer rents
      and charges, and all other governmental charges, general and special,
      ordinary and extraordinary, foreseen and unforeseen, which are or would be
      the obligation of Landlord pursuant to a Site Lease and which is not
      pursuant to the terms hereof assumed by or the responsibility of the
      Tenant.

            (c) A party from whom indemnification is due (the "Indemnifying
Person") shall forthwith upon demand reimburse any Landlord Indemnified Person
or Tenant Indemnified Person, as the case may be (such Person being the
"Indemnified Person"), for any sum or sums expended with respect to any of the
foregoing or, upon request from any Indemnified Person, shall pay such amounts
directly; provided, however, that a claim for indemnification against the
Landlord based on a matter covered by clause (ii) of paragraph (b) of this
Section 11 shall be subject to the limitations that (i) the total sum of all
claims for indemnity for all such matters shall exceed $480,000 in the aggregate
(the "Threshold Amount") before an Indemnified Person shall be entitled to
indemnification with respect to such matters, and then the Indemnified Person
shall be entitled to indemnification only for claims which exceed $480,000, (ii)
the aggregate liability of the Landlord with respect to such claims shall be
$4,560,000, and (iii) any claim for indemnity with respect to such matters shall
be made not later than one year from the Effective Date. Any amount payable to

                                       53
<PAGE>

any Indemnified Person or on behalf of any Indemnified Person pursuant to this
Section 11 shall be paid promptly upon receipt of a written demand therefor from
such Indemnified Person accompanied by a written statement describing in
reasonable detail the claims which are the subject of and basis for such
indemnity and the computation of the amount so payable and to whom. Any payment
made to or on behalf of any Indemnified Person pursuant to this Section 11 shall
be increased to such amount as will, after taking into account all taxes imposed
with respect to the accrual and receipt (or deemed receipt) of such payment (as
the same may be increased pursuant to this sentence), equal the amount of the
payment, reduced by the amount of any savings in such taxes actually realized by
the Indemnified Person as a result of the payment or accrual of the amounts in
respect of which the payment to or on behalf of the Indemnified Person hereunder
is made. To the extent that an Indemnifying Person in fact indemnifies any
Indemnified Person under the indemnity provisions of this Lease, such
Indemnifying Person shall be subrogated to such Indemnified Person's rights in
the affected transaction and shall have a right to determine the settlement of
such indemnified claims therein.

            (d) The indemnities contained in this Section 11 shall not be
affected by the expiration or other termination of this Lease, any Other Lease
Document, any Site Lease, or the Film Licensing Agreements, and shall continue
with respect to Losses relating to events or occurrences which happen, or
claims, suits or causes of action which are asserted following such expiration
or other termination if based on events or occurrences which predate (in whole
or in part) such expiration or other termination or as otherwise provided
herein.

            (e) Notwithstanding any provisions of this Section 11 to the
contrary, (i) the Tenant shall not be obligated to indemnify and hold harmless
any Landlord Indemnified Person against any claims and liabilities to the extent
arising from a Landlord Act, and (ii) the Landlord shall not be obligated to
indemnify and hold harmless any Tenant Indemnified Person against any claims and
liabilities to the extent arising from the negligence or willful misconduct of
any Tenant Indemnified Person.

            (f) In the event any claim, action, proceeding or suit (a "Third
Party Claim") is brought against an Indemnified Person with respect to which
indemnification may be sought under this Section 11, such Indemnified Person
shall promptly, and in any case within thirty (30) days after receipt by such
Indemnified Person of written notice of such Third Party Claim, notify the
Indemnifying Person from whom indemnification may be sought of such Third Party
Claim, the amount thereof, and the basis or alleged basis therefor. The
Indemnifying Person shall assume the defense thereof, including the employment
at its expense of counsel; provided, that the Indemnifying Person shall not have
the obligation to assume such defense to the extent that such Indemnified Person
shall have delivered to the Indemnifying Person a written notice waiving the
benefits of the indemnification of such Indemnified Person provided herein in
connection with such Third Party Claim. In the event that (i) such Third Party
Claim threatens to restrain or adversely affect the conduct of the business of
the Indemnified Person, excluding the business of the Landlord's ownership of
the Theatre Properties (but not including operations thereon by Landlord or any
of its Affiliates at any time when Tenant or a permitted successor or assign is
not operating its business

                                       54
<PAGE>

therein) or (ii) based on the written opinion of independent counsel to the
Indemnified Person, which opinion will be supplied to the Indemnifying Person,
such Indemnified Person shall have reasonably concluded that there are defenses
available to such Indemnified Person which conflict with those available to the
Indemnifying Person, the Indemnifying Person shall not have the obligation to
assume the defense of any such action on behalf of the Indemnified Person if
such Indemnified Person chooses to defend such action, but all reasonable costs,
expenses and attorneys' fees incurred by the Indemnified Person in defending
such action shall be borne by the Indemnifying Person. Notwithstanding the
assumption of the defense of any Third Party Claim by the Indemnifying Person
pursuant to this paragraph, any Indemnified Person shall have the right to
employ separate counsel and to participate in its defense, but, except as set
forth in the immediately preceding sentence, the fees and expenses of such
counsel shall be borne by the Indemnified Person. Any decision by an Indemnified
Person to employ its own counsel rather than counsel selected by the
Indemnifying Person (whether or not at the Indemnifying Person's expense) shall
in no way affect any rights of such Indemnified Person otherwise arising under
this Lease.

            (g) The Tenant hereby acknowledges and confirms that the
indemnification obligations of the Tenant set forth in this Section 11 shall
include, without limitation, all Environmental Damages not subject to paragraph
(b) or paragraph (e) of this Section 11 arising from the action or inaction of
the Tenant or arising during the Lease Term with respect to the Theatre
Properties or prior thereto to the extent not constituting a Landlord
Environmental Obligation, and such indemnification obligation shall not be
limited in any way by the passage of time or the occurrence of any event. The
obligations of the parties under this Section 11 shall survive termination or
expiration of this Lease, including by reason of the exercise of the Purchase
Option pursuant to Section 12 hereof.

            (h) Notwithstanding anything contained in this Lease to the
contrary:

                  (i) In no event shall any Indemnifying Party be liable to any
      Indemnified Party for special, indirect or consequential damages or loss
      of profits.

                  (ii) If any claim for indemnification hereunder is or may be
      the subject of insurance or other right to indemnification or contribution
      from any third party, the Indemnified Parties promptly shall notify each
      applicable insurance carrier of any such claim and related Loss and tender
      defense thereof to such insurance carrier, and shall notify each potential
      third party indemnitor or contributor that may be liable for all or any
      portion of such claim and related Loss. The Indemnified Parties shall
      cooperate with each such insurance carrier, and shall pursue diligently
      all rights against and cooperate with each such third party indemnitor or
      contributor.

                  (iii) Any liability for indemnification under this Section 11
      shall be determined without duplication of recovery by reason of the state
      of facts giving rise to such liability constituting a breach of more than
      one representation, warranty, covenant or agreement.

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<PAGE>

                  (iv) The Tenant shall provide to the Landlord from time to
      time notice of any claim based on a matter covered by clause (ii) of
      paragraph (b) which the Tenant believes would be required to be covered by
      the Landlord pursuant to this Section 11 but for the fact that the
      aggregate of Tenant claims with respect to such matters has not reached
      the Threshold Amount and shall upon the Landlord's request provide
      reasonable details in writing to support such belief. If the Tenant shall,
      either at its option or in response to a Landlord request, provide in
      writing the details, including the amount, of any such claim and including
      specific reference to this subparagraph of the Lease and the time limit
      within which the Landlord must respond or be precluded from contesting the
      Tenant's claim, the Landlord shall have sixty (60) days to challenge the
      Tenant's assertion that such claim makes up a part of the Threshold Amount
      or the amount thereof.

                  (v) A failure by an Indemnified Party to give timely notice of
      a third party claim will not affect the rights or obligations of any party
      hereunder except and only to the extent that, as a result of such failure,
      any party entitled to receive such notice was deprived of its right to
      recover any payment under its applicable insurance coverage or was
      otherwise adversely affected or damaged as a result of such failure to
      give timely notice.

            SECTION 12. TENANT'S RIGHTS OF PURCHASE AND RENEWAL.

            (a) So long as there is no Event of Default of the type described in
clause (f) of Section 18 hereof, the Tenant shall have the right (the "Purchase
Option"), subject to the terms of this Section 12, to purchase all, but not less
than all, of the Theatre Properties, including all Elements thereof as then
constituted, and all of the Landlord's right, title and interest in, to and
under the Site Leases (the "Purchased Assets"), for an amount equal to the
Acquisition Cost.

            (b) Tenant may exercise the Purchase Option to purchase the
Purchased Assets on and as of the last day of the Initial Term by giving
Landlord at least one hundred eighty (180) days' written notice (the "Exercise
Notice") but any such Exercise Notice delivered prior to June 1, 2009 shall be
ineffective.

            (c) Within five (5) Business Days after the Tenant gives notice of
exercise of the Purchase Option, the Landlord and the Tenant shall execute and
acknowledge in duplicate a contract of sale in the form attached to this Lease
as Exhibit F. The Landlord and the Tenant shall cooperate and use commercially
reasonable efforts to make all filings with, and obtain all consents and
approvals of, all Governmental Authorities and other parties necessary in
connection with the transfer of the Purchased Assets contemplated by this
Section 12.

            (d) If, other than as a result of a default by Tenant or an
Affiliate under the Sub-Management Agreement, the Sub-Management Agreement is
terminated prior to the end of the Initial Term (including by reason of the
expiration of its term as it may be extended or renewed), then:

                                       56
<PAGE>

                  (i) the Acquisition Cost shall be reduced by an amount (the
      "Acquisition Cost Adjustment") equal to $200,000 multiplied by the number
      of calendar months (including partial months) in the period from the date
      of termination of the Sub-Management Agreement to the date on which the
      Initial Term is scheduled to end, divided by 12; and

                  (ii) the Basic Rent, for each period after the date of such
      termination, will be adjusted in the manner provided in Section 16(d) as
      if such termination was an Event of Loss, the date of such termination was
      the Taking Payment Date, and the Acquisition Cost Adjustment was the
      Taking Proceeds.

            (e) If the Tenant exercises the Purchase Option, then, on the
Purchase Option Closing Date:

                  (i) The Tenant shall pay to the Landlord (A) the Acquisition
      Cost, (B) all Basic Rent payable to the Purchase Option Closing Date, (C)
      any Additional Rent owing to the Purchase Option Closing Date, (D) any
      amounts payable by Tenant pursuant to Section 11 hereof, and (E) any other
      amounts owing by Tenant hereunder. The Tenant shall pay such amounts in
      cash or certified funds, as the Landlord shall determine in its sole
      discretion; provided, that the Tenant may pay any of such amounts to any
      lender to Landlord, or any Person holding or asserting a Lien on any of
      the Purchased Assets which Lien or asserted Lien arose from any act or
      omission of the Landlord or any Affiliate (and not by reason of a Tenant
      Event), if and to the extent the Tenant reasonably determines such payment
      is necessary to enable the Tenant to obtain title to the Purchased Assets
      free and clear of Liens (other than Landlord Permitted Liens except those
      relating to Financing Agreements) and claims; provided, however, that
      nothing herein shall obligate the Landlord to cause any such Lien to be
      removed or cured if arising from a Tenant Event or to enforce any
      provision hereof or exercise any rights or remedies against the Tenant.

                  (ii) The Landlord shall transfer to the Tenant title to the
      Purchased Assets by a bill of sale, quitclaim deed or such other
      conveyance instrument or instruments as the Tenant may reasonably require
      to convey all the Purchased Assets, which bill of sale, quitclaim deed or
      other conveyance instrument shall otherwise be reasonably satisfactory to
      the Landlord and the Tenant. The transfer of the Landlord's interest in
      all the Theatre Properties and all of the Landlord's right, title and
      interest in, to and under the Site Leases shall be on an as-is,
      non-installment sale basis, without warranty by, or recourse to, the
      Landlord, except that such title shall be free of any Liens (other than
      Landlord Permitted Liens except those relating to Financing Agreements);
      provided, however, that nothing herein shall obligate the Landlord to
      cause any such Lien to be removed or cured if arising from a Tenant Event
      or to enforce any provision hereof or exercise any rights or remedies
      against the Tenant.

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<PAGE>

            (f) If this Lease expires or is terminated by Landlord in any manner
or for any reason whatsoever, the Purchase Option shall cease and said Option
shall be void; provided, however, that this shall not limit Tenant's rights to
recover damages for a breach of this Lease by Landlord, which shall include, as
applicable, damages for loss of the Purchase Option (subject to the limitation
that Landlord shall have no liability for lost or prospective profits or any
other special, punitive, exemplary, consequential, incidental or indirect losses
or damage (in tort, contract or otherwise)). The Purchase Option is not
assignable separate from this Lease (to the extent assignable) and the Landlord
shall not be obligated to convey hereunder to any party other than the Tenant,
except that the Purchase Option shall be exercisable by a permitted mortgagee of
Tenant.

            (g) In consideration of the Purchase Option, on or before the
Effective Date, the Tenant shall pay to the Landlord an amount equal to the
excess of the Option Fee over the Deposit Amount. If the Tenant does not
exercise the Purchase Option, the Landlord shall be entitled to keep the Option
Fee. If the Tenant exercises the Purchase Option, the Acquisition Cost shall be
reduced by an amount equal to the Option Fee.

            (h) So long as no Event of Default has occurred and is continuing,
the Tenant shall have the right, upon at least one hundred eighty (180) days'
written notice to the Landlord prior to the expiration of the Initial Term, to
renew the lease of all, but not less than all, of the Theatre Properties,
including each Element thereof as then constituted, as a whole on the same terms
and conditions of the Initial Term, except those terms and conditions conferred
in paragraph (f) of Section 9 and in paragraph (a) and this paragraph (h) of
this Section 12, for the Renewal Term of ten (10) years, commencing on the day
following the last day of the Initial Term, at a Basic Rent determined in
accordance with the provisions of paragraphs (i) and (j) of this Section 12 (the
"Renewal Rental Rate").

            (i) The Renewal Rental Rate of the Theatre Properties for each full
calendar month of the first year of the Renewal Term shall be an amount equal to
the greater of (i) the Basic Rent as it would be had the Initial Term included
such year and (ii) the sum of (A) (x) if the Landlord exercises its option to
acquire the fee interest in the underlying real estate comprising the Sutton
Theatre, a fair market rental value of such underlying real estate based on the
highest and best use of said real estate, or (y) if the Landlord does not
exercise such option to acquire the underlying real estate comprising the Sutton
Theatre, the lesser of (1) [two-thirds???] of the Fair Market Rental Value (as
such amount is determined pursuant to the Site Lease for such Theatre) and (2)
such Fair Market Rental Value less $$25,000 and (B) a fair market rental value
of the leasehold interests in the Village East Cinemas and the Cinemas 1, 2 and
3 based on the highest and best use of such applicable leasehold estate (subject
to limitations as to use set forth in the applicable Site Lease with respect to
the portion (if any) of the Renewal Term to which such limitations apply), as
shall be agreed upon by the Landlord and the Tenant or, if they are unable to
agree, pursuant to the Appraisal Procedure. Each year thereafter during the
Renewal Term, the Basic Rent shall be increased as determined pursuant to the
terms of paragraph (j) hereof. If the provisions of clause (A)(y) are
applicable, then the Tenant hereunder shall act for and in the name of the
Landlord hereunder (but at

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<PAGE>

the expense of the Tenant hereunder) in determining the Fair Market Rental Value
for purposes of the Site Lease for the Sutton Theatre.

            (j) The Basic Rent per month for any year during the Renewal Term
shall be increased annually by the percentage increase (if any) in the Consumer
Price Index for the month which is two months preceding the month in which
occurs the first anniversary of the commencement of the Renewal Term, and each
subsequent anniversary date thereof, over the Consumer Price Index for the
corresponding month in the preceding year, provided, however, that in no event
shall the percentage increase in any year during the Renewal Term exceed the
average annual Consumer Price Index increase (similarly calculated) over last
three years of Initial Term.

            (k) Landlord hereby notifies Tenant that, if Tenant exercises the
Purchase Option, the Theatre Properties may be sold pursuant to the like kind
exchange provisions of the Code. Tenant agrees to execute at the closing of the
purchase of the Theatre Properties pursuant to the Purchase Option (the
"Closing") all reasonable and customary documents necessary to accomplish the
sale under the like kind exchange rules as prepared by Landlord's attorney,
provided that Tenant shall not be required to execute any document that would or
might (i) require Tenant to incur any cost or expense; (ii) require Tenant to
take title to any property other than the Theatre Properties; or (iii) require
Tenant to incur any liability, whether current, accrued or contingent. Landlord
shall be responsible for all costs of such documentation and guarantees that no
terms or conditions in this Lease shall change due to the execution of the like
kind exchange documents, nor shall Closing be delayed thereby. As aforesaid,
Tenant will not be required to purchase any property (other than the Theatre
Properties), but may be required to pay the Acquisition Cost (or some portion
thereof, as the Landlord may direct prior to the Closing) into an escrow fund
established for the purpose of the like kind exchange. Landlord shall defend,
indemnify and save Tenant harmless from any loss, expense, claims or damages in
connection with Tenant executing any such documents. The provisions of this
Section 12(k) shall survive Closing.

            (l) Compliance by the Tenant with each and all of the time periods
set forth in this Section 12 shall be "of the essence."

            SECTION 13. UTILITY SERVICES.

            (a) During the Lease Term, the Tenant shall pay, or cause to be
paid, and shall indemnify, defend and hold the Landlord and the Theatre
Properties harmless from all charges for, and the Tenant shall make all required
provision for the supplying and proper functioning of, all water, sewage, gas,
heat, air conditioning, light, power, steam, telephone service and all other
services and utilities used, rendered or supplied to, on or in the Theatre
Improvements or Equipment, except to the extent the same are the responsibility
of any Site Landlord under a Site Lease.

            (b) The Landlord shall not be required to furnish to the Tenant, or
any other occupant of any Theatre Property or user of any Theatre Improvements
or Unit of Equipment during

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<PAGE>

the Lease Term, any water, sewage, gas, heat, air conditioning, light, power,
steam, telephone or any other utilities, equipment, labor, materials or services
of any kind whatsoever.

            SECTION 14. LEASE EXPIRATION.

            (a) Upon the expiration of the Lease Term, if the Purchase Option is
not exercised, the Tenant shall surrender all the Theatre Properties under this
Lease to the Landlord as required under this Lease.

            (b) If, as of the expiration or sooner termination of the Lease Term
(and provided the Tenant has either not exercised the Purchase Option or failed
to close pursuant thereto), obligations of the Tenant hereunder are not fully
performed to the extent performance thereof was due on or before such date of
expiration or sooner termination or the performance of obligations of the Tenant
hereunder is incomplete or unfinished, the Tenant shall remain liable hereunder
to the Landlord for the extent of the damages Landlord may suffer or incur as a
result of such non-performance or incomplete or unfinished performance,
including fees, costs and expenses of the Landlord (including reasonable fees
and expenses of attorneys and other professionals) in performing any such
obligations or completing or finishing such performance and in enforcing claims
hereunder; provided, however, that the Landlord shall not perform any such
obligation which can be performed by the payment of a sum certain only except
following the failure of the Tenant to pay such amount within five (5) Business
Days following written notice from the Landlord to the Tenant of Landlord's
intention to pay such amount.

            (c) If the Purchase Option had not been exercised properly or Tenant
had failed to close thereunder at the expiration of the Initial Term, the Tenant
shall, on the last day of the Lease Term, surrender the Theatre Properties to
the Landlord and pay to the Landlord the amount by which the residual value of
the Theatre Improvements and the Equipment has been reduced by wear and tear in
excess of that attributable to normal and proper use (the amount of such excess
wear and tear to be such amount as the Landlord and the Tenant agree, or if no
agreement is reached, the amount determined pursuant to the Appraisal
Procedure), and all other amounts owing by the Tenant hereunder. Upon such
termination, the Tenant shall have no further right, claim or interest in any
Element of any Theatre Property.

            (d) If the Purchase Option had not been exercised properly or Tenant
had failed to close thereunder at the expiration of the Initial Term, on or
prior to the last day of the Lease Term, the Tenant shall pay to the Landlord
(i) all Basic Rent payable, (ii) any Additional Rent owing, (iii) any amounts
payable pursuant to Section 11 hereof, and (iv) all other amounts owing
hereunder. Upon payment by the Tenant to the Landlord of all amounts owing
pursuant to the terms of this Lease and delivery of the Theatre Properties under
this Lease to the Landlord, this Lease shall terminate, except to the extent
provided in Section 11 hereof and elsewhere herein. Nothing contained in this
Section 14 shall permit the Tenant to make any payments due Landlord under this
Lease at times other than as set forth elsewhere in the Lease.

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<PAGE>

            (e) Subject to the provisions hereof, upon termination of this Lease
under circumstances in which the Theatre Properties are to be returned to the
Landlord, the Tenant shall surrender the Theatre Properties to the Landlord or a
designee of the Landlord at the location where such Theatre Properties are
located and the Equipment in the Theatre Property where utilized or at such
location as the Landlord and the Tenant may agree and, if they are unable to
agree, at such location as the Landlord may reasonably direct.

            (f) Upon the surrender of the Theatre Properties, the Tenant shall
deliver to the Landlord or its designee all logs, manuals, inspection data,
books and records which are applicable to the Theatre Properties which are
necessary to operate the Theatre Improvements and Equipment and which are in
accordance with sound industry practice customarily retained (or that the Tenant
actually did retain) or are required by law to be retained with respect to
similar property and equipment, including, without limitation, all software and
manuals applicable to all Theatre Improvements and Equipment and all design
plans, know-how, records and information used by the Tenant during operation of
the Theatre Improvements and Equipment. The Tenant may retain a copy of any of
the foregoing.

            SECTION 15. LOSS OF OR DAMAGE TO THEATRE IMPROVEMENTS OR EQUIPMENT.

            (a) The Tenant hereby assumes all risk of loss of or damage to the
Theatre Improvements and Equipment during the Lease Term, however caused. No
loss of or damage to any Theatre Improvements or Equipment shall impair any
obligation of the Tenant under this Lease, which shall continue in full force
and effect, including with respect to any lost or damaged Theatre Improvements
or Equipment, except as otherwise provided in this Section 15 or in Section 16
hereof.

            (b) In the event of damage of any kind whatsoever to any Theatre
Improvements or Equipment, the Tenant, at its own cost and expense, shall either
(i) place the same in good and safe operating order, repair, condition and
appearance in material compliance with applicable Legal Requirements and for use
as permitted in accordance with this Lease, or (ii) in the case of damage to any
Equipment, replace such Equipment with equipment of a similar like and kind, and
of a value not less than the Equipment being replaced (assuming that the
replaced Equipment had been maintained in accordance with the provisions
hereof), subject to the provisions of paragraph (c) hereof with respect to
certain occurrences during the Renewal Term. If the Tenant shall replace any
such Equipment, the Landlord and the Tenant shall amend, among other things, the
description of such Equipment on Exhibit D. The provisions of paragraph (f) of
Section 9 hereof shall be applicable with respect to any repairs to any Theatre
Improvements undertaken by the Tenant pursuant to this paragraph (b) of this
Section 15 as if the affected Theatre Property to be repaired were the "Affected
Premises" thereunder; provided, however, that (x) no consent or approval of
Landlord, as to plans or any other matters referred to in such paragraph (f) of
said Section 9, shall be required if the cost to repair is less than $1,000,000
prior to the Funding Date or $2,000,000 thereafter, (y) any such consent
required shall not be unreasonably withheld, and (z) the provisions of clause
(viii) of said paragraph (f) shall not be applicable and all such repaired
property shall from

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<PAGE>

inception be owned by the Landlord, subject to the other provisions of this
Lease. The Tenant's right to any proceeds paid under any insurance policy or
policies required under Section 10 of this Lease with respect to any such damage
to any Theatre Improvements or Equipment which has been so placed by the Tenant
in good operating order, repair, condition and appearance or replaced is
otherwise governed by paragraph (g) of Section 10 hereof.

            (c) In the event of damage of any kind whatsoever to any Theatre
Improvements or Equipment during the Renewal Term which results in the loss of a
substantial portion of the affected property (a "substantial portion" being
determined in the manner set forth in the definition of "Event of Loss"), the
Tenant shall promptly notify the Landlord in writing of such event, and the
Tenant, at its option, may elect not to repair or replace such Theatre
Improvements or Equipment, or any part thereof, as provided in paragraph (b) of
this Section 15. If the Tenant makes such an election, then (i) on the Basic
Rent Payment Date designated by the Tenant (the "Casualty Payment Date"), which
shall be a date within ninety (90) days following such event but not later than
the last day of the Lease Term, the Tenant shall pay to the Landlord the sum of
the amount of insurance proceeds received by Tenant with respect to the Theatre
Improvements or Equipment, or part thereof, which Tenant elected not to repair
or replace plus the amount of the deductible provided for in the insurance
maintained by the Tenant plus any co-insurance deduction or offset plus, if
Landlord advises Tenant that Landlord believes Tenant had not maintained
sufficient insurance to provide for the cost to replace the applicable Theatre
Improvements and Equipment in good and safe operating order, repair, condition
and appearance in compliance with applicable Legal Requirements, the amount of
the deficiency in insurance agreed to by Landlord and Tenant or, if they are
unable to so agree, the amount determined by the Appraisal Procedure, and (ii)
if such event resulted in the loss of a substantial portion of a Theatre
Property, on the Casualty Payment Date, (A) the Lease Term shall terminate as to
the affected Theatre Property, and Additional Rent shall not thereafter be
payable with respect to such affected Theatre Property (but Additional Rent
accrued to the Casualty Payment Date shall be paid), (B) the Lease Term shall
continue as to the unaffected Theatre Properties, and (C) the Basic Rent payable
and any Additional Rent and other amounts owing thereafter hereunder shall be
adjusted in accordance with paragraph (d) below.

            (d) If the Basic Rent or any other amounts are to be adjusted
pursuant to paragraph (c) of this Section 15, the Basic Rent, for each month in
the lease year in which the Casualty Payment Date occurs, shall be reduced by an
amount agreed to by the Landlord and the Tenant or determined by the Appraisal
Procedure (prorated, in the case of any partial month), taking account of the
method for determining the Basic Rent during the Renewal Term as described in
paragraph (i) of Section 12 hereof, and any other adjustments shall be
determined in a like manner; and the Basic Rent as so adjusted shall be further
adjusted for any subsequent lease year as provided in Section 12(j).

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<PAGE>

            SECTION 16. CONDEMNATION AND DEDICATION OF THEATRE PROPERTY;
                        EASEMENTS.

            (a) If the use, occupancy or title to all or a substantial portion
of any Theatre Property is taken, requisitioned or sold in, by or on account of
actual or threatened eminent domain or confiscation or similar proceedings or
other action by any Governmental Authority (such events collectively referred to
as a "Taking"), then the Tenant shall promptly notify the Landlord in writing of
such event and the Lease Term shall terminate as provided in paragraph (c) of
Section 16 hereof with respect to such Theatre Property. Upon receipt of
proceeds from any award or sale made in connection with such Taking, so long as
no Event of Default has occurred and is continuing, the Landlord shall remit to
the Tenant the net amount of such proceeds remaining after reimbursement for all
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by the Landlord in connection with the negotiation and settlement of
any proceedings related to such Taking up to the amount required to pay for in
full such replacement property and equipment, any excess to be retained by
Landlord; provided, however, that, if such Taking occurs during the Initial
Term, such excess shall be treated as Taking Proceeds and applied as described
in clause (ii) of paragraph (c) of this Section 16 and Basic Rent thereafter due
shall be recalculated as described in paragraph (d) of this Section 16.
Otherwise such sum shall be paid to and shall belong to Landlord, and the Tenant
shall have no claim thereto, by reason of this Lease or otherwise.

            (b) If less than a substantial portion of a Theatre Property is
subject to a Taking, then this Lease shall continue in effect as to the portion
of such Theatre Property not taken and any net proceeds, so long as no Event of
Default has occurred and is continuing, shall be paid to the Tenant for the
restoration of the Theatre Improvements and Equipment in accordance with
paragraph (g) of Section 10 and paragraph (b) of Section 15.

            (c) If an Event of Loss with respect to any Theatre Property occurs,
then:

                  (i) on the Basic Rent Payment Date designated by the Tenant
      (the "Taking Payment Date"), which shall be a date within ninety (90) days
      following such Taking but not later than the last day of the Lease Term,
      (A) the Tenant shall pay to the Landlord the Taking Proceeds received by
      Tenant (or, if not then received by the Tenant, shall assign to the
      Landlord the right to receive such Proceeds as and when determined), (B)
      the Lease Term shall terminate as to the affected Theatre Property and
      Additional Rent shall not thereafter be payable with respect to such
      affected Theatre Property (but Additional Rent accrued to the Taking
      Payment Date shall be paid), (C) the Lease Term shall continue as to the
      unaffected Theatre Properties, and (D) the Basic Rent payable and any
      Additional Rent and other amounts owing thereafter hereunder shall be
      adjusted in accordance with paragraph (d) below;

                  (ii) if such Event of Loss occurs during the Initial Term, (A)
      the Acquisition Cost shall be reduced by the amount of the Taking Proceeds
      actually paid or

                                       63
<PAGE>

      assigned to Landlord, and (B) once the aggregate of Taking Proceeds equals
      $29,000,000, any excess Taking Proceeds shall be paid to the Tenant; and

                  (iii) if the Tenant exercises the option to renew the Lease
      Term for the Renewal Term, the Renewal Rental Rate shall be determined as
      if the affected Theatre Property is not subject to this Lease.

The "Taking Proceeds" of any Taking shall mean the amount of proceeds of any
award or sale received by Tenant or Landlord or their Affiliates in connection
with such Taking, after deduction of any costs or expenses (including, without
limitation, reasonable attorneys' fees) incurred by the Landlord or Tenant in
connection with the negotiation and settlement of any proceedings related to
such Taking. Notwithstanding the foregoing, if the amount of Taking Proceeds
from all Takings during the Initial Term shall exceed the Acquisition Cost (as
reduced in accordance with clause (ii) of paragraph (d) of Section 12 hereof),
the amount in excess thereof shall be paid to and retained by Tenant (regardless
of whether initially paid to Tenant or Landlord) and shall not otherwise be
included in the term "Taking Proceeds."

            (d) If the Basic Rent or any other amounts are to be adjusted
pursuant to paragraph (c) of this Section 16:

                  (i) If such Event of Loss occurs during the Initial Term, the
      Basic Rent for each period from and after the Taking Payment Date to the
      end of the Initial Term shall be an amount equal to the Basic Rent as it
      would have been in effect for such period absent the adjustment made by
      this Section 16(d), multiplied by an amount equal to one minus a fraction,
      the numerator of which is the amount of the Taking Proceeds and the
      denominator of which is the then determined amount of the Acquisition Cost
      without taking account of such Event of Loss; and any other amounts shall
      be adjusted in a like manner as applicable.

                  (ii) If such Event of Loss occurs during the Renewal Term, the
      Basic Rent, for each month in the lease year in which the Taking Payment
      Date occurs, shall be reduced by an amount determined by the Landlord and
      the Tenant or determined by the Appraisal Procedure (prorated, in the case
      of any partial month), taking account of the method for determining the
      Basic Rent during the Renewal Term as described in paragraph (i) of
      Section 12 hereof, and any other amounts shall be adjusted in a like
      manner as applicable; and the Basic Rent as so adjusted shall be further
      adjusted for any subsequent lease year as provided in Section 12(j).

            (e) To the extent any of the provisions of the Site Leases
concerning any Taking, proceeds relating to any Taking, or the application of
any proceeds relating to any Taking are inconsistent with the provisions of this
Lease, the provisions of the Site Leases shall control and the parties shall be
relieved of any inconsistent obligation hereunder.

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<PAGE>

            (f) (i) So long as no Event of Default hereunder has occurred and is
continuing, the Tenant shall have the right during the Initial Term, subject, at
all times prior to the Funding Date, to the prior written consent of Landlord,
not to be withheld unreasonably, (A) to grant, obtain or enter into minor
easements for the benefit of or burdening any Parcel of Property, (B) to
voluntarily dedicate or convey, as required, portions of any Parcel of Property
for road, highway and other public purposes, (C) to voluntarily execute
petitions to have any Parcel of Property or a portion thereof annexed to any
municipality or included within any utility, highway or other improvement or
service district, provided, that no more than minor restoration is required and
such annexation has no material adverse effect on the value of such Parcel of
Property and (D) to contest on its own and the Landlord's behalf any proposed
Taking or the amount of any award in connection therewith. In connection with
the Tenant's development, if any, of a Theatre Property in accordance with and
subject to the terms of paragraph (f) of Section 9 hereof, the Tenant shall at
all times be free to enter into and/or execute such agreements, dedications,
easements, conditions, covenants and restrictions in favor of other property
owners, lessees or local agencies as are necessary for the conduct of the
Tenant's operations on the affected Theatre Property. If any monetary
consideration is paid for such easement or dedication, the Tenant shall be
entitled to receive or retain such consideration. Any monetary consideration
paid for such easement or dedication, after deduction for actual costs and
expenses (including reasonable counsel fees) of Tenant in connection therewith,
shall be treated as Taking Proceeds if received during the Initial Term and
shall be paid to Landlord if received during the Renewal Term.

                  (ii) Subject to the foregoing provisions of this Section
16(f), the Landlord will cooperate, without unreasonable delay and at the
Tenant's expense, as necessary and join in the execution of any appropriate
instrument or shall execute any separate instrument as necessary. As a condition
precedent to the Tenant's exercise of any of the Tenant's powers under this
Section 16(f), (A) the Tenant shall give the Landlord five (5) Business Days'
prior written notice of the proposed action and (B) the Tenant shall provide to
the Landlord a certificate of the Tenant stating that such action will not
materially adversely affect either the fair market value of such Theatre
Property or the use of such Theatre Property for its intended purpose, will not
affect the Landlord's ability to exercise its rights and remedies under this
Lease and that the Tenant undertakes to remain obligated under this Lease to the
same extent as if the Tenant had not exercised its powers under this Section 16
and the Tenant will perform all obligations under such instrument and shall
prepare all required documents and provide all other instruments and
certificates as the Landlord may reasonably request.

            (g) At any time during the Initial Term following the Funding Date,
and provided no Event of Default has occurred and is then continuing, the Tenant
shall have the right to conduct all proceedings relating to any Taking,
including any negotiations or other proceedings relating to the amount of any
Taking Proceeds, with counsel of its choice, reasonably acceptable to Landlord.
At any time when Tenant is not permitted by the preceding sentence to conduct
such proceedings, Landlord shall conduct such proceedings at Tenant's expense.

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            SECTION 17. ASSIGNMENT AND SUBLETTING.

            (a) Except as hereinafter provided (and then only in compliance with
the terms hereof), the Tenant shall not, without the prior written consent of
the Landlord in each instance, assign or sublease any right or interest herein
or in any Theatre Property or Element thereof; provided, however, that there
shall be no assignment or right to assign less than all of Tenant's rights and
interest hereunder. The Tenant shall not, without the prior written consent of
the Landlord in each instance, sublease or otherwise relinquish possession of
any Parcel of Property, Theatre Improvements or Unit of Equipment, except that
the Tenant may relinquish possession of Theatre Improvements or Equipment to any
contractor for use in performing work for the Tenant on such Theatre
Improvements or Equipment; provided, that such relinquishment of possession
shall in no way affect the obligations of the Tenant or the rights of the
Landlord hereunder with respect to such Theatre Improvements or Equipment. If
permitted under the applicable Site Lease(s), (i) the Landlord shall not
unreasonably withhold or delay its consent under this paragraph (a) to any
assignment of all but not less than all of Tenant's rights and interest
hereunder or any sublease, (ii) no consent of Landlord shall be required for any
assignment or sublease to Parent or any controlled Affiliate of Parent provided
Parent shall have confirmed in writing that the Lease Guaranty is applicable to
and covers the obligations and liabilities of such assignee as if originally
named in such Lease Guaranty, and (iii) no consent of Landlord shall be required
for any assignment or sublease to Reading or any controlled Affiliate of Reading
provided, in the case of an assignment or sublease to such an Affiliate, either
Parent shall have confirmed in writing that the Lease Guaranty is applicable to
and covers the obligations and liabilities of such assignee as if originally
named in such Lease Guaranty or Reading shall have provided a Lease Guaranty. In
the event Landlord consents to Tenant's subletting hereunder in any instance,
(A) the sublease shall expressly be made subject and subordinate to the
provisions hereof, shall by its terms be subject to termination upon the
termination for any reason of this Lease and shall expressly provide for the
surrender of the applicable Parcel of Property, Theatre Improvements or Unit of
Equipment by the sublessee at the election of the Landlord or Pledgee after the
occurrence of an Event of Default hereunder, (B) no sublease shall modify or
limit any right or power of the Landlord or Pledgee hereunder or affect or
reduce any obligation of the Tenant hereunder, and all such obligations shall
continue in full force and effect as obligations of a principal and not of a
guarantor or surety, as though no such subletting had been made, and (C) any
sublease made otherwise than as expressly permitted by this paragraph (a) shall
be void and of no force and effect.

            (b) As additional security to the Landlord for the performance of
the Tenant's obligations under this Lease, the Tenant (A) hereby assigns to the
Landlord all of the Tenant's right, title and interest in and to all subleases,
whether or not permitted hereby (although the foregoing does not constitute
authorization from the Landlord for any sublease not strictly conforming to the
limitations of paragraph (a) above) and (B) agrees to cause any sublessee to
enter into such commercially reasonable attornment agreement with the Landlord
as the Landlord may reasonably request. The Landlord shall have the present and
continuing right to collect and enjoy all rents and other sums of money payable
under any such sublease, and the Tenant hereby irrevocably assigns

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such rents and other sums to the Landlord for the benefit and protection of the
Landlord; provided, that unless an Event of Default shall have occurred and be
continuing hereunder, (i) the Tenant shall be entitled to collect and enjoy such
rents and other sums and (ii) Tenant shall be entitled to receive and retain any
amounts in excess of the amounts due Landlord hereunder; provided, however,
that, with respect to any such excess amounts received by the Landlord or the
Tenant during the existence of an Event of Default hereunder, such amount shall
be held by the recipient until either such Event of Default shall be cured or
the closing pursuant to the Purchase Option shall have occurred, in which event
such excess shall be retained by, or be paid to, as the case may be, the Tenant,
or the Lease Term shall be terminated or shall expire (the Purchase Option not
having been exercised or the closing pursuant thereto not having occurred), in
which event such excess shall be retained by, or paid to, as the case may be,
the Landlord.

            (c)   (i) In connection with a Business Sale by Parent, Parent may
be relieved of its future obligations under its Lease Guaranty (and, if such
Business Sale includes the sale of the Theatre Properties as such, Tenant may be
relieved of its future obligations hereunder) if Parent provides a Suitable
Replacement (whether as Tenant hereunder or guarantor pursuant to a guaranty
substantially in the form of the Lease Guaranty); provided, however, that the
foregoing shall not limit the proviso in the first sentence of paragraph (a) of
this Section 17 as relates to the Theatre Properties.

                  (ii) If Parent seeks to provide a Suitable Replacement (other
than Reading), Parent or the Tenant shall provide to Landlord, at least thirty
days prior to the date such assignment is to become effective, such information
regarding the financial ability and movie theatre operating and management
experience of the relevant party(ies) as shall enable Landlord to perform a
thorough evaluation of the suitability of the proposed party(ies). Landlord will
advise within fifteen days following its receipt of such information whether the
information is sufficient or, if additional information is required by Landlord
to conduct its evaluation, the areas and topics where the initially-proffered
information is insufficient. This process shall be repeated as Landlord may
reasonably require and Landlord shall ultimately be afforded ten Business Days
from the last delivery of information hereunder to determine whether the
proposed party(ies) constitute a Suitable Replacement.

                  (iii) Any provision of this paragraph (c) to the contrary
notwithstanding, Citadel will not be relieved of its obligations under the Lease
Guaranty, whether or not a Suitable Replacement is provided as the Tenant or
guarantor, until (A) such Suitable Replacement becomes the guarantor or the
Tenant hereunder and (B) either of the following has occurred: (I) the Funding
Date or (II) the Suitable Replacement or an Affiliate of such Suitable
Replacement has succeeded to Citadel's obligations under the Loan Agreement and,
if there then remains any unused Commitment under and as defined in the Loan
Agreement, such successor (or a guarantor of such obligations, pursuant to the
terms of a guaranty reasonably acceptable to Landlord) is either Reading or
meets the Minimum Net Worth Requirement.

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<PAGE>

                  (iv) Except upon compliance with and subject to the terms of
this paragraph (c), nothing in this Section 17 shall be construed to relieve
Tenant of its obligations hereunder.

            (d) The Tenant shall, within thirty (30) days after the execution of
any sublease or assignment, deliver a conformed copy thereof to the Landlord and
any Pledgee.

            (e) The decision of the Landlord to grant a request to approve a
subletting or assignment in any instance shall not constitute a waiver of the
obligation of the Tenant to seek such consent in any other instance (whether for
the same or a different Theatre Property, whether for the same proposed
subtenant or a different one) or a waiver by the Landlord of its rights to
withhold its consent in connection with any subsequent request.

            (f) For purposes hereof, an assignment shall include a transfer of
the direct or indirect interests in the Tenant such that the Tenant ceases to be
an Affiliate of the Parent.

            SECTION 18. EVENTS OF DEFAULT.

      Any of the following events of default shall constitute an "Event of
Default" and shall give rise to the rights on the part of the Landlord described
in Section 19 hereof:

            (a) Failure of the Tenant to pay Basic Rent or Additional Rent
pursuant to Section 7 hereof on or prior to the earlier of (i) five (5) Business
Days after such payment is due and (ii) the Lease Termination Date, or failure
of the Tenant to pay any other amount payable by the Tenant hereunder on or
prior to the earlier of (i) fifteen (15) Business Days after demand for such
other payment from the Landlord made on or after the due date therefor and (ii)
the Lease Termination Date;

            (b) Failure of the Tenant to maintain the insurance required by
Section 10 hereof, or default in the performance of the covenant contained in
paragraph (k) of Section 10 hereof and, in either case, the continuance of such
default for two (2) Business Days after written notice of such default is given
to the Tenant by the Landlord or written notice of the expiration of any
required policy is received by the Tenant from its insurance agent or an
insurer; or

            (c) Default in the performance of any other obligation or covenant
of the Tenant pursuant to this Lease and, if such default is capable of cure,
the continuance of such default for thirty (30) days after written notice of
such default is given to the Tenant by the Landlord; or with respect to any such
default that it is not capable of being cured within such thirty (30) day
period, the failure of Tenant within such initial thirty (30) day period to
commence appropriate steps to cure such default or, thereafter, to continue to
pursue such cure with diligence and good faith; or

            (d) The Tenant shall fail to observe or perform, after the
expiration of any applicable grace period, any material term, covenant or
condition of any of the Site Leases on the

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part of the Landlord, as tenant thereunder, to be observed or performed, unless
any such observance or performance shall have been waived or not required by the
Site Landlord under the applicable Site Lease, or if any one or more of the
events referred to in a Site Lease shall occur which would cause such Site Lease
to terminate without notice or action by the Site Landlord thereunder or which
would entitle the Site Landlord under such Site Lease to terminate such Site
Lease and the term thereof by the giving of notice to the Landlord without
opportunity to cure, as tenant thereunder; or

            (e) A default by Parent under the Lease Guaranty in favor of
Landlord past notice and time to cure if required or if any such Guaranty ceases
to be in full force and effect; or

            (f) (i) A default by Tenant in making any payment when due under the
notes delivered by Tenant under the Agreement of Purchase and Sale of Membership
Interest, of even date herewith, between Tenant and certain Affiliates of
Landlord, in any such case following expiration of cure and notice periods set
forth therein; or (ii) a default by the lender under the Loan Agreement to make
a loan thereunder when required to so lend by the terms thereof, provided such
failure continues for 30 days after notice; or (iii) the Lender under the Loan
Agreement shall default on any obligation under any indemnity agreement entered
into pursuant to Section 4.2(e)(y) of the Loan Agreement, provided such default
continues for 30 days after notice; or

            (g) The entry of a decree or order for relief in respect of the
Tenant or Parent by a court having jurisdiction in the premises or the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Tenant or the Parent of any
substantial part of the Tenant's or Parent's property, which appointment is not
discharged within sixty (60) days, or ordering the winding up or liquidation of
the Tenant's or Parent's affairs, in an involuntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal or state bankruptcy, insolvency or other similar law; or the
commencement against the Tenant or Parent of an involuntary case under the
Federal bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency or other similar law, and the
continuance of any such case undismissed and in effect for a period of sixty
(60) days; or

            (h) The suspension or discontinuance of the Tenant's or Parent's
business operations, the Tenant's or the Parent's insolvency (however evidenced)
or the Tenant's or the Parent's admission of insolvency or bankruptcy, or the
commencement by the Tenant or the Parent of a voluntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal or state bankruptcy, insolvency or other similar law, or the consent by
the Tenant or the Parent to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Tenant or the Parent or of any substantial part of the
Tenant's or the Parent's property, or the making by the Tenant or the Parent of
an assignment for the benefit of creditors, or the failure of the Tenant or the
Parent generally to pay its debts as such debts become due, or the taking of
corporate action by the Tenant or the Parent in furtherance of such action; or

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            (i) Failure of the Tenant to pay when due the Acquisition Cost if
the Purchase Option is exercised; or

            (j) This Lease or any Theatre Property or Element thereof is taken
upon execution or by other process of law (other than eminent domain or similar
proceedings) directed against the Tenant.

            SECTION 19. RIGHTS UPON DEFAULT.

            (a) Upon the occurrence and continuation of any Event of Default,
the Landlord may, at its sole option, give to the Tenant a notice (hereinafter
called "Notice of Termination") terminating this Lease at the expiration of
fifteen (15) days from the date of service of such Notice of Termination, and at
the expiration of such fifteen (15) days, this Lease and the term of this Lease,
as well as all of the right, title and interest of the Tenant hereunder, shall
wholly cease and expire in the same manner and with the same force and effect as
if the date of expiration of such fifteen (15) day period were the date
originally specified herein for the expiration of the term of this Lease, and
the Tenant shall then quit and surrender the Theatre Properties and each and
every Element thereof to the Landlord, and the Landlord or Landlord's agents or
servants may, either by summary process or by any suitable action or proceeding
at law, immediately or at any time thereafter re-enter the Theatre Properties
and each and every Element thereof and remove therefrom Tenant, its agents,
employees, servants, licensees, and any subtenants and other persons, and all or
any of its or their property therefrom, and repossess and enjoy the Theatre
Properties and each and every Element thereof, together with all additions,
alterations and improvements thereto; but Tenant shall remain liable as
hereinafter provided.

            (b) If this Lease shall be terminated as provided in paragraph (a)
of this Section 19, all of the right, title, estate and interest of Tenant (i)
in and to each Theatre Property and each and every Element thereof, all changes,
additions and alterations therein, and all renewals and replacements thereof,
(ii) in and to all rents, income, receipts, revenues, issues and profits issuing
from the Theatre Properties, or any Element, part or portion thereof, whether
then accrued or to accrue, (iii) in and to all insurance policies and all
insurance monies paid or payable thereunder, and (iv) in the then entire
undisbursed balance of any funds then being held by any party pursuant to the
terms hereof shall automatically pass to, vest in and belong to Landlord,
without further action on the part of either party, free of any claim thereto by
Tenant.

            (c) If this Lease is terminated under the provisions of paragraph
(a) of this Section 19, or in the event of the termination of this Lease, or of
re-entry, by or under any summary dispossess or other proceeding or action or
any provision of law by reason of an Event of Default hereunder on the part of
Tenant, Tenant shall pay to Landlord as liquidated damages, at the election of
Landlord, either

                  (i) a sum which at the time of such termination of this Lease
      or at the time of any such re-entry by Landlord, as the case may be,
      represents the then value of the

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      excess, if any, of (A) the aggregate amount of the Basic Rent and
      Additional Rent which would have been payable by Tenant for the period
      commencing with such earlier termination of this Lease and ending with the
      date contemplated as the expiration date hereof (ignoring the Renewal Term
      if such termination occurs during the Initial Term) if this Lease had not
      so terminated or if Landlord had not so re-entered the Theatre Properties,
      over (B) the aggregate rental value of the Theatre Properties for the same
      period, discounted at the rate of 7.75% per annum, or

                  (ii) a sum equal to any deficiency between the Basic Rent and
      Additional Rent which would have been payable by Tenant had this Lease not
      so terminated and the net amount, if any, of the rents, additional rent
      and other charges collected on account of the lease or leases of the
      Theatre Properties or any of them for each month of the period which would
      otherwise have constituted the balance of the term of this Lease, payable
      on the respective due dates thereof as specified herein. Any such
      reletting may be for a period shorter or longer than the remaining term of
      this Lease; but in no event shall Tenant be entitled to receive any excess
      of such credits over the sums payable by Tenant to Landlord hereunder, nor
      shall Tenant be entitled in any suit for the collection of damages
      pursuant to this Section to a credit in respect of any net rents from a
      reletting except to the extent that such net rents are actually received
      by Landlord. If the Landlord shall operate any or all of the Theatre
      Properties itself (or if the Landlord shall relet to an Affiliate of the
      Landlord), the deficiency shall be determined as if the Landlord had relet
      such Theatre Properties to a non-Affiliate, using as the rent from such
      re-letting the rent determined by agreement of the Landlord and the
      Tenant, or, if no such agreement can be reached, by the Appraisal
      Procedure.

In either event, Tenant shall pay Landlord the fair rental value of any space in
the Theatre Properties occupied by Tenant or an Affiliate after such termination
or re-entry. Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord from time to time at its election, and
nothing contained herein shall be deemed to (x) require Landlord to postpone
suit until the date when the term of this Lease would have expired if it had not
been so terminated under the provisions of paragraph (a) of this Section 19 or
under any provision of law, or had Landlord not re-entered the Theatre
Properties, or (y) preclude the bringing of additional or subsequent suits.

            (d) In computing such damages there shall be added to the said
deficiency such reasonable expenses as Landlord may incur in connection with
re-letting, such as reasonable legal expenses, reasonable attorneys' fees,
brokerage, advertising and expenses incurred in keeping the Theatre Properties
in good order or for preparing the same for re-letting or for use by Landlord
for its own operations or operations of an Affiliate. Any such damages shall be
paid in monthly installments by Tenant on the rent day specified in this Lease,
based on the amount of expense incurred by Landlord during the preceding month.
Landlord, in putting the Theatre Properties in good order or preparing the same
for re-rental or for use by Landlord for its own operations or operations of an
Affiliate, may, at Landlord's option, make such alterations, repairs,
replacements, and/or decorations in the Theatre Properties as Landlord, in
Landlord's sole judgment, considers

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<PAGE>

advisable and necessary for the purpose of re-letting the Theatre Properties or
for use by Landlord for its own operations or operations of an Affiliate and the
making of such alterations, repairs, replacements, and/or decorations shall not
operate or be construed to release Tenant from liability hereunder as aforesaid.
Landlord shall in no event be liable in any way whatsoever for failure to re-let
the Theatre Properties or to operate the Business therein, either directly or
through an Affiliate, or in the event that the Theatre Properties are re-let,
for failure to collect the rent thereof under such re-letting, and in no event
shall Tenant be entitled to receive the excess, if any, of such net rents
collected over the sums payable by Tenant to Landlord hereunder. In the event of
a breach or threatened breach by Tenant of any of the covenants or provisions
hereof beyond the applicable grace period, if any, Landlord shall have the right
of injunction and the right to invoke any remedy allowed at law or in equity as
if re-entry, summary proceedings and other remedies were not herein provided
for. Mention in this Lease of any particular remedy shall not preclude Landlord
from any other remedy, in law or in equity. Tenant hereby expressly waives any
and all rights of redemption granted by or under any present or future laws in
the event of Tenant being evicted or dispossessed for any cause, or in the event
of Landlord obtaining possession of the Theatre Properties by reason of the
violation by Tenant of any of the covenants and conditions of this Lease, or
otherwise.

            (e) The receipt of any payments under this Lease by the Landlord
with knowledge of any breach of this Lease by the Tenant or of any default by
the Tenant in the performance of any of the terms, covenants or conditions of
this Lease, shall not be deemed to be a waiver of any provision of this Lease.

            (f) No receipt of moneys by the Landlord from the Tenant after the
termination or cancellation hereof in any lawful manner shall reinstate,
continue or extend Lease Term or affect any notice theretofore given to the
Tenant, or operate as a waiver of the right of the Landlord to enforce the
payment of Basic Rent, Additional Rent or other charges payable hereunder, or
operate as a waiver of the right of the Landlord to recover possession of the
Theatre Properties and Equipment subject to this Lease by proper suit, action,
proceedings or remedy; it being agreed that, after the service of notice to
terminate or cancel this Lease, and the expiration of the time therein
specified, if the default has not been cured in the meantime, or after the
commencement of any suit, action or summary proceedings or of any other remedy,
or after a final order, warrant or judgment for the possession of any Theatre
Property or Element thereof, the Landlord may demand, receive and collect any
moneys payable hereunder, without in any manner affecting such notice,
proceedings, suit, action, order, warrant or judgment. Acceptance of the keys to
any Theatre Property or Theatre Improvements, or any similar act, by the
Landlord, or any agent or employee of the Landlord, during the term hereof,
shall not be deemed to be an acceptance of a surrender of any Theatre Property
or Theatre Improvements unless the Landlord shall consent thereto in writing.

            (g) With respect to the termination of this Lease as a result of an
Event of Default, the Tenant hereby waives service of any notice of intention to
re-enter. The Tenant hereby waives any and all rights to recover or regain
possession of any Parcel of Property, Theatre Improvement or Unit of Equipment
or to reinstate this Lease as permitted or provided by or under any statute, law
or

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<PAGE>

decision now or hereafter in force and effect. The words "re-enter" and
"re-entry" (and words of similar import) are not restricted to their technical
legal meaning.

            (h) No remedy referred to in this Section 19 is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to the Landlord at law or in equity,
and the exercise in whole or in part by the Landlord of any one or more of such
remedies shall not preclude the simultaneous or later exercise by the Landlord
of any or all such other remedies. No waiver by the Landlord of any Event of
Default hereunder shall in any way be, or be construed to be, a waiver of any
future or subsequent Event of Default, whether similar or dissimilar to the
previously assumed Event of Default.

            (i) Each party shall pay to the other all costs and expenses,
including reasonable attorneys' fees, incurred by such other party in
successfully enforcing any of the covenants and provisions of this Lease and
incurred in any successful action brought by such other party on account of the
provisions hereof, and all such costs, expenses, and attorneys' fees may be
included in and form a part of any judgment entered in any proceeding brought by
such other party on or under this Lease. All of the sums paid or obligations
incurred by one party as aforesaid with interest and costs shall be paid by such
party to the other within five (5) days of the rendition by such first party to
the other of any bill or statement therefor, and sums owing by the Tenant shall
be treated as Additional Rent.

            (j) Tenant expressly waives, for itself and for any person claiming
through or under Tenant, any rights which Tenant or any such person may have
under the provisions of Section 2-201 of the New York Civil Practice Law and
Rules and of any successor law of like import then in force, in connection with
any holdover summary proceedings which Landlord may institute to enforce the
provisions of this Article 19.

            SECTION 20. LANDLORD'S LIEN.

      To secure its payment of all Basic Rent, Additional Rent and all other
amounts owing hereunder and the performance of its covenants and agreements
contained in this Lease (including, without limitation, the covenants and
agreements contained in the Site Leases), the Tenant hereby grants to the
Landlord an express first and prior contractual lien and security interest on
all property (including fixtures, equipment, chattels and merchandise) that may
be placed on a Theatre Property, and also upon all proceeds of any insurance
that may accrue to the Tenant by reason of the destruction or damage to that
property. The Tenant will not remove that property from each Theatre Property
(except in the ordinary course of business) without the prior written consent of
the Landlord, which can be unreasonably withheld or delayed in the Landlord's
absolute discretion, until all arrearages in Basic Rent, Additional Rent and all
other amounts owing hereunder have been paid. The Tenant waives the benefit of
all exemption laws in favor of this lien and security interest. This lien and
security interest is given in addition to the Landlord's statutory lien and is
cumulative with it. Upon the occurrence of any Event of Default, these liens may
be foreclosed with or without court proceedings by public or private sale, so
long as the Landlord gives the Tenant at least ten (10) days'

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notice of the time and place of the sale. The Landlord will have the right to
become the purchaser of such property if it is the highest bidder at the sale.
Contemporaneously with its execution of this Lease, and if requested by the
Landlord at any time after the Effective Date, the Tenant will execute and
deliver to the Landlord Uniform Commercial Code financing statements in form and
substance sufficient (upon proper filing) to perfect the security interest
granted in this Section 20 hereof. If requested by the Landlord, the Tenant will
also execute and deliver to the Landlord Uniform Commercial Code continuation
statements in form and substance sufficient to reflect any proper amendment of,
modification in or extension of the security interest granted in this Section 20
hereof.

            SECTION 21. SUBORDINATION AND ATTORNMENT.

      This Lease and the Tenant's rights under this Lease are subject and
subordinate to any ground lease or underlying lease (including the Site Leases),
first mortgage, first deed of trust or other first lien encumbrance or indenture
(or series of mortgages held by or for the benefit of Affiliated parties),
whether encumbering any Theatre Property or the interest of the Landlord under
any of the Site Leases, together with any renewals, extensions, modifications,
consolidations, and replacements of them listed on Exhibit C that now or at any
subsequent time affects any Parcel of Property, Theatre Improvement or Unit of
Equipment or any interest of the Landlord in any Parcel of Property, Theatre
Improvement or Unit of Equipment or the Landlord's interest in this Lease and
the estate created by this Lease or such landlord's interest; provided, that
this Lease shall not be subordinate to any Lien created by Landlord other than a
Landlord Permitted Lien; and any and all mortgages and other encumbrances on the
interest of a Site Landlord under its Site Lease or in and to the estate of such
Site Landlord in and to the real property interest of the Site Landlord
thereunder. This provision will be self-operative and no further instrument of
subordination will be required in order to effect it. Nevertheless, the Tenant
will execute, acknowledge and deliver to the Landlord, at any time and from time
to time, within ten (10) Business Days following written demand by the Landlord,
documents reasonably requested by the Landlord, any Site Landlord or underlying
lessor or any mortgagee, or any holder of a deed of trust or other instrument
described in this paragraph, to confirm or effect the subordination.
Notwithstanding the foregoing, if Landlord shall not obtain from the holder of
any ground lease or underlying lease, first mortgage, first deed of trust or
other first lien encumbrance or indenture a reasonably acceptable
non-disturbance and attornment agreement, this Lease shall not be subject and
subordinate to such ground lease or underlying lease, first mortgage, first deed
of trust or other first lien encumbrance or indenture or other Landlord
Permitted Lien except to the extent now so provided in any Site Lease. Such
non-disturbance and attornment agreement will provide, among other things, that
anyone succeeding to the interest of the Landlord as a result of the exercise of
its rights under any ground lease or underlying lease, first mortgage, first
deed of trust or other first lien encumbrance or indenture or other Landlord
Permitted Lien will not be bound by (i) any payment of Basic Rent, Additional
Rent or any other amount payable hereunder for more than one month in advance,
or (ii) any amendment or modification of this Lease made thereafter without its
written consent, or (iii) any claim against the Landlord arising prior to the
date that the successor succeeded to the Landlord's interest (except to the
extent such claim relates to a condition or circumstance which continues to
exist thereafter), or (iv) any claim or offset of Basic Rent, Additional Rent or
any other amount owing hereunder against the Landlord

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(except to the extent such claim or offset relates to a condition or
circumstance which continues to exist thereafter but then, so long as such party
is not an Affiliate of Landlord, only as to the time period following such
party's succession to the interest of landlord hereunder). Upon request by the
successor and without cost to the Landlord or the successor, the Tenant will
execute, acknowledge and deliver reasonable documents confirming the attornment.

            SECTION 22. RIGHT TO PERFORM FOR TENANT.

            (a) If the Tenant fails to pay when due any amounts payable under
this Lease (including amounts payable pursuant to a Site Lease which are the
obligation of Tenant pursuant to the terms hereof) or to perform or comply with
any of its covenants or agreements contained in this Lease (including, without
limitation, the covenants or agreements contained in any of the Site Leases),
and the period to cure such failure has expired without the Tenant curing such
failure, the Landlord may, upon at least ten (10) days' advance written notice
to the Tenant (or without notice to the Tenant if the Landlord in its reasonable
discretion determines that any delay in performing or complying with such
covenant or agreement could have a Material Adverse Property Effect or in cases
of emergency), but without any obligation so to do (whether or not so done in
any previous instance) and without waiving or releasing any obligations or
default, itself perform or comply with such covenant or agreement.

            (b) All amounts paid by the Landlord pursuant to paragraph (a)
hereof and all costs and expenses incurred by the Landlord in connection with
the performance or compliance with any of those obligations will be payable by
the Tenant to the Landlord on demand, together with interest at the
Reimbursement Rate from the date incurred by the Landlord until the date repaid
by the Tenant. Any payments from Tenant to Landlord may be applied to costs,
fees and interest as Landlord may elect.

            (c) In the proof of any damages that the Landlord may claim against
the Tenant arising out of the Tenant's failure to maintain insurance pursuant to
any of the provisions of Section 10 hereof, the Landlord will not be limited to
the amount of the unpaid insurance premium but rather the Landlord will also be
entitled to recover, as damages for the breach, the amount of any uninsured loss
(to the extent of any deficiency in the insurance required by and actually
maintained pursuant to Section 10 hereof), damages, costs, and expenses of suit,
including reasonable attorneys' fees, arising out of damage to, or destruction
of, any Theatre Improvement and Unit of Equipment occurring during any period
for which the Tenant has failed to provide such insurance.

            (d) Nothing herein shall affect obligations of, or claims or rights
against, Tenant pursuant to Section 11 hereof.

            SECTION 23. PERMITTED CONTESTS.

            (a) The Tenant shall not be required, nor shall the Landlord have
the right, to pay, discharge or remove any tax, assessment, levy, fee, rent,
charge or Lien, or to comply or cause any

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Parcel of Property, Theatre Improvement or Unit of Equipment to comply with any
Legal Requirements applicable to any Parcel of Property, Theatre Improvement or
Unit of Equipment or the occupancy, use or operation thereof, so long as no
Event of Default exists under this Lease, and, in the reasonable judgment of the
Tenant's counsel (which, if the amount at issue would be reasonably likely to
exceed $50,000 and to comply with the following would not result in the loss of
any attorney-client, work product, or similar privilege, the Landlord may
request to be provided to it in writing), the Tenant shall have reasonable
grounds to contest the existence, amount, applicability or validity thereof by
appropriate proceedings, which proceedings, in the reasonable judgment of the
Landlord, (i) shall not involve any danger that the Parcel of Property, Theatre
Improvement or Unit of Equipment or any Basic Rent, Additional Rent or any other
amounts owing hereunder would be subject to sale, forfeiture or loss or loss of
use, as a result of failure to comply therewith, (ii) shall not affect the
payment of any Basic Rent, Additional Rent or any other sums due and payable
hereunder or result in any such sums being payable to any Person other than the
Landlord or any Pledgee except as provided herein, (iii) will not place the
Landlord, any Pledgee or a Site Landlord in any danger of civil liability for
which the Landlord, any Pledgee or such Site Landlord is not adequately
indemnified (the Tenant's obligations under Section 11 of this Lease shall be
deemed to be adequate indemnification if no Event of Default exists and if such
civil liability is reasonably likely to be less than $50,000 per Parcel or Unit
and $100,000 in the aggregate prior to the Funding Date and $500,000 per Parcel
or Unit and $1,000,000 in the aggregate from and after the Funding Date, and so
long as Tenant or a guarantor of its obligations hereunder meets the Minimum Net
Worth Requirement) or subject the Landlord, any Pledgee or such Site Landlord to
any danger of criminal liability, (iv) if involving Taxes, shall suspend the
collection of Taxes (unless the Tenant has provided a bond for the full amount
in dispute), and (v) shall be permitted under and be conducted in accordance
with the provisions of any other instrument (including, without limitation, the
Site Leases) to which the Tenant or the Parcel of Property, Theatre Improvement
or Unit of Equipment is subject and shall not constitute a default thereunder
(the "Permitted Contest"). The Tenant shall conduct all Permitted Contests in
good faith and with due diligence and shall promptly after the final
determination (including appeals) of any Permitted Contest (or, if earlier, upon
any of the above criteria no longer being satisfied) pay and discharge all
amounts which shall be determined to be payable therein. The Landlord shall at
the Tenant's expense reasonably cooperate in good faith with the Tenant with
respect to all Permitted Contests conducted by the Tenant pursuant to this
Section 23, including, without limitation, in assisting in the preparation of,
and participating in, filings related to such Permitted Contests.

            (b) At least ten (10) days prior to the commencement of any
Permitted Contest, the Tenant shall notify the Landlord in writing thereof if
the amount in contest or the cost of compliance exceeds (or is reasonably
estimated by Tenant to exceed) $100,000 if prior to the Funding Date or $500,000
thereafter, and shall describe such proceeding in reasonable detail. In the
event that the Landlord shall receive written notice from a taxing authority or
subdivision thereof which proposes an additional assessment or levy of any tax
for which the Tenant is obligated to reimburse the Landlord under this Lease
which notice does not indicate that an original or copy thereof was provided to
the Tenant, or in the event that the Landlord is notified in writing of the
commencement of an audit or similar proceeding which could result in such an
additional assessment

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which notice does not indicate that an original or copy thereof was provided to
the Tenant, then the Landlord shall in a timely manner notify the Tenant in
writing of such proposed levy or proceeding.

            SECTION 24. PLEDGE BY LANDLORD.

            (a) The Landlord shall have the right to obtain debt financing for
the continuing ownership of any Theatre Property or Element thereof by pledging
its right, title and interest in any or all amounts payable by or due from the
Tenant or any third party under this Lease and granting a security interest in
(including a Lien on) this Lease, or the Landlord's estate in such Theatre
Property and/or Element, to a lender or lenders under a Financing Agreement;
provided, that any such financing shall be subject to the rights and interests
of the Tenant under this Lease, including, without limitation, the Purchase
Option. In no event may the Landlord enter into any Financing Agreement or other
instrument, or take any other action, which would constitute or incur a Lien
which is not a Permitted Landlord Lien.

            (b) Any Pledgee shall, except as otherwise agreed by the Landlord
and such Pledgee, have all the rights, powers, privileges and remedies of the
Landlord hereunder, and the Tenant's obligations as between itself and such
Pledgee hereunder shall not be subject to any claims or defense that the Tenant
may have against the Landlord other than payment; provided that the foregoing
shall not be deemed to be a waiver of any claims the Tenant may have against the
Landlord. Anything contained herein to the contrary notwithstanding, no Pledgee
shall be obligated to perform any duty, covenant or condition required to be
performed by the Landlord hereunder, and any such duty, covenant or condition
shall be and remain the sole obligation of the Landlord.

            SECTION 25. NOTICES AND REQUESTS.

      Any notices, consents, or other communications between Landlord and Tenant
may be oral or in writing, so long as the Landlord remains Sutton Hill Capital,
L.L.C. or an Affiliate thereof and the Tenant remains Reading or Citadel or a
Subsidiary of Reading or Citadel; provided, however, that, if this Lease
specifically provides that a notice, consent or communication must be in
writing, then such provision controls. Subject to the preceding sentence, all
notices, offers, acceptances, approvals, waivers, requests, demands and other
communications hereunder or under any other instrument, certificate or other
document delivered in connection with the transactions described herein shall be
in writing, shall be addressed as provided below and shall be considered as
properly given (a) if delivered in person, (b) if sent by express courier
service (including, without limitation, Federal Express, Emery, DHL, Airborne
Express, and other similar express delivery services), (c) in the event
overnight delivery services are not readily available, if mailed by United
States Postal Service, postage prepaid, registered or certified with return
receipt requested, or (d) if sent by telecopy and confirmed; provided, that in
the case of a notice by telecopy, the sender shall in addition confirm such
notice by writing sent in the manner specified in clause (a), (b) or (c) of this
Section 25. All notices shall be effective upon receipt by the addressee;
provided, however, that if any notice is tendered to an addressee and the
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender. For the purposes of notice, the addresses of the parties shall
be as set

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forth below; provided, however, that any party shall have the right to change
its address for notice hereunder to any other location by giving written notice
to the other party in the manner set forth herein. The initial addresses of the
parties hereto are as follows:

                         If to the Tenant:

                         Citadel Cinemas, Inc.
                         550 South Hope Street
                         Suite 1825
                         Los Angeles, CA 90017
                         Attn:  President
                         Telecopy: (213) 235-2229

With a copy of all notices under this Section 25 to be simultaneously given,
delivered or served to S. Craig Tompkins at the following address:

                         Reading International, Inc.
                         550 South Hope Street, Suite 1825
                         Los Angeles, CA 90071
                         Telecopier  (213) 235-2229

                         If to Landlord:

                         Sutton Hill Capital, L.L.C.
                         120 North Robertson Boulevard
                         Los Angeles, CA 90048
                         Attention: Legal Department
                         Telecopy: (310) 652-6490

With a copy of all notices under this Section 25 to be simultaneously given,
delivered or served to Ira Levin at the following address:

                         Pacific Theatres
                         120 North Robertson Boulevard
                         Los Angeles, CA 90048
                         Telecopier: (310) 652-6490

With a copy of all notices under this Section 25 to any Pledgee at such address
as such Pledgee may specify by written notice to the Landlord and the Tenant.

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            SECTION 26. COVENANT OF QUIET ENJOYMENT.

      During the Lease Term and so long as (i) no Event of Default shall have
occurred and be continuing and (ii) the Tenant is performing and observing all
the covenants, conditions and agreements on the Tenant's part to be observed and
performed, the Landlord recognizes the Tenant's right to uninterrupted use and
quiet enjoyment of the Theatre Properties and all material Elements thereof on
the terms and conditions provided in this Lease without any interference from
the Landlord or anyone claiming through or under the Landlord, subject, however,
to the terms and conditions of the Site Leases and to the liens and encumbrances
listed on Exhibit C attached hereto. This covenant shall be construed as running
with the land to and against subsequent owners and successors in interest, and
is not, nor shall it operate or be construed as, a personal covenant of the
Landlord, except to the extent of the Landlord's interest in the Theatre
Properties, and this covenant and any and all other covenants of the Landlord
contained in this Lease shall be binding upon the Landlord and upon such
subsequent owners and successors in interest of the Landlord's interest under
this Lease, to the extent of their respective interests in the Theatre
Properties as and when they shall acquire same and then only for so long as they
shall retain such interest.

            SECTION 27. LEASEHOLD INTERESTS.

            (a) This Lease is subject to all of the terms, covenants, conditions
and agreements contained in the Site Leases for the Lease Term. Except as
otherwise expressly provided in this Lease, all of the terms, covenants,
conditions and agreements contained in the Site Leases, except such as by their
nature or purpose are inapplicable or inappropriate to the leasing of the
Theatre Properties pursuant to this Lease, are hereby incorporated in and made a
part of this Lease with the same force and effect as though set forth at length
herein and except that obligations and liabilities of the tenant or lessee
thereunder are deemed to refer to Tenant hereunder and all rights, benefits,
indemnities and protections in favor of the lessor or landlord thereunder also
inure to the benefit of the Landlord hereunder.

            (b) For the purposes of this Lease, the provisions of the Site
Leases, as incorporated herein, are subject to the following modifications or
deletions: (i) in all provisions requiring the approval or consent of the
Landlord, if the approval or consent of the lessor under any of the applicable
Site Leases is also required, the Tenant shall be required to obtain the
approval or consent of such lessor in addition to the approval or consent of the
Landlord; and (ii) the time limits provided in each of the Site Leases for the
giving of notice, making demands, performance of any act, condition or covenant,
or the exercise of any right, remedy, or option, are amended for the purpose of
this Lease by lengthening or shortening the same in each instance by five (5)
days, as appropriate, so that notices may be given, demands made, or any act,
condition or covenant performed, or any right, remedy or option hereunder
exercised, by the Landlord or the Tenant, as the case may be, within the same
limit relating thereto contained in the Site Leases.

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<PAGE>

            (c) The Tenant hereunder covenants and agrees to perform and to
observe and to cause each permitted sublessee to perform and observe all of the
terms, covenants, provisions, conditions and agreements of the Site Leases on
the Landlord's part as lessee or sublessee thereunder to be performed and
observed (including, without limitation, (x) payment of all rent, additional
rent, and any other amounts payable by the Landlord as lessee under the Site
Leases, (y) surrender of each Theatre Property under the Site Lease applicable
thereto in the condition required at the end of the term thereof as if such term
end coincided with the expiration or sooner termination of the Lease Term, and
(z) reconstruction following a casualty if and to the extent required therein)
to the end that all things shall be done which are necessary to keep unimpaired
the rights of the Landlord as lessee under the Site Leases. The Landlord and
Tenant further covenant that they shall cause to be exercised any renewal option
contained in the Site Leases which relates to renewal occurring in whole or in
part during the Lease Term. The Tenant agrees to cooperate fully with the
Landlord to enforce the Landlord's rights as the lessee under any of the Site
Leases as against the lessor under any of the Site Leases.

            (d) The Tenant covenants and agrees pursuant to Section 11 hereof to
indemnify and hold harmless the Landlord and any Pledgee from and against any
and all Losses arising by reason of the Tenant's or any permitted sublessee's
failure to comply with the Site Leases or the provisions of this Section 27
other than to the extent arising, from (i) a Landlord Act or (ii) any breach of
any covenant or agreement of Landlord or any Affiliate under this Lease or any
Other Lease Document.

            (e) The Landlord and the Tenant agree that during the Lease Term the
Landlord shall have no obligation or responsibility to provide services or
equipment required to be provided or repairs or restorations required to be made
in accordance with the provisions of the Site Leases by the lessor thereunder.
The Landlord shall in no event be liable to the Tenant nor shall the obligations
of the Tenant hereunder be impaired or the performance thereof excused because
of any failure or delay on the part of the Landlord as the lessee under the Site
Leases in providing such services or equipment or making such restorations or
repairs and such failure or delay shall not constitute a basis for any claim
against the Landlord or any offset against any amount payable to the Landlord
under this Lease. So long as there is no Event of Default hereunder, the
Landlord will reasonably cooperate, at the Tenant's sole cost and expense, to
seek from the lessor under any Site Lease the performance by such lessor of its
obligations under the applicable Site Lease.

            SECTION 28. MISCELLANEOUS.

            (a) All agreements, indemnities, representations and warranties
shall survive the expiration or other termination hereof.

            (b) This Lease and the instruments, documents or agreements referred
to herein constitute the entire agreement between the parties and no
representations, warranties, promises, guarantees or agreements, oral or
written, express or implied, have been made by any party hereto

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<PAGE>

with respect to this Lease or any Theatre Property or Element thereof, except as
provided herein or therein.

            (c) This Lease may not be amended, modified or terminated, nor may
any obligation hereunder be waived orally, and no such amendment, modification,
termination or waiver shall be effective for any purpose unless it is in
writing, signed by the party against whom enforcement thereof is sought. The
consent or approval by the Landlord to or of any act by the Tenant requiring the
Landlord's consent or approval shall not be deemed to have been waived by the
Landlord unless such waiver is in writing signed by the Landlord waiving such
covenant or condition.

            (d) The captions in this Lease are for convenience of reference
only, and shall not be deemed to affect the meaning or construction of any of
the provisions hereof. Any provision of this Lease which is prohibited by law or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and the parties hereto shall negotiate in good
faith appropriate modifications to reflect such changes as may be required by
law, and, as nearly as possible, to produce the same economic, financial and tax
effects as the provision which is prohibited or unenforceable; and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Landlord and the Tenant hereby waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect.

      THIS LEASE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF NEW YORK. THE
TENANT AND THE LANDLORD AGREE THAT, TO THE MAXIMUM EXTENT PERMITTED BY THE LAW
OF THE STATE OF NEW YORK, THIS LEASE, AND THE RIGHTS AND DUTIES OF THE TENANT
AND THE LANDLORD HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION,
SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) IN ALL
RESPECTS, INCLUDING, WITHOUT LIMITATION, IN RESPECT OF ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. EACH OF THE TENANT AND THE LANDLORD
HEREBY IRREVOCABLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE
SUPREME COURT OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS
LEASE OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING IS

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<PAGE>

BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER, OR THAT THIS LEASE OR ANY DOCUMENT OR ANY INSTRUMENT
REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF MAY NOT BE LITIGATED IN OR BY
SUCH COURT. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT
PRECLUDE EITHER PARTY FROM OBTAINING JURISDICTION OVER THE OTHER IN ANY COURT
OTHERWISE HAVING JURISDICTION. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE TENANT AND THE LANDLORD AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO
ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR
JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT.
EACH OF THE TENANT AND THE LANDLORD AGREES THAT SERVICE OF PROCESS MAY BE MADE
UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN
THIS LEASE OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK.

      THE LANDLORD AND THE TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRIAL
BY JURY OF ANY CAUSE OF ACTION, CLAIM, COUNTERCLAIM OR CROSS COMPLAINT IN ANY
ACTION, PROCEEDING AND/OR HEARING BROUGHT BY EITHER THE LANDLORD AGAINST THE
TENANT OR THE TENANT AGAINST THE LANDLORD ON ANY MATTER WHATSOEVER ARISING OUT
OF, OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF THE LANDLORD
AND THE TENANT, THE TENANT'S USE OR OCCUPANCY OF THE THEATRE PROPERTIES AND THE
ELEMENTS THEREOF, OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY
REMEDY UNDER ANY LAW, STATUTE OR REGULATION, EMERGENCY OR OTHERWISE, NOW OR
HEREAFTER IN EFFECT. THE LANDLORD AND THE TENANT ACKNOWLEDGE THAT THE PROVISIONS
OF THIS PARAGRAPH (D) OF SECTION 28 HAVE BEEN BARGAINED FOR AND THAT THEY HAVE
BEEN REPRESENTED BY COUNSEL IN CONNECTION THEREWITH.

            (e) This Lease may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

            (f) One or more waivers of any covenant or condition by the Landlord
shall not be construed as a waiver of a subsequent breach of the same covenant
or condition. The giving by the Landlord of any consent or approval hereunder
(whether affirmatively or by inaction) shall not be deemed a waiver of the
requirement for Tenant to seek such consent or approval in the future for the
same or a dissimilar event.

            (g) The Landlord recognizes the Tenant's right to call any Theatre
Property by such name or designation as the Tenant may deem appropriate in the
ordinary course of the Tenant's business and to place such signs, labels, plates
or other markings on any Theatre Property as the

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Tenant may desire in exercising such rights, subject to the provisions of
paragraph (b) of Section 8 hereof and the provisions of the Other Lease
Documents.

            (h) Each and every covenant contained herein shall be deemed
separate and independent and not dependent upon other provisions of this Lease.

            (i) The relationship of the parties hereto is that of landlord and
tenant and no partnership, joint venture or participation is hereby created.

            (j) Either party shall have the right to obtain specific performance
of any and all covenants or obligations of the other under this Lease, and
nothing contained in this Lease shall be construed as, or shall have the effect
of, abridging such right.

            (k) The Landlord acknowledges that Citadel, pursuant to its
obligations under the Securities Acts and the rules and regulations thereunder,
may be required to file this Lease, and certain or all of the Other Lease
Documents, with the Securities and Exchange Commission as exhibits to its
reports and statements under the Securities Acts, and the Landlord hereby
consents to the same.

            (l) This Lease has been prepared by the Landlord and its
professional advisors and reviewed by the Tenant and its professional advisors.
The Landlord, the Tenant and their separate advisors believe that this Lease is
the product of all of their efforts, that it expresses their agreement, and that
it should not be interpreted in favor of either the Landlord or the Tenant or
against the Landlord or the Tenant merely because of their efforts in preparing
it.

            (m) The Tenant agrees from time to time, no later than ten (10)
Business Days after a written request by the Landlord (including therein the
proposed certificate as the Landlord then in good faith would complete it on
behalf of the Tenant), to execute, acknowledge and deliver to the Landlord an
estoppel certificate, in form reasonably satisfactory to the Landlord, which:
(i) certifies that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the same is in full force and effect as
modified, and stating the modifications); (ii) states the expiration date of the
Lease Term and that (except as set forth herein) there are no agreements with
the Landlord to extend or renew the Lease Term or to permit any holding over (or
if there are any such other agreements, describes them and specifies the periods
of extension or renewal); (iii) certifies the dates through which Basic Rent,
Additional Rent and all other amounts owing hereunder have been paid; (iv)
states whether or not, to the knowledge and belief of the Tenant, the Landlord
is in default in performance of any of its obligations under this Lease, and
specifies each default of which the Tenant has knowledge; (v) states whether or
not, to the knowledge and belief of the Tenant, any event has occurred which,
with the giving of notice or passage of time, or both, would constitute a
default by the Landlord and, if such an event has occurred, specifies each such
event; (vi) states whether or not, to the knowledge and belief of the Tenant,
the Tenant is entitled to any credits, offsets, defenses or deductions against
payment of any amounts owing hereunder, and, if so, describes them; and (vii)
such other matters as may be

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reasonably requested by the Landlord. An estoppel certificate issued by the
Tenant pursuant to this paragraph (m) shall be a representation and warranty by
the Tenant which may be relied upon by the Landlord and by others with whom the
Landlord may be dealing, regardless of independent investigation. If the Tenant
fails within ten (10) Business Days after a written request by the Landlord to
execute and deliver an estoppel certificate or to advise the Landlord in writing
what, if anything, Tenant believes in good faith to be incorrect in the form
certificate provided by the Landlord, the Landlord's representations concerning
the factual matters covered by its proposed estoppel certificate, as described
above, shall be conclusively presumed to be correct.

            (n) All exhibits referred to in this Lease are attached hereto and
incorporated herein by reference.

            (o) The Landlord and its authorized representatives shall have the
right during business hours, upon not less than twenty-four (24) hours' oral or
written notice to the Tenant (except that in the case of an emergency, the
existence of which shall be determined by the Landlord in its reasonable
discretion, no advance notice shall be required) to enter upon any Theatre
Property for purposes of inspection and exercising its rights under this Lease,
provided that such inspections shall not unreasonably interfere with the
Tenant's construction or business activities.

            (p) Any holding over by the Tenant after the expiration of the Lease
Term shall be construed as a tenancy from month to month and shall be subject to
all of the terms and conditions which are provided for in this Lease except that
the Basic Rent for any such month shall be an amount equal to 150% of the Basic
Rent which would have been in effect for such month calculated as if the Lease
Term had continued (including beyond the originally scheduled expiration hereof)
and Basic Rent had been calculated for the applicable continuation period (Lease
Year by Lease Year) without reference to the adjustments contemplated by this
Section 28(p). Nothing herein shall be construed as an agreement or approval by
Landlord of any right or option to extend or renew the term hereof (except
strictly in compliance with and subject to the terms of Section 12 hereof).

            (q) This Lease shall not be recorded, but at the request of either
the Landlord or the Tenant, the other party agrees to join in the execution,
acknowledgment and delivery of any and all documents necessary to record a
memorandum or short form of this Lease. Subject to paragraph (g) of Section 2.2
and paragraph (e) of Section 2.4, all costs of recording a memorandum or short
form of this Lease shall be borne by the party requesting recordation.

            (r) The Landlord and any Pledgee shall, to the extent reasonably
requested by the Tenant, and at the Tenant's cost and expense, cooperate to
allow the Tenant to (a) perform its covenants contained in this Lease, including
at any time and from time to time, upon the reasonable request of the Tenant,
and at the Tenant's cost and expense, to execute and deliver any and all such
further instruments and documents as the Tenant may reasonably request in order
to perform such covenants, and (b) further the Tenant's requirements as lessee
of the Theatre Properties, including, at the Tenant's cost and expense, to file
any tax abatements or other tax requirements.

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            SECTION 29. CONSENTS.

            (a) The Tenant hereby waives any claim against Landlord which the
Tenant may have based upon any assertion that, when the consent or approval (or
words of similar import) of the Landlord is not to be withheld or delayed
unreasonably or the discretion or judgment (or words of similar import) of the
Landlord is to be exercised reasonably (any such instance, a "Consent"),
Landlord has unreasonably withheld or unreasonably delayed its Consent; and the
Tenant agrees that its sole remedy in any such instance shall be an action or
proceeding to enforce any such provision for specific performance, injunction or
declaratory judgment so long as the Landlord has not acted in bad faith. In the
event of such a determination by a court of competent jurisdiction, the
requested Consent shall be deemed to have been granted; provided, however, that
the Landlord shall have no liability to the Tenant for its refusal or failure to
give such Consent so long as the Landlord has not acted in bad faith. The sole
remedy for Landlord's unreasonably withholding or delaying of Consent, so long
as the Landlord has not acted in bad faith, shall be as provided in this Section
29 and shall be available only in those cases where Landlord has expressly
agreed in this Lease not to unreasonably withhold or unreasonably delay its
Consent. In any proceeding with respect to matters covered by this Section 29,
the prevailing party shall be liable for all costs (including reasonable
attorneys' fees and disbursements) of the other party.

            (b) In any instance in this Lease when Consent is not specified to
be subject to the reasonable discretion of the party whose consent is sought,
such Consent may be withheld in the sole and absolute discretion of the party in
question, for any reason or no reason at all, and without the need or obligation
to provide any explanation.

            SECTION 30. NO RECOURSE.

      The Landlord's obligations hereunder are intended to be the obligations of
the limited liability company Landlord only and no recourse for the payment of
any amount due under this Lease, the Site Leases or any other agreement
contemplated hereby or thereby, or for any claim based hereon or thereon or
otherwise in respect hereof or thereof, shall be had against any member of the
Landlord, or any incorporator, officer, director, member or Affiliate, as such,
past, present or future of the Landlord, any such member, parent or other
subsidiary of an Affiliate, except as set forth in a certain Guaranty of even
date herewith by Messrs. Cotter and Forman in favor of Tenant (as well as
Citadel Holding Corporation) and as set forth in a certain Pledge Agreement of
even date herewith between Citadel Holding Corporation and Sutton Hill
Associates, as amended and restated as of January 29, 2002, it being understood
that the Landlord is a limited liability company formed for the purpose of the
transactions involved in and relating to this Lease on the express understanding
aforesaid. Nothing contained in this Section 30 shall be construed to limit the
exercise or enforcement, in accordance with the terms of this Lease and any
other documents referred to herein, of the rights and remedies against the
Landlord or the assets of the Landlord.

                                       85
<PAGE>

            SECTION 31. NO MERGER.

      There shall be no merger of this Lease or of the leasehold estate hereby
created with the fee estate in any Parcel of Property by reason of the fact that
the same person acquires or holds, directly or indirectly, this Lease or the
leasehold estate hereby created or any interest herein or in such leasehold
estate as well as the fee estate in any Parcel of Property or any interest in
such fee estate.

            SECTION 32. EQUIPMENT TO BE PERSONAL PROPERTY.

      It is the intention and understanding of the Landlord and the Tenant that
all Equipment shall be and at all times remain personal property. The Tenant
shall obtain and record such instruments and take such steps as may be necessary
to prevent any Person from acquiring any rights in the Equipment paramount to
the rights of the Landlord by reason of such Equipment being deemed to be real
property.

            SECTION 33. MERGER, CONSOLIDATION OR SALE OF ASSETS.

      The Tenant may not consolidate with or merge into any other corporation or
sell or assign all or substantially all of its assets or its interest in the
Lease or any Theatre Property and Equipment to any Person, unless the surviving
corporation or transferee Person shall assume, by execution and delivery of
instruments reasonably satisfactory to the Landlord prior to any such
consolidation, merger, sale or assignment, the obligations of the Tenant
hereunder and become successor to the Tenant, but the Tenant shall not thereby
be released, without the consent of the Landlord, from its obligations hereunder
and provided, further, that no Event of Default shall have occurred and be
continuing, both prior and after giving effect to any such consolidation,
merger, sale or assignment and, if the successor Tenant shall be other than
Citadel Cinemas, Inc., Reading, Craig Corporation, or a controlled Affiliate of
Reading or Craig Corporation with respect to which Reading or Craig Corporation,
respectively, has furnished a Lease Guaranty, Citadel shall have confirmed in
writing that the Lease Guaranty is applicable to and covers the obligations and
liabilities of such successor as if originally named in such Lease Guaranty. The
terms and provisions of this Lease shall be binding upon and inure to the
benefit of the Tenant and its respective successors and assigns.

            SECTION 34. SUCCESSORS AND ASSIGNS.

      This Lease shall be binding on the parties hereto and their respective
successors and assigns but the foregoing shall not affect, alter or limit the
provisions of Section 17 hereof.

                                       86
<PAGE>

      IN WITNESS WHEREOF, the Landlord and the Tenant have caused this Lease to
be executed and delivered by their duly authorized officers as of the day and
year first above written.

                                        CITADEL CINEMAS, INC.

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

                                        SUTTON HILL CAPITAL, L.L.C.

                                        By:
                                           -----------------------------------
                                           Name:  James J. Cotter
                                           Title: Operating Member

                                       87

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