Cinergi Pictures Entertainment Inc – ‘PREM14A’ on 9/17/97

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Preliminary Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
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Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Preliminary Proxy Solicitation Material -- Merger    236   1.35M 
                          or Acquisition                                         

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.    ) 

Filed by the Registrant /X/                                             
Filed by a Party other than the Registrant / /                          
Check the appropriate box:                                              
/X/  Preliminary Proxy Statement                                        
/ /  Confidential, for Use of the Commission Only (as permitted by Rule 
14a-6(e)(2))                                                  
/ /  Definitive Proxy Statement                                         
/ /  Definitive Additional Materials                                    
/ /  Soliciting Material Pursuant to Section240.14a-11(c) or            
Section240.14a-12                                             

           CINERGI PICTURES ENTERTAINMENT INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
                      Not applicable
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):                              

/ /  No fee required.                                                           
/X/  Fee computed on table below per Exchange Act Rules 14a-6(i)(1)             
and 0-11.                                                             
    (1) Title of each class of securities to which transaction applies: Common
Stock, $.01 par value per share                               
(2) Aggregate number of securities to which transaction applies:      
   13,446,874 shares with respect to proposed Asset Sales; 6,442,341
shares with respect to proposed Merger.                       
         -----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed  
       pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):    
        $58,897,309 ($4.38 per share) with respect to the proposed Asset Sales
(consisting primarily of the assumption of certain Registrant 
        indebtedness and obligations with respect to the Film Library Sale and
     the cash consideration to be received by Registrant pursuant to the
         Assignment Agreement) and $17,394,321 ($2.70 per share) with respect to
         the proposed Merger. These numbers are estimates, are being used solely
    for purposes of calculating the filing fee, and do not necessarily
     represent either the actual consideration (on an aggregate or a per
  share basis) to be received by the Registrant as a result of the
         proposed Asset Sales or the actual (or maximum), aggregate or per share
    merger consideration, as such merger consideration may be adjusted
     pursuant to the terms of the Agreement of Merger, to be paid to the
Registrant's stockholders.                                    
         -----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:                  
$76,291,630                                                   
         -----------------------------------------------------------------------
(5) Total fee paid:                                                   
$15,258.33                                                    
         -----------------------------------------------------------------------
/ /  Fee paid previously with preliminary materials.                            
/ /  Check box if any part of the fee is offset as provided by Exchange Act Rule
  0-11(a)(2) and identify the filing for which the offsetting fee was paid
    previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.                   
(1) Amount Previously Paid:                                           
         -----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:                     
         -----------------------------------------------------------------------
(3) Filing Party:                                                     
         -----------------------------------------------------------------------
(4) Date Filed:                                                       
         -----------------------------------------------------------------------

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CINERGI PICTURES ENTERTAINMENT INC. 

2308 BROADWAY 

SANTA MONICA, CALIFORNIA 90404

        , 1997

Dear Stockholder:                                                               

You are cordially invited to attend a Special Meeting (the "Special     
Meeting") of Stockholders of Cinergi Pictures Entertainment Inc. (the "Company")
to be held on Thursday, December 4, 1997 at 10:00 a.m. local time, at        ,  
California. At the Special Meeting you will be asked:                           

1.  To consider and vote upon a proposal (the "Asset Sale Proposal") to 
      approve the sale of substantially all of the Company's assets, including
substantially all of the Company's film library, pursuant to two  
   agreements: (i) a Purchase and Sale Agreement dated April 3, 1997, as
      amended (the "Library Sale Agreement"), between the Company, its primary
       subsidiary and Walt Disney Pictures and Television and (ii) an Assignment
Agreement dated as of July 14, 1997, as amended (the "Assignment  
   Agreement), between the Company, its primary subsidiary and Twentieth
 Century Fox Film Corporation (collectively, the "Asset Sales"); and

   2.  To consider and vote upon a proposal (the "Merger Proposal") to approve
an Agreement of Merger, dated as of September 2, 1997 (the "Merger
   Agreement"), providing for the merger ("Merger") of CPEI Acquisition,
      Inc. ("Buyer"), a Delaware corporation, with and into the Company. Buyer
     is wholly owned by Andrew G. Vajna, Chairman of the Board of Directors,
President and Chief Executive Officer of the Company, and Valdina 
 Corporation N.V. ("Valdina"). Valdina is, as of September 17, 1997,
   indirectly beneficially owned 49.9% by Mr. Vajna and 50.1% by a trust
     which benefits certain persons including the son of Mr. Vajna, however,
     Valdina's corporate parent is in the process of effecting a transaction
  which will result in the increase of Mr. Vajna's indirect beneficial
ownership of Valdina to 99.8%.                                    

  THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS APPROVED THE ASSET
SALES. THE BOARD BELIEVES THAT THE TERMS OF THE ASSET SALES ARE FAIR TO,        
EXPEDIENT AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND     
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ASSET SALE PROPOSAL.
THE BOARD (EXCLUDING MR. VAJNA, WHO ABSTAINED FROM THE VOTE) HAS ALSO           
UNANIMOUSLY APPROVED THE MERGER AND THE MERGER AGREEMENT, BASED IN PART UPON THE
RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD (THE "SPECIAL COMMITTEE")    
CONSISTING OF ONE DIRECTOR NOT EMPLOYED BY OR OTHERWISE AFFILIATED WITH THE     
COMPANY. THE BOARD, BASED IN PART ON THE RECOMMENDATION OF THE SPECIAL          
COMMITTEE, BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF,   
THE STOCKHOLDERS OF THE COMPANY (OTHER THAN MR. VAJNA AND VALDINA), AND         
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE MERGER PROPOSAL.                    

  Stockholders of record who comply with the procedures specified in Section
262 ("Section 262") of the Delaware General Corporation Law, which are described
in the accompanying Proxy Statement, have the right to dissent from the Merger  
and to have their shares of common stock appraised by the Delaware Court of     
Chancery and to receive payment of the "fair value" of such shares as determined
by such Court in lieu of the merger consideration otherwise payable pursuant to 
the Merger Agreement. The text of Section 262 is attached as Appendix D to the  
accompanying Proxy Statement.                                                   

Enclosed is a Notice of Special Meeting of Stockholders and a Proxy     
Statement, which contains detailed information concerning the Asset Sales and   
Merger. Whether or not you plan to attend the Special Meeting, we urge you to   
read this material carefully. Your vote is important. We request that you mark, 
date, sign and return the enclosed proxy as soon as possible. A stockholder who 
executes and returns a proxy has the power to revoke it at any time before it is
voted by providing written notice thereof to the Secretary of the Company, by   
submitting a subsequent proxy, or by voting in person at the Special Meeting.   
The giving of a proxy does not affect a stockholder's right to attend and vote  
in person at the Special                                                        

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Meeting. A stockholder's presence at the Special Meeting, without further       
action, however, will not itself revoke the stockholder's proxy.                

Thank you for your consideration and continued support.                 

              Sincerely,

                    Warren Braverman

                                  CHIEF OPERATING OFFICER, CHIEF
             FINANCIAL

                                        OFFICER AND EXECUTIVE VICE PRESIDENT

(ii)

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CINERGI PICTURES ENTERTAINMENT INC. 

2308 BROADWAY 

SANTA MONICA, CA 90404

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS 

TO BE HELD ON DECEMBER 4, 1997

    NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of the
Stockholders of Cinergi Pictures Entertainment Inc. (the "Company") will be held
on Thursday, December 4, 1997, at 10:00 a.m. local time, at        , California,
for the following purposes:                                                     

1.  To consider and act upon a proposal (the "Asset Sale Proposal") to  
      approve the sale of substantially all of the Company's assets, including
     the sale of substantially all of the Company's film library (the "Asset
     Sales"), pursuant to (i) that certain Purchase and Sale Agreement dated
   April 3, 1997, as amended (the "Library Sale Agreement"), between the
     Company, its primary subsidiary and Walt Disney Pictures and Television
      ("Disney" is used herein to refer to Walt Disney Pictures and Television
      and/or its affiliates, including The Walt Disney Company, as applicable)
      and (ii) that certain Assignment Agreement dated as of July 14, 1997, as
    amended (the "Assignment Agreement"), between the Company, its primary
    subsidiary and Twentieth Century Fox Film Corporation. Pursuant to the
Library Sale Agreement, the Company has agreed to sell to Disney  
    substantially all of the films in the Company's motion picture library
and certain other assets in exchange for, among other things, the 
     cancellation of Disney's equity interest in the Company (555,556 shares
   of common stock and a warrant to purchase 150,000 shares at $9.00 per
      share), the cancellation of outstanding loans from Disney to the Company
(approximately $39,739,000 in principal and accrued interest as of
   September 1, 1997), and the assumption by Disney of certain specified
    obligations and liabilities of the Company. Pursuant to the Assignment
     Agreement, the Company has agreed to sell to Twentieth Century Fox Film
       Corporation the Company's rights in Die Hard With A Vengeance in exchange
for $11,250,000 in cash.                                          

  2.  To consider and act upon a proposal (the "Merger Proposal") to approve
   an Agreement of Merger, dated as of September 2, 1997 among Andrew G.
      Vajna, Chairman of the Board of Directors, President and Chief Executive
       Officer of the Company ("Vajna"), Valdina Corporation N.V. ("Valdina"), a
    corporation organized under the laws of the Netherlands Antilles, CPEI
       Acquisition, Inc. ("Buyer"), a Delaware corporation wholly owned by Vajna
   and Valdina, and the Company (the "Merger Agreement") providing for a
     merger pursuant to which Buyer will be merged with and into the Company
and the Company will become wholly owned by Vajna and Valdina (the
    "Merger"). Pursuant to the Merger, shares of Company common stock, par
 value $.01 per share (other than shares owned by Vajna, Valdina and
     shares as to which statutory dissenters' rights are perfected), will be
     converted into the right to receive $2.30 in cash, subject to potential
      upward adjustment as provided in the Merger Agreement. Valdina is, as of
  September 17, 1997, indirectly beneficially owned 49.9% by Vajna and
  50.1% by a trust which benefits certain persons including the son of
       Vajna, however, Valdina's corporate parent is in the process of effecting
 a transaction which will result in the increase of Vajna's indirect
beneficial ownership of Valdina to 99.8%.                         

   3.  To transact such other business as may properly come before the Special
Meeting and any adjournments thereof.                             

  THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS APPROVED THE ASSET
SALES. THE BOARD BELIEVES THAT THE TERMS OF THE ASSET SALES ARE FAIR TO,        
EXPEDIENT AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND     
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ASSET SALE PROPOSAL.
THE BOARD (EXCLUDING MR. VAJNA, WHO ABSTAINED FROM THE VOTE) HAS ALSO           
UNANIMOUSLY APPROVED THE MERGER                                                 

(iii) 

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AND THE MERGER AGREEMENT, BASED IN PART ON THE RECOMMENDATION OF A SPECIAL      
COMMITTEE OF THE BOARD (THE "SPECIAL COMMITTEE") CONSISTING OF ONE DIRECTOR NOT 
EMPLOYED BY OR OTHERWISE AFFILIATED WITH THE COMPANY. THE BOARD, BASED IN PART  
ON THE RECOMMENDATION OF THE SPECIAL COMMITTEE, BELIEVES THAT THE MERGER IS FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY (OTHER THAN   
VAJNA AND VALDINA), AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE MERGER      
PROPOSAL.                                                                       

  The Board has fixed the close of business on October 30, 1997 (the "Record
Date") as the record date for the determination of stockholders entitled to     
notice of, and to vote at, the Special Meeting. Accordingly, only stockholders  
of record as of the close of business on the Record Date will be entitled to    
notice of and to vote at the Special Meeting and any adjournments thereof.      

 EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. A COMPANY STOCKHOLDER WHO EXECUTES AND RETURNS A PROXY HAS THE POWER TO 
REVOKE IT AT ANY TIME BEFORE IT IS VOTED, BY PROVIDING WRITTEN NOTICE THEREOF TO
THE SECRETARY OF THE COMPANY OR BY SUBMITTING A SUBSEQUENT PROXY OR BY VOTING IN
PERSON AT THE COMPANY MEETING. THE GIVING OF A PROXY DOES NOT AFFECT A          
STOCKHOLDER'S RIGHT TO ATTEND AND VOTE IN PERSON AT THE MEETING. A STOCKHOLDER'S
PRESENCE AT THE MEETING, WITHOUT FURTHER ACTION, HOWEVER, WILL NOT ITSELF REVOKE
THE STOCKHOLDER'S PROXY.                                                        

                                       By Order of the Board of Directors,

                    Erick Feitshans,

             SECRETARY

, 1997                                                        

(iv)

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PROXY STATEMENT 

FOR 

CINERGI ENTERTAINMENT PICTURES INC. 

SPECIAL MEETING OF STOCKHOLDERS 

DECEMBER 4, 1997

INTRODUCTION

This Proxy Statement of Cinergi Pictures Entertainment Inc., a Delaware 
corporation (the "Company"), is being furnished to stockholders of the Company  
("Stockholders") in connection with the solicitation of proxies by the Board of 
Directors (the "Board") for use at a special meeting (the "Special Meeting") to 
be held on Thursday December 4, 1997, at 10:00 a.m. local time, at           ,  
California, and any adjournment thereof.                                        

The Stockholders will be asked to consider and act upon a proposal (the 
"Asset Sale Proposal") to approve a sale of substantially all the Company's     
assets, including substantially all of the Company's film library, pursuant to  
(i) that certain Purchase and Sale Agreement dated April 3, 1997, as amended    
(the "Library Sale Agreement"), between the Company, its primary subsidiary and 
Walt Disney Pictures and Television ("Disney" is used herein to refer to Walt   
Disney Pictures and Television and/or its affiliates, including The Walt Disney 
Company, as applicable) and (ii) that certain Assignment Agreement dated as of  
July 14, 1997, as amended (the "Assignment Agreement"), between the Company, its
primary subsidiary and Twentieth Century Fox Film Corporation ("Fox").          

  Pursuant to the terms of the Library Sale Agreement, the Company will sell
to Disney substantially all of the films in the Company's motion picture library
and certain other assets (referred to herein as the "Film Library Sale"). The   
film library being sold to Disney includes primarily all of the Company's rights
(except certain minimum guarantee payments) to the following eleven motion      
pictures: MEDICINE MAN; TOMBSTONE; RENAISSANCE MAN; COLOR OF NIGHT; JUDGE DREDD;
THE SCARLET LETTER; NIXON; EVITA (excluding soundtrack rights); AMANDA; THE     
SHADOW CONSPIRACY; and AN ALAN SMITHEE FILM. In consideration for the assets    
being sold to Disney, Disney has agreed to relinquish its equity interest in the
Company (555,556 shares of common stock and a warrant to purchase 150,000 shares
of common stock at a price of $9.00 per share) and cancel its outstanding loans 
to the Company (approximately $39,739,000 as of September 1, 1997). In addition,
Disney has agreed to assume with respect to the films and rights therein being  
sold to Disney (the "Film Library"), all residuals and participation obligations
(other than certain guild obligations arising from or related to the production 
of the films in the Film Library), as well as all scheduled obligations relating
to the Company's existing exploitation agreements. Upon consummation of the Film
Library Sale, the Company's twenty-five film domestic distribution arrangement  
with Disney, under which the Company has delivered nine films, will be          
terminated. The Company currently expects to consummate the Film Library Sale,  
subject to Stockholder approval and the satisfaction or waiver of all conditions
set forth in the Library Sale Agreement, as soon as practicable after the       
Special Meeting.                                                                

   Pursuant to the Assignment Agreement, the Company has agreed to sell to Fox
the Company's rights in DIE HARD WITH A VENGEANCE in exchange for $11,250,000 in
cash. The Company currently expects to consummate this transaction, subject to  
Stockholder approval and the satisfaction or waiver of all conditions set forth 
in the Assignment Agreement, concurrently with the consummation of the Film     
Library Sale.                                                                   

 THE BOARD, WHICH HAS APPROVED THE ASSET SALES, BELIEVES THAT THE TERMS OF
THE ASSET SALES ARE FAIR TO, EXPEDIENT AND IN THE BEST INTERESTS OF, THE        
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ASSET  
SALE PROPOSAL.                                                                  

  The Stockholders will also be asked to consider and act upon a proposal to
approve the Agreement of Merger dated as of September 2, 1997 among Andrew G.   
Vajna, Chairman of the Board, President and                                     

THIS PROXY STATEMENT IS DATED          , 1997, AND IS FIRST 
BEING DISTRIBUTED TO THE STOCKHOLDERS ON          , 1997. 

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Chief Executive Officer of the Company ("Vajna"), Valdina Corporation N.V.      
("Valdina"), CPEI Acquisition, Inc. ("Buyer"), a Delaware corporation wholly    
owned by Vajna and Valdina, and the Company (the "Merger Agreement") providing  
for a merger pursuant to which Buyer will be merged with and into the Company   
and the Company will become wholly owned by Vajna and Valdina (the "Merger").   
Valdina, a corporation organized under the laws of The Netherlands Antilles is, 
as of September 17, 1997, indirectly beneficially owned 49.9% by Vajna and 50.1%
by a trust which benefits certain persons including the son of Mr. Vajna (see   
"CERTAIN INFORMATION REGARDING THE COMPANY--Principal Stockholders of the       
Company"), however, Valdina's corporate parent is in the process of effecting a 
transaction which will result in the increase of Vajna's indirect beneficial    
ownership of Valdina to 99.8% (see "SPECIAL FACTORS RELATING TO THE             
MERGER--Certain Transactions Involving the Company's Common Stock").            

  Pursuant to the Merger Agreement, at the effective time of the Merger (the
"Effective Time"), each share ("Share") of Company common stock ("Company Common
Stock"), par value $.01 per share, (other than Shares owned by Vajna or Valdina,
treasury Shares, or Shares as to which statutory dissenters' rights are         
perfected) will be converted into the right to receive $2.30 in cash (the       
"Purchase Price"), subject to potential upward adjustment as provided in the    
Merger Agreement (as adjusted, the "Adjusted Purchase Price"). The Company      
currently expects to consummate the Merger, subject to Stockholder approval and 
the satisfaction or waiver of all conditions set forth in the Merger Agreement  
(including, without limitation, consummation of the transactions contemplated by
the Library Sale Agreement and the Assignment Agreement), as soon as practicable
after the Special Meeting. The term "Merger Consideration" as used herein means 
the Purchase Price or Adjusted Purchase Price, as the case may be.              

    THE BOARD (EXCLUDING MR. VAJNA, WHO ABSTAINED FROM THE VOTE) HAS UNANIMOUSLY
APPROVED THE MERGER AND THE MERGER AGREEMENT, BASED IN PART UPON THE            
RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD CONSISTING OF ONE DIRECTOR   
NOT EMPLOYED OR OTHERWISE AFFILIATED WITH THE COMPANY (THE "SPECIAL COMMITTEE").
THE BOARD, BASED IN PART ON THE RECOMMENDATION OF THE SPECIAL COMMITTEE,        
BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE          
STOCKHOLDERS (OTHER THAN VAJNA AND VALDINA) AND RECOMMENDS THAT STOCKHOLDERS    
VOTE "FOR" THE MERGER PROPOSAL.                                                 

In accordance with the Delaware General Corporation Law (the "DGCL"),   
approval of each of the Asset Sale Proposal and the Merger Proposal requires the
affirmative vote of the holders of a majority of the outstanding Shares. As of  
October 30, 1997 (the "Record Date") members of the Board, including Vajna,     
owned an aggregate of       Shares, or approximately   % of the Shares          
outstanding on the Record Date. Pursuant to the terms of the Library Sale       
Agreement, members of the Board who are also Stockholders have agreed, in       
effect, to vote their shares in favor of the Asset Sale Proposal. In addition,  
as of the Record Date, Valdina owned       Shares, or approximately   % of the  
Shares outstanding on the Record Date. Valdina has informed the Company that it 
intends to vote all of its Shares in favor of the Asset Sale Proposal. As a     
result, if Valdina and the members of the Board who own Shares do in fact cast  
their votes in favor of the Asset Sale Proposal, approval of the Asset Sale     
Proposal is assured.                                                            

As of the Record Date, Vajna owned or controlled the right to vote      
Shares (or approximately    % of the Shares outstanding as of such date) and    
Valdina owned     Shares (or approximately    % of the Shares outstanding as of 
such date). Pursuant to the terms of the Merger Agreement, Vajna and Valdina    
have agreed to vote such Shares in favor of the Merger Proposal. As a result,   
receipt of the statutorily required vote in favor of the Merger Proposal is     
assured.                                                                        

  HOWEVER, THE MERGER AGREEMENT ALSO PROVIDES, AS A CONDITION TO THE CLOSING
OF THE MERGER, THAT THE COMPANY SHALL HAVE OBTAINED THE AFFIRMATIVE VOTE OF A   
MAJORITY OF THE SHARES VOTED AT THE SPECIAL MEETING ON THE MERGER PROPOSAL      
(INCLUDING ABSTENTIONS, BUT EXCLUDING BROKER NON-VOTES), WHETHER IN PERSON OR BY
PROPERLY EXECUTED PROXY, WITHOUT TAKING INTO ACCOUNT THOSE SHARES OWNED BY      
VAJNA, VALDINA OR ANY AFFILIATE OF VAJNA OR VALDINA (THE "MAJORITY OF THE       
MINORITY VOTE"). "SEE MERGER AGREEMENT--CONDITIONS" FOR ADDITIONAL INFORMATION  
REGARDING THE CONDITIONS TO THE PARTIES' OBLIGATIONS TO CONSUMMATE THE MERGER.  

2 

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 There were approximately     holders of record of Company Common Stock on
the Record Date. Except where the context otherwise requires, the terms         
"Cinergi" and the "Company" refer to Cinergi Pictures Entertainment Inc. and its
wholly owned subsidiaries.                                                      

 This Proxy Statement constitutes the notice required by Section 262(d) of
the DGCL.                                                                       

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

STOCKHOLDERS ARE URGED TO READ CAREFULLY THIS PROXY STATEMENT IN ITS    
ENTIRETY.                                                                       

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

  THE TRANSACTIONS DESCRIBED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION
PASSED UPON THE FAIRNESS OR THE MERITS OF SUCH TRANSACTIONS NOR UPON THE        
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY         
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.                                     

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

THIS PROXY STATEMENT CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE   
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS
MAY CONSIST OF ANY STATEMENT OTHER THAN A RECITATION OF HISTORICAL FACT AND CAN 
BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "EXPECT,"
"ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER         
VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE READER IS CAUTIONED THAT ALL  
FORWARD-LOOKING STATEMENTS ARE NECESSARILY SPECULATIVE AND THERE ARE CERTAIN    
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER     
MATERIALLY FROM THOSE REFERRED TO IN SUCH FORWARD-LOOKING STATEMENTS. CERTAIN   
RISKS AND UNCERTAINTIES ARE DISCUSSED IN APPROPRIATE SECTIONS OF THIS PROXY     
STATEMENT. THE RISKS HIGHLIGHTED IN THIS PROXY STATEMENT SHOULD NOT BE ASSUMED  
TO BE THE ONLY THINGS THAT COULD AFFECT FUTURE PERFORMANCE OF THE COMPANY OR ANY
FORWARD LOOKING STATEMENTS. THE COMPANY DOES NOT HAVE A POLICY OF UPDATING OR   
REVISING FORWARD-LOOKING STATEMENTS AND THUS IT SHOULD NOT BE ASSUMED THAT      
SILENCE BY MANAGEMENT OF THE COMPANY OVER TIME MEANS THAT ACTUAL EVENTS ARE     
BEARING OUT AS ESTIMATED IN SUCH FORWARD-LOOKING STATEMENTS.                    

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TABLE OF CONTENTS 

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                                                                                                            PAGE   
                                                                                                          ---------
                                                                                                                   
SUMMARY..................................................................................................         6

THE SPECIAL MEETING......................................................................................        24
  Record Date and Persons Entitled to Vote at the Special Meeting........................................        24
  Quorum.................................................................................................        24
  Vote Required..........................................................................................        24
  Appraisal Rights.......................................................................................        24
  Proxies................................................................................................        25

PROPOSAL NO. 1:                                                                                                    
 SALE OF SUBSTANTIALLY ALL OF                                                                                      
 THE ASSETS OF THE COMPANY...............................................................................        26
  Parties to the Asset Sales.............................................................................        26
  Background and Reasons for the Library Sale Agreement..................................................        27
  Background and Reasons for the Assignment Agreement....................................................        30
  Recommendation of the Board............................................................................        31
  The Library Sale Agreement.............................................................................        33
  The Assignment Agreement...............................................................................        38
  Appraisal Rights Inapplicable..........................................................................        40
  Regulatory Approvals...................................................................................        40
  Accounting Treatment...................................................................................        40
  Certain Federal Income Tax Consequences................................................................        40
  Interests of Certain Persons in the Asset Sales........................................................        41
  Certain Additional Information Regarding Transactions with Disney......................................        41
  Certain Additional Information Regarding Transactions with Fox.........................................        42
  Operations of the Company Pending and Following the Asset Sales........................................        43

CERTAIN ARRANGEMENTS CONCERNING OTHER ASSETS.............................................................        44

PROPOSAL NO. 2:                                                                                                    
 THE MERGER..............................................................................................        49
  Parties to the Merger..................................................................................        49

  SPECIAL FACTORS RELATING TO THE MERGER.................................................................        50
  Background and Reasons for the Merger..................................................................        50
  Recommendation of the Special Committee and the Board; Fairness of the Merger..........................        53
  Purpose and Structure of the Merger....................................................................        56
  Operations Pending the Merger..........................................................................        56
  Plans for the Company Following the Merger.............................................................        57
  Regulatory Approvals...................................................................................        57
  Accounting Treatment...................................................................................        57
  Certain Federal Income Tax Consequences................................................................        57
  Fees and Expenses......................................................................................        58
  Financing of the Transaction...........................................................................        59
  Interests of Certain Persons in the Merger.............................................................        59
  Certain Transactions Involving the Company's Common Stock..............................................        61
  Certain Transactions With Vajna and Certain Related Stockholders.......................................        62

  THE MERGER AGREEMENT...................................................................................        65
  The Merger; Effective Time of the Merger...............................................................        65

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                                                        [Enlarge/Download Table]
                                                                                                                  
  Conversion of Company Common Stock into Merger Consideration...........................................       65
  Adjustments to Purchase Price..........................................................................       65
  Surrender of Company Common Stock Certificates.........................................................       68
  Representations and Warranties.........................................................................       68
  Conditions to the Merger...............................................................................       69
  Agreements of the Company, Buyer, Vajna and Valdina....................................................       70
  Termination; Fees and Expenses.........................................................................       71
  Amendments; Waivers....................................................................................       72
  Appraisal Rights.......................................................................................       72

  RIGHTS OF DISSENTING STOCKHOLDERS......................................................................       73

CERTAIN INFORMATION REGARDING THE COMPANY................................................................       76
  Business of the Company................................................................................       76
  Market Prices and Dividends on Company Common Stock....................................................       78
  Principal Stockholders of the Company..................................................................       79
  Directors and Executive Officers of the Company........................................................       81
  Executive Compensation.................................................................................       83

  PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED).............................................       90

  SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY....................................................       93

  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................       95
  General................................................................................................       95
  Results of Operations..................................................................................       96
  Liquidity and Capital Resources........................................................................      100

INDEX TO FINANCIAL STATEMENTS............................................................................      F-1

                                                                                                          Inside  
                                                                                                           Back   
AVAILABLE INFORMATION....................................................................................  Cover  

                                                                                                          Inside  
                                                                                                           Back   
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..........................................................  Cover  

APPENDICES:                                                                                                       
  Appendix A -- The Library Sale Agreement...............................................................      A-1
  Appendix B -- The Assignment Agreement.................................................................      B-1
  Appendix C -- The Merger Agreement.....................................................................      C-1
  Appendix D -- Section 262 of the Delaware General Corporation Law......................................      D-1

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SUMMARY 

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY, THE MORE DETAILED INFORMATION, THE FINANCIAL STATEMENTS, INCLUDING 
THE NOTES THERETO, AND THE PRO FORMA INFORMATION CONTAINED ELSEWHERE IN THIS    
PROXY STATEMENT, THE APPENDICES HERETO, AND THE DOCUMENTS REFERRED TO AND       
INCORPORATED BY REFERENCE HEREIN. STOCKHOLDERS ARE URGED TO READ THIS PROXY     
STATEMENT, ITS APPENDICES AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IN 
THEIR ENTIRETY BEFORE VOTING ON THE MATTERS DISCUSSED HEREIN.                   

THE SPECIAL MEETING OF STOCKHOLDERS 

The Special Meeting will be held at 10:00 a.m. local time on Thursday,  
December 4, 1997, at      , California. At the Special Meeting, including any   
adjournments thereto, the Stockholders will be asked to consider and act upon   
(i) a proposal to approve the sale of substantially all of the Company's assets,
including the sale of substantially all of the Company's film library pursuant  
to the Library Sale Agreement and the Assignment Agreement (the "Asset Sale     
Proposal"), (ii) a proposal to approve the Merger Agreement (the "Merger        
Proposal"), and (iii) such other matters as may properly come before the Special
Meeting. See "INTRODUCTION," "SPECIAL MEETING," "PROPOSAL NO. 1: SALE OF        
SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY," "SPECIAL FACTORS RELATING TO   
THE MERGER" AND "THE MERGER AGREEMENT."                                         

   The Board has fixed the close of business on October 30, 1997 as the Record
Date for the determination of Stockholders entitled to receive notice of, and to
vote at, the Special Meeting. The presence, in person or by properly executed   
proxy, of a majority of the outstanding Shares as of the Record Date is         
necessary to constitute a quorum to transact business at the Special Meeting.   
Stockholders are entitled to one vote at the Special Meeting for each Share held
of record by them on the Record Date. Each of the Asset Sale Proposal and the   
Merger Proposal require the affirmative vote of the majority of the outstanding 
Shares entitled to vote thereon. In addition, the Merger Agreement requires that
the Company obtain the Majority of the Minority Vote. As of the Record Date,    
there were         Shares outstanding. See "SPECIAL MEETING."                   

THE ASSET SALE PROPOSAL 

PARTIES TO THE ASSET SALES                                                      

THE COMPANY.  Then Company, formed in November 1989, is an independent  
producer and distributor of motion pictures. See "CERTAIN INFORMATION REGARDING 
THE COMPANY" and "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE
COMPANY--Parties to the Asset Sales."                                           

TWENTIETH CENTURY FOX FILM CORPORATION.  Fox, an indirect wholly owned  
subsidiary of The News Corporation Limited which is a diversified international 
communications company incorporated under the laws of Australia, is engaged in  
the business of filmed entertainment. The Company and Fox jointly own DIE HARD  
WITH A VENGEANCE which was produced by the Company and initially released       
domestically by Fox in May 1995. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL 
OF THE ASSETS OF THE COMPANY--Parties to the Asset Sales."                      

THE WALT DISNEY COMPANY.  Disney is a diversified international         
entertainment company. In 1990, the Company entered into a distribution         
agreement and certain related agreements with Disney (collectively, and as it   
has been amended, the "Domestic Distribution Agreement") pursuant to which      
Disney has distributed most of the Company's motion pictures in the United      
States and its possessions, Canada and Latin America (the "Americas"). Disney   
owns 555,556 Shares (the "Disney Shares") and a warrant to                      

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purchase 150,000 Shares at an exercise price of $9.00 per Share (the "Disney    
Warrant"). See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE  
COMPANY--Parties to the Asset Sales."                                           

BACKGROUND AND REASONS FOR THE LIBRARY SALE AGREEMENT                           

The Company was formed to develop, finance, produce and license "event" 
motion pictures for exhibition in domestic and international theatrical markets 
and for later worldwide release in all media, including home video and pay and  
free television. The Company has generally financed the production costs of its 
motion pictures through loans obtained under its credit facility with The Chase 
Manhattan Bank ("Chase") and a syndicate of lenders (under which the commitment 
to lend expired on August 31, 1997), advances and production loans from Disney  
pursuant to the Domestic Distribution Agreement, and direct investments by the  
Company, as necessary.                                                          

  In early 1996, in light of the disappointing financial results of three of
the Company's four 1995 releases (JUDGE DREDD, THE SCARLET LETTER and NIXON),   
the Board and management initiated an overall strategic review of the Company's 
goals and principal business strategies to ascertain whether those goals and    
strategies remained consistent with, among other things, the continuing increase
in production and releasing costs, the development projects available in the    
marketplace, an increased number of motion pictures released by motion picture  
companies domestically, and the Company's financial capabilities. In connection 
with the strategic review, the Board and management also considered various     
strategic alternatives in order to maximize stockholder value.                  

   At the end of May 1996, the Company retained the investment banking firm of
Jefferson Capital Group, Ltd. (of which R. Timothy O'Donnell, a director of the 
Company, is President and a principal stockholder) ("Jefferson Capital") to     
assist the Company in its strategic review (including discussions with third    
parties) and advise the Board with respect to the Company's strategic           
alternatives.                                                                   

 In connection with its engagement, Jefferson Capital, among other things,
assisted the Company in supplying information to, and organized a series of     
confidential meetings with, potential investors, merger partners and purchasers.
From April 1996 through Fall 1996, the Company held periodic discussions with a 
number of companies regarding a potential investment in, merger with or purchase
of the Company, and exchanged some information in connection with certain of    
these discussions. Approximately eleven companies entered into confidentiality  
agreements with the Company. No written proposal or letter of intent was        
executed by the Company with any of such parties.                               

  In Fall 1996, the Company also approached Disney to ascertain its interest
in an acquisition of the Company. Although Disney again indicated that it was   
not interested in an acquisition of the Company (the Company had previously     
approached Disney in July 1996), Disney indicated that it would be interested in
a transaction involving the acquisition of the Company's film library and       
termination of the Domestic Distribution Agreement. In late December 1996,      
Disney sent to the Company a proposed letter of intent. Discussions were held   
between the Company, Disney and their respective representatives from late      
January 1997 through February 1997.                                             

    At a meeting of the Board held on February 21, 1997, the Board discussed the
potential transaction with Disney and the strategic alternatives available to   
the Company, including continuing to produce motion pictures, the sale of the   
Company or a portion of the Company to another company, and winding down the    
Company's operations and dissolving. Although the Board believed the Company    
should continue after the meeting to solicit and respond to overtures regarding 
an investment in or purchase of the Company, in view of the results to such     
point in time of the Company's discussions with third parties regarding an      
investment in or acquisition of the Company, the Board did not view the         
likelihood in the then foreseeable future of the Company receiving a proposal   
for an investment or acquisition on terms advantageous to the Company to be     
significant. The Board also believed that in light of, among other things, the  
disappointing financial results of three of the Company's four 1995 releases and
the 1997                                                                        

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release of THE SHADOW CONSPIRACY and the continuing increase in motion picture  
production and releasing costs which could necessitate increased direct         
investment in the Company's motion pictures if the Company were to produce      
additional "event" motion pictures, that it would be in the best interests of   
the Stockholders to consider the winding down of the Company's operations. The  
Board also considered continuing to produce smaller budget films but believed   
that, in the current releasing environment, production of smaller budget films, 
with which the Company had significantly less experience, posed significant     
risk, including that of dissipating the Company's remaining assets. The Board   
also believed that Disney's desire to reach an agreement with the Company to    
terminate the Domestic Distribution Agreement, as well as both changes in       
management at Disney which had occurred since the Domestic Distribution         
Agreement had originally been entered into and the increased production by      
Disney itself of large budget "event" motion pictures, could negatively impact  
the distribution of the Company's films by Disney if the Company were to        
continue to produce films for distribution by Disney pursuant to the Domestic   
Distribution Agreement. Given the prior inability of the Company to negotiate an
alternative to the Domestic Distribution Agreement with either Disney or another
major studio, the Board believed that for the then foreseeable future the       
likelihood of the Company successfully obtaining an alternative distribution    
arrangement to the Domestic Distribution Agreement, on terms more advantageous  
to the Company than the Domestic Distribution Agreement, was not significant. As
a result of the foregoing, the Board authorized continued negotiations regarding
a sale of the Company's film library to Disney.                                 

   On April 2, 1997, the Board approved the Library Sale Agreement with Disney
which was executed on April 3, 1997. On August 27, 1997, the Board approved an  
amendment to the Library Sale Agreement with Disney which, among other things,  
modified the prior arrangements between the Company and Disney with respect to  
AN ALAN SMITHEE FILM and extended the date by which the Film Library Sale must  
be consummated or the parties can terminate the Library Sale Agreement. The     
amendment was entered into on August 27, 1997. See "PROPOSAL NO. 1: SALE OF     
SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Background and Reasons for the  
Library Sale Agreement."                                                        

BACKGROUND AND REASONS FOR THE ASSIGNMENT AGREEMENT                             

 The Company's initial negotiations with Disney regarding the Film Library
Sale had contemplated that the film rights to be acquired by Disney would       
include the Company's rights in DIE HARD WITH A VENGEANCE. During the course of 
negotiations, however, Disney and the Company agreed that such rights would not 
be part of the film rights to be sold to Disney. As a result, in March 1997, the
Company initiated discussions with Fox regarding the acquisition by Fox of the  
Company's rights in DIE HARD WITH A VENGEANCE. Negotiations were held between   
the Company and Fox through early July 1997. On July 2, 1997, the Board approved
the Assignment Agreement, subject to Fox indicating that it had completed its   
due diligence. On July 14, 1997, Fox indicated that it had completed its due    
diligence, and on July 15, 1997 the Assignment Agreement was executed. On August
27, the Board approved an amendment to the Assignment Agreement which reduced   
the amount of insurance coverage required to be maintained by the Company for   
Fox's benefit in connection with the transactions contemplated by the Assignment
Agreement. The amendment was entered into on August 27, 1997. See "PROPOSAL NO. 
1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Background and       
Reasons for the Assignment Agreement."                                          

RECOMMENDATION OF THE BOARD                                                     

    The Board believes that the consummation of the Asset Sales is expedient and
in the best interests of the Company and the Stockholders, and unanimously      
recommends that the Stockholders vote "FOR" the Asset Sale Proposal. In         
recommending that the Stockholders approve the Asset Sale Proposal, the Board   
considered a number of factors, including without limitation, the following: (i)
that the Asset Sale Agreements were the result of arms-length negotiations; (ii)
that the Company has incurred net losses in six of the seven full fiscal years  
since its formation and anticipates continuing operating losses; (iii) the      

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increase in the industry average of direct negative and print and advertising   
costs of 69.9% and 114.5%, respectively, from 1989 (the year of the Company's   
formation) through 1996; (iv) the significant risk of continued operations,     
including that of dissipating the Company's remaining assets; (v) the Board's   
belief that Disney desires to terminate, with the agreement of the Company, the 
Domestic Distribution Agreement; (vi) the lack of strategic alternatives        
available to the Company in view of the Company's disappointing operating       
results and efforts to implement other strategic alternatives without success;  
(vii) the significant reduction of the Company's liabilities resulting from the 
Asset Sales; and (viii) the existence of a substantial amount of cash and cash  
equivalents of the Company and the additional cash to be received in connection 
with the Assignment Agreement. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF
THE ASSETS OF THE COMPANY--Recommendation of the Board."                        

THE LIBRARY SALE AGREEMENT                                                      

  THE FILM LIBRARY.  Pursuant to the Library Sale Agreement, the Company has
agreed to sell to Disney substantially all of the films in the Company's motion 
picture library. Specifically, the Company has agreed to sell primarily all of  
the Company's rights to the following eleven motion pictures: MEDICINE MAN,     
TOMBSTONE, RENAISSANCE MAN, COLOR OF NIGHT, JUDGE DREDD, THE SCARLET LETTER,    
NIXON, AMANDA, EVITA (excluding the Company's rights in the soundtrack), THE    
SHADOW CONSPIRACY and AN ALAN SMITHEE FILM.                                     

Pursuant to the Library Sale Agreement, the rights being sold to Disney 
include the right to receive all worldwide "overages" and other payments of any 
kind paid or payable to or collected by the Company after January 1, 1997 which 
arise from the exploitation by the Company of the films being sold to Disney.   
The Company, however, will retain all minimum guarantees paid or payable to the 
Company pursuant to contracts in existence as of January 1, 1997 with respect to
the films being sold to Disney.                                                 

 CONSIDERATION FOR FILM LIBRARY.  In exchange for the assets being sold to
Disney, Disney has agreed to:                                                   

- Transfer the Disney Shares and Disney Warrant to the Company.         

- Assume the outstanding loans previously made by Disney to the Company 
(under which an aggregate of $39,739,000 in principal and accrued   
interest was outstanding as of September 1, 1997).                  

- Assume all residuals and participation obligations relating to the    
Film Library (other than certain guild obligations arising from or  
related to the production of the films in the Film Library).        

- Assume all obligations of the Company under the Company's existing    
 exploitation agreements with respect to the Film Library which are to
be performed on or after the closing of the Film Library Sale,      
provided such obligations have been listed on schedules provided to 
Disney.                                                             

 TERMINATION OF DOMESTIC DISTRIBUTION AGREEMENT.  Upon consummation of the
Film Library Sale, the Domestic Distribution Agreement with Disney will be      
terminated, including substantially all of the audit rights of the Company and  
Disney thereunder.                                                              

TREATMENT OF CERTAIN OTHER PROJECTS AND ARRANGEMENTS.  The Library Sale 
Agreement also addresses the terms by which Disney and the Company will resolve 
certain other arrangements and agreements between them.                         

    TERMINATION; MISCELLANEOUS.  The Library Sale Agreement may be terminated by
either party if, among other things, the closing of the transactions            
contemplated by such agreement have not occurred by November 22, 1997. Disney   
and the Company have agreed in principle to extend such date. The Library Sale  
Agreement also contains, among other things, representations, warranties,       
conditions and indemnification provisions. See "PROPOSAL NO. 1: SALE OF         
SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--The Library Sale Agreement."    

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THE ASSIGNMENT AGREEMENT                                                        

  BACKGROUND REGARDING EXISTING RIGHTS.  The Company and Fox jointly own DIE
HARD WITH A VENGEANCE pursuant to certain existing agreements. Pursuant to such 
agreements, Fox received the right to distribute DIE HARD WITH A VENGEANCE in   
all media in the United States and Canada (including territories and            
possessions), Japan, the Bahamas, Bermuda and the Panama Canal Zone and         
worldwide in certain ancillary media (the "Fox Territories"). The Company       
controls the remaining international distribution rights to the film, while Fox 
controls all sequel rights to the film. In 1994, the Company granted Disney     
distribution rights in DIE HARD WITH A VENGEANCE until June 2020 in a portion of
the international territories for which the Company controls distribution       
rights: the Benelux region, French speaking Europe and Africa, German speaking  
Europe, the United Kingdom and Ireland, Spain, Central and South America,       
Scandinavia, Taiwan, Switzerland, Portugal and Greece (the "Disney              
Territories"). The Company has also licensed to an aggregate of approximately   
thirty subdistributors (the "International Subdistributors") the right, in the  
aggregate, to distribute the film in certain of the international territories   
for which the Company controls distribution rights and which were not licensed  
to Disney (the "Subdistributor Territories").                                   

ASSIGNMENT OF RIGHTS AND TREATMENT OF RELATED RIGHTS AND                
OBLIGATIONS.  Pursuant to the Assignment Agreement, the Company has agreed to   
assign to Fox all of the rights in DIE HARD WITH A VENGEANCE (including the     
right to receive any overages from Fox with respect to the Fox Territories),    
subject to the terms of the Company's existing exploitation agreements relating 
to such rights, including the Company's license of distribution rights to Disney
with respect to the Disney Territories and to International Subdistributors with
respect to the Subdistributor Territories. However, the Company, which upon     
consummation of the Film Library Sale will relinquish the right to overages     
payable by Disney with respect to DIE HARD WITH A VENGEANCE, will still be      
entitled to receive any overages under the Company's existing exploitation      
Agreements with International Subdistributors. Fox will continue to be          
responsible for the payment of residuals relating to distribution of the film in
those territories for which Fox currently controls distribution rights, and, as 
the Company's existing exploitation agreements expire (including the Company's  
agreements with Disney and the International Subdistributors) and the           
distribution rights in those territories revert to Fox, Fox will become         
responsible for the payment of residuals in the applicable territories covered  
by such exploitation agreements. The Company, however, will be responsible for  
all participations due to profit participants in the film except those arising  
from distribution of DIE HARD WITH A VENGEANCE in the Disney Territories.       

   CONSIDERATION FOR THE RIGHTS BEING ASSIGNED.  In exchange for the Company's
assignment of rights to Fox and the other representations, warranties and       
agreements of the Company pursuant to the Assignment Agreement, Fox has agreed  
to pay to the Company the sum of $11,250,000 in cash.                           

 CONDITIONS; TERMINATION; MISCELLANEOUS.  The transactions contemplated by
the Assignment Agreement are conditioned on, among other things, consummation of
the transactions contemplated by the Library Sale Agreement. The Assignment     
Agreement will automatically terminate in the event the Library Sale Agreement  
terminates. The Assignment Agreement also contains, among other things,         
representations, warranties, conditions and indemnification provisions. See     
"PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--The    
Assignment Agreement."                                                          

REGULATORY APPROVALS                                                            

To the best knowledge of the Company, there are no federal or state     
regulatory requirements which must be complied with, nor are there any such     
governmental consents or approvals that must be obtained in connection with the 
consummation of the Asset Sales other than compliance with the Hart-Scott-Rodino
Anti-Trust Improvement Act of 1976, as amended, in connection with the Film     
Library Sale, including the filing of Notification and Report Forms and the     
expiration or termination of the applicable waiting period under such law.      

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ACCOUNTING TREATMENT                                                            

  The Asset Sale will be accounted for as a sale of assets and a transfer of
certain liabilities. The Company expects to record a gain upon the consummation 
of the Asset Sales as the net book value of the assets being sold pursuant to   
the Asset Sales are less than the consideration to be received, including the   
liabilities transferred.                                                        

CERTAIN FEDERAL INCOME TAX CONSEQUENCES                                         

The Asset Sales will not have any federal income tax consequences to the
Stockholders. The Asset Sales, however, will result in gross income on a tax    
basis of approximately $21,702,000 to the Company. Since the Company had a      
federal net operating loss carry forward of $59,406,000 as of December 31, 1996,
has incurred a tax operating loss of approximately $10,287,000 for the six      
months ended June 30, 1997, and will incur additional tax operating losses      
through the Effective Time, the gross income generated by the Asset Sales will  
be completely offset by such net operating losses and no federal income tax     
would be payable thereon. However, despite the carryover of the federal net     
operating loss to the current year, because of other adjustments in 1997 the    
Company would be subject to a federal alternative minimum tax of approximately  
$600,000. Moreover, because of limitations on the carryover of net operating    
losses under the California Revenue and Taxation Code, the Company currently    
estimates that there will be a California income tax liability for 1997 of      
between $400,000 and $500,000.                                                  

INTERESTS OF CERTAIN PERSONS IN THE ASSET SALES                                 

R. Timothy O'Donnell, a director of the Company, is the President and a 
principal stockholder of Jefferson Capital, a privately-held investment banking 
concern initially retained by the Company in connection with the Company's      
strategic review. Jefferson Capital's services have also included, among other  
things, assisting the Company with respect to the Asset Sales and the Merger.   
Upon retention of Jefferson Capital, in May 1996, the Company paid Jefferson    
Capital a fee of $75,000 and has agreed to reimburse Jefferson Capital for      
expenses (amounting to approximately $58,000 through September 1, 1997).        
Jefferson Capital will receive an additional payment of $300,000, which payment 
was contingent upon execution of the Merger Agreement, and will receive a       
further payment of $300,000 if the Asset Sales and the Merger are consummated.  

 In addition, the Merger Agreement provides that consummation of the Asset
Sales is a condition to the Merger. As indicated under "SPECIAL FACTORS RELATING
TO THE MERGER--Interests of Certain Persons in the Merger," certain of the      
Company's officers, directors and Stockholders have certain interests in the    
Merger. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE     
COMPANY--Interests of Certain Persons in the Asset Sales" and "CERTAIN          
ARRANGEMENTS CONCERNING OTHER ASSETS."                                          

OPERATIONS OF THE COMPANY PENDING AND FOLLOWING THE ASSET SALES                 

   The Company, which is currently in post-production on AN ALAN SMITHEE FILM,
does not presently intend to commence production in the future on any additional
motion pictures pending the Asset Sales and the Merger. Further, the commitment 
to lend under the Company's credit facility expired August 31, 1997 and,        
pursuant to the terms of the Library Sale Agreement, the Domestic Distribution  
Agreement will terminate upon the closing of the Film Library Sale. Certain     
assets of the Company are not included in the assets being sold as part of the  
Asset Sales, including, among other things: (i) twenty-one development projects 
which are wholly owned by the Company (the "Development Projects"); (ii)        
nineteen development projects (the "Stone Projects") funded by the Company under
its "first look arrangement" with Oliver Stone and certain of his affiliates    
("Stone"); (iii) visual effects equipment which is part of the Company's visual 
effects facility located in leased space in Lenox, Massachusetts (the "Visual   
Effects Facility"); (iv) the Company's rights ("Soundtrack Rights") in the      
soundtrack for EVITA (the "EVITA                                                

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Soundtrack"); (v) the right to receive any overages from International          
Subdistributors pursuant to the Company's existing exploitation agreements with 
respect to DIE HARD WITH A VENGEANCE (the "International DHWV Overages"); and   
(vi) certain miscellaneous assets including, among other things, approximately  
$763,000 in miscellaneous receivables as of September 1, 1997 (the              
"Miscellaneous Receivables") (not including payments to be received with respect
to AN ALAN SMITHEE FILM which will be used by the Company principally to pay    
down amounts outstanding under the Company's credit facility), an automobile and
certain furnishings and artwork. Except for certain discussions, arrangements   
and agreements regarding potential additional asset sales, the Company does not 
currently intend to engage in any significant business operations pending       
consummation of the Asset Sales and the Merger. In addition, the Library Sale   
Agreement and the Merger Agreement restrict the Company's operations pending the
Film Library Sale and the Merger, respectively. See "PROPOSAL NO. 1: SALE OF    
SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Operations of the Company       
Pending and Following the Asset Sales" and "THE MERGER AGREEMENT--Agreements of 
the Company, Buyer, Vajna and Valdina."                                         

The Company currently anticipates that the Merger will be consummated   
shortly after consummation of the Asset Sales assuming all conditions to the    
Merger are then satisfied or waived. Pending the Merger, the cash proceeds from 
consummation of the Asset Sales and any additional dispositions of assets and   
the Company's other cash resources will primarily be held as cash or invested in
short term government securities. No determination has been made by the Company 
as to its course of conduct in the event that the Assets Sales or the Merger are
not consummated, as the Company would consider all strategic alternatives       
reasonably available to it at the time. However, given the background and       
reasons for the Asset Sales and the Merger, and given the reductions in         
personnel and other overhead which are being implemented, the Company           
anticipates that it is likely that significant consideration would be given at  
any such time to a dissolution and winding up of the Company pursuant to        
Delaware law. See "SPECIAL FACTORS RELATING TO THE MERGER--Recommendation of the
Special Committee and the Board; Fairness of the Merger."                       

CERTAIN ARRANGEMENTS CONCERNING OTHER ASSETS

SOLICITATION OF BIDS FOR DEVELOPMENT PROJECTS                                   

 In addition to the Asset Sales pursuant to the Library Sale Agreement and
the Assignment Agreement, the Company recently completed a solicitation of bids 
for the Development Projects, in which Vajna was the prevailing bidder. In June 
1997, the Company instructed its financial advisor, Jefferson Capital, to       
solicit cash bids from qualified buyers for the purchase of the Development     
Projects, as a group. The Company received an initial bid of $4,750,000 (the    
"Initial Bid") for the Development Projects from Vajna. Vajna also agreed to    
assume all third party payments related to the Development Projects and made by 
the Company after May 1, 1997. Additional qualified bids ("Qualified Bids") were
required to be at least 15% higher than the Initial Bid. If the Company had     
received one or more Qualified Bids, the Development Projects were to be sold to
the final highest bidder according to an auction process, however, no additional
Qualified Bids were received and Vajna was declared the winning bidder. The sale
of the Development Projects to Vajna is subject to consummation of the Film     
Library Sale and the transactions contemplated by the Assignment Agreement. As  
the parties to the Merger negotiated the Merger Consideration on the basis of a 
value for the Development Projects equal to the Initial Bid, the Development    
Projects will merely be part of the assets of the Company at the time of the    
Merger and no separate cash consideration will be paid to the Company for such  
projects. The Company received a valuation report with respect to the           
Development Projects. See "CERTAIN ARRANGEMENTS CONCERNING OTHER ASSETS."       

THE STONE PROJECTS                                                              

   In July 1997, the Company also instructed Jefferson Capital to solicit cash
bids from qualified buyers with respect to a group of five Stone Projects (the  
"Five Stone Projects"), which are being offered for sale by the Company subject 
to certain rights of Stone as a producer and/or director attached to the        
project.                                                                        

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Vajna has not submitted, and does not intend to submit, a bid for the Five Stone
Projects. If the Company receives one or more bids of at least $1,000,000, the  
Five Stone Projects will be sold to the final highest bidder according to an    
auction process substantially the same as that which was conducted for the      
Development Projects. No valuation report was obtained with respect to the Stone
Projects or the Five Stone Projects. Two individuals assisting the Company in   
the attempted sale of the Five Stone Projects will receive an aggregate amount  
equal to 10% of any qualified bid received by the Company in excess of          
$1,000,000.                                                                     

   Under the Company's first look arrangement with Stone, Stone may attempt to
arrange for the production of those Stone Projects, other than the Five Stone   
Projects, with other companies. If any of the Stone Projects other than the Five
Stone Projects are produced by Stone, Stone must reimburse the related actual   
costs (plus interest) of the Company and Disney (which funded the first-look    
arrangement with Stone through February 1997).                                  

   The Company is also in discussions with Stone regarding a settlement of the
first look arangement with Stone which among other things, would result in the  
transfer of all of the Stone Projects to Stone, in lieu of their sale to a third
party.                                                                          

 In the event the Company enters into an agreement prior to the Adjustment
Date to sell the Five Stone Projects or to settle the Company's obligations     
pursuant to the first look arrangement with Stone, the Merger Consideration will
be adjusted upwards in accordance with the Merger Agreement. "Adjustment Date"  
means that date which is ten business days before the date of the Special       
Meeting, as such date is initially set by the Board, or as such date may be     
changed due to the adjournment, delay or other rescheduling of the Special      
Meeting; provided, however, that if, after the Adjustment Date, the Special     
Meeting is adjourned, delayed or otherwise rescheduled to a date which is less  
than ten business days from the date on which it was determined that the Special
Meeting will be adjourned, delayed or otherwise rescheduled, then, in such case,
the Adjustment Date will not be changed but will remain the date which is ten   
business days before the date the Special Meeting was set to occur prior to such
adjournment, delay or other rescheduling of the Special Meeting. See "MERGER    
AGREEMENT--Adjustments to Purchase Price."                                      

EVITA SOUNDTRACK RIGHTS                                                         

The Company is attempting to sell the Soundtrack Rights. Pursuant to the
Merger Agreement, in the event the sum of the aggregate amount of all monies    
received by the Company (as royalties or otherwise) in respect of the EVITA     
Soundtrack from September 2, 1997 through the Adjustment Date and the aggregate 
purchase price payable to the Company pursuant to any agreement for the sale of 
the Soundtrack Rights entered into by the Company prior to the Adjustment Date  
exceeds $1,500,000, the Merger Consideration will be adjusted upwards in        
accordance with the Merger Agreement. In addition, the parties to the Merger    
Agreement have agreed that in the event the Company does not enter into an      
agreement for the sale of the Soundtrack Rights prior to the Adjustment Date,   
the Special Committee and the Company will use their best efforts to monetize   
the Soundtrack Rights and distribute, subsequent to the Effective Time, the     
proceeds in connection therewith to the Stockholders immediately prior to the   
Effective Time. See "THE MERGER AGREEMENT--Adjustments to Purchase Price."      

ARRANGEMENTS WITH SUMMIT                                                        

Summit Entertainment N.V. ("Summit N.V.") and Summit Entertainment L.P. 
("Summit L.P.") (collectively with their affiliates, "Summit"), international   
sales agents unaffiliated with the Company, have assisted the Company as sales  
agents in the international pre-licensing of the Company's films. The Company   
has reached agreements or, in certain cases, agreements in principle subject to 
completion and execution of documentation (the "Summit Agreements") (i) for the 
purchase by Summit N.V., in exchange for the payment of $400,000 to the Company,
of the Company's rights in the International DHWV                               

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Overages (other than those relating to exploitation agreements with respect to  
the territories of Italy and Hungary), (ii) for the purchase by Summit N.V., in 
exchange for the payment of an additional $400,000 to the Company, of the       
Miscellaneous Receivables, (iii) to terminate Summit's sales agency             
relationships with the Company and settle the Company's obligations in          
connection therewith in exchange for an aggregate payment by the Company to     
Summit (which includes certain amounts payable to Summit with respect to a past 
Company production) of approximately $926,000.                                  

VISUAL EFFECTS FACILITY                                                         

    The subsidiary of the Company which has operated the Visual Effects Facility
has shut down the operations of the facility and is in discussions regarding the
transfer of certain assets and liabilities associated therewith to a third      
party.                                                                          

SUMMARY OF CERTAIN INFORMATION REGARDING THE MERGER 

PARTIES TO THE MERGER                                                           

 VAJNA.  Vajna is the Chairman of the Board, President and Chief Executive
Officer of the Company as well as a substantial Stockholder in the Company. See 
"CERTAIN INFORMATION REGARDING THE COMPANY--Directors and Executive Officers of 
the Company" and "--Principal Stockholders of the Company." Vajna's address is  
2308 Broadway, Santa Monica, California 90404 (telephone number: 310-315-6000.  

   CPEI ACQUISITION, INC.  Buyer is a Delaware corporation formed in July 1997
in connection with, and solely for the purposes of, effecting the Merger. Vajna 
is the sole director and officer of Buyer. All of the stock of Buyer is owned by
Vajna (86%) and Valdina (14%). Except as it relates to the consummation of the  
Merger, Buyer is not engaged in any business activity. Buyer's principal        
executive offices are located at 2308 Broadway, Santa Monica, California 90404  
(telephone number: 310-315-6000).                                               

    VALDINA CORPORATION N.V.  Valdina is a corporation, formed in 1990 under the
laws of the Netherlands Antilles, which finances feature film production.       
Valdina is, as of September 17, 1997, indirectly beneficially owned 49.9% by    
Vajna and 50.1% by a trust which benefits ceratin persons including the son of  
Vajna. Valdina's corporate parent, however, is in the process of effecting a    
transaction which will result in the increase of Vajna's indirect beneficial    
ownership of Valdina to 99.8% See "SPECIAL FACTORS RELATING TO THE              
MERGER--Certain Transactions Involving the Company's Common Stock." Valdina's   
principal executive offices are located at Polarisweg 35, Suite 6, Willemstad,  
Curacao, Netherlands Antilles (telephone number: 011-599-9-461-7799)            

THE COMPANY.  The Company, formed in November 1989, is an independent   
producer and distributor of motion pictures. See "CERTAIN INFORMATION REGARDING 
THE COMPANY" and "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE
COMPANY--Parties to the Asset Sales."                                           

EFFECTIVE TIME OF THE MERGER                                                    

   The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware. The date and time of such 
filing (the "Effective Time") is expected to occur as soon as practicable after 
the Special Meeting, subject to the satisfaction or waiver of the conditions    
precedent to the Merger set forth in the Merger Agreement, including among      
others, consummation of the transactions contemplated by the Library Sale       
Agreement and the Assignment Agreement. See "THE MERGER AGREEMENT."             

CONVERSION OF SHARES INTO MERGER CONSIDERATION                                  

    At the Effective Time, by virtue of the Merger and without any action on the
part of any holder of Shares, each Share issued and outstanding immediately     
prior to the Effective Time (other than (x) Shares                              

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held in the Company's treasury (all of which will be canceled), (y) Shares held 
by Buyer, Vajna or Valdina (all of which will remain outstanding) and (z) Shares
which have not been voted for approval and adoption of the Merger Agreement and 
with respect to which appraisal has been properly demanded in accordance with   
Section 262 of the DGCL ("Dissenting Shares")) will be converted into the right 
to receive $2.30 in cash, subject to adjustment as provided in the Merger       
Agreement.                                                                      

ADJUSTMENTS TO PURCHASE PRICE                                                   

  The Merger Agreement provides that the aggregate purchase price payable to
the Stockholders (other than Vajna and Valdina) in connection with the Merger   
(the "Aggregate Purchase Price") will be adjusted upwards at the Effective Time 
upon the occurrence of any of the following events (each such event being       
referred to as an "Adjustment Event").                                          

    FIVE STONE PROJECTS.  In the event the Company enters into an agreement (the
"Stone Agreement") prior to the Adjustment Date (A) to sell the Five Stone      
Projects or (B) to settle its obligations pursuant to its first look arrangement
with Stone, the Aggregate Purchase Price will be adjusted upwards by an amount  
equal to the sum of (X) the aggregate purchase price, if any, payable to the    
Company pursuant to the Stone Agreement, and (Y) the aggregate amount of        
liabilities and other obligations assumed or forgiven by the purchaser (or party
or parties with which the Company settles its obligations) pursuant to the Stone
Agreement.                                                                      

  EVITA SOUNDTRACK.  In the event the sum of (A) the aggregate amount of all
monies received by the Company (as royalties or otherwise) in respect of the    
EVITA Soundtrack from September 2, 1997 through the Adjustment Date and (B) the 
aggregate purchase price payable to the Company pursuant to any agreement for   
the sale of the Soundtrack Rights (an "Evita Agreement") entered into by the    
Company prior to the Adjustment Date, exceeds $1,500,000 (such excess being     
referred to herein as the "Soundtrack Amount"), the Aggregate Purchase Price    
will be adjusted upwards by an amount equal to the Soundtrack Amount. Subsequent
to execution of the Merger Agreement, the Company received a payment of         
approximately $1,760,000 in overages with respect to the Soundtrack Rights. The 
Merger Agreement also provides that in the event the Company does not enter into
an Evita Agreement prior to the Adjustment Date, the Special Committee and the  
Company will use their best efforts to monetize the Soundtrack Rights and       
distribute, subsequent to the Effective Time, the proceeds in connection        
therewith to the Stockholders immediately prior to the Effective Time.          

   ACCOUNTS RECEIVABLE.  In the event the aggregate amount of monies collected
by the Company in connection with certain outstanding accounts receivable (the  
"Non-Alan Smithee Receivables") from July 1, 1997 through the Adjustment Date   
(the "Measurement Period") is in excess of $1,573,000 (such excess amount being 
referred to as the "Non-Alan Smithee Receivables Amount"), the Aggregate        
Purchase Price will be adjusted upwards by an amount equal to the Non-Alan      
Smithee Receivables Amount. As all of the Non-Alan Smithee Receivables which    
have not previously been collected (i.e., the Miscellaneous Receivables) are    
being transfered to Summit as part of the Summit Agreements, upon consummation  
of such transaction, the aggregate amount of Non-Alan Smithee Receivables       
collected by the Company during the Measurement Period and the Non-Alan Smithee 
Receivables Amount will be fixed (and not subject to further adjustment) at     
$1,763,000 and $190,000, respectively. The Non-Alan Smithee Receivables do not  
include any receivables relating to AN ALAN SMITHEE FILM, for which there is a  
different potential adjustment, as described below.                             

MISCELLANEOUS ADJUSTMENTS.  The Aggregate Purchase Price will also be   
adjusted upwards in the event the sum of the adjustments (which may be either   
positive or negative) set forth below result in a positive number.              

    SGA ADJUSTMENT.  There will be a positive adjustment equal to the amount, if
any, by which the Company Expense Amount is less than $6,493,000. If instead,   
the Company Expense Amount is greater                                           

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than $6,493,000, there will be a negative adjustment equal to the amount by     
which the Company Expense Amount is greater than $6,493,000. The positive or    
negative adjustment referred to in the immediately preceding two sentences is   
referred to in this Proxy Statement as the "SGA Adjustment." "Company Expense   
Amount" is defined in the Merger Agreement to mean the aggregate Expenses paid  
or incurred during the Measurement Period by the Company. "Expenses" is defined 
in the Merger Agreement to consist of the following: salaries of Company        
personnel, severance payments, rent, utilities, accounting and legal fees and   
expenses, and other expenses which have generally been included as selling,     
general and administrative expenses in the Company's audited financial          
statements. "Expenses," however, does not include, among other things, (A) any  
expenses incurred by the Company with respect to the Company's development      
projects, (B) any expenses incurred by the Company with respect to (or funds    
provided by the Company to) Cinergi Productions Inc. (California), a California 
corporation and a wholly owned subsidiary of the Company ("CPI"), or the Visual 
Effects Facility operated by CPI, or (C) any expenses incurred by CPI. The      
Company Expense Amount will be computed on a consolidated basis (but excluding  
for such purpose CPI) and otherwise in a manner generally consistent with       
preparation of the Company's financial statements for the fiscal year ended     
December 31, 1996.                                                              

  ALAN SMITHEE ADJUSTMENT.  There will be a positive adjustment equal to the
amount, if any, by which the aggregate amount of monies collected by the Company
during the Measurement Period with respect to certain outstanding accounts      
receivable with respect to AN ALAN SMITHEE FILM (the "Alan Smithee Receivables")
exceeds $8,690,000. If instead, the aggregate amount of monies collected by the 
Company during the Measurement Period with respect to the Alan Smithee          
Receivables is less than $8,690,000, there will be a negative adjustment equal  
to the amount by which the aggregate amount of monies collected by the Company  
during the Measurement Period with respect to the Alan Smithee Receivables is   
less than $8,690,000. The positive or negative adjustment referred to in the    
immediately preceding two sentences is referred to in this Proxy Statement as   
the "Smithee Adjustment."                                                       

  MASSILLUSION ADJUSTMENT.  There will be a positive adjustment equal to the
amount, if any, by which the MassIllusion Expense Amount is less than           
$1,300,000. If instead, the MassIllusion Expense Amount is greater than         
$1,300,000, there will be a negative adjustment equal to the amount by which the
MassIllusion Expense Amount exceeds $1,300,000. The positive or negative        
adjustment referred to in the immediately preceding two sentences is referred to
in this Proxy Statement as the "MassIllusion Adjustment." "MassIllusion Expense 
Amount" is defined in the Merger Agreement to mean (a) the aggregate amount of  
monies provided by the Company, directly or indirectly, to CPI or to any third  
parties on behalf of CPI during the Measurement Period ("Disbursed Amounts"),   
plus (b) the aggregate amount of expenses borne by the Company during the       
Measurement Period with respect to CPI (including with respect to the Visual    
Effects Facility operated by CPI) ("Borne Expenses"), less (from the sum of (a) 
and (b)) the recovery by the Company, in any manner whatsoever (including,      
without limitation, reimbursements by CPI to the Company), of any of the        
Disbursed Amounts or Borne Expenses.                                            

   CALCULATION OF MISCELLANEOUS ADJUSTMENTS.  To the extent the sum of the SGA
Adjustment, the Smithee Adjustment and the MassIllusion Adjustment              
(collectively, the "Miscellaneous Adjustments") results in a positive amount    
(such number being referred to as the "Miscellaneous Adjustment Amount"), the   
Aggregate Purchase Price will be adjusted upwards by an amount equal to the     
Miscellaneous Adjustment Amount. To the extent the sum of the Miscellaneous     
Adjustments results in a negative amount, there will be no adjustment to the    
Purchase Price.                                                                 

The Company's chief financial officer, or other appropriate accounting  
officer, as the case may be, will calculate both the Expenses and the           
MassIllusion Expense Amount for the Measurement Period herein and forward such  
calculation to Vajna and the Special Committee no later than 6:00 p.m., Los     
Angeles time, on the day after the Adjustment Date. To the extent there is a    
disagreement between Vajna and the Special Committee with respect to the        
calculation of Expenses and/or the MassIllusion Expense Amount, the parties will
immediately forward such calculation(s) to the Company's independent            
accountants, whose                                                              

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determination as to the proper calculation of Expenses and/or the MassIllusion  
Expense Amount will be rendered no later than six business days prior to the    
Special Meeting and will be final and binding on all the parties to the Merger  
Agreement.                                                                      

CALCULATION OF PURCHASE PRICE ADJUSTMENT.  The aggregate per Share      
adjustment to the Purchase Price (the "Adjustment Amount") will be calculated by
dividing (i) the aggregate dollar amount of the adjustments resulting from the  
Adjustment Events by (ii) the total number of issued and outstanding Shares as  
of the Adjustment Date (including Shares held by Vajna and Valdina). The        
Adjustment Amount will be rounded off to the nearest whole penny. Except for the
Adjustment Events, there are no other positive adjustments to the Purchase      
Price.                                                                          

   PRESS RELEASES REGARDING ADJUSTMENTS.  In the event of an adjustment to the
Purchase Price resulting from a transaction relating to the sale or transfer of 
the Five Stone Projects or the sale of the Soundtrack Rights, the Company and   
Vajna will promptly thereafter issue a press release through a nationally       
recognized news wire service setting forth, among other things, the material    
terms underlying the particular transaction giving rise to the adjustment and   
the specific dollar amount of the adjustment to the Purchase Price. In addition,
the Company and Vajna will issue a press release no later than five business    
days prior to the Special Meeting, setting forth the exact dollar amount of the 
Adjustment Amount and the Adjusted Purchase Price.                              

BACKGROUND AND REASONS FOR THE MERGER                                           

  In early 1997, during the course of the Company's negotiations with Disney
regarding the Film Library Sale, the Company asked its financial advisor,       
Jefferson Capital, and the Company's outside counsel, Gipson Hoffman & Pancione,
P.C., to consider various strategic alternatives for the business and operations
of the Company assuming an agreement with Disney was reached.                   

  At the meeting of the Board held on February 21, 1997, the Board discussed
the strategic alternatives available to the Company, including the Film Library 
Sale, continuing to produce motion pictures, acquisition of the Company or a    
portion of the Company by another company, and winding down the Company's       
operations and dissolving. The Board believed that in light of, among other     
things, the disappointing financial results of three of the Company's four 1995 
releases and the 1997 release of THE SHADOW CONSPIRACY and the continuing       
increase in motion picture production and releasing costs, which could          
necessitate increased direct investment in the Company's motion pictures if the 
Company were to produce additional "event" motion pictures, that it would be in 
the best interests of the Stockholders to consider the winding down of the      
Company's operations. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE     
ASSETS OF THE COMPANY--Background and Reasons for the Library Sale Agreement."  
The Board discussed means of winding down the operations of the Company,        
including a liquidation under the statutory procedures set forth in Delaware law
or the sale of additional assets followed by the sale of the corporate entity   
and any remaining assets and liabilities. The Board believed that a statutory   
liquidation could take substantially longer and result in more expenses than a  
sale, reducing the amount of any cash payment to the Stockholders.              

At the Board meeting held on April 2, 1997 (at which the Library Sale   
Agreement with Disney was approved), the Board engaged in further discussion of 
the Company's strategic alternatives assuming consummation of the Film Library  
Sale. At such meeting, the Board authorized Warren Braverman, Executive Vice    
President, Chief Operating Officer, Chief Financial Officer and a Director of   
the Company, and R. Timothy O'Donnell, the President and a principal stockholder
of Jefferson Capital and a Director of the Company, to negotiate with other     
parties regarding the sale of the assets and provision for the liabilities that 
would remain assuming consummation of the Film Library Sale. The Board further  
authorized Mr. Braverman and Mr. O'Donnell, in consultation with the Special    
Committee, to discuss the sale of assets to and the assumption of liabilities by
Vajna as a means of winding down the operations of the Company in an expeditious
manner that would maximize stockholder value.                                   

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On May 19, 1997, Vajna's legal advisors met with Mr. Braverman, Mr.     
O'Donnell and the Company's outside counsel to discuss various matters relating 
to a possible acquisition by Vajna of the Company's publicly-held Shares.       

On May 30, 1997, counsel to Vajna sent a letter to the Board presenting 
discussion points regarding, among other things, a merger between the Company   
and an acquisition entity to be owned by Vajna, which would take place after the
sale of most of the Company's assets. The letter indicated that all outstanding 
Shares owned by persons other than Vajna would be acquired or redeemed for cash 
based on their proportionate share of the net worth of the Company at the time  
of the merger, and the entity owned (or controlled) by Vajna would become the   
sole owner of the Company which it was anticipated would, at that time, have    
certain residual assets and liabilities.                                        

    From June through the start of September, Vajna and his advisors, on the one
hand, and the Company and the Special Committee and their respective advisors,  
on the other hand, held a series of discussions and negotiations regarding the  
proposed Merger and the terms and conditions of the Merger Agreement.           

On September 2, 1997, the Board approved the terms and conditions of the
Merger Agreement and the Merger. On September 3, 1997, the Merger Agreement was 
executed. See "SPECIAL FACTORS RELATING TO THE MERGER--Recommendation of the    
Special Committee and the Board; Fairness of the Merger." See also "SPECIAL     
FACTORS RELATING TO THE MERGER--Background and Reasons for the Merger."         

RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD; FAIRNESS OF THE MERGER   

   On September 2, 1997, the Special Committee reported that it had determined
(i) that the Merger is fair to, and in the best interests of, the Stockholders  
(other than Vajna and Valdina) and (ii) to recommend that the Board approve and 
adopt the Merger Agreement and the transactions contemplated thereby, including 
the Merger. At a meeting held on the same day, the members of the Board         
(excluding Vajna, who abstained from the vote) unanimously determined, based in 
part on the recommendation of the Special Committee, that the Merger is fair to,
and in the best interests of, the Stockholders (other than Vajna and Valdina),  
approved and adopted the Merger Agreement and the transactions contemplated     
thereby, including the Merger, and determined to recommend that the Stockholders
approve and adopt the Merger Agreement. Vajna abstained from the vote due to his
significant ownership interest in Buyer.                                        

  In reaching the conclusions described above, the Special Committee and the
Board considered a number of factors, including, without limitation, the        
following: (a) the Company's historical financial losses and anticipated        
continuing operating losses; (b) increasing production and print and advertising
costs; (c) the significant risk of continued operations, including that of      
dissipating the Company's remaining assets; (d) the termination of the Domestic 
Distribution Agreement upon consummation of the Film Library Sale and the August
1997 expiration of the commitment to lend under the Company's credit facility;  
(e) the lack of strategic alternatives available to the Company in view of the  
Company's disappointing operating results and efforts to implement other        
strategic alternatives without success; (f) the existence of a substantial      
amount of cash and cash equivalents of the Company and the additional cash to be
received in connection with the Assignment Agreement; (g) the Board's belief    
that the Merger can be consummated more expeditiously and result in less        
expenses than a dissolution of the Company under Delaware law, resulting in a   
larger payment to the Stockholders in exchange for their equity interests in the
Company; (h) the historical market prices of the Shares; (i) Vajna's beneficial 
ownership of approximately 40.8% of the outstanding Shares; (j) the terms and   
conditions of the Merger Agreement; (k) that the Merger Consideration consists  
entirely of cash; (l) the possible conflicts of interest of Vajna, certain      
directors and members of management of the Company; and (m) that Stockholders   
have the right to dissent from the Merger and demand appraisal of the fair value
of their Shares under the DGCL. See "SPECIAL FACTORS RELATING TO THE            
MERGER--Recommendations of the Special Committee and the Board; Fairness of the 
Merger." In addition, the Board considered the recommendation of the Special    
Committee.                                                                      

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SURRENDER OF COMMON STOCK CERTIFICATES                                          

  Promptly after the Effective Time, a letter of transmittal and a notice of
consummation of the Merger and instructions with respect to the surrender of    
certificates ("Certificates") previously representing Shares will be sent to    
each record holder of Shares immediately prior to the Effective Time. The letter
of transmittal will set forth the procedure for surrendering such Certificates  
to ChaseMellon Shareholder Services ("the Paying Agent"). Each holder of a      
Certificate or Certificates (other than Certificates for Dissenting Shares,     
Shares held in the treasury of the Company or Shares owned by Buyer, Vajna or   
Valdina) will be entitled to receive, upon surrender to the Paying Agent of the 
Certificate or Certificates for cancellation, together with such letter of      
transmittal duly executed, and subject to any required backup withholding       
(within the meaning of Section 3406 of the Internal Revenue Code of 1986, as    
amended (the "Code"), the aggregate amount of cash into which the Shares        
previously represented by such Certificate or Certificates are converted in the 
Merger. Until surrendered to the Paying Agent, each Certificate (other than     
Certificates for Dissenting Shares, Shares held in the treasury of the Company  
or Shares owned by Buyer, Vajna or Valdina) shall be deemed for all corporate   
purposes to evidence only the right to receive upon such surrender the aggregate
amount of cash into which the Shares represented thereby shall have been        
converted, subject to any required backup withholding (within the meaning of    
Section 3406 of the Code). No interest will accrue or be paid on the cash       
payable upon the surrender of the Certificate or Certificates. See "THE MERGER  
AGREEMENT--Surrender of Company Common Stock Certificates." STOCKHOLDERS SHOULD 
NOT RETURN ANY CERTIFICATES WITH THE FORM OF PROXY ACCOMPANYING THIS PROXY      
STATEMENT.                                                                      

TREATMENT OF STOCK OPTIONS AND WARRANTS                                         

 Prior to the Effective Time, the Company must (i) terminate the Company's
1994 Basic Stock Option and Stock Appreciation Rights Plan and 1994 Special     
Stock Option and Stock Appreciation Rights Plan (collectively, the "Option      
Plans"), and any unexercised options issued thereunder, and (ii) cancel the     
Company's outstanding warrants. Upon consummation of the Film Library Sale and  
the transactions contemplated by the Assignment Agreement, the Option Plans and 
all unexercised options previously granted under the Option Plans will          
terminate.                                                                      

CONDITIONS TO THE MERGER; TERMINATION                                           

The obligations of each party to effect the Merger are subject to the   
fulfillment and/or waiver, at or prior to the Effective Time, of certain        
conditions, including: (a) the Merger Agreement shall have been approved and    
adopted by the requisite vote of the Stockholders under the DGCL; (b) the       
consummation of the Merger shall not be prohibited by any statute, rule or      
regulation; (c) no court of competent jurisdiction shall have issued (and such  
issuance shall not be threatened or pending) any injunction, restraining order  
or other order which prohibits the consummation of the Merger and no            
governmental action shall have been commenced or threatened which seeks to      
prohibit the Merger; (d) certain litigation, proceedings or investigations shall
not be pending, threatened or in existence; (e) the Company shall have obtained 
the Majority of the Minority Vote at the Special Meeting; (f) the percentage of 
Shares demanding appraisal in accordance with Section 262 of the DGCL to the    
total number of Shares outstanding immediately prior to the Effective Time shall
not exceed 15%; (g) the transactions contemplated by the Library Sale Agreement,
shall have been consummated in all material respects; and (h) the transactions  
contemplated by the Assignment Agreement shall have been consummated in all     
material respects. See "THE MERGER AGREEMENT--Conditions to the Merger;         
Termination."                                                                   

The Merger Agreement may be terminated and the transactions contemplated
thereby abandoned (a) by the mutual written consent of the Special Committee, on
behalf of the Company, and the Board of Directors of Buyer; (b) by the Company  
or Buyer if the Library Sale Agreement terminates; (c) by the Company, acting   
through the Special Committee, or Buyer if, without a breach or violation of the
Merger Agreement by the terminating party, the Merger has not been consummated  
by December 31, 1997; and                                                       

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(d) by the Company if the Board, based on the recommendation of the Special     
Committee, shall have failed to recommend or withdrawn, modified or amended in  
any material resect its approval or recommendation of the Merger or failed to   
hold the Special Meeting by December 31, 1997. See "THE MERGER                  
AGREEMENT--Conditions to the Merger," "--Termination; Fees and Expenses" and    
"--Amendments; Waivers."                                                        

REGULATORY APPROVALS                                                            

To the best knowledge of the Company, there are no federal or state     
regulatory requirements which must be complied with, nor are there any such     
governmental consents or approvals that must be obtained in connection with the 
consummation of the Merger other than compliance with certain federal securities
laws.                                                                           

ACCOUNTING TREATMENT                                                            

The Merger will be accounted for at historical cost as a combination of 
entities under common control.                                                  

CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE STOCKHOLDERS                     

The Merger, pursuant to which Shares (other than Shares owned by Buyer, 
Vajna or Valdina, Shares held in treasury, or Shares as to which statutory      
dissenters' rights are perfected) will be converted into the right to receive   
cash, will be a taxable transaction to the Stockholders whose Shares have been  
so converted. Gain or loss would generally be realized and recognizable by each 
such Stockholder in an amount equal to the difference between the Merger        
Consideration received and the basis of the Shares owned by such Stockholder.   
EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO      
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER,    
INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX     
LAWS.                                                                           

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

   MANAGEMENT; OWNERSHIP OF SHARES/OPTIONS.  As a result of Vajna's beneficial
ownership of approximately 40.8% of the outstanding Shares (not including any   
Shares owned by Valdina or any Shares for which Vajna only holds a proxy to     
vote), Vajna (and, as a result, Buyer) may be deemed to control the Company. In 
addition, Vajna, who is an officer, director and substantial stockholder of     
Buyer, is also the Chairman of the Board, President and Chief Executive Officer 
of the Company.                                                                 

  As of the Record Date, the executive officers and directors of the Company
(other than Vajna) owned an aggregate of     Shares and held options to purchase
an aggregate of     Shares (of which options to purchase an aggregate of        
Shares were exercisable at prices below $2.30 per Share). If the Merger is      
consummated, such persons will receive an aggregate of $    for their Shares    
(including Shares issuable upon exercise of the options which have exercise     
prices below $2.30 per Share). See "CERTAIN INFORMATION REGARDING THE           
COMPANY--Principal Stockholders of the Company" and "-- Executive Compensation."

INDEMNIFICATION.  The Merger Agreement provides for the survival of all 
rights to indemnification now existing in favor of the directors and executive  
officers of the Company and the maintenance of a policy of directors' and       
officers' liability insurance for a period of four years. See "THE MERGER       
AGREEMENT." The directors, officers and employees of the Company are also       
indemnified against certain actions, claims and liabilities pursuant to the     
Company's Certificate of Incorporation and Bylaws and, in the case of each      
director, pursuant to indemnification agreements with the Company. See "CERTAIN 
INFORMATION REGARDING THE COMPANY--Executive Compensation."                     

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SEVERANCE ARRANGEMENTS.  In connection with the Merger, the Company and 
Vajna have mutually agreed to terminate the Employment Agreement between Vajna  
and the Company, dated as of January 1, 1994, as amended (the "Vajna Employment 
Agreement"), effective as of the Effective Time. Upon termination of the Vajna  
Employment Agreement at the Effective Time, Vajna will be paid an amount equal  
to the sum of (i) one hundred percent of the fixed annual compensation that     
would otherwise have been payable to Vajna in the ordinary course from the      
Effective Time through December 31, 1997 had the Vajna Employment Agreement not 
been terminated at the Effective Time, and (ii) $500,000 (representing fifty    
percent of the fixed annual compensation that would otherwise have been payable 
to Vajna in the ordinary course from January 1, 1998 through December 31, 1998  
had the Vajna Employment Agreement not been terminated at the Effective Time),  
and (iii) $344,666 representing producer's performance fees earned under the    
Vajna Employment Agreement with respect to DIE HARD WITH A VENGEANCE. Assuming  
the Merger occurs on or about December 1, 1997, it is anticipated that, at the  
Effective Time, Vajna will receive an aggregate amount of approximately $927,666
in consideration for the termination of the Vajna Employment Agreement. See "THE
MERGER AGREEMENT" and "CERTAIN INFORMATION REGARDING THE COMPANY--Executive     
Compensation."                                                                  

In connection with the Merger, the Company and certain officers of the  
Company, including Warren Braverman, Chief Operating Officer, Chief Financial   
Officer, Executive Vice President and a Director of the Company, have agreed to 
certain severance arrangements. See "SPECIAL FACTORS RELATING TO THE            
MERGER--Interests of Certain Persons in the Merger," "THE MERGER AGREEMENT" and 
"CERTAIN INFORMATION REGARDING THE COMPANY--Executive Compensation."            

OTHER.  For serving on certain committees of the Board, including on the
Special Committee, Gregory R. Paul receives an aggregate of $20,000 per year.   
The Company also reimburses Mr. Paul (and the Company's other directors) for    
travel expenses incurred in connection with his activities on behalf of the     
Company. For serving on the Special Committee, Mr. Paul will also receive       
$50,000.                                                                        

R. Timothy O'Donnell, a director of the Company, is the President and a 
principal stockholder of a privately-held investment banking concern, which is  
the Company's financial advisor and which is receiving certain fees in          
connection with the Merger. See "SPECIAL FACTORS RELATING TO THE MERGER--Fees   
and Expenses," "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE  
COMPANY--Interests of Certain Persons in the Asset Sales" and "SPECIAL FACTORS  
RELATING TO THE MERGER--Interests of Certain Persons in the Merger."            

OPERATIONS PENDING AND FOLLOWING THE MERGER                                     

  The Company's plans pending the Merger are substantially the same as those
pending the Asset Sales. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE  
ASSETS OF THE COMPANY-- Operations of the Company Pending and Following the     
Asset Sales." At the time of the Merger, it is anticipated that substantially   
all of the Company's assets will have been sold and substantially all of the    
Company's previous operations will have ceased. The commitment to lend under the
Company's credit facility has terminated. It is further anticipated that the    
Domestic Distribution Agreement will have terminated by the Effective Time, and 
the Company will have only minimal personnel remaining at such time. As a       
result, any operations conducted by the Company following the Merger will in    
large part represent start-up operations. The Company, alone or with related    
entities, may seek to acquire, produce and arrange for the financing and        
distribution of motion picture projects (including the Development Projects)    
pursuant to new arrangements entered into by the Company following the Merger.  
Upon consummation of the Merger, Buyer intends to terminate the registration of 
the Company's Common Stock under the Exchange Act and delist the Company's      
Common Stock from the NASDAQ National Market System. The Company will also cease
to file periodic reports with the Commission, and the Company will be relieved  
of the obligation to comply with the proxy rules of Regulation 14A under Section
14 of the Exchange Act.                                                         

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APPRAISAL RIGHTS                                                                

    Stockholders who, not later than the date of the Special Meeting, deliver to
the Company a written demand for appraisal rights, who do not vote in favor of  
the Merger and who comply with all other applicable requirements of Section 262 
of the DGCL ("Section 262"), will have the right to dissent from the Merger and 
to have their Shares appraised by the Delaware Court of Chancery and to receive 
payment of the "fair value" of such Shares as determined by such court, rather  
than the Merger Consideration. The procedure for perfecting appraisal rights is 
summarized under the caption "RIGHTS OF DISSENTING STOCKHOLDERS," and the       
pertinent provisions of Section 262 are included as Appendix "D" to this Proxy  
Statement.                                                                      

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SUMMARY CONDENSED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE INFORMATION)

  The following summary financial data for the five years ended December 31,
1996 are derived from the audited consolidated financial statements of the      
Company. The financial data for the six month periods ended June 30, 1996 and   
1997 are derived from unaudited condensed consolidated financial statements. The
unaudited financial statements include all adjustments, consisting of normal    
recurring accruals, which the Company considers necessary for a fair            
presentation of the financial position and the results of operations for these  
periods. Operating results for the six months ended June 30, 1997 are not       
necessarily indicative of the results that may be expected for the entire fiscal
year ending December 31, 1997. The data should be read in conjunction with the  
audited consolidated financial statements and the unaudited condensed           
consolidated financial statements of the Company, related notes and             
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" included in this Proxy Statement.                                   

                                                        [Enlarge/Download Table]

                                                                                                   SIX MONTHS ENDED   
                                                         YEAR ENDED DECEMBER 31,                       JUNE 30,       
                                          -----------------------------------------------------  -------------------- 
                                            1992       1993       1994       1995       1996       1996       1997    
                                          ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                                                                                                      
OPERATIONS:                                                                                                           
  Total revenue.......................... $  39,566  $   9,006  $ 109,028  $ 192,880  $ 133,000  $  59,583  $  43,540 
  (Loss) income from operations..........    (7,744)    (2,672)     2,912    (16,762)   (16,364)    (1,707)   (11,377)
  Net (loss) income......................   (10,804)    (4,823)     2,895    (16,062)   (15,905)    (1,353)   (12,953)
  (Loss) income per common share.........    --           (.64)       .30      (1.23)     (1.12)      (.10)      (.90)
  Weighted average shares outstanding....    --          7,518      9,494     13,025     14,169     14,192     13,449 



                                                              DECEMBER 31,                             JUNE 30,       
                                          -----------------------------------------------------  -------------------- 
                                            1992       1993       1994       1995       1996       1996       1997    
                                          ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                                                                                                      
BALANCE SHEET DATA:                                                                                                   
  Cash................................... $   1,985  $   1,840  $   2,665  $  29,832  $  27,364  $  12,676  $  30,274 
  Restricted cash........................     1,000        500     --         --          5,654     --          3,920 
  Film costs, net of amortization........    18,665    115,108    223,827    160,756    103,792    164,547     68,522 
  Total assets...........................    27,102    119,992    253,891    206,257    156,548    190,475    116,096 
  Total debt.............................    32,711     93,991    143,146     73,202     47,420     68,528     52,017 
  Stockholders' (deficiency) equity......   (14,808)   (18,506)    44,434     51,717     36,607     50,364     25,755 

PER SHARE DATA:                                                                                                       
Net book value per common share.......... $   (2.32) $   (2.90) $    4.41  $    3.96  $    2.80  $    3.85  $    1.92 
Common shares outstanding................     6,383      6,383     10,075     13,075     13,075     13,075     13,447 

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THE SPECIAL MEETING 

RECORD DATE AND PERSONS ENTITLED TO VOTE AT THE SPECIAL MEETING                 

   The Board has fixed the close of business on October 30, 1997 as the Record
Date for the determination of Stockholders entitled to receive notice of and to 
vote at the Special Meeting. Only holders of record of Company Common Stock at  
the close of business on the Record Date will be entitled to notice of, and to  
vote at, the Special Meeting. At the close of business on the Record Date, the  
Company had outstanding           Shares.                                       

QUORUM                                                                          

   The presence, in person or by properly executed proxy, of a majority of the
outstanding Shares as of the Record Date is necessary to constitute a quorum to 
transact business at the Special Meeting. Those Shares present, in person or by 
proxy, including Shares as to which authority to vote on any proposal being     
considered at the Special Meeting is withheld, Shares abstaining as to any      
proposal being considered at the Special Meeting, and broker non-votes on any   
proposal being considered at the Special Meeting, will be considered present at 
the Special Meeting for purposes of establishing a quorum.                      

VOTE REQUIRED                                                                   

   Stockholders are entitled to one vote at the Special Meeting for each Share
held of record by them on the Record Date. Each of the Asset Sale Proposal and  
the Merger Proposal require the affirmative vote of the holders of a majority of
the outstanding Shares entitled to vote thereon.                                

As of the Record Date, members of the Board, including Vajna, owned an  
aggregate of         Shares, or approximately    % of the Shares outstanding on 
the Record Date. Pursuant to the terms of the Library Sale Agreement, members of
the Board who are also Stockholders have agreed, in effect, to vote their Shares
in favor of the Asset Sale Proposal. In addition, Valdina has informed the      
Company that it intends to vote all of its Shares in favor of the Asset Sale    
Proposal. As a result, if Valdina and the members of the Board who own Shares do
in fact cast their votes in favor of the Asset Sale Proposal, approval of the   
Asset Sale Proposal is assured.                                                 

As of the Record Date, Vajna owned or controlled the right to vote      
Shares (or approximately    % of the Shares outstanding as of such date) and    
Valdina owned         Shares (or approximately    % of the Shares outstanding as
of such date). See "CERTAIN INFORMATION REGARDING THE COMPANY--Principal        
Stockholders of the Company." Pursuant to the terms of the Merger Agreement,    
Vajna and Valdina have agreed to vote such Shares in favor of the Merger        
Proposal. As a result, receipt of the statutorily required vote in favor of the 
Merger Proposal is assured. However, the Merger Agreement also provides, as a   
condition to the closing of the Merger, that the Company shall have obtained the
Majority of the Minority Vote.                                                  

   As of the Record Date, all directors and executive officers of the Company,
including Vajna, beneficially owned an aggregate of         Shares, or          
approximately    % of those Shares outstanding on the Record Date. See "CERTAIN 
INFORMATION REGARDING THE COMPANY--Principal Stockholders of the Company." The  
Company has been informed that all such persons intend to vote their Shares in  
favor of the Asset Sale Proposal and the Merger Agreement.                      

APPRAISAL RIGHTS                                                                

   Stockholders who comply with the procedures specified in Section 262 of the
DGCL will be entitled to dissent from the Merger and to have their Shares       
appraised by the Delaware Court of Chancery and to receive payment of the "fair 
value" of such Shares as determined by such Court rather than the Merger        
Consideration. See "RIGHTS OF DISSENTING STOCKHOLDERS." Stockholders intending  
to dissent from the Merger should NOT vote their shares in favor of the Merger  
Proposal. A vote in favor of the                                                

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Merger Proposal will constitute a waiver of such Stockholder's appraisal rights.
Appraisal rights are not available with respect to the Asset Sales.             

PROXIES                                                                         

When a proxy card is returned, properly signed and dated, the Shares    
represented thereby will be voted in accordance with the instructions on the    
proxy card. If a Stockholder does not attend the Special Meeting and does not   
return the signed proxy card, such holder's Shares will not be voted and this   
will have the effect of a vote against matters to be voted on at the Special    
Meeting for purposes of determining whether the statutorily required vote is    
obtained, however, it will have no effect on determining whether the Majority of
the Minority Vote has been obtained. Stockholders are urged to mark the box on  
the proxy card to indicate how the Shares represented by the proxy card are to  
be voted. Abstentions will be have the effect of a vote "against" the matter    
being voted upon. If a Stockholder returns a signed proxy card but does not     
indicate how his or her Shares are to be voted, such Shares will be voted "FOR" 
approval of the Asset Sales and "FOR" approval of the Merger Agreement. The     
proxy card also confers discretionary authority on the individuals appointed by 
the Board and named on the proxy card to vote the Shares represented thereby on 
any other matter that is properly presented for action at the Special Meeting. A
Stockholder who has given a proxy may revoke it at any time prior to its        
exercise at the Special Meeting by delivering an instrument of revocation to the
Secretary of the Company, by duly executing and submitting a proxy bearing a    
later date, or by appearing at the Special Meeting and voting in person. The    
mere presence at the Special Meeting of the person who has given a proxy will   
not revoke such proxy. In addition, brokers who hold Shares as nominees will not
have discretionary authorization to vote such Shares on any of the matters to be
voted thereon in the absence of instructions from the beneficial owners and,    
therefore, the failure of the beneficial owners to give such instructions will  
have the effect of a vote "against" such matters for purposes of determining    
whether the statutorily required vote is obtained, however, it will have no     
effect on determining whether the Majority of the Minority Vote has been        
obtained.                                                                       

    Proxies will be solicited through the use of the mails. In addition, certain
directors, officers and employees of the Company may solicit proxies (for no    
additional compensation) by personal interview, telephone, telex, telegram or   
similar means of communication. Arrangements have also been made with brokerage 
firms and other custodians, nominees and fiduciaries for the forwarding of      
solicitation material by such persons to the beneficial owners of Shares, and   
the Company will reimburse such brokerage firms, custodians, nominees and       
fiduciaries for reasonable out-of-pocket expenses incurred by them in connection
therewith. In addition, the Company has retained D.F. King & Co., Inc. ("D.F.   
King") to assist in the solicitation of proxies from the Company's Stockholders.
D.F. King will receive for such service a fee of approximately $4,000 plus      
reimbursement of reasonable out-of-pocket expenses. The Company will bear all   
such costs of solicitation.                                                     

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PROPOSAL NO. 1
SALE OF SUBSTANTIALLY ALL OF
THE ASSETS OF THE COMPANY 

   Pursuant to Proposal No. 1, the Stockholders are being asked to approve the
sale of substantially all of the Company's assets, including the sale of        
substantially all of the Company's film library, pursuant to the Library Sale   
Agreement with Disney and the Assignment Agreement with Fox.                    

PARTIES TO THE ASSET SALES                                                      

   CINERGI PICTURES ENTERTAINMENT INC.  The Company is an independent producer
and distributor of motion pictures. See "CERTAIN INFORMATION REGARDING THE      
COMPANY." The Company's executive offices are located at 2308 Broadway, Santa   
Monica, California 90404 (telephone number: 310-315-6000). Since the Company's  
formation in November 1989 it has produced the following twelve motion pictures:

                                                                [Download Table]

                                       DOMESTIC     
                                      THEATRICAL    
MOTION PICTURE                       RELEASE DATE   
--------------------------------  ------------------
                                                    
MEDICINE MAN                      February 1992     
TOMBSTONE                         December 1993     
RENAISSANCE MAN                   June 1994         
COLOR OF NIGHT                    August 1994       
DIE HARD WITH A VENGEANCE         May 1995          
JUDGE DREDD                       June 1995         
THE SCARLET LETTER                October 1995      
NIXON                             December 1995     
AMANDA                            July 1996 (1)     
EVITA                             December 1996     
THE SHADOW CONSPIRACY             January 1997      
AN ALAN SMITHEE FILM                    -- (2)      

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

(1) AMANDA has not been released theatrically (except in Spain).  
The date shown is the date AMANDA (which did not meet the 
    criteria under the Company's domestic distribution arrangement
with Disney to be distributed thereunder) was delivered to
    Family Channel Pictures, the owner of all rights to distribute
    the film in the United States and Canada. The Company controls
   the distribution rights to the film for the rest of the world
 and has used an unaffiliated international sales company to
assist in international distribution of the film.         

(2) This film is currently in post-production.                    

TWENTIETH CENTURY FOX FILM CORPORATION.  Fox, an indirect wholly owned  
subsidiary of The News Corporation Limited which is a diversified international 
communications company incorporated under the laws of Australia, is engaged in  
the business of filmed entertainment, i.e., the production, financing,          
acquisition and distribution of motion pictures and television programming. The 
Company and Fox jointly own DIE HARD WITH A VENGEANCE which was produced by the 
Company and initially released domestically by Fox in May 1995.                 

THE WALT DISNEY COMPANY.  Disney is a diversified international         
entertainment company. In 1990, the Company entered into a distribution         
agreement and certain related agreements with Disney (collectively, and as it   
has been amended, the "Domestic Distribution Agreement") pursuant to which      
Disney has distributed most of the Company's motion pictures in the United      
States and its possessions, Canada and Latin America (the "Americas"). In       
connection with an April 1994 amendment to the Domestic Distribution Agreement, 
the Company granted Disney a warrant to purchase 150,000 Shares at an exercise  
price of                                                                        

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$9.00 per Share (the "Disney Warrant"). In conjunction with the Company's       
initial public offering in June 1994, Disney also purchased 555,556 Shares (the 
"Disney Shares") at the initial public offering price of $9.00 per share. In    
addition, the Company and Disney have engaged in certain other transactions     
(including the license by the Company to Disney of certain of the Company's     
rights in DIE HARD WITH A VENGEANCE). See "The Library Sale Agreement" and      
"Certain Additional Information Regarding Transactions with Disney" below.      

BACKGROUND AND REASONS FOR THE LIBRARY SALE AGREEMENT                           

The Company was formed to develop, finance, produce and license "event" 
motion pictures for exhibition in domestic and international theatrical markets 
and for later worldwide release in all media, including home video and pay and  
free television. "Event" motion pictures, which feature major film stars, high  
quality production values and other exploitable qualities which appeal to the   
largest segment of the motion picture audiences in both the United States and   
international markets, also typically involve direct negative costs (excluding  
capitalized interest and overhead) substantially in excess of the industry      
average direct negative cost. The industry average direct negative cost in 1996 
for members of the Motion Picture Association of America ("MPAA") an industry   
trade association which includes the major studios with which the Company       
competes was $39,835,000 (an increase of approximately 16.2% from 1994 and      
approximately 69.9% from 1989) and the industry average prints and advertising  
costs per picture in 1996 for members of the MPAA was $19,838,000 (an increase  
of approximately 23.4% from 1994 and approximately 114.5% from 1989).           

The Company has generally financed the production costs of its motion   
pictures through loans obtained under its credit facility with The Chase        
Manhattan Bank ("Chase") and a syndicate of lenders (under which the commitment 
to lend expired August 31, 1997), advances and production loans from Disney     
pursuant to the Domestic Distribution Agreement, and direct investments by the  
Company, as necessary. Typically the Company obtained advances (before          
commencement and during production of its motion pictures, but generally payable
upon delivery of the applicable film) from pre-licensing of distribution rights,
pursuant to single picture or output agreements, as well as pursuant to the     
Domestic Distribution Agreement, in an amount equal to a substantial percentage 
of the aggregate direct negative cost of each motion picture. For motion        
pictures with budgeted direct negative cost exceeding approximately $40,000,000,
however, such advances available from third parties and Disney would not        
typically cover the direct production costs of such films, thereby necessitating
direct investment by the Company.                                               

In light of the apparently continuing increases in the cost of motion   
picture production which could have necessitated increasing direct investment by
the Company in its films if it chose to continue to produce higher budget       
"event" motion pictures, in 1995 the Company "greenlighted" (initiated pre-     
production on) three films with relatively smaller budgets on average than those
of the Company's then recent past productions. The average direct negative cost 
of the three motion pictures greenlighted in 1995 and scheduled by the Company  
at that time to be released in 1996 (AMANDA, EVITA and THE SHADOW CONSPIRACY)   
was approximately $35,529,000 which was substantially less than the average     
direct negative cost of the four motion pictures released by the Company in 1995
(DIE HARD WITH A VENGEANCE, JUDGE DREDD, THE SCARLET LETTER and NIXON) of       
$64,297,000.                                                                    

    In Fall 1995, the Company also initiated discussions with Disney regarding a
potential restructuring of the Domestic Distribution Agreement which would have 
taken into account the increased cost of producing and releasing motion         
pictures. Such discussions continued periodically through early 1996. As an     
agreement could not be reached with Disney to restructure the Domestic          
Distribution Agreement, the Company, with Disney's assent, approached certain of
the other major motion picture studios in early 1996 to ascertain their interest
in entering into an arrangement to distribute the Company's films domestically  
in the event the Company and Disney agreed to terminate the Domestic            
Distribution Agreement. Although discussions were held, no agreement was reached
by the Company with respect to an alternative domestic distribution arrangement 
to the Company's arrangement with Disney.                                       

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  In early 1996, in light of the disappointing financial results of three of
the Company's four 1995 releases (JUDGE DREDD, THE SCARLET LETTER and NIXON),   
the Board and management initiated an overall strategic review of the Company's 
goals and principal business strategies to ascertain whether those goals and    
strategies remained consistent with, among other things, the continuing increase
in production and releasing costs, the development projects available in the    
marketplace, an increased number of motion pictures released by motion picture  
companies domestically, and the Company's financial capabilities.               

In connection with the strategic review, the Board and management also  
considered various strategic alternatives in order to maximize stockholder      
value. The Board and management considered raising additional capital in public 
financings but concluded that raising additional capital in the public markets  
on terms advantageous to the Company was not feasible due to the Company's      
recent financial performance and the Company's then current stock price. The    
Board and management also considered the sale of a partial interest in the      
Company or the entire Company.                                                  

   At the end of May 1996, the Company retained the investment banking firm of
Jefferson Capital Group, Ltd. ("Jefferson Capital") (of which R. Timothy        
O'Donnell, a director of the Company, is President and a principal stockholder) 
to assist the Company in its strategic review (including discussions with third 
parties) and advise the Board on the Company's strategic alternatives. Jefferson
Capital has substantial experience in advising independent motion picture and   
similar entertainment companies. On June 6, 1996, the Company publicly announced
that its strategic review included discussions with third parties regarding the 
sale of a partial interest in the Company or of the entire Company and that     
Jefferson Capital had been retained to assist in the strategic review.          

    In connection with its engagement, Jefferson Capital assisted the Company in
supplying information to and organized a series of confidential meetings with   
potential investors, merger partners and purchasers. From April 1996 through    
Fall 1996, the Company had periodic discussions with a number of companies      
regarding a potential investment in, merger with or purchase of the Company, and
exchanged some information in connection with certain of these discussions.     
Approximately eleven companies entered into confidentiality agreements with the 
Company. No written proposal or letter of intent was executed by the Company and
any of such parties. The Company engaged in substantive negotiations with New   
Regency Productions Inc., an independent motion picture production company ("New
Regency"), and in June 1996 received a proposed term sheet from New Regency     
suggesting for discussion purposes a cash tender by New Regency for the         
Company's Common Stock other than Common Stock owned by Vajna or Valdina which  
New Regency proposed would be exchanged for stock in New Regency. Under the     
discussion proposal, the cash tender price and share exchange ratio were to be  
based on a value of the Company of $45,000,000 and a value of New Regency of    
$810,000,000. The discussion proposal was subject to a variety of conditions.   
New Regency and the Company engaged in substantive negotiations with respect to 
New Regency's proposal during May and June 1996. On July 2, 1996, in connection 
with consideration of New Regency's proposal in particular, and potential       
business combinations and other strategic alternatives in general, the Board    
formed the Special Committee, consisting of the director Gregory R. Paul, who is
not employed by or otherwise affiliated with the Company, as the committee's    
sole member. On the same date, the Special Committee retained the law firm of   
Cahill Gordon & Reindel as outside counsel to the Special Committee. In July    
1996, however, New Regency abandoned its discussions with the Company.          

 The Company also engaged in substantive discussions with Phoenix Pictures
Inc., an independent motion picture production company ("Phoenix"), and in      
October 1996 received a proposed letter of intent from Phoenix with respect to a
proposed merger of the Company with a subsidiary of Phoenix whereby the Company 
would have become a subsidiary of Phoenix and the Company's operations          
curtailed. Pursuant to the proposed merger, in exchange for their Company Common
Stock, the Stockholders of the Company would have received a class of stock     
different than that to be held by the existing stockholders and management of   
Phoenix which would have had one vote per share (versus ten votes per share for 
the class to be held by existing Phoenix stockholders and management). Pursuant 
to the Phoenix proposal, the exchange ratio would have been based on the        
relationship of the net present value of the Company's free                     

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cash (which was not defined in the proposal) to $70,725,000, subject to certain 
adjustments. Under the Phoenix proposal, after the proposed merger the          
Stockholders of the Company would have owned a minority of the issued and       
outstanding voting securities of Phoenix. The Company terminated discussions    
with Phoenix because the Company did not believe that the transaction envisioned
by Phoenix would be in the best interests of the Company's Stockholders as it   
would result in the Stockholders receiving equity in another independent film   
company--one which had been recently formed, did not have an extensive track    
record, and could, in the Company's view, face many of the same factors that had
led the Company to initiate its strategic review--pursuant to an exchange ratio 
which valued Phoenix at a substantial premium to book value.                    

In July 1996, the Company had approached Disney to ascertain whether it 
would be interested in acquiring the Company. Disney had indicated it was not   
interested in an acquisition of the Company. In Fall 1996, the Company again    
approached Disney to ascertain its interest in an acquisition of the Company.   
Although Disney again indicated that it was not interested in an acquisition of 
the Company, Disney indicated that it would be interested in a transaction      
involving the acquisition of the Company's film library and termination of the  
domestic distribution arrangement between Disney and the Company. Additional    
discussions were held between the Company and Disney through December 1996. In  
late December 1996, Disney sent to the Company a proposed letter of intent.     
Disney and the Company subsequently agreed that rather than negotiate a letter  
of intent, to instead negotiate a definitive agreement. Discussions were held   
between the Company and its representatives and Disney and its representatives  
from late January 1997 through February 1997.                                   

    At a meeting of the Board held on February 21, 1997, the Board discussed the
potential transaction with Disney and the strategic alternatives available to   
the Company including continuing to produce motion pictures, the acquisition of 
the Company or a portion of the Company by another company in the entertainment 
industry or which desired to enter the entertainment industry, and winding down 
the Company's operations and dissolving. Although the Board believed the Company
should continue after the meeting to solicit and respond to overtures regarding 
an investment in or purchase of the Company, in view of the results to such     
point in time of the Company's discussions with third parties regarding an      
investment in or acquisition of the Company, the Board did not view the         
likelihood in the then foreseeable future of the Company receiving a proposal   
for an investment or acquisition on terms advantageous to the Company to be     
significant. The Board also believed that in light of, among other things, the  
disappointing financial results of three of the Company's four 1995 releases and
the 1997 release of THE SHADOW CONSPIRACY and the continuing increase in motion 
picture production and releasing costs which could necessitate increased direct 
investment in the Company's motion pictures if the Company were to produce      
additional "event" motion pictures, that it would be in the best interests of   
the Stockholders to consider the winding down of the Company's operations. The  
Board also considered continuing to produce smaller budget films but believed   
that, in the current releasing environment, production of smaller budget films, 
with which Company management had significantly less experience, posed          
significant risk, including that of dissipating the Company's remaining assets. 
The Board also believed that Disney's desire to reach an agreement with the     
Company to terminate the Domestic Distribution Agreement, as well as both the   
changes in management at Disney which had occurred since the Domestic           
Distribution Agreement had originally been entered into and the increased       
production by Disney itself of large budget "event" motion pictures, could      
negatively impact the distribution of the Company's films by Disney in the event
the Company were to continue to produce films for distribution by Disney        
pursuant to the Domestic Distribution Agreement. Given the prior inability of   
the Company to negotiate an alternative to the Domestic Distribution Agreement  
with either Disney or another major studio, the Board believed that for the then
foreseeable future the likelihood of the Company successfully obtaining an      
alternative distribution arrangement, on terms more advantageous to the Company 
than the Domestic Distribution Agreement, was not significant. As a result of   
the foregoing, the Board authorized continued negotiations with Disney regarding
a sale of the Company's film library to Disney.                                 

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  After the February 21st Board meeting, the Company and its representatives
continued to negotiate with Disney and its representatives through the beginning
of April 1997.                                                                  

   On April 2, 1997, the Board approved the Library Sale Agreement with Disney
which was executed on April 3, 1997. Execution of the Library Sale Agreement was
publicly announced the same day. Concurrent with such announcement, the Company 
also announced, among other things, that it did not presently intend to commence
production on any additional motion pictures. Pursuant to the Library Sale      
Agreement, Disney conducted additional due diligence relating to the film       
library through late August 1997. On August 27, 1997, the Board approved an     
amendment to the Library Sale Agreement with Disney which, among other things,  
modified the prior arrangements between the Company and Disney with respect to  
AN ALAN SMITHEE FILM and extended the date by which the Film Library Sale must  
be consummated or the parties can terminate the Library Sale Agreement. The     
amendment was entered into on August 27, 1997.                                  

BACKGROUND AND REASONS FOR THE ASSIGNMENT AGREEMENT                             

As indicated above, the Company and Fox jointly own DIE HARD WITH A     
VENGEANCE, which was produced by the Company and initially released domestically
by Fox in May 1995. The rights of the Company and Fox with respect to DIE HARD  
WITH A VENGEANCE are governed by a Memorandum of Agreement dated as of September
9, 1992 and a One Picture Theatrical Motion Picture License Agreement dated as  
of April 15, 1994 (collectively, the "DIE HARD AGREEMENTS"). Pursuant to the Die
Hard Agreements, in August 1994, the Company was paid $30,000,000 in advances by
Fox which received the right to distribute DIE HARD WITH A VENGEANCE in all     
media in the United States and Canada (including territories and possessions),  
Japan, the Bahamas, Bermuda and the Panama Canal Zone and worldwide in certain  
ancillary media (the "Fox Territories"). The Company controls the remaining     
international distribution rights to the film, while Fox controls all sequel    
rights to the film. In 1994, in exchange for aggregate advances of $23,200,000  
which were paid in 1995, the Company granted Disney distribution rights in DIE  
HARD WITH A VENGEANCE until June 2020 in a portion of the international         
territories for which the Company controls distribution rights: the Benelux     
region, French speaking Europe and Africa, German speaking Europe, the United   
Kingdom and Ireland, Spain, Central and South America, Scandinavia, Taiwan,     
Switzerland, Portugal and Greece (the "Disney Territories"). The Company has    
also licensed to an aggregate of approximately thirty subdistributors (the      
"International Subdistributors") the right, in the aggregate, to distribute the 
film in certain of the international territories for which the Company controls 
distribution rights and which were not licensed to Disney (the "Subdistributor  
Territories"). In most cases, the Company received an advance from the          
respective International Subdistributor.                                        

   In general, Fox, Disney and the International Subdistributors are obligated
to pay all costs associated with distribution of the picture in the respective  
territories for which they have distribution rights and are entitled to receive 
certain specified percentages of gross revenues generated in each media in such 
territories as distribution fees, and then to recoup the amounts advanced to the
Company, together with interest thereon, as well as their costs of distribution.
The Company is thereafter presently entitled, with certain exceptions, to       
receive overages, i.e., the remainder of all revenues generated by the picture  
in excess of Fox's, Disney's and the International Subdistributor's ongoing     
distribution fees and costs. Fox, Disney and the Company are responsible for all
residuals arising from exploitation of DIE HARD WITH A VENGEANCE in the         
territories for which they have distribution rights to the film. The Company is 
also responsible for residuals arising from exploitation of the film in the     
Subdistributor Territories. Residuals represent payments which motion picture   
producers must make to various entertainment guilds and unions when the producer
exploits a motion picture in markets other than the motion picture's primary    
intended market. Residuals are generally calculated as a percentage of the gross
revenues derived from exploiting the picture in these ancillary markets. The    
Company is obligated to pay participations associated with the distribution of  
the film in the territories for which the Company controls distribution rights  
to the film, as well as in the Fox Territories, the Disney Territories and the  
Subdistributor Territories. However, upon consummation of the Film Library Sale,
Disney will be obligated to pay participations associated with                  

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distribution of DIE HARD WITH A VENGEANCE in the Disney Territories.            
Participations represent rights granted by a motion picture producer to key     
creative talent involved in the production of a particular motion picture to    
participate in the revenues generated by such motion picture, in many cases     
payable only after the producer has recouped its costs of production (including 
capitalized interest and overhead) but in some cases payable before the producer
has recouped such costs.                                                        

 The Company's initial negotiations with Disney regarding the Film Library
Sale had contemplated that the film rights to be acquired by Disney would       
include the Company's rights in DIE HARD WITH A VENGEANCE. During the course of 
negotiations, however, Disney and the Company agreed that such rights would not 
be part of the film rights to be sold to Disney. As a result, in March 1997, the
Company initiated discussions with Fox regarding the acquisition by Fox of the  
Company's rights in DIE HARD WITH A VENGEANCE. Negotiations were held between   
the Company and Fox through early July 1997. On July 2, 1997, the Board of      
Directors approved the Assignment Agreement with Fox, subject to Fox indicating 
that it had completed its due diligence. On July 14, 1997, Fox indicated that it
had completed its due diligence, and on July 15, 1997 the Assignment Agreement  
was executed. Execution of the Assignment Agreement was publicly announced on   
July 16, 1997. On August 27, the Board approved an amendment to the Assignment  
Agreement which reduced the amount of insurance coverage required to be         
maintained by the Company for Fox's benefit in connection with the transactions 
contemplated by the Assignment Agreement. The amendment was entered into on     
August 27, 1997.                                                                

RECOMMENDATION OF THE BOARD                                                     

    The Board believes that the consummation of the Asset Sales is expedient and
in the best interests of the Company and the Stockholders, and unanimously      
recommends that the Stockholders vote "FOR" the Asset Sale Proposal. The Board  
believes that the terms of each of the Library Sale Agreement and the Assignment
Agreement (collectively, the "Asset Sale Agreements") are fair to, and in the   
best interests of, the Company and the Stockholders. In recommending that the   
Stockholders approve the Asset Sale Proposal, the Board considered a number of  
factors, including, without limitation, the following:                          

       (a)  Arms-length Negotiations.  That the Asset Sale Agreements were the
  result of arms-length negotiations between the Company and Disney and Fox,
respectively. In the Board's opinion, Fox was desirous of reaching an   
    agreement with the Company to obtain the Company's rights in DIE HARD WITH A
    VENGEANCE, and Disney was desirous of reaching an agreement with the Company
to obtain the Film Library and terminate the Domestic Distribution      
Agreement. Accordingly, the Board believes its negotiations were at     
arms-length and produced a fair price.                                  

(b)  Operating Losses and Limited Prospects for Profitable      
    Operations.  The net losses incurred by the Company in six of the seven full
 fiscal years since the Company's formation, including the $16,062,000 net
loss incurred by the Company for the year ended December 31, 1995, the  
    $15,905,000 net loss incurred by the Company for the year ended December 31,
    1996, the $12,953,000 net loss incurred by the Company during the six months
  ended June 30, 1997, and anticipated continuing operating losses, combined
 with the Board's belief that there is a substantial risk that the Company
  would not be able to operate profitably before depleting substantially all
of its remaining assets.                                                

    (c)  Increasing Production and Releasing Costs.  The increase in the
industry average direct negative costs for members of the MPAA which    
   includes the major studios with which the Company competes of 69.9% between
1989 (the year of the Company's formation) through 1996 and the         
   corresponding increase in the industry average prints and advertising costs
   per picture for members of the MPAA of 114.5% over the same period, and the
apparent continuing increase of such costs which could necessitate      
increasing direct investment by the Company in its films if it were to  
continue to produce "event" motion pictures.                            

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      (d)  Risks of Continued Operations.  The significant risk of continued
    operations, including that of dissipating the Company's remaining assets, in
light of: the disappointing audience acceptance of many of the Company's
past productions; the apparent continuing increase in production and    
  releasing costs which could necessitate increased direct investment by the
Company in its films if it was to continue to produce "event" motion    
 pictures; the relative lack of experience of management of the Company in
 producing smaller budget films; the competitive releasing environment and
the presence of numerous competitors many of which have significantly   
  greater financial and other resources than the Company; the Board's belief
that Disney desires to terminate, with the agreement of the Company, the
  Domestic Distribution Agreement; and the August 31, 1997 expiration of the
commitment to lend under the Company's credit facility.                 

     (e)  Domestic Distribution Agreement.  The Board's belief that Disney
desires to terminate, with the agreement of the Company, the Domestic   
   Distribution Agreement, and Disney's position, as expressed to the Company,
  that in the event the Company were to engage in an alternative transaction
  to the Film Library Sale that included the sale of stock to a third party,
Disney believed it would have the right to terminate the Domestic       
Distribution Agreement. The Library Sale Agreement includes a provision 
  requiring the Company to give written notice to any third party interested
  in a purchase of stock of the Company in an alternative transaction to the
    Film Library Sale, that Disney has informed the Company that Disney believes
   that the consummation of such alternative transaction would give Disney the
right to terminate the Domestic Distribution Agreement.                 

        (f)  Lack of Strategic Alternatives.  The lack of strategic alternatives
 available to the Company in view of the Company's disappointing operating
results and efforts to implement other strategic alternatives without   
success. The Company had been considering various strategic alternatives
   since late 1995 and had been unable to (i) negotiate a restructuring of the
Domestic Distribution Agreement with Disney, (ii) obtain an alternative 
    domestic distribution arrangement with another major studio, (iii) attract a
    significant investment in the Company, or (iv) enter into an agreement for a
   merger or other business combination or acquisition of the Company, in each
  case on terms advantageous to the Company and the Stockholders. Based upon
    the Company's unsuccessful pursuit of strategic alternatives since late 1995
   and anticipated continuing operating losses, the Board believes that it had
exhausted its identified realistic strategic alternatives and that the  
  Company would be unable to attract a significant investment in the Company
or enter into an agreement for a merger or other business combination or
acquisition of the Company that the Board believed would be in the best 
interests of the Company and the Stockholders.                          

(g)  Reduction of Liabilities.  The significant reduction of the
Company's liabilities resulting from the Asset Sales, including the     
    assumption by Disney of (i) the Company's outstanding loans from Disney, and
(ii) residuals, participations and scheduled liabilities relating to the
Film Library.                                                           

        (h)  Existence of Cash Assets.  The existence of a substantial amount of
   cash and cash equivalents of the Company and the potential use of such cash
    in combination with the cash consideration to be received in connection with
consummation of the Assignment Agreement to make a cash payment to the  
   Stockholders in exchange for their equity interests in the Company pursuant
 to the proposed Merger. If the Company were to delay the Asset Sales, the
  Company believes that anticipated continuing operating losses would reduce
    the Company's cash position and would, most likely, reduce the amount of any
future cash payment to the Company's Stockholders in exchange for their 
equity interests in the Company.                                        

In view of the wide variety of factors considered in connection with its
evaluation of the proposed Asset Sales, the Board did not find it practical to, 
and did not, quantify or otherwise attempt to assign relative weights to the    
specific factors considered in reaching its determination.                      

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THE LIBRARY SALE AGREEMENT                                                      

The following description of the Library Sale Agreement and the other   
information regarding the Library Sale Agreement contained herein are only      
summaries of certain provisions of the Library Sale Agreement and are qualified 
in their entirety by reference to the Library Sale Agreement which is included  
as Appendix "A" to this Proxy Statement.                                        

  THE FILM LIBRARY.  Pursuant to the Library Sale Agreement, the Company has
agreed to sell to Disney substantially all of the films in the Company's motion 
picture library. Specifically, the Film Library being sold to Disney includes   
primarily all of the Company's rights to the following eleven motion pictures:  
MEDICINE MAN, TOMBSTONE, RENAISSANCE MAN, COLOR OF NIGHT, JUDGE DREDD, THE      
SCARLET LETTER, NIXON, AMANDA, EVITA (excluding the Company's rights in the     
soundtrack), THE SHADOW CONSPIRACY and AN ALAN SMITHEE FILM.                    

Pursuant to the Library Sale Agreement, the rights being sold to Disney 
include the right to receive all worldwide "overages" and other payments of any 
kind paid or payable to or collected by the Company after January 1, 1997 which 
arise from the exploitation by the Company of the films being sold to Disney.   
The Company, however, will retain all minimum guarantees paid or payable to the 
Company pursuant to contracts in existence as of January 1, 1997 with respect to
the films being sold to Disney (subject to certain arrangements with respect to 
AN ALAN SMITHEE FILM described below). Prior to the commencement of production  
of a motion picture, the Company has generally entered into license agreements  
with distributors pursuant to which distributors acquire the right to distribute
such motion picture (or series of motion pictures pursuant to an "output        
agreement") in a certain geographic territory and media for a specific term.    
Minimum guarantees represent fixed amounts required to be paid to the Company by
distributors of the Company's films prior to or upon delivery of the film to the
distributor. Generally, once the distributor has recouped an amount equal to its
minimum guarantee and costs of distribution, the distributor is entitled to     
retain ongoing distribution fees computed as a percentage of the gross revenues 
generated from the distribution of the motion picture. The Company is thereafter
entitled to receive "overages," i.e., all remaining revenues received by the    
distributor from distribution of the picture in such territory in excess of the 
ongoing distribution fee retained by the distributor. From January 1, 1997      
through September 1, 1997, the Company has received approximately $156,000 in   
overages which will be paid to Disney upon consummation of the Film Library     
Sale, along with any overages received by the Company after September 1, 1997.  

 CONSIDERATION FOR FILM LIBRARY.  In exchange for the assets being sold to
Disney, Disney has agreed to:                                                   

- TRANSFER THE DISNEY SHARES AND DISNEY WARRANT TO THE COMPANY.         

The Disney Shares represent approximately 4% of the issued and        
outstanding Shares.                                                   

- ASSUME THE OUTSTANDING LOANS PREVIOUSLY MADE BY DISNEY TO THE         
COMPANY.                                                            

Pursuant to the Domestic Distribution Agreement with Disney, the      
Company has outstanding term loans from Disney (the proceeds of which 
were used to finance a portion of the production costs of five of the 
Company's films) under which an aggregate $39,739,000 in principal and
accrued interest was outstanding as of September 1, 1997. Each Disney 
term loan bears interest at the prime rate in effect from time to time
(8.5% at June 30, 1997) plus 1.5% and is to be repaid with accrued    
interest on or before the earlier of (i) four years after the loan    
proceeds were first made available to the Company or (ii) three years 
after the initial domestic theatrical release of such picture.        
Although one such loan was scheduled to mature in May 1997, Disney    
agreed that no repayment of such loan (or any other term loan) is     
required unless the Library Sale Agreement is terminated. Each of the 
loans is secured by rights to distribute the respective motion picture
in the Americas and, except for one term loan which is personally     
guaranteed by Vajna, certain other distribution rights related to the 
other motion pictures financed by Disney.                             

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- ASSUME ALL RESIDUALS AND PARTICIPATION OBLIGATIONS RELATING TO THE    
FILM LIBRARY (OTHER THAN CERTAIN GUILD OBLIGATIONS ARISING FROM OR  
RELATED TO THE PRODUCTION OF THE FILMS IN THE FILM LIBRARY.         

The obligation to pay residuals arising out of Disney's exploitation  
of the Company's motion pictures in the Americas has previously been  
assumed by Disney pursuant to the Domestic Distribution Agreement     
(subject to Disney's right to recoup such payments). The residuals and
participation obligations being assumed by Disney constitute          
substantially all of the Company's residuals and participation        
obligations (other than certain residuals and participation           
obligations relating to DIE HARD WITH A VENGEANCE).                   

- ASSUME ALL OBLIGATIONS OF THE COMPANY UNDER THE COMPANY'S EXISTING    
 EXPLOITATION AGREEMENTS WITH RESPECT TO THE FILM LIBRARY WHICH ARE TO
BE PERFORMED ON OR AFTER THE CLOSING OF THE FILM LIBRARY SALE,      
PROVIDED SUCH OBLIGATIONS HAVE BEEN LISTED ON SCHEDULES PROVIDED TO 
DISNEY.                                                             

The Company has arranged for international distribution of its films  
(in territories other than Canada and Latin America) by licensing them
to various local or international distributors (including in some     
circumstances Disney) either on a picture-by-picture basis or pursuant
to selected output agreements. Upon consummation of the Film Library  
Sale, Disney will acquire all of the rights and benefits (in addition 
to assumption of scheduled liabilities) arising under the Company's   
existing exploitation agreements with respect to the Film Library.    
However, with respect to the Company's output agreements, Disney will 
not acquire the right (or have any obligation) to have any additional 
motion pictures of Disney or its affiliates be distributed by the     
distributors who are party to such output agreements.                 

 TERMINATION OF DOMESTIC DISTRIBUTION AGREEMENT.  Upon consummation of the
Film Library Sale, the Domestic Distribution Agreement with Disney will be      
terminated, including substantially all of the audit rights of the Company and  
Disney thereunder. Pursuant to the Domestic Distribution Agreement, in exchange 
for exclusive distribution rights in all media throughout the Americas, Disney  
is required, subject to the terms and conditions of the Domestic Distribution   
Agreement, to advertise, promote and exploit in all such media 25 "qualified"   
motion pictures produced by the Company that meet certain criteria specified in 
the Domestic Distribution Agreement. In general, "qualified" motion pictures    
have budgets exceeding $25,000,000, feature star performers meeting certain     
criteria, and do not include foreign language films or films receiving ratings  
from the MPAA more restrictive than "R." During the term of the Domestic        
Distribution Agreement, Disney also has the right to elect to distribute any    
non-qualified motion pictures produced by the Company. Disney exercised this    
right in the case of AN ALAN SMITHEE FILM. The Domestic Distribution Agreement  
provides that its term extends until the Company has delivered 25 qualified     
motion pictures, although Disney's right to distribute in the Americas motion   
pictures produced during the term of the Domestic Distribution Agreement        
continues in perpetuity if Disney continues to actively exploit the motion      
pictures. The Company has delivered nine films to date which count toward the 25
qualified motion pictures. AN ALAN SMITHEE FILM will count as the tenth such    
film.                                                                           

   The Domestic Distribution Agreement obligates Disney to provide the Company
with advances and loans (at the Company's option, subject to certain conditions)
for the production of qualified motion pictures based upon scaled percentages of
each film's budgeted direct negative cost, subject to certain maximums and the  
other terms of the Domestic Distribution Agreement. Subject to the terms of the 
Domestic Distribution Agreement, Disney is also obligated to advance amounts to 
cover the costs of the initial theatrical release of each such motion picture in
the United States and Canada, including specified minimum amounts to cover the  
costs of manufacturing release prints, advertising and publicity. All advances  
and distribution costs are recoupable out of the revenues generated by the      
motion picture in the Americas, except that distribution costs expended for home
video distribution and Latin American distribution are recoupable only out of   
the respective revenues generated in each such media or market. As set forth in 
the Domestic Distribution Agreement, Disney is entitled to receive certain      
specified percentages of gross revenues generated in each media as distribution 
fees and is entitled to recoup the                                              

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amounts advanced to the Company, together with interest thereon, as well as its 
costs of distribution. The Company is thereafter entitled to receive the        
remainder of all revenues received by Disney generated by the Company's films in
excess of Disney's ongoing distribution fees. The repayment of each production  
loan made by Disney with respect to each qualified motion picture is secured by 
certain rights in such qualified picture and all proceeds from the exploitation 
of such qualified motion picture in all media in the Americas. The Domestic     
Distribution Agreement provides that it may be terminated by Disney in the event
that the Company fails to deliver a qualified picture to Disney for a period of 
three years or in the event of the loss of Vajna's services; provided, however, 
that if the loss of Vajna's services is due to death or disability, Disney may  
not terminate the Domestic Distribution Agreement with respect to qualified     
pictures for which the Company has already engaged certain creative elements.   
Pursuant to the Library Sale Agreement, in the event the Company were to        
commence pre-production or production on a motion picture during the term of the
Library Sale Agreement, the motion picture would not be considered a "qualified"
motion picture under the Domestic Distribution Agreement, and, accordingly,     
Disney would not be obligated to finance or distribute such motion picture.     

 TREATMENT OF CERTAIN OTHER PROJECTS AND ARRANGEMENTS.  In addition to the
Domestic Distribution Agreement, the Company has certain other agreements and   
arrangements with Disney. The Library Sale Agreement provides for the following 
treatment of those arrangements:                                                

AN ALAN SMITHEE FILM.  Under existing agreements with Disney, Disney was
obligated to pay the Company $5,000,000 upon the delivery of AN ALAN SMITHEE    
FILM to Disney by the Company. Pursuant to the Library Sale Agreement, Disney   
will instead pay the reduced amount of $3,950,000 to the Company upon delivery  
of the film. The Company has agreed to use such amount to pay off a portion of  
the outstanding principal and interest which the Company owes under its credit  
facility relating to the production of the film. In addition, at the closing of 
the Film Library Sale, the Company must pay to Disney an amount equal to the    
difference between (a) the aggregate amount of minimum guarantees payable to the
Company with respect to such film, which amount is to be no less than           
$10,912,000 and (b) the sum of (x) the actual out-of-pocket production costs for
AN ALAN SMITHEE FILM (including actual finance costs and interest under the     
Company's credit facility to the extent such costs and interest are directly    
attributable to loans under the credit facility in connection with production of
the film) (the "Smithee Production Costs") up to $10,000,000 plus (y) 50% of any
Smithee Production Costs in excess of $10,000,000 (such sum of (x) and (y) not  
to exceed $10,500,000). See "Management's Discussion and Analysis of Financial  
Condition and Results of Operations--Liquidity and Capital Resources" for       
additional information regarding the estimated amount of such payment.          

DIE HARD WITH A VENGEANCE OVERAGES.  If the Film Library Sale is        
consummated, the Company will relinquish its rights to all overages otherwise   
payable by Disney to the Company after January 1, 1997 from the distribution of 
DIE HARD WITH A VENGEANCE in those international territories for which          
distribution rights were previously licensed by the Company to Disney. In 2020, 
the distribution rights granted by the Company to Disney will revert to Fox.    
Disney is responsible for all residuals (and, upon consummation of the Film     
Library Sale, will be responsible for participation obligations) arising from   
exploitation of DIE HARD WITH A VENGEANCE in the territories and during the term
for which it has been granted distribution rights to the film.                  

OLIVER STONE FIRST LOOK ARRANGEMENT.  The Company has a "first-look"    
arrangement with Oliver Stone and certain of his affiliated entities            
(collectively, "Stone") pursuant to which Stone submits to the Company all      
theatrical motion picture projects owned or controlled by Stone for the         
Company's development and consideration of possible production. As consideration
for Stone's submitting such projects to the Company, the Company pays certain   
amounts annually to Stone for overhead and development. Disney has reimbursed   
the Company for all amounts payable to Stone through February 10, 1997, however,
if the Film Library Sale is consummated, the Company will be responsible for all
payments due to Stone from February 10, 1997 through expiration of the          
arrangement in February 1998. The Company currently estimates the payments due  
under the first look arrangement with Stone from June 30, 1997 through February 
1998 will be approximately $1,570,000. See "CERTAIN ARRANGEMENTS CONCERNING     
OTHER ASSETS."                                                                  

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    DEEP RISING.  The Company and Disney have an arrangement whereby the Company
is financially obligated to pay Disney the lesser of 50% of the cost of the     
motion picture currently entitled DEEP RISING or $22,500,000 (the "Cost         
Amount"), in exchange for (i) a 50% equity participation in DEEP RISING, and    
(ii) a sales fee for international distribution of such motion picture. If the  
Film Library Sale is consummated, the Company (a) will no longer have any       
interest in the film as it will no longer serve as sales agent with respect to  
the film, (b) will relinquish the equity participation and sales fee, (c) will  
remit to Disney all minimum guarantees received by the Company with respect to  
DEEP RISING while it served as a sales agent with respect to the film and which 
were not previously remitted to Disney, and (d) will no longer be obligated to  
pay the Cost Amount.                                                            

SMOKE AND MIRRORS.  Through September 1, 1997, Disney had advanced      
approximately $2,584,296 (which accrues interest at $528 per day) to assist in  
the development of the Company's motion picture project SMOKE AND MIRRORS. If   
the Film Library Sale is consummated, Disney will receive a right of first      
negotiation to acquire or participate in the financing and distribution of such 
project, and Disney will also be entitled to reimbursement of its costs and     
expenses (including interest) in the project in the event it is made into a     
film.                                                                           

EATERS OF THE DEAD.  In July 1996, the Company assigned to Disney the   
development project Eaters of the Dead in exchange for the following in the     
event a theatrical motion picture based on the project is produced and released:
$767,298 (plus interest) representing reimbursement of the Company's development
costs relating to the project, $1,500,000 if the Company provides the executive 
producing services of Vajna in connection with the production, and a            
participation interest in the motion picture. If the Library Sale is            
consummated, Disney will not be obligated to make any such payments (or grant   
any participation) to the Company with respect to EATERS OF THE DEAD. Disney has
informed the Company that production of EATERS OF THE DEAD has commenced.       

   JUDGE DREDD AND EVITA SALE-LEASEBACKS.  In 1995 and 1996, respectively, the
Company completed sale-leaseback transactions with respect to JUDGE DREDD and   
EVITA. The sale-leaseback transactions may be unwound in certain circumstances  
relating to British tax treatment of the transactions, and the Company could be 
liable for certain unwind costs. Disney has agreed, upon consummation of the    
Film Library Sale to assume all of the rights and obligations under the         
applicable leases of the Company's subsidiaries that are the lessees in such    
sale-leaseback transactions, however, the Company would remain a guarantor of   
payment of the unwind costs and certain other potential liabilities.            

    UP CLOSE AND PERSONAL.  The Company has assisted Disney in the international
pre-licensing of the Disney motion picture UP CLOSE AND PERSONAL. Upon          
consummation of the Film Library Sale, the Company will no longer assist Disney 
in pre-licensing the film or be paid any fees with respect thereto. All sales   
agency fees paid to the Company by Disney in 1994, 1995 and 1996 for            
pre-licensing such film were paid by the Company to Summit International Ltd.   
(collectively with its affiliates, "Summit"), an international sales company    
unaffiliated with the Company which has assisted the Company as a sales agent in
the international pre-licensing of the Company's films and was utilized by the  
Company in connection with the pre-licensing of UP CLOSE AND PERSONAL.          

REPRESENTATIONS AND WARRANTIES.  The Library Sale Agreement contains    
representations and warranties by the Company and Disney relating to, among     
other things: (a) due organization, valid existence and good standing of the    
Company and Disney and other similar corporate matters; (b) the authorization   
and enforceability of the Library Sale Agreement; and (c) the consents required 
to effectuate the Film Library Sale. The Library Sale Agreement contains        
additional representations and warranties, including representations and        
warranties by the Company with respect to the Film Library and representations  
and warranties by Disney with respect to Disney's ownership of the Disney Shares
and Disney Warrant.                                                             

CERTAIN COVENANTS.  Prior to the closing of the Film Library Sale or    
termination of the Library Sale Agreement, the Company is permitted to continue 
operating in the ordinary course of business and may                            

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enter into transactions that will not materially adversely affect the Film      
Library. Without Disney's consent, however, the Company may not further license 
or exploit or agree to license or exploit the Film Library or modify existing   
agreements relating to the Film Library. The Company has also agreed to obtain  
errors and omissions insurance for each of the motion pictures being sold to    
Disney, with a term of five years following the closing of the Film Library Sale
and with aggregate liability limits with respect to each film of not less than  
$3,000,000. In addition, the Company and Disney have agreed to make all filings 
and use reasonable efforts to obtain all approvals necessary to consummate the  
Film Library Sale.                                                              

CONDITIONS TO THE FILM LIBRARY SALE.  The obligations of the Company and
Disney to consummate the Film Library Sale are subject to the satisfaction or   
waiver of a number of conditions, including, among other things: (a) approval of
the Film Library Sale by the Company's Stockholders; (b) the expiration or      
termination of any applicable waiting period under the Hart-Scott-Rodino        
Anti-Trust Improvements Act of 1976, as amended; (c) the other party's          
representations and warranties being true and correct in all material respects  
at the closing; (d) the other party having performed and complied in all        
material respects with the undertakings and covenants required by the Library   
Sale Agreement to be performed or complied with by it prior to or at the        
closing; (e) the absence of any pending litigation, claim, action,              
investigation, or proceeding which might restrain, delay, challenge or          
invalidate any part of the Film Library Sale; and (f) the receipt of required   
consents and approvals.                                                         

  The Company's obligation to consummate the Film Library Sale is subject to
certain additional conditions including, among other things: Disney's release of
all guarantees and security interests granted Disney in connection with the term
loans from Disney, and Disney's execution of agreements with each of the        
entertainment guilds effectuating Disney's assumption of the Company's residuals
obligations with respect to the Film Library. Disney's obligation to consummate 
the Film Library Sale is also subject to certain additional conditions,         
including, among other things, (i) no material adverse changes in the Film      
Library; (ii) the release by the lenders under the Company's credit facility of 
their liens against the Film Library; (iii) termination of all sales agency     
agreements between the Company and Summit; (iv) the grant of a security interest
in certain assets to Disney to secure certain of the obligations to Disney      
relating to SMOKE AND MIRRORS and to certain Stone projects; (v) the completion 
by the Company and delivery to Disney of AN ALAN SMITHEE FILM; and (vi) the     
receipt by Disney of various acknowledgments and consents required with respect 
to Disney's assumption of the rights and obligations of the applicable          
subsidiaries of the Company under the leases in the JUDGE DREDD and EVITA       
sale-leaseback transactions.                                                    

  INDEMNIFICATION.  The Library Sale Agreement provides that the Company and
Disney will each indemnify and hold harmless the other party and its directors, 
officers, employees, affiliates (and the affiliates' directors, officers, and   
employees), agents and assigns of the other from and against any and all losses 
relating to any breach of the representations, warranties, covenants or         
agreements made in or pursuant to the Library Sale Agreement or related         
agreements (subject to certain limitations contained in the Library Sale        
Agreement). The Company has also agreed to indemnify Disney against losses      
incurred by Disney as a result of any claim asserted by any stockholder of the  
Company with respect to the Film Library Sale or the Film Library, or as a      
result of any liabilities not expressly assumed by Disney. In addition, Disney  
has also agreed to indemnify the Company against losses incurred by the Company 
as a result of the liabilities which Disney is expressly assuming as part of the
Film Library Sale. The representations and warranties of the Company and Disney 
contained in the Library Sale Agreement will generally survive the Closing for  
eighteen months, with certain limited exceptions.                               

   AMENDMENTS; TERMINATION.  The Library Sale Agreement may be amended only by
written consent of the parties. The Library Sale Agreement terminates           
automatically if: (i) prior to approval of the Film Library Sale by the         
Company's Stockholders, the Company's Board receives an unsolicited offer from a
third party to take part in an alternative transaction ("Alternative            
Transaction"), (ii) the Company's Board determines, in the exercise of its      
fiduciary duties under applicable law, that the Alternative Transaction would be
more beneficial to the Company or the Company's Stockholders than the Film      
Library Sale;                                                                   

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(iii) the Alternative Transaction and the Film Library Sale cannot both be      
consummated in accordance with their respective terms, and (iv) the Alternative 
Transaction is subsequently consummated.                                        

  The Library Sale Agreement may be terminated at any time prior to Closing:
(a) upon mutual written consent of the Company and Disney; (b) by either the    
Company or Disney if the other party materially breaches its respective         
representations, warranties or covenants and fails to cure any such breach      
within thirty days of receiving written notice of the breach; (c) by the Company
or Disney if the conditions to its obligations to close have not been satisfied 
in all material respects by the date of Closing; (d) by Disney if the Company   
commences negotiations for an Alternative Transaction, or (e) by Disney or the  
Company if the closing has not occurred by November 22, 1997 (unless the Library
Sale Agreement has, by its terms, been extended to accommodate an Alternative   
Transaction). Disney and the Company have agreed in principle to extend such    
date.                                                                           

  If the Library Sale Agreement is terminated, all obligations of Disney and
the Company thereunder will terminate without liability of either party to the  
other except (i) certain provisions, including the indemnification provisions,  
will survive such termination, (ii) the Company will remain liable for losses   
incurred by Disney (with certain exceptions) as the result of the breach by the 
Company of the Company's representations and warranties or certain specified    
covenants in the Library Sale Agreement or because the Company intentionally    
refuses to proceed with the closing or intentionally prevents the closing from  
taking place (other than because the Company is pursuing an Alternative         
Transaction), and (iii) Disney will remain liable for losses incurred by the    
Company as a result of the breach by Disney of certain specified covenants. In  
addition, if the Library Sale Agreement is terminated as a result of the breach 
by one party of the agreement, then, subject to certain limitations, the        
non-breaching party may also seek damages and pursue any other available legal  
remedies.                                                                       

Disney is entitled to certain other rights if the Film Library Sale     
terminates as the result of an Alternative Transaction which is consummated. If 
the Alternative Transaction involves the sale of any of the Company's assets    
that would otherwise have been sold to Disney pursuant to the Library Sale      
Agreement, then: (a) Disney's obligations under the Domestic Distribution       
Agreement with respect to motion pictures not yet completed and/or delivered by 
the Company to Disney for distribution will terminate, (b) the Domestic         
Distribution Agreement will remain in full force and effect with respect to     
previously delivered motion pictures, and (c) the term loans from Disney will   
immediately become due and payable by the Company. If, however, the Alternative 
Transaction involves the sale of stock of the Company, the Company has agreed to
pay all reasonable out-of-pocket expenses incurred by Disney incident to the    
negotiation, preparation and performance of the Library Sale Agreement. The     
Library Sale Agreement also requires the Company to give written notice to any  
third party in such an Alternative Transaction involving the sale of stock of   
the Company, that Disney has informed the Company that Disney believes that     
consummation of such Alternative Transaction would give Disney the right to     
terminate the Domestic Distribution Agreement.                                  

  CLOSING DATE.  The Library Sale Agreement provides that, unless Disney and
the Company consent to a different date, the closing of the Film Library Sale   
will take place within 5 business days after the receipt of the last consent or 
approval required for either Disney or the Company to consummate the Film       
Library Sale. The Company currently anticipates that the closing of the Film    
Library Sale will occur as soon as practicable after the Special Meeting,       
subject to the satisfaction or waiver of the conditions precedent to the Film   
Library Sale set forth in the Library Sale Agreement.                           

THE ASSIGNMENT AGREEMENT                                                        

The following description of the Assignment Agreement and the other     
information regarding the Assignment Agreement contained herein are only        
summaries of certain provisions of such agreement and are qualified in their    
entirety by reference to the Assignment Agreement which is included as Appendix 
"B" to this Proxy Statement.                                                    

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ASSIGNMENT OF RIGHTS AND TREATMENT OF RELATED RIGHTS AND                
OBLIGATIONS.  Pursuant to the Assignment Agreement, the Company has agreed to   
assign to Fox the Company's rights in DIE HARD WITH A VENGEANCE (including the  
right to receive any overages from Fox with respect to the Fox Territories),    
subject to the terms of the Company's existing exploitation agreements relating 
to such rights, including the Company's license of distribution rights to Disney
with respect to the Disney Territories and to International Subdistributors with
respect to the Subdistributor Territories. However, the Company, which upon     
consummation of the Film Library Sale will relinquish the right to overages     
payable by Disney with respect to DIE HARD WITH A VENGEANCE, will still be      
entitled to receive any overages under the Company's existing exploitation      
agreements with International Subdistributors. Fox will continue to be          
responsible for the payment of residuals relating to distribution of the film in
those territories for which Fox currently controls distribution rights, and, as 
the Company's existing exploitation agreements expire (including the Company's  
agreements with Disney and the International Subdistributors) and the           
distribution rights in those territories revert to Fox, Fox will become         
responsible for the payment of residuals in the applicable territories covered  
by such exploitation agreements. The Company, however, will be responsible for  
all participations due to profit participants in the film except those arising  
from distribution of DIE HARD WITH A VENGEANCE in the Disney Territories. The   
profit participations relating to the film include primarily a "producer's      
performance fee" due to Vajna under his employment agreement with the Company of
$344,666 which is to be paid to Vajna upon consummation of the Merger. The      
Company currently anticipates, subject to, among other things, actual future    
revenues generated by the film, that the Company's residuals and participation  
obligations with respect to such film will be approximately $811,000.           

   CONSIDERATION FOR THE RIGHTS BEING ASSIGNED.  In exchange for the Company's
assignment of rights to Fox and the other representations, warranties and       
agreements of the Company pursuant to the Assignment Agreement, Fox has agreed  
to pay to the Company the sum of $11,250,000 in cash.                           

CONDITIONS TO THE ASSIGNMENT AGREEMENT.  The parties' obligations to    
consummate the transactions under the Assignment Agreement are conditioned on   
the Stockholders' approval of the Asset Sales and the consummation of the       
transactions contemplated by the Library Sale Agreement.                        

REPRESENTATIONS AND WARRANTIES.  The Assignment Agreement contains      
representations and warranties by the Company and Fox relating to, among other  
things: (a) due organization, valid existence and good standing of the Company  
and Fox and other similar corporate matters; and (b) the authorization and      
enforceability of the Assignment Agreement. The Assignment Agreement also       
contains additional representations and warranties by the Company with respect  
to the rights being assigned to Fox and certain materials provided to Fox in    
connection with its due diligence review.                                       

    INDEMNIFICATION.  The Assignment Agreement provides that the Company and Fox
will each indemnify and hold harmless the other party and its parents,          
subsidiaries, affiliates, stockholders, directors, officers, employees and      
agents against all third party claims and losses resulting from the exploitation
of its rights in DIE HARD WITH A VENGEANCE and for any breach of its            
representations, warranties and/or agreements in the Assignment Agreement. The  
Company has agreed to further indemnify Fox from any claim or action against Fox
based on any liability or obligation of the Company not expressly assumed by Fox
pursuant to the Assignment Agreement, or initiated by the Company or a          
stockholder or creditor of the Company relating to the Assignment Agreement or  
with respect to the assignment of rights to Fox thereunder, other than an action
to enforce the Assignment Agreement. Fox has also agreed to indemnify the       
Company against any claim or action against the Company relating to any         
obligation or liability assumed by Fox pursuant to the Assignment Agreement.    

    CERTAIN COVENANTS.  Pursuant to the Assignment Agreement, the Company agreed
that it or any successor in interest will maintain liquid assets of at least    
$500,000 for five years after the closing of the Assignment Agreement to provide
additional security to Fox with respect to the Company's obligations to Fox     
under the Assignment Agreement. The Company further agreed that if the liquid   
assets of the Company or any successor in interest fall below such level during 
the five year period that the Company, in                                       

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order to secure its obligations under the Assignment Agreement, will either (i) 
grant Fox a security interest in $250,000 worth of acceptable collateral, (ii)  
obtain a letter of credit in favor of Fox in the amount of $250,000 from a bank 
with $200,000,000 or more of assets, or (iii) provide a personal guarantee of   
Vajna in the amount of $250,000. The Company has also agreed to maintain for    
five years from the date of closing errors and omissions insurance for DIE HARD 
WITH A VENGEANCE covering Fox and its affiliates, and to maintain for four years
from the date of closing directors' and officers' liability insurance with      
coverage up to $500,000 naming the Fox Parties as additional insureds. Fox has  
agreed not to interfere with Disney's or the International Subdistributors'     
exercise of their respective distribution rights to DIE HARD WITH A VENGEANCE.  
In addition, the Company and Fox have agreed to perform such further acts and   
execute such further documents as may be reasonably necessary or to carry out   
the intent of the Assignment Agreement.                                         

 AMENDMENTS; TERMINATION.  The Assignment Agreement may be amended only by
written consent of the parties. In the event the Library Sale Agreement         
terminates, the Assignment Agreement will automatically terminate without       
liability of either party to the other.                                         

CLOSING.  The transactions contemplated by the Assignment Agreement are 
scheduled to close concurrently with the closing of the Film Library Sale.      

APPRAISAL RIGHTS INAPPLICABLE                                                   

   Under Delaware law, the Stockholders do not possess any appraisal rights in
relation to the Asset Sales. However, Stockholders who follow certain procedures
under Delaware law will be entitled to dissent from the Merger and have their   
Shares appraised by the Delaware Court of Chancery. See "THE MERGER             
AGREEMENT--Dissenter's Rights" and "RIGHTS OF DISSENTING STOCKHOLDERS."         

REGULATORY APPROVALS                                                            

To the best knowledge of the Company, there are no federal or state     
regulatory requirements which must be complied with, nor are there any such     
governmental consents or approvals that must be obtained in connection with     
consummation of the Asset Sales other than compliance with the Hart-Scott-Rodino
Anti-Trust Improvement Act of 1976, as amended, in connection with the Film     
Library Sale, including the filing of Notification and Report Forms and the     
expiration or termination of the applicable waiting period under such law.      

ACCOUNTING TREATMENT                                                            

   The Asset Sales will be accounted for as a sale of assets and a transfer of
certain liabilities. The Company expects to record a gain upon the consummation 
of the Asset Sales as the net book value of the assets being sold pursuant to   
the Asset Sales are less than the consideration to be received, including the   
liabilities transferred.                                                        

CERTAIN FEDERAL INCOME TAX CONSEQUENCES                                         

The Asset Sales will not have any federal income tax consequences to the
Stockholders. The Asset Sales, however, will result in gross income on a tax    
basis of approximately $21,702,000 to the Company. Since the Company had a      
federal net operating loss carry forward of $59,406,000 as of December 31, 1996,
has incurred a tax operating loss of approximately $10,287,000 for the six      
months ended June 30, 1997, and will incur additional tax operating losses      
through the Effective Time of the Merger, the gross income generated by the     
Asset Sales will be completely offset by such net operating losses and no       
federal income tax would be payable thereon. However, despite the carryover of  
the federal net operating loss to the current year, because of other adjustments
in 1997 the Company would be subject to a federal alternative minimum tax of    
approximately $600,000. Moreover, because of limitations on the carryover of net
operating losses under the California Revenue and Taxation Code, the Company    
currently estimates that there will be a California income tax liability for    
1997 of between $400,000 and $500,000.                                          

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INTERESTS OF CERTAIN PERSONS IN THE ASSET SALES                                 

  In considering the recommendation of the Board with respect to the Library
Sale Agreement and the Assignment Agreement and the Asset Sales contemplated    
thereby, Stockholders should be aware that certain of the Company's executive   
officers, directors and Stockholders have certain interests that present actual 
or potential conflicts of interest in connection therewith and have interests   
that may be different from, or in addition to, the interests of the Stockholders
generally, including those referred to below. The Board was aware of these      
actual or potential conflicts of interest and considered them along with the    
other matters described under "Recommendation of the Board" above.              

R. Timothy O'Donnell, a director of the Company, is the President and a 
principal stockholder of Jefferson Capital, a privately-held investment banking 
concern which is the Company's financial advisor. As indicated under "Background
and Reasons for the Library Sale Agreement," the Company retained Jefferson     
Capital to assist the Company in its strategic review. Jefferson Capital's      
services have also included assisting the Company with respect to the Asset     
Sales and the Merger. Upon retention of Jefferson Capital, in May 1996, the     
Company paid Jefferson Capital a fee of $75,000 and has agreed to reimburse     
Jefferson Capital for expenses (amounting to approximately $58,000 through      
September 1, 1997). Jefferson Capital will receive an additional payment of     
$300,000 which was contingent upon execution of the Merger Agreement, and a     
further payment of $300,000 if the Asset Sales and the Merger are consummated.  

 In addition, the Merger Agreement provides that consummation of the Asset
Sales is a condition to the Merger. As indicated under "SPECIAL FACTORS RELATING
TO THE MERGER--Interests of Certain Persons in the Merger," certain of the      
Company's officers, directors and Stockholders have certain interests in the    
Merger. See "CERTAIN ARRANGEMENTS CONCERNING OTHER ASSETS."                     

CERTAIN ADDITIONAL INFORMATION REGARDING TRANSACTIONS WITH DISNEY               

Over the past three years, Disney has represented the Company's most    
important business relationship. In 1994, 1995 and 1996, Disney accounted for   
$43,207,000 (40%), $57,808,000 (30%) and $43,454,000 (33%), respectively, of the
Company's consolidated revenues in such years. The following chart shows for    
each of the years 1994, 1995 and 1996, and for the six months ended June 30,    
1997: (i) the amount borrowed by the Company from Disney, (ii) the repayment of 
amounts borrowed, (iii) interest paid to Disney by the Company on outstanding   
borrowings, (iv) advances and minimum guarantees paid by Disney to the Company, 
(v) overages paid by Disney to the Company with respect to previously released  
films, and (vi) distribution fees earned by Disney.                             

                                                        [Enlarge/Download Table]

                                                     YEAR ENDED DECEMBER 31,             SIX MONTHS   
                                           -------------------------------------------   ENDED JUNE   
                                               1994           1995           1996         30, 1997    
                                           -------------  -------------  -------------  ------------- 
                                                                                                      
Company Borrowings........................ $  13,860,000  $  13,865,000  $   7,907,000  $   1,119,000 

Repayment of Loans........................     5,832,000     12,155,000        575,000              0 
Interest Paid to Disney...................     1,157,000        585,000              0              0 
Advances & Minimum Guarantees Paid to                                                                 
 Company..................................    31,421,000     68,185,000     15,168,000      2,708,000 
Overages Paid to Company..................     4,213,000     18,003,000      3,016,000         23,000 
Disney Distribution Fees..................    12,484,000     36,356,000     14,909,000      8,745,000*

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

*   Amount shown is for the three months ended March 31, 1997 (the      
   latest practicable date for which figures are available) with respect
to fees relating to DIE HARD WITH A VENGEANCE.                    

In addition to the transactions between Disney and the Company described
elsewhere under Proposal No. 1, including those for which provision has been    
made in the Library Sale Agreement, since January 1, 1994, Disney and the       
Company have engaged in certain additional transactions. In 1994, Disney bonded 

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two pictures for the Company, receiving fees of $650,000 in connection          
therewith. In the same year, Disney purchased a previously written-off film     
project from the Company for payment of the Company's costs in the project of   
approximately $4,145,000.                                                       

  In 1995, the Company assisted Disney in the international pre-licensing of
the motion picture UP CLOSE AND PERSONAL (utilizing the services of Summit) and 
received a co-producer credit on and participation interest in the film which   
was released domestically by Disney in March 1996. In the same year, the term   
loan for JUDGE DREDD (under which $7,500,000 was then outstanding) was canceled 
as consideration for the Company's sale to Disney of an equity interest in JUDGE
DREDD. As additional consideration to Disney for its purchase of an equity      
interest in JUDGE DREDD, the Company also assigned to Disney substantially all  
of its profit participation in UP CLOSE AND PERSONAL.                           

In 1995, the Company, separate and apart from the Domestic Distribution 
Agreement, also licensed to Disney certain distribution rights to NIXON in      
Japan, China, Switzerland and German speaking Europe in exchange for an advance 
of $8,875,000. In 1995, in connection with the Company's decision to produce    
EVITA, the Company became obligated to repay the development costs previously   
expended on such project by certain parties, including approximately $3,900,000 
by Disney. In early 1997, such amount was offset against production advances    
otherwise due to the Company from Disney, and unused availability under the term
loans with Disney for NIXON, EVITA and THE SHADOW CONSPIRACY was reduced.       

In 1996, the Company, separate and apart from the Domestic Distribution 
Agreement, also licensed to Disney certain distribution rights to EVITA in Spain
in exchange for an advance of $3,000,000.                                       

  In February 1997, after commencement of principal photography, the Company
ceased production of the motion picture BROADWAY BRAWLER and entered into       
discussions with certain parties involved with the production, including Disney,
a performer in the film and an affiliate of such individual, regarding          
settlement of various obligations ("Shutdown Costs") incurred in connection with
the production and shut down of the film. As a result of agreements entered into
among such parties, on May 15, 1997, the Company was relieved of the obligation 
to repay $3,000,000 in advances which had been made by Disney as part of funding
production of the film, the Company transferred its BROADWAY BRAWLER production 
subsidiary and the Company's rights in the film to the performer's affiliate,   
the Company was paid an aggregate of approximately $11,821,000 by the           
performer's affiliate representing Shutdown Costs incurred or committed to by   
the Company and payment for the transfer of the production subsidiary and the   
film rights, and the Company was indemnified by the performer's affiliate for   
additional Shutdown Costs the Company may bear, subject to certain limited      
exceptions and limitations. Disney agreed to guarantee the obligations of the   
performer and his affiliate.                                                    

CERTAIN ADDITIONAL INFORMATION REGARDING TRANSACTIONS WITH FOX                  

 Over the past two years, Fox has represented the Company's most important
business relationship other than the Company's business relationship with       
Disney. In 1995 and 1996, Fox accounted for $44,053,000 (23%) and $12,937,000   
(10%), respectively, of the Company's consolidated revenues in such years. In   
addition to the $30,000,000 in advances paid to the Company by Fox in 1994 with 
respect to DIE HARD WITH A VENGEANCE (see "--Background and Reasons for the     
Assignment Agreement"), in 1994, 1995 and 1996 and for the six months ended June
30, 1997, Fox paid the Company approximately $0, $19,000,000, $7,990,000 and $0,
respectively, in overages with respect to the distribution of such film in the  
Fox Territories. During the same periods, Fox earned approximately $0,          
$24,640,000, $27,550,800 and $0, respectively, in distribution fees with respect
to the distribution of the film in the Fox Territories.                         

OPERATIONS OF THE COMPANY PENDING AND FOLLOWING THE ASSET SALES                 

   The Company, which is currently in post-production on AN ALAN SMITHEE FILM,
does not presently intend to commence production in the future on any additional
motion pictures pending the Asset Sales and the Merger. See "--Background and   
Reasons for the Library Sale Agreement." Further, the                           

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commitment to lend under the Company's credit facility expired August 31, 1997  
and, pursuant to the terms of the Library Sale Agreement, the Domestic          
Distribution Agreement (the Company's current means of distributing its motion  
pictures in the Americas and, together with the credit facility, the primary    
source of financing the production of the Company's motion pictures) will       
terminate upon the closing of the Film Library Sale.                            

  Certain assets of the Company are not included in the assets being sold as
part of the Asset Sales, including, among other things:                         

- Twenty-one development projects which are wholly owned by the Company 
(the "Development Projects");                                       

- Nineteen development projects (the "Stone Projects") funded by the    
Company under its "first look arrangement" with Oliver Stone and    
certain of his affiliates ("Stone");                                

- Visual effects equipment which is part of the Company's visual        
 effects facility located in leased space in Lenox, Massachusetts (the
"Visual Effects Facility");                                         

- The Company's rights ("Soundtrack Rights) in the soundtrack for EVITA 
(the "EVITA Soundtrack");                                           

- Right to receive any overages from International Subdistributors      
pursuant to the Company's existing exploitation agreements with     
respect to DIE HARD WITH A VENGEANCE (the "International DHWV       
Overages"); and                                                     

- Certain miscellaneous assets including, among other things,           
approximately $763,000 in miscellaneous receivables as of September 
1, 1997, (the "Miscellaneous Receivables")(not including payments to
be received with respect to AN ALAN SMITHEE FILM which will be used 
by the Company principally to pay down amounts outstanding under the
Company's credit facility) an automobile and certain furnishings and
artwork.                                                            

 The Company has solicited bids for the Development Projects pursuant to a
competitive bidding process in which Vajna was the prevailing bidder, has       
agreements in principle with respect to the sale of the Miscellaneous           
Receivables and most of the International DHWV Overages, is in discussions      
regarding the Stone Projects and the Company's "first look" arrangement with    
Stone, and is exploring the possibility of the sale of certain of the other     
assets listed above, including the Soundtrack Rights. The subsidiary of the     
Company which has operated the Visual Effects Facility has shut down the        
operations of the facility and is in discussion regarding the transfer of       
certain assets and liabilities associated therewith to a third party. See       
"CERTAIN ARRANGEMENTS CONCERNING OTHER ASSETS." No assurances can be given,     
however, that any additional sales of assets will take place. Except for the    
foregoing discussions and potential additional asset sales, the Company does not
currently intend to engage in any significant business operations pending       
consummation of the Asset Sales and the Merger. In addition, the Library Sale   
Agreement and the Merger Agreement restrict the Company's operations pending the
Film Library Sale and the Merger, respectively. See "--The Library Sale         
Agreement" and "THE MERGER AGREEMENT--Agreements of the Company, Buyer, Vajna   
and Valdina." The Company has also implemented and may consider additional      
reductions in overhead, including reductions in personnel, to achieve levels of 
overhead commensurate with the Company's current level of activity. See "CERTAIN
INFORMATION REGARDING THE COMPANY--Business of the Company--Employees" and      
"MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF    
OPERATIONS."                                                                    

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The Company currently anticipates that the Merger will be consummated   
shortly after consummation of the Asset Sales assuming all conditions to the    
Merger are then satisfied or waived. See "THE MERGER AGREEMENT." Pending the    
Merger, the cash proceeds from consummation of the Asset Sales and any          
additional dispositions of assets and the Company's other cash resources will   
primarily be held as cash or invested in short term government securities. No   
determination has been made by the Company as to its course of conduct in the   
event that the Assets Sales or the Merger are not consummated, as the Company   
would consider all strategic alternatives reasonably available to it at the     
time. However, given the background and reasons for the Asset Sales and the     
Merger, and given the reductions in personnel and other overhead which are being
implemented, the Company anticipates that it is likely that significant         
consideration would be given at any such time to a dissolution and winding up of
the Company pursuant to Delaware law. See "SPECIAL FACTORS RELATING TO THE      
MERGER-- Recommendation of the Special Committee and the Board; Fairness of the 
Merger."                                                                        

CERTAIN ARRANGEMENTS CONCERNING OTHER ASSETS

SOLICITATION OF BIDS FOR DEVELOPMENT PROJECTS.  In addition to the Asset
Sales pursuant to the Library Sale Agreement and the Assignment Agreement, the  
Company recently completed a solicitation of bids for the Development Projects, 
in which Vajna was the prevailing bidder. In June, 1997, the Company instructed 
its financial advisor, Jefferson Capital, to solicit cash bids from qualified   
buyers for the purchase of the Development Projects, as a group. The Company    
received an initial bid of $4,750,000 (the "Initial Bid") for the Development   
Projects from Vajna. Vajna also agreed to assume all third party payments       
related to the Development Projects and made by the Company after May 1, 1997.  
Additional qualified bids ("Qualified Bids") were required to be at least 15%   
higher than the Initial Bid. If the Company had received one or more Qualified  
Bids, the Development Projects were to be sold to the final highest bidder      
according to an auction process, however, no additional Qualified Bids were     
received and Vajna was declared the winning bidder. The sale of the Development 
Projects to Vajna is subject to consummation of the Film Library Sale and the   
transactions contemplated by the Assignment Agreement. As the parties to the    
Merger negotiated the Merger Consideration on the basis of a value for the      
Development Projects equal to the Initial Bid, the Development Projects will    
merely be part of the assets of the Company at the time of the Merger and no    
separate cash consideration will be paid to the Company for such projects.      

VALUATION REPORT WITH RESPECT TO DEVELOPMENT PROJECTS.  In April 1997, a
committee of the Board consisting of two outside directors, Mr. O'Donnell and   
Mr. Gregory R. Paul (the "Committee"), retained Alice P. Neuhauser on behalf of 
the Company to provide valuation services with respect to the Development       
Projects. Ms. Neuhauser has served since August 1996 as the President, Chief    
Financial Officer and Secretary of Carolco Pictures Inc. ("Carolco"), a company 
which had engaged in the financing, production and leasing of motion pictures   
prior to filing bankruptcy in November 1995. She is also the President, Chief   
Executive Officer and Secretary of The Carolco Liquidating Trust which was      
formed in June 1997 to complete the liquidation of Carolco. Prior to being      
appointed to her current position with Carolco, Ms. Neuhauser was employed by   
Carolco in various financial capacities beginning in May 1989. She holds a      
Masters in Business Administration from U.C.L.A.                                

Ms. Neuhauser's experience in the valuation of assets such as the       
Development Projects stems from her experience at Carolco during the last eight 
years as Carolco sold and acquired motion picture projects. For the last two    
years, Ms. Neuhauser has had primary responsibility for the marketing and       
selling of Carolco's film projects as part of the liquidation of Carolco.       
Timothy O'Donnell, a director of the Company, was also involved in these sales  
as a representative of Jefferson Capital, which also serves as Carolco's        
financial advisor. Ms. Neuhauser was proposed by Mr. O'Donnell and was          
ultimately selected by the Committee due to her experience in film project      
valuation.                                                                      

    On May 14, 1997, Ms. Neuhauser issued a report to the Committee in which she
concluded that a sale of the Development Projects conducted over a period of    
less than 12 months would generate approximately $5,000,000. She further        
concluded that, with a marketing period of 12 to 18 months, a sale of the       

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Development Projects could generate up to $7,000,000, but with the higher value 
reduced by the costs of maintaining both the sales process and a corporate      
presence. In performing her valuation, Ms. Neuhauser relied on the Committee's  
instruction that the Company planned to sell the Development Projects as a      
package rather than sell each project individually. She was not requested, at   
that time, to and did not solicit third party indications of interest in        
acquiring all or a portion of the Development Projects. Ms. Neuhauser's report  
covered a group of twenty-three development projects (the Development Projects  
and two additional projects), however, she subsequently indicated to the        
Committee that the conclusions in her report were applicable, without any       
material changes, to the twenty-one Development Projects.                       

   In connection with her valuation of the Development Projects, Ms. Neuhauser
reviewed relevant development cost and other information furnished to her by the
Company, including information provided during conversations with Company       
management. With respect to the development expenses, she reviewed the amount of
previously expended costs, future non-contingent obligations (such as additional
option payments and writer payments) and payments contingent on commencement of 
production. Ms. Neuhauser also reviewed the agreements provided to her by the   
Company with respect to certain talent attached to the projects and with respect
to the underlying rights in the projects. She received information on the genre 
and format of the underlying literary material, but did not actually read the   
underlying literary material itself or make any evaluation of its literary      
content. She relied, with the Committee's assent and without independent        
verification, on the accuracy and completeness of all historical costs as set   
forth in the respective accounting statements and on other information that was 
furnished or otherwise communicated to her by the Company.                      

In rendering her opinion on the value of the Development Projects, Ms.  
Neuhauser considered certain factors and performed certain analyses she deemed  
relevant as follows:                                                            

(I)  DIRECT COSTS ASSOCIATED WITH THE DEVELOPMENT PROJECTS.  Ms.
Neuhauser's report noted that unproduced motion picture projects are    
 generally valued by the direct costs associated with the projects through
the date of valuation. As an example, she indicated that "turnaround"   
clauses typically provide various parties a right to reacquire projects 
 which do not get produced by another party (the "transferor") for a price
equal to reimbursement of the costs expended on the project by the      
transferor, plus interest. Ms. Neuhauser calculated the aggregate direct
 costs for the Development Projects as approximately $11,500,000. However,
Ms. Neuhauser's report noted that, unlike sales which would occur in the
 ordinary course of business, (1) the purchase of the Development Projects
  was not to be structured as an option with only a portion of the cost paid
 up-front by the buyer (a structure preferred by buyers because it enables
 them to defer the costs until there is a greater certainty of the project
  going into production), and (2) the sale of the Development Projects would
not be driven by the interests of a buyer which actively sought out the 
    rights, but instead was seller-motivated. She also noted that certain of the
  Development Projects had high contingent payments because of the Company's
    backloading of certain costs associated with development which a prospective
buyer would factor into its bid by discounting the bid.                 

      (II)  GENRE AND FORMAT OF UNDERLYING LITERARY MATERIAL.  Ms. Neuhauser
  reviewed the genre and format of the underlying literary material to gauge
the potential demand for the Development Projects. She viewed action    
  adventure projects as being most attractive to purchasers, romantic dramas
 as least attractive and other genres at various levels of desirability in
 between. With respect to format, a draft screenplay was considered by Ms.
Neuhauser to be more desirable than a treatment, i.e., a story summary. 

        (III)  TALENT ATTACHED TO DEVELOPMENT PROJECTS.  Ms. Neuhauser evaluated
 the prior credits of the writers, directors and producers attached to the
    Development Projects based upon her industry knowledge and data she obtained
from computer data bases.                                               

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       (IV)  UNIQUE INTEREST CHARACTERISTICS.  Ms. Neuhauser evaluated whether
there were any unique characteristics of the Development Projects which 
   could provide additional value because of their interest to buyers, such as
franchise potential or previous television series exposure.             

   After analyzing the above factors, Ms. Neuhauser considered two alternative
methods of assessing the value of the Development Projects. The first method was
to evaluate each of the Development Projects individually, assign a value to    
each and then aggregate the value of all of the Development Projects. Ms.       
Neuhauser's report rejected this approach because the uncertainties inherent in 
the motion picture development and production process which affect the viability
of a project and thus its value (such as availability of talent, cyclicality of 
genres, and politics within a motion picture studio) are difficult to assess for
an individual project. Ms. Neuhauser's report concluded that a value based on   
the package as a whole would spread the uncertainties among all the Development 
Projects providing a means of diversification that would minimize the impact of 
such uncertainties in calculating value. In addition, assigning a value to each 
Development Project assumes that every project could in fact be sold at its     
assigned value and Ms. Neuhauser believed that it was extremely unlikely that   
any prospective buyer would be interested in each of the Development Projects.  
In Ms. Neuhauser's view, since the Development Projects were to be sold as a    
package, it was much more likely that a prospective buyer would only agree to a 
price based almost entirely on the values placed on the few Development Projects
which it was seeking to put into development (with a small value factored in for
the rest of the Development Projects which the buyer could then re-sell or, for 
example, provide to another division of the buyer such as a television          
division).                                                                      

Ms. Neuhauser therefore concluded that it was more appropriate to use a 
second valuation alternative which involved placing a value on what she         
considered the top few individual projects (based on the factors described      
above) and adding in a minimum amount for the remaining projects (based upon,   
for example, their potential resale value). Under this approach, the strength of
the top Development Projects would essentially define the value of the package. 
She felt that certain prospective buyers would have greater interest in some    
Development Projects than others although this interest would vary by buyer.    
Based on her prior experience, she determined that, for a relatively quick sale 
(less than 12 months), the top two or three Development Projects would drive the
sale and that, with a longer marketing period of between 12 and 18 months, a    
buyer could be found who would be interested in four to six of the Development  
Projects.                                                                       

    THE REPORT AND ANALYSIS OF MS. NEUHAUSER SUMMARIZED HEREIN WERE NOT PREPARED
WITH THE ASSISTANCE OF, OR REVIEWED BY, INDEPENDENT ACCOUNTANTS. THIS SUMMARY OF
THE REPORT AND ANALYSIS OF MS. NEUHAUSER IS INCLUDED IN THIS PROXY STATEMENT    
SOLELY BECAUSE SUCH REPORT WAS FURNISHED BY MS. NEUHAUSER TO THE COMMITTEE. SUCH
REPORT AND ANALYSIS ARE BASED UPON A VARIETY OF ASSUMPTIONS AND OTHER SIMILAR   
MATTERS AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF 
WHICH ARE BEYOND THE COMPANY'S CONTROL, AND, THEREFORE, SUCH REPORT AND ANALYSIS
ARE INHERENTLY IMPRECISE AND THERE CAN BE NO ASSURANCE THAT ANY VALUATION       
THEREIN COULD BE REALIZED. NEITHER MS. NEUHAUSER NOR THE COMPANY ASSUMES ANY    
RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF HER
REPORT AND ANALYSIS.                                                            

    The summary set forth above does not purport to be a complete description of
Ms. Neuhauser's analysis or written report. Ms. Neuhauser's written report      
regarding the value of the Development Projects is available for inspection and 
copying at the principal executive offices of the Company during its regular    
business hours by any interested Stockholder of the Company or his or her       
representative who has been so designated in writing. A copy of Ms. Neuhauser's 
written report will by transmitted by the Company to any interested Stockholder 
of the Company or his or her representative who has been so designated in       
writing upon written request and at the expense of the requesting Stockholder.  

The Company paid Ms. Neuhauser $25,000 for her services and advice, in  
addition to reimbursing her expenses. The Company has also agreed to indemnify  
Ms. Neuhauser against, among other things, any losses, claims, liabilities and  
expenses (including liabilities and expenses under federal securities laws) that
she might suffer as a result of her engagement to render the valuation report or
the inclusion of the report in this Proxy Statement. The Company also retained  
Ms. Neuhauser (and an individual assisting her) to                              

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assist the Company in the solicitation of bids for the Development Projects and,
in connection therewith, the Company paid to Ms. Neuhauser and such individual  
an aggregate fee of $25,000 (and agreed to pay certain additional amounts if the
Company had received a Qualified Bid in excess of the Initial Bid).             

THE STONE PROJECTS.  In July 1997, the Company also instructed Jefferson
Capital to solicit cash bids from qualified buyers with respect to a group of   
five Stone Projects (the "Five Stone Projects"), which are being offered for    
sale by the Company subject to certain rights of Stone as a producer and/or     
director attached to the project. Vajna has not submitted, and does not intend  
to submit, a bid for the Five Stone Projects. If the Company receives one or    
more bids of at least $1,000,000, the Five Stone Projects will be sold to the   
final highest bidder according to an auction process substantially the same as  
that which may be conducted for the Development Projects. No valuation report   
was obtained with respect to the Stone Projects or the Five Stone Projects. The 
Company also retained Ms. Neuhauser (and an individual assisting her) to assist 
the Company in the attempted sale of the Five Stone Projects. Under the terms of
such arrangement, Ms. Neuhauser and such individual would receive an amount     
equal to 10% of any qualified bid received by the Company in excess of          
$1,000,000.                                                                     

   Under the Company's first look arrangement with Stone, Stone may attempt to
arrange for the production of those Stone Projects other than the Five Stone    
Projects with other companies. If any of the Stone Projects other than the Five 
Stone Projects are produced by Stone, Stone must reimburse the related actual   
costs (plus interest) of the Company and Disney (which funded the first-look    
arrangement with Stone through February 1997).                                  

   The Company is also in discussions with Stone regarding a settlement of the
first look arrangement with Stone which, among other things, would result in the
transfer of all of the Stone Projects to Stone, in lieu of their sale to a third
party.                                                                          

 In the event the Company enters into an agreement prior to the Adjustment
Date to sell the Five Stone Projects or to settle the Company's obligations     
pursuant to the first look arrangement with Stone, the Merger Consideration will
be adjusted in accordance with the Merger Agreement. "Adjustment Date" means    
that date which is ten business days before the date of the Special Meeting, as 
such date is initially set by the Board, or as such date may be changed due to  
the adjournment, delay or other rescheduling of the Special Meeting; provided,  
however, that if, after the Adjustment Date, the Special Meeting is adjourned,  
delayed or otherwise rescheduled to a date which is less than ten business days 
from the date on which it was determined that the Special Meeting will be       
adjourned, delayed or otherwise rescheduled, then, in such case, the Adjustment 
Date will not be changed but will remain the date which is ten business days    
before the date the Special Meeting was set to occur prior to such adjournment, 
delay or other rescheduling of the Special Meeting. See "MERGER                 
AGREEMENT--Adjustments to Purchase Price."                                      

  EVITA SOUNDTRACK RIGHTS.  The Company is attempting to sell the Soundtrack
Rights. Pursuant to the Merger Agreement, in the event the sum of the aggregate 
amount of all monies received by the Company (as royalties or otherwise) in     
respect of the EVITA Soundtrack from September 2, 1997 through the Adjustment   
Date and the aggregate purchase price payable to the Company pursuant to any    
agreement for the sale of the Soundtrack Rights entered into by the Company     
prior to the Adjustment Date exceeds $1,500,000, the Merger Consideration will  
be adjusted upwards in accordance with the Merger Agreement. In addition, the   
parties to the Merger Agreement have agreed that in the event the Company does  
not enter into an agreement for the sale of the Soundtrack Rights prior to the  
Adjustment Date, the Special Committee and the Company will use their best      
efforts to monetize the Soundtrack Rights and distribute, subsequent to the     
Effective Time, the proceeds in connection therewith to the Stockholders of the 
Company immediately prior to the Effective Time. See "THE MERGER                
AGREEMENT--Adjustments to Purchase Price."                                      

    ARRANGEMENTS WITH SUMMIT.  The Company has reached agreements or, in certain
cases, agreements in principle subject to the completion and execution of       
documentation (the "Summit Agreements") (i) for                                 

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the purchase by Summit N.V., in exchange for the payment of $400,000 to the     
Company, of the Company's rights in the International DHWV Overages (other than 
those relating to exploitation agreements with respect to the territories of    
Italy and Hungary), (ii) for the purchase by Summit N.V., in exchange for the   
payment of an additional $400,000 to the Company, of the Miscellaneous          
Receivables and (iii) to terminate Summit's sales agency relationships with the 
Company and settle the Company's obligations in connection therewith in exchange
for an aggregate payment by the Company to Summit (which includes certain       
amounts payable to Summit with respect to a past production) of approximately   
$926,000.                                                                       

  VISUAL EFFECTS FACILITY.  The subsidiary of the Company which has operated
the Visual Effects Facility has shut down the operations of the facility and is 
in discussions regarding the transfer of certain assets and liabilities         
associated therewith to a third party.                                          

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PROPOSAL NO. 2
THE MERGER

   Pursuant to Proposal No. 2, the Stockholders are being asked to approve the
Merger Agreement among the Company, Buyer, Vajna and Valdina, pursuant to which 
Buyer will merge with and into the Company, with the Company surviving the      
Merger (the "Surviving Corporation"). As a result of the Merger, the Company    
will become wholly owned by Vajna and Valdina. Pursuant to the Merger, Shares   
(other than Shares owned by Vajna, Valdina and Shares as to which dissenters'   
rights are perfected), will be converted into the right to receive $2.30 in     
cash, subject to potential upward adjustment as provided in the Merger          
Agreement.                                                                      

PARTIES TO THE MERGER                                                           

 VAJNA.  Vajna is the Chairman of the Board, President and Chief Executive
Officer of the Company as well as a substantial stockholder in the Company. See 
"CERTAIN INFORMATION REGARDING THE COMPANY--Principal Stockholders of the       
Company." See also "CERTAIN INFORMATION REGARDING THE COMPANY--Directors and    
Executive Officers of the Company" for certain information regarding the        
business experience of Vajna. Vajna's address is 2308 Broadway, Santa Monica,   
California 90404 (telephone number: 310-315-6000).                              

CPEI ACQUISITION INC.  CPEI Acquisition Inc. (or "Buyer") is a Delaware 
corporation formed in July 1997 in connection with, and solely for the purposes 
of, effecting the Merger. Vajna is the sole director and officer of Buyer. All  
of the stock of Buyer is owned by Vajna (86%) and Valdina (14%). Except as it   
relates to the consummation of the Merger, Buyer is not engaged in any business 
activity. Buyer's principal executive offices are located at 2308 Broadway,     
Santa Monica, California 90404 (telephone number: 310-315-6000).                

    VALDINA CORPORATION N.V.  Valdina is a corporation, formed in 1990 under the
laws of the Netherlands Antilles, which finances feature film production.       
Valdina is, as of September 17, 1997, indirectly beneficially owned 49.9% by    
Vajna and 50.1% by a trust which benefits certain persons including the son of  
Mr. Vajna, however, Valdina's corporate parent is in the process of effecting a 
transaction which will result in the increase of Vajna's indirect beneficial    
ownership of Valdina to 99.8%. See "Certain Transactions Involving the Company's
Common Stock" below. Valdina's principal executive offices are located at       
Polarisweg 35, Suite 6, Willemstad, Curacao, Netherlands Antilles (telephone    
number: 011-599-9-461-7799).                                                    

THE COMPANY.  The Company, formed in November 1989, is an independent   
producer and distributor of motion pictures. See "CERTAIN INFORMATION REGARDING 
THE COMPANY" and "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE
COMPANY--Parties to the Asset Sales."                                           

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SPECIAL FACTORS RELATING TO THE MERGER

The following is a summary of certain factors relating to the Merger,   
including the background of, and the recommendations of the Special Committee   
and the Board with respect to, the Merger.                                      

BACKGROUND AND REASONS FOR THE MERGER                                           

  In early 1997, during the course of the Company's negotiations with Disney
regarding the Film Library Sale, the Company asked its financial advisor,       
Jefferson Capital, and the Company's outside counsel, Gipson Hoffman & Pancione,
P.C., to consider various strategic alternatives for the business and operations
of the Company assuming an agreement with Disney was reached. During January and
February 1997, Jefferson Capital consulted with the Special Committee and its   
counsel, management of the Company and the Company's outside counsel with       
respect to a series of such potential alternatives. During such period,         
Jefferson Capital and the Company's outside counsel regularly informed the      
Special Committee and its counsel and Vajna and his advisors of the progress of 
consideration of the various strategic alternatives. On February 19, 1997, a    
meeting was held at the offices of the Company's outside counsel attended by,   
among others, the Company's outside counsel, certain officers of the Company    
(other than Vajna), and Ronald L. Blanc of Blanc Williams Johnston & Kronstadt, 
counsel to Vajna. Mr. O'Donnell participated by telephone. The purpose of the   
meeting was to update the attendees on the status of discussions regarding the  
strategic alternatives available to the Company and to exchange information     
regarding the Company and its assets, liabilities, and current operations.      

  At the meeting of the Board held on February 21, 1997, the Board discussed
the strategic alternatives available to the Company including the Film Library  
Sale, continuing to produce motion pictures, acquisition of the Company or a    
portion of the Company by another company in the entertainment industry or which
desired to enter the entertainment industry, and winding down the Company's     
operations and dissolving. As indicated under "PROPOSAL NO. 1: SALE OF          
SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Background and Reasons for the  
Library Sale Agreement," the Board believed that in light of, among other       
things, the disappointing financial results of three of the Company's four 1995 
releases and the 1997 release of THE SHADOW CONSPIRACY and the continuing       
increase in motion picture production and releasing costs, which could          
necessitate increased direct investment in the Company's motion pictures if the 
Company were to continue to produce additional "event" motion pictures, that it 
would be in the best interests of the Stockholders to consider the winding down 
of the Company's operations. In addition to authorizing continued negotiations  
with Disney with respect to the Film Library Sale, the Board discussed means of 
winding down the operations of the Company including a dissolution under the    
statutory procedures set forth in Delaware law or the sale of additional assets 
followed by the sale of the corporate entity and any remaining assets and       
liabilities. The Board believed that a statutory dissolution would take         
substantially longer and result in more expenses that would ultimately reduce   
any cash payment to the Stockholders, than the latter alternative. The Board    
instructed the Company's advisors to give further consideration to the Company's
various alternatives assuming consummation of the Film Library Sale.            

At the Board meeting held on April 2, 1997 at which the Library Sale    
Agreement with Disney was approved, the Board engaged in further discussion of  
the Company's strategic alternatives assuming consummation of the Film Library  
Sale. At such meeting, the Board authorized Mr. Braverman and Mr. O'Donnell to  
negotiate with other parties regarding the sale of the assets and provision for 
the liabilities that would remain assuming consummation of the Film Library     
Sale. The Board further authorized Mr. Braverman and Mr. O'Donnell, in          
consultation with the Special Committee, to discuss the sale of assets to and   
the assumption of liabilities by Vajna as a means of winding down the operations
of the Company in an expeditious manner that would maximize stockholder value.  

    On April 3, 1997, concurrently with the Company's public announcement of the
execution of the Library Sale Agreement, the Company also announced that it did 
not intend to commence production on any additional motion pictures, that it was
in the process of considering its alternatives assuming                         

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consummation of the Film Library Sale including disposition of additional       
assets, and that it anticipated that any decision made regarding its            
alternatives assuming consummation of the Film Library Sale would effectively   
result, after provision for the Company's remaining liabilities, in a cash      
payment to the Stockholders in exchange for their equity interests in the       
Company.                                                                        

On May 19, 1997, Mr. O'Donnell, Mr. Braverman and the Company's outside 
counsel met with Vajna's legal advisors: Harry M. Brittenham of Ziffren,        
Brittenham, Branca & Fischer and Mr. Blanc. In March 1997, Mr. Brittenham had   
resigned as a member of the Board. Also participating in the May 19th meeting by
telephone was counsel to the Special Committee, and also present at the meeting 
were certain officers of the Company. Vajna did not attend the meeting. Prior to
the meeting and upon consultation with the Special Committee and its counsel,   
Mr. O'Donnell had proposed to Vajna's legal advisors that Vajna initiate a      
tender offer for the Shares he did not already own based upon the belief of the 
Special Committee and its counsel that this would be the most expeditious manner
in which the Stockholders could receive a cash payment in exchange for their    
equity interests in the Company. At the meeting, Vajna's advisors rejected such 
proposal and instead proposed an alternative single step transaction in which an
entity controlled by Vajna would merge with the Company and the Stockholders    
(other than Vajna) would receive cash in exchange for their equity interests in 
the Company. The persons present at the meeting discussed the general structure 
and potential terms of such a transaction.                                      

   On May 30, 1997, counsel to Vajna sent a letter to the Board indicating the
terms under which Vajna would agree, subject to various conditions, to purchase 
most of the motion picture development projects currently owned by the Company  
and cancel his existing employment agreement with the Company, which has a term 
ending December 31, 1998. The purchase price proposed by Vajna for the          
development projects was $4,750,000; however Vajna proposed that the Company    
would be free, for a period of 60 days, to solicit higher bids from third       
parties subject to a 15% minimum over-bid requirement and a right on the part of
Vajna to match any qualified overbid. See "CERTAIN ARRANGEMENTS RELATING TO     
OTHER ASSETS." Under his proposal for termination of the employment agreement,  
Vajna would have received a portion of the amounts otherwise payable to him     
through December 31, 1998 and a payment in settlement of certain other benefits 
and compensation, and he would have been free to enter into other employment,   
including motion picture production, subject to, among other things, completion 
of the Film Library Sale. The letter from counsel to Vajna to the Board also    
presented discussion points regarding a merger between the Company and an       
acquisition entity to be owned by Vajna, which would take place after the sale  
of most of the Company's assets. The letter indicated that all outstanding      
Shares owned by persons other than Vajna would be acquired or redeemed for cash 
based on their proportionate share of the net worth of the Company at the time  
of the merger, and Vajna would become the sole owner of the Company which it was
anticipated would, at that time, have certain residual assets and liabilities.  

On June 3, 1997, the Board met to discuss the status of the Film Library
Sale, the discussions with Fox regarding the Company's rights in DIE HARD WITH A
VENGEANCE, and the receipt of the letter from counsel to Vajna. At the meeting, 
the Board confirmed that the Special Committee would have authority to, among   
other things, consider the terms of a transaction with Vajna, and recommend to  
the Board approval or disapproval of such a transaction. After the Board        
meeting, the Special Committee held a telephonic meeting with counsel to the    
Special Committee, Mr. O'Donnell and outside counsel to the Company and         
discussed the letter from counsel to Vajna. The Special Committee indicated     
that, after consideration, it believed that, in light of the contemplated sale  
of substantially all of the assets of the Company either as the result of arms' 
length negotiations or independent bidding and given that the Company's assets  
at the time of a merger with an entity controlled by Vajna would consist        
predominantly of cash, the significant expense to the Company of obtaining a    
fairness opinion with respect to such a merger transaction with Vajna was not   
justified and would not be in the best interests of the Stockholders. In making 
such determination, the Special Committee also noted that it would be able to   
rely upon its own financial expertise and would be able to review the work of   
Jefferson Capital, which has substantial experience in similar transactions,    
including those which required the evaluation by Jefferson Capital of           
entertainment assets and liabilities.                                           

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After the Special Committee meeting, Mr. O'Donnell spoke with counsel to
Vajna regarding certain items in its letter to the Board. Among other things,   
Mr. O'Donnell requested that Vajna raise his bid for the development projects to
$5,000,000. Vajna's counsel rejected such request, as well as a request by Mr.  
O'Donnell that the 15% overbid requirement be reduced. It was agreed, however,  
that in the event of an overbid, rather than Vajna having the right to match any
such overbid, an auction process would be initiated.                            

On June 11, 1997, Jefferson Capital, after consultation with the Special
Committee and its counsel, sent a letter to counsel for Vajna. The letter from  
Jefferson Capital indicated provisional acceptance of Vajna's proposal to       
purchase the Development Projects subject to revised over-bid procedures,       
additional provisions on reimbursement of the Company for development           
expenditures, successful negotiation and execution of a binding agreement of    
purchase and sale if Vajna should be the successful bidder for the Development  
Projects, and other conditions. The letter from Jefferson Capital also suggested
revised terms for termination of Vajna's employment agreement. With respect to a
potential merger between the Company and an entity controlled by Vajna, the     
letter from Jefferson Capital suggested that the parties attempt to negotiate   
and agree upon a definitive merger agreement rather than continuing to refine   
the letter of discussion points from counsel to Vajna to the point that it would
become a formal binding offer to the Company. The letter indicated that the     
Company's outside counsel had been instructed to begin preparation of a draft   
merger agreement.                                                               

    Thereafter, Jefferson Capital, after consultation with the Special Committee
and its counsel, and the Company's outside counsel, prepared and distributed    
bidding procedures and an information package on the Development Projects to be 
sent to potential bidders for the development projects.                         

   On June 24, 1997, the Company publicly announced that (i) it had instructed
Jefferson Capital to solicit cash bids from qualified buyers for the purchase of
the Development Projects, (ii) it had received an initial bid for the           
Development Projects from Vajna, (iii) it was in discussions with Fox regarding 
the sale to Fox of the Company's rights in DIE HARD WITH A VENGEANCE, and (iv)  
negotiations had commenced with Vajna with respect to a potential merger with an
entity controlled by Vajna that would occur after the sale of substantially all 
of the assets of the Company.                                                   

   On July 1, 1997, the Company's outside counsel, after consultation with the
Special Committee and its counsel, and Jefferson Capital, delivered a draft of  
the Merger Agreement to Vajna and his counsel. Copies of the draft were also    
delivered to, among others, the Special Committee and its counsel and Jefferson 
Capital.                                                                        

   On July 10, 1997, counsel to Vajna met with Mr. O'Donnell and the Company's
outside counsel to discuss a timetable for completion of the Merger Agreement   
and to provide their comments on the draft Merger Agreement for forwarding to   
the Special Committee and its counsel. Also present at various times during the 
meeting were representatives of the Company's independent auditors and various  
officers of the Company (other than Vajna).                                     

On July 16, 1997, the Company publicly announced the execution of the   
Assignment Agreement with Fox.                                                  

 On August 1, 1997, the Company's outside counsel, after consultation with
Jefferson Capital and counsel to the Special Committee, delivered a revised     
draft of the Merger Agreement to Vajna and his counsel. Copies of the draft were
also delivered to, among others, the Special Committee and its counsel and      
Jefferson Capital.                                                              

 On August 7, 1997, counsel to Vajna met with, among others, the Company's
outside counsel and various officers of the Company (other than Vajna) to       
discuss a revised timetable for completion of the Merger Agreement, to provide  
comments on the latest draft of the Merger Agreement for forwarding to the      
Special Committee and its counsel and Jefferson Capital, and to review draft    
preliminary proxy materials.                                                    

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  On August 20, 1997, Jefferson Capital, after consultation with the Special
Committee, met with counsel to Vajna to discuss the terms of the Merger.        

  Negotiations continued between Vajna and his counsel, on the one hand, and
Jefferson Capital in consultation with the Special Committee and its counsel, on
the other hand, through the start of September 1997. The Special Committee met  
with its counsel, Jefferson Capital and the Company's outside counsel on        
multiple occasions during such period. During such period, multiple drafts of   
the Merger Agreement were circulated by the Company's outside counsel, after    
consultation with Jefferson Capital and the Special Committee, to among others, 
Mr. Vajna and his counsel, Jefferson Capital, the Special Committee and its     
counsel, and the Board. The Board met on August 27, 1997 and August 29, 1997 to,
among other things, discuss the Merger, the Merger Agreement and the status of  
the Merger negotiations.                                                        

  On September 2, 1997, the Board of Directors approved the Merger Agreement
and the Merger, based in part on the recommendation of the Special Committee. On
September 3, 1997, the Merger Agreement was executed. Execution of the Merger   
Agreement was publicly announced on September 4, 1997.                          

RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD; FAIRNESS OF THE MERGER   

  THE COMPANY.  On September 2, 1997, the Special Committee reported that it
had determined (i) that the Merger is fair to, and in the best interests of, the
Stockholders (other than Vajna and Valdina) and (ii) to recommend that the Board
approve and adopt the Merger Agreement and the transactions contemplated        
thereby, including the Merger. At a meeting held on the same day, the members of
the Board (excluding Vajna, who abstained from the vote), based in part on the  
recommendation of the Special Committee, unanimously determined that the Merger 
is fair to, and in the best interests of, the Stockholders (other than Vajna and
Valdina), approved and adopted the Merger Agreement and the transactions        
contemplated thereby, including the Merger, and determined to recommend that the
Stockholders approve and adopt the Merger Agreement. Vajna abstained from the   
vote due to his significant ownership interest in Buyer.                        

  In reaching the conclusions described above, the Special Committee and the
Board considered a number of factors, including but not limited to the          
following:                                                                      

(a)  Operating Losses and Limited Prospects for Profitable      
    Operations.  The net losses incurred by the Company in six of the seven full
fiscal years since the Company's formation and anticipated continuing   
operating losses, combined with the Board's belief that there is a      
 substantial risk that the Company would not be able to operate profitably
 before depleting substantially all of its remaining assets. See "PROPOSAL
NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE                   
COMPANY--Recommendation of the Board."                                  

     (b)  Increasing Production and Releasing Costs.  The increases in the
   industry average direct negative costs per picture and the industry average
print and advertising costs per picture for members of the MPAA, and the
apparent continuing increase of such costs which could necessitate      
increasing direct investment by the Company in its films if it were to  
 continue to produce "event" motion pictures. See "PROPOSAL NO. 1: SALE OF
SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Recommendation of the   
Board."                                                                 

      (c)  Risks of Continued Operations.  The significant risk of continued
    operations, including that of dissipating the Company's remaining assets, in
light of: the disappointing audience acceptance of many of the Company's
past productions; the apparent continuing increase in production and    
  releasing costs which could necessitate increased direct investment by the
Company in its films if it were to continue to produce "event" motion   
 pictures; the relative lack of experience of management of the Company in
 producing smaller budget films; the competitive releasing environment and
the                                                                     

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 presence of numerous competitors many of which have significantly greater
    financial and other resources than the Company. See "PROPOSAL NO. 1: SALE OF
SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Recommendation of the   
Board."                                                                 

        (d)  Termination of Certain Agreements.  The termination of the Domestic
  Distribution Agreement upon consummation of the Film Library Sale, and the
August 31, 1997 expiration of the commitment to lend under the Company's
credit facility. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE  
    ASSETS OF THE COMPANY--The Library Sale Agreement" and "CERTAIN ARRANGEMENTS
 CONCERNING OTHER ASSETS." As a result, any continued operations after the
Film Library Sale would in large part represent start-up operations.    

        (e)  Lack of Strategic Alternatives.  The lack of strategic alternatives
 available to the Company in view of the Company's disappointing operating
results and efforts to implement other strategic alternatives without   
success. The Company had been considering various strategic alternatives
   since late 1995 and had been unable to (i) negotiate a restructuring of the
Domestic Distribution Agreement with Disney, (ii) obtain an alternative 
    domestic distribution arrangement with another major studio, (iii) attract a
    significant investment in the Company, or (iv) enter into an agreement for a
   merger or other business combination or acquisition of the Company, in each
  case on terms advantageous to the Company and the Stockholders. Based upon
    the Company's unsuccessful pursuit of strategic alternatives since late 1995
   and anticipated continuing operating losses, the Board believes that it had
 exhausted its identified realistic strategic alternatives and that it was
 unlikely the Company would be able to attract a significant investment in
the Company or enter into an agreement for a merger or other business   
    combination or acquisition of the Company with a party other than Vajna that
would provide for a price in excess of the Merger Consideration. See    
"PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE         
COMPANY--Recommendation of the Board."                                  

        (f)  Existence of Cash Assets.  The existence of a substantial amount of
cash and cash equivalents and the cash consideration to be received in  
connection with consummation of the Assignment Agreement. If the Company
  were to delay the Merger, the Company believes that anticipated continuing
 operating losses would reduce the Company's cash position and would, most
   likely, reduce the amount of any future cash payment to the Stockholders in
exchange for their equity interests in the Company. See "PROPOSAL NO. 1:
 SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Recommendation of
the Board."                                                             

        (g)  Dissolution Alternative.  The most viable alternative to the Merger
after consummation of the Asset Sales is the dissolution of the Company 
under Delaware law, the disposition of the Company's remaining assets as
part of such dissolution, and the subsequent distribution of the net    
proceeds to the Stockholders after provision for the Company's remaining
liabilities. The Board believes that the Merger can be consummated more 
    expeditiously and result in less expenses than such a dissolution, resulting
 in a larger cash payment to the Stockholders in exchange for their equity
interests in the Company.                                               

    (h)  Historical Market Price of Common Stock.  The historical market
  prices of the Shares, including the fact that the Shares traded as high as
$11.375 in the first quarter of 1995 and as low as $.375 in the second  
quarter of 1997 and the fact that the $2.30 per Share Purchase Price    
    represents a 26.9% premium to the market price of the Shares on September 3,
1997 ( the "Pre-Announcement Price"), the day prior to the public       
   announcement of the terms of the Merger (see "CERTAIN INFORMATION REGARDING
THE COMPANY--Market Prices and Dividends on Company Common Stock").     

      (i)  Vajna Ownership.  Vajna's ownership of approximately 40.8% of the
  currently outstanding Shares (not including any Shares owned by Valdina or
 any Shares for which Vajna only holds a proxy to vote) and the effects of
 such ownership on the alternatives available to the Company including the

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fact that, as a practical matter, no such strategic alternative could be
effected without the support of Vajna.                                  

        (j)  Terms and Conditions of Merger Agreement.  The terms and conditions
  of the Merger Agreement, including that the Merger is conditioned upon the
Majority of the Minority Vote, and that, after the Merger, the Surviving
 Corporation will be responsible for contingent and unknown liabilities of
the Company. See "THE MERGER AGREEMENT."                                

     (k)  Nature of Merger Consideration.  The consideration to be paid to
the Stockholders in the Merger is all cash.                             

(l)  Possible Conflicts of Interests.  The possible conflicts of
interest of Vajna and certain directors and members of management of the
Company discussed below under "SPECIAL FACTORS RELATING TO THE          
MERGER--Interests of Certain Persons in the Merger."                    

        (m)  Appraisal Rights.  That Stockholders have the right to dissent from
   the Merger and demand appraisal of the fair value of their Shares under the
DGCL. See "SPECIAL FACTORS RELATING TO THE MERGER--Appraisal Rights."   

In addition, the Board considered the recommendation of the Special     
Committee.                                                                      

    The Special Committee and the Board also recognized that, while consummation
of the Merger will result in Stockholders receiving a minimum of $2.30 in cash  
for each of their Shares, it will eliminate the opportunity for current         
Stockholders (other than Vajna and Valdina) to participate in the benefit of any
increases in the Company's value following the Merger. In light of, among other 
things, the Company's agreements to sell substantially all of its assets to     
Disney and Fox, the anticipated termination of the Domestic Distribution        
Agreement upon consummation of the Film Library Sale, and the August 31, 1997   
expiration of the commitment to lend under the Company's credit facility, the   
Special Committee and the Board concluded that this factor was not significant  
and would not justify the Stockholders foregoing the receipt of a cash payment  
for their Shares pursuant to the Merger.                                        

As mentioned above, the Special Committee and the Board considered the  
alternative of dissolving the Company under Delaware law in determining whether 
the Merger was fair to the Stockholders from a financial point of view. Given   
that substantially all of the Company's assets are to be sold in arms-length    
transactions with Disney and Fox, that third party bids were solicited (but not 
received) for the Development Projects, and that after the consummation of the  
transactions contemplated by the Library Sale Agreement and the Assignment      
Agreement, a substantial portion of the Company's assets will consist of cash,  
the Company did not seek a formal appraisal of the liquidation value of the     
Company for purposes of evaluating the Merger or considering the alternative of 
a dissolution and winding up of the Company under Delaware law. The Board       
believed that there could be no assurance in a dissolution as to when any       
distributions would be made to the Stockholders or as to the amount of any such 
distribution. As part of the Merger, the Surviving Corporation will continue to 
be subject to the liabilities and obligations of the Company at the Effective   
Time, including unknown and contingent liabilities. The Surviving Corporation   
will also be bound by the potential indemnification obligations of the Company  
under the Library Sale Agreement and the Assignment Agreement. In connection    
with a dissolution under Delaware law, the Company would be required to make    
provision for contingent claims, pending claims and unknown claims (which based 
on facts known to the Company are likely to arise or become known within ten    
years of dissolution). The Board believed that in light of such obligation that 
any preliminary distribution in a dissolution would be smaller than the cash    
consideration to be paid upon consummation of the Merger. The Board also        
considered that most of the representations and warranties of the Company under 
the Library Sale Agreement survive for eighteen months following the closing of 
the Film Library Sale (and certain representations and warranties survive for a 
longer period). The Board further believed that it was likely that a dissolution
would take substantially longer to complete than the Merger and, therefore, it  
was likely that the expenses associated with a dissolution would be in excess of
those associated with the Merger.                                               

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  In view of the wide variety of factors considered in connection with their
evaluation of the Merger, neither the Special Committee nor the Board found it  
practicable to, and did not, quantify or otherwise attempt to assign relative   
weights to the specific factors they considered in reaching their               
determinations. On balance, the Special Committee and the Board viewed the      
factors set forth in items (a) - (g), (k) and (m) as favorable to their         
decision, the factors set forth (h), (i) and (j) as having both favorable and   
unfavorable aspects, and the factors set forth in item (l) as neutral to their  
determination.                                                                  

    VAJNA/BUYER.  Vajna and Buyer regard the Merger as an opportunity to provide
a cash payment to the Stockholders in exchange for their equity interests in the
Company in a fair and expeditious manner. Vajna and Buyer have concluded that   
the Merger is fair to the Stockholders (other than Vajna and Valdina) based upon
the following factors: (i) the factors referred to above as having been taken   
into account by the Board; and (ii) that the terms of the Merger, including the 
Merger Consideration, are the result of negotiations intended to be arms'       
length. Vajna and Buyer did not find it practicable, and did not, quantify or   
otherwise attach relative weights to the specific factors considered by them.   
However, Vajna and the Company gave significant weight to all of the factors    
discussed in (a) through (h) and (j) through (m) above.                         

PURPOSE AND STRUCTURE OF THE MERGER                                             

The purpose of the Merger, in light of the Company's decision to sell   
substantially all of the assets of the Company pursuant to the Asset Sales, is  
to provide a cash payment to the Stockholders (other than Vajna and Valdina) in 
exchange for their equity interests in the Company, in a manner which the       
Company and Vajna believe is more expeditious and will result in lower expenses 
than the most viable alternative acceptable to the Company and Vajna, a         
dissolution under Delaware law.                                                 

Consummation of the Merger will terminate the equity interests in the   
Company of the Stockholders other than Vajna and Valdina. Following the Merger, 
the interest of Vajna and Valdina in the Company's net book value and net income
will increase to 100%. Vajna and Valdina, as the sole stockholders of the       
Surviving Corporation, will thereafter benefit from any increases in the value  
of the Surviving Corporation and will also bear the risk of any decreases in the
value of the Surviving Corporation. See "THE MERGER AGREEMENT--The Merger;      
Effective Time of the Merger."                                                  

OPERATIONS PENDING THE MERGER                                                   

  The Company's plans pending the Merger are substantially the same as those
pending the Asset Sales. See "Operations of the Company Pending and Following   
the Asset Sales" under Proposal No. 1. The Merger Agreement and the Library Sale
Agreement restrict the Company's operations pending the Merger and the Film     
Library Sale, respectively. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF   
THE ASSETS OF THE COMPANY--The Library Sale Agreement" and "THE MERGER          
AGREEMENT--Agreements of the Company, Buyer, Vajna and Valdina."                

 Pending consummation of the Merger, the Merger Agreement permits Vajna to
enter into a producer agreement, employment agreement, consulting agreement or  
other similar agreement which provides that he will render services to a third  
party. However, without the prior written consent of the Special Committee,     
Vajna's obligations under any such agreement to render services to a third party
must be subject to consummation of the Merger and his services must remain      
exclusive to the Company to the extent provided by his employment agreement with
the Company. Vajna's employment agreement permits him to be involved in the     
management of certain corporations in which he has direct or indirect ownership 
interests. In light of the Company's present intention not to commence          
production on any additional motion pictures, Vajna has expanded his activities 
on behalf of such corporations. The Company believes such activities will not   
materially interfere with his activities on behalf of the Company. See "Interest
of Certain Persons in the Merger--Severance Arrangements" below.                

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PLANS FOR THE COMPANY FOLLOWING THE MERGER                                      

  At the time of the Merger, it is anticipated that substantially all of the
Company's assets will have been sold and substantially all of the Company's     
previous operations will have ceased. The commitment to lend under the Company's
credit facility has terminated. It is further anticipated that the Domestic     
Distribution Agreement will have terminated by the Effective Time, and the      
Company will have only minimal personnel remaining at such time. As a result,   
any operations conducted by the Company following the Merger will in large part 
represent start-up operations.                                                  

    Upon consummation of the Merger, Buyer intends to terminate the registration
of the Company's Common Stock under the Exchange Act and delist the Company's   
Common Stock from the NASDAQ National Market System. The Company will also cease
to file periodic reports with the Commission, and the Company will be relieved  
of the obligation to comply with the proxy rules of Regulation 14A under Section
14 of the Exchange Act.                                                         

    Except as disclosed in this Proxy Statement, neither Buyer nor Vajna has any
present plans or proposals that would result in an extraordinary material       
corporate transaction following the Merger such as a subsequent merger,         
reorganization, liquidation, or sale or transfer of assets involving the Company
or any of its subsidiaries, or any material changes in the Company's corporate  
structure or business or the composition of its management. However, from time  
to time following the Merger, depending on the circumstances then existing,     
Vajna may review the Company's businesses, operations, policies, corporate      
structure and management, and consider if any changes would be desirable.       

   Notwithstanding the foregoing, the Company, alone or with related entities,
may seek to acquire, produce and arrange for the financing and distribution of  
motion picture projects (including the Development Projects) pursuant to new    
arrangements entered into by the Company following the Merger.                  

REGULATORY APPROVALS                                                            

To the best knowledge of the Company, there are no federal or state     
regulatory requirements which must be complied with, nor are there any such     
governmental consents or approvals that must be obtained in connection with the 
consummation of the Merger other than compliance with certain federal securities
laws, including certain filings with the Securities and Exchange Commission that
must be made in connection therewith.                                           

ACCOUNTING TREATMENT                                                            

The Merger will be accounted for at historical cost as a combination of 
entities under common control.                                                  

CERTAIN FEDERAL INCOME TAX CONSEQUENCES                                         

TAX CONSEQUENCES TO THE STOCKHOLDERS.  The Merger, pursuant to which the
Shares (other than Shares owned by Vajna or Valdina, treasury Shares, or Shares 
as to which statutory dissenters' rights are perfected) will be converted into  
the right to receive cash, will be a taxable transaction to the Stockholders    
whose Shares are converted. Gain or loss will be realized and recognizable by   
each such Stockholder in an amount equal to the difference between the Merger   
Consideration received and the basis of the Shares owned by such Stockholder.   

   The foregoing discussion may not be applicable to Stockholders who acquired
their Shares pursuant to the exercise of employee stock options or other        
compensation arrangements or who are not citizens of the United States or who   
are otherwise subject to special tax treatment under the Code.                  

  THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED ON EXISTING        

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TAX LAW AS OF THE DATE OF THIS PROXY STATEMENT, WHICH MAY DIFFER ON THE DATE OF 
THE CONSUMMATION OF THE MERGER. EACH STOCKHOLDER IS URGED TO CONSULT SUCH       
STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO   
SUCH STOCKHOLDER OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS FOR WHICH NO INFORMATION HAS BEEN PROVIDED    
HEREIN.                                                                         

   TAX CONSEQUENCES TO THE COMPANY.  Upon consummation of the Asset Sales, the
Company estimates that it will have a remaining federal net operating loss of   
approximately $22,104,000, taking into account anticipated additional net       
operating losses between July 1, 1997 and the Effective Time of the Merger.     
Because of the "ownership change" rules of Section 382(g) of the Internal       
Revenue Code of 1986, as amended (the "Code"), and the conversion of Shares to  
cash pursuant to the Merger, the amount of losses realized by the Company before
the Merger available to offset taxable income of the Company after the Merger   
will be limited under Section 382(b) of the Code. In addition, if the Company   
does not continue its same business enterprise at all times during the two year 
period following the Effective Time, Section 382(c) of the Code would disallow  
all net operating loss carryforwards. As a result, it is uncertain at this time 
(a) whether the Surviving Corporation to be owned by Vajna and Valdina will be  
able to utilize any portion of the net operating loss of the Company incurred   
prior to the Merger, and (b) if such loss may be utilized, how much in any      
post-Merger period may be applied to offset post-Merger taxable income under the
Section 382(b) limitation.                                                      

FEES AND EXPENSES                                                               

   The Company has retained Jefferson Capital in connection with the Company's
strategic review, the Asset Sales and the Merger. In connection therewith, in   
May 1996, the Company paid Jefferson Capital a fee of $75,000 and has agreed to 
reimburse Jefferson Capital for expenses (amounting to approximately $58,000    
through September 1, 1997). Jefferson Capital will receive an additional payment
of $300,000 which was contingent upon execution of the Merger Agreement, and    
Jefferson Capital will receive a further payment of $300,000 if the Asset Sales 
and the Merger are consummated. In addition, the Company has agreed to indemnify
Jefferson Capital against certain liabilities and expenses in connection with   
the merger, including liabilities under federal securities law. See "PROPOSAL   
NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Interests of     
Certain Persons in the Asset Sales."                                            

    The Company has retained D.F. King & Co., Inc. to act as Proxy Solicitor and
ChaseMellon Shareholder Services ("ChaseMellon") to act as Paying Agent in      
connection with the Merger. The Proxy Solicitor and ChaseMellon will each       
receive reasonable and customary compensation for their services, will be       
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses in connection with the Merger,         
including liabilities under federal securities laws. In addition, brokers,      
dealers, commercial banks and trust companies will, upon request, be reimbursed 
by the Company for customary mailing expenses incurred by them in forwarding    
material to their customers.                                                    

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    The Company currently estimates that the expenses incurred by the Company in
connection with the Merger will be approximately as set forth below:            

                                                                [Download Table]
                                                                            
Financial Advisor fees and expenses(1)..........................  $ 745,000 
Paying Agent fees and expenses..................................      7,600 
Proxy Solicitor fees and expenses...............................      5,000 
Legal fees and expenses(2)......................................    500,000 
Accounting fees and expenses....................................    150,000 
Printing, mailing, and distribution expenses....................     75,000 
Filing fees.....................................................     15,259 
Miscellaneous...................................................     50,000 
                                                                  --------- 
Total...........................................................  $1,547,859
                                                                  --------- 
                                                                  --------- 

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

(1) Includes payment for services rendered in connection with the 
    Company's strategic review and the Asset Sales, as well as the
Merger.                                                   

(2) Does not include legal fees and expenses incurred in          
connection with the Asset Sales.                          

FINANCING OF THE TRANSACTION                                                    

The maximum amount required by Buyer to purchase all of the outstanding 
Shares (other than Shares owned by Vajna and Valdina) at a Merger Price of $2.30
per Share and to pay related fees and expenses is currently estimated by the    
Company to be approximately $14,817,000. Buyer intends to obtain all funds      
needed to purchase the Shares from the cash on hand at the Company as of the    
Effective Time of the Merger.                                                   

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

 In considering the recommendations of the Special Committee and the Board
with respect to the Merger Agreement and the Merger contemplated thereby,       
Stockholders should be aware that certain members of the Board (none of whom,   
however, were members of the Special Committee) have certain interests that     
present actual or potential conflicts of interest in connection with the Merger 
and have interests in the Merger which are different from, or in addition to,   
the interests of the Stockholders generally, including those referred to below. 
The Special Committee and the Board were aware of these actual or potential     
conflicts of interest and considered them along with other matters described    
under "SPECIAL FACTORS RELATING TO THE MERGER--Recommendation of the Special    
Committee and the Board; Fairness of the Merger."                               

  MANAGEMENT; OWNERSHIP OF SHARES/OPTIONS.  As a result of Vajna's ownership
of approximately 40.8% of the outstanding Shares (not including any Shares owned
by Valdina or any Shares for which Vajna only holds a proxy to vote), Vajna     
(and, as a result, Buyer) may be deemed to control the Company. In addition,    
Vajna, who is an officer, director and significant stockholder of Buyer, is also
the Chairman of the Board, President and Chief Executive Officer of the Company.

  As of the Record Date, the executive officers and directors of the Company
(other than Vajna) owned an aggregate of       Shares and held options to       
purchase an aggregate of       Shares (of which options to purchase an aggregate
      Shares were exercisable at prices below $2.30 per Share). If the Merger is
consummated, such persons will receive an aggregate of $      for their Shares  
(including Shares issuable upon exercise of options which have exercise prices  
below $2.30 per Share). See "THE MERGER AGREEMENT" for a discussion relating to 
the treatment of options in the Merger. See                                     

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"CERTAIN INFORMATION REGARDING THE COMPANY--Principal Stockholders of the       
Company" and "--Executive Compensation."                                        

INDEMNIFICATION.  The Merger Agreement provides for the survival of all 
rights to indemnification now existing in favor of the directors and executive  
officers of the Company and the maintenance of a policy of directors' and       
officers' liability insurance for a period of four years. See "THE MERGER       
AGREEMENT." The directors, officers and employees of the Company are also       
indemnified against certain actions, claims and liabilities pursuant to the     
Company's Certificate of Incorporation and Bylaws and, in the case of each      
director, pursuant to indemnification agreements with the Company. See "CERTAIN 
INFORMATION REGARDING THE COMPANY--Executive Compensation."                     

SEVERANCE ARRANGEMENTS.  In connection with the Merger, the Company and 
Vajna have mutually agreed to terminate the Employment Agreement between Vajna  
and the Company, dated as of January 1, 1994, as amended (the "Vajna Employment 
Agreement"), effective as of the Effective Time. Prior to consummation of the   
Merger or earlier termination of the Merger Agreement, Vajna will continue to   
receive his fixed annual compensation in accordance with the terms of the Vajna 
Employment Agreement. Upon termination of the Vajna Employment Agreement at the 
Effective Time, Vajna will be paid an amount equal to the sum of (i) one hundred
percent of the fixed annual compensation that would otherwise have been payable 
to Vajna in the ordinary course from the Effective Time through December 31,    
1997 had the Vajna Employment Agreement not been terminated at the Effective    
Time, (ii) $500,000 (representing fifty percent of the fixed annual compensation
that would otherwise have been payable to Vajna in the ordinary course from     
January 1, 1998 through December 31, 1998 had the Vajna Employment Agreement not
been terminated at the Effective Time), and (iii) $344,666 representing         
producer's performance fees earned under the Vajna Employment Agreement with    
respect to DIE HARD WITH A VENGEANCE. Assuming the Merger occurs on or about    
December 1, 1997, it is anticipated that, at the Effective Time, Vajna will     
receive an aggregate amount of approximately $927,666 in consideration for the  
termination of the Vajna Employment Agreement. Notwithstanding anything in the  
Vajna Employment Agreement to the contrary, all of the terms and provisions of  
the Vajna Employment Agreement (including, without limitation, all provisions   
regarding termination and compensation upon termination) will terminate as of   
the Effective Time and neither the Company nor Vajna will have any further      
obligation to the other with respect to the Vajna Employment Agreement except as
expressly set forth in the Merger Agreement. The Vajna Employment Agreement will
continue in full force and effect if the Merger is not consummated or if the    
Merger Agreement is otherwise terminated. See "THE MERGER AGREEMENT" and        
"CERTAIN INFORMATION REGARDING THE COMPANY--Executive Compensation."            

In connection with the Merger, the Company and Warren Braverman, Chief  
Operating Officer, Chief Financial Officer, Executive Vice President and a      
Director of the Company, have agreed to the material terms of a severance       
arrangement pursuant to which Mr. Braverman's employment agreement with the     
Company will be terminated, effective as of the Effective Time. Upon termination
of Mr. Braverman's employment agreement at the Effective Time, Mr. Braverman    
will be paid an amount equal to (i) one hundred percent of the fixed annual     
compensation that would otherwise have been payable to Mr. Braverman in the     
ordinary course from the Effective Time through December 31, 1997 had his       
employment agreement not been terminated at the Effective Time, plus (ii)       
$598,000 (representing fifty percent of the fixed annual compensation that would
otherwise have been payable to him in the ordinary course from January 1, 1998  
through December 31, 1999 had his employment agreement not been terminated at   
the Effective Time), plus (iii) $48,000 (representing certain automobile and    
health benefits that would otherwise have been payable to him in the ordinary   
course from January 1, 1998 through December 31, 1999 had his employment        
agreement not been terminated at the Effective Time), less (iv) $18,000         
(representing the principal amount of a non-interest bearing loan previously    
extended by the Company to him which shall, as a result, be deemed repaid at the
Effective Time). The Company will also forgive a loan extended to Mr. Braverman 
in 1994 in connection with the purchase by Mr. Braverman of                     

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certain Shares in the Company. As of September 1, 1997, an aggregate of $549,000
in principal and accrued interest was outstanding under such loan. Mr. Braverman
will also be paid for his accrued unused vacation time. In addition, the Company
and Mr. Braverman have agreed to enter into a mutual release at the Effective   
Time. See "THE MERGER AGREEMENT" and "CERTAIN INFORMATION REGARDING THE         
COMPANY--Executive Compensation."                                               

   The Company also has severance arrangements with two other directors and/or
executive officers (or former executive officers) of the Company: Fred          
Feitshans, former President of Production, and Randolph M. Paul, Senior Vice    
President--Business Affairs and a Director of the Company. Pursuant to such     
arrangements, the Company has paid Mr. Feitshans an aggregate of $250,000 in    
severance upon his resignation in July 1997. The Company has agreed to pay Mr.  
Paul an aggregate of $220,000 at the Effective Time of the Merger and forgive a 
$50,000 loan (bearing interest at the rate of 7% per annum) which was made to   
Mr. Paul in January 1997.                                                       

OTHER.  For serving on certain committees of the Board, Gregory R. Paul 
receives an aggregate of $20,000 per year. The Company also reimburses Mr. Paul 
(and the Company's other directors) for travel expenses incurred in connection  
with their activities on behalf of the Company. For serving on the Special      
Committee, Mr. Paul will also receive $50,000.                                  

R. Timothy O'Donnell, a director of the Company, is the President and a 
principal stockholder of a privately-held investment banking concern which is   
the Company's financial advisor and which is receiving certain fees in          
connection with the Merger. See "--Fees and Expenses" and "PROPOSAL NO. 1: SALE 
OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Interests of Certain Persons 
in the Asset Sales."                                                            

CERTAIN TRANSACTIONS INVOLVING THE COMPANY'S COMMON STOCK                       

In addition to the Company's initial public offering in June 1994, the  
Company sold an additional 3,000,000 Shares in an underwritten public offering  
in May 1995 at a price of $8.50 per share (exclusive of underwriting discounts  
and commissions) with aggregate proceeds to the Company (after expenses and     
underwriting discounts and commissions) of approximately $23,450,000.           

   Since January 1, 1995, Vajna has purchased an aggregate of 54,000 Shares in
open market transactions at prices ranging from approximately $3.18 through     
$6.25 per share (consisting of a purchase of 10,000 Shares for $6.25 per Share  
in January 1995 and purchases of an aggregate 44,000 Shares in December 1995 for
an average purchase price of approximately $3.52 per Share).                    

   On July 9, 1997, Vajna filed with the Securities and Exchange Commission an
amendment to his Schedule 13D indicating that, upon redemption of certain shares
in a foreign corporation by such corporation as described below (the            
"Redemption"), Vajna will be the beneficial owner (as determined in accordance  
with Rule 13d-3 under the Securities Exchange Act of 1934, as amended ("Rule    
13d-3")) of 6,821,318 Shares (approximately 50.7%) of the Company's Common      
Stock. Those 6,821,318 Shares include not only the 5,491,531 Shares that Vajna  
owns directly, but also (i) 372,341 Shares (the "Proxy Shares") owned by Mr.    
Braverman, which Vajna has the right to vote pursuant to an irrevocable proxy   
and (ii) 957,446 Shares (the "Valdina Shares") owned by Valdina which, upon such
Redemption, will be indirectly beneficially owned 99.8% by Vajna and 0.2% by The
Mong Family Trust which benefits certain descendants of Mong Hing Yan, including
the son of Vajna (the "Trust"). Prior to effectiveness of such Redemption, Vajna
beneficially owns (as determined in accordance with Rule 13d-3) 5,863,872 Shares
(approximately 43.6%) of the Company's Common Stock including the Proxy Shares, 
but excluding the Valdina Shares as to which Vajna has disclaimed beneficial    
ownership because, prior to the Redemption, Valdina is indirectly beneficially  
owned 49.9% by Vajna and 50.1% by the Trust and Vajna does not have voting,     
investment or dispositive power with respect to the Valdina Shares. On June 27, 
1997, Valdina's indirect Dutch parent corporation ("Valdina Parent              
Corporation"), which was then owned 49.9% by Vajna and 50.1% by a corporation   
indirectly wholly owned by the Trust (the "Trust Subsidiary"), acted to redeem  

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substantially all of the interest of the Trust Subsidiary in Valdina Parent     
Corporation (such Redemption anticipated by Vajna to be effective in October    
1997). The consideration for the Redemption will be the transfer by Valdina     
Parent Corporation to the Trust Subsidiary of Valdina Parent Corporation's right
and interest in a portion (70,000,000 Netherlands Guilders) of a pre-existing   
promissory note originally made by Vajna in favor of Valdina Parent Corporation 
in 1995 in an unrelated transaction. As of June 27, 1997, according to exchange 
rates published in the WALL STREET JOURNAL, one Netherlands Guilder could be    
exchanged for approximately .51 US Dollars. Valdina Parent Corporation's        
indirect interest in the Valdina Shares represented only a portion of Valdina   
Parent Corporation's assets, and in the redemption no allocation was made by the
parties thereto of the value of the assigned note to the Valdina Shares as      
opposed to other direct or indirect assets of Valdina Parent Corporation.       

On December 30, 1996 and January 2, 1997, respectively, the Company     
repurchased 372,341 Shares held by Dianne Caplan Lebovits, a Director and former
executive officer of the Company, and 372,341 Shares held by the law firm of    
Ziffren, Brittenham, Branca & Fischer ("ZBBF"), which provides legal services to
the Company. Harry M. Brittenham, a partner in ZBBF, was a member of the Board  
from July 1994 until March 13, 1997. Ms. Lebovits and ZBBF had each originally  
acquired 372,341 Shares pursuant to separate Stock Purchase Agreements dated as 
of January 1, 1994 (each an "Original Purchase Agreement") and in exchange for  
payment of the aggregate par value of such Shares in cash and a full recourse   
secured promissory note in the principal amount of $450,000, bearing interest at
the rate of 6% per annum, and secured by a pledge of the 372,341 Shares         
purchased (each a "Purchase Note"). The principal of each note was payable to   
the Company on December 31, 1998 or, in the event of the earlier termination of 
the purchaser's relationship with the Company (continued employment by the      
Company with respect to Ms. Lebovits and continued engagement by the Company    
with respect to ZBBF), upon the date any Shares vested and could be sold without
restrictions under the Securities Act of 1933, as amended, or pursuant to Rule  
144 thereunder. Ms. Lebovits subsequently split her Purchase Note into two      
separate notes (the "Purchase Notes"), one secured by new collateral consisting 
of marketable securities and one secured by Shares. Pursuant to the terms of the
repurchase, in consideration for the sale by ZBBF of its 372,341 Shares to the  
Company, the Company canceled the Purchase Note of ZBBF under which $450,000 was
then outstanding. Pursuant to the terms of Ms. Lebovits' Original Purchase      
Agreement, 51,714 Shares held by Ms. Lebovits which were not vested at the time 
of her resignation as Executive Vice President, General Counsel and Corporate   
Secretary of the Company in August 1996, were repurchased at the original       
purchase price (approximately $1.21 per share) by reducing the aggregate balance
due under her Purchase Notes by approximately $62,500. In consideration for the 
sale by Ms. Lebovits to the Company of the other 320,627 Shares repurchased, the
Company canceled the remaining balances of her Purchase Notes under which       
approximately $468,000 was then outstanding (after the $62,500 reduction).      

CERTAIN TRANSACTIONS WITH VAJNA AND CERTAIN RELATED STOCKHOLDERS                

  Prior to January 1, 1994, the Company and certain other entities which are
now wholly-owned subsidiaries of the Company were wholly-owned by Vajna. As of  
January 17, 1994, Vajna contributed all of the capital stock of these entities  
to the Company. Shortly thereafter, the Company acquired all of the outstanding 
stock of one of the Company's principal subsidiaries (the "Principal            
Subsidiary") from Valdina for consideration consisting of a $3,300,000          
promissory note (the "Valdina Note") of the Company (bearing interest at the    
rate of 6% per annum, with principal and interest originally due January 17,    
1995) and 957,446 Shares. The maturity date of the Valdina Note was subsequently
extended first until July 17, 1996 and then until January 17, 1997. The interest
rate after January 17, 1996 was 7% per annum. The Valdina Note, under which an  
aggregate of approximately $3,500,000 in principal and accrued interest was     
outstanding as of September 1, 1997, is currently due and payable in its        
entirety. Pursuant to the Merger Agreement, the Company has agreed to pay the   
Valdina Note in full on or prior to the closing of the Merger. See "THE MERGER  
AGREEMENT." In conjunction with the foregoing transactions, Valdina received    
certain "piggyback" registration rights with respect to its Shares, which, with 
certain exceptions, require the Company to use its best efforts to include in   
any of the Company's registration statements any                                

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shares requested by Valdina to be included. The Company agreed to pay all       
registration expenses incurred by the Company, and Valdina agreed to pay all    
expenses directly incurred on its behalf in connection with any such            
registration. The Company has also agreed to certain indemnification provisions 
in favor of Valdina in connection with any such registration.                   

 From inception of the Company through June 1994, the Company's operations
were funded in large part through loans to the Company and its subsidiaries     
provided by Vajna, Valdina and Valdi Corporation N.V. ("Valdi"), the corporate  
parent of Valdina Parent Corporation. At December 31, 1993, such outstanding    
loans aggregated $36,661,000 (the "Prior Loans"). In addition, Vajna directly or
indirectly guaranteed (for no fee) all loans from third parties to the Company  
to finance production of each of its motion pictures. All amounts loaned to the 
Company by Vajna, Valdina and Valdi were payable on demand and bore interest at 
a rate of 10% per annum. On January 16, 1994, Valdina and Valdi contributed     
$12,535,000 of their Prior Loans to the capital of the Principal Subsidiary. On 
January 17, 1994, Vajna contributed $21,126,000 of Prior Loans to the capital of
the Company. As a result, $3,000,000 of Prior Loans from Vajna (bearing interest
at a rate of 6% per annum and originally due January 17, 1995) remained         
outstanding. Such loans were paid in full by the Company by December 1995.      

From January 1994 through early June 1994, Mr. Vajna, Valdina and Valdi 
loaned an additional $6,696,689 to the Company to fund development,             
pre-production and overhead expenses. Such amount (plus interest of $148,686 at 
the rate of 6% per annum) was repaid in June 1994. The indebtedness owed to     
Disney pursuant to the term loan agreements to finance TOMBSTONE (which loan has
been paid off) and COLOR OF NIGHT (but which will terminate upon consummation of
the Film Library Sale) were guaranteed by Mr. Vajna, and the guarantee which    
remains with respect to COLOR OF NIGHT is secured by certain of his real        
property. In addition, Valdi had guaranteed repayment of certain project loans  
obtained from one of the Company's commercial lenders to finance the production 
of TOMBSTONE, RENAISSANCE MAN and COLOR OF NIGHT and a $10,000,000 loan obtained
from such lender to provide interim financing to fund the pre-production costs  
of JUDGE DREDD, DIE HARD WITH A VENGEANCE and THE SCARLET LETTER. These loans   
were later refinanced through the Company's credit facility, relieving Valdi of 
the guaranty.                                                                   

In 1994, in order to assist the Company in obtaining financing for and  
completion bonds on certain films, Valdi entered into an arrangement with the   
Company (which has since expired) whereby Valdi undertook to have letters of    
credit issued for the benefit of the Company's lenders to provide additional    
collateral under the Company's credit facility. Valdi is owed a facility fee of 
$110,220 in connection therewith. In addition, as of September 1, 1997, the     
Company has non-interest bearing receivables of $285,000 from Valdi and an      
affiliate representing amounts due from Valdi and/or its affiliate to reimburse 
the Company for financial planning and related services provided to such        
entities. The Company previously forgave an additional $33,000 of such          
receivables.                                                                    

   Valdi beneficially owns approximately 84.7% of Intercom KFT ("Intercom"), a
distributor of motion pictures in Hungary to which the Company licenses         
Hungarian distribution rights to its motion pictures in various media. The      
Company and Intercom have an agreement in principle for an output agreement for 
the Hungarian distribution of all of the Company's films, beginning with NIXON. 
The agreement in principle provides for a distribution fee to Intercom of 17.5% 
of the gross receipts of Intercom from distribution of such filMs. Prior to     
reaching such agreement in principal in late 1995, the Company entered into     
separate license agreements with Intercom on a picture-by-picture basis which   
provided for a distribution fee of 20% of gross receipts to Intercom plus       
reimbursement of distribution expenses. During the Company's fiscal years ended 
December 31, 1994, 1995 and 1996, Intercom received distribution fees of        
approximately $12,000, $106,000 and $189,000, respectively, with respect to     
distribution of various of the Company's films. In addition, Intercom has       
assisted the Company by paying to the Hungarian tax authorities on behalf of the
Company value added taxes incurred by the Company in connection with its        
distribution of films through its Hungarian subsidiary, Cinergi Productions KFT 
("CPKFT"). Intercom subsequently files for and receives the refund of such      
taxes. In 1996, the Company paid Intercom approximately $349,000, representing  
the aggregate accrued interest on amounts advanced in 1996 and certain prior    
years by                                                                        

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Intercom to the Hungarian tax authorities from the date of payment of each such 
advance until receipt by Intercom of the applicable refund, and Intercom's out  
of pocket costs incurred in connection with Intercom's activities on behalf of  
the Company in 1996 and prior years. During 1995, Wondervale Ltd., a United     
Kingdom corporation which was owned by Valdina Parent Corporation, provided     
certain production services in connection with the production of JUDGE DREDD and
EVITA for fees of $75,000 and $50,000, respectively. In October 1996, the       
Company acquired Wondervale Ltd. from Valdina Parent Corporation for $5,000.    

   The Company leases the building housing its corporate headquarters in Santa
Monica, California from Vajna. During the calendar years 1994, 1995 and 1996,   
the Company made total lease payments of $462,000 per year to Vajna under a     
lease which provided for monthly rental payments of $38,500 (approximately $1.75
per square foot) and expired on May 1, 1996. Subsequent thereto, the Company has
been leasing its corporate headquarters on the same general terms and at the    
same rental rate, but on a month-to-month basis. The Company is substantially   
reducing the amount of space it leases from Vajna in its corporate headquarters 
building (from 19,359 square feet to 6,157 square feet by October 1, 1997). See 
"CERTAIN INFORMATION REGARDING THE COMPANY--Business of the                     
Company--Properties." The Company and its affiliates have also obtained air     
charter services from a corporation owned by Vajna. During the Company's fiscal 
years ended December 31, 1994, 1995 and 1996, the Company incurred air charter  
expenses to such corporation in the amount of $1,199,000, $747,000 and $229,000,
respectively, pursuant to a protocol approved by the independent members of the 
Company's Board of Directors. At September 1, 1997, no amounts were owed by the 
Company for such air charter expenses. During 1994, 1995 and 1996, Vajna also   
received financial planning, legal and related services from the Company on     
terms approved by the Company's Audit Committee. In consideration for such      
services, Vajna agreed to pay the Company $175,000 for 1994, $171,000 for 1995, 
and $142,000 for 1996 (the Audit Committee determined reimbursement of an       
aggregate additional $162,000 in such services over such periods would not be   
required). In May 1997, the Company loaned $150,000 to Vajna for certain        
personal expenses relating to the Cannes Film Festival. The loan bears interest 
at a rate of 7% per annum, was due June 9, 1997, and is currently due and       
payable.                                                                        

   Vajna has agreed to pay (or cause to be paid) in full to the Company, at or
prior to the closing of the Merger, all amounts owed by him and his affiliates  
to the Company pursuant to various of the foregoing transactions (an aggregate  
of approximately $710,000 as of June 30, 1997).                                 

The Company also has a Tax Reimbursement Agreement with Vajna, and in   
connection therewith Vajna loaned the Company $10,000,000 in May 1994. See      
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF     
OPERATIONS." The Tax Reimbursement Agreement and related loan to the Company    
will not be affected by the Merger. For financial reporting purposes, the loan  
payable and a receivable from Vajna (created to take into account a possible    
payment from Vajna in accordance with the Tax Reimbursement Agreement) are      
netted against one another pursuant to a legal right of offset in such          
agreements.                                                                     

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THE MERGER AGREEMENT

   The following description of the Merger Agreement and the other information
regarding the Merger Agreement contained herein are only summaries of certain   
provisions of the Merger Agreement and are qualified in their entirety by       
reference to the Merger Agreement which is included as Appendix "C" to this     
Proxy Statement.                                                                

THE MERGER; EFFECTIVE TIME OF THE MERGER                                        

   The Merger will become effective upon the filing of a Certificate of Merger
with the Delaware Secretary of State. The Effective Time is expected to occur as
soon as practicable after the satisfaction or waiver of the conditions to the   
Merger set forth in the Merger Agreement. See "--Conditions to the Merger." As  
of the Effective Time, Buyer will be merged with and into the Company in        
accordance with the applicable provisions of the DGCL. Following the Merger, the
Company will be the Surviving Corporation and the separate corporate existence  
of Buyer will cease.                                                            

 The Bylaws of the Surviving Corporation will be identical to those of the
Company. The Certificate of Incorporation of the Company will be amended and    
restated at the Effective Time and become the Restated Certificate of           
Incorporation of the Surviving Corporation. In addition, the directors and      
officers of Buyer immediately prior to the Effective Time will be the directors 
and officers of the Surviving Corporation.                                      

CONVERSION OF COMPANY COMMON STOCK INTO MERGER CONSIDERATION.                   

    At the Effective Time, by virtue of the Merger and without any action on the
part of any holder of Shares, (i) each Share issued and outstanding immediately 
prior to the Effective Time (other than (x) Shares held in the Company's        
treasury (all of which will be canceled), (y) Shares held by Vajna or Valdina   
(all of which will remain outstanding) and (z) Shares which have not been voted 
for approval and adoption of the Merger Agreement and with respect to which     
appraisal has been properly demanded in accordance with Section 262 of the DGCL 
("Dissenting Shares")) will be converted into and represent the right to receive
the Purchase Price or the Adjusted Purchase price, as the case may be, and (ii) 
each share of Buyer common stock, par value $.01 per share, issued and          
outstanding immediately prior to the Effective Time will be canceled.           

ADJUSTMENTS TO PURCHASE PRICE                                                   

In accordance with the Merger Agreement, the aggregate purchase price   
payable to the Stockholders (other than Vajna and Valdina) in connection with   
the Merger (the "Aggregate Purchase Price") will be adjusted upwards at the     
Effective Time upon the occurrence of any of the following events (each such    
event being referred to as an "Adjustment Event"):                              

    FIVE STONE PROJECTS.  In the event the Company enters into an agreement (the
"Stone Agreement") prior to the Adjustment Date (A) to sell the Five Stone      
Projects or (B) to settle its obligations pursuant to its "first look"          
arrangement with Stone, the Aggregate Purchase Price will be adjusted upwards by
an amount equal to the sum of (X) the aggregate purchase price, if any, payable 
to the Company pursuant to the Stone Agreement, and (Y) the aggregate amount of 
liabilities and other obligations assumed or forgiven by the purchaser (or party
or parties with which the Company settles its obligations) pursuant to the Stone
Agreement. "Adjustment Date" means that date which is ten business days before  
the date of the Special Meeting, as such date is initially set by the Board, or 
as such date may be changed due to the adjournment, delay or other rescheduling 
of the Special Meeting; provided, however, that if, after the Adjustment Date,  
the Special Meeting is adjourned, delayed or otherwise rescheduled to a date    
which is less than ten business days from the date on which it was determined   
that the Special Meeting will be adjourned, delayed or otherwise rescheduled,   
then, in such case, the Adjustment Date will not be changed                     

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but will remain the date which is ten business days before the date the Special 
Meeting was set to occur prior to such adjournment, delay or other rescheduling 
of the Special Meeting.                                                         

  EVITA SOUNDTRACK.  In the event the sum of (A) the aggregate amount of all
monies received by the Company (as royalties or otherwise) in respect of the    
EVITA Soundtrack from September 2, 1997 through the Adjustment Date and (B) the 
aggregate purchase price payable to the Company pursuant to any agreement for   
the sale of the Soundtrack Rights (an "Evita Agreement") entered into by the    
Company prior to the Adjustment Date, exceeds $1,500,000 (such excess being     
referred to herein as the "Soundtrack Amount"), the Aggregate Purchase Price    
will be adjusted upwards by an amount equal to the Soundtrack Amount. Subsequent
to execution of the Merger Agreement, the Company received a payment of         
approximately $1,760,000 in overages with respect to the Soundtrack Rights. The 
Merger Agreement also provides that in the event the Company does not enter into
an EVITA Agreement prior to the Adjustment Date, the Special Committee and the  
Company will use their best efforts to monetize the Soundtrack Rights and       
distribute, subsequent to the Effective Time, the proceeds in connection        
therewith to the Stockholders of the Company immediately prior to the Effective 
Time.                                                                           

   ACCOUNTS RECEIVABLE.  In the event the aggregate amount of monies collected
by the Company in connection with certain outstanding accounts receivable (the  
"Non-Alan Smithee Receivables") from July 1, 1997 through the Adjustment Date   
(the "Measurement Period") is in excess of $1,573,000 (such excess amount being 
referred to as the "Non-Alan Smithee Receivables Amount"), the Aggregate        
Purchase Price will be adjusted upwards by an amount equal to the Non-Alan      
Smithee Receivables Amount. As all of the Non-Alan Smithee Receivables which    
have not previously been collected (i.e., the Miscellaneous Receivables) are    
being transferred to Summit as part of the Summit Agreements, upon consummation 
of such transaction, the aggregate amount of Non-Alan Smithee Receivables       
collected by the Company during the Measurement Period and the Non-Alan Smithee 
Receivables Amount will be fixed (and not subject to further adjustment) at     
$1,763,000 and $190,000, respectively. The Non-Alan Smithee Receivables do not  
include any receivables relating to AN ALAN SMITHEE FILM, for which there is a  
different potential adjustment, as described below.                             

MISCELLANEOUS ADJUSTMENTS.  The Aggregate Purchase Price will also be   
adjusted upwards in the event the sum of the adjustments (which may be either   
positive or negative) set forth below result in a positive number.              

    SGA ADJUSTMENT.  There will be a positive adjustment equal to the amount, if
any, by which the Company Expense Amount is less than $6,493,000. If instead,   
the Company Expense Amount is greater than $6,493,000, there will be a negative 
adjustment equal to the amount by which the Company Expense Amount is greater   
than $6,493,000. The positive or negative adjustment referred to in the         
immediately preceding two sentences is referred to in this Proxy Statement as   
the "SGA Adjustment." "Company Expense Amount" is defined in the Merger         
Agreement to mean the aggregate Expenses paid or incurred during the Measurement
Period by the Company. "Expenses" is defined in the Merger Agreement to consist 
of the following: salaries of Company personnel, severance payments, rent,      
utilities, accounting and legal fees and expenses, and other expenses which have
generally been included as selling, general and administrative expenses in the  
Company's audited financial statements. "Expenses," however, does not include,  
among other things, (A) any expenses incurred by the Company with respect to the
Company's development projects, (B) any expenses incurred by the Company with   
respect to (or funds provided by the Company to) Cinergi Productions Inc.       
(California), a California corporation and a wholly owned subsidiary of the     
Company ("CPI"), or the Visual Effects Facility operated by CPI, or (C) any     
expenses incurred by CPI. The Company Expense Amount will be computed on a      
consolidated basis (but excluding for such purpose CPI) and otherwise in a      
manner generally consistent with preparation of the Company's financial         
statements for the fiscal year ended December 31, 1996.                         

  ALAN SMITHEE ADJUSTMENT.  There will be a positive adjustment equal to the
amount, if any, by which the aggregate amount of monies collected by the Company
during the Measurement Period with respect to                                   

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certain outstanding accounts receivable with respect to AN ALAN SMITHEE FILM    
(the "Alan Smithee Receivables") exceeds $8,690,000. If instead, the aggregate  
amount of monies collected by the Company during the Measurement Period with    
respect to the Alan Smithee Receivables is less than $8,690,000, there will be a
negative adjustment equal to the amount by which the aggregate amount of monies 
collected by the Company during the Measurement Period with respect to the Alan 
Smithee Receivables is less than $8,690,000. The positive or negative adjustment
referred to in the immediately preceding two sentences is referred to in this   
Proxy Statement as the "Smithee Adjustment."                                    

  MASSILLUSION ADJUSTMENT.  There will be a positive adjustment equal to the
amount, if any, by which the MassIllusion Expense Amount is less than           
$1,300,000. If instead, the MassIllusion Expense Amount is greater than         
$1,300,000, there will be a negative adjustment equal to the amount by which the
MassIllusion Expense Amount exceeds $1,300,000. The positive or negative        
adjustment referred to in the immediately preceding two sentences is referred to
in this Proxy Statement as the "MassIllusion Adjustment." "MassIllusion Expense 
Amount" is defined in the Merger Agreement to mean (a) the aggregate amount of  
monies provided by the Company, directly or indirectly, to CPI or to any third  
parties on behalf of CPI during the Measurement Period ("Disbursed Amounts"),   
plus (b) the aggregate amount of expenses borne by the Company during the       
Measurement Period with respect to CPI (including with respect to the Visual    
Effects Facility operated by CPI) ("Borne Expenses"), less (from the sum of (a) 
and (b)) the recovery by the Company, in any manner whatsoever (including,      
without limitation, reimbursements by CPI to the Company), of any of the        
Disbursed Amounts or Borne Expenses.                                            

   CALCULATION OF MISCELLANEOUS ADJUSTMENTS.  To the extent the sum of the SGA
Adjustment, the Smithee Adjustment and the MassIllusion Adjustment              
(collectively, the "Miscellaneous Adjustments") results in a positive amount    
(such number being referred to in this Proxy Statement as the "Miscellaneous    
Adjustment Amount"), the Aggregate Purchase Price will be adjusted upwards by an
amount equal to the Miscellaneous Adjustment Amount. To the extent the sum of   
the Miscellaneous Adjustments results in a negative amount, there will be no    
adjustment to the Purchase Price.                                               

The Company's chief financial officer, or other appropriate accounting  
officer, as the case may be, will calculate both the Expenses and the           
MassIllusion Expense Amount for the Measurement Period and forward such         
calculation to Vajna and the Special Committee no later than 6:00 p.m., Los     
Angeles time, on the day after the Adjustment Date. To the extent there is a    
disagreement between Vajna and the Special Committee with respect to the        
calculation of Expenses and/or the MassIllusion Expense Amount, the parties will
immediately forward such calculation(s) to the Company's independent            
accountants, whose determination as to the proper calculation of Expenses and/or
the MassIllusion Expense Amount will be rendered no later than six business days
prior to the Special Meeting and will be final and binding on all the parties to
the Merger Agreement.                                                           

CALCULATION OF PURCHASE PRICE ADJUSTMENT.  The aggregate per Share      
adjustment to the Purchase Price (the "Adjustment Amount") will be calculated by
dividing (i) the aggregate dollar amount of the adjustments resulting from the  
Adjustment Events by (ii) the total number of issued and outstanding Shares as  
of the Adjustment Date (including Shares held by Vajna and Valdina). The        
Adjustment Amount will be rounded off to the nearest whole penny. Except for the
Adjustment Events, there are no other positive adjustments to the Purchase      
Price.                                                                          

  PRESS RELEASE REGARDING ADJUSTMENTS.  In the event of an adjustment to the
Purchase Price resulting from a transaction relating to the sale or transfer of 
the Five Stone Projects or the sale of the EVITA Soundtrack, the Company and    
Vajna will promptly thereafter issue a press release through a nationally       
recognized news wire service setting forth, among other things, the material    
terms underlying the particular transaction giving rise to the adjustment and   
the specific dollar amount of the adjustment to the Purchase Price. In addition,
the Company and Vajna will issue a press release no later than five business    
days prior to the Special Meeting, setting forth the exact dollar amount of the 
Adjustment Amount and the Adjusted Purchase Price.                              

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SURRENDER OF COMPANY COMMON STOCK CERTIFICATES.                                 

  Promptly after the Effective Time, a letter of transmittal and a notice of
consummation of the Merger and instructions with respect to the surrender of    
certificates ("Certificates") previously representing Shares will be sent to    
each record holder of Shares immediately prior to the Effective Time. The letter
of transmittal will set forth the procedure for surrendering such Certificates  
to ChaseMellon Shareholder Services ("the Paying Agent"). Each holder of a      
Certificate or Certificates (other than Certificates for Dissenting Shares,     
Shares held in the treasury of the Company or Shares owned by Buyer, Vajna or   
Valdina) will be entitled to receive, upon surrender to the Paying Agent of the 
Certificate or Certificates for cancellation, together with such letter of      
transmittal duly executed, and subject to any required backup withholding       
(within the meaning of Section 3406 of the Code), the aggregate amount of cash  
into which the Shares previously represented by such Certificate or Certificates
are converted in the Merger. Until surrendered to the Paying Agent, each        
Certificate (other than Certificates for Dissenting Shares, Shares held in the  
treasury of the Company or Shares owned by Buyer, Vajna or Valdina) will be     
deemed for all corporate purposes to evidence only the right to receive upon    
such surrender the aggregate amount of cash into which the Shares represented   
thereby shall have been converted, subject to any required backup withholding   
(within the meaning of Section 3406 of the Code). No interest will accrue or be 
paid on the cash payable upon the surrender of the Certificate or Certificates. 
If payment is to be made to a person other than the person in whose name the    
Certificate surrendered is registered, it will be a condition of payment that   
the Certificate so surrendered is properly endorsed or otherwise in proper form 
for transfer and that the person requesting such payment pays any transfer or   
other taxes required by reason of the payment to a person other than the        
registered holder of the Certificate surrendered or establishes to the          
satisfaction of the Surviving Corporation that such tax has been paid or is not 
applicable.                                                                     

Concurrent with the Effective time, Buyer, if necessary, will deposit or
cause to be deposited with the Paying Agent in trust for the benefit of the     
Stockholders (other than Vajna and Valdina) an amount of cash which, together   
with the cash on hand at the Company as of such date, will equal the aggregate  
cash consideration payable to the Stockholders (other than Vajna and Valdina)   
pursuant to the terms of the Merger Agreement. Amounts made available to the    
Paying Agent and not exchanged for Certificates representing Shares within six  
months after the Effective Time will be returned by the Paying Agent to the     
Surviving Corporation, which will thereafter act as Paying Agent subject to the 
rights of holders of unsurrendered Certificates representing Shares.            
Notwithstanding the foregoing, neither the Paying Agent nor any party to the    
Merger Agreement will be liable to a holder of Shares for any cash delivered to 
a public official pursuant to applicable abandoned property laws, or for any    
interest thereon. If Certificates are not surrendered prior to six years after  
the Effective Time (or, in any particular case, prior to such earlier date on   
which the consideration payable in respect of such Shares would otherwise       
escheat to or become the property of any governmental unit or agency), any      
consideration payable in respect of such Certificate will, to the extent        
permitted by applicable law, become the property of the Surviving Corporation,  
free and clear of all claims of interest of any person previously entitled      
thereto.                                                                        

STOCKHOLDERS SHOULD NOT RETURN ANY CERTIFICATES WITH
THE FORM OF PROXY ACCOMPANYING THIS PROXY STATEMENT.

REPRESENTATIONS AND WARRANTIES                                                  

   The Merger Agreement contains various representations and warranties of the
parties thereto including, among others, representations as to due organization 
and existence, corporate authority, enforceability of the Merger agreement, the 
consents required to effectuate the Merger, no violation of the charter or      
bylaws of the Company or Buyer or applicable law relating to the Merger, and the
accuracy of information included in certain materials in connection with the    
Merger. In addition, the Merger Agreement contains additional representations   
and warranties of the Company, including, among others, as to the Company's     
capitalization, as well as the accuracy of the Company's public filings         
(including the financial statements contained therein).                         

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CONDITIONS TO THE MERGER                                                        

    The respective obligations of each party to effect the Merger are subject to
the fulfillment and/or waiver, at or prior to the Effective Time, of the        
following conditions:                                                           

(a) The Merger Agreement shall have been approved and adopted by the    
requisite vote under the DGCL of the Stockholders;                              

  (b) The consummation of the Merger shall not be prohibited by any statute,
rule or regulation enacted, promulgated or deemed applicable to the Merger by   
any government or governmental agency that prohibits or makes illegal           
consummation of the Merger;                                                     

   (c) No court of competent jurisdiction shall have issued (and such issuance
shall not be threatened or pending) any injunction, restraining order or other  
order which prohibits the consummation of the transactions contemplated by the  
Merger Agreement and which is in effect as of the closing of the Merger and no  
governmental action or proceeding shall have been commenced or threatened       
seeking an injunction, restraining order or other order which seeks to prohibit 
the consummation of the transactions contemplated by the Merger Agreement;      

   (d) No litigation, proceeding or investigation shall be pending, threatened
or in existence which, if adversely determined, could result in:                

        (i) the issuance of a preliminary or permanent injunction or other order
   which would restrain, prevent or require rescission of the Merger Agreement
or the transactions contemplated thereby;                               

     (ii) liability to the Company, Vajna, Valdina, Buyer or any officers,
directors, employees or agents of any of them arising from the Merger   
Agreement or the transactions contemplated thereby; or                  

   (iii) the consummation of the transactions contemplated by the Merger
Agreement being unlawful;                                               

(e) The Company shall have obtained the Majority of the Minority Vote;  

   (f) The percentage of Shares demanding appraisal in accordance with Section
262 of the DGCL to the total number of Shares outstanding immediately prior to  
the Effective Time shall not exceed 15%;                                        

   (g) The transactions contemplated by the Library Sale Agreement, shall have
been consummated in all material respects; and                                  

(h) The transactions contemplated by the Assignment Agreement shall have
been consummated in all material respects.                                      

The obligations of Buyer, Vajna and Valdina to consummate the Merger    
pursuant to the Merger Agreement are further subject to the satisfaction or     
waiver at or prior to the Effective Time of the following conditions:           

(a) The Option Plans and all unexercised stock options shall have been  
terminated; and                                                                 

 (b) The Company shall have performed in all material respects each of its
obligations under the Merger Agreement required to be performed by it on or     
prior to the Effective Time, including without limitation, the cancellation and 
termination of the Company's outstanding warrants (the Disney Warrant and a     
warrant held by Jefferson Capital to purchase 50,000 Shares at $9.00 per Share) 
as required in the Merger Agreement.                                            

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The obligations of the Company to consummate the Merger pursuant to the 
Merger Agreement are further subject to the satisfaction or waiver at or prior  
to the Effective Time of the following conditions:                              

  (a) Buyer, Vajna and Valdina shall have performed in all material respects
their respective obligations under the Merger Agreement required to be performed
by them on or prior to the Effective Time;                                      

    (b) All of the representations and warranties of Vajna, Buyer and Valdina in
the Merger Agreement shall be true and correct as of the Effective Time as if   
such representations and warranties were made as of such time; and              

(c) Buyer shall have deposited with the Paying Agent the cash amount    
required pursuant to the Merger Agreement.                                      

AGREEMENTS OF THE COMPANY, BUYER, VAJNA AND VALDINA                             

The Merger Agreement contains a number of covenants and agreements,     
including without limitation, the following:                                    

    BEST EFFORTS.  The Company, Buyer, Vajna and Valdina have each agreed in the
Merger Agreement, subject to the terms and conditions thereof, to use their best
efforts to do all things necessary, proper or advisable to consummate and make  
effective as promptly as practicable the transactions contemplated by the Merger
Agreement, and to cooperate with each other in connection with the foregoing,   
including using their best efforts to (i) obtain all necessary waivers, consents
and approvals from other parties to material agreements, leases and other       
contracts, (ii) obtain all necessary consents, approvals and authorizations as  
are required to be obtained under any federal, state or foreign law or          
regulation, (iii) lift or rescind any injunction or restraining order or other  
order adversely affecting the ability of the parties to consummate the          
transactions contemplated by the Merger Agreement, (iv) effect any necessary    
registrations and filings and submissions of information requested by           
governmental authorities, and (v) fulfill all conditions to the Merger          
Agreement. Vajna and Valdina have also agreed to vote or cause to be voted all  
Shares owned by them (and any of their affiliates) in favor of approval of the  
Merger and the adoption of the Merger Agreement. In addition, Vajna has agreed  
to assist the Company in good faith and use commercially reasonable best efforts
to collect the Alan Smithee Receivables and the Non-Alan Smithee Receivables.   

OPERATIONS PENDING MERGER.  The Company has agreed that, prior to the   
Effective Time, unless Buyer has otherwise consented in writing or unless       
otherwise approved by a majority of the entire Board, or except as otherwise    
expressly contemplated by the Merger Agreement, the Library Sale Agreement or   
the Assignment Agreement, neither the Company nor any of its subsidiaries shall 
directly or indirectly: (i) declare or pay any dividend or make any distribution
with respect to any shares of its capital stock; (ii) purchase or otherwise     
acquire, or propose to purchase or otherwise acquire, any outstanding shares of 
its capital stock; (iii) propose or adopt any amendments to its charter         
documents or bylaws; (iv) issue, sell, pledge, dispose of or encumber any       
capital stock of the Company or any of its subsidiaries (other than pursuant to 
stock options outstanding on the date of the Merger Agreement); (v) except in   
the ordinary course of business consistent with past practice, sell, pledge,    
dispose of or encumber any material asset of the Company or any of its          
subsidiaries (including, without limitation, any material indebtedness owed to  
them or any material claims held by them); (vi) incur any long-term indebtedness
for borrowed money or issue any debt securities in a material amount or assume, 
guarantee or endorse any material obligations of any other person except for    
obligations of any wholly owned subsidiary; (vii) approve, adopt or amend any   
agreement, plan, program or arrangement which provides any benefits to any      
employee of the Company; (viii) except in the ordinary and usual course of      
business, increase the compensation of any employee of the Company; or (ix)     
authorize or propose any of the foregoing, or enter into any contract or        
arrangement to do any of the foregoing.                                         

INDEMNIFICATION.  Buyer and the Company have agreed that all rights to  
indemnification existing in favor of the present or former directors or officers
of the Company or any of its subsidiaries as provided in                        

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the Company's or any of its subsidiaries' charter documents in effect as of the 
date of the Merger Agreement, with respect to matters occurring prior to the    
Effective Time, will survive the Merger and will generally continue in full     
force and effect after the Effective Time. Buyer, Vajna and the Company have    
also agreed that all rights to indemnification existing in favor of the present 
or former directors or officers of the Company or any of its subsidiaries in any
indemnification agreement between such person and the Company or any such       
subsidiary will survive the Merger and continue in full force and effect in     
accordance with the terms of such agreement. The Company has also agreed to     
purchase a policy of directors' and officers' liability insurance covering,     
among other things, matters occurring prior to the Effective Time. Vajna has    
agreed to cause the Company to maintain such insurance policy for a period of   
four years from the Effective Time. To the extent the Company purchases         
insurance which covers matters relating to the activities of the Surviving      
Corporation following the Effective Time, Vajna and Buyer have agreed to        
reimburse the Company for the premiums paid with respect thereto.               

STOCK OPTIONS.  The Company has agreed to terminate, at or prior to the 
Effective Time, the Option Plans and all stock options issued thereunder.       

SEVERANCE.  The Company and Vajna have agreed to terminate the Vajna    
Employment Agreement, effective as of the Effective Time. See "SPECIAL FACTORS  
RELATING TO THE MERGER-- Interests of Certain Persons in the Merger." The       
Company and Warren Braverman have also agreed to the material terms of a        
severance arrangement pursuant to which Mr. Braverman's employment agreement    
would be terminated as of the Effective Time. See "SPECIAL FACTORS RELATING TO  
THE MERGER--Interests of Certain Persons in the Merger." The Company has also   
agreed to certain severance arrangements with Fred Feitshans and Randolph Paul. 
See "SPECIAL FACTORS RELATING TO THE MERGER--Interests of Certain Persons in the
Merger." See "CERTAIN INFORMATION REGARDING THE COMPANY--Certain Relationships  
and Related Transactions."                                                      

 PAYMENT OF OUTSTANDING OBLIGATIONS.  Vajna has agreed to pay in full, and
has agreed to cause his affiliates to pay in full, at or prior to the closing of
the Merger, all amounts owed by him or them, as the case may be, to the Company 
and its subsidiaries. The Company has agreed to pay in full, at or prior to the 
closing of the Merger, the outstanding principal amount (and any accrued        
interest thereon) under the Valdina Note. See "Certain Transactions with Vajna  
and Certain Related Stockholders."                                              

TERMINATION; FEES AND EXPENSES                                                  

 The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, whether prior to or after approval by the 
Stockholders: (i) by mutual written consent of the Special Committee, on behalf 
of the Company, and the Board of Directors of Buyer; (ii) by the Company or     
Buyer if the Library Sale Agreement terminates; (iii) by the Company, acting    
through the Special Committee, or Buyer if, without a breach or violation of the
Merger Agreement by the terminating party, the Merger has not been consummated  
by December 31, 1997; or (iv) by the Company, if the Board, based on the        
recommendation of the Special Committee, has failed to recommend, or withdrawn, 
modified or amended in any material respect, its approval or recommendation of  
the Merger or failed to hold the Special Meeting prior to December 31, 1997.    

   In the event of any such termination, the Merger Agreement will become void
and have no effect, and there will be no liability on the part of Buyer, Vajna, 
Valdina or the Company, except that (i) obligations pursuant to the Merger      
Agreement relating to the obligation of each party to pay its own costs and     
expenses will survive such termination, and (ii) the termination of the Merger  
Agreement will not relieve any party from liability for any willful breach of   
the Merger Agreement.                                                           

    The Merger Agreement provides that whether or not the Merger is consummated,
all costs and expenses incurred in connection with the Merger Agreement, the    
Merger and the consummation of the transactions contemplated thereby will be    
paid by the party incurring such expenses.                                      

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AMENDMENTS; WAIVERS                                                             

   The Merger Agreement may not be amended except by action of the Board (with
the assent of the Special Committee) on behalf of the Company and the Board of  
Directors of Buyer on behalf of Buyer, Vajna and Valdina. Any amendment will be 
set forth in a written instrument signed by each of the Company, Buyer, Vajna   
and Valdina. However, after approval of the Merger Agreement by the             
Stockholders, no amendment may be made without further approval of the          
Stockholders which would: (i) decrease the Merger Consideration; or (ii) change 
any other terms and conditions of the Merger Agreement if any of the changes,   
alone or in the aggregate, would materially adversely affect the Stockholders.  
At any time prior to the Effective Time, whether before or after approval of the
Merger by the Stockholders, Buyer, Vajna, Valdina or the Company, may (i) extend
the time for the performance of any of the obligations or other acts of any     
other party to the Merger Agreement, (ii) waive any inaccuracies in the         
representations and warranties contained in the Merger Agreement or in any      
document, certificate or writing delivered pursuant to the Merger Agreement, or 
(iii) waive compliance with any of the agreements of any other party or with any
conditions to its own obligations; provided that neither Buyer, Vajna or Valdina
(each a "Buyer Party"), may extend the time for performance of any obligation   
of, waive any inaccuracy in any representation or warranty of, or waive         
compliance with any agreement or condition with respect to any Buyer Party.     

APPRAISAL RIGHTS                                                                

In the event of the Merger, Stockholders who do not vote in favor of the
Merger and have otherwise complied with the requirements of Section 262 of the  
DGCL will be entitled to dissent and demand appraisal of their Shares           
outstanding immediately prior to the Effective Time. Pursuant to the Merger     
Agreement, Dissenting Shares (i.e., Shares which are outstanding immediately    
prior to the Effective Time and which have not been voted for approval of the   
Merger and the adoption of the Merger Agreement and with respect to which       
appraisal has been properly demanded in accordance with Section 262) will not be
converted into the right to receive the Merger Consideration at or after the    
Effective Time unless and until the holder of such Shares withdraws his or her  
demand for such appraisal (in accordance with Section 262(k) of the DGCL) or    
becomes ineligible for appraisal. If a holder of Dissenting Shares withdraws (in
accordance with Section 262(k) of the DGCL) his or her demand for such appraisal
or becomes ineligible for appraisal, then, as of the Effective Time or the      
occurrence of such event whichever last occurs, such holder's Dissenting Shares 
will cease to be Dissenting Shares and will be converted into and represent the 
right to receive the Merger Consideration. The Company has agreed to give Buyer 
(i) prompt notice of any written demands for appraisal, withdrawals of demands  
for appraisal and any other instruments served pursuant to Section 262 and      
received by the Company and (ii) the opportunity to direct all negotiations and 
proceedings with respect to demands for appraisal under Section 262. The Company
will not voluntarily make any payment with respect to any demands for appraisal 
and will not, except with the prior written consent of Buyer, settle or offer to
settle any such demands.                                                        

Set forth below under "RIGHTS OF DISSENTING STOCKHOLDERS" is additional 
information regarding dissenters' appraisal rights under the DGCL including a   
summary of the steps required to be taken to perfect such rights.               

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RIGHTS OF DISSENTING STOCKHOLDERS 

    Stockholders who, not later than the date of the Special Meeting, deliver to
the Company a written demand for appraisal rights, who do not vote in favor of  
the Merger and who comply with all other applicable requirements of Section 262 
of the DGCL, will have the right to dissent from the Merger and to have their   
Shares appraised by the Delaware Court of Chancery and to receive payment of the
"fair value" of such Shares as determined by such court, rather than the Merger 
Consideration. Set forth below is a summary description of Section 262. Section 
262 is reprinted in its entirety as Appendix "D" to this Proxy Statement. All   
references in Section 262 and in this summary to a "Stockholder" are to the     
record holder of Shares as to which appraisal rights are asserted. A person     
having a beneficial interest in Shares that are held of record in the name of   
another person, such as a broker or nominee, must act promptly to cause the     
record holder to follow the steps summarized below properly and in a timely     
manner to perfect whatever appraisal rights the beneficial owner may have.      

THE FOLLOWING SUMMARY IS NOT A COMPLETE STATEMENT OF THE LAW RELATING TO
APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX "D." 
THIS SUMMARY AND APPENDIX "D" SHOULD BE REVIEWED CAREFULLY BY ANY STOCKHOLDER   
WHO WISHES TO PRESERVE THE RIGHT TO APPRAISAL BECAUSE FAILURE TO COMPLY STRICTLY
WITH THE PROCEDURES SET FORTH HEREIN AND THEREIN WILL RESULT IN THE LOSS OF     
APPRAISAL RIGHTS.                                                               

WRITTEN DEMAND FOR APPRAISAL.  In accordance with Section 262, any      
Stockholder entitled to appraisal rights may demand in writing from the Company 
the appraisal of the fair value of such Stockholder's Shares. Such demand must  
reasonably inform the Company of the identity of the Stockholder and that the   
Stockholder intends thereby to demand the appraisal of the fair value of such   
Stockholder's Shares. A written demand for appraisal of Shares must be delivered
to the Company by a Stockholder seeking appraisal before the taking of the vote 
on the Merger Agreement. This written demand must be separate from any proxy or 
vote abstaining from or voting against adoption of the Merger Agreement. Voting 
against adoption of the Merger Agreement, abstaining from voting, or failing to 
vote with respect to adoption of the Merger Agreement will not constitute a     
demand for appraisal within the meaning of Section 262. Stockholders electing to
exercise their appraisal rights under Section 262 must not vote for adoption of 
the Merger Agreement. A vote by a Stockholder against adoption of the Merger    
Agreement is not required in order for that Stockholder to exercise appraisal   
rights. However, if a Stockholder returns a signed proxy but does not specify a 
vote against adoption of the Merger Agreement or a direction to abstain, the    
proxy, if not revoked, will be voted for adoption of the Merger Agreement, which
will have the effect of waiving that Stockholder's appraisal rights.            

    A demand for appraisal must be executed by or for the Stockholder of record,
fully and correctly, as such Stockholder's name appears on the stock            
certificates. If Shares are owned of record in a fiduciary capacity, such as by 
a trustee, guardian or custodian, the demand must be executed by the fiduciary. 
If Shares are owned of record by more than one person, as in a joint tenancy or 
tenancy in common, the demand must be executed by all joint owners. An          
authorized agent, including an agent for two or more joint owners, may execute  
the demand for appraisal for a Stockholder of record; however, the agent must   
identify the record owner and expressly disclose the fact that, in exercising   
the demand, he or she is acting as agent for the record owner.                  

   A record owner, such as a broker, who holds Shares as a nominee for others,
may exercise appraisal rights with respect to the Shares held for all or less   
than all of the beneficial owners of Shares as to which the holder is the record
owner. In such case, the written demand must set forth the number of Shares     
covered by the demand. Where the number of Shares is not expressly stated, the  
demand will be presumed to cover all Shares outstanding in the name of the      
record owner. Beneficial owners who are not record owners and who intend to     
exercise appraisal rights should instruct the record owner to comply strictly   
with                                                                            

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the statutory requirements with respect to the delivery of written demand prior 
to the taking of the vote on the Merger Agreement.                              

  A Stockholder who elects to exercise appraisal rights must mail or deliver
the written demand for appraisal to: Cinergi Picture Entertainment Inc.,        
Attention: Secretary, 2308 Broadway, Santa Monica, California 90404, or should  
deliver such demand to the Company in person at the Special Meeting. The written
demand for appraisal should specify the Stockholder's name and mailing address  
and the number of the Company's Shares of Common Stock owned by the Stockholder,
and should state that the Stockholder is thereby demanding appraisal in         
accordance with Section 262 of the DGCL. Any Stockholder (other than a record   
owner who is acting as a nominee holder for different beneficial owners) seeking
to exercise appraisal rights for a portion, but not all, of such Stockholder's  
Shares should consult with legal counsel before taking any such action. The     
Company believes that Delaware law has not clearly addressed the ability of such
a Stockholder to exercise appraisal rights with respect to a portion, but not   
all, of such Stockholder's Shares. Stockholders should be aware of the risk     
that, should a Stockholder seek to exercise appraisal rights with respect to a  
portion, but not all, of such Stockholder's Shares, the Company may assert that 
by doing so such Stockholder has waived such Stockholder's appraisal rights and 
a Delaware Court may find that such Stockholder has so waived such Stockholder's
appraisal rights.                                                               

   OTHER PROCEDURES.  Within 10 days after the Effective Time, the Company, as
the surviving corporation in the Merger, must provide notice as to the date of  
effectiveness of the Merger to all Stockholders who have duly and timely        
delivered demands for appraisal and who have not voted for adoption of the      
Merger Agreement.                                                               

  Within 120 days after the Effective Time, any Stockholder who has complied
with the required conditions of Section 262 is entitled, upon written request,  
to receive from the Company a statement setting forth the aggregate number of   
Shares not voted in favor of adoption of the Merger Agreement and with respect  
to which demands for appraisal have been received by the Company and the        
aggregate number of holders of such Shares. Such statement must be mailed within
10 days after the written request therefor has been received by the Company or  
within 10 days after expiration of the period for delivery of demands for       
appraisal under Section 262, whichever is later.                                

Within 120 days after the Effective Time, either the Company, as the    
surviving corporation in the Merger, or any Stockholder who has complied with   
the required conditions of Section 262 may file a petition in the Delaware Court
of Chancery demanding a determination of the fair value of the Shares of all    
such dissenting stockholders. If a petition for an appraisal is timely filed,   
after a hearing on such petition, the Delaware Court of Chancery will determine 
which Stockholders are entitled to appraisal rights and thereafter will appraise
the Shares owned by such Stockholders, determining the fair value of such       
Shares, exclusive of any element of value arising from the accomplishment or    
expectation of the Merger, together with a fair rate of interest to be paid, if 
any, upon the amount determined to be the fair value.                           

Stockholders considering whether to seek appraisal rights should bear in
mind that the fair value of their Shares determined under Section 262 could be  
more than, the same as, or less than the value of the Merger Consideration to be
paid pursuant to the Merger.                                                    

    The cost of the appraisal proceeding may be determined by the Delaware Court
of Chancery and taxed upon the parties as the Court deems equitable in the      
circumstances. Upon application of a Stockholder, the Court may order that all  
or a portion of the expenses incurred by any Stockholder in connection with the 
appraisal proceeding, including, without limitation, reasonable attorneys' fees 
and the fees and expenses of experts, be charged pro rata against the value of  
all shares entitled to appraisal. In the absence of such a determination or     
assessment, each party bears its own expenses.                                  

    A Stockholder who has duly demanded appraisal in compliance with Section 262
will not, after the Effective Time, be entitled to vote for any purpose the     
Shares subject to such demand or to receive                                     

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payment of dividends or other distributions on such Shares, except for dividends
or other distributions payable to Stockholders of record at a date prior to the 
Effective Time.                                                                 

 At any time within 60 days after the Effective Time, any Stockholder will
have the right to withdraw his or her demand for appraisal and to accept the    
Merger Consideration. After this period, a Stockholder may withdraw his or her  
demand for appraisal only with the written consent of the Company. If no        
petition for appraisal is filed with the Delaware Court of Chancery within 120  
days after the Effective Time, Stockholders' rights to appraisal will cease and 
they will be entitled to receive only the Merger Consideration. Inasmuch as the 
Company has no obligation to file such a petition, any Stockholder who desires  
such a petition to be filed is advised to file it on a timely basis. However, no
petition timely filed in the Delaware Court of Chancery demanding appraisal will
be dismissed as to any Stockholder without the approval of the Delaware Court of
Chancery, and such approval may be conditioned upon such terms as the Delaware  
Court of Chancery deems just.                                                   

FAILURE TO TAKE ANY REQUIRED STEP IN CONNECTION WITH THE EXERCISE OF    
APPRAISAL RIGHTS MAY RESULT IN THE TERMINATION OR WAIVER OF SUCH RIGHTS.        

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CERTAIN INFORMATION REGARDING THE COMPANY 

BUSINESS OF THE COMPANY                                                         

  MOTION PICTURE PRODUCTION AND FINANCING.  As indicated under "PROPOSAL NO.
1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY," the Company has     
produced twelve motion pictures to date. Of such films, EVITA, based on the     
music of Andrew Lloyd Weber, starring Madonna and Antonio Banderas and directed 
by Alan Parker, was released in 1996 (Christmas Day), and THE SHADOW CONSPIRACY,
directed by George Cosmatos, was released in 1997 (January 31). In addition,    
AMANDA was completed by the Company in 1996 and delivered to Family Channel     
Pictures, Inc. ("FCP") in July 1996 for domestic distribution and to Summit     
(which has been assisting the Company in the international distribution of the  
film) in connection with the film's international distribution. FCP has not yet 
obtained domestic theatrical distribution of the film. See "Distribution of     
Motion Pictures--Other Production and Distribution Arrangements." The Company is
currently in post-production on AN ALAN SMITHEE FILM, a satirical look at the   
making of big budget action/adventure Hollywood films, and anticipates that     
delivery of AN ALAN SMITHEE FILM will be made to Disney for domestic            
distribution prior to consummation of the Film Library Sale. In February 1997,  
the Company also commenced principal photography on the film BROADWAY BRAWLER,  
starring Bruce Willis, however, due to circumstances beyond the Company's       
control, production by the Company on such film ceased permanently approximately
three weeks after commencement of principal photography. See "PROPOSAL NO. 1:   
SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--Certain Additional      
Information Regarding Transactions with Disney." The Company does not presently 
intend to commence production on any additional motion pictures. See "PROPOSAL  
NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY-- Background and  
Reasons for the Library Sale Agreement" and "--Recommendation of the Board."    

The Company does not own or operate sound stages and related production 
facilities generally referred to as a "studio" and instead has generally        
utilized, as needed in the production of its motion pictures, creative and      
technical personnel (such as screenwriters, directors and performers),          
production and editing facilities and laboratories available in the market. The 
Company acquired certain visual effects equipment to complete the visual effects
for JUDGE DREDD and also used such equipment for visual effects for DIE HARD    
WITH A VENGEANCE. The Company's Visual Effects Facility is located in Lenox,    
Massachusetts. See "Properties" below. The Company is shutting down the         
operations of the Visual Effects Facility and is in discussions regarding the   
transfer of certain assets and liabilities associated therewith to a third      
party.                                                                          

The Company has generally financed the production costs of its motion   
pictures through loans obtained under its credit facility with Chase and a      
syndicate of lenders, advances and loans from Disney pursuant to the Domestic   
Distribution Agreement, and direct investments by the Company, as necessary. See
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations." In connection with such financing, the Company would assign the    
right to receive minimum guarantees for such motion picture to its lenders as   
collateral to secure loans used to finance a portion of the production costs of 
the motion picture. This manner of financing (referred to herein as             
"pre-licensing") guaranteed a minimum return from distribution in each such     
territory which is the subject of a license agreement prior to completion of a  
picture, while still generally allowing the Company to retain the right to share
in overages.                                                                    

 DISTRIBUTION OF MOTION PICTURES.  The Company has not engaged in domestic
theatrical distribution of its motion pictures due to the substantial costs     
involved. Instead, in July 1990, the Company entered into the Domestic          
Distribution Agreement. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE   
ASSETS OF THE COMPANY--Parties to the Asset Sale" for additional information    
regarding the Domestic Distribution Agreement. Upon consummation of the Film    
Library Sale, the Domestic Distribution Agreement will be terminated.           

OTHER PRODUCTION AND DISTRIBUTION ARRANGEMENTS.  As indicated under     
"PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE                 
COMPANY--Background and Reasons for the                                         

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Assignment Agreement," the Company and Twentieth Century Fox jointly own DIE    
HARD WITH A VENGEANCE. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE    
ASSETS OF THE COMPANY--Background and Reasons for the Assignment Agreement" for 
additional information regarding the distribution arrangements with respect to  
DIE HARD WITH A VENGEANCE. As AMANDA did not meet the criteria under the        
Domestic Distribution Agreement to be a "qualified" motion picture, in 1995 the 
Company entered into a production and distribution agreement with FCP granting  
FCP all distribution rights in the U.S. and Canada to the film AMANDA in        
exchange for payment of approximately one-half of the negative cost of the      
picture, while the Company retained the distribution rights for the rest of the 
world. The Company used Summit to assist in the international distribution of   
the film. The Company financed AMANDA by borrowings under its credit facility   
and assigned to the lenders thereunder, FCP's payment due on delivery of the    
motion picture and minimum guarantees from international distributors. In 1996, 
AMANDA was delivered to FCP for domestic distribution and to Summit in          
connection with the film's international distribution. FCP has not yet obtained 
domestic theatrical distribution of AMANDA, which, if not obtained, could       
adversely affect certain foreign revenues ultimately realized by the Company    
from the exploitation of the international distribution rights to AMANDA in the 
event the Film Library Sale is not consummated. In addition to the foregoing,   
the Company and Disney have an arrangement with respect to the motion picture   
tentatively entitled DEEP RISING. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL
OF THE ASSETS OF THE COMPANY--The Library Sale Agreement--Treatment of Certain  
Other Projects and Arrangements."                                               

INTERNATIONAL DISTRIBUTION.  The Company has arranged for international 
distribution of its motion pictures (in territories other than Canada and Latin 
America) by licensing them to various local distributors in those territories   
either on a picture-by-picture basis or pursuant to selected output agreements. 
Under the Domestic Distribution Agreement, Disney receives the exclusive        
distribution rights in all media in the territories of Canada and Latin America 
for all qualified motion pictures. In the past, the Company has generally       
arranged for international distribution of motion pictures on a                 
territory-by-territory basis by entering into licensing agreements with         
distributors (including, in some circumstances, affiliates of Disney) in        
territories such as England, France, Germany, Japan, Italy, Australia and       
others. The Company has either entered into such agreements directly or has     
utilized the services of Summit. Under such license agreements, the Company     
typically receives a minimum guarantee prior to the release of the picture in a 
particular territory, which is then recouped by the distributor out of the      
revenues generated by the picture in such territory. The distributor typically  
receives certain fees for its distribution of the picture and recoups its costs 
of distribution and minimum guarantee before remitting the remaining revenues   
received by it to the Company. The Company must rely on the distributor's       
ability to successfully exploit the film in order to receive any proceeds in    
excess of any applicable minimum guarantee. Often the Company has obtained      
letters of credit from acceptable banks guaranteeing payment of the minimum     
guarantees under the license agreements.                                        

   The Company has entered into output agreements with distributors in certain
major territories whereby the distributor agrees for a period of years or for a 
specified number of pictures to advance or guarantee, in many cases backed by   
letters of credit, a portion of the final budget of each motion picture produced
by the Company and available for release during the term of the relevant        
agreement in exchange for the right to distribute in a particular territory all 
such motion pictures. These output agreements include an output agreement in    
Australia, New Zealand and Greece with Village Roadshow Netherlands B.V., in    
Scandinavia with AB Svensk Filmindustri, in Italy with Medusa Film S.p.A., in   
the United Kingdom with Entertainment Film Distributors Ltd. and in South Korea 
with SKC America, Inc.                                                          

  Upon consummation of the Film Library Sale, Disney will acquire all of the
rights and benefits arising under the Company's existing exploitation agreements
with respect to the films and rights therein being sold to Disney and will      
assume scheduled liabilities under such existing exploitation agreements. With  
respect to the Company's output agreements, Disney will not acquire the right   
(or have any obligation) to                                                     

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have any additional motion pictures of Disney or its affiliates be distributed  
by such distributors party to the Company's output agreements.                  

 EMPLOYEES.  The Company, like other independent production companies, has
not maintained a substantial staff of creative or technical personnel. As the   
Company does not presently intend to commence production on any additional      
motion pictures, management of the Company has been implementing reductions in  
personnel to achieve staff size commensurate with the Company's current level of
activity. At September 1, 1997, the Company employed a total of 15 full time    
employees, a reduction of 15 employees since the beginning of 1997. The Company 
and certain of its subsidiaries are subject to the terms in effect from time to 
time of various industry-wide collective bargaining agreements, including the   
Writers Guild of America, the Directors Guild of America, the Screen Actors     
Guild and the International Alliance of Theatrical Stage Employees.             

PROPERTIES.  The Company leases the building housing its corporate      
headquarters in Santa Monica, California from Andrew G. Vajna under a lease     
which expired in May 1996. Subsequent thereto, the Company has been leasing its 
corporate headquarters on the same general terms but on a month-to-month basis. 
The Company has agreed to substantially reduce the amount of space it leases in 
its corporate headquarters beginning September 1, 1997. See "SPECIAL FACTORS    
RELATING TO THE MERGER--Certain Transactions With Vajna and Certain Related     
Stockholders." The subsidiary of the Company which has operated the Visual      
Effects Facility leases space from an unaffiliated party in Lenox, Massachusetts
under a lease which expired in August 1996. Subsequent thereto, such subsidiary 
has been leasing the facility on the same general terms but on a month-to-month 
basis.                                                                          

 RECENT SETTLEMENT OF CERTAIN LITIGATION.  On August 25, 1997, the Company
settled legal proceedings brought by Laurence Fishburne and The LOA Productions,
Inc., Mr. Fishburne's loan-out corporation ("LOA"), against the Company, a      
subsidiary of the Company and Randolph M. Paul, Senior Vice President, Business 
Affairs and a Director of the Company (the "Fishburne Litigation"). The action, 
for breach of oral contract, fraud and deceit, and civil conspiracy, was        
originally filed on July 11, 1994. The plaintiffs had claimed that the Company  
entered into an oral contract for Mr. Fishburne to appear in the motion picture,
DIE HARD WITH A VENGEANCE, but repudiated the contract the following day.       
Plaintiffs claimed damages of $1,750,000, representing the fixed compensation to
which they allege they were entitled, additional compensatory damages of up to  
$350,000 and general and punitive damages. Trial had been scheduled for August  
25, 1997 in Los Angeles Superior Court.                                         

  Pursuant to the terms of the settlement, the Company paid LOA $750,000 and
entered into certain agreements with the plaintiffs and an entity controlled by 
Mr. Fishburne which provide the Company with a non-exclusive option (the        
"Option") to acquire certain rights ("Rights") to a play and related screenplay 
both written by Mr. Fishburne. The Company has also agreed to establish a letter
of credit in the amount of $600,000, the amount which must be paid to the entity
controlled by Mr. Fishburne if the Company does not exercise the Option, if the 
Company does not meet certain other time deadlines, or if the Company fails to  
match any bona fide third party offers for the Rights. If, during the term of   
the Option, the Company takes certain actions which will result in the Option   
becoming exclusive, exercises the Option, or successfully matches any bona fide 
third party offers for the Rights, then the Company will also incur additional  
obligations such as those with respect to the financing and development of the  
Rights.                                                                         

MARKET PRICES AND DIVIDENDS ON COMPANY COMMON STOCK                             

    MARKET PRICE.  Since the Company's initial public offering in June 1994, the
Shares have been traded on the National Association of Securities Dealers       
Automated Quotation National Market System ("NASDAQ/NMS"). The following table  
sets forth the high and low reported bid prices for Shares on the               

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NASDAQ/NMS in each of the periods indicated. The prices represent quotations    
between dealers without adjustment for mark-up, mark-down or commission, and may
not necessarily represent actual transactions.                                  

                                                                [Download Table]

                                   HIGH       LOW    
                                  -------   -------  
                                                     
Fiscal 1995                                          
  First Quarter.................  $11 3/8   $ 5 7/8  
  Second Quarter................   11 1/4     5 7/8  
  Third Quarter.................    6 5/8     3 3/8  
  Fourth Quarter................    6         2 17/32

Fiscal 1996                                          
  First Quarter.................  $ 2 11/16 $ 1 1/16 
  Second Quarter................    3 5/16    1 1/16 
  Third Quarter.................    2 3/8     1 9/16 
  Fourth Quarter................    2 3/16    1 7/16 

Fiscal 1997                                          
  First Quarter.................  $ 2 1/16  $ 1 1/16 
  Second Quarter................    1 1/2       3/8  
  Third Quarter (through                             
    September 12, 1997).........    2 1/8     1 1/8  

On April 3, 1997, the last full trading day prior to the first public   
announcement by the Company of the execution of the Library Sale Agreement, the 
closing bid price for the Shares on the NASDAQ/NMS was $1 5/16. On July 15,     
1997, the last full trading day prior to the first public announcement by the   
Company of the execution of the Assignment Agreement, the closing bid price for 
the Shares on the NASDAQ/NMS was $1 7/32.                                       

On June 23, 1997, the last full trading day prior to the first public   
announcement by the Company that it had commenced negotiations with Vajna       
regarding the Merger, the closing bid price for the Shares on the NASDAQ/NMS was
$ 3/4. On September 3, 1997, the last full trading day prior to the first public
announcement by the Company of the terms of the Merger, the closing bid price   
for the Shares on the NASDAQ/NMS was $1 13/16.                                  

 HOLDERS.  As of September 1, 1997, there were approximately 98 holders of
record of the Company's Common Stock, and there were 13,446,874 Shares issued   
and outstanding of the 20,000,000 shares authorized.                            

   DIVIDENDS.  Since the Company's incorporation in November 1989, the Company
has not paid cash dividends in respect of Shares. The Company has no present    
intention to pay any cash dividends in respect of Shares.                       

PRINCIPAL STOCKHOLDERS OF THE COMPANY                                           

   The following table sets forth certain information regarding the beneficial
ownership of Shares as of September 1, 1997 by (i) each person known to the     
Company to be the beneficial owner of more than 5% of the outstanding Shares,   
(ii) each director of the Company, (iii) each executive officer of the Company, 
and (iv) all executive officers and directors of the Company as a group. Unless 
otherwise indicated in the footnotes following the table, the persons as to whom
the information is given had sole voting and                                    

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investment power over the Shares shown as beneficially owned by them, subject to
community property laws where applicable.                                       

                                                        [Enlarge/Download Table]

                                                       NUMBER OF SHARES                            
                                                       OF COMMON STOCK         PERCENT OF COMMON   
                                                         BENEFICIALLY         STOCK BENEFICIALLY   
NAME                                                     OWNED (1)(2)            OWNED (1)(2)      
-----------------------------------------------------  ----------------      --------------------- 
                                                                                                   
Andrew G. Vajna......................................       5,863,872  (3)(4)                 43.6%
Valdina Corporation N.V..............................         957,446  (5)                    7.1% 
Warren Braverman.....................................         373,591  (6)                    2.8% 
Dianne Caplan Lebovits...............................           7,500  (7)                    *    
Fred R. Feitshans....................................               0  (12)                   *    
Randolph M. Paul.....................................           8,667  (8)                    *    
R. Timothy O'Donnell.................................          76,250  (9)                    *    
Gregory R. Paul......................................          15,000  (8)                    *    
The Walt Disney Company..............................         705,556  (10)                   5.2% 
All executive officers & directors as a group (seven                                               
  persons)...........................................       5,972,539  (11)                  44.4% 

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

* Less than 1%                                                              

(1) The number of shares and percentages in this table and accompanying       
    footnotes are based on 13,446,874 Shares of Common Stock outstanding as of
September 1, 1997.                                                    

(2) The Shares underlying immediately exercisable options, warrants or rights,
or immediately convertible securities, or Shares underlying options,  
warrants, rights or convertible securities that become exercisable or 
convertible within 60 days of September 1, 1997, are deemed to be     
outstanding for the purpose of calculating the number and percentage  
beneficially owned by the holder of such options, warrants, rights or 
convertible securities, but are not deemed to be outstanding for the  
     purpose of computing the percentage beneficially owned by any other person.

(3) Includes the right to vote 372,341 Shares pursuant to an irrevocable proxy
   granted to Vajna by Mr. Braverman (which continues during Mr. Braverman's
ownership of the Shares for the maximum period permitted by applicable
     law). See footnote 6 below. Does not include shares of Common Stock held by
 Valdina which, prior to effectiveness of the Redemption described under
     "SPECIAL FACTORS RELATING TO THE MERGER--Certain Transactions Involving the
   Company's Common Stock," is indirectly owned 49.9% by Mr. Vajna and 50.1%
   by The Mong Family Trust, which benefits certain descendants of Mong Hing
Yan, including the son of Mr. Vajna. See footnote 5 below. Upon       
    effectiveness of the Redemption, Mr. Vajna will beneficially own 6,821,318
  (50.7%) of the Company's outstanding shares (including for such purposes
   the shares owned by Valdina, which will then be indirectly owned 99.8% by
Mr. Vajna and .02% by The Mong Family Trust).                         

(4) The business address of Vajna is in care of the Company, 2308 Broadway,   
Santa Monica, California 90404.                                       

(5) Valdina is currently indirectly beneficially owned 49.9% by Mr. Vajna and 
    50.1% by The Mong Family Trust, which benefits certain descendants of Mong
  Hing Yan, including the son of Mr. Vajna, and the trustee of which is BT
   Trustees (Jersey) Ltd. Upon effectiveness of the Redemption, Valdina will
  be indirectly beneficially owned 99.8% by Mr. Vajna and .02% by The Mong
     Family Trust. The address of Valdina is Polarisweg 35, Suite 6, Willemstad,
    Curacao, Netherlands Antilles, and the address of The Mong Family Trust is
     c/o BT Trustees (Jersey) Ltd., Chelsea Street, St. Helier, Jersey, JE4 8YZ,
Channel Islands.                                                      

(6) Of the Shares indicated, 372,341 Shares are subject in the event of       
    transfer to a right of first refusal in favor of Vajna at the then current
 market price. Such right of first refusal will not apply to the Merger.

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In addition, Mr. Braverman has granted the right to vote such 372,341 
  Shares to Vajna pursuant to an irrevocable proxy (which continues during
     Mr. Braverman's ownership of the shares for the maximum period permitted by
applicable law).                                                      

(7) Includes 5,000 Shares subject to immediately exercisable options granted  
     under the Company's 1994 Special Stock Option and Stock Appreciation Rights
Plan.                                                                 

(8) Represents Shares subject to immediately exercisable options.             

(9) Includes 50,000 Shares issuable pursuant to a warrant held by Jefferson   
   Capital, of which Mr. O'Donnell is President and a principal Stockholder.
Also includes 15,000 Shares subject to immediately exercisable options
  granted under Company's 1994 Special Stock Option and Stock Appreciation
Rights Plan.                                                          

(10) Includes 150,000 Shares issuable pursuant to the Disney Warrant. See       
"PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE       
     COMPANY--Parties to the Asset Sale." The address of The Walt Disney Company
is 500 South Buena Vista Street, Burbank, California 91521.           

(11) Includes 50,000 Shares issuable pursuant to a warrant held by Jefferson    
     Capital (see footnote 9 above) and an aggregate of 39,917 Shares underlying
    options granted to Mr. Randolph M. Paul, Ms. Lebovits, Mr. Gregory R. Paul
  and Mr. O'Donnell (see footnotes 7, 8 and 9 above). Does not include any
    Shares owned by Valdina. If the Shares owned by Valdina were included, the
     number of Shares beneficially owned by all executive officers and directors
as a group would be equal to 6,929,985 or 51.1%.                      

(12) Mr. Feitshans resigned as President of Production in July 1997. The        
information regarding his ownership of Shares is as of the date of his
resignation.                                                          

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY                                 

   The following information regarding the business experience during the past
five years of the directors and executive officers of the Company (all of whom  
are U.S. citizens) has been provided to the Company by such individuals. Unless 
otherwise indicated, each person has a business address of 2308 Broadway, Santa 
Monica, California 90404.                                                       

ANDREW G. VAJNA founded the Company in November 1989 and has served as  
Chairman of the Board of Directors, President and Chief Executive Officer of the
Company since such date. He is the producer of MEDICINE MAN, THE SCARLET LETTER,
NIXON, AN ALAN SMITHEE FILM and EVITA, and he is executive producer of          
TOMBSTONE, RENAISSANCE MAN, COLOR OF NIGHT, JUDGE DREDD, THE SHADOW CONSPIRACY  
and DIE HARD WITH A VENGEANCE. Mr. Vajna co-founded the motion picture company  
Carolco Pictures Inc. ("Carolco") in 1986 (and Carolco's predecessor in 1975)   
and served as Co-Chairman of its Board of Directors until November 1989 when he 
sold virtually all of his interest at that time in Carolco. During such period, 
Mr. Vajna was co-executive producer of many well known films, including FIRST   
BLOOD, RAMBO: FIRST BLOOD PART II and TOTAL RECALL. In 1982, Mr. Vajna was a    
founder and subsequently served as President of the American Film Marketing     
Association.                                                                    

 WARREN BRAVERMAN joined the Company in March 1990 and has served as Chief
Operating Officer, Chief Financial Officer, Executive Vice President and a      
Director of the Company since such date. From 1985 through February 1990, Mr.   
Braverman was the Chief Financial Officer and Executive Vice President of       
Carolco, and he served as a director of Carolco from 1986 through February 1990.

    RANDOLPH M. PAUL has served as Senior Vice President, Business Affairs since
January 1994 and a Director of the Company since March 1994. Mr. Paul began     
providing business affairs services to the Company in April 1993 (when he joined
the Company). From 1991 through 1992, Mr. Paul was Senior Vice President of     
Business Affairs for Sovereign Pictures, Inc., a production company and         
distributor of motion                                                           

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pictures in international markets. From January 1, 1993 through March 31, 1993, 
Mr. Paul provided business affairs services to the Company as an independent    
contractor. From 1986 through 1990, he served as Senior Vice President of       
Business Affairs at Miramax Film Corp., a production and domestic distribution  
company.                                                                        

   DIANNE CAPLAN LEBOVITS joined the Company in March 1990 and has served as a
Director of the Company since such date. Ms. Lebovits also served as General    
Counsel, Executive Vice President and Corporate Secretary of the Company from   
March 1990 until her resignation from such positions in August 1996. After her  
resignation from the Company, Ms. Lebovits returned to, and is currently in,    
private legal practice. From 1984 through 1988, Ms. Lebovits was a principal in,
and from 1989 until joining the Company "of counsel" to, the law firm of Gipson 
Hoffman & Pancione, P.C. in Los Angeles, California.                            

  R. TIMOTHY O'DONNELL became a Director of the Company in March 1994. He is
currently President of Jefferson Capital, a privately-held investment banking   
group which he co-founded in August 1989. Mr. O'Donnell serves on the board of  
directors of Shorewood Packaging Corporation (a specialty packaging company),   
and All American Communications Inc. (a diversified entertainment company). The 
address of Jefferson Capital is One James Center, Suite 1400, 901 East Cary     
Street, Richmond, Virginia 23219.                                               

   GREGORY R. PAUL became a Director of the Company in March 1994. Mr. Paul is
a Managing Director of BT Securities Corporation, an affiliate of Bankers Trust 
Company. Mr. Paul joined Bankers Trust Company in 1981. Since 1985, Mr. Paul has
specialized in the financing of media and entertainment companies. The address  
of BT Securities Corporation is One Bankers Trust Plaza, 130 Liberty Street,    
30th Floor, New York, New York 10006.                                           

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EXECUTIVE COMPENSATION                                                          

The following "Summary Compensation Table" sets forth individual        
compensation information with respect to Vajna, the Company's Chief Executive   
Officer, and four other executive officers of the Company during the fiscal year
ended December 31, 1996 whose total salary and bonus compensation during fiscal 
1996 was in excess of $100,000, including three individuals who were serving as 
executive officers at the end of fiscal 1996 (Messrs. Braverman, Feitshans and  
Randolph M. Paul) and Ms. Lebovits, who resigned as an executive officer and    
employee of the Company in August 1996. Mr. Feitshans resigned as an executive  
officer and employee of the Company in July 1997. Such five executives are      
referred to herein as the "Named Executives." The Summary Compensation Table    
includes compensation information with respect to the Named Executives for      
services rendered as executive officers to the Company and its subsidiaries     
during the fiscal years ended December 31, 1994, 1995 and 1996.                 

  Following the Summary Compensation Table are certain additional charts and
tables detailing other aspects of the compensation of the Named Executives      
including (i) an Option/SAR Grants Table that includes information regarding    
individual grants of options made to the Named Executives during fiscal 1996    
along with the grant date present value of such options, (ii) a table that      
indicates whether any of the Named Executives exercised options in fiscal 1996  
and includes the number and value of unexercised options held by the Named      
Executives at December 31, 1996, and (iii) a Long-Term Incentive Plans ("LTIP") 
Table that includes information on LTIPs awarded to the Named Executives.       

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                                                  LONG TERM COMPENSATION                       
                                                                          ---------------------------------------              
                                                                                   AWARDS                                      
                                           ANNUAL COMPENSATION            -------------------------                            
                                 ---------------------------------------                 SECURITIES     PAYOUTS                
                                                            OTHER ANNUAL   RESTRICTED    UNDERLYING   -----------  ALL OTHER   
NAME AND                                                    COMPENSATION     STOCK        OPTIONS/       LTIP      COMPENSATION
PRINCIPAL POSITION         YEAR  SALARY($)     BONUS($)         ($)        AWARDS($)      SARS(#)     PAYOUTS($)      ($)      
-------------------------  ----  ----------  ------------   ------------  ------------   ----------   -----------  ----------  
                                                                                                                               
ANDREW G. VAJNA            1996  $1,000,000  $250,000(1)    $224,421(2)     -0-           -0-         $293,147(4)  $33,350(5)  
CHAIRMAN OF THE BOARD,     1995   1,000,000   250,000(1)      86,000(3)     -0-           -0-           32,278(4)   33,350(5)  
  PRESIDENT AND CHIEF      1994   1,000,000   250,000(1)      67,963(3)     -0-           -0-           -0-         16,700(5)  
  EXECUTIVE OFFICER                                                                                                            

WARREN BRAVERMAN           1996  $  531,000  $150,000               (12)    -0-           -0-           -0-        $ 5,760(9)  
CHIEF OPERATING OFFICER,   1995     508,000   150,000        130,000(8)     -0-           -0-           -0-          4,260(9)  
  CHIEF FINANCIAL OFFICER  1994     465,000    96,000(10)    300,000(8)   $450,000(11)    -0-           -0-          4,260(9)  
  AND EXECUTIVE VICE                                                                                                           
  PRESIDENT                                                                                                                    

DIANNE CAPLAN LEBOVITS     1996  $  250,000  $ 50,000               (12)    -0-           5,000         -0-        $ 2,656(9)  
EXECUTIVE VICE PRESIDENT,  1995     387,000   100,000        130,000(8)     -0-           -0-           -0-          4,260(9)  
  GENERAL COUNSEL AND      1994     350,000   100,000(13)    300,000(8)   $450,000(11)    -0-           -0-          4,260(9)  
  CORPORATE SECRETARY                                                                                                          
  (THROUGH AUGUST 1996)                                                                                                        

FRED R. FEITSHANS          1996  $  500,000    -0-                  (12)    -0-          10,000         -0-          -0-       
PRESIDENT OF PRODUCTION    1995     500,000    -0-                  (12)    -0-          50,000         -0-          -0-       
  (THROUGH JULY 1997)      1994     500,000    -0-                  (12)    -0-          10,000(14)     -0-          -0-       

RANDOLPH M. PAUL           1996  $  215,089  $ 12,000               (12)    -0-           5,000         -0-          -0-       
SENIOR VICE PRESIDENT,     1995     177,000    10,000               (12)    -0-          10,000         -0-          -0-       
  BUSINESS AFFAIRS         1994     168,759    12,500               (12)    -0-           4,000(15)     -0-          -0-       

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

(1) Represents commencement fees paid pursuant to Vajna's employment agreement
 (described under "Employment Agreements" below) in the amount of $125,000
    for each of THE SHADOW CONSPIRACY and EVITA in 1996, for each of THE SCARLET
   LETTERand NIXON in 1995 and for each of DIE HARD WITH A VENGEANCE and JUDGE
 DREDD in 1994. Although principal photography commenced on a third motion

                                      (FOOTNOTES CONTINUE ON THE FOLLOWING PAGE)

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 picture during 1995 (THE SHADOW CONSPIRACY), Vajna's employment agreement
   limits his commencement fees to $250,000 per year. The employment agreement
 permits the carryover of such fees to future years during the term of the
agreement, subject to the $250,000 yearly maximum. Vajna has agreed to  
 forego his commencement fee for AMANDA. Vajna received a commencement fee
for AN ALAN SMITHEE FILM in 1997.                                       

(2) Includes the cost of past financial planning, legal and related services  
    provided by the Company to Vajna in the amount of $162,000 and for which the
Company's Audit Committee determined reimbursement by Vajna will not be 
required.                                                               

(3) Includes legal fees in the amount of $50,000 incurred by Vajna and paid by
    the Company pursuant to Vajna's employment agreement. Also includes in 1995,
  Company paid health insurance and medical reimbursements for Vajna and his
family in the amount of $23,000.                                        

(4) Represents Producer's performance fees paid in connection with TOMBSTONE. 
    See the "Long-Term Incentive Plans--Awards in Last Fiscal Year" table below.

(5) Represents Company paid term life insurance for which designees of Vajna  
are the beneficiaries.                                                  

(8) Represents the amount paid by the Company on behalf of the Named Executive
   to assist the Named Executive in discharging federal and state income taxes
in connection with the stock purchase disclosed in the "Restricted Stock
   Awards" column and described in footnote 11 below. Perquisites with respect
   to such Named Executive did not exceed the lesser of $50,000 or 10% of such
executive officer's salary and bonus.                                   

(9) Represents imputed interest for the fiscal year (at the applicable federal
rate) on an outstanding $50,000 non-interest bearing loan to the Named  
Executive and on an $18,000 non-interest bearing advance.               

(10) Represents a bonus equal to 3% of the Company's earnings before interest   
and taxes (but exclusive of investment income) earned pursuant to Mr.   
Braverman's employment agreement.                                       

(11) Represents the difference between the price paid by the Named Executive for
  372,341 restricted Shares purchased from the Company in 1994 and the value
    of such Shares on the date of purchase, which was prior to the establishment
    of a public trading market for the Shares. All of Mr. Braverman's shares are
vested. Ms. Lebovits' Shares have been repurchased by the Company. See  
   "SPECIAL FACTORS RELATING TO THE MERGER--Certain Transactions Involving the
Company's Common Stock."                                                

(12) Perquisites with respect to such Named Executive did not exceed the lesser 
of $50,000 or 10% of such executive officer's salary and bonus.         

(13) Paid pursuant to Ms. Lebovits' employment contract which expired on March  
12, 1995.                                                               

(14) Represents an option for 5,000 Shares granted in 1994 and an option for an 
identical number of underlying Shares granted upon cancellation of such 
  prior grant as part of a stock option cancellation and reissuance program.

(15) Represents an option for 2,000 Shares granted in 1994 and an option for an 
identical number of underlying Shares granted upon cancellation of such 
  prior grant as part of a stock option cancellation and reissuance program.

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OPTION/SAR GRANTS IN FISCAL 1996

                                                        [Enlarge/Download Table]

                                                          INDIVIDUAL GRANTS                                  
                                     -----------------------------------------------------------  GRANT DATE 
                                       NUMBER OF       % OF TOTAL                                    VALUE   
                                       SECURITIES     OPTIONS/SARS                                -----------
                                       UNDERLYING      GRANTED TO      EXERCISE OR                GRANT DATE 
                                      OPTIONS/SARS    EMPLOYEES IN     BASE PRICE    EXPIRATION     PRESENT  
                    NAME             GRANTED (#)(1)    FISCAL YEAR       ($/SH)         DATE      VALUE(2)($)
         --------------------------  --------------  ---------------  -------------  -----------  -----------
                                                                                                             
Andrew G. Vajna                            0               --              --            --           --     

Warren Braverman                           0               --              --            --           --     

Dianne Caplan Lebovits                    5,000(3)         (4)         $    2.00(6)     12/1/06    $   8,800 

Fred R. Feitshans                        10,000(5)             20%     $    2.00(6)     9/18/06    $  17,600 

Randolph M. Paul                          5,000(5)             10%     $    2.00(6)     9/18/06    $   8,800 

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

(1) Although the Company's stock option plans provide for the granting of stock 
  appreciation rights, no grant of such rights has been made by the Company.

(2) These values were established using the modified Black-Scholes stock option 
    valuation model which modifies the Black-Scholes model to include the impact
   of the right to exercise options prior to their maturity. The actual value,
  if any, an executive may realize upon exercise of such options will depend
  upon the excess of the stock price over the exercise price on the date the
option is exercised. Therefore, there can be no assurance that the value
realized by an executive will be at or near the value estimated by this 
Black-Scholes model. The estimated values under the model are based on  
   arbitrary assumptions as to variables and as to interest rates, stock price
 volatility and future dividend yield. The above model assumes a period of
three years after grant until exercise, a volatility of the stock price 
  equal to that experienced in 1996 (standard deviation 0.9425), an interest
   rate of 6.48% (rate as of the grant date of U.S. Treasury Notes with a term
of three years) and a dividend yield of 0%.                             

(3) Options for these shares vested immediately on the date of grant (December  
2, 1996).                                                               

(4) These options were granted after Ms. Lebovits resigned as Executive Vice    
President, General Counsel and Corporate Secretary of the Company and   
represent an automatic grant of options pursuant to the Company's 1994  
    Special Stock Option and Stock Appreciation Rights Plan to Ms. Lebovits as a
non-employee member of the Board. See "Board Fees" below.               

(5) Options for one-third of these shares were to vest one year after the date  
 of grant (September 18, 1996), options for another one-third were to vest
  two years after the date of grant and options for the final one-third were
to vest three years after the date of grant. All such options terminated
upon the date of Mr. Feitshan's resignation in July 1997.               

(6) Market price of the Shares on the date of grant (September 18, 1996 in the  
  case of Messrs. Feitshans and Paul and December 2, 1996 in the case of Ms.
Lebovits).                                                              

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AGGREGATED OPTION/SAR EXERCISES IN LAST 
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES(1)

                                                        [Enlarge/Download Table]

                                                                                 NUMBER OF SECURITIES                        
                                                                                      UNDERLYING         VALUE OF NEXERCISED 
                                                                                      UNEXERCISED           IN-THE-MONEY     
                                                                                    OPTIONS/SARS AT        OPTIONS/SARS AT   
                                                                                   DECEMBER 31, 1996      DECEMBER 31, 1996  
                                                                                 ---------------------  ---------------------
                                      SHARES ACQUIRED ON       VALUE REALIZED        EXERCISABLE/           EXERCISABLE/     
              NAME                       EXERCISE (#)                ($)           UNEXERCISABLE (#)      UNEXERCISABLE ($)  
---------------------------------  -------------------------  -----------------  ---------------------  ---------------------
                                                                                                                             
Andrew G. Vajna                                0                  $   0                  0(2)                 $   0          

Warren Braverman                               0                      0                  0(2)                  0             

Dianne Caplan Lebovits                      0                       0                  5,000/0                0/0            

Fred R. Feitshans                           0                       0               30,001/34,999             0/0            

Randolph M. Paul                            0                       0               7,000/10,000              0/0            

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

(1) Although the Company's stock option plans provide for the granting of stock 
  appreciation rights, no grant of such rights has been made by the Company.

(2) The Named Executive did not hold any options at December 31, 1996.          

LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR 

                                                        [Enlarge/Download Table]

                                                                                             ESTIMATED FUTURE PAYOUTS          
                                        NUMBER OF SHARES,       PERFORMANCE OR           UNDER NON-STOCK PRICE-BASED PLANS     
                                         UNITS OR OTHER       OTHER PERIOD UNTIL    -------------------------------------------
                                             RIGHTS              MATURATION OR        THRESHOLD       TARGET         MAXIMUM   
                NAME                           (#)                  PAYOUT            ($ OR #)       ($ OR #)       ($ OR #)   
------------------------------------  ---------------------  ---------------------  -------------  -------------  -------------
                                                                                                                               
Andrew G. Vajna                                    (1)                    (1)                (3)            (2)            (3) 

Warren Braverman                                    0                 --                 --             --             --      

Dianne Caplan Lebovits                              0                 --                 --             --             --      

Fred R. Feitshans                                   0                 --                 --             --             --      

Randolph M. Paul                                    0                 --                 --             --             --      

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

(1) Pursuant to his employment agreement, Vajna is entitled to receive          
producer's performance fees with respect to each of the Company's motion
    pictures for which principal photography has commenced after January 1, 1993
   but before December 31, 1998, in an amount equal to three percent of "Gross
Receipts" commencing at "Actual Break-Even" (as defined in Vajna's      
   employment agreement and described below under "Employment Agreements") and
  payable solely out of the Company's receipts from the exploitation of such
motion picture in excess of Actual Break-Even.                          

(2) As of December 31, 1996, Vajna had earned producer's performance fees only  
   on TOMBSTONE ($32,278 and $293,147 in such fees were paid in 1995 and 1996,
   respectively). See "Summary Compensation Table" above. As of June 30, 1997,
 Vajna had also earned $344,666 in producer's performance fees relating to
DIE HARD WITH A VENGEANCE which will be paid at the Effective Time. See 
    "SPECIAL FACTORS RELATING TO THE MERGER--Interests of Certain Persons in the
Merger."                                                                

(3) Not Applicable.                                                             

BOARD FEES.  Pursuant to one of the Company's stock option plans, each  
member of the Compensation Committee of the Board and each other member of the  
Board who is not employed by the Company receives an automatic annual grant on  
December 1 of each year of non-qualified stock options to purchase 5,000 Shares 
at the fair market value of such Shares on the date of grant. In addition, each 
member of the                                                                   

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Board who is not employed by the Company receives $20,000 per year, and the     
Company reimburses all directors for travel expenses incurred in connection with
their activities on behalf of the Company. For serving on the Special Committee,
Mr. Paul will also receive $50,000. Directors of the Company are not otherwise  
compensated for serving on the Board.                                           

   COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.  The Company's
Compensation Committee was established in March 1994 and currently consists of  
Gregory R. Paul and R. Timothy O'Donnell. Harry M. Brittenham, formerly a       
Director of the Company, was appointed to the Compensation Committee in May 1996
but attended no meetings of such committee and took no action as a member of    
such committee prior to his resignation from such committee as of September 1,  
1996.                                                                           

INDEMNIFICATION.  Pursuant to Article Tenth of the Company's Restated   
Certificate of Incorporation, and Article V of the Company's Bylaws, indemnity  
agreements entered into between the Company and certain of its officers and     
directors, and the provisions of Section 145 of the DGCL, the Company has been  
advancing the expenses of certain of its employees, officers and directors other
than Vajna ("Indemnitees") which they may incur in connection with the          
Investigation described in Note 10 of Notes to the Company's Consolidated       
Financial Statements for the year ended December 31, 1996 contained herein. The 
Indemnitees have undertaken to reimburse the Company for their expenses if it is
ultimately determined that they are not entitled to be indemnified. In addition,
Vajna has undertaken to reimburse the Company under certain circumstances with  
respect to the expenses of the Indemnitees. Given the current uncertainty       
regarding the scope and duration of the Investigation and the amount of expenses
which may be incurred by the Indemnitees in connection with the Investigation,  
there is no basis upon which to estimate the financial impact which the         
foregoing may have on the Company. The Company also advanced the expenses of    
certain of its employees, officers and directors in connection with certain     
purported class action lawsuits which were dismissed in January 1997. See "THE  
MERGER AGREEMENT--Agreements of the Company, Buyer, Vajna and Valdina" regarding
the survival of such indemnification rights following the Merger.               

 VAJNA EMPLOYMENT AGREEMENT.  The Vajna Employment Agreement provides that
Vajna shall serve as Chairman of the Board of Directors, Chief Executive        
Officer, and a member of the Executive (or comparable) Committee, for a term    
which commenced as of January 1, 1994 and ends December 31, 1998 (the "Term").  
Although Vajna's production services are exclusive to the Company during the    
Term, the agreement permits Vajna to continue to be actively involved in the    
management of certain corporations in which he has a direct or indirect         
ownership interest and which include Intercom KFT, a distributor of motion      
pictures in Hungary to which the Company licenses Hungarian distribution rights 
in various media for its motion pictures and Blackburn International Casino KFT,
the operator of a casino in Hungary. See "SPECIAL FACTORS RELATING TO THE       
MERGER--Operations Pending the Merger." As compensation for his services, Vajna 
receives fixed compensation of $1,000,000 per year. Vajna is also entitled to   
receive a commencement fee of $125,000 for each motion picture produced by the  
Company for which principal photography commences after January 1, 1994, up to a
maximum of $250,000 per year (but with carryovers of such fees allowed subject  
to the yearly maximum). Vajna is also entitled to receive certain producer's    
performance fees with respect to each of the Company's motion pictures for which
principal photography has commenced after January 1, 1993 but before the end of 
the Term. Vajna's agreement also provides for such additional incentive         
compensation as may be approved by the Board, demand registration rights for    
Shares held by Vajna or his affiliates, and certain fringe benefits, including  
reimbursement of Vajna's personal, legal and accounting expenses in an amount   
not to exceed $50,000 per year.                                                 

 Pursuant to the terms of the agreement, if the agreement is terminated by
Vajna due to a material breach by the Company or by the Company other than for  
"Cause," "Death," or "Disability" (as such terms are defined in the agreement), 
Vajna will receive a payment equal to 200% of the aggregate of all fixed annual 
compensation discounted to its then present value at a discount rate of five    
percent per annum with respect to each future payment, plus any commencement    
fees, producer's performance fees                                               

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and additional incentive compensation due and payable to Vajna as of the date of
termination. Vajna is also entitled to receive any commencement fees and        
producer's performance fees to which he may thereafter become entitled relating 
to motion pictures for which principal photography commenced prior to           
termination. Vajna will also be entitled, under limited circumstances, to       
acquire from the Company all rights to certain projects in development at the   
time of such termination upon reimbursement of all costs incurred by the Company
in connection with the projects, plus interest, and payment to the Company of a 
percentage of the revenues thereafter generated by each such project.           

In connection with the Merger and pursuant to the terms of the Merger   
Agreement, Vajna and the Company have agreed to terminate the Vajna Employment  
Agreement effective as of the Effective Time. See "SPECIAL FACTORS RELATING TO  
THE MERGER--Interests of Certain Persons in the Merger" for a discussion of the 
specific terms of such termination arrangement. See also "THE MERGER            
AGREEMENT--Agreements of the Company, Buyer and Vajna."                         

  BRAVERMAN EMPLOYMENT AGREEMENT.  Mr. Braverman's employment agreement with
the Company (the "Braverman Employment Agreement") provides that Mr. Braverman  
will serve as Chief Operating Officer of the Company from January 1, 1994       
through December 31, 1999. Under the agreement, Mr. Braverman receives an annual
base salary of $556,000 for 1997, $584,000 for 1998 and $613,000 for 1999       
("Fixed Annual Compensation"). Pursuant to the last amendment, Mr. Braverman    
also received a signing bonus of $600,000 of which $300,000 was used to fully   
repay two loans previously made by the Company to Mr. Braverman (a $250,000 loan
bearing interest at 7% per annum, which matured December 31, 1996 and a $50,000 
interest free loan maturing September 30, 1997). Mr. Braverman is also entitled 
to annual incentive compensation in an amount equal to 3% of the Company's      
earnings before interest and taxes (but exclusive of investment income) ("EBIT")
until Mr. Braverman has received $1,000,000 of such incentive compensation, 2%  
of EBIT for the next $1,000,000 of such incentive compensation, and 1% of EBIT  
thereafter ("Incentive Compensation").                                          

 If Mr. Braverman's employment is terminated by the Company for any reason
other than material breach, death or disability or by Mr. Braverman due to a    
material breach by the Company, Mr. Braverman is entitled to receive all (i)    
Fixed Annual Compensation, (ii) Incentive Compensation and (iii) health         
insurance benefits due under the agreement through the term.                    

   In connection with the Merger, the Company and Mr. Braverman have agreed to
the material terms of a severance arrangement which provides for, among other   
things, the termination of the Braverman Employment Agreement effective as of   
the Effective Time. See "SPECIAL FACTORS RELATING TO THE MERGER--Interests of   
Certain Persons in the Merger" for additional information regarding this        
severance arrangement.                                                          

   STOCK OPTION PLANS.  The Company has two stock-based incentive compensation
plans for the Company's employees and certain other persons providing services  
to the Company: the Cinergi Pictures Entertainment Inc. 1994 Basic Stock Option 
and Stock Appreciation Rights Plan (the "Basic Plan") and the Cinergi Pictures  
Entertainment Inc. 1994 Special Stock Option and Stock Appreciation Rights Plan 
(the "Special Plan") (collectively, the "Option Plans"). All of the Company's   
regular full-time employees, and all other persons (including directors and     
consultants) providing services to the Company on a regular or substantial      
basis, are eligible to participate in the Basic Plan. The Special Plan is       
designed to provide alternative procedures in meeting special requirements      
imposed by federal income tax law relating to compensation expense deductions   
for making grants to certain key or highly compensated employees. Accordingly,  
only officers, directors who are also employed by the Company, and non-clerical 
salaried employees of the Company are eligible to participate in the Special    
Plan. As of September 1, 1997, options to purchase an aggregate of 82,250 shares
of Common Stock were outstanding under the Option Plans (of which options to    
purchase an aggregate 28,750 shares of Common Stock are presently vested and    
exercisable at exercise prices below the $2.30 Purchase Price). Upon            
consummation of the Film Library                                                

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Sale and the transactions contemplated by the Assignment Agreement, the Option  
Plans and all unexercised options previously granted under the Option Plans will
terminate.                                                                      

    DEFERRED COMPENSATION PLAN.  Under the Company's Deferred Compensation Plan,
the executive officers of the Company may elect by written notice to the Company
on or before the close of the fiscal year to credit to an account such portion  
of the employee's base annual compensation and/or incentive compensation for the
succeeding year as may be selected by the employee. Amounts credited to this    
account shall be kept in cash or invested in mutual funds, stocks, bonds,       
securities or such other assets as may be selected by the Board or an investment
advisor selected by the Company. The return (if any) or loss from these         
investments will be credited or debited (as the case may be) to such account. To
date, Mr. Braverman is the only executive officer of the Company who has elected
to participate in the Deferred Compensation Plan.                               

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CINERGI PICTURES ENTERTAINMENT INC. 
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997 
(UNAUDITED) 

 The following unaudited Pro Forma Condensed Consolidated Balance Sheet is
based upon the historical balance sheet of the Company at June 30, 1997 giving  
effect to the Asset Sales, the Merger and certain specified additional          
transactions taking place in connection therewith, under the assumptions and    
adjustments set forth below and in the accompanying Notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet. The unaudited Pro Forma Condensed         
Consolidated Balance Sheet gives effect to the Asset Sales, the Merger and such 
additional transactions, as if the Asset Sales, the Merger and such specified   
additional transactions had each occurred on June 30, 1997.                     

  The unaudited Pro Forma Condensed Consolidated Balance Sheet reflects: (1)
the Film Library Sale, (2) the transactions contemplated by the Assignment      
Agreement, (3) certain of the transactions contemplated by the Summit           
Agreements, (4) payment by the Company of the Valdina Note and the payment by   
Vajna and his affiliates of certain amounts owed to the Company, (5) settlement 
of the Fishburne Litigation, (6) payment of the net premiums associated with the
directors and officers insurance required by the Merger Agreement, (7) payment  
of the estimated 1997 income tax liabilities of the Company, (8) payment of the 
severance paid or due to the Company's executive officers, (9) payment of the   
estimated professional fees and expenses (legal, accounting and financial       
advisor fees and expenses) to be incurred by the Company in connection with the 
Merger, and (10) conversion of the outstanding Shares (other than Shares owned  
by Vajna or Valdina) into the Merger Consideration, assuming for such purpose   
that the Purchase Price is $2.30 per Share (i.e., that no adjustment to the     
Purchase Price occurs), that no outstanding stock options are exercised, and    
that no Stockholders perfect appraisal rights. THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET DOES NOT OTHERWISE REFLECT ANY ADJUSTMENTS FOR       
GENERAL OVERHEAD COSTS OR OPERATIONAL EXPENSES OF THE COMPANY AFTER JUNE 30,    
1997 (INCLUDING, AMONG OTHER THINGS, SALARIES OF COMPANY PERSONNEL, SEVERANCE   
FOR OFFICERS AND EMPLOYEES OTHER THAN THE COMPANY'S EXECUTIVE OFFICERS, RENT AND
UTILITIES), WHICH COSTS AND EXPENSES MAY BE SUBSTANTIAL.                        

   As consummation of the Asset Sales will essentially eliminate substantially
all of the revenue producing assets of the Company resulting in no revenue and  
cost of sales for the Company, pro forma condensed consolidated statements of   
operations for the year ended December 31, 1996 and for the six months ended    
June 30, 1997 have not been presented.                                          

THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MAY NOT    
REPRESENT THE FINANCIAL POSITION OF THE COMPANY (I) WHICH ACTUALLY WOULD HAVE   
BEEN OBTAINED IF THE TRANSACTIONS DESCRIBED ABOVE HAD OCCURRED AS OF JUNE 30,   
1997 OR (II) WHICH MAY BE OBTAINED IN THE FUTURE, INCLUDING AT THE ACTUAL DATE  
OF THE MERGER. THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND 
NOTES THERETO SHOULD BE READ IN CONJUNCTION WITH THE HISTORICAL FINANCIAL       
STATEMENTS OF THE COMPANY, INCLUDING NOTES THERETO, WHICH ARE INCLUDED ELSEWHERE
IN THIS PROXY STATEMENT.                                                        

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CINERGI PICTURES ENTERTAINMENT INC. 
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED) 
JUNE 30, 1997 

                                                        [Enlarge/Download Table]

                                                                                                          SETTLEMENT  DIRECTORS &
                                                          FILM                                 RELATED        OF       OFFICERS  
                                                         LIBRARY    ASSIGNMENT     SUMMIT       PARTY     FISHBURNE   INSURANCE, 
                                                          SALE       AGREEMENT   AGREEMENTS    PAYMENTS   LITIGATION   PREMIUMS  
                                          AS REPORTED      (1)          (2)          (3)         (4)         (5)          (6)    
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------
                                                                                                                                 
ASSETS                                                                                                                           
Cash and cash equivalents................  30,274,000     (827,000)  11,250,000    (526,000)  (2,743,000) (1,350,000)   (860,000)
Restricted cash..........................   3,920,000   (3,851,000)                                                              
Accounts receivable......................   8,946,000   (6,228,000)                                                              
Accounts receivable, related parties.....     874,000                                           (710,000)                        
Film costs, less accumulated                                                                                                     
  amortization...........................  68,522,000  (49,944,000) (10,645,000)   (378,000)                                     
Property and equipment, at cost less                                                                                             
  accumulated depreciation...............   1,670,000                                                                            
Other assets.............................   1,890,000                                                                            
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------
TOTAL ASSETS............................. 116,096,000  (60,850,000)     605,000    (904,000)  (3,453,000) (1,350,000)   (860,000)
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                             

LIABILITIES                                                                                                                      
Accounts payable.........................   2,798,000                              (175,000)              (1,350,000)            
Accrued interest.........................      22,000      (22,000)                                                              
Accrued residuals & participations.......  12,181,000  (11,369,000)                                                              
Deferred revenue.........................  15,272,000  (13,901,000)                                                              
Loans payable............................   8,093,000   (8,093,000)                                                              
Capital lease obligation.................           0                                                                            
Notes and amounts payable to related                                                                                             
  parties................................  51,975,000  (47,282,000)                           (3,452,000)                        
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------
TOTAL LIABILITIES........................  90,341,000  (80,667,000)           0    (175,000)  (3,452,000) (1,350,000)          0 
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------

STOCKHOLDERS' EQUITY                                                                                                             
Preferred stock..........................           0            0                                                               
Common stock.............................     135,000            0                                                               
Treasury stock...........................           0   (1,277,779)                                                              
Additional paid-in capital...............  68,095,000            0                                                               
Retained (deficit) earnings.............. (42,025,000)  21,094,779      605,000    (729,000)      (1,000)               (860,000)
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------
TOTAL STOCKHOLDER'S EQUITY...............  26,205,000   19,817,000      605,000    (729,000)      (1,000)          0    (860,000)
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------
Receivable from Shareholder..............    (450,000)                                                                           
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------
                                           25,755,000   19,817,000      605,000    (729,000)      (1,000)          0    (860,000)
TOTAL LIABILITIES & STOCKHOLDERS'                                                                                                
  EQUITY................................. 116,096,000  (60,850,000)     605,000    (904,000)  (3,453,000) (1,350,000)   (860,000)
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------
                                          -----------  -----------  -----------  -----------  ----------  ----------  -----------


                                          ESTIMATED   EXECUTIVE     MERGER     CONVERSION OF                                     
                                             1997      OFFICER    PROFESSIONAL  SHARES INTO                                      
                                            INCOME    SEVERANCE     FEES &        MERGER                                         
                                            TAXES      PAYMENTS    EXPENSES    CONSIDERATION   PRO FORMA                         
                                             (7)         (8)          (9)          (10)       AS ADJUSTED                        
                                          ----------  ----------  -----------  -------------  -----------                        
                                                                                                                                 
ASSETS                                                                                                                           
Cash and cash equivalents................ (1,100,000) (1,723,000) (1,348,000)   (14,817,384)   16,229,616                        
Restricted cash..........................                                                          69,000                        
Accounts receivable......................                                                       2,718,000                        
Accounts receivable, related parties.....               (138,000)                                  26,000                        
Film costs, less accumulated                                                                                                     
  amortization...........................                                                       7,555,000                        
Property and equipment, at cost less                                                                                             
  accumulated depreciation...............                                                       1,670,000                        
Other assets.............................                                                       1,890,000                        
                                          ----------  ----------  -----------  -------------  -----------                        
TOTAL ASSETS............................. (1,100,000) (1,861,000) (1,348,000)   (14,817,384)   30,157,616                        
                                          ----------  ----------  -----------  -------------  -----------                        
                                          ----------  ----------  -----------  -------------  -----------                        
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                             
LIABILITIES                                                                                                                      
Accounts payable.........................                                                       1,273,000                        
Accrued interest.........................                                                               0                        
Accrued residuals & participations.......                                                         812,000                        
Deferred revenue.........................                                                       1,371,000                        
Loans payable............................                                                               0                        
Capital lease obligation.................                                                               0                        
Notes and amounts payable to related                                                                                             
  parties................................                                                       1,241,000                        
                                          ----------  ----------  -----------  -------------  -----------                        
TOTAL LIABILITIES........................          0           0           0              0     4,697,000                        
                                          ----------  ----------  -----------  -------------  -----------                        
                                          ----------  ----------  -----------  -------------  -----------                        
STOCKHOLDERS' EQUITY                                                                                                             
Preferred stock..........................                                                               0                        
Common stock.............................                                                         135,000                        
Treasury stock...........................                                                      (1,277,779)                       
Additional paid-in capital...............                                       (14,817,384)   53,277,616                        
Retained (deficit) earnings.............. (1,100,000) (2,311,000) (1,348,000)                 (26,674,221)                       
                                          ----------  ----------  -----------  -------------  -----------                        
TOTAL STOCKHOLDER'S EQUITY............... (1,100,000) (2,311,000) (1,348,000)   (14,817,384)   25,460,616                        
                                          ----------  ----------  -----------  -------------  -----------                        
Receivable from Shareholder..............                450,000                                        0                        
                                          ----------  ----------  -----------  -------------  -----------                        
                                          (1,100,000) (1,861,000) (1,348,000)   (14,817,384)   25,460,616                        
TOTAL LIABILITIES & STOCKHOLDERS'                                                                                                
  EQUITY................................. (1,100,000) (1,861,000) (1,348,000)   (14,817,384)   30,157,616                        
                                          ----------  ----------  -----------  -------------  -----------                        
                                          ----------  ----------  -----------  -------------  -----------                        

See notes to unaudited pro forma condensed consolidated balance sheet.

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CINERGI PICTURES ENTERTAINMENT INC. 
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET 
(UNAUDITED) 

Note 1:  The adjustment reflects consummation of the Film Library Sale  
(including the Company's arrangements with Disney with respect to AN ALAN       
SMITHEE FILM). Pursuant to the Library Sale Agreement, the Company has agreed to
sell to Disney substantially all of the films in the Company's motion picture   
library and certain other assets principally in exchange for the transfer of the
Disney Shares and Disney Warrant to the Company, the assumption by Disney of the
outstanding loans previously made by Disney to the Company, the assumption by   
Disney of all residuals and participation obligations relating to the Film      
Library, and the assumption by Disney of all obligations of the Company under   
the Company's existing exploitation agreements with respect to the Film Library 
which are to be performed on or after the closing of the Film Library Sale and  
which have been listed on schedules provided to Disney.                         

Note 2:  The adjustment reflects consummation of the transactions       
contemplated by the Assignment Agreement. Pursuant to the Assignment Agreement, 
the Company has agreed to assign to Fox the Company's rights in DIE HARD WITH A 
VENGEANCE in exchange for $11,250,000 in cash.                                  

    Note 3:  The adjustment reflects certain of the payments required to be made
by the Summit Agreements: payment by the Company to Summit of an aggregate      
$926,000 primarily to settle the Company's obligations in connection with       
termination of the sales agency relationship between Summit and the Company, and
payment by Summit to the Company of $400,000 in exchange for the Company's      
rights in the International DHWV Overages (other than those relating to         
exploitation agreements with respect to the territories of Italy and Hungary).  

    Note 4:  The adjustment reflects certain payments required to be made by the
Merger Agreement: payment by the Company of the Valdina Note and payment by     
Vajna and his affiliates of approximately $710,000 in amounts owed to the       
Company.                                                                        

Note 5:  Pursuant to the terms of the settlement of the Fishburne       
Litigation, in August 1997 the Company paid Mr. Fishburne's loan-out corporation
$750,000 and entered into certain agreements which provide the Company with a   
non-exclusive Option to acquire certain Rights to a play and related screenplay.
The adjustment reflects the payment of the $750,000 and assumes payment of      
$600,000, an amount which must be paid by the Company if it does not exercise   
the Option, if the Company does not meet certain deadlines, or if the Company   
fails to match any bona fide third party offers for the Rights.                 

Note 6:  The Merger Agreement requires the Company to purchase, to the  
extent available, a policy of directors' and officers' liability insurance and  
to maintain such insurance policy for four years after the Effective Time. The  
adjustment reflects the premiums associated with such insurance, net of an      
anticipated refund of certain past payments to the insurance carrier.           

 Note 7:  The adjustment reflects payment of the estimated 1997 income tax
liabilities of the Company including payment of federal alternative minimum     
income tax and California franchise income tax.                                 

Note 8:  The adjustment reflects severance paid or due to the Company's 
current (and one former) executive officers (Messrs. Vajna, Braverman, Feitshans
and Randolph M. Paul).                                                          

   Note 9:  The adjustment reflects payment of the estimated professional fees
and expenses (legal, accounting and financial advisor fees and expenses) to be  
incurred by the Company in connection with the Merger (but does not include any 
of such expenses related to the Asset Sales).                                   

Note 10:  The adjustment reflects conversion of the outstanding Shares  
(other the Shares owned by Vajna or Valdina) into the Merger Consideration      
pursuant to the Merger, assuming for such purpose that the Purchase Price is    
$2.30 per Share (i.e., no adjustment to the Purchase Price occurs), that no     
outstanding stock options are exercised, and that no Stockholders perfect       
appraisal rights.                                                               

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SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY 

   The selected consolidated financial data set forth below as of December 31,
1995 and 1996 and for each of the three years in the period ended December 31,  
1996 are derived from the Company's Consolidated Financial Statements included  
elsewhere in this Proxy Statement. The selected consolidated financial data set 
forth below as of December 31, 1992, 1993 and 1994 and for the periods ended    
December 31, 1992 and 1993 are derived from audited financial statements not    
included herein. The Consolidated Financial Statements as of December 31, 1995  
and 1996 and for each of the three years in the period ended December 31, 1996  
have been audited by Ernst & Young LLP, independent auditors, whose report with 
respect thereto appears elsewhere in this Proxy Statement. The selected         
financial data set forth below as of June 30, 1996 and 1997 and for the six     
months ended June 30, 1996 and 1997 are derived from unaudited consolidated     
financial statements but include all adjustments (consisting of only normal     
recurring adjustments) which management considers necessary for a fair          
presentation of results for these periods. The following financial data and the 
accompanying Management's Discussion and Analysis of Financial Condition and    
Results of Operations should be read in conjunction with the Company's          
Consolidated Financial Statements and Notes thereto appearing elsewhere in this 
Proxy Statement.                                                                

                                                        [Enlarge/Download Table]

                                                                                                    SIX MONTHS ENDED   
                                                          YEAR ENDED DECEMBER 31,                       JUNE 30,       
                                           -----------------------------------------------------  -------------------- 
                                             1992       1993       1994       1995       1996       1996       1997    
                                           ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                              
                                                                                                                       
STATEMENT OF OPERATIONS DATA:                                                                                          
Revenues:                                                                                                              
  Feature films........................... $  39,566  $   8,064  $ 108,517  $ 192,582  $ 132,940  $  59,552  $  43,539 
  Fee income..............................    --            942        511        298         60         31          1 
                                           ---------  ---------  ---------  ---------  ---------  ---------  --------- 
  Total Revenues..........................    39,566      9,006    109,028    192,880    133,000     59,583     43,540 
Costs and Expenses:                                                                                                    
  Amortization of film costs, residuals                                                                                
    and participations....................    39,447      7,899    103,422    204,544    139,612     58,411     44,414 
  Selling, general and administrative                                                                                  
    expenses..............................     7,863      3,779      2,694      5,098      9,752      2,879      7,838 
  Provision for impairment of long-lived                                                                               
    assets................................    --         --         --         --         --         --          2,665 
                                           ---------  ---------  ---------  ---------  ---------  ---------  --------- 
  Operating (loss) income.................    (7,744)    (2,672)     2,912    (16,762)   (16,364)    (1,707)   (11,377)
  Interest expense........................    (3,774)    (1,875)      (281)      (241)      (448)      (176)    (2,393)
  Interest income.........................       568        111        264        941        907        530        817 
                                           ---------  ---------  ---------  ---------  ---------  ---------  --------- 
  (Loss) income before equity in income                                                                                
    (loss) of affiliated company..........   (10,950)    (4,436)     2,895    (16,062)   (15,905)    (1,353) $ (12,953)
  Equity in income (loss) of affiliated                                                                                
    company...............................       146       (387)    --         --         --         --         --     
                                           ---------  ---------  ---------  ---------  ---------  ---------  --------- 
  Net (loss) income....................... $ (10,804) $  (4,823) $   2,895  $ (16,062) $ (15,905) $  (1,353) $ (12,953)
                                           ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                           ---------  ---------  ---------  ---------  ---------  ---------  --------- 
  Net (loss) income per share.............            $    (.64) $     .30  $   (1.23) $   (1.12) $   ( .10) $    (.96)
                                                      ---------  ---------  ---------  ---------  ---------  --------- 
                                                      ---------  ---------  ---------  ---------  ---------  --------- 
  Weighted average number of shares                                                                                    
    outstanding...........................                7,518      9,494     13,025     14,169     14,192     13,449 
                                                      ---------  ---------  ---------  ---------  ---------  --------- 
                                                      ---------  ---------  ---------  ---------  ---------  --------- 

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                                                        [Enlarge/Download Table]

                                                              DECEMBER 31,                             JUNE 30,      
                                          -----------------------------------------------------  --------------------
                                            1992       1993       1994       1995       1996       1996       1997   
                                          ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                             
                                                                                                                     
BALANCE SHEET DATA:                                                                                                  
  Cash................................... $   1,985  $   1,840  $   2,665  $  29,832  $  27,364  $  12,676     30,274
  Restricted cash........................     1,000        500     --         --          5,654     --          3,920
  Film costs, net of amortization........    18,665    115,108    223,827    160,756    103,792    164,547     68,522
  Total assets...........................    27,102    119,992    253,891    206,257    156,548    190,475    116,096
  Total debt.............................    32,711     93,991    143,146     73,202     47,420     68,528     52,017
  Stockholders' (deficiency) equity......   (14,808)   (18,506)    44,434     51,717     36,607     50,364     25,755
PER SHARE DATA:                                                                                                      
  Net book value per common share........ $   (2.32) $   (2.90) $    4.41  $    3.96  $    2.80  $    3.85  $    1.92
  Common shares outstanding..............     6,383      6,383     10,075     13,075     13,075     13,075     13,447

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS 

GENERAL                                                                         

  On April 3, 1997, the Company entered into the Library Sale Agreement with
Disney pursuant to which it will sell to Disney, subject to certain conditions, 
the Film Library. On July 15, 1997, the Company entered into the Assignment     
Agreement with Fox pursuant to which the Company will transfer to Fox, subject  
to certain conditions, its rights in DIE HARD WITH A VENGEANCE. On September 4, 
1997, the Company announced the execution of the Merger Agreement. The Company  
has also announced that it does not presently intend to commence production on  
any additional motion pictures.                                                 

The Company's determination to halt the commencement of production on   
additional motion pictures, and to effect the Asset Sales and the Merger follows
a year long strategic review initiated by the Company to assess its goals and   
business strategies. The strategic review included discussions with other       
parties regarding the sale of an interest in the Company or of the entire       
Company. See "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE    
COMPANY--Background and Reasons for the Library Sale Agreement."                

In light of, among other things, the disappointing financial results of 
three of the Company's four 1995 releases (JUDGE DREDD, THE SCARLET LETTER and  
NIXON) and the 1997 release of THE SHADOW CONSPIRACY, and the continuing        
increase in motion picture production and releasing costs which could           
necessitate increased direct investment by the Company in its motion pictures if
it were to produce additional "event" motion pictures, the Company determined   
the Assets Sales and the Merger to be in the best interests of the Company's    
Stockholders. See "SPECIAL FACTORS RELATING TO THE MERGER--Background of the    
Merger" and "--Recommendation of the Special Committee and the Board; Fairness  
of the Merger."                                                                 

    The Company reflects advances and minimum guarantees as income for financial
reporting purposes when a picture is available for exploitation in the          
applicable media or territory. See Note 2 of Notes to the Company's Consolidated
Financial Statements for the year ended December 31, 1996. As a matter of custom
and practice and contractual requirements, the Company delays the exploitation  
of home video rights and television rights for a period of time after initial   
theatrical distribution in the applicable territory. This results in a delay in 
the recognition of advances and minimum guarantees from those media as income   
for financial reporting purposes.                                               

 Costs accumulated in the production of a film ("unamortized film costs"),
including direct negative costs, marketing costs, capitalized interest and      
overhead, represent a major component of the Company's assets. Unamortized film 
costs are amortized in the proportion that gross revenues realized bear to      
management's estimate of total gross revenues expected to be received.          
Currently, based on the Company's estimate of future revenues, approximately 92%
of unamortized released film costs at December 31, 1996 will be amortized during
the three year period ending December 31, 1999. For purposes of determining the 
total amortization of film costs for each motion picture, the Company includes  
its estimated obligations to pay residuals and participations.                  

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    The following table sets forth the unamortized film costs for the last three
years:                                                                          

                                                        [Enlarge/Download Table]

                                                                                                          SIX   
                                                                                                        MONTHS  
                                                                                                         ENDED  
                                                                        YEAR ENDED DECEMBER 31,        JUNE 30, 
                                                                   ----------------------------------  ---------
                                                                      1994        1995        1996       1997   
                                                                   ----------  ----------  ----------  ---------
                                                                                  (IN THOUSANDS)                
                                                                                                                
Released films (net of amortization).............................. $   30,082  $  101,238  $   52,077  $  50,659
Completed, not released...........................................     --          --          37,025     --    
Production & development..........................................    193,745      59,518      14,690     17,863
                                                                   ----------  ----------  ----------  ---------
  Film costs, net of amortization................................. $  223,827  $  160,756  $  103,792  $  68,522
                                                                   ----------  ----------  ----------  ---------
                                                                   ----------  ----------  ----------  ---------

A substantial portion of the unamortized film costs attributable to     
RENAISSANCE MAN, COLOR OF NIGHT and TOMBSTONE were amortized in 1994 due to the 
domestic theatrical release and international availability of these pictures in 
1994.                                                                           

The decrease in unamortized film costs in 1995 reflects the domestic    
theatrical release and international availability of DIE HARD WITH A VENGEANCE, 
JUDGE DREDD, and THE SCARLET LETTER, and the resulting amortization of a        
substantial portion of the unamortized film costs attributable to such pictures.
Although NIXON was initially released on December 20, 1995 and is, therefore,   
included in "Released Films" in the amount of $43,000,000, no revenues were     
recognized in 1995. Unamortized film costs for 1995 also includes the production
costs of AMANDA, THE SHADOW CONSPIRACY and EVITA incurred through December 31,  
1995.                                                                           

The decrease in unamortized film costs in 1996 reflects the domestic    
theatrical release and international availability of EVITA and the international
availability of NIXON (as described above). Although THE SHADOW CONSPIRACY was  
initially released on January 31, 1997, it was completed in 1996, available for 
release as of December 31, 1996 and accordingly included in "Completed, not     
Released" rather than "Released Films" in the amount of $37,000,000, which      
reflects an adjustment to reduce the film cost to its net realizable value.     
Unamortized film costs for 1996 also includes the production costs of THE SHADOW
CONSPIRACY, AN ALAN SMITHEE FILM and BROADWAY BRAWLER incurred through December 
31, 1996.                                                                       

The decrease in unamortized film costs in the first six months of 1997  
primarily reflects the domestic theatrical release of THE SHADOW CONSPIRACY and 
the domestic home video availability of EVITA. Unamortized film costs for 1997  
also includes the production costs of AN ALAN SMITHEE FILM incurred through June
30, 1997.                                                                       

RESULTS OF OPERATIONS                                                           

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996       

 Feature film revenues decreased from $59,552,000 for the six months ended
June 30, 1996 to $43,539,000 for the six months ended June 30, 1997. Feature    
film revenues for the six months ended June 30, 1996 consisted mainly of the    
domestic home video availability of THE SCARLET LETTER, international           
availability of NIXON, continuing domestic home video revenue from TOMBSTONE and
continuing domestic and international revenues from DIE HARD WITH A VENGEANCE.  
Feature film revenues for the six months ended June 30, 1997 resulted mainly    
from revenues from the theatrical release of THE SHADOW CONSPIRACY and the      
domestic home video availability of EVITA.                                      

Amortization of film costs, residuals and participations decreased from 
$58,411,000 for the six months ended June 30, 1996 to $44,414,000 for the six   
months ended June 30, 1997 primarily due to the decrease in feature film revenue
recognized for the six months ended June 30, 1997 as compared to the six months 
ended June 30, 1996. The Company estimates the total projected revenues to be   
received from the exploitation of a motion picture in all territories and media.
As results from a motion picture are                                            

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recognized, the percentage of revenues recognized to total projected revenues is
applied to film costs for such motion picture to record amortization. Where     
applicable, unamortized film costs for a picture are written down to net        
realizable value for such picture based upon the Company's appraisal of current 
market conditions.                                                              

   Selling, general and administrative ("SG&A") expenses (excluding production
overhead costs capitalized to film costs) increased from $2,879,000 for the six 
months ended June 30, 1996 to $7,838,000 for the six months ended June 30, 1997.
The increase is due primarily to (i) no production overhead being capitalized   
into film costs in the six months ended June 30, 1997 in light of the Library   
Sale Agreement and the Assignment Agreement and the Company's current intention 
not to commence production on additional motion pictures, and (ii) the creation 
of a $1,350,000 reserve with respect to the Fishburne Litigation. In 1996 and   
prior periods, the Company capitalized production overhead incurred in          
connection with the production of a motion picture by adding such costs to the  
capitalized film costs of the motion picture. The total of SG&A expenses and    
production overhead costs capitalized to film costs increased from $5,971,000   
for the six months ended June 30, 1996 to $7,838,000 for the six months ended   
June 30, 1997 primarily due to the creation of the litigation reserve as        
described above and the Company paying a bonus to an executive (the Executive   
Vice President, Chief Operating Officer, and Chief Financial Officer of the     
Company) pursuant to an amendment of such executive's employment agreement in   
January 1997.                                                                   

  The provision for impairment of long-lived assets reflects a write down of
the Company's visual effects equipment under provisions of Statement of         
Financial Accounting Standards No. 121, "Accounting for the Impairment of       
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 121).  
In April 1997, the Company announced that (i) the Company had entered into the  
Library Sale Agreement, (ii) the Company did not presently intend to commence   
production of any additional motion pictures and (iii) the Company was          
considering its alternatives assuming consummation of the Film Library Sale. The
Company's visual effects assets are not included in the Asset Sales. In light of
the foregoing and due to operating losses of the Visual Effects Facility, the   
Company determined that a write-down to net realizable value of the visual      
effects assets was required under SFAS No. 121. Accordingly, the Company        
recognized a non-cash charge of $2,665,000 at June 30, 1997 for the impairment  
of the visual effects long-lived assets. The provision for impairment was       
calculated based upon the excess of the carrying amount of the visual effects   
assets over the estimated fair value of the visual effects assets.              

  Interest expense increased from $176,000 for the six months ended June 30,
1996 to $2,393,000 for the six months ended June 30, 1997 primarily because no  
interest expense for the six months ended June 30, 1997 was capitalized to film 
costs in light of the Library Sale Agreement and the Assignment Agreement and   
the Company's current intention not to commence production on additional motion 
pictures. In 1996 and prior periods, the Company capitalized applicable interest
expense incurred in connection with the production of each motion picture. The  
Company determined the amount of interest expense to be capitalized to each     
motion picture in production by multiplying the average cumulative film cost of 
each motion picture in a given period by the overall effective interest rate    
paid by the Company on the aggregate amount of debt outstanding for such period.
Interest expense, including interest capitalized to film costs, decreased from  
$3,337,000 for the six months ended June 30, 1996 to $2,393,000 for the six     
months ended June 30, 1997. The decrease is the result of the Company having a  
lower average outstanding balance of production loans for the six months ended  
June 30, 1997 because one film was in production in such period as compared to  
three films in production in the corresponding period in 1996.                  

 Interest income increased from $530,000 for the six months ended June 30,
1996 to $817,000 for the six months ended June 30, 1997 primarily due to higher 
cash balances during the six months ended June 30, 1997 compared to the six     
months ended June 30, 1996.                                                     

    As a result of the above, the Company incurred a net loss for the six months
ended June 30, 1997 of $12,953,000 as compared to a net loss of $1,353,000 for  
the six months ended June 30, 1996.                                             

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YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995   

Feature film revenues decreased from $192,582,000 for the year ended    
December 31, 1995 to $132,940,000 for the year ended December 31, 1996 primarily
because of the lower revenues associated with NIXON, AMANDA and EVITA in 1996 as
compared to the revenues from DIE HARD WITH A VENGEANCE, JUDGE DREDD and THE    
SCARLET LETTER in 1995. Feature film revenues for the year ended December 31,   
1995 consisted mainly of domestic and international revenues from the theatrical
release of DIE HARD WITH A VENGEANCE, JUDGE DREDD and THE SCARLET LETTER and    
domestic and certain international home video revenue from DIE HARD WITH A      
VENGEANCE. Although NIXON was initially released on December 20, 1995, no       
revenues were recognized until 1996. Feature film revenues in 1995 also included
$5,000,000 received in October 1995 from a major studio in exchange for an actor
relinquishing an acting commitment to the Company. Feature film revenues for the
year ended December 31, 1996 consisted mainly of domestic and international     
revenues from the theatrical release of NIXON, home video revenues from NIXON   
and international revenues from the theatrical release of EVITA. Feature film   
revenues in 1996 also included certain domestic television revenues from        
TOMBSTONE, certain domestic revenues from THE SCARLET LETTER and AMANDA and     
continuing domestic and foreign overages from DIE HARD WITH A VENGEANCE.        

Amortization of film costs, residuals and participations decreased from 
$204,544,000 for the year ended December 31, 1995 to $139,612,000 for the year  
ended December 31, 1996 primarily due to the decrease in feature film revenue   
recognized in the year ended December 31, 1996 as compared to the year ended    
December 31, 1995. The amortization of film costs, residuals and participations 
for the year ended December 31, 1996 included $10,086,000 of adjustments to     
reduce the cost of two films (EVITA and THE SHADOW CONSPIRACY) released in 1996 
and 1997, respectively, to their net realizable values compared to $32,452,000  
of adjustments for the year ended December 31, 1995 to reduce the costs of three
films released in 1995 (JUDGE DREDD, THE SCARLET LETTER and NIXON) to their net 
realizable value. It has been the Company's policy to write-off development     
costs incurred on projects which do not enter production within three years     
after development costs are first incurred and to capitalize these costs to     
motion pictures currently in production. In 1996, development costs of          
$3,246,000 were written off and were allocated to current motion pictures in    
production as compared to write-offs of such costs of $668,000 in 1995.         

SG&A expenses (excluding production overhead costs capitalized to film  
costs) increased from $5,098,000 for the year ended December 31, 1995 to        
$9,752,000 for the year ended December 31, 1996. The difference is primarily    
because indirect costs attributable to the Visual Effects Facility were included
in general and administrative expense in the year ended December 31, 1996. For  
the year ended December 31, 1995, substantially all of the indirect costs       
attributable to the Visual Effects Facility were included in film costs, as the 
special effects for JUDGE DREDD, which was in production during such period,    
were primarily created at the facility. The increase in overhead during the year
ended December 31, 1996 was also due to approximately $1,461,000 in legal       
expenses in connection with the Investigation and lawsuits described in Note 10 
of Notes to the Company's Consolidated Financial Statements for the year ended  
December 31, 1996. Production overhead being capitalized to film costs increased
from $6,591,000 in the year ended December 31, 1995 to $7,918,000 in the year   
ended December 31, 1996, and the total of SG&A expenses and production overhead 
costs capitalized to film costs increased from $11,689,000 for the year ended   
December 31, 1995 to $17,670,000 for the year ended December 31, 1996, primarily
due to the factors described above.                                             

Interest expense increased from $241,000 for the year ended December 31,
1995 to $448,000 for the year ended December 31, 1996 because certain interest  
expense paid to a related party was not capitalizable. Interest expense,        
including interest capitalized to film costs, decreased from $11,106,000 for the
year ended December 31, 1995 to $6,836,000 for the year ended December 31, 1996.
This decrease was due to the lower average outstanding balance of the Company's 
production loans in the year ended December 31, 1996 as compared to the year    
ended December 31, 1995. Four films were in various stages of production during 
the year ended December 31, 1996 as compared to six films during the year ended 
December 31, 1995.                                                              

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  Fee income decreased from $298,000 for the year ended December 31, 1995 to
$60,000 for the year ended December 31, 1996. Fee income represents fees earned 
in connection with an arrangement to collect accounts receivable on behalf of   
and to distribute motion pictures produced by an unrelated third party.         

As a result of the above, the Company had a net loss for the year ended 
December 31, 1996 of $15,905,000 as compared to a net loss of $16,062,000 for   
the year ended December 31, 1995.                                               

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994   

Feature film revenues increased from $108,517,000 for the year ended    
December 31, 1994 to $192,582,000 for the year ended December 31, 1995 primarily
because of the higher revenues associated with DIE HARD WITH A VENGEANCE, JUDGE 
DREDD and THE SCARLET LETTER as compared to the revenues from TOMBSTONE,        
RENAISSANCE MAN and COLOR OF NIGHT in 1994. Feature film revenues for the year  
ended December 31, 1994 include domestic and international revenues from the    
release of TOMBSTONE, RENAISSANCE MAN and COLOR OF NIGHT, the domestic home     
video revenues from TOMBSTONE and domestic pay television and international     
television revenues for MEDICINE MAN. Feature film revenues for the year ended  
December 31, 1995 include principally domestic and international revenues from  
the theatrical release of DIE HARD WITH A VENGEANCE, JUDGE DREDD and THE SCARLET
LETTER and domestic and certain international home video revenue from DIE HARD  
WITH A VENGEANCE. Although NIXON was initially released on December 20, 1995, no
revenues were recognized until 1996. Feature film revenues in 1995 also included
$5,000,000 received in October 1995 from a major studio in exchange for an actor
relinquishing an acting commitment to the Company.                              

Amortization of film costs, residuals and participations increased from 
$103,422,000 for the year ended December 31, 1994 to $204,544,000 for the year  
ended December 31, 1995 primarily due to the increase in feature film revenues  
recognized in the year ended December 31, 1995 as compared to the year ended    
December 31, 1994. The amortization of film costs, residuals and participations 
for the year ended December 31, 1995 included $32,452,000 of adjustments to     
reduce the cost of two films released in 1994 (COLOR OF NIGHT and RENAISSANCE   
MAN) and three films released in 1995 (JUDGE DREDD, THE SCARLET LETTER and      
NIXON) to their net realizable value compared to $6,343,000 of adjustments for  
the year ended December 31, 1994 to reduce the costs of the two films released  
in 1994 indicated above to their net realizable value. In addition, in 1995,    
development costs of $668,000 were written off and were allocated to current    
motion pictures in production as compared to write-offs of such costs of        
$1,187,000 in 1994.                                                             

SG&A expenses (excluding production overhead costs capitalized to film  
costs) increased from $2,694,000 for the year ended December 31, 1994 to        
$5,098,000 for the year ended December 31, 1995. This difference is primarily   
due to a substantial portion of the overhead attributable to the Company's      
Visual Effects Facility, which was acquired in late 1994, not being capitalized 
into film costs in 1995. Production overhead being capitalized to films         
decreased from $7,236,000 for year ended December 31, 1994 as compared to       
$6,591,000 for the year ended December 31, 1995. The total of SG&A expenses and 
production overhead costs capitalized to film costs increased from $9,930,000   
for the year ended December 31, 1994 to $11,689,000 for the year ended December 
31, 1995 primarily due to the overhead costs associated with operations of the  
Visual Effects Facility.                                                        

Interest expense decreased from $281,000 for the year ended December 31,
1994 to $241,000 for the year ended December 31, 1995. This decrease was due    
primarily to a greater percentage of total interest expense being capitalized to
film costs due to the Company's having more films in production in 1995.        
Interest expense of $5,465,000 was capitalized into film costs in 1994 compared 
to $10,865,000 in 1995. Interest expense, including interest capitalized into   
film costs, increased from $5,746,000 for the year ended December 31, 1994 to   
$11,106,000 for the year ended December 31, 1995. This increase was due to      

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the larger average outstanding balances of the Company's production loans in the
year ended December 31, 1995 as compared to the year ended December 31, 1994.   
Six films were in various stages of production during 1995 as compared to only  
three films in 1994.                                                            

  Fee income decreased from $511,000 for the year ended December 31, 1994 to
$298,000 for the year ended December 31, 1995. Fee income represented fees      
earned in connection with an arrangement to collect accounts receivable on      
behalf of, and to distribute motion pictures produced by, an unrelated third    
party. See Note 6 of Notes to the Company's Consolidated Financial Statements   
for the year ended December 31, 1996.                                           

    Interest income increased from $264,000 for the year ended December 31, 1994
to $941,000 for the year ended December 31, 1995 due to higher cash balances    
during 1995 resulting from the Company's public offering of Common Stock which  
was completed in May 1995.                                                      

As a result of the above, the Company had a net loss for the year ended 
December 31, 1995 of $16,062,000 as compared to net income of $2,895,000 for the
year ended December 31, 1994.                                                   

LIQUIDITY AND CAPITAL RESOURCES                                                 

  The Company has a Credit, Security, Pledge and Guaranty Agreement dated as
of August 16, 1994 with Chase and a syndicate of lenders (collectively, the     
"Lenders") which provided the Company with a revolving credit facility (the     
"Credit Facility") in the amount of $50,000,000. The commitment to lend under   
the Credit Facility expired August 31, 1997. The Credit Facility (which is      
secured by substantially all of the assets of the Company) matures on February  
28, 1999. As of June 30, 1997, approximately $8,093,000 in borrowings were      
outstanding under the Credit Facility, net of cash retained from the collection 
of deposits of minimum guarantees. As of the same date, the interest rate on the
amounts outstanding under the Credit Facility was approximately 7.15% per annum.

    Although at December 31, 1996 and March 31, 1997, the Company was in default
under the Credit Facility because it was not in compliance with certain         
covenants, the Lenders under the Credit Facility have since, in each case,      
either waived such noncompliance or amended the applicable covenant, as a result
of which the Company was in compliance with such covenants as of June 30, 1997. 

The Company previously entered into term loan agreements with Disney to 
finance a portion of the costs of COLOR OF NIGHT, THE SCARLET LETTER, NIXON, THE
SHADOW CONSPIRACY and EVITA. Each loan must be repaid with accrued interest on  
or before the earlier of (i) four years after the loan proceeds are first made  
available to the Company or (ii) three years after the initial domestic         
theatrical release of the applicable picture. Each of these loans are secured by
rights to distribute the respective motion picture in the Americas and, except  
for the term loan with respect to COLOR OF NIGHT which is personally guaranteed 
by Mr. Vajna, certain other distribution rights related to other motion pictures
financed by Disney. The COLOR OF NIGHT term loan with a balance of $4,510,000 at
June 30, 1997 was scheduled to mature in May 1997, however, Disney has agreed   
pursuant to the Library Sale Agreement that no repayment of such loan or any    
other term loan is required unless the Library Sale Agreement is terminated.    
None of the remaining currently outstanding term loans with Disney mature in the
ordinary course in the next twelve months. At June 30, 1997, the aggregate      
amount outstanding under all term loans from Disney plus accrued interest was   
approximately $39,209,000.                                                      

 Pursuant to the Library Sale Agreement, Disney will pay $3,950,000 to the
Company upon delivery of AN ALAN SMITHEE FILM to Disney (a reduction of         
$1,050,000 from Disney's current payment obligation pursuant to existing        
agreements between the Company and Disney). The Company has agreed to use such  
amount to pay off a portion of the outstanding principal and interest which the 
Company owes under the Credit Facility relating to production of the film. In   
addition, in the event the Film Library Sale is consummated, the Company has    
agreed to pay Disney an amount equal to the difference between (a) the aggregate
amount of minimum guarantees payable to the Company with respect to such film,  
which                                                                           

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amount is to be no less than $10,912,000 and (b) the sum of (x) the actual      
out-of-pocket production costs for AN ALAN SMITHEE FILM (including actual       
finance costs and interest under the Credit Facility to the extent such costs   
and interest are directly attributable to loans under the Credit Facility in    
connection with production of the film) (the "Smithee Production Costs") up to  
$10,000,000 plus (y) 50% of any Smithee Production Costs in excess of           
$10,000,000 (such sum of (x) and (y) not to exceed $10,500,000). The Company    
presently estimates, based on information currently available to management,    
that it will receive approximately $10,912,000 in advances and minimum          
guarantees with respect to such film and that the Smithee Production Costs will 
be approximately $10,972,000 (the direct negative cost of approximately         
$10,419,000 plus an estimated $553,000 in finance costs and interest), and,     
therefore, the Company currently anticipates that the payment to Disney will be 
approximately $425,000. However, such amount is only an estimate and the actual 
payment to Disney under this arrangement could be different depending on, among 
other things, the actual amount of post-production costs and the actual date of 
delivery of the film to Disney. The minimum guarantees received by the Company  
from parties other than Disney with respect to AN ALAN SMITHEE FILM will be used
to pay down amounts outstanding under the Credit Facility relating to the film. 
The Company currently anticipates that no significant amounts will be           
outstanding under the Credit Facility after the application of such minimum     
guarantees (including the $3,950,000 from Disney) to pay down amounts           
outstanding under the Credit Facility.                                          

The Company also has an outstanding promissory note in favor of Valdina 
which is currently due and payable and under which an aggregate of $3,452,000 in
principal and accrued interest was outstanding at June 30, 1997.                

The Company and Disney have an arrangement with respect to the motion   
picture tentatively entitled Deep Rising. See "PROPOSAL NO. 1: SALE OF          
SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY--The Library Sale Agreement."    
Pursuant to the Library Sale Agreement, upon consummation of the Film Library   
Sale, the Company (a) will no longer have any interest in the film as it will no
longer serve as sales agent with respect to the film, (b) will relinquish its   
equity participation in the film and sales fee, (c) will remit to Disney all    
minimum guarantees received by the Company with respect to DEEP RISING while it 
served as sales agent with respect to the film and which were not previously    
remitted to Disney, and (d) will no longer be obligated to pay the Cost Amount  
(the lessor of fifty percent of the cost of the film or $22,500,000). In the    
event the Film Library Sale is not consummated, the Company currently           
anticipates that it will have obtained sufficient advances and minimum          
guarantees with respect to its interest in the film to satisfy the Cost Amount. 

   As described under "PROPOSAL NO. 1: SALE OF SUBSTANTIALLY ALL OF THE ASSETS
OF THE COMPANY--The Library Sale Agreement," the Company has a "first-look"     
arrangement with Stone. Disney has reimbursed the Company for all amounts       
payable to Stone through February 10, 1997, however, pursuant to the Library    
Sale Agreement, the Company is generally responsible for all payments to Stone  
from such date through expiration of the arrangement in February 1998. The      
Company currently estimates that the payments due under the first look          
arrangement with Stone from June 30, 1997 through February 1998 will be         
approximately $1,570,000. The Company is in discussions with Stone regarding a  
settlement of the first look arrangement with Stone. See "CERTAIN ARRANGEMENTS  
CONCERNING OTHER ASSETS."                                                       

   In addition, the Company has certain agreements and agreements in principle
with Summit, including, among other things, with respect to the sale of certain 
receivables and rights to overages. See "CERTAIN ARRANGEMENTS CONCERNING OTHER  
ASSETS."                                                                        

   At June 30, 1997, the Company had cash on hand of approximately $30,274,000
(exclusive of restricted cash of approximately $3,920,000 consisting primarily  
of amounts due to Disney from deposits received in connection with the          
international distribution of DEEP RISING).                                     

As the Company does not presently intend to commence production on any  
additional motion pictures, management of the Company has been implementing     
reductions in personnel to achieve staff size                                   

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commensurate with the Company's current level of activity. The Company also will
have reduced the amount of space it leases in its corporate headquarters        
building by approximately fifty percent by October 1, 1997. The subsidiary of   
Company which has operated the Visual Effects Facility has shut down the        
operations of such facility. See "CERTAIN INFORMATION REGARDING THE COMPANY--   
Business of the Company--Motion Picture Production and Financing."              

 The Company believes that its existing capital, funds from operations and
other available sources of capital (including cash on hand), will be sufficient 
to enable the Company to fund its overhead related expenditures and currently   
intended reduced level of activities for the next 12 months.                    

INFLATION.  Management believes that neither the Company's operating    
revenues nor costs have materially increased in the last fiscal year due to     
inflation or general price changes and, in particular, management believes that 
no material increases in revenue were attributable to increases in ticket prices
for admission to motion picture theatres.                                       

    CERTAIN TAX MATTERS.  The Company and each of its domestic subsidiaries were
S Corporations from their incorporation through the tax year ended December 31, 
1993. Taxable income and the loss of the Company for 1993 and prior years was   
included in the computation of the taxable income or loss of Vajna, the         
Company's sole stockholder during those years. The corporate income tax returns 
of the Company for its 1990, 1991, 1992 and 1993 fiscal years are currently     
under audit by the Internal Revenue Service ("IRS") and California Franchise Tax
Board, and returns for the 1995 and 1996 fiscal years remain open to audit. The 
Company anticipates no federal tax liability and only minimal, if any,          
California tax liability as a result of any income tax audits for pre-1994 years
because of the S Corporation election in effect for such years. In the absence  
of the agreement described below, Vajna, the sole stockholder during such       
period, and not the Company would be responsible for any tax liability assessed 
as a result of such audits of pre-1994 years.                                   

   The Company received approximately $20,000,000 of advances (the "Advances")
during the fiscal year ended December 31, 1993. The Advances were received in   
connection with motion pictures that were released during the fiscal year ending
December 31, 1994. Consistent with its financial accounting for the Advances and
prior tax reporting practices, the Company did not include the Advances in its  
1993 taxable income, and instead included such amounts--and deducted the related
costs--in computing its taxable income for the year in which the underlying     
motion pictures were released, in this case 1994. It is possible, however, that 
the IRS will challenge the Company's tax treatment of the Advances, and if the  
IRS were successful in that challenge, the Company would be required to include 
the Advances in the computation of its 1993 taxable income without an offsetting
deduction in 1993 for costs associated with those motion pictures. As a result  
of the S Corporation election then in effect, such an adjustment (an            
"Adjustment") to the Company's 1993 taxable income would cause a corresponding  
increase in the taxable income of Vajna and, therefore, a significant increase  
in Vajna's tax liability for 1993. However, if the Company has cumulative       
taxable income in 1994 through 1997 (exclusive of the Advances), it would obtain
a benefit from the Adjustment in the form of a reduction in its 1994 taxable    
income and related tax liability as it would not be required to include the     
Advances in its 1994 taxable income.                                            

   In order to alleviate the additional tax burden on Vajna relating solely to
the Adjustment for the Advances, the Company and Vajna entered into a Tax       
Reimbursement Agreement (the "Tax Agreement"), dated as of December 30, 1993.   
Pursuant to the terms of the Tax Agreement, the Company paid Vajna $10,000,000  
(the "Reimbursement Payment") on June 8, 1994. Such amount represents the tax   
liability which could be imposed on Vajna, exclusive of interest and penalties, 
if the Advances are included in 1993 taxable income. The tax associated with the
increase in taxable income to Vajna resulting from the Adjustment will exceed   
the potential reduction in taxes realized by the Company due to the difference  
between personal and corporate tax rates and approximately $1,500,000 of the    
Reimbursement Payment is                                                        

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intended to reimburse Vajna for such difference. In order to assist the Company 
in funding the Reimbursement Payment, Vajna loaned $10,000,000 to the Company on
May 12, 1994 in exchange for a promissory note (the "Stockholder Note").        

  The Tax Agreement provides that Vajna will be required to repay all of the
Reimbursement Payment to the Company in the following circumstances: (i) a final
determination by the IRS or the courts either that the Company is not required  
to make an Adjustment or is required to include the Advances in 1993 taxable    
income but also is permitted to deduct all capitalized costs incurred with      
respect to the Advances in 1993, (ii) lapse of the applicable statutes of       
limitation with no Adjustment having been made or (iii) the Company does not    
have cumulative taxable income for the period 1994 through 1997 taking into     
account the Advances, even if Vajna is assessed additional taxes with respect to
the Adjustment. The Tax Agreement also provides for a pro rata repayment of the 
Reimbursement Payment by Vajna if the Company earns cumulative taxable income   
for the 1994 through 1997 period (including the Advances in 1994 income for this
purpose) that is greater than zero but less than $20,000,000. If, on the other  
hand, there is an Adjustment and the Company has earned cumulative taxable      
income for the 1994 through 1997 period of $20,000,000 or more (treating income 
relating to the Advances as taxable income in 1994), then Vajna will not be     
required to repay any portion of the Reimbursement Payment. The Tax Agreement   
also permits the Company after April 15, 1995 to amend its 1993 tax return with 
Vajna's concurrence to take into account the Advances in 1993; provided,        
however, that Vajna will be subject to the obligation to repay the Reimbursement
Payment in the same manner as set forth above. For purposes of calculating      
cumulative taxable income for the period 1994 through 1997, the effect of any   
post-1997 net operating loss carrybacks will not be taken into account. From    
January 1, 1994 through December 31, 1996, the Company had a cumulative taxable 
loss (treating income relating to the Advances as taxable income in 1994) in    
excess of $20,000,000.                                                          

    In the event Vajna repays all or any portion of the Reimbursement Payment to
the Company, then, until December 31, 2010, the Company will be obligated to    
return to Vajna a portion (up to 100%) of the Reimbursement Payment equal to the
reduction in taxes thereafter realized by the Company to the extent a net       
operating loss in 1994 (or carried back to 1994) is subsequently utilized to    
reduce the Company's tax obligations. Such determination will be made on March  
15, 2011 and any amount to be paid by Vajna as a result will be paid at that    
time.                                                                           

Interest and principal under the Stockholder Note will become due and   
payable on April 30, 1998 unless it has not been finally determined whether     
Vajna will have to pay some or all of the Reimbursement Payment pursuant to the 
Tax Agreement, in which case the maturity date will be extended. The Stockholder
Note, which bears interest at a floating rate equal to the federal short term   
rate plus two percent (2%) per annum, is subject to offset against amounts that 
may be owed to the Company by Vajna pursuant to the Tax Agreement. If at the    
maturity date of the Stockholder Note it has not been finally determined whether
Vajna will have to repay some or all of the Reimbursement Payment, then the     
maturity date of the Stockholder Note will be extended to coincide with the date
the Company receives a tax refund as a result of including the Advances in 1993 
taxable income and not in 1994 taxable income.                                  

  For financial reporting purposes, pursuant to the Company's agreement with
Vajna described above, should the Company not receive the tax benefit as        
described above, the Company may offset the $10,000,000 loan payable to Vajna   
against a receivable from Vajna created to reflect the possibility that the     
Company will not get such benefit. Pursuant to the legal right of offset, such  
loan payable and corresponding receivable are netted against one another for    
financial reporting purposes.                                                   

At December 31, 1996, the Company had a federal net operating loss      
carryforward of approximately $59,406,000 which expires in 2011. Since the      
Company has incurred a tax operating loss of approximately $10,287,000 for the  
six months ended June 30, 1997 and will incur additional operating losses       
through the Effective Time of the Merger, the approximately $21,702,000 of tax  
basis gross income resulting from the Asset Sales will be completely offset by  
such net operating losses and no federal income tax would be payable thereon.   
However, despite the carryover of the federal net operating loss to the current 
year, because of other adjustments in 1997 the Company would be subject to a    
federal alternative minimum tax of approximately $600,000. Moreover, because of 
limitations on the carryover of net operating losses under the California       
Revenue and Taxation Code, the Company currently estimates that there will be a 
California income tax liability for 1997 of between $400,000 and $500,000.      

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INDEX TO FINANCIAL STATEMENTS 
CINERGI PICTURES ENTERTAINMENT INC. 

                                                        [Enlarge/Download Table]

                                                                                                              PAGE   
                                                                                                            ---------
                                                                                                                     
Unaudited Financial Statements:                                                                                      

  Condensed Consolidated Balance Sheets--December 31, 1996 and June 30, 1997...............................       F-2

  Condensed Consolidated Statements of Operations--six months ended June 30, 1996 and 1997.................       F-4

  Condensed Consolidated Statements of Cash Flow--six months ended June 30, 1996                                     
    and 1997...............................................................................................       F-5

  Notes to Condensed Consolidated Financial Statements (Unaudited).........................................       F-7

Audited Financial Statements:                                                                                        

  Report of Independent Auditors...........................................................................      F-13

  Consolidated Balance Sheets--December 31, 1995 and 1996..................................................      F-14

  Consolidated Statement of Operations--years ended December 31, 1994, 1995 and 1996.......................      F-15

  Consolidated Statement of Shareholders' Equity--years ended December 31, 1994, 1995 and 1996.............      F-16

  Consolidated Statements of Cash Flows--years ended December 31, 1994, 1995 and 1996......................      F-17

  Notes to Consolidated Financial Statements...............................................................      F-19

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CINERGI PICTURES ENTERTAINMENT INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                                   DECEMBER 31,                 
                                                                                       1996                     
                                                                                  --------------     JUNE 30,   
                                                                                                       1997     
                                                                                                  --------------
                                                                                                   (UNAUDITED)  
                                                                                                                
                                                     ASSETS                                                     
Cash and cash equivalents........................................................ $   27,364,000  $   30,274,000
Restricted cash..................................................................      5,654,000       3,920,000
Accounts receivable..............................................................     10,850,000       8,946,000
Accounts receivable, related parties.............................................        799,000         874,000
Film costs, less accumulated amortization........................................    103,792,000      68,522,000
Property and equipment, at cost, less accumulated depreciation...................      4,819,000       1,670,000
Other assets.....................................................................      3,270,000       1,890,000
                                                                                  --------------  --------------
    TOTAL ASSETS................................................................. $  156,548,000  $  116,096,000
                                                                                  --------------  --------------
                                                                                  --------------  --------------

                                      LIABILITIES AND STOCKHOLDERS' EQUITY                                      
Liabilities                                                                                                     
  Accounts payable............................................................... $    2,141,000  $    2,798,000
  Accrued interest...............................................................         23,000          22,000
  Accrued residuals & participations.............................................     13,045,000      12,181,000
  Deferred revenue...............................................................     46,568,000      15,272,000
  Capital lease obligation.......................................................        291,000        --      
  Loans payable..................................................................      6,026,000       8,093,000
  Notes and amounts payable to related parties...................................     49,747,000      51,975,000
                                                                                  --------------  --------------
    TOTAL LIABILITIES............................................................ $  117,841,000  $   90,341,000
                                                                                  --------------  --------------
                                                                                  --------------  --------------

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CINERGI PICTURES ENTERTAINMENT INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) 

                                                        [Enlarge/Download Table]

                                                                                    DECEMBER 31,                  
                                                                                        1996                      
                                                                                   --------------     JUNE 30,    
                                                                                                        1997      
                                                                                                   -------------- 
                                                                                                    (UNAUDITED)   
                                                                                                                  
Common Stock with certain redemption features, $.01 par value, 744,682 (1996) and                                 
  0 (1997) shares issued and outstanding less notes receivable from related                                       
  parties amounting to $900,000 (1996) and $0 (1997).............................  $    2,100,000  $     --       

Commitments & Contingencies (Note 4).............................................        --              --       

STOCKHOLDERS' EQUITY                                                                                              
  Preferred Stock, $.01 par value, 5,000,000 shares authorized, no shares issued                                  
    and outstanding..............................................................        --              --       
  Common Stock, $.01 par value, 20,000,000 shares authorized, 13,074,533 (1996)                                   
    and 13,446,874 (1997) shares issued and outstanding..........................         131,000         135,000 
  Additional Paid-in Capital.....................................................      65,548,000      68,095,000 
  Retained Deficit...............................................................     (29,072,000)    (42,025,000)
                                                                                   --------------  -------------- 
    TOTAL STOCKHOLDERS' EQUITY...................................................      36,607,000      26,205,000 

    Receivable from shareholder..................................................        --              (450,000)
                                                                                   --------------  -------------- 
                                                                                   $   36,607,000  $   25,755,000 
                                                                                   --------------  -------------- 
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY.........................................  $  156,548,000  $  116,096,000 
                                                                                   --------------  -------------- 
                                                                                   --------------  -------------- 

NOTE:  The balance sheet at December 31, 1996 has been derived from the audited 
consolidated financial statements at that date but does not include all the     
information and footnotes required by generally accepted accounting principles  
for complete financial statements.                                              

See notes to condensed consolidated financial statements. 

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CINERGI PICTURES ENTERTAINMENT INC. 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                                          SIX MONTHS ENDED        
                                                                                              JUNE 30,            
                                                                                    ----------------------------- 
                                                                                        1996            1997      
                                                                                    -------------  -------------- 
                                                                                                                  
Revenues                                                                                                          
  Feature films.................................................................... $  59,552,000  $   43,539,000 
  Fee income.......................................................................        31,000           1,000 
                                                                                    -------------  -------------- 
                                                                                       59,583,000      43,540,000 

Cost and expenses:                                                                                                
  Amortization of film costs, residuals & participations...........................    58,411,000      44,414,000 
  Selling, general & administrative expenses.......................................     2,879,000       7,838,000 
Provision for impairment of long-lived assets......................................      --             2,665,000 
                                                                                    -------------  -------------- 
Operating loss.....................................................................    (1,707,000)    (11,377,000)

Interest expense...................................................................      (176,000)     (2,393,000)
Interest income....................................................................       530,000         817,000 
                                                                                    -------------  -------------- 
Net loss........................................................................... $  (1,353,000) $  (12,953,000)
                                                                                    -------------  -------------- 
                                                                                    -------------  -------------- 
Net loss per share................................................................. $       (0.10) $        (0.96)
                                                                                    -------------  -------------- 
                                                                                    -------------  -------------- 
Weighted average number of shares outstanding......................................    14,192,000      13,449,000 
                                                                                    -------------  -------------- 
                                                                                    -------------  -------------- 

See notes to condensed consolidated financial statements. 

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CINERGI PICTURES ENTERTAINMENT INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                                          SIX MONTHS ENDED        
                                                                                              JUNE 30,            
                                                                                   ------------------------------ 
                                                                                        1996            1997      
                                                                                   --------------  -------------- 
                                                                                                                  
OPERATING ACTIVITIES                                                                                              

Net loss.......................................................................... $   (1,353,000) $  (12,953,000)

Adjustments to reconcile net loss to net cash provided by (used in) operating                                     
  activities:                                                                                                     
  Depreciation....................................................................        641,000         594,000 
  Provision for impairment of long-lived assets...................................       --             2,665,000 
  Amortization of unearned compensation...........................................        625,000               0 
  Film cost amortization..........................................................     53,481,000      38,885,000 
  Changes in operating assets and liabilities: Accounts receivable................      3,181,000       1,904,000 
  Accounts receivable, related parties............................................       (129,000)        (75,000)
  Film cost additions.............................................................    (57,272,000)     (3,615,000)
  Other assets....................................................................        374,000       1,380,000 
  Accounts payable & accrued interest.............................................        336,000         656,000 
  Accrued residuals and participations payable....................................        551,000        (864,000)
  Deferred revenue................................................................    (14,458,000)    (31,296,000)
                                                                                   --------------  -------------- 
Net cash used in operating activities.............................................    (14,023,000)     (2,719,000)

INVESTING ACTIVITIES                                                                                              

Purchase of property and equipment................................................        (70,000)       (110,000)
                                                                                   --------------  -------------- 
Net cash used in investing activities.............................................        (70,000)       (110,000)

See notes to condensed consolidated financial statements. 

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CINERGI PICTURES ENTERTAINMENT INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                                          SIX MONTHS ENDED        
                                                                                              JUNE 30,            
                                                                                   ------------------------------ 
                                                                                        1996            1997      
                                                                                   --------------  -------------- 
                                                                                                                  
FINANCING ACTIVITIES                                                                                              

Increase in loans payable......................................................... $   29,483,000  $   19,883,000 
Payments on loans payable.........................................................    (31,328,000)    (17,816,000)
Decrease in restricted cash.......................................................       --             1,734,000 
Increase in notes and amounts payable to related parties..........................        421,000       2,646,000 
Payments on notes and amounts payable to related parties..........................       (718,000)       (417,000)
Payments on capital lease obligation..............................................       (921,000)       (291,000)
                                                                                   --------------  -------------- 
Net cash (used in) provided by financing activities...............................     (3,063,000)      5,739,000 
                                                                                   --------------  -------------- 
(Decrease) increase in cash.......................................................    (17,156,000)      2,910,000 

Cash and cash equivalents at beginning of year....................................     29,832,000      27,364,000 
                                                                                   --------------  -------------- 
Cash and cash equivalents at end of period........................................ $   12,676,000  $   30,274,000 
                                                                                   --------------  -------------- 
                                                                                   --------------  -------------- 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                  

Cash paid during the period for:                                                                                  
  Income taxes.................................................................... $       23,000  $       18,400 

SIX MONTHS ENDING JUNE 30, 1997                                                 

  In January 1997, the Company repurchased 372,341 shares of Common Stock of
the Company in exchange for the forgiveness of a note amounting to $450,000.    

SIX MONTHS ENDING JUNE 30, 1996                                                 

Visual effects equipment amounting to $1,580,000 was purchased under a  
capital lease agreement.                                                        

 Accrued interest of $575,000 relating to production loans owed to a third
party was offset against monies owed to the Company by such third party.        

See notes to condensed consolidated financial statements. 

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) 
JUNE 30, 1997 

NOTE 1--PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS              

 The accompanying unaudited condensed consolidated financial statements of
Cinergi Pictures Entertainment Inc. (the "Company" or "CPEI") have been prepared
in accordance with generally accepted accounting principles for interim         
financial information and with the instructions to Form 10-Q and Article 10 of  
Regulation S-X. Accordingly, they do not include all of the information and     
footnotes required by generally accepted accounting principles for complete     
financial statements. In the opinion of management, all adjustments (consisting 
of normal recurring accruals) considered necessary for a fair presentation have 
been included. Operating results for the six months ended June 30, 1997 are not 
necessarily indicative of the results that may be expected for the year ended   
December 31, 1997. For further information, refer to the consolidated financial 
statements and footnotes thereto included in CPEI's Annual Report on Form 10-K  
("Annual Report") filed with the Securities and Exchange Commission.            

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES                                         

NET LOSS PER COMMON SHARE.  The per share data for the six month periods
ended June 30, 1996 and 1997 are based on the weighted average number of common 
and common share equivalents outstanding during the period. Common Stock with   
certain redemption features are considered common share equivalents. Stock      
options and warrants are considered common share equivalents if dilutive.       

  RECENT DEVELOPMENTS.  In February 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 128, Earnings Per Share, which is effective for  
annual and interim financial statements issued for periods ending after December
15, 1997 and early adoption is not permitted. When adopted, the statement will  
require restatement of prior years' earnings per share ("EPS"). SFAS No. 128 was
issued to simplify the standards for calculating EPS previously found in APB No.
15, Earnings Per Share. SFAS No. 128 replaces the presentation of primary EPS   
with a presentation of basic EPS. The new rules also require dual presentation  
of basic and diluted EPS on the face of the statement of operations for         
companies with a complex capital structure. For the Company, basic EPS will     
exclude the dilutive effects of stock options and warrants. Diluted EPS for the 
Company will reflect all potential dilutive securities. Under the provisions of 
SFAS No. 128, basic and diluted EPS would have been the same as the reported    
amounts.                                                                        

NOTE 3--FILM COSTS                                                              

Film costs consist of the following:                                    

                                                        [Enlarge/Download Table]

                                                                DECEMBER 31,     JUNE 30,   
                                                                    1996           1997     
                                                               --------------  -------------
                                                                                            
Released, less amortization................................... $   52,077,000  $  50,659,000
Completed, not released.......................................     37,025,000       --      
In production.................................................      9,373,000     11,028,000
Development...................................................      5,317,000      6,835,000
                                                               --------------  -------------
                                                               $  103,792,000  $  68,522,000
                                                               --------------  -------------
                                                               --------------  -------------

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 
JUNE 30, 1997 

NOTE 4--COMMITMENTS AND CONTINGENCIES                                           

  In December 1995, the U.S. Attorney for the Central District of California
served subpoenas ("Subpoenas") on the Company relating to a grand jury          
investigation of federal tax aspects of various transactions involving Andrew G.
Vajna, President, Chief Executive Officer and Chairman of the Board of Directors
of the Company, and certain other persons and entities (the "Investigation").   
The Company believes the Investigation is focusing primarily on (i) the 1988 and
1989 personal tax returns of Mr. Vajna and the tax returns of certain other     
persons and entities, and (ii) the ongoing audits of Mr. Vajna's tax returns    
since 1990 by the Internal Revenue Service. The Company has not been identified 
by the U.S. Attorney as being a target of the Investigation; however, there can 
be no assurance that the Company's status will not change in the future. The    
Company engaged counsel to represent it in connection with the Investigation and
is in the process of responding to the Subpoenas. Given the uncertainty of the  
Investigation, there is currently no basis upon which to estimate the impact, if
any, the Investigation may have on the Company.                                 

Pursuant to Article Tenth of the Company's Restated Certificate of      
Incorporation, Article V of the Company's Bylaws, indemnity agreements entered  
into between the Company and certain of its officers and directors, and the     
provisions of Section 145 of the Delaware General Corporation Law, the Company  
is advancing the expenses of certain of its employees, officers and directors   
other than Mr. Vajna ("Indemnitees") which they may incur in connection with the
Investigation. As of August 15, 1997, the Company had advanced an aggregate of  
$258,000 on behalf of the Indemnitees. The Indemnitees have undertaken to       
reimburse the Company for their expenses if it is ultimately determined that    
they are not entitled to be indemnified. In addition, Mr. Vajna has undertaken  
to reimburse the Company under certain circumstances with respect to the        
expenses of the Indemnitees. Given the current uncertainty regarding the scope  
and duration of the Investigation and the amount of expenses which may be       
incurred by the Indemnitees in connection with the Investigation, there is no   
basis upon which to estimate the financial impact which the foregoing may have  
on the Company.                                                                 

In February 1997, the Company ceased production on the motion picture,  
BROADWAY BRAWLER after commencement of principal photography and entered into   
discussions with certain parties involved in the production, including Buena    
Vista Pictures Distribution, Inc. ("BVPD"), a performer in the film and an      
affiliate of such individual, regarding settlement of various obligations       
("Shutdown Costs") incurred in connection with the production and shut down of  
the film. As a result of agreements entered into among such parties, on May 15, 
1997, the Company was relieved of the obligation to repay $3,000,000 in advances
which had been made by BVPD as part of funding production of the film, the      
Company transferred its BROADWAY BRAWLER subsidiary and the Company's right in  
the film to the performer's affiliate, the Company was paid an aggregate of     
$11,821,000 representing Shutdown Costs incurred or committed to by the Company 
and payment for the transfer of the production subsidiary and the film rights.  
Of the $11,821,000 paid to the Company, approximately $8,466,000 was immediately
used by the Company to repay the debt incurred under the Credit Facility in     
connection with production of the film, and the Company was indemnified for     
additional Shutdown Costs it may bear, subject to certain limited exceptions and
limitations. The Company was not reimbursed for overhead otherwise allocable to 
production of the film.                                                         

    In April 1997, the Company has settled legal proceedings with Le Film Office
("LFO") which had arisen with respect to a $3,071,000 minimum guarantee advance 
payable by LFO to the Company upon delivery of THE SHADOW CONSPIRACY to LFO     
pursuant to an output arrangement then in effect between the                    

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 
JUNE 30, 1997 

NOTE 4--COMMITMENTS AND CONTINGENCIES (CONTINUED)                               
Company and LFO. In August and September 1996, respectively, LFO obtained first 
a temporary restraining order and then a preliminary injunction in California   
Superior Court, Los Angeles, California (the "Court") preventing the Company,   
the international sales company handling the international distribution of THE  
SHADOW CONSPIRACY, and one of the lenders under the Company's credit facility,  
from drawing down the letter of credit securing LFO's minimum guarantee advance 
on the basis of LFO's allegations that the Company failed to give proper notice 
to LFO for extending the delivery date of THE SHADOW CONSPIRACY. The parties    
agreed to stay the Court proceedings and submit the dispute to binding          
arbitration by the American Film Marketing Association which occurred on April  
17, 1997. On April 18, 1997 and before a decision could be rendered in the      
arbitration, the Company and LFO entered into a settlement agreement whereby the
parties agreed to reduce the minimum guarantee advance from $3,071,000 to       
$2,300,000, which was subsequently paid on May 12, 1997 by LFO (which will      
distribute the film in France).                                                 

   Trial is scheduled for August 25, 1997, in Los Angeles Superior Court, in a
lawsuit by Laurence Fishburne and the LOA Productions, Inc., Mr. Fishburne's    
loan-out corporation, against the Company, a subsidiary of the Company and      
Randolph M. Paul, Senior Vice President, Business Affairs and a Director of the 
Company. The action, for breach of oral contract, fraud and deceit, and civil   
conspiracy was originally filed on July 11, 1994. The plaintiffs claim that the 
Company entered into an oral contract for Mr. Fishburne to appear in the motion 
picture, DIE HARD WITH A VENGEANCE, but repudiated the contract the following   
day. Plaintiffs are claiming damages of $1,750,000, representing the fixed      
compensation to which they alleged they are entitled, additional compensatory   
damages of up to $350,000 and general and punitive damages. The Company believes
it has meritorious defenses to the allegations.                                 

The Company is a party to various other legal proceedings arising in the
ordinary course of its business. The Company does not currently believe that any
such proceedings will have a material adverse effect on the Company's operations
or financial condition.                                                         

On April 3, 1997, the Company entered into a Purchase and Sale Agreement
(the "Library Sale Agreement") with Walt Disney Pictures and Television, a      
subsidiary of The Walt Disney Company, to sell to Walt Disney Pictures and      
Television substantially all of the films in the Company's motion picture       
library and certain other assets (referred to herein as the "Film Library Sale";
"Disney" is used herein to refer to Walt Disney Pictures and Television and/or  
its affiliates, including The Walt Disney Company, as applicable). In exchange  
for the assets being sold to Disney, Disney has agreed to relinquish its equity 
interest in the Company (555,556 shares of the Company's Common Stock and a     
warrant to purchase 150,000 shares of the Company's Common Stock at an exercise 
price of $9.00 per share) and cancel its outstanding loans and outstanding      
interest to the Company (approximately $39,209,000 as of June 30, 1997). In     
addition, Disney has agreed to assume with respect to the films and rights      
therein being sold to Disney all residuals and participation obligations, as    
well as all scheduled obligations relating to the Company's existing            
exploitation agreements. Disney also agreed to assume the outstanding debt under
the Company's credit facility relating to the soon to be completed AN ALAN      
SMITHEE FILM (one of the films included in the Film Library Sale), up to a      
maximum amount of $10,000,000, and the Company agreed to transfer to Disney all 
minimum guarantee payments and any overages paid or to be paid with respect to  
such film. The Company and Disney, however, have agreed in principle to change  
such arrangement, subject to preparation and execution of an appropriate        
amendment to the Library Sale Agreement. Under the proposed amendment,          

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 
JUNE 30, 1997 

NOTE 4--COMMITMENTS AND CONTINGENCIES (CONTINUED)                               
Disney would pay $3,950,000 to the Company upon delivery of AN ALAN SMITHEE FILM
to Disney (which amount would be used by the Company to pay off a portion of the
outstanding balance under the Company's credit facility) and, in the event the  
Film Library Sale is consummated, the Company may be obligated to pay Disney an 
amount currently estimated by the Company to be approximately $425,000. See     
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations--Liquidity and Capital Resources" for additional information         
regarding this proposed amendment to the Library Sale Agreement.                

The film library being sold to Disney includes primarily all of the     
Company's rights (except minimum guarantee payments) to the following eleven    
motion pictures: MEDICINE MAN, TOMBSTONE, RENAISSANCE MAN, COLOR OF NIGHT, JUDGE
DREDD, THE SCARLET LETTER, NIXON, EVITA (excluding soundtrack rights), AMANDA,  
THE SHADOW CONSPIRACY, and AN ALAN SMITHEE FILM. Disney will also retain        
overages otherwise payable to the Company by Disney after January 1, 1997 with  
respect to certain distribution rights to DIE HARD WITH A VENGEANCE previously  
licensed to Disney. In addition, upon consummation of the Film Library Sale, the
Company's twenty-five film domestic distribution arrangement with BVPD, under   
which nine films have been delivered, will be terminated.                       

 The Film Library Sale is subject to numerous conditions, including, among
other things, completion of certain due diligence by Disney, expiration of any  
applicable Hart-Scott-Rodino waiting period, and the approval of the Company's  
stockholders. The Library Sale Agreement and related Film Library Sale may also 
be terminated by the Company or Disney in certain circumstances, including,     
among other things, upon failure to consummate the Film Library Sale by         
September 15, 1997. The Company and Disney have agreed in principle to amend the
Library Sale Agreement to change such date to a date in the fourth quarter of   
1997, however, no amendment has been executed nor has a different date been     
agreed to as of August 19, 1997. Members of the Company's Board of Directors who
are also stockholders in the Company have agreed to vote their shares in favor  
of the transaction in accordance with the terms of the Library Sale Agreement.  

On April 3, 1997, the Company also announced that it did not presently  
intend to commence production on any additional motion pictures (although the   
Library Sale Agreement does not preclude the Company, pending consummation of   
the Film Library Sale, from commencing production on films that would not be    
distributed by Disney) and that it was in the process of considering its        
alternatives assuming consummation of the Film Library Sale to Disney. See "Note
6--Subsequent Events and Other Matters" regarding certain additional            
announcements by the Company and agreements entered into by the Company after   
the quarter ended June 30, 1997.                                                

   The Company has a "first-look" arrangement with Oliver Stone and certain of
his affiliated entities pursuant to which Mr. Stone submits to the Company all  
theatrical motion picture projects owned or controlled by Mr. Stone for the     
Company's development and consideration of possible production and, as          
consideration for Mr. Stone's submitting such projects to the Company, the      
Company pays certain amounts annually to Mr. Stone for overhead and development.
The Walt Disney Company has reimbursed the Company for all amounts payable to   
Mr. Stone through February 10, 1997. However, pursuant to the Library Sale      
Agreement, the Company is generally responsible for all payments to Mr. Stone   
from such date through expiration of the arrangement on February 10, 1998. The  
Company currently estimates that                                                

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 
JUNE 30, 1997 

NOTE 4--COMMITMENTS AND CONTINGENCIES (CONTINUED)                               
the payments due under Mr. Stone's agreement from June 30, 1997 through         
expiration of the arrangement in February 1998 will be approximately $1,570,000.

    In 1996, the Company and Hollywood Pictures Company ("HPC"), a subsidiary of
The Walt Disney Company, entered into a Financing and Distribution Agreement    
whereby the Company is financially obligated to pay to HPC the lesser of 50% of 
the cost of the motion picture tentatively entitled "DEEP RISING" or $22,500,000
(the "Cinergi Amount"), in exchange for (i) a 50% equity participation in such  
motion picture and (ii) a sales fee for international distribution of such      
motion picture. Pursuant to the Library Sale Agreement, upon consummation of the
Film Library Sale, the Company will no longer be obligated to pay the Cinergi   
Amount, will relinquish the equity participation and sales fee, and will no     
longer serve as sales agent with respect to such motion picture.                

NOTE 5--PROVISION FOR IMPAIRMENT OF LONG-LIVED ASSETS                           

    During 1996, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived 
Assets to Be Disposed Of" (SFAS No. 121). In April 1997, the Company announced  
that (i) the Company had entered into the Library Sale Agreement with Disney to 
sell to Disney substantially all of the films in the Company's motion picture   
library and certain other assets, (ii) the Company did not presently intend to  
commence production of any additional motion pictures, and (iii) the Company was
considering its alternatives assuming consummation of the Film Library Sale. The
Company's visual effects assets are not included in the Film Library Sale. In   
light of the foregoing and due to operating losses of the special effects       
facility, the Company determined that a write-down to net realizable value of   
the visual effects assets was required under SFAS No. 121. Accordingly, the     
Company recognized a non-cash charge of $2,665,000 at June 30, 1997 for the     
impairment of the visual effects long-lived assets. The provision for impairment
was calculated based upon the excess of the carrying amount of the visual       
effects assets over the estimated fair value of the visual effects assets.      

NOTE 6--SUBSEQUENT EVENTS AND OTHER MATTERS                                     

On July 15, 1997, the Company entered into an Assignment Agreement (the 
"Assignment Agreement") with Twentieth Century Fox Film Corporation ("Fox") to  
sell to Fox, subject to certain conditions, the Company's rights in DIE HARD    
WITH A VENGEANCE in exchange for $11,250,000 in cash. The Company owns DIE HARD 
WITH A VENGEANCE with Fox. Fox controls all sequel rights to the film, as well  
as distribution right to the film in the United States, Canada and Japan (and   
certain additional minor territories), and worldwide in certain ancillary media.
Pursuant to the Assignment Agreement, the Company will relinquish the right to  
receive overages from those territories and media for which Fox controls        
distribution rights.                                                            

  Fox will receive the Company's rights in DIE HARD WITH A VENGEANCE subject
to the terms of the Company's existing exploitation agreements relating to such 
rights, including the Company's agreements with Disney. The Company, which      
controls distribution rights to DIE HARD WITH A VENGEANCE in international      
territories other than those for which Fox controls distribution rights, has    
previously granted Disney distribution rights to the film in a portion of those 
international territories. Pursuant to the Library Sale Agreement, the Company  
has agreed, upon consummation of the Film Library Sale, to relinquish overages  
payable by Disney after January 1, 1997 with respect to DIE HARD WITH A         
VENGEANCE. However, pursuant to the Assignment Agreement, the Company will still
be entitled to receive any overages under its existing                          

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 
JUNE 30, 1997 

NOTE 6--SUBSEQUENT EVENTS AND OTHER MATTERS (CONTINUED)                         
exploitation agreements which relate to DIE HARD WITH A VENGEANCE and are with  
parties other than Disney and Fox.                                              

 Pursuant to the Assignment Agreement, Fox will continue to be responsible
for the payment of residuals relating to distribution of the film in those      
territories for which Fox currently controls distribution rights, and, as the   
Company's existing exploitation agreements expire (including the Company's      
agreements with Disney) and the distribution rights in those territories revert 
to Fox, Fox will become responsible for the payment of residuals in the         
applicable territories covered by any exploitation agreements. The Company,     
however, will continue to be responsible for all participations due to profit   
participants in the film (other than those associated with distribution of the  
film in the territories licensed to Disney, for which Disney is responsible).   
The Company currently anticipates, subject to, among other things, actual future
revenues generated by the film, that the Company's residuals and participation  
obligations with respect to such film will not exceed approximately $1,000,000. 

The sale of the Company's rights in DIE HARD WITH A VENGEANCE to Fox is 
subject to several conditions including, among other things, consummation of the
Film Library Sale to Disney and applicable approval of the Company's            
stockholders. If the Library Sale Agreement terminates, the Assignment Agreement
will automatically also terminate.                                              

In June 1997, the Company instructed its financial advisor, Jefferson   
Capital Group, Ltd., to solicit cash bids from qualified buyers for the purchase
of the Company's slate of approximately twenty wholly-owned development         
projects. The Company received an initial bid for the development projects of   
$4,750,000 (plus the reimbursement of certain of the Company's costs related to 
such projects) from Mr. Vajna, President, Chief Executive Officer and Chairman  
of the Board of Directors of the Company. Additional qualified bids were        
required to be at least fifteen percent higher than the initial bid and         
submitted to the Company by noon, eastern time, on August 19, 1997. As no       
additional qualified bids were received by the bidding deadline, Mr. Vajna was  
the prevailing bidder and, subject to consummation of the Film Library Sale and 
the transactions contemplated by the Assignment Agreement, will purchase such   
development projects for his initial bid. Not included in the slate of          
development projects for which bids were initially solicited are approximately  
twenty development projects funded by the Company under its "first-look"        
arrangement with Oliver Stone and certain of his affiliated entities. In July   
1997, the Company instructed Jefferson Capital Group, Ltd. to solicit cash bids 
from qualified buyers with respect to five such projects which are being offered
for sale by the Company subject to certain rights of Stone as a producer and/or 
director attached to the projects. Mr. Vajna has not submitted a bid for such   
five projects. The bidding deadline for such projects had not expired as of the 
date of the filing of this Report. Oliver Stone and his affiliates have the     
right to arrange with a third party for production of the other projects        
developed under the "first-look" arrangement subject to certain rights of the   
Company to elect to further develop or produce such projects in certain         
circumstances. In the event any such projects are produced by Stone, Stone must 
reimburse the related actual costs (plus interest) previously incurred by the   
Company and Disney (which funded the first-look arrangement with Stone through  
February 1997).                                                                 

   On June 24, 1997, the Company announced that the Company, through a Special
Committee of its Board of Directors, had commenced negotiations with Mr. Vajna  
with respect to the terms of a merger that would follow the Film Library Sale   
and the sale of all or a portion of the Company's other assets (including the   
Company's rights with respect to DIE HARD WITH A VENGEANCE).                    

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REPORT OF INDEPENDENT AUDITORS

Board of Directors                                                              
Cinergi Pictures Entertainment Inc.                                             

We have audited the accompanying consolidated balance sheets of Cinergi 
Pictures Entertainment Inc. and subsidiaries as of December 31, 1995 and 1996,  
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.   
These financial statements are the responsibility of the Company's management.  
Our responsibility is to express an opinion on these financial statements based 
on our audits.                                                                  

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

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cinergi        
Pictures Entertainment Inc. and subsidiaries at December 31, 1995 and 1996, and 
the consolidated results of their operations and their cash flows for each of   
the three years in the period ended December 31, 1996 in conformity with        
generally accepted accounting principles.                                       

                     Ernst & Young LLP

Los Angeles, California                                                         
April 11, 1997                                                                  

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CINERGI PICTURES ENTERTAINMENT INC. 
CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                                           DECEMBER 31,          
                                                                                  ------------------------------ 
                                                                                       1995            1996      
                                                                                  --------------  -------------- 
                                                                                                                 
ASSETS (Note 5)                                                                                                  
Cash and cash equivalents........................................................ $   29,832,000  $   27,364,000 
Restricted cash (Note 1).........................................................       --             5,654,000 
Accounts receivable (including $745,000 (1995) and $3,074,000 (1996) from a                                      
  related party).................................................................      7,494,000      10,850,000 
Accounts receivable, related parties (Note 7)....................................        682,000         799,000 
Film costs, less accumulated amortization (Note 3)...............................    160,756,000     103,792,000 
Property and equipment, at cost, less accumulated depreciation (Note 4)..........      4,381,000       4,819,000 
Other assets.....................................................................      3,112,000       3,270,000 
                                                                                  --------------  -------------- 
    Total assets................................................................. $  206,257,000  $  156,548,000 
                                                                                  --------------  -------------- 
                                                                                  --------------  -------------- 

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                             

Liabilities:                                                                                                     
  Accounts payable............................................................... $    1,785,000  $    2,141,000 
  Accrued interest...............................................................         81,000          23,000 
  Accrued residuals and participations...........................................      8,781,000      13,045,000 
  Deferred revenue (including $44,949,000 (1995) and $29,582,000 (1996) from a                                   
    related party) (Notes 2 and 10)..............................................     68,791,000      46,568,000 
  Loans payable (Note 5).........................................................     41,578,000       6,026,000 
  Capital lease obligation.......................................................       --               291,000 
  Notes and amounts payable to related parties (Note 7)..........................     31,624,000      49,747,000 
                                                                                  --------------  -------------- 
    Total liabilities............................................................    152,640,000     117,841,000 

Common Stock, with certain redemption features, $.01 par value, 1,117,023 (1995)                                 
  and 744,692 (1996) shares issued and outstanding, less notes receivable from                                   
  related parties amounting to $1,350,000 (1995) and $900,000 (1996) (Note 9)....      1,900,000       2,100,000 
Commitments and contingencies (Note 10)                                                                          

Stockholders' equity (Notes 1 and 9):                                                                            
  Preferred Stock, $.01 par value, 5,000,000 shares authorized, no shares                                        
    issued.......................................................................       --              --       
  Common Stock, $.01 par value, 20,000,000 shares authorized, 13,075,000 (1995)                                  
    and 13,075,000 (1996) shares issued and outstanding..........................        131,000         131,000 
  Additional paid-in capital.....................................................     64,753,000      65,548,000 
  Retained deficit...............................................................    (13,167,000)    (29,072,000)
                                                                                  --------------  -------------- 
Total stockholders' equity.......................................................     51,717,000      36,607,000 
                                                                                  --------------  -------------- 
    Total liabilities and stockholders' equity................................... $  206,257,000  $  156,548,000 
                                                                                  --------------  -------------- 
                                                                                  --------------  -------------- 

See accompanying notes. 

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CINERGI PICTURES ENTERTAINMENT INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                                            YEAR ENDED DECEMBER 31,             
                                                                 ---------------------------------------------- 
                                                                      1994            1995            1996      
                                                                 --------------  --------------  -------------- 
                                                                                                                
Revenues:                                                                                                       
  Feature films (including $43,207,000 (1994), $57,808,000                                                      
    (1995) and $43,454,000 (1996) from a related party)......... $  108,517,000  $  192,582,000  $  132,940,000 
  Fee income (Note 6)...........................................        511,000         298,000          60,000 
                                                                 --------------  --------------  -------------- 
                                                                    109,028,000     192,880,000     133,000,000 

Costs and expenses:                                                                                             
  Amortization of film costs, residuals and participations......    103,422,000     204,544,000     139,612,000 
  Selling, general and administrative expense (including                                                        
    $102,000 (1994), $93,000 (1995) and $274,000 (1996) from                                                    
    related parties) (Notes 7 and 10)...........................      2,694,000       5,098,000       9,752,000 
                                                                 --------------  --------------  -------------- 
Operating income (loss).........................................      2,912,000     (16,762,000)    (16,364,000)

Interest expense (including $91,000 (1994), $61,000 (1995) and                                                  
  $323,000 (1996) from related parties) Notes 5 and 7)..........       (281,000)       (241,000)       (448,000)
Interest income (including $81,000 (1994), $85,000 (1995) and                                                   
  $98,000 (1996) from a related party) (Note 7).................        264,000         941,000         907,000 
                                                                 --------------  --------------  -------------- 
Net income (loss)............................................... $    2,895,000  $  (16,062,000) $  (15,905,000)
                                                                 --------------  --------------  -------------- 
                                                                 --------------  --------------  -------------- 
Net income (loss) per share.....................................           $.30          $(1.23)         $(1.12)
                                                                 --------------  --------------  -------------- 
                                                                 --------------  --------------  -------------- 
Weighted average number of shares outstanding...................      9,494,000      13,025,000      14,169,000 
                                                                 --------------  --------------  -------------- 
                                                                 --------------  --------------  -------------- 

See accompanying notes. 

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CINERGI PICTURES ENTERTAINMENT INC. 
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY 

                                                        [Enlarge/Download Table]

                                              COMMON STOCK          ADDITIONAL       RETAINED                    
                                        ------------------------     PAID-IN        (DEFICIT)                    
                                           SHARES       AMOUNT       CAPITAL         EARNINGS         TOTAL      
                                        ------------  ----------  --------------  --------------  -------------- 
                                                                                                                 
Balance at December 31, 1993...........    6,383,000  $   64,000  $   10,256,000  $  (28,826,000) $  (18,506,000)
  Additional capital contribution......      --           --          33,661,000        --            33,661,000 
  Distribution.........................      --           --            --            (3,300,000)     (3,300,000)
  Reclassification of Subchapter S                                                                               
    retained deficit...................      --           --         (32,126,000)     32,126,000        --       
  Issuance of Common Stock in initial                                                                            
    public offering....................    3,692,000      37,000      29,647,000        --            29,684,000 
  Net income...........................      --           --            --             2,895,000       2,895,000 
                                        ------------  ----------  --------------  --------------  -------------- 
Balance at December 31, 1994...........   10,075,000     101,000      41,438,000       2,895,000      44,434,000 
  Issuance of Common Stock in public                                                                             
    offering...........................    3,000,000      30,000      23,315,000        --            23,345,000 
  Net loss.............................      --           --            --           (16,062,000)    (16,062,000)
                                        ------------  ----------  --------------  --------------  -------------- 
Balance at December 31, 1995...........   13,075,000     131,000      64,753,000     (13,167,000)     51,717,000 
Repurchase of Common Stock, with                                                                                 
  certain redemption features..........      --           --             795,000        --               795,000 
  Net loss.............................      --           --            --           (15,905,000)    (15,905,000)
                                        ------------  ----------  --------------  --------------  -------------- 
Balance at December 31, 1996...........   13,075,000  $  131,000  $   65,548,000  $  (29,072,000) $   36,607,000 
                                        ------------  ----------  --------------  --------------  -------------- 
                                        ------------  ----------  --------------  --------------  -------------- 

See accompanying notes. 

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CINERGI PICTURES ENTERTAINMENT INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                            YEAR ENDED DECEMBER 31,              
                                                                ------------------------------------------------ 
                                                                     1994             1995             1996      
                                                                ---------------  ---------------  -------------- 
                                                                                                                 
OPERATING ACTIVITIES                                                                                             
Net income (loss).............................................. $     2,895,000  $   (16,062,000) $  (15,905,000)
Adjustments to reconcile net income (loss) to net cash (used                                                     
  in) provided by operating activities:                                                                          
  Depreciation.................................................         402,000          731,000       1,251,000 
  Amortization of unearned compensation........................       1,250,000          650,000       1,076,000 
  Amortization of film costs...................................      94,246,000      200,591,000     129,843,000 
  Changes in operating assets and liabilities:                                                                   
    Accounts receivable........................................     (20,074,000)      12,939,000      (3,356,000)
    Accounts receivable, related parties.......................        (704,000)         267,000        (198,000)
    Film costs additions.......................................    (202,965,000)    (137,520,000)    (73,454,000)
    Other assets...............................................      (2,577,000)         227,000        (158,000)
    Accounts payable and accrued interest......................       2,223,000       (1,219,000)        298,000 
    Accrued residuals and participations.......................       7,925,000          311,000       4,264,000 
    Deferred revenue...........................................      10,406,000       15,285,000     (22,223,000)
                                                                ---------------  ---------------  -------------- 
Net cash (used in) provided by operating activities............    (106,973,000)      76,200,000      21,438,000 

INVESTING ACTIVITIES                                                                                             
Purchase of property and equipment.............................      (1,402,000)      (2,434,000)       (587,000)
                                                                ---------------  ---------------  -------------- 
Net cash used in investing activities..........................      (1,402,000)      (2,434,000)       (587,000)

FINANCING ACTIVITIES                                                                                             
Increase in loans payable......................................     140,748,000       77,380,000      37,899,000 
Payments on loans payable......................................     (69,622,000)    (146,709,000)    (73,451,000)
Decrease (Increase) in restricted cash.........................         500,000        --             (5,654,000)
Increase in notes and amounts payable to related parties.......      20,496,000       16,291,000      19,493,000 
Payments on notes and amounts payable to related parties.......     (12,106,000)     (16,906,000)       (795,000)
Proceeds from public offering..................................      29,684,000       23,345,000        --       
Payments on capital lease obligations..........................       --               --               (811,000)
                                                                ---------------  ---------------  -------------- 
Net cash provided by (used in) financing activities............     109,700,000      (46,599,000)    (23,319,000)
                                                                ---------------  ---------------  -------------- 
Increase (Decrease) in cash....................................       1,325,000       27,167,000      (2,468,000)
Cash and cash equivalents at beginning of year.................       1,340,000        2,665,000      29,832,000 
                                                                ---------------  ---------------  -------------- 
Cash and cash equivalents at end of year....................... $     2,665,000  $    29,832,000  $   27,364,000 
                                                                ---------------  ---------------  -------------- 
                                                                ---------------  ---------------  -------------- 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                 
Cash paid during the year for:                                                                                   

  Interest (net of amount capitalized)......................... $     --         $     --         $      808,000 
                                                                ---------------  ---------------  -------------- 
                                                                ---------------  ---------------  -------------- 
  Income taxes................................................. $         2,000  $        60,000  $       23,000 
                                                                ---------------  ---------------  -------------- 
                                                                ---------------  ---------------  -------------- 

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CINERGI PICTURES ENTERTAINMENT INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) 

SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING AND FINANCING ACTIVITIES           

1994:                                                                           

 Notes and amounts payable to related parties decreased by $33,661,000 and
additional paid-in capital increased by $33,661,000 due to a capital            
contribution by Mr. Vajna, Valdina Corporation N.V. (Valdina) and Valdi         
Corporation N.V. (Valdi) (See Note 1).                                          

Notes and amounts payable to related parties increased by $3,300,000 and
retained deficit decreased by $3,300,000 due to a distribution to Valdina (see  
Note 1).                                                                        

 Two executive officers and a law firm engaged by the Company purchased an
aggregate of 1,117,000 shares of Common Stock of the Company in exchange for    
three notes totaling $1,350,000 (see Note 9).                                   

1995:                                                                           

In 1995, a term loan of $7,500,000 and accrued interest amounting to    
$585,000 for one motion picture was canceled as consideration for the Company's 
sale to Buena Vista Pictures Distribution, Inc. (BVPD) of an equity interest in 
the picture.                                                                    

    During 1995, the Company and BVPD mutually agreed to reduce a term loan from
BVPD relating to one motion picture by $4,655,000 by offsetting the present     
value of certain funds due to the Company from BVPD.                            

1996:                                                                           

   In December 1996, the Company repurchased 372,341 shares of Common Stock of
the Company from a former executive officer through the forgiveness of a note   
and accrued interest due from the former executive officer amounting to         
$531,000.                                                                       

    During 1996, the Company and BVPD mutually agreed to reduce a term loan from
BVPD relating to one motion picture by $575,000 by offsetting certain funds due 
to the Company from BVPD.                                                       

   During 1996, the Company entered into a capital lease agreement for special
effects equipment amounting to approximately $1,102,000 (see Note 10).          

See accompanying notes. 

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996 

1.  BASIS OF FINANCIAL STATEMENT PRESENTATION AND ORGANIZATION                  

  The accompanying consolidated financial statements include the accounts of
Cinergi Pictures Entertainment Inc. and subsidiaries (the Company). The Company 
is engaged in the business of developing, financing, producing and licensing    
feature-length motion pictures worldwide. All significant intercompany balances 
and transactions have been eliminated.                                          

In January 1994, Andrew G. Vajna, Chairman of the Board of Directors,   
President and Chief Executive Officer of the Company, contributed to the Company
all of the Common Stock of certain domestic corporations which were previously  
100% owned by Mr. Vajna. Further, in January 1994, the Company acquired all the 
outstanding Common Stock of the foreign corporation from Valdina, a company     
indirectly beneficially owned 49.9% by Mr. Vajna, in consideration for 18 shares
(pre-split) of Company Common Stock and a note in the principal amount of       
$3,300,000 (of which $600,000 in principal amount was paid) at 6% due January   
17, 1995. The maturity date of the note was subsequently extended until July 17,
1996, from which date the promissory note was due on demand until January 17,   
1997 and is currently due and payable in its entirety. The note bears interest  
at the rate of 7% per annum after January 17, 1996. At December 31, 1995 and    
1996, accrued interest relating to this obligation amounted to $396,000 and     
$655,000, respectively.                                                         

 Mr. Vajna has entered into an employment agreement with the Company for a
five year term commencing January 1, 1994, pursuant to which he will receive    
base compensation of $1,000,000 per year. In addition, Mr. Vajna may also       
receive commencement fees and producer's performance fees with respect to motion
pictures produced by the Company.                                               

2.  SIGNIFICANT ACCOUNTING POLICIES                                             

USE OF ESTIMATES                                                                

The preparation of financial statements in conformity with generally    
accepted accounting principles requires management to make estimates and        
assumptions that affect the amounts reported in the financial statements and    
accompanying notes. Actual results could differ from those estimates.           

REVENUE RECOGNITION                                                             

The Company recognizes revenues in accordance with the provisions of    
Statement of Financial Accounting Standards (FAS) No. 53. Minimum guaranteed    
amounts from theatrical exhibition and revenues from home video, television and 
pay television license agreements are recognized when the applicable license    
period begins for each motion picture and such motion picture is made available 
to the distributor for exploitation pursuant to the terms of the applicable     
license agreement. Amounts in excess of the minimum guarantee under such license
agreements and other amounts (where no minimum guarantee was given) are         
recognized when earned. Accounts receivable represent amounts due from domestic 
and international distributors. Cash collected in advance of the time of        
availability is recorded as deferred revenue.                                   

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                 
  Once completed, a typical theatrical film will generally be made available
for licensing as follows:                                                       

                                                        [Enlarge/Download Table]

                                                               MONTHS                         
                                                            AFTERINITIAL                      
                                                              DOMESTIC                        
                                                             THEATRICAL         APPROXIMATE   
MARKETPLACE                                                    RELEASE        RELEASE PERIOD  
--------------------------------------------------------  -----------------  -----------------
                                                                                              
Domestic theatrical.....................................                          4 - 6 months
International theatrical................................                         6 - 12 months
Domestic home video (initial release)...................       4 - 6 months           6 months
Domestic pay-per-view...................................       6 - 9 months           2 months
International video (initial release)...................      6 - 12 months      6 - 12 months
Domestic pay television.................................     12 - 15 months          18 months
International television (pay or free)..................     18 - 24 months     12 - 36 months
Domestic free television*...............................     30 - 33 months        1 - 5 years

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

* Includes network, barter syndication, syndication and basic cable.            

FILM COSTS                                                                      

Costs incurred in connection with the acquisition of story rights, the  
development of stories, production, print and advertising costs (which benefit  
future periods) and allocable interest and production overhead are capitalized  
as film costs. Film costs are stated at the lower of cost or net realizable     
value. The individual film forecast method is used to amortize film costs. Costs
accumulated in the production of a film are amortized in the proportion that    
gross revenues realized bear to management's estimate of the total gross        
revenues expected to be received. Estimated liabilities for residuals and       
participations are accrued as the Company amortizes film cost inventories and   
expensed in the same manner as film cost inventories. Revenue estimates on a    
film-by-film basis are reviewed periodically by management and are revised, if  
warranted, based upon management's appraisal of current market conditions.      
Unamortized film costs are written down to net realizable value based on this   
appraisal, where applicable.                                                    

PROPERTY AND EQUIPMENT                                                          

   Property and equipment are carried at cost and are depreciated or amortized
over their estimated useful lives (which range from 5 to 10 years) using the    
following methods:                                                              

                                                                [Download Table]
                                                                     
                                                     Double declining
Editing equipment..................................  balance         
                                                     Double declining
Office furniture and equipment.....................  balance         
                                                     Double declining
Computer equipment.................................  balance         
Computer software..................................  Straight-line   
Vehicles...........................................  Straight-line   
Leasehold improvements.............................  Straight-line   
Special effects equipment..........................  Straight-line   

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                 
INCOME TAXES                                                                    

    The Company records its income tax provision in accordance with Statement of
Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes."
Deferred income taxes are provided on transactions which are reported in the    
financial statements in different periods than they are for income tax purposes.

NET INCOME (LOSS) PER COMMON SHARE                                              

 The per share data are based on the weighted average number of common and
common share equivalents outstanding during the period. Common Stock with       
certain redemption features are considered common share equivalents. Stock      
options and warrants are considered common share equivalents if dilutive. Fully 
diluted amounts for each period do not materially differ from the amounts       
presented herein.                                                               

FOREIGN CURRENCY TRANSLATION                                                    

All of the Company's transactions are expressed in U.S. dollars.        

CONCENTRATION OF CREDIT RISKS AND CASH EQUIVALENTS                              

  The Company licenses various rights in its motion pictures to distributors
throughout the world. Generally, upon the Company's delivery of the picture to  
the distributor, the minimum guarantee is received in full. In most instances,  
letters of credit secure the payment of minimum guarantees from international   
distributors prior to delivery.                                                 

  The Company places its temporary cash investments with high credit quality
financial institutions and mutual funds. Generally, the investments made mature 
within 30 days and therefore are subject to little risk. The Company has not    
incurred any losses related to these investments.                               

As of December 31, 1995 and 1996, the Company had no significant        
concentration of credit risk.                                                   

FAIR VALUE OF FINANCIAL INSTRUMENTS                                             

At December 31, 1996, the carrying value of the Company's financial     
instruments, which consist primarily of loans payable, approximates the fair    
value thereof.                                                                  

RESTRICTED CASH                                                                 

 At December 31, 1996, restricted cash represents cash collections made by
the Company on behalf of BVPD (see Note 10) and cash subject to restrictions    
relating to film production in connection with the Company's distribution       
agreement with BVPD.                                                            

STOCK BASED COMPENSATION                                                        

  Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting
for Stock Based Compensation", encourages, but does not require companies to    
recognize expense for stock-based awards based on their fair value on the date  
of grant. The Company has elected to continue to account for its stock          
compensation arrangements under the provision of APB 25, "Accounting for Stock  
Issued to Employees."                                                           

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                 
Accordingly, compensation expense for stock compensation arrangements" is       
measured as the excess, if any, of the quoted market price of the Company's     
stock at the date of the grant over the amount the recipient of the stock award 
must pay to acquire the stock. If the Company measured compensation expense     
using the fair value method prescribed in FAS 123, there would be no material   
impact on reported net loss or loss per share.                                  

3.  FILM COSTS                                                                  

Film costs consist of the following:                                    

                                                        [Enlarge/Download Table]

                                                                     DECEMBER 31,          
                                                           --------------------------------
                                                                 1995              1996    
                                                           ----------------    ------------
                                                                                           
Released, less amortization............................... $    101,238,000(1) $ 52,077,000
Completed, not released...................................        --             37,025,000
In production.............................................       53,545,000       9,373,000
Development...............................................        5,973,000       5,317,000
                                                           ----------------    ------------
                                                           $    160,756,000    $103,792,000
                                                           ----------------    ------------
                                                           ----------------    ------------

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

(1) Includes approximately $43 million in connection with the motion picture    
"Nixon", which was released in December 1995 for which no revenues were 
recognized in 1995.                                                     

Interest capitalized into film costs during the years ended December 31,
1995 and 1996 totaled $10,865,000 and $6,156,000, respectively. Based on the    
Company's estimate of future revenues, approximately 92% of unamortized released
film costs at December 31, 1996 will be amortized during the three years ending 
December 31, 1999.                                                              

4.  PROPERTY AND EQUIPMENT                                                      

Property and equipment consist of the following:                        

                                                        [Enlarge/Download Table]

                                                                           DECEMBER 31,       
                                                                    --------------------------
                                                                        1995          1996    
                                                                    ------------  ------------
                                                                                              
Editing equipment.................................................  $    130,000  $    130,000
Office furniture and equipment....................................       765,000       769,000
Computer equipment and software...................................       371,000       433,000
Vehicles..........................................................       260,000       260,000
Leasehold improvements............................................       932,000       932,000
Special effects equipment, including $1,102,000 in equipment under                            
  capital lease (1996)............................................     3,555,000     5,179,000
                                                                    ------------  ------------
                                                                       6,013,000     7,703,000
Less accumulated depreciation and amortization....................     1,632,000     2,884,000
                                                                    ------------  ------------
                                                                    $  4,381,000  $  4,819,000
                                                                    ------------  ------------
                                                                    ------------  ------------

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

5.  LOANS PAYABLE                                                               

  The Company entered into a Credit, Security, Pledge and Guaranty Agreement
dated as of August 16, 1994 with Chase Manhattan Bank (Chase) and a syndicate of
lenders (collectively, the Lenders) which provides the Company with a revolving 
credit facility initially in the amount of $150,000,000, but which has been     
reduced to $50,000,000 on March 31, 1997 (the Credit Facility). Under the Credit
Facility, the Lenders have committed to make loans available until August 31,   
1997, although the Lenders will continue to make loans to finance any motion    
picture in which principal photography has commenced or that has otherwise      
satisfied certain conditions prior to such date. The Credit Facility, which is  
secured by substantially all of the assets of the Company (including $5,000,000 
of "key man" life insurance on Mr. Vajna), matures on February 28, 1999. The    
amount available under the Credit Facility for borrowing at any time is limited 
in accordance with a formula based upon the value of collateral in the Company's
borrowing base as defined in the agreement. As of December 31, 1995 and 1996,   
approximately $41,578,000 and $6,026,000, respectively, in borrowings were      
outstanding under the Credit Facility. The interest rate payable to Lenders on  
borrowings under the Credit Facility is selected by the Company as either (i)   
1.5% above the London Interbank Offering Rate (LIBOR) (5.5% at December 31,     
1996) in effect from time to time for one, two, three or six months (if         
available as determined by Chase) as selected by the Company, or (ii) a rate    
equal to the greatest of the prime rate (8.25% at December 31, 1996) plus 0.5%, 
the base CD rate (5.55% at December 31, 1996) plus 1.5% and the federal funds   
rate (6.26% at December 31, 1996) plus 1%, as such rates are in effect from time
to time. Interest is payable quarterly. The commitment fee on the average daily 
unused portion of the commitment is 3/8 of one percent per annum. The Credit    
Facility also requires the Company to meet certain financial ratios. At December
31, 1996, the Company is not in compliance with three covenants under the Credit
Facility (the minimum consolidated net worth covenant, the limitation on capital
expenditures and the limitation on unallocated overhead costs) and is therefore 
in default under the Credit Facility. The Company intends to seek waivers of    
such defaults from the lenders under the Credit Facility, however, there can be 
no assurance that lenders under the Credit Facility will grant such waivers. If 
the lenders were to accelerate the amounts outstanding under the Credit Facility
as a result of such defaults, such acceleration would also constitute a default 
under the Company's term loan agreements with BVPD described below. The Company,
however, believes that it currently has sufficient resources to satisfy the     
amounts outstanding under the Credit Facility in the event the lenders were to  
accelerate the amounts outstanding thereunder as a result of such defaults. The 
Credit Facility restricts the Company's ability to declare and pay dividends.   

6.  FEE INCOME                                                                  

On November 24, 1992, the Company and The Summit Group (M.E.V.) N.V.    
(Summit) entered into a sales agency agreement, collection agency agreement and 
a consulting services agreement (collectively, the Sovereign Agreement) with    
Sovereign Pictures, Inc. (Sovereign) whereby the Company agreed to perform      
certain services for Sovereign for a fee. Such services consisted of sale of    
product, collection of accounts receivable, and resolution of Sovereign         
liabilities. The Company and Summit agreed to share all fees earned equally. The
term of the agreement is for 15 years. The Company earned fees totaling         
$511,000, $298,000 and $60,000 for the years ended December 31, 1994, 1995 and  
1996, respectively, in connection with the Sovereign Agreement.                 

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

7.  RELATED PARTY TRANSACTIONS                                                  

   The Company incurred air charter expenses from Airborne Charter Inc. (ACI),
a company owned 100% by Mr. Vajna, amounting to $1,199,000, $747,000 and        
$229,000 for the years ended December 31, 1994, 1995 and 1996, respectively. Of 
such amounts, the Company capitalized to film costs $1,199,000 (1994), $580,000 
(1995) and $226,000 (1996). A liability in connection with unpaid air charter   
expenses of $195,000 to ACI was included in notes and amounts payable to related
parties at December 31, 1995.                                                   

   Mr. Vajna also received financial planning, legal and related services from
the Company on terms approved by the Company's Audit Committee.                 

The Company had notes payable to Mr. Vajna aggregating $24,126,000 at   
December 31, 1993. The notes bore interest at 10% and were payable on demand.   
Such funds were used to fund operations and development of motion picture       
properties. On January 17, 1994, Mr. Vajna contributed $21,126,000 of such      
amount to equity which resulted in a balance of $3,000,000 at December 31, 1994.
In December 1995, the Company paid Mr. Vajna the full amount of the note and    
related accrued interest.                                                       

During 1995 and 1996, the Company entered into term loan agreements with
BVPD to finance three motion pictures. The maximum amount to be borrowed is     
based upon a certain percentage of each production budget. Each loan bears      
interest at the prime rate in effect from time to time (8.25% at December 31,   
1996) plus 1.5% and shall be repaid with accrued interest on or before the      
earlier of (i) four years after the loan proceeds are first made available to   
the Company or (ii) three years after the initial domestic theatrical release of
such picture. The loans are secured by certain distribution rights of the       
Company and one of the loans is also guaranteed by Mr. Vajna. In 1995, a term   
loan of $7,500,000 and accrued interest amounting to $585,000 for one motion    
picture was canceled as consideration for the Company's sale to BVPD of an      
equity interest in the picture. As additional consideration to BVPD for its     
purchase of an equity interest in this picture, the Company also assigned to    
BVPD substantially all of its profit participation in another motion picture.   
During 1995, the Company and BVPD mutually agreed to reduce a term loan from    
BVPD relating to one motion picture by $4,655,000 by offsetting the present     
value of certain funds due to the Company from BVPD. In 1996, the Company and   
BVPD mutually agreed to reduce a term loan from BVPD relating to one motion     
picture by $575,000 by offsetting certain funds due to the Company from BVPD. At
December 31, 1995 and 1996, the aggregate principal loan balances including     
accrued interest were $26,314,000 and $36,564,000, respectively. In connection  
with the Company's decision to produce Evita, the Company became obligated to   
pay the development costs previously expensed on such project by certain        
partners, including $3,900,000 by Disney. Such amount will be offset against    
obligations of Disney to the Company.                                           

Interest expense incurred by the Company in connection with these       
obligations amounted to $1,849,000, $2,844,000 and $2,882,000 in 1994, 1995 and 
1996, respectively. Of such amounts $1,758,000, $2,783,000 and $2,797,000 were  
capitalized to film costs, respectively.                                        

  The Company has a nonqualified deferred compensation plan in which one key
officer participates. Such obligation at December 31, 1995 and December 31, 1996
was $1,230,000 and $1,475,000, respectively (which includes bonuses or partial  
bonuses of $150,000 and $75,000 for the years ended December 31, 1995 and 1996, 
respectively).                                                                  

The Company leases office space from Mr. Vajna under an agreement which 
expired on April 30, 1996 (see Note 10).                                        

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

7.  RELATED PARTY TRANSACTIONS (CONTINUED)                                      
R. Timothy O'Donnell, a Director of the Company, is the President of    
Jefferson Capital Group, Ltd. (Jefferson Capital), a privately-held investment  
banking group, which provided financial advisory services to the Company in     
connection with the issuance of common stock in the initial public offering     
(Offering) and the sale of common stock to BVPD. In connection therewith, the   
Company reimbursed Jefferson Capital's expenses amounting to $20,000, paid      
Jefferson Capital a $150,000 fee and issued a warrant to purchase 50,000 shares 
of Common Stock, expiring in June 1999, at an exercise price per share equal to 
$9.00, the initial public offering price. Jefferson Capital was retained by the 
Company in 1996 to assist the Company in its strategic review. In connection    
therewith, the Company paid Jefferson Capital a retainer of $75,000 and         
reimbursed Jefferson Capital's expenses amounting to $13,000. In the event the  
Film Library Sale or other dispositions of assets or similar transactions are   
consummated, Jefferson Capital will also be entitled to additional fees based   
upon the size of such transactions.                                             

  In 1994, the Company sold a previously written off project to BVPD for the
Company's costs in the project of approximately $4,145,000.                     

   Ziffren, Brittenham & Branca (Ziffren), a law firm of which a director is a
partner, received an annual retainer of $250,000 for each of the years ended    
December 31, 1994 and 1995 in connection with legal services rendered for the   
Company. For the year ended December 31, 1996, Ziffren was paid $156,000.       

    The Company had noninterest bearing receivables of $100,000 and $50,000 from
executive officers at December 31, 1995 and December 31, 1996, respectively, and
at those respective dates had additional noninterest bearing receivables of     
$197,000 and $246,000, respectively, from Mr. Vajna and other entities owned or 
partially owned by Mr. Vajna. In 1994, an additional loan amounting to $250,000 
was made to a key officer bearing interest at 7% due December 31, 1996. Such    
loan and noninterest bearing receivable were paid on January 2, 1997 pursuant to
an amendment to such key officer's employment agreement. Interest receivable    
amounting to $135,000 and $81,000 was outstanding at December 31, 1995 and 1996,
respectively, from two executive officers and Ziffren. Further, at December 31, 
1996, a noninterest bearing advance of $18,000 was due from a key officer.      

The Company entered into an agreement with Twentieth Century Fox for the
production of "Die Hard, With a Vengeance." The Company granted Buena Vista     
International, Inc. (BVI), an affiliate of BVPD, certain distribution rights in 
such motion picture in certain foreign territories (including Belgium, France,  
Germany, the United Kingdom, Spain, Latin America, Scandinavia, Taiwan,         
Switzerland, Portugal and Greece) for an aggregate of $23,200,000 in advances to
be paid upon delivery of such picture to BVI. Such amount was recognized as     
revenue in 1995.                                                                

In order to assist the Company in obtaining financing for and completion
bonds on the pictures "Die Hard, With a Vengeance," "Judge Dredd" and "The      
Scarlet Letter," Valdi entered into a Reimbursement and Term Loan Agreement     
(Letter of Credit Facility) dated as of August 16, 1994 whereby Valdi undertook 
to have letters of credit issued for the benefit of Chase in an amount not to   
exceed $22,044,000 to provide additional collateral for the Company's Credit    
Facility with respect to the financing of the pictures listed above. The Letter 
of Credit Facility and the letter of credit provided thereunder expired on      
November 15, 1995 without any monies having been drawn thereunder. There is no  
obligation on the part of any stockholder or affiliate of the Company to        
guarantee borrowings under the Credit Facility or any other future loan obtained
by the Company or to enter into any future arrangements similar to the Letter of
Credit Facility.                                                                

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

7.  RELATED PARTY TRANSACTIONS (CONTINUED)                                      

 In consideration for providing the Letter of Credit Facility, the Company
agreed to pay Valdi a one time facility fee of $110,220 and a utilization fee.  
As no amounts were drawn under the Letter of Credit Facility prior to its       
expiration, no utilization fees were paid to Valdi.                             

   Valdi beneficially owns approximately 84.7% of Intercom KFT ("Intercom"), a
distributor of motion pictures in Hungary to which the Company licenses         
Hungarian distribution rights to its motion pictures in various media. The      
Company and Intercom have an agreement in principle for an output agreement for 
the Hungarian distribution of all of the Company's films, beginning with        
"Nixon." The agreement in principle provides for a distribution fee to Intercom 
of 17.5% of the gross receipts of Intercom from distribution of such films plus 
reimbursement of distribution expenses. During the Company's fiscal year ended  
December 31, 1996, Intercom received distribution fees of approximately $189,000
with respect to this distribution arrangement with the Company. In addition,    
Intercom has assisted the Company by paying to the Hungarian tax authorities on 
behalf of the Company value added taxes incurred by the Company in connection   
with its distribution of films through its Hungarian subsidiary, Cinergi        
Productions KFT ("CPKFT"). Intercom subsequently files for and receives the     
refund of such taxes. During 1996, the Company paid Intercom approximately      
$349,000 representing the aggregate accrued interest on amounts advanced by     
Intercom to the Hungarian tax authorities from the date of payment of each such 
advance until receipt by Intercom of the applicable refund and Intercom's out of
pocket costs incurred in connection with Intercom's activities on behalf of the 
Company in 1996 and in prior years.                                             

8.  INCOME TAXES                                                                

The components of pretax income (loss) for the Company are as follows:  

                                                        [Enlarge/Download Table]

                                                          YEAR ENDED DECEMBER 31,            
                                                -------------------------------------------- 
                                                    1994           1995            1996      
                                                ------------  --------------  -------------- 
                                                                                             
Domestic....................................... $   (394,000) $  (16,062,000) $  (15,905,000)
International..................................    3,289,000        --              --       
                                                ------------  --------------  -------------- 
                                                $  2,895,000  $  (16,062,000) $  (15,905,000)
                                                ------------  --------------  -------------- 
                                                ------------  --------------  -------------- 

  Current and noncurrent deferred income taxes generally reflect the net tax
effects of temporary differences between the carrying amounts of assets and     
liabilities for financial reporting purposes and the                            

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

8.  INCOME TAXES (CONTINUED)                                                    
amounts used for income tax purposes. Significant components of the Company's   
current and noncurrent deferred tax liabilities and assets are as follows:      

                                                        [Enlarge/Download Table]

                                                                        DECEMBER 31,         
                                                                ---------------------------- 
                                                                    1995           1996      
                                                                -------------  ------------- 
                                                                                             
Current and noncurrent deferred tax liabilities:                                             
  Film costs................................................... $   6,904,000  $   6,813,000 
  Amortization of film costs...................................    27,075,000     23,457,000 
                                                                -------------  ------------- 
                                                                   33,979,000     30,270,000 
Current and noncurrent deferred tax assets:                                                  
  Accruals not currently deductible............................     1,091,000      1,381,000 
  Deferred revenues............................................    25,835,000     17,815,000 
  Net operating loss carryover.................................    12,915,000     22,574,000 
  Other........................................................        38,000         38,000 
                                                                -------------  ------------- 
                                                                   39,879,000     41,808,000 
Valuation allowance............................................    (5,900,000)   (11,538,000)
                                                                -------------  ------------- 
                                                                   33,979,000     30,270,000 
                                                                -------------  ------------- 
Net deferred tax............................................... $    --        $    --       
                                                                -------------  ------------- 
                                                                -------------  ------------- 

   A reconciliation of income tax computed at the statutory federal income tax
rate to income tax expenses for the Company is as follows:                      

                                                        [Enlarge/Download Table]

                                                                  YEARS ENDED DECEMBER 31,   
                                                                ---------------------------- 
                                                                    1995           1996      
                                                                -------------  ------------- 
                                                                                             
Provision assuming federal income tax rate of 35%.............. $  (5,622,000) $  (5,567,000)
Effect of net operating loss for which no benefit was                                        
  received.....................................................     5,622,000      5,567,000 
Non-deductible items without tax benefit and other.............      --             --       
                                                                -------------  ------------- 
                                                                $    --        $    --       
                                                                -------------  ------------- 
                                                                -------------  ------------- 

    At December 31, 1996, the Company had a federal net operating loss carryover
of approximately $59,406,000 which expires in 2011.                             

9.  STOCKHOLDERS' EQUITY                                                        

  On January 1, 1994, two executive officers of the Company and Ziffren each
purchased 372,341 shares of Common Stock from the Company. The two executive    
officers and Ziffren are hereafter referred to as "Purchasers."                 

Each Purchaser acquired the Common Stock in exchange for payment of the 
aggregate par value of such shares (pre-split) in cash and a full recourse      
promissory note in the amount of $450,000 (approximately $1.21 per share of     
Common Stock). The principal of each note is payable to the Company on December 
31, 1998 or upon the earlier termination of Purchaser's relationship with the   
Company. Each                                                                   

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

9.  STOCKHOLDERS' EQUITY (CONTINUED)                                            
promissory note accrues interest at the rate of 6% per annum, payable annually, 
and is secured by a pledge of all of the Common Stock so purchased by the       
Purchaser. The Company paid on behalf of each of the executive officers $300,000
in 1994 and $130,000 in 1995, to assist them in discharging federal and state   
income taxes relating to the stock purchase transaction.                        

    Each of the Purchasers has granted to Mr. Vajna the right to vote the Common
Stock purchased pursuant to an irrevocable proxy which continues during such    
Purchaser's ownership of the shares for the maximum period permitted by         
applicable law. Each of the Purchasers also received certain "piggyback"        
registration rights which, with certain exceptions, require the Company to use  
its best efforts to include in any of the Company's registration statements any 
shares requested by such Purchaser to be so included. The Purchaser will pay all
expenses directly incurred on its behalf in connection with such registration.  

 Until January 1, 1997, the Company was obligated to repurchase the Common
Stock purchased by each Purchaser, except for vested shares, at the original    
purchase price if such Purchaser's relationship with the Company terminated for 
any reason other than death, disability or discharge without cause. Until such  
date, such shares could not be transferred to third parties. For one executive  
officer and Ziffren, one-third of the shares vested free of such restrictions   
for each full year of continued employment from and after December 31, 1993 (or,
in the case of Ziffren, the continued engagement of Ziffren by the Company for  
each full year from and after December 31, 1993). For the other executive       
officer (Other Executive Officer), two-thirds of the shares vested as of        
December 31, 1995, and the remaining balance vested monthly until the Other     
Executive Officer resigned in August 1996 (see below). Also, in the case of the 
executive officers, all shares of the Common Stock were to vest upon their      
death, disability or discharge without cause.                                   

   On December 30, 1996 the Company repurchased the 372,341 shares held by the
Other Executive Officer. The 51,714 shares of the Common Stock held by the other
executive officer that were not vested at the time of resignation were          
repurchased at the original purchase price (approximately $1.21 per share) by   
reducing the aggregate balance due under the Other Executive Officer's          
promissory note to the Company by approximately $62,500. In consideration for   
the sale to the Company of the remaining 320,627 shares, the Company canceled   
the remaining balance of the Other Executive Officer's promissory note of       
approximately $468,000 (after the $62,500 reduction).                           

The aggregate difference between the fair value of the Common Stock     
purchased on January 1, 1994 and the $1.21 consideration given per share was    
$3,750,000 and was recognized as expense using the straight-line method over the
vesting period of the related shares. The promissory notes amounting to         
$1,350,000 and $900,000 at December 31, 1995 and 1996, respectively, have been  
netted against Common Stock with certain redemption features in the balance     
sheet.                                                                          

   In January 1997, the shares held by Ziffren were repurchased by the Company
and the Company cancelled the promissory note from Ziffren amounting to         
$450,000.                                                                       

The Preferred Stock is issuable in one or more series by the Board of   
Directors which may fix, among other things, the designation of and number of   
shares to comprise each series and the relative rights, preferences and         
privileges of shares of each series, including the dividends payable thereon,   
voting rights, conversion rights, the price and terms on which shares may be    
redeemed, the amounts payable upon such shares in the event of voluntary or     
involuntary liquidation and any sinking fund provisions for redemption of       
purchases of such shares. The Board of Directors, without stockholder approval, 
may issue Preferred                                                             

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

9.  STOCKHOLDERS' EQUITY (CONTINUED)                                            
Stock with voting and/or conversion rights which could adversely affect the     
voting power of the holders of the Common Stock, or which could be used as a    
defensive measure in connection with an attempted hostile takeover of the       
Company.                                                                        

Such shares could be privately placed with purchasers who might align   
themselves with the Board of Directors in opposing a hostile takeover bid. In   
addition, the Board could authorize holders of a series of Preferred Stock to   
vote as a class, either separately or with the holders of Common Stock, on any  
merger, sale or exchange of assets by the Company or any other extraordinary    
corporate transaction. The Board could also issue Preferred Stock having terms  
that could discourage an acquisition attempt or other transaction that some     
stockholders might believe to be in their best interests or in which            
stockholders might receive a premium for their stock over the then current      
market price of such stock. Although the Company has no present intention to    
issue any shares of Preferred Stock, there can be no assurance that the Company 
will not do so in the future.                                                   

10.  COMMITMENTS AND CONTINGENCIES                                              

The Company has employment contracts with Mr. Vajna and one of its key  
officers with the longest term extending through 1999. Collectively, these      
agreements provide for minimum annual compensation of approximately $1,500,000  
that can be increased for incentives based on the Company's achieving specified 
levels of earnings or the receipt of specific revenues attributable to the      
commencement of production and distribution of its motion pictures. Pursuant to 
an amendment to the agreement with the key officer dated January 1, 1997, the   
key officer received a signing bonus of $600,000, of which $300,000 was used to 
fully repay two loans previously made by the Company (see Note 7). In addition, 
Mr. Vajna is entitled to receive additional amounts payable solely out of the   
revenues of each picture produced after January 1, 1993 after "actual           
breakeven," as defined in his employment agreement with the Company.            

At December 31, 1995 and 1996, the Company had commitments totaling     
$1,985,000 and $3,205,000 (excluding amounts to Mr. Stone (see below)),         
respectively in connection with motion picture projects in development and      
certain other assets.                                                           

  The Company has leases for certain equipment and office space which expire
through 1998. The Company leases its office space from Mr. Vajna under an       
agreement which expired in 1996. Since such expiration, the Company has been    
leasing its office space from Mr. Vajna on a month-to-month basis. Rent expense 
paid in connection with this lease amounted to $462,000 for each of the years   
ended December 31, 1994, 1995 and 1996. Total rent expense for the years ended  
December 31, 1994, 1995 and 1996 was $581,000, $702,000 and $868,000,           
respectively. Of such amounts, the Company capitalized to film costs $508,000   
(1994), $497,000 (1995) and $383,000 (1996). Future minimum payments under      
noncancelable operating leases are as follows:                                  

                                                                [Download Table]
                                                                             
1997..............................................................  $  82,000
1998..............................................................     30,000
Thereafter........................................................     --    
                                                                    ---------
                                                                    $ 112,000
                                                                    ---------
                                                                    ---------

  During 1996, the Company entered into a one year capital lease for certain
special effects equipment. Such lease, which expires in March 1997, includes an 
option to purchase the leased equipment for                                     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

10.  COMMITMENTS AND CONTINGENCIES (CONTINUED)                                  
$153,000. Future minimum lease payments under this capital lease amount to      
$291,000. Amortization of assets recorded under this lease is included in       
depreciation expense.                                                           

In 1990, the Company entered into a distribution agreement and certain  
related agreements with BVPD (collectively, the BVPD Agreement) whereby BVPD    
agreed to distribute certain motion pictures produced by the Company in the     
United States and its possessions, Canada and Latin America. At December 31,    
1995 and 1996, $44,949,000 and $29,582,000, respectively, in advances had been  
recorded as deferred revenue in connection with the BVPD Agreement. The advances
for each motion picture bear interest at the Bank of America prime rate (8.25%  
at December 31, 1996) plus 1.5%.                                                

In connection with an April 1994 amendment of the BVPD Agreement, the   
Company granted BVPD a warrant to purchase 150,000 shares of the Company's      
Common Stock at an exercise price equal to $9.00 per share, the initial public  
offering price, expiring in June 1999. BVPD also purchased concurrently with the
Offering at $9.00 per share, the initial public offering price, 555,556 shares  
of Common Stock for approximately $5,000,000.                                   

  The Company and each of its domestic subsidiaries have been S Corporations
from their incorporation through the tax year ended December 31, 1993. As a     
result, the Company and its domestic subsidiaries were not subject to federal   
income taxes and were subject to a reduced rate of state income taxes through   
that date. In addition, due to the S Corporation elections, the Company and its 
domestic subsidiaries have no net operating loss carryforwards for federal and  
state tax purposes for years prior to 1994. Rather, taxable income and loss of  
the Company for 1993 and prior years was included in the computation of the     
taxable income or loss of Mr. Vajna, the Company's sole stockholder during those
years. Effective January 1, 1994, the Company and each of the domestic          
subsidiaries revoked their S Corporation elections. The Company therefore       
expects that it will be subject to federal and state corporate income tax in    
1994 and future tax years.                                                      

    The corporate income tax returns of the Company for its 1990, 1991, 1992 and
1993 fiscal years are currently under audit by the Internal Revenue Service     
(IRS) and California Franchise Tax Board, and returns for the 1993 and 1994     
fiscal years remain open to audit. The Company anticipates no federal tax       
liability and only minimal, if any, California tax liability as a result of any 
income tax audits for pre-1994 years because of the S Corporation election in   
effect for such years. In the absence of the agreement described below, Mr.     
Vajna, the sole stockholder of the Company during such period, and not the      
Company would be responsible for any tax liability assessed as a result of such 
audits of pre-1994 years.                                                       

 The Company received approximately $20,000,000 of advances (the Advances)
during the fiscal year ended December 31, 1993. The Advances were received in   
connection with motion pictures that were released during the fiscal year ending
December 31, 1994. Consistent with its financial accounting for the Advances and
prior tax reporting practices, the Company did not include Advances in its 1993 
taxable income, and instead included such amounts - and deducted the related    
costs - in computing its taxable income for the year in which the underlying    
motion pictures were released, in this case 1994. It is possible, however, that 
the IRS will challenge the Company's tax treatment of the Advances, and if the  
IRS were successful in that challenge, the Company would be required to include 
the Advances in the computation of its 1993 taxable income without an offsetting
deduction in 1993 for costs associated with those motion pictures. As a result  
of the S Corporation election then in effect, such an adjustment (an Adjustment)
to the Company's 1993 taxable income would cause a corresponding increase in the
taxable income of                                                               

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

10.  COMMITMENTS AND CONTINGENCIES (CONTINUED)                                  
Mr. Vajna and, therefore, a significant increase in Mr. Vajna's tax liability   
for 1993. However, if the Company has cumulative taxable income in 1994 through 
1997 (exclusive of the Advances), it would obtain a benefit from the Adjustment 
in the form of a reduction in its 1994 taxable income and related tax liability 
as it would not be required to include the Advances in its 1994 taxable income. 

    Therefore, should Mr. Vajna's tax liability for 1993 increase as a result of
the Adjustment (i.e., acceleration of 1994 income into 1993) and only if the    
Company does have cumulative taxable income in 1994 through 1997 (exclusive of  
the Advances) and thereby obtains a corresponding decrease in its tax liability,
the Company has agreed to reimburse Mr. Vajna for the increase in his 1993      
income tax liability. For purposes of calculating cumulative taxable income for 
the period 1994 through 1997, the effect of any post-1997 net operating loss    
carrybacks will not be taken into account.                                      

 In order to allow the reimbursement, if required, to be paid to Mr. Vajna
under tax free provisions of the tax law, the Company paid $10,000,000 to Mr.   
Vajna in June 1994. Mr. Vajna loaned the Company $10,000,000 to assist in       
funding the distribution.                                                       

    From January 1, 1994 through December 31, 1996, the Company had a cumulative
taxable loss (treating income relating to the Advances as taxable income in     
1994) in excess of $20,000,000.                                                 

Should the Company not receive the tax benefit as described above, the  
Company may offset the $10,000,000 loan payable to Mr. Vajna against a          
receivable from Mr. Vajna created to reflect the possibility that the Company   
will not get such benefit. Pursuant to the legal right of offset, such loan     
payable and corresponding receivable will be netted against one another for     
financial reporting purposes.                                                   

   In 1995, the Company completed a transaction structured as a sale-leaseback
with respect to its motion picture "Judge Dredd." The Company sold its interest 
in "Judge Dredd" to British corporation Lloyds Commercial Leasing Ltd. and      
concurrently leased the film back pursuant to a 12 year lease. The Company      
retained approximately $3,000,000 of the sale proceeds (after payment of related
expenses) and placed the remainder of the sale proceeds (an amount sufficient to
satisfy the anticipated aggregate lease payments over the term of the lease     
assuming certain adjustments do not occur) on deposit with ABN AMRO Bank (the   
ABN Bank) to be used as security for a guaranty of the lease payments issued by 
the ABN Bank. The amount retained by the Company reduced unamortized film costs.
Under the original terms of such transaction, depending on the level of the UK  
corporate tax rate over various time periods, the Company could have been liable
for additional lease payments or entitled to a return of a portion of the amount
on account at the ABN Bank. In October 1996, the parties to such transaction    
agreed to amend the terms of such transaction to eliminate the adjustments for  
changes in the UK corporate tax rate. As a result, in October 1996, $1,388,000  
(net of related fees) of the funds on account at the ABN Bank were returned to  
the Company.                                                                    

In 1996, the Company also completed a sale-leaseback transaction with   
respect to its motion picture "Evita." The Company sold its interest in "Evita" 
to Lloyds General Leasing Limited (Lloyds General) and concurrently leased the  
film back pursuant to a 15 year lease. The Company retained approximately       
$5,769,000 of the sale proceeds (after payment of related expenses) and placed  
the remainder of the sale proceeds (an amount sufficient to satisfy the         
anticipated aggregate lease payments over the term of the lease assuming certain
adjustments do not occur) on deposit with the ABN Bank to be used as security   
for a guaranty of the lease payments issued by the ABN Bank. The amount retained
by the Company reduced unamortized film costs. The sale-leaseback transactions  
with respect to "Judge Dredd" and "Evita" may be                                

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

10.  COMMITMENTS AND CONTINGENCIES (CONTINUED)                                  
unwound by Lloyds General in certain circumstances relating to British tax      
treatment of the transactions, and the Company could be liable for certain      
unwind costs which could be substantial, although based upon Lloyds General's   
discussion with British taxing authorities prior to the respective transactions,
the Company believes it unlikely the transactions will be unwound. Pursuant to  
the Library Sale Agreement (see Note 12), Disney has agreed, upon consummation  
of the Film Library Sale, to either acquire the Company's subsidiaries that are 
the lessees in such sale-leaseback transactions or assume all of such           
subsidiaries rights and obligations under such leases; however, the Company     
would remain responsible for any of the foregoing unwind costs.                 

  In December 1995, the U.S. Attorney for the Central District of California
served subpoenas (Subpoenas) on the Company relating to a grand jury            
investigation of federal tax aspects of various transactions involving Andrew G.
Vajna, President, Chief Executive Officer and Chairman of the Board of Directors
of the Company, and certain other persons and entities (the Investigation). The 
Company believes the Investigation is focusing primarily on (i) the 1988 and    
1989 personal tax returns of Mr. Vajna and the tax returns of certain other     
persons and entities, and (ii) the ongoing audits of Mr. Vajna's tax returns    
since 1990 by the Internal Revenue Service. The Company has not been identified 
by the U.S. Attorney as being a target of the Investigation; however, there can 
be no assurance that the Company's status will not change in the future. The    
Company engaged counsel to represent it in connection with the Investigation and
is in the process of responding to the Subpoenas. Given the uncertainty of the  
Investigation, there is currently no basis upon which to estimate the impact, if
any, the Investigation may have on the Company.                                 

Pursuant to Article Tenth of the Company's Restated Certificate of      
Incorporation, Article V of the Company's Bylaws, indemnity agreements entered  
into between the Company and certain of its officers and directors, and the     
provisions of Section 145 of the Delaware General Corporation Law, the Company  
is advancing the expenses of certain of its employees, officers and directors   
other than Mr. Vajna (Indemnitees) which they may incur in connection with the  
Investigation. The Indemnitees have undertaken to reimburse the Company for     
their expenses if it is ultimately determined that they are not entitled to be  
indemnified. In addition, Mr. Vajna has undertaken to reimburse the Company     
under certain circumstances with respect to the expenses of the Indemnitees.    
Given the current uncertainty regarding the scope and duration of the           
Investigation and the amount of expenses which may be incurred by the           
Indemnitees in connection with the Investigation, there is no basis upon which  
to estimate the financial impact which the foregoing may have on the Company.   

   In connection with the Investigation, the Company has determined to advance
the expenses of the Indemnitees which the Indemnitees may incur in connection   
with the Investigation. As of December 31, 1996, the Company had advanced an    
aggregate of $154,000 on behalf of the Indemnitees.                             

In February 1997, the Company ceased production on one of its motion    
pictures after commencement of principal photography. The Company is currently  
in discussions with certain parties involved in the production of "Broadway     
Brawler" regarding settlement of various obligations in connection therewith    
including, among other things, debt incurred under the Credit Facility in       
connection with production of the film (approximately $8.3 million at March 31, 
1997) and advances (approximately $3 million at March 31, 1997) received from   
BVPD as part of funding production (repayment of which is guaranteed in both    
cases by the completion guarantor for the film), as well as shutdown costs and  
other commitments made in connection with production of the film (approximately 
$4.7 million at March 31, 1997). The completion                                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

10.  COMMITMENTS AND CONTINGENCIES (CONTINUED)                                  
guarantor for "Broadway Brawler" guaranteed completion and delivery of a motion 
picture containing certain essential elements. As the motion picture could not  
be completed with such essential elements, the completion guarantor is required 
to pay an amount equal to the amount loaned by the Lenders and advanced by BVPD 
to make the motion picture and such additional amounts as were required to      
complete delivery of the motion picture and which had been committed prior to   
the shut down. Management of the Company believes, although no assurances can be
given, that a settlement of the obligations relating to "Broadway Brawler" will 
be reached. In the event a settlement is not reached, management believes a     
substantial portion of any obligations the Company might otherwise have with    
respect to "Broadway Brawler" will be borne by the completion guarantor.        

 The Company had an output agreement in France with Le Film Office ("LFO")
(which expired after the delivery of "Evita"). Pursuant to the output agreement 
with LFO, a $3,071,000 advance was payable to the Company upon delivery of "The 
Shadow Conspiracy" to LFO. On August 27, 1996, LFO filed for and obtained a     
temporary restraining order in California Superior Court in Los Angeles,        
California (the "Court"), restraining the Company, Summit (the international    
sales company handling the international distribution of "The Shadow            
Conspiracy") and Chase (one of the lenders under the Company's Credit Facility),
from drawing down the letter of credit securing LFO's advance on the basis of   
LFO's allegations that the Company failed to give proper notice to LFO for      
extending the delivery date of "The Shadow Conspiracy". On September 20, 1996,  
the Court issued a preliminary injunction against the Company, Summit and Chase.
The parties agreed to stay the Court proceedings and submit the dispute to      
binding arbitration by the American Film Marketing Association, as required by  
the output agreement. However, LFO filed a motion with the Court seeking to     
dismiss the arbitration and proceed with the litigation in Court. On April 10,  
1997, such motion was denied by the Court. An arbitration hearing is scheduled  
for April 17, 1997. The Company believes that LFO's allegations are without     
merit and intends to defend them vigorously. In light of the disappointing      
domestic box office performance of "The Shadow Conspiracy" and the adverse      
publicity generated in France by LFO's refusing to accept delivery of "The      
Shadow Conspiracy", in the event the Company does not prevail in the            
arbitration, it believes that it will be difficult to obtain alternative        
distribution of "The Shadow Conspiracy" in France. In addition, even if an      
alternative distribution arrangement is obtained, it is unlikely any such       
arrangement will provide for an advance on delivery or otherwise be on terms as 
advantageous as those under the Company's output agreement with LFO.            
Accordingly, if the Company does not prevail in the arbitration, the Company    
could be required to write down the carrying value of the film by an amount     
equal to the difference between the amount of LFO advance not received and      
amounts actually received by the Company pursuant to alternative distribution   
arrangements, if any.                                                           

   Trial is scheduled for August 11, 1997, in Los Angeles Superior Court, in a
lawsuit by Laurence Fishburne and the LOA Productions, Inc., Mr. Fishburne's    
loan-out corporation, against the Company, a subsidiary of the Company and      
Randolph M. Paul, Senior Vice President, Business Affairs and a Director of the 
Company. The action, for breach of oral contract, fraud and deceit, and civil   
conspiracy and declaratory relief, was originally filed on July 11, 1994. The   
plaintiffs claim that the Company entered into an oral contract for Mr.         
Fishburne to appear in the motion picture, "Die Hard, with a Vengeance," but    
repudiated the contract the following day. On September 4, 1994, the Company    
successfully demurred to all of the plaintiffs' causes of action except the     
breach of contract claim, and on November 29, 1994, the Company successfully    
demurred to an amended complaint for bad faith denial of existence of contract. 
On December 29, 1994, the Company and the other defendants answered the First   
Amended Complaint for                                                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

10.  COMMITMENTS AND CONTINGENCIES (CONTINUED)                                  
breach of contract, fraud and deceit and civil conspiracy. Summary adjudication 
has been obtained in favor of Mr. Vajna, who was named as an additional         
defendant in the original complaint. Plaintiffs are claiming damages of         
$1,750,000, representing the fixed compensation to which they alleged they are  
entitled, additional compensatory damages of up to $350,000 and general and     
punitive damages. The Company believes it has meritorious defenses and is       
defending the action vigorously.                                                

   The Company has a "first-look" arrangement with Oliver Stone and certain of
his affiliated entities pursuant to which Mr. Stone submits to the Company all  
theatrical motion picture projects owned or controlled by Mr. Stone for the     
Company's development and consideration of possible production and, as          
consideration for Mr. Stone's submitting such projects to the Company, the      
Company pays certain amounts annually to Mr. Stone for overhead and development.
Disney has reimbursed the Company for all amounts paid to Mr. Stone ($2,685,000 
in 1996); however, pursuant to the Library Sale Agreement, the Company will be  
responsible for all future payments due to Mr. Stone for the duration of the    
arrangement, which expires February 10, 1998. The Company currently estimates   
the payments due under Mr. Stone's agreement during such period will be         
approximately $1,875,000.                                                       

   In 1996, the Company and Hollywood Pictures Company (HPC), as subsidiary of
The Walt Disney Company, entered into a Financing and Distribution Agreement    
whereby the Company is financially obligated to pay to HPC the lesser of 50% of 
the cost of the motion picture tentatively entitled "Deep Rising" or            
$22,500,000, in exchange for (i) a 50% equity participation in such motion      
picture and (ii) a sales fee for international distribution of such motion      
picture. In connection with the Library Sale Agreement (see Note 12), upon      
consummation of the Film Library Sale, the Company will no longer be obligated  
to pay the latter amount, will relinquish the equity participation and sales    
fee, and will no longer serve as sales agent with respect to such motion        
picture. At December 31, 1996, the Company had an obligation to BVPD in         
connection with this arrangement amounting to $3,675,000.                       

The Company is a party to various other legal proceedings arising in the
ordinary course of its business. The Company does not currently believe that any
such proceedings will have a material adverse effect on the Company's operations
or financial condition.                                                         

11.  STOCK OPTION PLANS                                                         

   In 1994, the Company adopted two stock option plans. The Basic Stock Option
and Stock Appreciation Rights Plan (the Basic Plan) is for regular full-time    
employees, directors and consultants. The Special Stock Option and Stock        
Appreciation Rights Plan (the Special Plan) is for certain key or highly        
compensated employees and is designed to provide alternative procedures for     
meeting special requirements imposed by federal income tax law in connection    
with making grants to certain key or highly compensated employees. Furthermore, 
grants of options or stock appreciation rights (SARs) under the Special Plan    
will reduce the maximum amount of options and SARs that can be issued in the    
aggregate and to the recipient under the Basic Plan. Both the Basic Plan and the
Special Plan provide for the grant of "incentive stock options" (ISOs) and      
"nonqualified stock options" (NSOs) to acquire the Company's Common Stock, as   
well as SARs entitling the recipient on exercise to receive payment of increases
in the market value of the Company's Common Stock from the date of grant to the 
date of exercise. ISOs may only be issued to employees of the Company and its   
subsidiaries, whereas NSOs and SARs may be issued to employees and other        
persons. The maximum number of shares subject to the Basic Plan and the Special 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

11.  STOCK OPTION PLANS (CONTINUED)                                             
Plan are 500,000 and both plans by their terms will expire on December 31, 2003 
unless terminated sooner by the Company.                                        

  On October 28, 1994, the Company's compensation committee, which consisted
of two outside Directors of the Company adopted a program for the cancellation  
of certain options granted under the Basic Plan and Special Plan prior to such  
date (the Reissuance Date) and the reissuance of new options for the same number
of shares for which the old options could have been exercised with exercise     
prices equal to the closing price of the Company's Common Stock on the          
Reissuance Date.                                                                

A summary of stock option activity under all plans relating to certain  
employees and other persons who provide services to the Company is as follows:  

                                                        [Enlarge/Download Table]

                                                                             WEIGHTED-AVERAGE 
                                                                                 EXERCISE     
                                                                   SHARES          PRICE      
                                                                  ---------  -----------------
                                                                                              
Balance at January 1, 1994.......................................    --          $  --        
Granted..........................................................    78,350(1)          7.26  
                                                                  ---------          -----    
Balance at December 31, 1994.....................................    78,350           7.26    

Granted..........................................................   129,000(2)          3.96  
Canceled.........................................................    (8,350)          6.73    
                                                                  ---------          -----    
Balance at December 31, 1995.....................................   199,000      $    5.14    

Granted..........................................................    66,000(3)          2.00  
Canceled.........................................................   (10,500)          4.17    
                                                                  ---------          -----    
Balance at December 31, 1996.....................................   254,500      $    4.37    
                                                                  ---------          -----    
                                                                  ---------          -----    

                                                        [Enlarge/Download Table]

                                                                          DECEMBER 31,          
                                                                 -------------------------------
                                                                   1994       1995       1996   
                                                                 ---------  ---------  ---------
                                                                                                
Exercisable.....................................................    78,350     98,334    128,660
Weighted Average Exercise Price................................. $    7.26  $    6.43  $    5.45

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

(1) These options fully vested on the date of grant.                            

(2) Options relating to 1994 service vest one-third on the date of grant,       
 one-third one year after the date of grant, and one-third two years after
   the date of grant. Options relating to 1995 service vest one-third one year
 after the date of grant, one-third two years after the date of grant, and
    one-third three years after the date of grant. Certain options granted under
the Special Plan vest in full on the date of grant.                     

(3) These options vest one-third one year after the date of grant, one-third two
  years after the date of grant, and one-third three years after the date of
grant.                                                                  

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

11.  STOCK OPTION PLANS (CONTINUED)                                             
  The following table summarizes information about stock options outstanding
at December 31, 1996:                                                           

                                                        [Enlarge/Download Table]

                                                OPTIONS OUTSTANDING                             
                                              ------------------------    OPTIONS EXERCISABLE   
                                   NUMBER      WEIGHTED-                ------------------------
                                OUTSTANDING     AVERAGE     WEIGHTED-                 WEIGHTED- 
                                     AT        REMAINING     AVERAGE                   AVERAGE  
                                DECEMBER 31,  CONTRACTUAL   EXERCISE      NUMBER      EXERCISE  
EXERCISE PRICE                      1996         LIFE         PRICE     EXERCISABLE     PRICE   
------------------------------  ------------  -----------  -----------  -----------  -----------
                                                                                                
$2.00.........................       66,000    9.9 years    $    2.00       15,000    $    2.00 
 3.88.........................      109,500    9.0 years         3.88       40,540         3.88 
 4.88.........................       10,000    8.9 years         4.88       10,000         4.88 
 6.63.........................       10,000    7.9 years         6.63       10,000         6.63 
 6.88.........................       29,000    7.8 years         6.88       23,120         6.88 
 8.00.........................       30,000    2.3 years         8.00       30,000         8.00 

  At December 31, 1996, 1995 and 1994, 78,350, 199,000 and 254,500 shares of
Common Stock were reserved for future issuance under the Basic Plan and Special 
Plan. Options to purchase 421,650 (1994), 301,000 (1995) and 245,000 (1996) were
available for grant under the Basic Plan and Special Plan.                      

12.  SUBSEQUENT EVENTS                                                          

On April 3, 1997, the Company entered into a Purchase and Sale agreement
(the "Library Sale Agreement") with Walt Disney Pictures and Television, a      
subsidiary of The Walt Disney Company, to sell to Walt Disney Pictures and      
Television substantially all of the films in the Company's motion picture       
library and certain other assets (referred to herein as the "Film Library Sale";
"Disney" is used herein to refer to Walt Disney Pictures and Television and/or  
its affiliates, including The Walt Disney Company, as applicable). In exchange  
for the assets being sold to Disney, Disney has agreed to relinquish its equity 
interest in the Company (555,556 shares of the Company's Common Stock and a     
warrant to purchase 150,000 shares of the Company's Common Stock at an exercise 
price of $9.00 per share) and cancel its outstanding loans and outstanding      
interest to the Company (approximately $36,654,000 as of December 31, 1996). In 
addition, Disney has agreed to assume with respect to the films and rights      
therein being sold to Disney all residuals and participation obligations, as    
well as all scheduled obligations relating to the Company's existing            
exploitation agreements. Disney has also agreed to assume the outstanding debt  
under the Company's credit facility relating to the soon to be completed "An    
Alan Smithee Film," (one of the films included in the Film Library Sale) up to a
maximum amount of $10,000,000 (which the Company anticipates will not be        
exceeded), and the Company has agreed to transfer to Disney all minimum         
guarantee payments and any overages paid or to be paid with respect to such     
film.                                                                           

The film library being sold to Disney includes primarily all of the     
Company's rights (except minimum guarantee payments for films other than "An    
Alan Smithee Film") to the following eleven motion pictures: "Medicine Man,"    
"Tombstone," "Renaissance Man," "Color of Night," "Judge Dredd," "The Scarlet   
Letter," "Nixon," "Evita" (excluding soundtrack rights, which will be retained  
by the Company), "Amanda," "The Shadow Conspiracy," and "An Alan Smithee Film." 
Disney will also retain overages otherwise payable to the Company by Disney     
after January 1, 1997 with respect to certain distribution rights to "Die Hard, 
With a Vengeance" previously licensed to Disney. In addition, upon consummation 
of                                                                              

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

12.  SUBSEQUENT EVENTS (CONTINUED)                                              
the Film Library Sale, the Company's twenty-five film domestic distribution     
arrangement with BVPD, under which nine films have been delivered, will be      
terminated.                                                                     

 The Film Library Sale is subject to numerous conditions, including, among
other things, completion of certain due diligence by Disney, expiration of any  
applicable Hart-Scott-Rodino waiting period, and the approval of the Company's  
stockholders. The Library Sale Agreement and related Film Library Sale may also 
be terminated by the Company or Disney in certain circumstances, including,     
among other things, upon failure to consummate the Film Library Sale by         
September 15, 1997. Management of the Company (including Chairman of the Board  
and Chief Executive Officer, Andrew G. Vajna), which owns approximately 43.7% of
the outstanding Common Stock of the Company, has agreed to vote its shares in   
favor of the transaction in accordance with the terms of the Library Sale       
Agreement.                                                                      

On April 3, 1997, the Company also announced that it does not presently 
intend to commence production on any additional motion pictures (although the   
Library Sale Agreement does not preclude the Company, pending consummation of   
the Film Library Sale, from commencing production on films that would not be    
distributed by Disney) and that it is in the process of considering its         
alternatives assuming consummation of the Film Library Sale to Disney. Such     
alternatives include disposing of those assets which are not being sold to      
Disney, in one or a series of transactions.                                     

  Not included in the Film Library Sale to Disney are the Company's slate of
approximately forty development projects, the Company's visual effects facility,
and Cinergi's rights in "Die Hard, With a Vengeance" (which the company owns    
with Twentieth Century Fox which controls the sequel rights to the film).       

13.  GEOGRAPHICAL INFORMATION                                                   

 The Company's operations are principally developing, financing, producing
and licensing feature-length motion pictures worldwide. In 1994, the Company    
earned revenues from one significant customer of approximately $43,207,000      
(40%). In 1995, the Company earned revenues from two significant customers of   
approximately $57,808,000 (30%) and $44,053,000 (23%). In 1996, the Company     
earned revenues from two significant customers of approximately $43,454,000     
(33%) and $12,937,000 (10%).                                                    

Export revenues by geographic area are as follows:                      

                                                        [Enlarge/Download Table]

                                                         YEAR ENDED DECEMBER 31,           
                                              ---------------------------------------------
                                                   1994            1995           1996     
                                              --------------  --------------  -------------
                                                                                           
Europe....................................... $   45,200,000  $   72,648,000  $  41,964,000
Asia.........................................     16,248,000      51,970,000     19,377,000
South America................................      4,058,000       3,813,000      4,428,000
Other........................................      4,373,000       9,897,000      4,927,000
                                              --------------  --------------  -------------
Total export revenue......................... $  109,028,000  $  192,880,000  $  70,696,000
                                              --------------  --------------  -------------
                                              --------------  --------------  -------------

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CINERGI PICTURES ENTERTAINMENT INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996 

14.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)                                

Certain quarterly financial information is presented below:             

                                                        [Enlarge/Download Table]

                                        FIRST         SECOND          THIRD          FOURTH                     
                                       QUARTER        QUARTER        QUARTER     QUARTER(1)(2)        YEAR      
                                    -------------  -------------  -------------  --------------  -------------- 
                                                                                                                
1995:                                                                                                           
  Revenues......................... $  12,706,000  $  50,960,000  $  51,528,000  $   77,686,000  $  192,880,000 
  Gross profit (loss)..............       905,000     (8,936,000)    (8,162,000)      4,529,000     (11,664,000)
  Operating income (loss)..........       336,000     (9,756,000)    (9,217,000)      1,875,000     (16,762,000)
  Net income (loss)................       233,000     (9,435,000)    (9,059,000)      2,199,000     (16,062,000)
  Net income (loss) per share......           .02           (.76)          (.64)            .15           (1.23)

1996:                                                                                                           
  Revenues......................... $  37,116,000  $  22,467,000  $  30,189,000  $   43,228,000  $  133,000,000 
  Gross profit (loss)..............       781,000        391,000      1,646,000      (9,430,000)     (6,612,000)
  Operating income (loss)..........      (695,000)    (1,012,000)      (465,000)    (14,192,000)    (16,364,000)
  Net income (loss)................      (637,000)      (716,000)      (294,000)    (14,258,000)    (15,905,000)
  Net income (loss) per share......          (.04)          (.05)          (.02)          (1.01)          (1.12)

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

(1) In the fourth quarter of 1995, the Company revised its revenue and certain  
   cost estimates related to released films, the effect of which decreased the
net income in the quarter ended December 31, 1995, by approximately     
$3,700,000.                                                             

(2) In the fourth quarter of 1996, the Company revised its revenue and certain  
   cost estimates related to released films, the effect of which decreased the
net income in the quarter ended December 31, 1996, by approximately     
$5,964,000.                                                             

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                                                                      APPENDIX A

PURCHASE AND SALE AGREEMENT 

   This PURCHASE AND SALE AGREEMENT (the "AGREEMENT") is made and entered into
this 3rd day of April, 1997, by and between Cinergi Pictures Entertainment Inc.,
a Delaware corporation, f/k/a Cinergi Productions, Inc. ("CINERGI") and Cinergi 
Productions N.V. Inc., a Delaware corporation (collectively, "SELLER"), and Walt
Disney Pictures and Television, a California corporation ("BUYER").             

R E C I T A L S 

  A. WHEREAS, Seller owns or has other rights with respect to the Assets (as
such term is defined on Schedule A hereto, together with certain other          
capitalized terms), including without limitation the Pictures listed on Exhibit 
A hereto.                                                                       

  B.  WHEREAS, Buyer is willing to purchase all of Seller's right, title and
interest in, to and under the Assets, and Seller is willing to sell such right, 
title and interest, all on the terms and conditions set forth herein.           

NOW, THEREFORE, based on the above premises and in consideration of the 
mutual covenants and agreements contained herein, the parties agree as follows: 

1.  Agreement to Purchase and Sell.                                     

     1.1  Acquisition.  On the terms and subject to the conditions of this
   Agreement, on the Closing Date, Seller shall sell to Buyer, and Buyer shall
purchase from Seller, the following assets (collectively, the "ASSETS"):

     (a) All of Seller's right, title and interest of every kind and
    nature whatsoever in, to and under the Film Assets, including, without
limitation:                                                       

         (i) Subject only to the Existing Third Party Exploitation
          Rights, the sole and exclusive right, commencing on the Closing Date
         and continuing in perpetuity, to Exploit the Film Assets, including
         without limitation the right to exercise all Exploitation rights in
and to the Pictures;                                      

(ii) All Physical Properties;                   

               (iii) All rights and remedies (including, without limitation, the
      benefit of all representations, warranties, indemnifications and
         other covenants) under the Existing Exploitation Agreements and all
other agreements with respect to the Assets;              

(iv) All Accounts Receivable;                   

              (v) All rights pursuant to that certain Letter Agreement dated
           as of August 1, 1994 by and between Cinergi Productions N.V. Inc. and
     Buena Vista International, Inc. (the "BVI DIE HARD DISTRIBUTION
         AGREEMENT") in and to the motion picture entitled "Die Hard III" in
        all media and in all territories, during the twenty-five (25) year
        term of the BVI Die Hard Distribution Agreement, including without
         limitation, all of Seller's rights to payments thereunder (the "BVI
DIE HARD RIGHTS");                                        

         (b) At Buyer's election, either (a) stock of J.D. Distribution Inc.
     and E.P. Distribution Inc., or (b) an assignment and assumption of J.D.
     Distribution Inc.'s and E.P. Distribution Inc.'s rights and obligations
under the sale-leaseback agreements, provided such assignment and 
      assumption do not require a consent that cannot be obtained and provided
   further that Buyer notifies Seller of its election within thirty (30)
days of the expiration of the Due Diligence Period;               

           (c) All monies received by Seller for "Deep Rising" a/k/a "Tentacles"
   and all cash held in the "Deep Rising" a/k/a "Tentacles" account (the
"TENTACLES ACCOUNT"); and                                         

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        (d) Rights to fund and acquire rights in and to the motion picture
      development project presently entitled "Smoke and Mirrors", which rights
are subject to Section 2.12 below (the "SMOKE PROJECT").          

1.2  Closing.                                                   

          (a)  Time and Place.  The closing (the "CLOSING") of the Transaction
    shall take place at the offices of Buyer within five (5) business days
       after the last consent or approval required for either Seller or Buyer to
       consummate the Transaction is received by Seller or Buyer, as applicable,
or at such other time and place as to which the parties agree (the
      "CLOSING DATE"); provided, however, that if the Closing has not occurred
on or before September 15, 1997, either party may terminate this  
  Agreement and the transactions contemplated by this Agreement unless
      extended to accommodate an Alternative Transaction pursuant to the terms
of Section 5.8.                                                   

   1.3  Transfer.  At the Closing, Seller shall transfer the Assets to
Buyer in accordance with this Agreement.                                

     1.4  Allocation of Consideration; Sales Tax.  (a) Buyer will allocate
  the Purchase Price among the Assets and provide Seller with a copy of such
allocation. The parties agree (i) to report the Transaction for federal,
  state, local and other tax purposes in accordance with such allocation and
  (ii) not to take any position inconsistent with such allocation on its tax
   return without the written consent of the other. Buyer shall be responsible
    for all sales, use, transfer, stamp and similar taxes, if any, incurred as a
result of this Agreement and the consummation of the Transaction.       

        (b) If Buyer elects to acquire the stock of a subsidiary of Seller
       pursuant to Section 1.1(b), (i) Seller shall join Buyer in making (x) the
    elections provided for in Section 338(g) and Section 338(b)(10) of the
     Code with respect to Seller and (y) such other similar elections as may
       be necessary to achieve substantially the same results to the parties for
      state and local income or franchise tax purposes (collectively, the "338
       ELECTIONS"); (ii) Seller and Buyer shall comply fully with all filing and
      other requirements necessary to effectuate the 338 Elections on a timely
basis and agree to cooperate in good faith with each other in the 
      preparation and timely filing of any tax returns required to be filed in
     connection with the making of the 338 Elections, including the exchange
  of information and the joint preparation and filing of Form 8023 and
related schedules; and (iii) any income, deduction, gain or loss  
  recognized as a result of, and in accordance with, the 338 Elections
       shall be included in the consolidated federal income tax return of Seller
 (and the consolidated, combined or unitary state or local income or
      franchise tax return of Seller) for its taxable period that includes the
Closing Date.                                                     

2.  Consideration and General Terms.                                    

 2.1  Consideration.  The consideration for the sale of the Assets
    hereunder shall be the consideration provided for in Sections 2.2, 2.3, 2.4,
2.5 and 2.6 below.                                                      

   2.2  Assumption of Certain Liabilities.  Buyer will assume, pay and
   perform only the following obligations and liabilities of Seller arising in
   connection with the Film Assets: (a) the outstanding principal and interest
   as of the Closing Date on the loans owed to Buyer or any Affiliate of Buyer
    relating to the motion pictures "Color of Night", "Scarlet Letter", "Nixon",
 "Evita" and "Shadow Conspiracy" (the "DISNEY LOANS"); (b) the outstanding
 principal and interest as of the Closing Date under the Credit, Security,
  Pledge and Guaranty Agreement dated as of August 16, 1994, between Cinergi
   Productions N.V. Inc. and The Chase Manhattan Bank, as Agent ("CHASE") (the
"CHASE CREDIT AGREEMENT") up to a maximum amount of Ten Million Dollars 
($10,000,000) to the extent and only to the extent such outstanding     
principal and interest under the Chase Credit Agreement is directly     
attributable to Seller's payment of production costs for the Picture    
presently entitled "An Alan Smithee Film", which production costs shall 
   include financing costs and interest solely attributable to loans under the
  Chase Credit Agreement for the Picture presently entitled "An Alan Smithee
  Film"; (c) all Guild Obligations and Participation Obligations relating to
the Pictures; provided that Buyer's                                     

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  Participation Obligations with respect to the motion picture entitled "Die
 Hard III" shall be limited to Buyer's and/or Buyer's Affiliate's Pro Rata
   Share of the Participation Obligations arising only from Buyer's or Buyer's
   Affiliate's exercise of Buyer's or Buyer's Affiliate's rights under the BVI
Die Hard Distribution Agreement as described in Section 2.13 below, and 
  Buyer's Guild Obligations with respect to the motion picture entitled "Die
   Hard III" shall be limited to the Guild Obligations arising from Buyer's or
Buyer's Affiliate's exploitation of its rights under the BVI Die Hard   
Distribution Agreement; and (d) those certain obligations pursuant to   
    Existing Exploitation Agreements that are to be performed in accordance with
  the terms of such Existing Exploitation Agreements on or after the Closing
  Date, but only if such obligations are specifically listed on Schedule 2.1
attached hereto. Buyer shall not assume and shall not be liable for any 
other liabilities or obligations except as expressly set forth in the   
preceding sentence, including without limitation the following excluded 
liabilities (collectively, the "EXCLUDED LIABILITIES"): (1) any claims  
against Seller or any obligations or liabilities of Seller (including,  
   without limitation, all claims, obligations and liabilities relating to the
  claims described on Schedule 3.14 attached hereto) which arise from facts,
  circumstances, conditions, actions or failures to take actions existing or
    occurring prior to the Closing Date regardless of whether any suit, claim or
 proceeding related thereto was commenced prior to the Closing Date, other
than the liabilities assumed in (a), (b) or (c) above; (2) any claims   
  against Seller or Seller's Affiliates or any obligations or liabilities of
 Seller or Seller's Affiliates arising from or related to the Evita Warner
  Bros. Soundtrack Rights or arising under the Evita Warner Bros. Soundtrack
  Agreement, in either case, whether or not such obligations and liabilities
arise before or after the Closing Date; and (3) any obligations or      
liabilities to the shareholders of Seller, in their capacities as       
  shareholders, whether or not such obligations and liabilities arise before
or after the Closing Date.                                              

  2.3  Non Disturbance.  Buyer will not interfere with the rights of
    existing licensees under Existing Exploitation Agreements, including without
   limitation all rights of access in and to the Physical Properties. However,
    if any such licensees are in default under Existing Exploitation Agreements,
Buyer reserves the right to exercise any of Seller's rights and remedies
pursuant to such Existing Exploitation Agreements.                      

        2.4  Termination of Distribution Agreements and Sales Agency Agreements;
Audit Rights. Except as expressly set forth in this Agreement, all of   
Buyer's and Buyer's Affiliates' respective rights, obligations and      
liabilities and all of Seller's rights, and Seller's obligations and    
    liabilities arising after the Closing Date, under the distribution and sales
   agency agreements set forth on Schedule 2.4 attached hereto shall terminate
  on the Closing Date including without limitation (i) all of Seller's audit
rights (except with respect to the Smoke Project) or claims for payments
   thereunder whether arising prior to or following the Closing Date; (ii) all
of Buyer's audit rights except with respect to the following motion     
  pictures: "Deep Rising" a/k/a "Tentacles", "Up Close and Personal" and "An
    Alan Smithee Film"; and (iii) all of Seller's and Summit's rights to receive
any sales agency or distribution fees or other compensation thereunder. 
Notwithstanding any termination of the distribution agreements or sales 
agency agreements listed on Schedule 2.4 hereto, (x) Seller shall remain
  responsible for the production, completion and delivery of and the payment
   of all expenses necessary to produce, complete and deliver "An Alan Smithee
    Film" except for such costs and expenses, if any, which Buyer's Affiliate is
 responsible for pursuant to existing agreements and (y) Buyer and Buyer's
Affiliates shall retain all rights and Seller shall remain obligated and
   liable for any breach of any representation, warranty or covenant by Seller
 existing on or prior to the Closing Date and any indemnification relating
  thereto under the distribution agreements set forth on Schedule 2.4. As of
   the date of this Agreement, Buyer does not have any knowledge of any breach
    by Seller of any representation, warranty or covenant under the distribution
 agreements listed on Schedule 2.4; provided, however, this sentence shall
   not be interpreted as a waiver by either Buyer or Buyer's Affiliates of any
rights either Buyer or Buyer's Affiliates may have if in fact Seller has
breached or does breach said representations, warranties or covenants.  

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     2.5  Termination of Loan Agreements and Guarantees.  Any and all loan
   documents, including without limitation that certain Letter Agreement dated
  July 13, 1990, as amended, between Buena Vista Pictures Distribution, Inc.
 and Seller or Seller's Affiliates and that certain Letter Agreement dated
  April 8, 1994, as amended, between Buena Vista Pictures Distribution, Inc.
   and Seller (collectively, the "MASTER LOAN AGREEMENTS"), guarantees and all
security interests related thereto entered into or granted in connection
 with the Disney Loans shall terminate on the Closing Date and Buyer shall
   execute and deliver to Seller any and all documents necessary to effectuate
such termination.                                                       

        2.6  Surrender of Stock.  At the Closing, Buyer shall transfer, or shall
cause Buyer's Affiliates to transfer, to Seller all shares of, and all  
   warrants with respect to, common stock in Cinergi owned by Buyer or Buyer's
Affiliates as of the date hereof (the "CINERGI STOCK").                 

2.7  "Eaters of The Dead".  Neither Seller nor any of Seller's  
   Affiliates nor any of their respective employees, agents or representatives
(including, without limitation, Andrew Vajna) shall be entitled to any  
compensation or other payment of any kind or nature (including, without 
   limitation, reimbursement of development costs, producer fees or contingent
compensation) in connection with the motion picture presently entitled  
"Eaters of the Dead", and all such amounts shall be retained by Buyer or
    Buyer's Affiliates. Andrew Vajna shall, however, be entitled to an executive
 producer credit for the motion picture "Eaters of the Dead", if produced,
    pursuant to that certain agreement between Buyer and Seller dated as of July
    3, 1996. Seller acknowledges that Buyer owns and shall own all rights in and
to the motion picture project entitled "Eaters of the Dead" and all     
   derivative works based thereon, including without limitation, any resulting
motion picture, and accordingly, any and all payments of any kind that  
    Seller might receive in connection with such motion picture shall be held in
trust for Buyer and shall be immediately paid to Buyer. Buyer agrees to 
   indemnify and hold harmless Seller for any Losses it incurs with respect to
  such motion picture other than Losses for any claims caused by any actions
  or inactions of Seller, and, if "Eaters of the Dead" is produced, financed
 and/or distributed by Buyer and/or any Buyer Affiliate, Seller and Andrew
Vajna shall be covered as additional insureds on Buyer's or Buyer's     
  Affiliates' errors and omissions insurance policy in effect for the motion
   picture entitled "Eaters of the Dead". Subsequent to the Closing, except as
   otherwise set forth in this Agreement, neither party shall have any further
obligations to the other party with respect to this motion picture.     

     2.8  "Deep Rising" a/k/a "Tentacles".  Seller acknowledges that Buyer
 owns all rights in and to the motion picture entitled "Deep Rising" a/k/a
    "Tentacles", including without limitation any rights that Seller may have to
receive payments of any kind, whether in the form of minimum guarantees,
license fees, sales agency fees, distribution fees or otherwise, from   
    sub-distributors or any other party with respect to such motion picture, and
  accordingly, any and all payments of any kind that Seller might receive in
connection with such motion picture shall be held in trust for Buyer and
shall be immediately paid to Buyer. Buyer agrees to indemnify and hold  
    harmless Seller for any Losses it incurs with respect to such motion picture
other than Losses for any claims caused by any actions or inactions of  
  Seller, and Seller shall be covered as an additional insured on Buyer's or
   Buyer's Affiliates' errors and omissions insurance policy in effect for the
  motion picture entitled "Deep Rising" a/k/a "Tentacles". Subsequent to the
Closing, except as otherwise set forth in this Agreement, neither party 
  shall have any further obligations to the other party with respect to this
motion picture, including without limitation, pursuant to that unsigned 
Financing and Distribution Agreement dated as of April 22, 1996.        

      2.9  "Up Close and Personal".  Seller acknowledges that Buyer owns all
rights in and to the motion picture entitled "Up Close and Personal",   
including without limitation any rights that Seller may have to receive 
payments of any kind, whether in the form of minimum guarantees, license
fees, sales agency fees, distribution fees or otherwise, from           
    sub-distributors or any other party with respect to such motion picture, and
  accordingly, any and all payments of any kind that Seller might receive in

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connection with such motion picture shall be held in trust for Buyer and
shall be immediately paid to Buyer. Buyer agrees to indemnify and hold  
    harmless Seller for any Losses it incurs with respect to such motion picture
other than Losses for any claims caused by any actions or inactions of  
  Seller, and Seller shall be covered as an additional insured on Buyer's or
   Buyer's Affiliates' errors and omissions insurance policy in effect for the
   motion picture entitled "Up Close and Personal". Subsequent to the Closing,
 except as otherwise set forth in this Agreement, neither party shall have
   any further obligations to the other party, and Buyer shall have no further
obligations to Summit, with respect to this motion picture, including   
   without limitation, pursuant to that certain letter dated May 19, 1994 from
Buyer's Affiliate to Seller.                                            

      2.10  Oliver Stone Reimbursement Obligations.  Buyer shall be entitled
to recoup all monies advanced by Buyer or Buyer's Affiliates for the    
    "Overhead", the "Producer Advance" and the "Development Fund" referred to in
 that certain unsigned letter agreement dated as of August 1, 1995, by and
between Seller and Buena Vista Pictures Distribution, Inc. (the         
    "BUYER/SELLER STONE AGREEMENT") as set forth in, and in accordance with, the
Buyer/Seller Stone Agreement, except as Buyer's or Buyer's Affiliates'  
   recoupment rights are modified by this Section 2.10. Seller shall, prior to
the Closing, grant to Buyer first priority security interest(s) and     
mortgage(s) of copyright in those Oliver Stone projects for which monies
  from the Development Fund were or are expended, which security interest(s)
and mortgage(s) of copyright (a) shall secure Buyer's recoupment rights 
   regarding the "Development Fund" under the Buyer/Seller Stone Agreement and
   hereunder; and (b) shall be released on a project by project basis by Buyer
  upon Buyer's recoupment of all monies advanced from the "Development Fund"
  (plus interest) for the applicable project by Buyer or Buyer's Affiliates.
   For purposes of this Section 2.10, the terms "Overhead", "Producer Advance"
and "Development Fund" shall have the same meaning as set forth in the  
    Buyer/Seller Stone Agreement. Seller shall not terminate or amend the "First
 Look Deal" defined and referred to in the Buyer/Seller Stone Agreement in
any way that would have a material adverse effect on Buyer's or Buyer's 
    Affiliates' rights under this Section 2.10 without the prior written consent
  of Buyer. Notwithstanding Buyer's or Buyer's Affiliates' recoupment rights
under the Buyer/Seller Stone Agreement, for each motion picture, if any,
that is produced and/or directed by Oliver Stone and produced, financed 
and/or distributed by Seller, Seller's Affiliate, any entity owned or   
controlled by Andrew Vajna or Andrew Vajna individually, Buyer shall be 
  entitled to recoup "Overhead", the "Producer Advance" and the "Development
   Fund" as follows: (x) Buyer shall be entitled to recoup "Overhead", and the
"Producer Advance" to the extent the "Producer Advance" is not recouped 
pursuant to (y) below, funded or reimbursed by Buyer at a rate of Two   
Million Dollars ($2,000,000) per picture (up to a total of Six Million  
  Dollars ($6,000,000)); (y) Buyer shall be entitled to recoup the "Producer
   Advance" pursuant to and in accordance with paragraph 11 of the "First Look
Deal" (up to a total of One Million Dollars ($1,000,000)); and (z) Buyer
   shall be entitled to recoup the "Development Fund" sums (plus interest), if
    any, that are expended by Buyer pursuant to the Buyer/Seller Stone Agreement
to the extent that any such sums were expended in connection with such  
motion picture. Each such recoupment payment shall be payable upon      
  commencement of principal photography of the applicable motion picture, if
   any. Buyer acknowledges that notwithstanding the provisions of this Section
 2.10 and the terms of the Buyer/Seller Stone Agreement, neither Buyer nor
    Buyer's Affiliates are entitled to reimbursement by Seller under paragraph 4
    of the Buyer/Seller Stone Agreement of (1) the Five Hundred Thousand Dollars
($500,000) for each motion picture that Oliver Stone directs for a third
  party unrelated to Seller; or (2) the amount that Oliver Stone is entitled
to take as a credit against and reduction of the unrecouped "Overhead". 
Buyer further acknowledges that Buyer's and Buyer's Affiliates' only    
  recoupment rights are as set forth in the Buyer/Seller Stone Agreement, as
   modified by and under this Section 2.10, and that neither Buyer nor Buyer's
 Affiliates shall be entitled to seek reimbursement for monies expended by
any of them pursuant to the Buyer/Seller Stone Agreement from Seller,   
provided that Seller causes any applicable third parties to assume the  
  reimbursement obligation to Buyer as part of any transfer or assignment of
  rights to the applicable Oliver Stone project. Except for Buyer or Buyer's
Affiliates recoupment rights, (i) each of Seller and Buyer              

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    acknowledges that neither Buyer or Buyer's Affiliates nor Seller or Seller's
Affiliates shall have any further rights or obligations pursuant to the 
    Buyer/Seller Stone Agreement; and (ii) each of Seller and Buyer acknowledges
    that neither Buyer nor Buyer's Affiliates shall have any other rights in the
motion pictures produced pursuant to the Buyer/Seller Stone Agreement.  

    2.11  Accounting and Payment of Receivables.  At least ten (10) days
   prior to the Closing Date, Seller shall provide Buyer with an accounting of
  all worldwide overages and other payments of any kind from Exploitation of
the Film Assets that have been paid, credited or otherwise collected by 
Seller or Seller's agents or representatives on or after January 1, 1997
 (the "Accounting"). The amount reflected in the Accounting, excluding the
Excluded Receivables, shall be paid by Seller to Buyer by wire or other 
    transfer of immediately available funds to an account designated by Buyer on
or before the Closing Date. After the Closing, Seller agrees that if it 
   receives any other payments which are intended to be included in the Assets
 purchased by Buyer hereunder, Seller shall promptly remit such amounts to
Buyer.                                                                  

       2.12  Smoke Project.  If Seller goes forward with the production of the
  Smoke Project, or if Seller abandons or sells its interest or part thereof
  in the Smoke Project, or otherwise transfers or disposes of rights therein
 or seeks financing and/or distribution of a motion picture based thereon,
Buyer shall have a right of first negotiation with respect thereto;     
provided, however, if Buyer does not enter into an agreement with Seller
    with respect thereto, Seller can sell all or part of its interest so offered
    to Buyer in the Smoke Project to a third party on terms no less favorable to
    Seller than those offered to Buyer. If Seller desires to sell all or part of
 its interest in the Smoke Project to a third party on terms that are less
   favorable to Seller than those last offered by Seller to Buyer, Seller must
first offer those less favorable terms to Buyer and Buyer shall have ten
    (10) business days to accept such offer. If the Smoke Project is produced by
Seller or a third party, unless Buyer agrees otherwise, Buyer shall be  
 entitled to immediate reimbursement in full of all of Buyer's and Buyer's
 Affiliates' costs and expenses (including interest) on the Smoke Project,
which reimbursement obligation will be secured by the security interest 
   described in Section 7.22 below. If the Smoke Project is produced by Seller
    or a third party with Buyer's involvement, Buyer shall cooperate with Seller
    or said third party in obtaining production financing for the Smoke Project,
   including without limitation, the subordination of Buyer's liens subject to
customary non-disturbance rights, or if Buyer or Buyer's Affiliates     
participate in the production financing for the Smoke Project, Buyer or 
Buyer's Affiliates shall enter into mutually satisfactory inter-creditor
agreements with any other participants to such production financing.    

      2.13  BVI Die Hard Distribution Agreement.  After the Closing, the BVI
   Die Hard Distribution Agreement shall be modified as follows: (a) except as
  provided in (e) below, neither Buyer nor Buyer's Affiliates shall have any
obligations to make further payments of any kind whatsoever to Seller   
  pursuant to the BVI Die Hard Distribution Agreement, and all payments that
would otherwise be payable to Seller pursuant to the BVI Die Hard       
  Distribution Agreement shall be retained by Buyer for Buyer's own account;
(b) neither Buyer nor Buyer's Affiliates shall have a right of first    
   negotiation under the BVI Die Hard Distribution Agreement at the end of the
term of such agreement; (c) notwithstanding anything to the contrary    
contained in the BVI Die Hard Distribution Agreement, Buyer and Buyer's 
   Affiliates acknowledge and agree that all Persons, other than Fox, entitled
to Participation Obligations with respect to the motion picture entitled
  "Die Hard III" shall have the right to directly audit Buyer and/or Buyer's
  Affiliates pursuant to the provisions relating to and on the same terms as
    Seller's audit rights in the BVI Die Hard Distribution Agreement; (d) if and
to the extent that Fox waives its rights to participate in worldwide    
revenues from the exploitation of the motion picture entitled "Die Hard 
III", Buyer and/or Buyer's Affiliates shall waive its or their right to 
   participate in such revenues; and (e) Buyer and/or Buyer's Affiliates shall
pay only Buyer's or Buyer's Affiliates' Pro Rata Share of Participation 
Obligations for the motion picture entitled "Die Hard III" arising from 
 Buyer's or Buyer's Affiliates' exercise of Buyer's or Buyer's Affiliates'
  rights under the BVI Die Hard Distribution Agreement, which Pro Rata Share
  shall be payable by Buyer or Buyer's Affiliates upon receipt of an invoice
from Seller or Seller's designee (the "Invoicing Party") stating the    

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amount of Buyer's and/or Buyer's Affiliates' Pro Rata Share of such     
 Participation Obligations. The Invoicing Party shall deliver such invoice
contemporaneously with its delivery of statements to participants. Said 
invoices shall also show the calculation of Buyer's and/or Buyer's      
Affiliates' Pro Rata Share and shall be accompanied by supporting       
    documentation reasonably satisfactory to Buyer or Buyer's Affiliates. Seller
   acknowledges and agrees that Buyer and/or Buyer's Affiliates shall have the
right to audit the calculation and documentation in support thereof. For
   purposes of this Section 2.13, the term "Pro Rata Share", as of the date of
any calculation, shall be defined as a fraction, the numerator of which 
  shall be a number equal to the cumulative amount of minimum guarantees and
overages that Seller (v) has received as of the Closing Date and (w)    
otherwise would be entitled to receive from Buyer or Buyer's Affiliates 
  pursuant to the BVI Die Hard Distribution Agreement as of the date of such
calculation, and the denominator of which shall be a number equal to the
  cumulative amount of worldwide minimum guarantees and overages that Seller
    (x) has received as of the Closing Date, (y) receives after the Closing Date
and (z) otherwise would be entitled to receive from the worldwide       
    exploitation of the motion picture entitled "Die Hard III" as of the date of
such calculation. Any and all audit rights of Buyer and/or Buyer's      
  Affiliates in connection with revenues from the territories covered by the
BVI Die Hard Distribution Agreement may only be asserted against the    
  Invoicing Party. Except as modified by this Section 2.13, the BVI Die Hard
Distribution Agreement shall remain in full force and effect and Buyer  
   and/or Buyer's Affiliates shall retain all of its or their rights contained
therein.                                                                

      2.14  Delivery of Missing Schedules; Due Diligence Period.  (a) In the
event that Schedules 2.2, 2.4, 3.2, 3.4, 3.10, 3.11, 3.13, 3.14, 3.16 or
7.11 (the "SELLER PREPARED SCHEDULES"), or any of them, have not been   
  delivered to Buyer on or prior to the date of this Agreement (the "MISSING
   SCHEDULES"), the Missing Schedules shall be delivered to Buyer on or before
April 15, 1997 (the "SCHEDULE DELIVERY DATE").                          

       (b) Provided that Seller fully complies with Sections 3.4 and 5.3
     below, Buyer shall have until May 15, 1997 (the "DUE DILIGENCE PERIOD")
 to review all contracts, accounting books and records and documents
 relevant to the Assets or the Transaction. If Seller does not fully
    comply with its obligations to provide access and/or deliver documents
       under Sections 3.4 and 5.3 (as reasonably and in good faith determined by
      Buyer), the Due Diligence Period shall be extended by the number of days
  that Buyer is denied the access or documents to which it is entitled
      pursuant to Sections 3.4 and 5.3. Buyer agrees that it shall give Seller
      prompt written notice of such denial of access and the number of days in
  which the Due Diligence Period is being extended. On or prior to the
     expiration of the Due Diligence Period, Buyer shall provide Seller with
   written notice of whether Buyer elects to terminate this Agreement or
    proceed with the Closing of the Transaction (the "DUE DILIGENCE PERIOD
       NOTICE"); provided, however, if Seller has not received the Due Diligence
 Period Notice by the expiration of the Due Diligence Period, Seller
      shall, at any time thereafter, give Buyer written notice of such failure
     and Buyer shall have five (5) days from its receipt of such notice from
    Seller to deliver the Due Diligence Period Notice to Seller. If Seller
       has not received the Due Diligence Period Notice within said five (5) day
      period, this Agreement shall be deemed to have been approved and remains
       in full force. Notwithstanding anything to the contrary contained herein,
     Buyer shall only have the right to terminate this Agreement pursuant to
       this Section 2.14(b) under the following circumstances: (i) if the Seller
    Prepared Schedules contain a disclosure of an obligation, liability or
     any other fact that is either different from the information previously
  delivered or communicated to Buyer with respect to the Assets or the
  Transaction or previously undisclosed to Buyer, and such obligation,
      liability or fact has a Material Adverse Effect on the Assets, on Seller
       or on the Transaction; or (ii) if during Buyer's review of the contracts,
     accounting books and records and other documents relevant to the Assets
    or the Transaction, Buyer discovers any fact relating to the Assets or
the Transaction that has not previously been disclosed to Buyer by
      Seller, in the Seller Prepared Schedules or otherwise, that could have a
Material Adverse Effect on the Assets or Seller.                  

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   3.  Representations and Warranties of Seller.  As a material inducement for
Buyer to enter into this Agreement, Seller represents and warrants that each of 
the following statements is true and correct as of the date hereof and on the   
Closing Date:                                                                   

       3.1  Existence and Rights.  Cinergi, and each of its subsidiaries party
hereto, (a) is a corporation duly organized and validly existing in good
 standing under the laws of the state of its incorporation and (b) has the
corporate power and adequate authority, licenses and rights to own its  
   properties, to carry on its business as now conducted and to make and carry
out the Transaction.                                                    

       3.2  Agreements Authorized.  The execution, delivery and performance by
Seller of this Agreement and the Related Agreements to which Seller is a
party has been duly authorized by all necessary action on the part of   
Seller, including without limitation the approval by Seller's board of  
  directors, but excluding approval by Seller's stockholders, and, except as
set forth on Schedule 3.2, does not require notice to, or the consent or
approval of, any governmental or other regulatory authority or any other
 Person, except where Seller's failure to give such notices or obtain such
   consents or approvals does not have a Material Adverse Effect on the Assets
    or Seller. Each of this Agreement and the Related Agreements to which Seller
is a party has been or when delivered at Closing will have been duly    
executed and delivered by Seller and is or will be a legal, valid and   
binding obligation of Seller, enforceable in accordance with its terms, 
    except only to the extent limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting the rights and
remedies of creditors generally.                                        

        3.3  No Conflict.  The execution, delivery and, subject to obtaining the
 consents in Schedule 3.2, performance by Seller of this Agreement and the
Related Agreements to which Seller is a party will not (a) breach or    
  constitute grounds for the occurrence or declaration of a default under or
allow another party a right to terminate, accelerate or cancel any      
  agreement, indenture, undertaking or other instrument to which Seller is a
    party or by which Seller or any of the Assets may be bound or affected which
breach or default would have a Material Adverse Effect on the Assets or 
Seller; (b) violate any provision of law or any regulation or any order,
 judgment, or decree of any court or other agency or government that would
have a Material Adverse Effect on the Assets or Seller; (c) violate any 
   provision of the charter or bylaws of Seller; or (d) result in the creation
    or imposition of (or the obligation to create or impose) any lien, charge or
    encumbrance on, or security interest in, any of the Assets that would have a
   Material Adverse Effect on the Assets or Seller, other than as contemplated
by the Transaction.                                                     

   3.4  Conveyance of all Interests; Existing Exploitation Agreements;
  Chain-of-Title Documents. On the Closing Date, Seller will convey to Buyer
all of Seller's right, title and interest of every kind and nature      
    whatsoever in and to the Assets. Seller's rights to Exploit the Pictures and
the Picture Rights related thereto are subject only to the Existing     
Exploitation Agreements and any liens in favor of SAG and DGA on the    
Pictures securing obligations with respect to the Pictures under the    
applicable collective bargaining agreement (the "GUILD LIENS"). True,   
correct and complete copies (including all amendments, if any) of the   
    Existing Exploitation Agreements and other agreements listed on Schedule 3.4
   have been provided to Buyer or will be provided to Buyer within thirty (30)
days from the date hereof. Schedule 3.4 accurately sets forth all of the
Existing Exploitation Agreements. True, correct and complete copies     
(including all amendments, if any) of all chain-of-title documents      
establishing Seller's interest in the Film Assets have been provided to 
Buyer or will be provided to Buyer prior to commencement of the Due     
Diligence Period.                                                       

     3.5  Rights Unimpaired.  Except only for the rights licensed to third
    parties under the Existing Exploitation Agreements, (a) Seller has not done,
    nor authorized to be done, any act or thing by which any Exploitation of the
   Film Assets has been or will be in any way materially adversely affected or
    impaired and (b) Seller has not conveyed, transferred, licensed, assigned or
 otherwise disposed of any right, title or interest Seller ever had in the
Film Assets.                                                            

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      3.6  Non-infringement and Litigation.  Neither the Film Assets nor any
  portion thereof nor the exercise of any rights to Exploit the Film Assets,
   will violate or infringe upon the trademark, trade name, copyright, patent,
    or any literary, dramatic, musical, artistic, or personal right or any right
 of privacy, publicity, property right or any other right of any Person or
    entity or defame any Person or entity. Seller has not entered into, and will
not enter into, any agreement which is inconsistent with any of the     
 provisions of this Agreement, and will not exercise any right or take any
action or license or authorize any other Person to exercise any right or
    take any action or license which could have a Material Adverse Effect on the
    Assets. Seller has provided Buyer with notice of, and copies of, any and all
   papers, documents and pleadings served or delivered to Seller or any of its
   Affiliates regarding any claims, actions or litigations, either threatened,
pending or concluded (including, without limitation, those described on 
Schedule 3.14 attached hereto), which might reasonably be expected to   
adversely affect any of the Assets or which seek to prevent, restrict or
delay the consummation of the Transaction. Except for such matters that 
   would not have a Material Adverse Effect on the Assets or Seller, there are
   no orders, writs, judgments, injunctions, decrees, determinations or awards
    against the Assets or Seller, or any of Seller's other assets or properties.

   3.7  Licenses.  Seller owns or has proper and effective licenses in
perpetuity for each Picture (which ownership and licenses will be       
   transferred by Seller to Buyer at the Closing) for (a) the use of the sound
    recording systems employed in the production of the Pictures, (b) the use of
    any copyrighted music or copyrighted sound recordings and (c) the use of any
patented processes, methods and inventions employed in the production   
    thereof. Notwithstanding the foregoing, the parties agree that any breach by
  Seller of this representation and warranty will not constitute a breach of
  this Agreement if such breach is covered by Seller's applicable errors and
  omissions insurance policy (which policy must comply with the requirements
of Section 5.7 below), and Buyer agrees that it will first attempt to   
   recover for any such breach from such errors and omissions insurance policy
  before pursuing its other remedies against Seller under this Agreement for
Seller's breach of this representation and warranty.                    

     3.8  Clearance.  Seller has obtained proper and effective licenses or
grants of authority to use the results of the services of performers and
  other persons connected with the production of the Pictures to Exploit the
Film Assets (which licenses and grants will be transferred by Seller to 
    Buyer on the Closing Date). Notwithstanding the foregoing, the parties agree
that any breach by Seller of this representation and warranty will not  
   constitute a breach of this Agreement if such breach is covered by Seller's
  applicable errors and omissions insurance policy (which policy must comply
  with the requirements of Section 5.7 below), and Buyer agrees that it will
   first attempt to recover for any such breach from such errors and omissions
insurance policy before pursuing its other remedies against Seller under
this Agreement for Seller's breach of this representation and warranty. 

        3.9  Copyrights.  Good and sufficient copyright notice is affixed to the
   Pictures. Each Picture has been registered with the United States Copyright
Office in Seller's name and Seller's rights in each Picture have been   
  registered with the Copyright Office, provided, however, that with respect
 to the motion picture presently entitled "An Alan Smithee Film", only the
 screenplay for said motion picture has been registered with the Copyright
Office in Seller's name.                                                

       3.10  Bankruptcy; Liens/Encumbrances.  Seller has not become subject to
    voluntary or involuntary bankruptcy proceedings. Except only as specified on
Schedule 3.10 and the Guild Liens, there are no liens, encumbrances or  
claims on the Assets or any portion thereof or upon any revenues or     
   receivables from the Exploitation of the Film Assets except for such liens,
  encumbrances or claims that will not have a Material Adverse Effect on the
Assets or Seller.                                                       

    3.11  Music.  Except as set forth in Schedule 3.11, all non-dramatic
 music rights (so called "small rights") contained in the Pictures are (a)
available by license from American Society for Composers, Authors and   
Publishers ("ASCAP"), Broadcast Music Inc. ("BMI"), or SESAC, Inc. or   

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 (b) in the public domain, or (c) controlled by Seller directly or through
licenses (in which event at the Closing Seller will transfer all such   
licenses to Buyer).                                                     

       3.12  Credits.  The credits contained in the main and end titles of the
    Pictures as delivered to Buyer shall comply with all contractual obligations
  to third parties who rendered services in connection with the Pictures and
all applicable Guild agreements.                                        

 3.13  Insurance Claims.  Except as set forth on Schedule 3.13, no
   insurance claims have been made and are currently outstanding and unsettled
as of the date of this Agreement on the producer's errors and omissions 
   policies or any other insurance policies that Seller maintains with respect
    to the Pictures. Except as set forth on Schedule 3.13, no claim with respect
   to any of the Pictures under any errors and omissions policy has required a
   payment by the insurance company or Seller and no claim with respect to any
   of the Pictures that would be covered under any errors and omissions policy
has been asserted.                                                      

        3.14  Contingencies; Proceedings.  Except as set forth in Schedule 3.14,
(a) there is no litigation, arbitration, other proceeding, written audit
request or, to the knowledge of Seller, investigation, pending against  
Seller or any of its officers or directors (in their capacities as such)
which in any way could have a Material Adverse Effect on the Assets or  
   Seller, and (b) Seller does not know of any threats of any such litigation,
arbitration, other proceedings or written audit requests, the results of
which could reasonably be expected to have, individually or in the      
aggregate, a Material Adverse Effect on the Assets or Seller.           

      3.15  Compliance With Law.  Seller has conducted and is conducting its
business in compliance with all applicable laws and regulations in all  
    material respects and has obtained all necessary licenses, permits and other
    approvals of any governmental authority, except where Seller's failure to do
so could not have a Material Adverse Effect on the Assets or Seller.    

        3.16  Commissions.  Except as set forth in Schedule 3.16, neither Seller
nor any of its officers, directors, agents or employees have employed or
incurred any liability to any broker, finder or agent for any brokerage 
  fees, finder's fees, commissions or other similar payments with respect to
the Transaction. Seller hereby agrees that all such amounts payable to  
 brokers, finders or agents are and shall be the sole obligation of Seller
and Seller hereby indemnifies and holds Buyer harmless from any claims  
arising from such obligations.                                          

     3.17  Accuracy of Information Furnished.  No statement or information
  with respect to the Assets contained in any schedule, certificate or other
  document or information furnished, or to be furnished, in writing by or on
behalf of Seller to Buyer, including without limitation the Accounting, 
contains or will contain any untrue statement of a material fact.       

  3.18  "An Alan Smithee Film".  Seller has obtained, or by the time
    Seller delivers the motion picture presently entitled "An Alan Smithee Film"
  to Buyer, Seller shall have obtained, all written releases or other grants
   of necessary rights from all applicable Persons with respect to such motion
   picture and Seller has fully complied in all respects with all requirements
of its errors and omissions insurance policy in effect for such motion  
picture, including without limitation compliance with such policy's     
clearance procedures. In addition, no third party Exploitation Agreement
with respect to this motion picture contains any domestic or other      
  theatrical release requirement except any such requirements to which Buyer
   has expressly agreed pursuant to the terms of the Alan Smithee Distribution
Agreement.                                                              

 3.19  Guild Liens.  Except for Guild Liens with respect to claims
   related to "residuals", "reuse", "rerun" or "supplemental market" payments,
   there are no claims that have been asserted or are assertable by the Guilds
 against the Pictures. This representation and warranty shall not apply to
any claims that may be assertable as the result of actions of Buyer or  
Buyer's Affiliates.                                                     

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       3.20  Evita Warner Bros. Soundtrack Rights.  All of Seller's agreements
    with third party participants in connection with the motion picture entitled
"Evita", including without limitation, any agreement with, or for the   
    services of, Andrew Vajna, specifically exclude from the calculation of each
  such participation any revenues derived from the exploitation of the Evita
 Warner Bros. Soundtrack Rights, and Seller shall be solely liable for any
payments to such third party participants and/or any other party in     
connection with the "Evita" soundtrack. Seller acknowledges that Buyer's
obligations hereunder to assume and pay Participation Obligations in    
 connection with the motion picture entitled "Evita" shall not include any
   Participation Obligations arising in whole or in part from the exploitation
of the Evita Warner Bros. Soundtrack Rights.                            

  4.  Representations and Warranties of Buyer.  As a material inducement for
Seller to enter into this Agreement, Buyer hereby represents and warrants that  
each of the following statements is true and correct as of the date hereof:     

     4.1  Existence and Rights.  Buyer (a) is a corporation duly organized
and validly existing in good standing under the laws of the State of    
   California and (b) has the corporate power and adequate authority, licenses
   and rights to own its properties, to carry on its business as now conducted
and to make and carry out the Transaction.                              

       4.2  Agreements Authorized.  The execution, delivery and performance of
this Agreement and the Related Agreements to which Buyer is a party by  
    Buyer, has been duly authorized by all necessary action on the part of Buyer
    and, except as set forth on Schedule 4.2, does not require notice to, or the
 consent or approval of, any governmental or other regulatory authority or
any other Person, except where Buyer's failure to give such notices or  
    obtain such consents or approvals does not have a Material Adverse Effect on
    Buyer. Each of this Agreement and the Related Agreements to which Buyer is a
    party has been or when delivered at Closing will have been duly executed and
 delivered by Buyer and is a legal, valid and binding obligation of Buyer,
 enforceable in accordance with its terms, except to the extent limited by
  bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights and remedies of creditors generally.  

        4.3  No Conflict.  The execution, delivery and, subject to obtaining the
consents in Schedule 4.2, performance by Buyer of this Agreement and the
Related Agreements to which Buyer is a party will not (a) breach or     
  constitute grounds for the occurrence or declaration of a default under or
   allow another party a right to terminate, accelerate or cancel any material
 agreement, indenture, undertaking or other instrument to which Buyer is a
    party or by which Buyer may be bound or materially affected; (b) violate any
   provision of law or any regulation or any order, judgment, or decree of any
court or other agency or government that could have a Material Adverse  
 Effect on Buyer; or (c) violate any provision of the charter or bylaws of
Buyer.                                                                  

    4.4  Commissions.  Neither Buyer nor any of its officers, directors,
  agents or employees have employed or incurred any liability to any broker,
   finder or agent for any brokerage fees, finder's fees, commissions or other
similar payments with respect to the Transaction.                       

     4.5  Cinergi Stock.  Buyer owns all of the Cinergi Stock beneficially
  and of record and free and clear of any Encumbrance. At the Closing, Buyer
  will transfer good and marketable title to, and complete ownership of, the
Cinergi Stock, free of any Encumbrance.                                 

      4.6  Full Investigation.  Upon expiration of the Due Diligence Period,
    Buyer will confirm that no representation or warranty relating to the Assets
  has been made by Seller other than as set forth in this Agreement and that
Buyer is entering into this Agreement based on (a) Buyer's review of the
Seller Prepared Schedules, (b) Buyer's own evaluation of the Assets and 
 Buyer's review of the properties, books, records, contracts and documents
relating thereto as provided to Buyer by Seller; and (c) Seller's       
representations and warranties as set forth in this Agreement.          

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       4.7  Smoke Project.  As of March 1, 1997, Buyer had expended a total of
Two Million Four Hundred Eighty-Seven Thousand Six Hundred Ninety-Two   
    Dollars ($2,487,692) in connection with the Smoke Project, consisting of One
Million Eight Hundred Sixty-Seven Thousand Seven Hundred Eighty-Seven   
Dollars ($1,867,787) for costs and expenses and Six Hundred Nineteen    
Thousand Nine Hundred Five Dollars ($619,905) in interest. For each day 
 after March 1, 1997, additional interest shall accrue at the rate of Five
   Hundred Twenty-Eight Dollars ($528) per day. Seller acknowledges that Buyer
will not make any further payment in connection with the Smoke Project  
    unless Buyer otherwise agrees in writing. Buyer acknowledges that Seller may
audit the above figures in connection with the Smoke Project.           

5.  Covenants of Seller.                                                

        5.1  Conduct of Business Prior to Closing.  Seller agrees that until the
Closing Date, or earlier termination of this Agreement, unless Buyer    
otherwise consents in writing and except for the Transaction, it will:  

        (a) Except as expressly permitted in Section 5.8 below, not offer,
       license or sell or agree to offer, license or sell any rights or property
  (tangible or intangible) which are included in the Assets or modify,
     amend, terminate, rescind or cancel or grant any waiver with respect to
any existing agreements (including without limitation any Existing
      Exploitation Agreements) with respect to the Assets or expand any rights
     or property (tangible or intangible) with respect to the Assets granted
       to any Person or accelerate the time for payments of any amounts owing to
 Seller under any such agreements without first securing the written
      consent of Buyer; provided, however, that Seller may continue to operate
     in the ordinary course of its business and enter into transactions that
 will not have a Material Adverse Effect on the Assets without first
  securing the written consent of Buyer; in any event, however, Seller
      shall not offer, license or sell, or agree to offer, license or sell, in
      the ordinary course of its business or otherwise, any rights or property
(tangible or intangible) which are included in the Assets in the  
      territories set forth on Schedule 5.1 without first securing the written
consent of Buyer;                                                 

        (b) And after the Closing Date it will, promptly notify Buyer with
   respect to the receipt of any notice of the type described in Section
3.6;                                                              

    (c) Not enter into any Exploitation Agreements relating to the
Exploitation of any Film Assets without securing the prior written
   consent of Buyer, and provided further, that if Buyer consents to any
  such Exploitation Agreements, then any Proceeds of such Exploitation
      Agreements received by Seller prior to the Closing Date shall be used by
    Seller only to pay for budgeted production costs of the motion picture
entitled "An Alan Smithee Film";                                  

          (d) Not transfer or encumber or agree to transfer or encumber any of
   the Assets in any way, except as specifically permitted herein; Buyer
  acknowledges and agrees that the sale by Seller of any rights in the
       motion picture entitled "Die Hard III" other than the BVI Die Hard Rights
       shall not constitute a sale of any Assets hereunder, so long as such sale
does not have a Material Adverse Effect on any of the BVI Die Hard
       Rights; Buyer further acknowledges that anything that Buyer has agreed to
    in this Agreement will not constitute a Material Adverse Effect on the
BVI Die Hard Rights;                                              

          (e) Maintain its Books and Records in accordance with past practices
    and policies, except for such changes of which it will advise Buyer as
     are required to comply with generally accepted accounting principles or
applicable law;                                                   

          (f) Deliver to Buyer each month a statement detailing the agreements
    or other transactions entered into in accordance with this Section 5.1
with respect to the Assets; and                                   

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          (g) Agree that (i) no motion picture on which Seller and/or Seller's
     Affiliates commence pre-production or production will be deemed to be a
     "Qualified Picture" (as that term is defined in the Disney Distribution
      Agreement) under the Disney Distribution Agreement and neither Seller or
       Seller's Affiliates, on the one hand, nor Buyer or Buyer's Affiliates, on
      the other hand, will have any rights or obligations with respect to such
     motion picture against the other party; and (ii) if Seller produces any
     such motion picture, there will not be any cross-collateralization with
respect to or against the Assets.                                 

        5.2  Representations True.  Seller shall not perform any act to make any
  of its representations or warranties set forth in this Agreement untrue or
    incorrect on and as of the Closing Date. Without Buyer waiving any rights it
  may have, Seller will inform Buyer promptly upon discovery that any of its
  representations or warranties ceases to be true or correct in any material
respect.                                                                

       5.3  Access.  Seller will (a) upon reasonable prior notice permit Buyer
  and its authorized representatives and agents to have access during normal
business hours and on Saturdays to all contracts, accounting books and  
   records and documents relevant to the Assets or the Transaction, whether in
Seller's possession or control or the possession or control of Seller's 
Representatives, and to make extracts from and copies of such contracts,
    books and records and documents, subject only to third party confidentiality
rights (and Seller shall use all reasonable efforts to obtain as soon as
  possible waivers by such third parties to permit such access), (b) furnish
    to Buyer or its authorized representatives and agents such other information
   with respect to the business or properties of Seller relating to the Assets
 or the Transaction as Buyer may from time to time reasonably request, (c)
otherwise reasonably cooperate in the examination or audit of Seller by 
Buyer and (d) confer with Buyer to keep it informed with respect to     
operational matters of a material nature affecting the Assets or the    
    Transaction and to report on the general status of the business of Seller as
    it relates to the Assets or the Transaction, except to the extent restricted
  by confidentiality obligations to third parties that are not Affiliates of
Seller.                                                                 

        5.4  Permits.  Seller will make all filings with governmental bodies and
other regulatory authorities and use reasonable efforts to obtain all   
permits, approvals, authorizations and consents of all third parties    
necessary for Seller to consummate the Transaction (including without   
    limitation, consents of any guarantor) without being in violation of any law
or otherwise materially adversely affecting any of the Assets.          

        5.5  Delivery of Books and Records and Other Files.  As soon as possible
after the Closing, to the extent available and to the extent Seller has 
   access during normal business hours and has not theretofore done so, Seller
and Seller's attorneys shall deliver to a location specified by Buyer   
    original copies of all Books and Records that relate solely to the Assets or
accurate copies of all Books and Records that relate to the Assets in   
addition to other businesses or properties of Seller unrelated to the   
Assets.                                                                 

   5.6  Best Efforts.  Seller shall use its best efforts to effect the
Closing.                                                                

    5.7  Errors and Omissions Insurance.  Seller shall obtain errors and
omissions insurance for each of the Pictures with a reputable insurance 
    company approved by Buyer and shall maintain such coverage for at least five
(5) years after the Closing Date with liability limits of not less than 
$1,000,000 for each occurrence and $3,000,000 in the aggregate with a   
$25,000 deductible, naming Buyer and each of its Affiliates and their   
respective directors, officers and employees as beneficiary and named   
insured thereunder. On the Closing Date, Seller shall deliver to Buyer  
appropriate certificates of insurance reflecting the foregoing, it being
understood and agreed that such policies shall in no way limit Seller's 
indemnity under Section 10 hereof.                                      

5.8  No Solicitation.  Until the earlier of the Closing or the  
    termination of this Agreement, Seller shall not, and shall not permit any of
its Affiliates to, nor shall it authorize or permit any of its          

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officers, directors, employees, investment bankers, financial advisors, 
    attorneys, accountants or other representatives retained by it or any of its
 Affiliates ("REPRESENTATIVES") to, solicit any inquiries or the making of
 any proposal which constitutes, or may reasonably be expected to lead to,
any Alternative Transaction; provided, however, that Seller may, and may
permit its Representatives to (a) furnish information to Persons making 
unsolicited inquiries or proposals related to a possible Alternative    
    Transaction or (b) enter into negotiations or discussions with such Persons.
  Additionally, prior to Seller's stockholder's approval of the Transaction,
Seller may enter into one or more agreements providing for one or more  
    possible Alternative Transactions; provided that (i) within five (5) days of
the commencement of any negotiations or discussions with a third party  
    relating to a possible Alternative Transaction, Seller gives Buyer notice in
    writing of the start of any such negotiations or discussions; (ii) if Seller
commences negotiations or discussions with a third party for a possible 
   Alternative Transaction on or after the thirty-first day following the date
 of this Agreement, Buyer shall have the right, but not the obligation, to
    terminate this Agreement at any time after receipt of such notice; and (iii)
within five (5) business days of the commencement of any negotiations or
discussions with a third party relating to a possible Alternative       
Transaction that consists of a sale of the stock of Seller, but in any  
event, prior to the execution of a definitive purchase agreement with   
respect to such possible Alternative Transaction, Seller shall give the 
   stock purchaser in the possible Alternative Transaction written notice that
  Buyer has informed Seller that Buyer believes that the consummation of the
   possible Alternative Transaction will give Buyer the right to terminate the
 Disney Distribution Agreement. If at any point Seller determines that all
  Alternative Transactions cannot or will not be consummated for any reason,
Seller must give Buyer written notice of such fact and, if Buyer has the
right to terminate this Agreement pursuant to (ii) above, and has not   
  already exercised such right, Buyer shall have five (5) business days from
 the date it receives such notice to notify Seller whether Buyer elects to
    terminate this Agreement or proceed with the consummation of the Transaction
in accordance with the terms of this Agreement. In the event that Buyer 
elects to consummate the Transaction (or does not have the right to     
   terminate this Agreement pursuant to (ii) above), the parties shall proceed
to consummate the Transaction in accordance with the terms of this      
    Agreement, provided, however the Closing Date set forth in Section 1.2 above
shall be extended by the number of days Seller has spent pursuing said  
   Alternative Transaction. Nothing contained in this Agreement shall prohibit
   Seller or the members of its Board of Directors from complying with its and
  their (a) fiduciary duties; and (b) obligations under applicable state and
federal law or rules and regulations promulgated thereunder.            

5.9  Stockholders' Meeting; Proxy Statement.                    

           (a)  Meeting of Stockholders of Seller.  Seller shall take all action
   it deems necessary, in accordance with the General Corporation Law of
      Delaware and its respective Certificate of Incorporation and By-Laws, or
as Seller otherwise deems advisable, to convene a meeting of its  
 stockholders as soon as reasonably practicable to consider and vote
whether or not to approve the Transaction; provided, that Seller's
       obligations in this sentence shall be suspended after it receives, and so
      long as it is pursuing, an offer for a possible Alternative Transaction.
      Subject to the provisions of Section 5.8 and the following sentence, (i)
       the Proxy Statement shall contain the recommendation of Seller's Board of
Directors in favor of approval of the Transaction and any other   
    transaction for which approval may also be sought by Seller's Board of
  Directors at the stockholders' meeting; (ii) such Board of Directors
 shall recommend that the stockholders of Seller vote to approve the
  Transaction and any other transaction for which approval may also be
       sought by Seller's Board of Directors at the stockholders' meeting; (iii)
    members of such Board of Directors who are also stockholders of Seller
       shall vote their shares to approve the Transaction; and (iv) Seller shall
    use its reasonable best efforts to solicit from stockholders of Seller
    proxies in favor of such approval. Nothing contained in this Agreement
 shall prohibit Seller or the members of its Board of Directors from
complying with its and their (a) fiduciary duties; and (b)        

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obligations under applicable state and federal law or rules and   
regulations promulgated thereunder.                               

  (b)  Proxy Statements; Other Filings.  As soon as reasonably
   practicable, Seller shall prepare, and Seller shall file with the SEC
  under the Exchange Act, and shall use all reasonable efforts to have
cleared by the SEC and promptly thereafter shall mail to its      
     stockholders, a proxy statement and a form of proxy with respect to the
   meeting of the Seller's stockholders referred to in clause (a) above;
     provided, that Seller's obligations in this sentence shall be suspended
       after it receives, and so long as it is pursuing, an offer for a possible
      Alternative Transaction. The term "PROXY STATEMENT" shall mean each such
proxy statement and all related proxy materials including, without
   limitation, the notice of meeting, letter to stockholders and form of
    proxy at the time such statement and materials initially are mailed to
   Seller's stockholders, and all amendments and supplements thereto, if
       any, similarly filed and mailed. Buyer agrees to cooperate with Seller in
      the preparation of the Proxy Statement by, among other things, using its
    best efforts to provide such information to Seller regarding Buyer and
     the Transaction as may be reasonably requested by Seller. In connection
       with Seller's preparation of the Proxy Statement, Buyer shall be entitled
       to review and make recommendations with respect to the description of the
     Transaction to be contained in the Proxy Statement and Seller shall not
       unreasonably refuse to comply with such recommendation to the extent that
       failure to so comply might materially and adversely affect Buyer. As soon
    as reasonably practicable after the date hereof, Seller shall promptly
     prepare and file any other filings required to be filed by it under the
Exchange Act or any other federal or state law relating to the    
     Transaction; provided, that Seller's obligations in this sentence shall
     be suspended after it receives, and so long as it is pursuing, an offer
for a possible Alternative Transaction. Seller shall notify Buyer 
promptly of the receipt of any written comments of the SEC, of any
      request by the SEC for amendments or supplements to the Proxy Statement,
     and of any request by the SEC with respect to any other filings. Seller
shall use its best reasonable efforts to obtain and furnish the   
      information required to be included in the Proxy Statement and any other
      filings. Seller, after consultation with Buyer, shall use its reasonable
   best efforts to respond promptly to any comments made by the SEC with
 respect to the Proxy Statement and any preliminary version thereof.
      Seller agrees that the information provided and to be provided by it for
      use in the Proxy Statement and any other filings shall, on the date such
      Proxy Statement is first mailed to Seller's stockholders, or on the date
      any other filing is filed with the relevant governmental official and in
       each case on the date of the meeting of Seller's stockholders referred to
   in clause (a) above, be true and correct in all material respects and
     shall not omit to state any material fact required to be stated therein
in order to make the information set forth therein not false or   
       misleading, and Seller agrees to correct any such information provided by
    it for use in the Proxy Statement or any other filing which shall have
become materially false or misleading; provided, however, that no 
representation, covenant or agreement is made by Seller under this
    sentence with respect to information supplied by or on behalf of Buyer
    expressly for inclusion in the Proxy Statement or other filings. Buyer
   covenants to Seller that the information supplied by it expressly for
       inclusion in the Proxy Statement and any other filings shall, on the date
      such Proxy Statement is first mailed to Seller's stockholders, or on the
 date any other filing is filed, and in each case on the date of the
       meeting of Seller's stockholders referred to in clause (a) above, be true
  and correct in all material respects and shall not omit to state any
material fact required to be stated therein in order to make the  
     information set forth therein not false or misleading, and Buyer agrees
     to promptly notify Seller (and provide corrected information to Seller)
      in the event any such information provided by Buyer expressly for use in
 the Proxy Statement or any other filing becomes materially false or
misleading.                                                       

6.  Covenants of Buyer.                                                 

       6.1  Representations True.  Buyer shall not perform any act to make any
  of its representations or warranties set forth in this Agreement untrue or
incorrect on and as of the Closing Date. Without                        

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Seller waiving any rights it may have, Buyer will inform Seller promptly
 upon discovery that any of its representations or warranties ceases to be
true or correct in any material respect.                                

       6.2  Permits.  Buyer will make all filings with governmental bodies and
other regulatory authorities and use reasonable efforts to obtain all   
permits, approvals, authorizations and consents of all third parties    
necessary for Buyer to consummate the Transaction (including without    
    limitation, consents of any guarantor) without being in violation of any law
or otherwise materially adversely affecting any of the Assets.          

  6.3  Best Efforts.  Buyer shall use its best efforts to effect the
Closing.                                                                

   6.4  Disney Loans.  Other than the Disney Loans, there are no other
   outstanding loans made by Buyer or Buyer's Affiliates to Seller or Seller's
Affiliates. Buyer and Buyer's Affiliates agree that Seller shall have no
    repayment obligations with respect to the Disney Loans after the date hereof
 unless this Agreement is terminated; provided that upon such termination,
 all amounts that would otherwise have been due and payable on or prior to
    such termination (including interest after any applicable due date) shall be
immediately due and payable. Notwithstanding the foregoing, Buyer and   
Buyer's Affiliates agree that no late payment fees or increased interest
charges that might otherwise be payable with respect to the Disney Loans
 shall apply to the period commencing with the applicable due date for any
    such loan and ending with the date that is three (3) business days after the
termination of this Agreement.                                          

   7.  Conditions Precedent to Obligations of Buyer.  The obligations of Buyer
to consummate this Agreement and the Transaction are subject to the fulfillment,
prior to or as of the Closing Date, of each of the following conditions, each of
which may only be waived by Buyer in writing:                                   

        7.1  Representations and Warranties.  The representations and warranties
  of Seller contained in Section 3 shall be true and correct in all material
 respects at and as of the Closing Date and Seller shall have delivered to
  Buyer a certificate in form and substance satisfactory to Buyer, dated the
Closing Date, to such effect.                                           

    7.2  Covenants.  Seller shall have complied in all material respects
    with all covenants contained herein to be complied with by it prior to or at
   the Closing, and Seller shall have delivered to Buyer a certificate in form
    and substance satisfactory to Buyer, dated the Closing Date, to such effect.

       7.3  No Injunction Or Litigation.  Buyer shall not be prohibited by any
statute, rule, regulation, order, ruling, consent, decree, judgment or  
 injunction of a court or regulatory agency of competent jurisdiction from
    consummating the Transaction. No litigation, claim, action, investigation or
    proceeding instituted by any governmental body or other regulatory authority
or any other Person shall be pending to restrain, delay, challenge or   
invalidate any part of the Transaction.                                 

       7.4  Consents Obtained.  Seller shall have obtained all of the consents
  and approvals required for the execution, delivery and performance of this
 Agreement by it, including, without limitation, consents of any guarantor
with respect to, and consents required under the terms of, any Existing 
 Exploitation Agreement or any other agreement listed in Schedule 3.4, and
any related notices of assignment and acknowledgments, except for such  
   consents and approvals that would not have a Material Adverse Effect on the
Assets or Seller.                                                       

     7.5  Release of Liens.  Chase shall have released all of its liens in
the Assets in connection with the Chase Credit Agreement.               

       7.6  Participations and Guild Obligations.  Seller shall have delivered
to Buyer a true and complete statement setting forth all Participation  
Obligations relating to the Film Assets and all Guild Obligations with  
   respect to the Film Assets with the level of detail reasonably satisfactory
to Buyer.                                                               

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      7.7  Existing Exploitation Agreements.  Seller shall have delivered to
Buyer true and complete copies of all Existing Exploitation Agreements  
relating to the Pictures.                                               

        7.8  Assignments of Copyright.  Seller shall have executed and delivered
   to Buyer Assignments of Copyright relating to all copyrights and rights and
interests in copyrights domestic and foreign included in the Film Assets
substantially in the form of Schedule 7.8.                              

       7.9  Bill of Sale.  Seller shall have executed and delivered to Buyer a
Bill of Sale substantially in the form of Schedule 7.9.                 

7.10  Physical Properties.  Seller shall have transferred legal 
ownership to Buyer in and to all Physical Properties owned by Seller,   
    subject to lab access letters in favor of third parties pursuant to Existing
Exploitation Agreements ("OWNED ELEMENTS"). With respect to the Owned   
Elements, Seller shall have delivered to Buyer agreements, in form and  
substance reasonably satisfactory to Buyer, executed by Seller and any  
   Person holding any of the Assets pursuant to which Seller acknowledges that
    as of the Closing Date, legal ownership and title to the applicable Physical
Property has been conveyed to Buyer ("LAB NOTICES"). Seller shall have  
transferred to Buyer all of Seller's rights of access to and use of all 
    Physical Properties which Seller has in and to Physical Properties not owned
 by Seller relating to the Film Assets ("ACCESS PICTURE PROPERTIES"). With
  respect to Access Picture Properties, Seller shall have delivered to Buyer
    agreements, in form and substance reasonably satisfactory to Buyer, executed
   by Seller and any Person holding any of the Assets pursuant to which Seller
  acknowledges that as of the Closing Date, all of Seller's access rights to
the applicable Access Picture Properties have been conveyed to Buyer    
("ACCESS NOTICES"). Prior to and following the Closing, Seller agrees to
   assist Buyer, as needed, in obtaining possession of any Physical Properties
    transferred to Buyer hereunder, including without limitation assisting Buyer
in gaining access to and inspecting the Physical Property prior to the  
Closing Date.                                                           

     7.11  Additional Notices.  Seller shall have delivered to Buyer fully
  executed copies of (a) notices to and acknowledgments by all Persons party
to the Existing Exploitation Agreements in form and substance reasonably
  acceptable to Buyer ("NOTICES AND ACKNOWLEDGMENTS OF ASSIGNMENT"); (b) all
   documentation required to transfer Seller's interests in any sale-leaseback
transactions to Buyer; (c) all documentation required by applicable     
   financial institutions to transfer the bank or similar accounts and letters
of credit listed on Schedule 7.11 hereto into the name of Buyer; (d) all
documentation required to effectuate Buyer's interests in all musical   
 compositions with the applicable performing rights societies; and (e) all
 documentation required to assign any security interests held by Seller to
Buyer.                                                                  

  7.12  Legal Opinion.  Buyer shall have received a legal opinion of
Gipson Hoffman Pancione P.C., counsel to Seller, in a form reasonably   
satisfactory to Buyer and its counsel.                                  

  7.13  Financial Statements.  Buyer shall have received the audited
  balance sheet of Seller as of December 31, 1996 and the related statements
 of income and cash flows for the fiscal year ended on that date and notes
related thereto and any financial statements filed with the SEC prepared
after December 31, 1996 by Seller or Seller's accountants.              

 7.14  Stockholder Authorization.  The Transaction shall have been
approved by Seller's stockholders in accordance with Section 5.9.       

7.15  Completion of "An Alan Smithee Film".  The motion picture 
presently entitled "An Alan Smithee Film" shall have been completed and 
delivered by Seller.                                                    

      7.16  Outstanding Accounts Receivable.  Seller shall have delivered to
  Buyer a list of all Accounts Receivable which shall be true and correct in
all material respects.                                                  

        7.17  Related Agreements; Closing Documents.  Seller shall have executed
and delivered each of the Related Agreements and each and every other   
document required to be delivered at Closing as                         

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set forth in this Agreement, each in form and substance reasonably      
 satisfactory to Buyer and Buyer's counsel. Seller shall have executed and
delivered any and all documents necessary or appropriate to assign all  
security interests in favor of Seller with respect to the Assets, any   
    portion thereof or any revenues or Accounts Receivable from the Film Assets.

        7.18  Further Assurances.  Seller shall have executed and delivered, and
shall have caused all third parties to execute and deliver, any and all 
   documents necessary to transfer title in the Assets to Buyer and to confirm
Buyer's ownership rights in and to the Assets.                          

   7.19  No Adverse Changes.  During the period commencing on the date
   hereof and ending on the Closing Date, there shall not have been any change
that could constitute a Material Adverse Effect on the Assets or Seller.

        7.20  HSR Act.  Any waiting period (and any extension thereof) under the
  HSR Act applicable to the purchase of the Assets contemplated hereby shall
have expired or shall have been terminated.                             

7.21  Summit Sales Agency Agreement.  Buyer shall have received 
reasonably satisfactory evidence of the termination of any and all sales
 agency agreements between Seller and Summit relating to the Assets and of
  the release of Seller's obligations thereunder with respect to the Assets.

       7.22  Smoke Project.  Seller shall have executed and delivered to Buyer
 such security agreements and filed such Uniform Commercial Code financing
 statements and copyright mortgages required by Buyer in order to grant to
    Buyer a first priority security interest in all underlying properties in and
    to the Smoke Project, including without limitation all Literary Property and
derivative works based thereon (which derivative works shall include any
   resulting motion picture). If Buyer does not fund and acquire rights in the
   Smoke Project, Buyer agrees that it will take such actions as are necessary
   to release such security interests upon receipt by Buyer of payment in full
of all of Buyer's or Buyer's Affiliates' costs and expenses (including  
interest) in connection with the Smoke Project.                         

7.23  Accounting.  Buyer shall have approved the accuracy of the
Accounting delivered to Buyer pursuant to Section 2.11.                 

     7.24  Oliver Stone Security Interest.  Seller shall have executed and
delivered to Buyer such security agreements and filed such Uniform      
Commercial Code financing statements and copyright mortgages required by
Buyer in order to grant to Buyer the first priority security interests  
described in Section 2.10.                                              

8.  Conditions Precedent to Obligations of Seller.  The obligations of  
Seller to consummate this Agreement and the Transaction are subject to the      
fulfillment, prior to or as of the Closing Date, of each of the following       
conditions, each of which may be waived by Seller in writing:                   

        8.1  Representations and Warranties.  The representations and warranties
 of Buyer contained in Section 4 shall be true and correct in all material
respects at and as of the Closing Date and Buyer shall have delivered to
 Seller a certificate, in form and substance satisfactory to Seller, dated
the Closing Date, to such effect.                                       

        8.2  Covenants.  Buyer shall have complied in all material respects with
   all covenants contained herein to be complied with by it prior to or at the
   Closing, and Buyer shall have delivered to Seller a certificate in form and
 substance satisfactory to Seller, dated the Closing Date, to such effect.

        8.3  No Injunction Or Litigation.  Seller shall not be prohibited by any
statute, rule, regulation, order, ruling, consent, decree, judgment or  
 injunction of a court or regulatory agency of competent jurisdiction from
    consummating the Transaction. No litigation, claim, action, investigation or
    proceeding instituted by any governmental body or other regulatory authority
or any other Person shall be pending to restrain, delay, challenge or   
invalidate any part of the Transaction.                                 

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      8.4  Consents Obtained.  Buyer shall have obtained all of the consents
  and approvals required for the execution, delivery and performance of this
   Agreement by it, except for such consents and approvals that would not have
a Material Adverse Effect on Buyer.                                     

8.5  Assumption of Liabilities.  Buyer shall have assumed the   
 liabilities set forth in Section 2.1, other than the Excluded Liabilities
and shall have taken all actions necessary to evidence such assumption. 

       8.6  HSR Act.  Any waiting period (and any extension thereof) under the
  HSR Act applicable to the purchase of the Assets contemplated hereby shall
have expired or shall have been terminated.                             

 8.7  Release of Guarantees.  Buyer shall have released, or caused
   Buyer's Affiliate to release, any guarantees or security interests executed
or granted in connection with the Disney Loans.                         

      8.8  Related Agreements; Closing Documents.  Buyer shall have executed
    and delivered each of the Related Agreements to which it is a party and each
    and every other document required to be delivered at Closing as set forth in
this Agreement.                                                         

  8.9  Legal Opinion.  Seller shall have received a legal opinion of
  O'Melveny & Myers LLP, counsel to Buyer, in a form reasonably satisfactory
to Seller and its counsel.                                              

       8.10  Guild Assumption Agreements.  Buyer and Seller shall have entered
    into agreements with each of SAG, WGA, DGA, AFM, and IATSE pursuant to which
  Buyer shall have assumed Seller's Guild Obligations (the "GUILD ASSUMPTION
   AGREEMENTS"). The Guild Assumption Agreements shall be in the form required
  under the applicable collective bargaining agreement or in such other form
acceptable to the Guilds and Buyer.                                     

9.  Termination.                                                        

    9.1  Grounds for Termination.  This Agreement may, under subsections
(a), (b), (c), (d), (f) or (g), or shall, under subsection (e), be      
  terminated at any time prior to the Closing Date and not thereafter (a) by
    mutual written consent of Buyer and Seller; (b) by either Buyer or Seller if
there has been a material breach of the representations, warranties or  
 covenants of the other party set forth herein, provided if such breach is
curable, it is not cured within thirty (30) days after the delivery of  
    written notice of the breach by the non-breaching party; (c) by Buyer if the
  conditions stated in Section 7 cannot be or have not been satisfied in all
material respects by the Closing Date; (d) by Seller if the conditions  
stated in Section 8 cannot be or have not been satisfied in all material
    respects by the Closing Date; (e) without any further action by either party
if prior to Seller's stockholders approval of the Transaction, Seller's 
   Board of Directors receives an unsolicited offer from a third party to take
part in an alternative transaction (the "ALTERNATIVE TRANSACTION") and  
Seller's Board of Directors determines, in the exercise of its fiduciary
   duties under applicable law, that the Alternative Transaction would be more
beneficial to Seller or Seller's stockholders than the Transaction, such
 Alternative Transaction and the Transaction cannot both be consummated in
 accordance with their respective terms and the Alternative Transaction is
  consummated; (f) by Buyer pursuant to Section 5.8 if negotiations commence
 for an Alternative Transaction on or after the thirty-first day after the
date of this Agreement; or (g) by Buyer pursuant to the terms of Section
2.14.                                                                   

   9.2  Effect of Termination.  (a) If this Agreement is terminated as
provided in Section 9.1, all obligations of the parties hereunder will  
    terminate without liability of any party to any other party, except (i) that
   the obligations set forth in Sections 10, 11.2 and 11.5, and the provisions
    of Sections 11.3, 11.7, 11.8, 11.10, 11.11, 11.12 and 11.13 will survive any
such termination; (ii) that Seller will be liable for Losses incurred by
Buyer caused by and resulting from any breach by Seller of the covenants
contained in Section 5.1(a), 5.1(c), 5.8 or 5.9, or because Seller      
intentionally or willfully refuses to proceed with the Closing or       
 intentionally or willfully prevents the Closing from taking place (unless
Seller refuses to proceed with the Closing or prevents the Closing from 
taking place because it is                                              

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  consummating or pursuing an Alternative Transaction in accordance with the
   terms of Section 5.8); (iii) that Seller will be liable for Losses incurred
by Buyer (excluding only those Losses resulting or arising from the     
  continuation of the Disney Distribution Agreement) caused by and resulting
from any breach by Seller of the covenants contained in Sections 5.1(b),
5.1(d), 5.1(e), 5.1(f), 5.2, 5.3, 5.4, 5.5, 5.6 or 5.7 or any breach by 
   Seller of the representations and warranties contained in Section 3 (unless
Seller refuses to proceed with the Closing or prevents the Closing from 
taking place because it is consummating or pursuing an Alternative      
 Transaction in accordance with the terms of Section 5.8); (iv) that Buyer
 will be liable for Losses incurred by Seller caused by and resulting from
    any breach by Buyer of the covenants contained in Section 6; and (v) that if
    the termination of this Agreement is pursuant to Section 9.1(b), (c) or (d),
  except as provided in (ii) and (iii) above, nothing herein shall prejudice
   the ability of the non-breaching party from seeking damages from any Person
 for any breach of this Agreement, including without limitation attorneys'
fees and the right to pursue any remedy at law or in equity.            

        (b) In addition to any and all other rights of Buyer hereunder, if
this Agreement is terminated pursuant to Section 9.1(e) or Section
      9.1(f), in each case, Buyer shall have the following rights and remedies
   only if the Alternative Transaction is consummated, as of the date of
such consummation:                                                

               (i) If the Alternative Transaction consists of a sale of any of
      the Assets, the parties agree that (x) all of Buyer's or Buyer's
         Affiliates obligations under the Disney Distribution Agreement with
      respect to motion pictures not yet completed and/or delivered by
           Seller shall terminate; (y) all rights of Buyer or Buyer's Affiliates
           and obligations of Seller under the Disney Distribution Agreement and
 the Alan Smithee Distribution Agreement with respect to the
           Previously Delivered Motion Pictures shall remain unmodified, and the
     Disney Distribution Agreement and the Alan Smithee Distribution
         Agreement with respect to the Previously Delivered Motion Pictures,
  and any security agreements, mortgages of copyright or other
     agreements entered into between Buyer or Buyer's Affiliates and
  Seller or Seller's Affiliates with respect to the Previously
         Delivered Motion Pictures shall remain unmodified and in full force
    and effect; and (z) the Master Loan Agreements shall terminate
           immediately and the Disney Loans shall be immediately due and payable
in full by Seller.                                        

             (ii) If the Alternative Transaction consists of a sale of the
         stock of Seller, the parties agree that Seller shall pay all of the
         reasonable out-of-pocket expenses incurred by Buyer incident to the
        negotiation, preparation and performance of this Agreement and the
        transactions contemplated hereby, including without limitation due
 diligence costs and the fees, expenses and disbursements of
accountants and counsel.                                  

       9.3  Rights to Proceed.  Subject to Sections 9.1 and 9.2, if any of the
  conditions specified in Article 7 have not been satisfied, Buyer will have
   the right to proceed with the Transaction without waiving any of its rights
 hereunder to seek damages for any breach of a representation, warranty or
covenant. Subject to Sections 9.1 and 9.2, if any of the conditions     
  specified in Article 8 have not been satisfied, Seller will have the right
   to proceed with the Transaction without waiving any of its rights hereunder
 to seek damages for any breach of a representation, warranty or covenant.

  9.4  Specific Performance.  The Assets are uniquely suited for the
purposes and needs of Buyer. If Seller should breach any of its         
  representations, warranties or covenants under this Agreement, the parties
 each acknowledge that the remedy at law would be inadequate to compensate
Buyer. Accordingly, Buyer, in addition to any other available rights or 
    remedies, may at its sole option sue in equity for specific performance, and
Seller expressly waives the defense that a remedy in damages will be    
adequate. Notwithstanding the foregoing, Buyer shall not be entitled to 
   specific performance hereunder unless and until it has tendered all amounts
 due pursuant to Section 2, subject to any right of offset which Buyer may
have.                                                                   

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     9.5  Survival of Representations and Warranties.  The representations
and warranties contained herein and any investigation or due diligence  
    conducted by the parties, including without limitation any claims or notices
received from third parties shall survive the Closing for eighteen (18) 
   months; provided, however, that (a) Seller's representations and warranties
    pursuant to Section 3.16 and Buyer's representations and warranties pursuant
   to Section 4.4 shall survive until the expiration of the applicable statute
of limitations relating thereto; and (b) all claims asserted within such
eighteen (18) month period shall survive even if such claims are not    
resolved within such eighteen (18) month period.                        

10.  Indemnification.                                                   

 10.1  Obligations of Seller.  Seller agrees to indemnify and hold
harmless Buyer and its directors, officers, employees, Affiliates (and  
 directors, officers and employees of such Affiliates), agents and assigns
   from and against any and all Losses of Buyer arising from, under or related
  to, or as a result of (a) subject to the limitations set forth in Sections
   9.2(a)(ii) and (iii), any breach of any of the representations, warranties,
  covenants or agreements made by Seller in or pursuant to this Agreement or
    the Related Agreements, (b) subject to the limitations set forth in Sections
   9.2(a)(ii) and (iii), any other breach by Seller of this Agreement, (c) any
  claims asserted by any shareholder of Seller (whether or not such claim is
asserted directly against Buyer) with respect to the Transaction or the 
Assets or (d) the Excluded Liabilities.                                 

        10.2  Obligations of Buyer.  Buyer agrees to indemnify and hold harmless
 Seller and its directors, officers, employees, Affiliates (and directors,
officers and employees of such Affiliates), agents and assigns from and 
against any Losses of Seller arising from, under or related to, or as a 
result of (a) any breach of any of the representations, warranties,     
 covenants or agreements made by Buyer in or pursuant to this Agreement or
    the Related Agreements, (b) any other breach by Buyer of this Agreement, and
(c) the liabilities assumed by Buyer in Section 2.2 above.              

10.3  Procedure.                                                

      (a)  Notice.  Any party seeking indemnification (an "INDEMNIFIED
       PARTY") with respect to any Loss shall give written notice thereof to the
       party required to provide indemnity hereunder (the "INDEMNIFYING PARTY").
      Notwithstanding the foregoing, the rights of any Indemnified Party to be
      indemnified in respect of any Loss resulting from the asserted liability
   shall not be adversely affected by the Indemnified Party's failure to
      give or delay in giving notice unless (and then only to the extent that)
the Indemnifying Party is materially prejudiced thereby.          

         (b)  Defense.  If any claim, demand or liability is asserted by any
     third party against any Indemnified Party, the Indemnifying Party shall
    be entitled to participate therein and defend any action or proceeding
     brought against the Indemnified Party in respect of matters embraced by
       the indemnity, and the Indemnifying Party shall have the right to conduct
    and control the defense subject to the Indemnified Party's approval in
  writing of outside counsel selected by the Indemnifying Party. After
notice from the Indemnifying Party to the Indemnified Party of its
      election to assume the defense of such claim or action, the Indemnifying
      Party shall not be liable to the Indemnified Party under this Section 10
      for any legal or other expenses subsequently incurred by the Indemnified
      Party in connection with the defense thereof other than reasonable costs
    of investigation. In any action defended by the Indemnifying Party the
 Indemnified Party shall have the right to be represented by its own
  counsel at its own expense unless (1) the employment of such counsel
    shall have been authorized in writing by the Indemnifying Party or (2)
the Indemnifying Party shall not have properly employed counsel   
     reasonably satisfactory to such Indemnified Party to have charge of the
  defense of such action; in each of such cases such fees and expenses
shall be paid by the Indemnifying Party. In addition, if the named
     parties to any such action, suit or proceeding (including any impleaded
 parties) shall include both such Indemnified Party and Indemnifying
Party, and such Indemnified Party shall have been advised         

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     by counsel that there may be one or more legal defenses available to it
which are different from, or additional to, those available to the
Indemnifying Party, and if such Indemnified Party notifies the    
     Indemnifying Party in writing that it elects to employ separate counsel
    at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense of such action, suit or  
       proceeding on behalf of such Indemnified Party, and the Indemnified Party
   may participate in the defense of such action, suit or proceeding and
      such fees and expenses shall be paid by the Indemnifying Party; it being
       understood, however, that the Indemnifying Party shall not, in connection
       with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general  
 allegations or circumstances, be liable for the reasonable fees and
      expenses of more than one separate firm of attorneys (in addition to any
     local counsel for all such Indemnified Parties). The Indemnifying Party
will not, without Indemnified Party's written consent, settle or  
compromise any indemnifiable claim or consent to the entry of any 
       judgment in respect thereof unless such settlement, compromise or consent
 includes an unconditional release of the Indemnified Party from all
 liability in respect of such Indemnifiable Claim. The parties shall
       cooperate in the defense of all third party claims which may give rise to
Indemnifiable Claims hereunder.                                   

      10.4  Survival.  This Section 10 shall survive any termination of this
Agreement.                                                              

11.  Miscellaneous.                                                     

 11.1  Complete Agreement; Modifications.  This Agreement, and any
    documents referred to herein or executed contemporaneously herewith pursuant
    hereto, constitute the parties' entire agreement with respect to the subject
matter hereof and supersede all agreements, representations, warranties,
statements, promises and understandings, whether oral or written, with  
respect to the subject matter hereof. This Agreement may not be amended,
altered or modified except by a writing signed by the parties.          

     11.2  Expenses.  Subject to Section 9.2, the parties hereto will each
    pay all of their own expenses incurred in connection with the authorization,
preparation, execution and performance of this Agreement and the        
  Transaction, including, without limitation, all fees and expenses of their
respective agents, representatives, counsel and accountants.            

  11.3  Remedies not Exclusive; No Termination.  Except as expressly
 stated to the contrary herein, no remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other   
    remedy, and each and every remedy will be cumulative and will be in addition
    to every other remedy given hereunder or now or hereafter existing at law or
in equity or by statute or otherwise. The election of any one or more   
    remedies will not constitute a waiver of the right to pursue other available
remedies.                                                               

       11.4  Cooperation.  Each party hereto agrees, both before and after the
  Closing, to execute any and all further documents and writings and perform
    such other reasonable actions which may be or become reasonably necessary or
  expedient to effectuate and carry out the Transaction (which shall include
  any obligation to make payments). If at any time after the Closing, Seller
  receives any payment that is part of the Assets, it will hold such payment
    in trust and pay it to Buyer within five (5) business days of its receipt by
    Seller. If at any time after the Closing, Buyer receives any payment that is
not part of the Assets, it will hold such payment in trust and pay it to
Seller within five (5) business days of its receipt by Buyer.           

        11.5  Confidentiality Obligations.  From and after the date hereof, each
party hereto shall strictly maintain the confidential nature of, and not
  make any public announcement or disclose to any third party or use for any
   purpose other than in connection with the Transaction without prior written
  consent of the other party, (a) any confidential information learned about
the other or its Affiliates in the course of the Transaction, or (b) the
existence or terms of, or information relating to, this                 

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Agreement (including the Purchase Price), the Related Agreements or any 
other documents signed at the Closing Date, unless and to the extent    
    necessary to carry out the Transaction or as permitted by this Section 11.5.
  Each party shall be responsible for any breach of this Section 11.5 by its
Affiliates, directors, officers, employees, agents or advisors. These   
    restrictions on use and obligations of confidentiality will not apply to any
 information (i) to the extent the receiving party is required to disclose
  such information by law or applicable regulation, including any securities
laws and regulations and the regulations of any securities exchange, or 
   under court or government order (in which case no public announcement shall
  be made without prior consultation with the other party), (ii) then in the
public domain by acts not attributable to such party, (iii) hereafter   
    received by the receiving party from a third party source on an unrestricted
basis, (iv) known to the receiving party prior to the date of disclosure
    hereunder except to the extent subject to a prior confidentiality agreement,
or (v) necessary to enforce this Agreement provided that all reasonable 
 steps are taken to limit the amount of disclosure. If the Closing occurs,
 Buyer shall be released from any obligations under this Section 11.5 with
regard to the Assets and the Transaction. Seller shall not disclose any 
 confidential information about the Assets before or after Closing without
   the prior written consent of Buyer except as provided in clauses (i), (ii),
(iii) or (v) of the fourth sentence of this Section 11.5. Upon any      
    termination of this Agreement pursuant to Section 9.1, Buyer and Seller each
    agree to return or destroy any and all materials containing any confidential
information.                                                            

       11.6  Notices.  All notices under this Agreement will be in writing and
   will be delivered by personal service, facsimile or certified mail (postage
prepaid) to such address as may be designated from time to time by the  
  relevant party, and which will initially be as set forth below. Any notice
  delivered by personal service will be deemed delivered when it is actually
  delivered and received by the relevant party. Any notice sent by facsimile
will be deemed delivered when the confirmation of the successful        
transmission of the facsimile is printed by the facsimile machine and   
received by the sending party. Any notice sent by certified mail will be
deemed to have been given three (3) days after the date on which it is  
mailed. No objection may be made to the manner of delivery of any notice
    actually received in writing by an authorized agent of a party. Notices will
 be addressed as follows or to such other address as the party to whom the
same is directed will have specified in conformity with the foregoing:  

If to Buyer:                                                    

Walt Disney Pictures and Television                       
500 S. Buena Vista Street                                 
Burbank, CA 91521                                         
Attn: Business and Legal Affairs                          

Fax No.: (818) 843-7109                                   

With a copy to:                                                 

Walt Disney Pictures and Television                       
500 S. Buena Vista Street                                 
Burbank, CA 91521                                         
Attn: Corporate Legal                                     
Fax No.: (818) 563-3366                                   

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If to Seller:                                                   

Cinergi Pictures Entertainment Inc.                       
Cinergi Productions N.V. Inc.                             
2308 Broadway                                             
Santa Monica, CA 90404                                    
Attn: Warren Braverman                                    

Fax No.: (310) 828-0443                                   

With a copy to:                                                 

Gipson Hoffman & Pancione                                 
1901 Avenue of the Stars                                  
Suite 1100                                                
Los Angeles, CA 90067-6002                                
Attn: Robert H. Steinberg, Esq.                           

Fax No.: (310) 556-8945                                   

     11.7  Third Party Benefits.  None of the provisions of this Agreement
   will be for the benefit of, or enforceable by, any third-party beneficiary.

      11.8  Governing Law; Jurisdiction; Service of Process.  This Agreement
has been negotiated and entered into in the State of California, and all
 questions with respect to the Agreement and the rights and liabilities of
 the parties will be governed by the laws of that state, regardless of the
 choice of law provisions of California or any other jurisdiction. Any and
   all disputes between the parties which may arise pursuant to this Agreement
 will be heard and determined before an appropriate federal or state court
    located in Los Angeles, California. The parties hereto acknowledge that such
  court has the jurisdiction to interpret and enforce the provisions of this
    Agreement and the parties waive any and all objections that they may have as
 to personal jurisdiction or venue in any of the above courts. The parties
   hereby agree that service of all process in any such proceeding in any such
    court may be made by registered or certified mail, return receipt requested,
to the applicable party at its address provided in Section 11.6, such   
  service being hereby acknowledged by the applicable party to be sufficient
    for personal jurisdiction in any action against such party in any such court
   and to be otherwise effective and binding service in every respect. Nothing
    herein shall affect the right to serve process in any other manner permitted
by law.                                                                 

      11.9  Waivers Strictly Construed.  With regard to any power, remedy or
  right provided herein or otherwise available to any party hereunder (a) no
   waiver or extension of time will be effective unless expressly contained in
  a writing signed by the waiving party; and (b) no alteration, modification
    or impairment will be implied by reason of any previous waiver, extension of
time, delay or omission in exercise, or other indulgence.               

   11.10  Illegality; Severability.  Nothing herein contained shall be
   construed to require the performance by either party of any act contrary to
 law. If any term, provision, covenant or restriction of this Agreement is
   held by a court of competent jurisdiction or other authority to be invalid,
    void or unenforceable, (i) the remainder of the terms, provisions, covenants
    and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and (ii) to the   
    fullest extent possible, the provisions of this Agreement (including without
 limitation, all portions of any section of this Agreement containing such
provision held to be invalid, illegal or unenforceable that are not     
 themselves invalid, illegal or unenforceable) shall be construed so as to
   give effect to the intent manifested by the provision held invalid, illegal
or unenforceable.                                                       

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  11.11  Relationship of Parties.  Nothing herein contained shall be
   deemed to constitute a partnership between or joint venture by the parties,
    nor shall either party be deemed the agent of the other. Neither party shall
hold itself out contrary to the provisions hereof.                      

 11.12  Successors and Assigns.  This Agreement shall inure to the
benefit of and shall be binding on the parties, and their respective    
successors and assigns except that Seller may not assign its rights or  
    obligations under this Agreement without the prior written consent of Buyer.
 Seller may assign its rights and obligations under this Agreement without
  the prior written consent of Buyer if the assignment is made pursuant to a
merger, consolidation or sale of all or substantially all of Seller's   
  assets; provided, however, if said assignment occurs prior to the Closing,
  Seller's successor/assignee must assume Seller's obligations hereunder and
   Buyer must be reasonably satisfied that said successor/assignee is at least
as able to perform Seller's obligations pursuant to this Agreement as   
  Seller. Any assignment made by Seller pursuant to this Section 11.12 shall
   not release Seller from any of its obligations or liabilities hereunder and
any assignment made in violation of this Section shall be null and void.
Buyer may assign its rights and obligations under this Agreement to any 
Affiliate.                                                              

11.13  Rules of Construction.                                   

        (a)  Headings.  The Article and Section headings in this Agreement
 are inserted only as a matter of convenience, and in no way define,
 limit, or extend or interpret the scope of this Agreement or of any
particular Article or Section.                                    

         (b)  Tense and Case.  Throughout this Agreement, as the context may
     require, references to any word used in one tense or case shall include
all other appropriate tenses or cases.                            

      11.14  Counterparts.  This Agreement may be executed simultaneously in
   two or more counterparts, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.          

        11.15  Disclosure Schedule.  Disclosure of information in any section of
    this Agreement or the disclosure schedule shall not be deemed disclosure for
   purposes of any other Section of this Agreement or the disclosure schedule.

  11.16  Construction.  The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be    
   construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the 
authorship of any of the provisions of this Agreement.                  

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IN WITNESS WHEREOF, the parties hereto have duly caused the execution of
this Agreement by its authorized representative as of the date first above      
written.                                                                        

                                                                [Download Table]
                                              
CINERGI PICTURES ENTERTAINMENT INC.,          
f/k/a CINERGI PRODUCTIONS, INC.               

By:             /s/ WARREN BRAVERMAN          
     -----------------------------------------
     Name: Warren Braverman                   
     Title: EXECUTIVE VICE PRESIDENT          

CINERGI PRODUCTIONS N.V. INC.                 

By:             /s/ WARREN BRAVERMAN          
     -----------------------------------------
     Name: Warren Braverman                   
     Title: EXECUTIVE VICE PRESIDENT          

WALT DISNEY PICTURES AND TELEVISION           

By:             /s/ ROBERT S. MOORE           
     -----------------------------------------
     Name: Robert S. Moore                    
     Title: EXECUTIVE VICE PRESIDENT          

Each of the undersigned members of Seller's Board of Directors, in their
capacities as shareholders of Seller, hereby acknowledges, and agrees to comply 
with, the terms of Section 5.9(a)(iii).                                         

                                                                [Download Table]
                                         
             /s/ ANDREW VAJNA            
-----------------------------------------
               Andrew Vajna              
Dated: April 3, 1997                     

           /s/ WARREN BRAVERMAN          
-----------------------------------------
             Warren Braverman            
Dated: April 3, 1997                     

  To the extent that the rights of either of the undersigned are affected by
this Agreement, each of the undersigned acknowledges and consents to any such   
modifications.                                                                  

                                                                [Download Table]
                                              
BUENA VISTA INTERNATIONAL, INC.               

By:                /s/ L. KAPLAN              
     -----------------------------------------
     Name: L. Kaplan                          
     Title: SENIOR VICE PRESIDENT/GENERAL     
     MANAGER                                  

BUENA VISTA PICTURES DISTRIBUTION,            
a division of ABC, Inc.                       

By:            /s/ PHILLIP L. BARLOW          
     -----------------------------------------
     Name: Phillip L. Barlow                  
     Title: PRESIDENT--DISTRIBUTION           

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LIST OF SCHEDULES AND EXHIBITS

                                                        [Enlarge/Download Table]
                                                                                     
Schedule A................. Definitions                                              
Schedule 2.2............... Assumed Obligations with respect to Existing Exploitation
                            Agreements                                               
Schedule 2.4............... Distribution and Sales Agency Agreements                 
Schedule 3.2............... Required Notices and Consents (Seller)                   
Schedule 3.4............... Existing Exploitation Agreements                         
Schedule 3.10.............. Permitted Liens                                          
Schedule 3.11.............. Music Rights                                             
Schedule 3.13.............. Insurance Claims                                         
Schedule 3.14.............. Litigation                                               
Schedule 3.16.............. Commissions                                              
Schedule 4.2............... Required Notices and Consents (Buyer)                    
Schedule 5.1............... Territories Requiring Buyer's Prior Written Consent      
Schedule 7.8............... Form of Assignment of Copyright                          
Schedule 7.9............... Form of Bill of Sale                                     
Schedule 7.11.............. Bank Accounts                                            

Exhibit A.................. Pictures                                                 

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SCHEDULE A
DEFINITIONS 

  For all purposes of the Agreement to which this is attached as Schedule A,
except as otherwise expressly provided or unless the context otherwise requires,

    (a) the terms defined in this Schedule have the meanings assigned to them in
this Schedule and include the plural as well as the singular,                   

(b) all accounting terms not otherwise defined herein have the meanings 
assigned under generally accepted accounting principles in the United States,   

  (c) pronouns of either gender or neuter shall include, as appropriate, the
other pronoun forms, and                                                        

   (d) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,    
Section or other subdivision.                                                   

  As used in the Agreement and the Exhibits and Schedules delivered pursuant
to the Agreement, the following definitions shall apply:                        

"338 Elections" is defined in Section 1.4.                              

"Access Notices" is defined in Section 7.10.                            

"Access Picture Properties" is defined in Section 7.10.                 

"Account" shall have the meaning given to such term in the Uniform      
Commercial Code.                                                                

"Accounting" is defined in Section 2.11.                                

"Accounts Receivable" means all accounts receivable, unpaid advances and
guarantees, rights to payment, proceeds, letters of credit, claims (including   
claims for past due amounts and audit claims whether due or arising prior to or 
subsequent to the Closing Date), recoveries or consideration of any nature      
whatsoever under the Existing Exploitation Agreements and all other agreements  
with respect to the Assets. Without limiting the generality of the foregoing,   
the term "Accounts Receivable" shall expressly include all domestic and         
non-domestic overages or other payments or rights to payments paid or payable   
after January 1, 1997, whether or not paid, credited or otherwise collected, on 
the Film Assets. Notwithstanding the foregoing, the term "Accounts Receivable"  
shall expressly exclude all contractual minimum guarantees payable pursuant to a
contract in existence as of January 1, 1997 with respect to the Film Assets     
other than minimum guarantees due with respect to the motion pictures presently 
entitled "An Alan Smithee Film", "Up Close and Personal" and "Deep Rising" a/k/a
"Tentacles" (the "EXCLUDED RECEIVABLES").                                       

  "Affiliate" means, with regard to any Person, any other Person directly or
indirectly controlling or controlled by or under direct or indirect common      
control with such first Person.                                                 

"Agency Films" means all motion pictures listed in Exhibit A hereto and 
identified on Exhibit A as "Agency Films".                                      

    "Agreement" is defined in the introductory paragraph and means the Agreement
to which this is attached as Schedule A, as amended or supplemented together    
with all Exhibits and Schedules attached or incorporated by reference therein.  

"Alan Smithee Distribution Agreement" means that certain Distribution   
Agreement dated as of October 2, 1996 by and between Seller and Buena Vista     
Pictures Distribution, Inc.                                                     

"Alternative Transaction" is defined in Section 9.1(e).                 

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"Ancillary Rights" means all ancillary, subsidiary or allied rights now 
known and unknown, including without limitation publishing, novelization, music 
publishing, soundtrack recording, screenplay, publication, sponsorship,         
commercial tie-up, character, live stage, theme park and merchandising rights of
every kind and nature whatsoever derived from, appurtenant to or related to the 
Pictures, Picture Rights, the Literary Property, the title or titles of the     
Pictures, or said Literary Property, the characters appearing in the Pictures,  
Picture Rights or said Literary Property and/or the names or characteristics of 
said characters.                                                                

"ASCAP" is defined in Section 3.11.                                     

"Assets" is defined in Section 1.1.                                     

"Bill of Sale" means the Bill of Sale in the form attached hereto as    
Schedule 7.9.                                                                   

"BMI" is defined in Section 3.11.                                       

"Books and Records" means all of Seller's files, books and records      
(including, without limitation, financial books and records), data bases, ledger
cards, files, correspondence, computer programs, tapes, disks and related data  
processing software that at any time evidence or contain information relating to
any of the Assets or are otherwise necessary or helpful in the Exploitation,    
ownership or collection thereof or realization thereupon, continuity lists,     
dialogue lists, spotting lists, synchronization licenses, contracts,            
correspondence and business affairs and legal files relating to the development,
acquisition, production and Exploitation of the Pictures and the Picture Rights,
cast lists, artwork, press books, story synopses, credit requirements lists,    
posters, advertising and publicity materials and all versions thereof and all of
Seller's rights of access to the foregoing, contracts, agreements, assignments, 
documents or other papers, including originally executed copies of such         
contracts, agreements, assignments, documents or other papers relating to the   
Pictures and the Picture Rights.                                                

"Buyer" is defined in the introductory paragraph.                       

"Buyer/Seller Stone Agreement" is defined in Section 2.10.              

"BVI Die Hard Distribution Agreement" is defined in Section 1.1(a)(v).  

"BVI Die Hard Rights" is defined in Section 1.1(a)(v).                  

"Chase" is defined in Section 2.2.                                      

"Chase Credit Agreement" is defined in Section 2.2.                     

"Chattel Paper" shall have the meaning given to such term in the Uniform
Commercial Code.                                                                

    "Code" means the Internal Revenue Code of 1986, as amended and any successor
thereto and the Treasury Regulations promulgated thereunder.                    

"Cinergi" is defined in the introductory paragraph.                     

"Cinergi Films" means all motion pictures listed in Exhibit A hereto and
identified on Exhibit A as "Cinergi Films".                                     

"Cinergi Stock" is defined in Section 2.6.                              

"Closing" means the consummation of the Transaction contemplated by the 
Agreement.                                                                      

"Closing Date" is defined in Section 1.2.                               

 "Disney Distribution Agreement" means that certain Distribution Agreement
dated as of July 9, 1990, as amended, among Seller, Buyer and Buyer's           
Affiliates.                                                                     

"Disney Loans" is defined in Section 2.2.                               

"Document" shall have the meaning given to such term in the Uniform     
Commercial Code.                                                                

"Due Diligence Period" is defined in Section 2.14(b).                   

"Due Diligence Period Notice" is defined in Section 2.14(b).            

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"Encumbrance" means any claim, charge, easement, encumbrance, lease,    
covenant, security interest, lien, option, pledge, rights of others, or         
restriction (whether on voting, sale, transfer, disposition or otherwise),      
whether imposed by agreement, understanding, law, equity or otherwise, except   
for any restrictions on transfer generally arising under any applicable federal 
or state securities law.                                                        

"Evita Warner Bros. Soundtrack Agreement" means that unsigned letter    
agreement dated as of June 12, 1995 by and between Warner Bros. Records Inc. and
Cinergi Service, Inc.                                                           

"Evita Warner Bros. Soundtrack Rights" means only Seller's or Seller's  
Affiliates' rights under the Evita Warner Bros. Soundtrack Agreement (or any    
substitute or replacement agreement or additional similar agreement) regarding  
the "Evita" soundtrack.                                                         

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

"Excluded Liabilities" is defined in Section 2.2.                       

   "Excluded Receivables" is defined in the definition of Accounts Receivable.

"Existing Exploitation Agreements" means the Exploitation Agreements in 
effect as of the date hereof and are listed on Schedule 3.4 hereto.             

"Existing Third Party Exploitation Rights" means the Exploitation rights
sold, licensed or granted to third parties pursuant to existing Exploitation    
Agreements.                                                                     

"Exploitation" and the correlative "Exploit" means:                     

        (a) The right, under copyright and otherwise, to release, sell, exhibit,
distribute, subdistribute, lease, sublease, market, exploit, license,   
    sublicense, broadcast, transmit, reproduce, advertise, publicize, perform or
  otherwise exploit and derive revenues from the Pictures and Picture Rights
in perpetuity, throughout the universe, in any and all languages and    
versions, on any and all sizes and gauges of film, videotape or other   
material and by any and every means and media, now known or which may   
hereafter be developed (including, without limitation, theatrical,      
 non-theatrical, all forms of television (including free, pay, basic cable
and satellite) and video devices, all interactive and computer assisted 
   media; and in connection with any such uses (whether the same be for profit
    or otherwise) to use and perform all sound and music synchronized therewith.

 (b) The right to manufacture and procure such positive prints and
    preprint and other materials and to cause the performance of such laboratory
    work with respect to the Pictures as Buyer may require and to cause trailers
  of the Pictures to be produced, manufactured, exhibited and distributed by
every means, method or device now or hereafter known.                   

  (c) The right to advertise, publicize and exploit the Pictures and
Picture Rights by such means in such media now known and unknown, and to
  such extent as Buyer may deem desirable. Such rights shall include without
  limitation, with respect to all Persons appearing in or rendering services
   in connection with the Pictures, the right to issue and authorize publicity
concerning them and the right to use, reproduce, transmit, broadcast,   
exploit, publicize and exhibit their names, photographs, likenesses,    
    transcriptions, films and other reproductions thereof in connection with the
distribution, exhibition, advertising and exploitation of the Pictures. 

      (d) The right to exercise Sequel and Remake Rights and other Ancillary
Rights.                                                                 

 "Exploitation Agreement" means any agreement relating to the sale, grant,
license or other conferral to any Person of any right to release, sell,         
distribute, subdistribute, lease, sublease, market, license, sublicense,        
exhibit, broadcast, transmit, reproduce, publicize, or otherwise Exploit any    
Pictures or Picture Rights or any rights in any Pictures or Picture Rights.     

  "Film Assets" means all right, title and interest of every kind and nature
without limitation in and to the Pictures and Picture Rights, including without 
limitation all tangible and intangible property and rights                      

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relating thereto and all Proceeds (as defined below in this Schedule A) thereof 
now known and unknown other than the Excluded Receivables. Without limiting the 
generality of the foregoing, the term "Film Assets" shall include all tangible  
and intangible rights now known and unknown and property related to the Pictures
and Picture Rights, including, without limitation, the following:               

       1.  All rights of every kind and nature (including, without limitation,
copyrights) in and to any literary, trademark, service mark, literary   
    property right, personal right, musical, dramatic or other literary material
of any kind or nature upon which, in whole or in part, any Pictures or  
   Picture Rights is or may be based, or from which it is or may be adapted or
inspired or which may be or has been used or included in any Pictures or
   Picture Rights including, without limitation, all scripts, outlines, books,
  titles, concepts, manuscripts or other properties or materials of any kind
or nature in whatever state of completion and all drafts, versions and  
variations thereof (collectively, the "LITERARY PROPERTY");             

       2.  All tangible personal property, Goods and other physical properties
    of every kind or nature of or relating to Pictures or Picture Rights and all
versions thereof, including, without limitation, all Physical Properties
  relating to the development, production, completion, delivery, exhibition,
 distribution or other exploitation of any Pictures or Picture Rights, and
all versions thereof or any part thereof;                               

      3.  All rights of every kind or nature in and to any and all music and
  musical compositions created for, used in or to be used in connection with
    any Pictures or Picture Rights including, without limitation, all copyrights
    therein and all rights to perform, copy, record, rerecord, produce, publish,
  reproduce or synchronize any or all of said music and musical compositions
 as well as all other rights to exploit such music including record, sound
track recording, and music publishing rights;                           

4.  All Ancillary Rights;                                       

     5.  All rights of every kind or nature, present and future, in and to
    all agreements relating to the development, production, completion, delivery
and Exploitation of any Pictures, including, without limitation, all    
   agreements for the services of writers, directors, cast, producers, special
effects personnel, musicians, animators, cameramen and other creative,  
artistic and technical staff and agreements for the use of studio space,
equipment, facilities, locations, animation services, special effects   
services and laboratory contracts;                                      

       6.  All rights to receive development cost reimbursements plus interest
and any other sums relating to development costs of the Pictures;       

       7.  All insurance and insurance policies heretofore or hereafter placed
   upon any Pictures, Picture Rights, the Physical Properties or the insurable
   properties thereof and/or any person or persons engaged in the development,
    production, completion, delivery or exploitation of any Pictures or Pictures
Rights and the proceeds thereof;                                        

  8.  All copyrights, rights in copyrights, interests in copyrights,
applications for copyrights, and renewals and extensions of copyrights, 
 domestic and foreign, heretofore or hereafter obtained upon any Pictures,
  Picture Rights or the Literary Property or any part thereof, and the right
    to make publication thereof for copyright purposes, to register claims under
   copyright, and the right to renew and extend such copyrights, and the right
to sue for past, present and future infringements of copyright;         

  9.  All rights to produce, acquire, lease, sublease or Exploit any
Pictures, Picture Rights, the Literary Property and any and all rights  
 therein in perpetuity, without limitation, in any manner and in any media
   whatsoever throughout the universe by any and all means, methods, processes
   or devices now known or hereafter conceived, devised or created, including,
without limitation, all contract rights, General Intangibles, Accounts, 
Chattel Paper, Documents, Instruments, letters of credit and            

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other rights of any kind except only the Excluded Receivables (and all  
Proceeds and products of any of the foregoing) arising out of or in     
connection with any Existing Exploitation Agreement (the "ASSIGNED      
 EXPLOITATION AGREEMENTS"), including without limitation (a) all rights of
  the Seller to receive moneys due or to become due pursuant to the Assigned
 Exploitation Agreements and all audit claims with respect thereto, except
only the Excluded Receivables; (b) all rights of the Seller to receive  
  proceeds of any insurance, indemnity, warranty or guaranty with respect to
the Assigned Exploitation Agreements; (c) all claims of the Seller for  
damages arising out of or for breach of or default under the Assigned   
  Exploitation Agreements; (d) all rights of the Seller to terminate, amend,
supplement, modify or exercise rights or options under any Assigned     
  Exploitation Agreement, all rights of the Seller to perform thereunder and
    to compel performance and otherwise exercise any and all rights and remedies
    under the Assigned Exploitation Agreements; and (e) all rights of the Seller
in, to and under all security agreements, leases and other documents    
   (including without limitation all drawing documents relating to any letters
    of credit) and contracts securing, guaranteeing or otherwise relating to any
 such Assigned Exploitation Agreements, Accounts, contract rights, Chattel
Paper, Documents, Instruments, letters of credit, General Intangibles or
other obligations;                                                      

       10. Any pledgeholder, laboratory access, or film warehousing agreements
relating to any Pictures or Picture Rights and any and all documents,   
  receipts or books and records, including, without limitation, documents or
  receipts of any kind or nature issued by any pledgeholder, warehouseman or
bailee with respect to any Pictures, Picture Rights and any Physical    
Property relating thereto;                                              

        11. The title or titles of any Pictures or Picture Rights and all rights
  of Seller to the exclusive use thereof including rights protected pursuant
  to trademark, service mark, unfair competition and/or other laws, rules or
principles of law or equity;                                            

12. The following collection accounts:                          

       a.  All deposit and other accounts listed on Schedule 7.11 to the
   Agreement (the "COLLECTION ACCOUNTS") and any extension or renewal of
      such accounts and all certificates and instruments, if any, from time to
  time representing or evidencing such accounts with any bank or other
financial institution;                                            

      b.  All monies on deposit in any Collection Account, all account
     investments relating thereto from time to time and all certificates and
    instruments, if any, from time to time representing or evidencing such
account investments (the "ACCOUNT INVESTMENTS"); and              

       c.  All interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed or
distributable in respect of or in exchange for any or all of the  
Collection Accounts.                                              

   13. Any and all tangible and intangible personal property including
without limitation General Intangibles not elsewhere included in this   
    definition, constituting or relating to any Pictures or Picture Rights which
    may arise in connection with the creation, production, completion, delivery,
   financing, ownership, possession or exploitation of any Pictures or Picture
Rights;                                                                 

       14. All proceeds, products, rents and profits of or from any and all of
the foregoing Film Assets and, to the extent not otherwise included, all
   payments under insurance or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the     
   foregoing Film Assets excluding only the Excluded Receivables (collectively
"PROCEEDS"). For purposes of this Schedule A, the term Proceeds includes
 whatever is receivable or received when Film Assets or proceeds are sold,
  exchanged, collected or otherwise disposed of, whether such disposition is
voluntary or involuntary.                                               

"Fox" shall mean Twentieth Century Fox.                                 

   "Goods" shall have the meaning given to such term in the Uniform Commercial
Code.                                                                           

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"General Intangibles" shall have the meaning given to such term in the  
Uniform Commercial Code, and in any event shall include without limitation, all 
United States and foreign inventions, processes, formulae, computer software,   
designs, trade secrets, rights in proprietary information, licenses, patents,   
patent rights, patent applications, copyrights, copyright rights, copyright     
applications, trademarks, trademark rights, trademark applications, and all     
related goodwill, service marks, service mark rights, service mark applications,
and all related goodwill, trade names, trade name rights, business names, and   
other like business property rights, all renewals and extensions thereof and all
applications to acquire, renew or extend any such rights on file or for which   
application may at any time be made in the future, contracts, franchises,       
licenses, permits, subscriptions and other agreements and all rights thereunder,
rights granted by others which permit the Seller to sell or market items of     
personal property, documents, good will, judgments, causes in action and claims,
whether or not inchoate (including without limitation the right to sue for past,
present and future infringement), and all other general intangibles and         
intangible property and all rights thereunder.                                  

"Guild" means any guild, craft, union or labor organization having      
jurisdiction over any Person rendering services or granting any rights in any   
capacity in connection with the Pictures.                                       

"Guild Assumption Agreements" is defined in Section 8.10.               

"Guild Liens" is defined in Section 3.4.                                

    "Guild Obligations" means all obligations, liabilities and/or commitments of
any kind or nature arising under or in connection with any contract, collective 
bargaining agreement or other document or instrument with any Guild or the      
members of any Guild, including, without limitation, any obligation or liability
to make any payments pursuant to any such contracts, agreements, documents or   
instruments arising in connection with or as a result of the development,       
acquisition, production or Exploitation of any Picture or any Picture Rights,   
including, without limitation, any so-called "residual", "reuse", "rerun" or    
"supplemental market" payments.                                                 

  "HSR Act" means the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976,
as amended, and rules and regulations thereunder.                               

"Indemnifiable Claim" means any Loss for or against which any party is  
entitled to indemnification under this Agreement.                               

   "Indemnified Party" is defined in Section 10.3 and means the party entitled
to indemnity hereunder.                                                         

"Indemnifying Party" is defined in Section 10.3 and means the party     
obligated to provide indemnification hereunder.                                 

"Instrument" shall have the meaning given to such term in the Uniform   
Commercial Code.                                                                

"Invoicing Party" is defined in Section 2.13.                           

"Lab Notices" is defined in Section 7.10.                               

 "Licensed Films" means all motion pictures listed in Exhibit A hereto and
identified on Exhibit A as "Licensed Films".                                    

    "Loss" or "Losses" means any action, cost, damage, obligation, disbursement,
expense, liability, loss and settlement payments, including without limitation  
attorneys', accountants and other professional fees and costs.                  

"Master Loan Agreements" is defined in Section 2.5.                     

   "Material Adverse Effect" with respect to the Assets means any effect which
would materially prejudice or derogate from the Assets or otherwise materially  
alter or diminish the value of the Assets or Buyer's rights and remedies with   
respect to the Assets or would materially increase the liabilities assumed      

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by Buyer pursuant to this Agreement. "Material Adverse Effect" with respect to  
any Person means any effect which renders a Person insolvent or which would     
materially diminish the ability of such Person to perform its obligations under 
this Agreement or to consummate the Transaction.                                

"Missing Schedules" is defined in Section 2.14(a).                      

"Notices and Acknowledgments of Assignment" is defined in Section 7.11. 

"Owned Elements" is defined in Section 7.10.                            

  "Participation Obligations" means all financial obligations for contingent
compensation incurred or assumed by Seller in connection with the Exploitation  
of the Pictures or Picture Rights in the nature of gross participations, net    
profit or net proceeds participations or so-called deferments based upon the    
Exploitation of any Picture, any Picture Rights, any Sequel and Remake Rights or
Ancillary Rights acquired by Buyer.                                             

   "Person" means an association, a corporation, an individual, a partnership,
a joint stock company, a joint venture, a limited liability company, a trust or 
any other entity or organization, or a government or any political subdivision  
or agency thereof.                                                              

   "Physical Properties" means all tangible properties of every kind or nature
of or relating to the Pictures or Picture Rights, and all versions and copies   
thereof owned by Seller or to which Seller has a right of access or use         
including, without limitation, all Books and Records, scripts, the Literary     
Property, exposed film, developed film, positives, negatives, prints, answer    
prints, special effects, preprint materials (including interpositives,          
negatives, videotapes, duplicate negatives, internegatives, color reversals,    
intermediates, lavenders, fine grain master prints and matrices, video masters  
and all other forms of preprint elements which may be used to produce prints or 
other copies or additional preprint elements, whether now known or hereafter    
devised), foreign language dubbed and subtitled versions, sound tracks,         
recordings, audio and video tapes and discs of all types and gauges, cutouts,   
trims, all contracts, credit lists, music licenses, all promotional materials   
relating to any Pictures or Picture Rights, including, without limitation,      
transparencies, posters, press books, publicity kits, still photographs and     
promotional trailers and any and all other physical properties of every kind and
nature relating to any Pictures in whatever state of completion, and all        
duplicates, drafts, versions, variations and copies of each thereof.            

"Picture Rights" means: (a) any rights, whether arising under written   
contracts or otherwise, to sell, produce, acquire, distribute, subdistribute,   
act as sales agent for, exhibit, lease, sublease, license, sublicense or        
otherwise Exploit Pictures, including all rights under so-called sales agency,  
license, "pick up" or "sale-leaseback" arrangements and other contracts and     
agreements relating to the acquisition of Pictures or any interest therein in   
any market, territory or media, now known or unknown, by any means, method,     
process or device, now known or hereafter developed, (b) all rights to sell     
trailer and advertising accessories relating to Pictures, (c) all Sequel and    
Remake Rights relating to Pictures, and (d) any rights to Exploit any element or
component of Pictures or any Ancillary Rights relating to Pictures, including   
without limitation music publishing rights relating to any music embodied in or 
written for Pictures, including the right to grant licenses to print, perform or
mechanically reproduce such music. Notwithstanding anything to the contrary     
contained herein, (i) the term "Picture Rights" with respect to the motion      
picture entitled "Evita" shall exclude the Evita Warner Bros. Soundtrack Rights;
and (ii) the term "Picture Rights" with respect to the motion picture entitled  
"Die Hard III" shall be limited to the BVI Die Hard Rights.                     

    "Pictures" means the Cinergi Films, the Licensed Films, the Agency Films and
the Reimbursement Films; provided, however, (i) the term "Pictures" with respect
to the motion picture entitled "Evita" shall exclude the Evita Warner Bros.     
Soundtrack Rights; and (ii) the term "Pictures" with respect to the motion      
picture entitled "Die Hard III" shall be limited to the BVI Die Hard Rights.    

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    "Previously Delivered Motion Pictures" means those motion pictures completed
and delivered by Seller to Buyer prior to the Closing Date pursuant to the      
Disney Distribution Agreement and the Alan Smithee Distribution Agreement.      

"Pro Rata Share" is defined in Section 2.13.                            

"Proxy Statement" is defined in Section 5.9(b).                         

 "Purchase Price" means the value of the assumed obligations under Section
2.2 and the value of the stock and warrants surrendered under Section 2.6.      

  "Reimbursement Films" means all motion pictures listed in Exhibit A hereto
and identified on Exhibit A as "Reimbursement Films".                           

   "Related Agreements" means the Agreement, the Bill of Sale, the Assignments
of Copyright, the Guild Assumption Agreements, the Lab Notices, the Access      
Notices, the Account Notices, the Notices and Acknowledgments of Assignment,    
letters of credit transfer documents, transfer documents for the Collections    
Accounts and any documents executed or delivered under Section 7.17.            

"Representatives" is defined in Section 5.8.                            

"Schedule Delivery Date" is defined in Section 2.14(a).                 

   "SEC" means the Securities and Exchange Commission or any similar successor
entity.                                                                         

"Seller" is defined in the introductory paragraph.                      

"Seller Prepared Schedules" is defined in Section 2.14(a).              

  "Sequel and Remake Rights" means all rights to develop, produce or exploit
remakes, sequels, prequels and any other motion picture, television program or  
series of programs or other production based in whole or in part on a Picture,  
the title of a Picture, any Picture Rights, any underlying Literary Property or 
any material included in a Picture.                                             

"Smoke Project" is defined in Section 1.1(d).                           

"Summit" means Summit Entertainment Ltd.                                

"Tentacles Account" is defined in Section 1.1(c).                       

  "Transaction" means the transactions contemplated by the Agreement and the
Related Agreements.                                                             

    "Uniform Commercial Code" means the Uniform Commercial Code in effect in the
State of California as of the date hereof.                                      

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EXHIBIT A 
PICTURES

"Up Close and Personal" (the "Agency Films")                            

 "Medicine Man", "Tombstone", Renaissance Man", "Color of Night", "Scarlet
Letter", "Nixon", "Die Hard III"*, "Shadow Conspiracy", "Amanda" and "An Alan   
Smithee Film" (collectively, the "Cinergi Films")                               

"Judge Dredd", "Evita"** and "Deep Rising" (a/k/a "Tentacles")          
(collectively, the "Licensed Films")                                            

"Eaters of the Dead" (the "Reimbursement Films")                        

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

*  Rights with respect to the Picture entitled "Die Hard III" shall be limited
to the BVI Die Hard Rights as set forth in Sections 1.1(a)(v) of this   
Agreement and in the definitions of Pictures and Picture Rights.        

**  Rights with respect to the Picture entitled "Evita" shall not include the   
Evita Warner Bros. Soundtrack Rights as set forth in the definition of  
Pictures and Picture Rights.                                            

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FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

  This FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this " Amendment") is
dated as of this 26th day of August, 1997, by and between Cinergi Pictures      
Entertainment Inc., a Delaware corporation, f/k/a/ Cinergi Productions, Inc.,   
Cinergi Productions N.V. Inc., a Delaware corporation (collectively, "Seller")  
and Walt Disney Pictures and Television, a California corporation ("Buyer").    

W I T N E S S E T H:

  WHEREAS, Seller and Buyer entered into a Purchase and Sale Agreement dated
as of April 3, 1997 (the "Purchase Agreement"; capitalized terms used, but not  
otherwise defined herein, shall have the meaning given to such terms in the     
Purchase Agreement); and                                                        

    WHEREAS, Seller and Buyer each desire to amend certain terms of the Purchase
Agreement as set forth herein.                                                  

NOW, THEREFORE, based on the above premises and in consideration of the 
mutual covenants and agreements contained herein, the parties agree as follows: 

1.  Amendment to Section 1.1(b). Section 1.1(b) is hereby amended in its
entirety to read as follows:                                                    

        "(b) At Buyer's election, either (a) stock of J.D. Distribution Inc. and
   E.P. Distribution Inc., or (b) an assignment and assumption by Buyer, or an
    entity or entities designated by Buyer, of J.D. Distribution Inc.'s and E.P.
Distribution Inc.'s rights and obligations under the sale/leaseback     
    agreements, provided that Buyer notifies Seller of its election prior to the
Closing Date;"                                                          

2.  Amendment to Section 1.2(a). Section 1.2(a) is hereby amended by    
deleting the phrase "September 15, 1997" appearing in the sixth (6th) line and  
replacing it with the phrase "November 22, 1997."                               

   3.  Amendment and Restatement of Section 2.2. Section 2.2 is hereby amended
in its entirety to read as follows:                                             

  "2.2 Assumption of Certain Liabilities. Buyer will assume, pay and
   perform only the following obligations and liabilities of Seller arising in
   connection with the Film Assets: (a) the outstanding principal and interest
    as of the Closing Date on the loans made to Seller by Buyer or any Affiliate
    of Buyer relating to the motion pictures "Color of Night", "Scarlet Letter",
    "Nixon", "Evita" and "Shadow Conspiracy" (the "Disney Loans"); (b) all Guild
Obligations (other than Guild Obligations arising from or related to the
production of the Pictures ("Excluded Guild Obligations")) arising in   
  connection with the Exploitation of the Pictures arising prior to or after
   the Closing Date and all Participation Obligations relating to the Pictures
arising prior to or after the Closing Date; provided that Buyer's       
  Participation Obligations with respect to the motion picture entitled "Die
 Hard III" shall be limited to Buyer's and/or Buyer's Affiliate's Pro Rata
   Share of the Participation Obligations arising only from Buyer's or Buyer's
   Affiliate's exercise of Buyer's or Buyer's Affiliate's rights under the BVI
Die Hard Distribution Agreement as described in Section 2.13 below, and 
  Buyer's Guild Obligations with respect to the motion picture entitled "Die
   Hard III" shall be limited to the Guild Obligations arising from Buyer's or
Buyer's Affiliate's exploitation of its rights under the BVI Die Hard   
Distribution Agreement; and (c) those certain obligations pursuant to   
    Existing Exploitation Agreements that are to be performed in accordance with
  the terms of such Existing Exploitation Agreements on or after the Closing
  Date, but only if such obligations are specifically listed on SCHEDULE 2.2
attached hereto. Buyer shall not assume and shall not be liable for any 
other liabilities or obligations except as expressly set forth in the   
preceding sentence, including without limitation the following excluded 
liabilities (collectively, the "Excluded Liabilities"): (1) any claims  
against Seller or any obligations or liabilities of Seller (including,  
   without limitation, all claims, obligations and liabilities relating to the
  claims described on SCHEDULE 3.14 attached hereto) which arise from facts,
  circumstances, conditions, actions or failures to take actions existing or
    occurring prior to the Closing Date regardless of whether any suit, claim or
proceeding related thereto was commenced prior to the                   

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 Closing Date, other than the liabilities assumed in (a), (b) or (c) above
(for the avoidance of any doubt, Buyer shall not assume and shall not be
liable for any obligation to pay any amounts whatsoever to Laurence     
Fishburne or The LAO Productions, Inc., or any successor in interest or 
person or entity claiming through them, in connection with any claims   
brought by such parties or on their behalf against Seller or any Seller 
Affiliate, including without limitation the existing lawsuit brought by 
Laurence Fishburne and The LAO Productions, Inc. against Seller, Andrew 
Vajna and Randolph Paul in the Superior Court of California, Los Angeles
  County, Case No. SC 031787, in connection with the motion picture entitled
    "Die Hard III"); (2) any claims against Seller or Seller's Affiliates or any
   obligations or liabilities of Seller or Seller's Affiliates arising from or
related to the Evita Warner Bros. Soundtrack Rights or arising under the
    Evita Warner Bros. Soundtrack Agreement, in either case, whether or not such
   obligations and liabilities arise before or after the Closing Date; (3) any
obligations or liabilities to the shareholders of Seller, in their      
   capacities as shareholders, whether or not such obligations and liabilities
arise before or after the Closing Date; (4) any obligation to pay any   
  amounts whatsoever to any licensee/lessee under an Exploitation Agreement,
    or to repay or refund to any licensee/lessee under an Exploitation Agreement
any amounts previously paid to or on behalf of Seller or any Seller's   
Affiliate or paid to or on behalf of any other licensor/ lessor under an
Exploitation Agreement, including, without limitation, minimum guarantee
payments, except where the obligation to make any such payment to any   
   licensee/lessee constitute damages directly attributable to Buyer's failure
   to perform an obligation assumed by Buyer pursuant to Section 2.2(c) above;
and, notwithstanding the foregoing, Buyer shall be obligated to pay or  
    refund amounts received from licensees/lessees under Exploitation Agreements
   in connection with the motion pictures entitled "Up Close and Personal" and
"Deep Rising" a/k/a "Tentacles" if and only to the extent that (i) such 
  amounts were actually received by Buyer and (ii) such repayment obligation
 arises because the cost of production of such motion picture is less than
the amount stated in the relevant Exploitation Agreement as the cost of 
    production for such motion picture; (5) any obligations or liabilities under
 any so-called "output" distribution agreements with respect to any motion
   pictures other than obligations under Existing Exploitation Agreements with
respect to the Pictures listed on Exhibit A hereto and then only to the 
extent such obligations are assumed by Buyer pursuant to Section 2.2(c) 
above; (6) any Excluded Guild Obligations; and (7) any obligations or   
   liabilities for unpaid compensation for services rendered or rights granted
and/or any other production costs incurred in connection with the Assets
  other than obligations or liabilities for unpaid compensation for services
rendered or rights granted and/or any other production costs incurred in
connection with the motion pictures entitled "Up Close and Personal" and
"Deep Rising" a/k/a "Tentacles"."                                       

4.  Amendment to Section 2.12. Section 2.12 is amended by adding the    
following provisions to the end of Section 2.12.                                

     "Seller has notified Buyer that Seller desires to solicit third party
  offers to acquire a package of development projects owned or controlled by
 Seller including among such development projects the Smoke Project. Buyer
has agreed that notwithstanding Seller's obligations to accord Buyer the
 rights described above with respect to the Smoke Project on a stand-alone
basis, Seller may only solicit offers and sell the Smoke Project in a   
  package with other development projects owned or controlled by Seller (the
"Package") on and subject to the following terms and conditions:        

   (1) If a third party other than Buyer acquires the Package, the third
       party acquirer of the Package (the "Package Buyer") will agree to
     accord Buyer a 45-day good faith right of first negotiation (as
        described above) with respect to the terms and conditions on which
        (i) Buyer and the Package Buyer (or any successor or assign of the
        Package Buyer) will co-produce and/or co-finance the Smoke Project
           and (ii) Buyer will acquire distribution rights to the motion picture
      based on the Smoke Project in agreed upon territories and media;

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     (2) Buyer's security interest in the Smoke Project described in Section
           7.22 will secure all of Buyer's rights and Seller's obligations under
        this Section 2.12 including Buyer's reimbursement rights described
          above and Buyer's rights described in Subsection (1) of this Section
          2.12 and such security interest shall be perfected prior to any sale
          or transfer of rights in the Smoke Project to the Package Buyer; and

      (3) If the Smoke Project is not sold as part of a package of development
        projects, Seller shall remain obligated to accord Buyer the rights
     described above in this Section 2.12 and Seller shall otherwise
       comply with all of Seller's obligations under this Section 2.12."

 5.  Amendment to Section 2.13. Section 2.13 is hereby amended by adding a
new seventh sentence, as follows:                                               

 "Upon the expiration of the BVI Die Hard Rights, Buyer or Buyer's
Affiliates shall terminate all of Buyer's or Buyer's Affiliates' liens, 
encumbrances or claims on the BVI Die Hard Rights."                     

6.  Amendment with respect to "An Alan Smithee Film". A new Section 2.15
shall be added as follows:                                                      

"2.15 "AN ALAN SMITHEE FILM". Seller shall complete the motion picture  
   entitled "An Alan Smithee Film" and fully deliver said motion picture prior
to Closing to Buyer in accordance with the terms of the Alan Smithee    
Distribution Agreement and to each of the foreign distributors who have 
entered into an Exploitation Agreement including, without limitation,   
Existing Exploitation Agreements with respect to said motion picture. As
provided in that certain Amendment to the Alan Smithee Distribution     
Agreement dated as of [    ] upon delivery of said motion picture in    
compliance with the terms of the Alan Smithee Distribution Agreement, as
    amended, Buyer shall pay to Seller a sum of Three Million Nine Hundred Fifty
   Thousand Dollars ($3,950,000), which payment shall be used by Seller to pay
off a portion of the outstanding principal and interest owing by Seller 
    under the Credit, Security, Pledge and Guaranty Agreement dated as of August
16, 1994, between Cinergi Productions N.V. Inc. and The Chase Manhattan 
   Bank, as Agent ("Chase") (the "Chase Credit Agreement"). To the extent that
   Seller receives payments from Buyer and the applicable foreign distributors
in the aggregate with respect to "An Alan Smithee Film" in excess of the
    "Smithee Amount" (as defined below), then Seller shall account for and remit
  such excess to Buyer on the Closing Date and thereafter in accordance with
Section 2.11 above. As used herein, the term "Smithee Amount" means the 
   actual out-of-pocket production costs for "An Alan Smithee Film" (including
 actual finance costs and interest under the Chase Credit Agreement to the
   extent such costs and interest are directly attributable to loans under the
    Chase Credit Agreement for the motion picture) up to $10,000,000 plus 50% of
   any such amounts in excess of $10,000,000 but in no event will the "Smithee
    Amount" exceed $10,500,000. Seller shall be solely responsible for all other
 costs with respect to such motion picture. Seller represents and warrants
    that the total fixed cash minimum guarantees payable on delivery of "An Alan
Smithee Film" as previously reduced and in effect as of August 5, 1997  
   (including the $3,950,000 payable pursuant to the Alan Smithee Distribution
Agreement, as amended) is no less than $10,912,000. Seller agrees that  
neither Seller nor any Seller Affiliate will or will permit any foreign 
  distributor who has entered into an Exploitation Agreement with respect to
  "An Alan Smithee Film" to reduce or delay payment of the minimum guarantee
 payments payable with respect to such film as in effect on August 5, 1997
without receiving Buyer's prior written consent, which consent Buyer may
give or withhold in its sole and absolute discretion."                  

  7.  Amendment with respect to Guild Settlement Negotiations. A new Section
2.16 shall be added as follows:                                                 

  "2.16 GUILD SETTLEMENT NEGOTIATIONS. Seller has notified Buyer that Seller
is presently in settlement discussions with certain unions and guilds   
 regarding claims asserted by the unions and guilds against Seller. Seller
  agrees to keep Buyer advised as to the status of all such negotiations and
   will not object to Buyer's attendance at or other participation in any such
negotiations. Seller agrees that it will not                            

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enter into any settlement agreement with the unions and guilds without  
Buyer's prior written approval. If notwithstanding the foregoing, Seller
  enters into a settlement agreement with the unions and guilds which is not
approved by Buyer, Seller's obligations under any such settlement       
agreement(s) shall be Excluded Guild Obligations for purposes of Section
2.2."                                                                   

 8.  Amendment to Section 3.4. Section 3.4 is hereby amended by adding the
following sentence after the fourth sentence in that section:                   

  "Except as otherwise noted on SCHEDULE 3.4, Seller is not in default under
    any Existing Exploitation Agreement and each Existing Exploitation Agreement
  remains in full force and effect and shall remain in full force and effect
after the Closing Date in accordance with its terms."                   

 9.  Amendment to Section 7. A new Section 7.25 shall be added as follows:

"7.25 Sale/Leaseback Transactions. Buyer shall have received an         
acknowledgment and consent executed by each of Lloyds Commercial Leasing
    Limited and Lloyds General Leasing Limited (collectively, "Lloyds"), in form
   and substance reasonably satisfactory to Buyer, whereby Lloyds acknowledges
that either Buyer or the entity or entities designated by Buyer shall   
replace the current lessees under the leases with respect to the motion 
   pictures entitled "Judge Dredd" and "Evita." Buyer shall also have received
such other amendments and/or modifications to the other agreements that 
constitute part of the sale/leaseback documentation as Buyer reasonably 
    deems necessary to reflect the assignment and assumption by Buyer or Buyer's
designee and to otherwise effectuate said assignment and assumption. In 
    addition, Buyer shall have received an acknowledgment executed by Seller, in
form and substance reasonably satisfactory to Buyer, in which Seller    
    acknowledges that it has waived all of its rights of subrogation pursuant to
its guaranty of each lessee's obligations under the leases and that     
notwithstanding said waiver and said assignment/assumption by Buyer or  
Buyer's designee, each guaranty will remain in full force and effect and
enforceable against Seller and Seller's successor(s) in interest for the
full term of the applicable lease.                                      

  10. Amendmenth to Section 8. A new Section 8.11 shall be added as follows:

    "8.11 Stockholder Authorization. The Transaction shall have been approved by
Seller's stockholders in accordance with Section 5.9."                  

  11. Amendment to Schedule A. The definition of "Chase Credit Agreement" is
hereby deleted in its entirety and replaced with the following definition:      

"Chase Credit Agreement" is defined in Section 2.15.                    

12. Amendment to Schedule A. The following definitions shall be added to
Schedule A:                                                                     

"Excluded Guild Obligations" is defined in Section 2.2.                 

"Lloyds" is defined in Section 7.25.                                    

"Package" is defined in Section 2.12.                                   

"Package Buyer" is defined in Section 2.12.                             

"Smithee Amount" is defined in Section 2.15.                            

    13. Amendment to Schedule 3.10. Schedule 3.10 is hereby amended and restated
to read in its entirety as set forth on Exhibit A hereto.                       

 14. Counterparts. This Amendment may be executed simultaneously in two or
more counterparts, each of which will be deemed an original, but all of which   
together will constitute one and the same instrument.                           

    15. No Other Changes. Except as expressly modified by the provisions of this
Amendment, the Purchase Agreement shall remain unchanged in all respects and in 
full force and effect.                                                          

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 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.                                                   

                                                                [Download Table]
                                             
CINERGI PICTURES ENTERTAINMENT INC., F/K/A   
CINERGI PRODUCTIONS, INC.                    

By:    /s/ WARREN BRAVERMAN                  
       --------------------------------------
Name:  Warren Braverman                      
Title: EXECUTIVE VICE PRESIDENT              

CINERGI PRODUCTIONS N.V. INC.                

By:    /s/ RANDOLPH M. PAUL                  
       --------------------------------------
Name:  Randolph M. Paul                      
Title: SENIOR VICE PRESIDENT                 

WALT DISNEY PICTURES AND TELEVISION          

By:    /s/ ROBERT S. MOORE                   
       --------------------------------------
Name:  Robert S. Moore                       
Title: EXECUTIVE VICE PRESIDENT AND          
       CHIEF FINANCIAL OFFICER               

  To the extent that the rights of either of the undersigned are affected by
this Agreement, each of the undersigned acknowledges and consents to any such   
modifications.                                                                  

                                                                [Download Table]
                                             
BUENA VISTA INTERNATIONAL, INC.              

By:    /s/ JERE HAUSFATER                    
       --------------------------------------
Name:  Jere Hausfater                        
Title: SENIOR VICE PRESIDENT                 

BUENA VISTA PICTURES DISTRIBUTION,           
A DIVISION OF ABC, INC.                      

By:    /s/ JERE HAUSFATER                    
       --------------------------------------
Name:  Jere Hausfater                        
Title: SENIOR VICE PRESIDENT                 

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EXHIBIT A 
SCHEDULE 3.10 
PERMITTED LIENS 

1.  Liens in favor of Chase pursuant to the Chase Credit Agreement for the      
Picture;                                                                

2.  Liens in favor of Film Finances for the Picture "An Alan Smithee Film";     

3.  Liens in favor of Laboratories and suppliers of equipment and materials for 
the Pictures, provided that on and after the Closing Date, none of such 
Liens shall secure any obligations of Seller or for which Seller is     
   responsible which arise or relate to services provided prior to the Closing
Date;                                                                   

4.  Liens in favor of Seller or Seller's Affiliates in the Pictures, provided   
   that such Liens shall have been terminated on or prior to the Closing Date;

5.  Liens in connection with the Picture entitled "Die Hard With A Vengeance"   
granted in favor of Fox;                                                

6.  Tax Liens not yet due and payable;                                          

7.  The following Liens in connection with Sale/Leasebacks:                     

  7.1 Lab Access Agreements with Technicolor Inc. and Technicolor Limited in
favor of the Lessor in the form previously furnished to Buyer; and      

7.2 ABN AMRO Pledge Agreements                                          

8.  Guild Obligations.                                                          

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                                                                      APPENDIX B

ASSIGNMENT AGREEMENT

 This Agreement dated as of July 14, 1997 ("ASSIGNMENT AGREEMENT") between
TWENTIETH CENTURY FOX FILM CORPORATION, a Delaware corporation ("FOX"), on the  
one hand, and CINERGI PRODUCTIONS INC. now named CINERGI PICTURES ENTERTAINMENT 
INC., a Delaware corporation ("CPEI") and CINERGI PRODUCTIONS N.V. INC., a      
Delaware corporation ("CPNV"), previously known as CINERGI PRODUCTIONS N.V., on 
the other hand (collectively, "CINERGI"), is made with reference to the         
following facts:                                                                

A. Fox and Cinergi entered into a One Picture Theatrical Motion Picture 
License Agreement dated as of April 15, 1994 ("ONE PICTURE LICENSE") with       
respect to the production of a Theatrical Motion Picture entitled "DIE HARD WITH
A VENGEANCE" f/k/a "DIE HARD 3" ("PICTURE"), whereby Fox transferred certain    
rights to Cinergi and Cinergi assumed all obligations of Fox in connection      
therewith as such rights related to the Picture.                                

B.  Fox and Cinergi entered into a Memorandum of Agreement, dated as of 
September 9, 1992, as amended ("FOX AGREEMENT"), relating to the financing,     
distribution and exploitation of the Picture. Pursuant to the Fox Agreement, all
of the distribution and exploitation rights in and to the Picture were divided  
into the "FOX RIGHTS" as set forth on Exhibit "A" attached hereto, and the      
"CINERGI RIGHTS", as set forth on Exhibit "B" attached hereto.                  

C.  Cinergi and Buena Vista International Inc. ("BVI") entered into that
certain agreement dated as of September 10, 1992 ("BVI AGREEMENT"), whereby     
Cinergi licensed certain of the Cinergi Rights to BVI to distribute and exploit 
the Picture in certain foreign territories ("BVI RIGHTS") , which rights are set
forth and attached hereto as Exhibit "C".                                       

D. Cinergi engaged Summit Entertainment L.P. and Summit UK Ltd. as sales
agents (collectively "SUMMIT") to license certain of the Cinergi Rights in the  
Picture to subdistributors in certain foreign territories ("SUMMIT RIGHTS")     
pursuant to the "SUMMIT AGREEMENT(S)". With respect to the Summit Agreements,   
each subdistributor, and a summary of certain of the respective distribution    
rights, territories and terms are set forth and attached hereto as Exhibit "D". 

  E.  Fox and Cinergi now wish to enter into an agreement to transfer to Fox
certain rights and obligations of Cinergi in connection with the Picture.       

 NOW, THEREFORE, in consideration of the following covenants and for other
good and valuable consideration, the receipt and adequacy of which are hereby   
acknowledged, the parties hereto agree as follows:                              

   1.  CONDITIONS PRECEDENT:  Except for those obligations which vest upon the
signature of this Assignment Agreement or conditions which must be satisfied    
upon the signature of this Assignment Agreement, as more fully set forth below  
in Paragraph 16., Fox and Cinergi's obligations under this Assignment Agreement 
are conditioned upon the following "CONDITIONS PRECEDENTS": (a) a due diligence 
review by Fox, to be completed to Fox's satisfaction within 5 business days of  
the date of this Assignment Agreement, of the relevant portions of all documents
and agreements (including, but not limited to, agreements with third party      
distributors, status of residual payments, etc.), to be provided by Cinergi, as 
required by Fox in connection with the Picture and the Assignment Agreement; (b)
the approval of Cinergi's stockholders of the sale of substantially all of the  
assets of Cinergi; (c) consummation of all of the transactions contemplated by  
the Purchase and Sale Agreement dated April 3, 1997 between Cinergi and Walt    
Disney Pictures and Television ("WDPT")(the "LIBRARY AGREEMENT", as such        
agreement may be amended from time to time by the parties thereto), including   
without limitation the delivery by Cinergi and WDPT to one another of all       
consideration to be delivered at the closing under the Library Agreement (the   
"WDPT CLOSING").                                                                

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  2.  CLOSING:  The closing of this Assignment Agreement ("FOX CLOSING") and
the assignment of rights hereunder shall take place concurrently with the WDPT  
Closing of the Library Agreement. Cinergi represents and warrants that the      
Library Agreement has been signed by the parties thereto. If the Library        
Agreement terminates or is terminated prior to the Fox Closing, then this       
Assignment Agreement will automatically terminate. If this Assignment Agreement 
is terminated pursuant to the provisions of this Paragraph, then all of the     
obligations of the parties hereto will terminate without liability of either    
party to the other and neither party shall have any remedies at law or at equity
against the other. Except as set forth in the immediately preceding two         
sentences, neither party shall have the right to terminate this Assignment      
Agreement and if either party is in breach of this Assignment Agreement, each   
party's remedies shall be as provided in Paragraph 18.(c).                      

3.  ASSIGNMENT OF RIGHTS:  At the Fox Closing at which payment of the   
Purchase Price (as hereinafter defined in Paragraph 11.) is required to be made 
for the Fox Closing to be effective, Cinergi shall irrevocably and perpetually  
transfer and assign to Fox, its successors, assigns and licensees, in perpetuity
and throughout the universe, all of Cinergi's present and future right, title   
and interest in and to the Picture ("GRANTED RIGHTS"), subject to the license of
the BVI Rights during the BVI Term (as hereinafter defined) and the license of  
the Summit Rights during the Summit Terms (as hereinafter defined) and Cinergi's
right to receive certain revenues derived under the Summit Agreements (as more  
specifically described below), which Granted Rights include without limitation  
those rights derived as follows:                                                

     (a)  DOCUMENTS:  The Granted Rights include any and all of the rights
   either granted to Cinergi or held by Cinergi in connection with the Picture
in or under the following documents:                                    

            (i) The Fox Agreement, which rights include, without limitation, (A)
      the Cinergi Rights; (B) Cinergi's copyright ownership in the Picture and
     all elements thereof (copyright in the Picture and all elements thereof
  are currently vested jointly in Fox and Cinergi), including, without
 limitation, all advertising, promotional and marketing materials in
     connection with the Picture (e.g., press kits, EPKs, movie posters, web
   sites, and promotional films); (C) the right to retain or receive any
      amounts pursuant to Paragraphs 8.(a)(ii), 8.(b)(ii) and 8.(c)(ii) of the
 Fox Agreement; and (D) any right or interest in connection with any
      Sequel or Remake of the Picture, including without limitation, any right
of first negotiation/last refusal or any right to receive passive 
   payments. The parties hereto acknowledge and agree that (1) Fox shall
have no obligation to remit to or share with any party, including 
   Cinergi, any revenue from the exploitation of the Fox Rights, (2) Fox
  shall have no obligation whatsoever to account to, render accounting
  statements to, or make payment to any third party participants or to
   Cinergi, other than to pay the Purchase Price to Cinergi, (3) Cinergi
  shall have no obligation whatsoever to account to, render accounting
statements to, or make payment to Fox, (4) Cinergi shall have no  
obligation to remit to or share with Fox, any revenue from the    
      exploitation of the Cinergi Rights, including without limitation the BVI
     Rights and the Summit Rights, or pursuant to Paragraph 9.(b) of the Fox
       Agreement, and (5) Cinergi shall have no obligation to pay the Fox Rights
      Fee as set forth in Paragraph 10. of the Fox Agreement and no obligation
      to remit to or share with any party, including Fox, any revenue from the
exploitation of the Cinergi Rights.                               

          (ii) One Picture License. The parties hereto acknowledge and agree
      that Fox assumes no obligations in connection with the rights granted to
Cinergi pursuant to the One Picture License, and that Cinergi's   
    obligation to indemnify Fox in connection with Cinergi's assumption of
 obligations under the One Picture License remains in full force and
    effect, until such time as the Cinergi Rights are fully exploitable by
Fox.                                                              

         (iii) The BVI Agreement, pursuant to which Cinergi has licensed the
     BVI Rights to BVI until the termination of the current term (or earlier
 termination, if applicable) ("BVI TERM") of exploitation of the BVI
    Rights, to expire on June 1, 2020, following which the BVI Rights will

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       automatically revert to Fox in accordance with this Assignment Agreement.
    During the BVI Term, Fox will not be entitled to receive any monies in
      connection with the BVI Rights, including those amounts which would have
been Cinergi's share of the overages.                             

          (iv) The Summit Agreements, pursuant to which Cinergi has licensed
  the Summit Rights until the termination of the current terms of each
license agreement (or earlier termination, if applicable) ("SUMMIT
       TERM(S)") of exploitation of the Summit Rights, to expire as set forth in
the respective license agreements between Summit and each of the  
    licensees ("SUMMIT AGREEMENTS"), as substantially set forth on Exhibit
       "D" attached hereto, following which the Summit Rights will automatically
  revert to Fox, as each respective term ends, in accordance with this
       Assignment Agreement. If a Summit Term terminates early, then Cinergi may
relicense the respective Cinergi Rights subject to such early     
      termination, provided that the new license period does not extend beyond
  the current term of such licensed rights; and, if any of the Cinergi
     Rights are not licensed as of the date hereof, then Cinergi may license
      such rights hereafter, provided that the terms for such license(s) shall
   not extend beyond May 31, 2002. In either of the foregoing instances,
     Cinergi will provide Fox with a copy of any such new license agreement.
       During the Summit Term(s), Fox will not be entitled to receive any monies
in connection with the Summit Rights.                             

     (b)  COPYRIGHT REVENUES:  Without limiting Cinergi's right to receive
 monies derived directly from the distribution and the exploitation of the
  Cinergi Rights and BVI's right to receive monies derived directly from the
  distribution and exploitation of the BVI Rights, Cinergi grants to Fox the
exclusive right to collect all royalties, fees and other revenues which 
    Cinergi, or the current registered copyright owner of the Granted Rights, is
otherwise entitled to collect by reason of any statute, governmental    
   regulation, operation of law, or in any other manner, for, based upon or in
   connection with, in whole or in part, or directly or indirectly, any use of
the Picture pursuant to any exercise of the Granted Rights ("COPYRIGHT  
REVENUES"), including the recording and/or retransmission of the signal 
embodying the Picture, as well as the secondary transmission or         
   retransmission of the Picture, by any means now known or hereafter devised.

       (c)  OTHER REVENUES:  With the exception of the continuing revenue from
 the Summit Rights until the end of the Summit Term(s) (which shall be the
   sole property of Cinergi), all consideration payable to Cinergi by WDPT for
the Library Agreement (which shall be the sole property of Cinergi), and
BVI's rights to receive revenues from the BVI Agreement pursuant to     
  Paragraph 3.(a)(iii) hereof (which shall be the sole property of BVI), any
and all other revenues of any kind or nature, in connection with the    
Picture, from any and all sources whether or not referred to herein, are
    expressly assigned to Fox, and Cinergi, or Cinergi's successors in interest,
shall immediately upon receipt thereof, transfer such revenues to Fox.  
Cinergi shall have no rights with respect to the Picture or any revenues
therefrom except as expressly set forth in this Assignment Agreement.   

  4.  PARTICIPANT ACCOUNTING:  The parties acknowledge and agree that Fox is
not assuming any obligation to pay any "PARTICIPATIONS" in the so-called        
"back-end" of the Picture (e.g., "net profits", "gross receipts", etc.) at any  
time, and that Cinergi will remain solely liable for any such participations and
for any audit claims by all third party participants in connection with any and 
all participation statements and payments made by Cinergi. The participation    
statement rendered by Fox dated November, 1996 is the last statement to be      
rendered by Fox to Cinergi in connection with the Picture and Cinergi waives any
and all rights it may have to audit or challenge any participation statement    
rendered by Fox to Cinergi with respect to the Picture. Cinergi shall have no   
obligation to render any further participation statements to Fox and Fox waives 
any and all rights it may have to audit or challenge any participation          
statements rendered by Cinergi to Fox in connection with the Picture. Any       
participations (or settlements or buy-outs in lieu of Cinergi paying such       
participation) paid by Cinergi to participants in the Picture after Cinergi's   
receipt of the Purchase Price (as defined below) will take into account the     
receipt by Cinergi of the Purchase Price. Cinergi and Fox each releases and     
discharges the other and each of the other's parents, subsidiaries, affiliates, 
shareholders, directors, officers, employees and agents (the "Fox Parties" and  
the                                                                             

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"Cinergi Parties", respectively) from and against any and all claims,           
liabilities, contracts, agreements, causes of action, costs, expenses and       
obligations of every kind and nature whatsoever, known or unknown, contingent or
fixed, liquidated or unliquidated, against any of either the Cinergi Parties or 
the Fox Parties, respectively, in connection with each party's accounting or    
obligation to account to any party in connection with the Picture. Each party   
waives all rights it may have or claim to have under the provisions of          
California Civil Code section 1542 or under any equivalent statutory or         
decisional authority or law of any jurisdiction. Section 1542 of the California 
Civil Code provides as follows:                                                 

     A general release does not extend to claims which the creditor does not
    now know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his  
settlement with the debtors.                                      

Each party understands that the facts with respect to which the foregoing       
release is given may hereafter turn out to be other than or different from the  
facts now known to it or believed by it to be true, and it therefore expressly  
assumes the risk of the facts turning out to be different and agrees that the   
foregoing release shall be in all respects effective and not subject to         
termination or rescission by any such difference in facts.                      

   5.  RESIDUAL ACCOUNTING:  Cinergi will deliver any additional documents and
records as required by Fox as reasonably necessary in connection with residual  
accounting for the Picture. The parties acknowledge and agree that Fox is       
assuming no liability for guild and union residuals for the Cinergi Rights and  
that Fox will have no obligation in connection therewith until such time as Fox 
commences receiving revenues derived from Fox's exploitation of the former      
Cinergi Rights. Fox will enter into the appropriate guild and union assumption  
agreements as required. Prior to such time, Cinergi, or Cinergi's licensees,    
shall remain obligated for the residual accounting for the Cinergi Rights.      

  6.  CINERGI'S REPRESENTATIONS:  Each of CPEI and CPNV hereby represent and
warrant that each of the following statements is true and correct as of the date
hereof and as of the payment of the Purchase Price at the Closing:              

(a)  EXISTENCE:  Each of CPEI and CPNV (i) is a corporation duly
   organized and validly existing in good standing under the laws of the State
   of Delaware and (ii) has the corporate power and adequate authority to make
 and carry out the transactions contemplated by this Assignment Agreement.

      (b)  AGREEMENT AUTHORIZED:  The execution, delivery and performance of
this Assignment Agreement has been duly authorized by all necessary     
corporate action on the part of each of CPEI and CPNV, except for any   
   applicable approval of CPEI's stockholders, which if required by applicable
    law will be sought by CPEI at the same time it seeks stockholder approval of
the transactions contemplated by the Library Agreement. This Assignment 
   Agreement has been duly executed and delivered by each of CPEI and CPNV and
is a legally valid and binding obligation of each of CPEI and CPNV,     
enforceable against each of CPEI and CPNV in accordance with its terms, 
except as their respective obligations may be affected by bankruptcy,   
   insolvency, reorganization, receivership, moratorium or similar laws, or by
  equitable principles relating to or limiting creditors' rights or remedies
generally.                                                              

        (c)  NO CLAIMS/EXCLUSIVE PROPRIETOR/NO IMPAIRMENT:  Subject to the terms
   and conditions of the BVI Agreement and the Summit Agreement(s): Cinergi is
 the exclusive proprietor, throughout the universe, of the Granted Rights;
  Cinergi has not assigned, licensed or in any manner encumbered, materially
    diminished or impaired the Granted Rights; Cinergi has not committed any act
by which the Granted Rights will be materially diminished or impaired or
   omitted to perform any material or commercially reasonable act necessary to
  preserve the Granted Rights; and to the best of Cinergi's knowledge, there
are no outstanding claims or litigation pending against or involving the
   Granted Rights and none of the Granted Rights have been granted or assigned
by                                                                      

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    Cinergi or any party acting with the authority of or on behalf of Cinergi to
any party other than to Fox; upon the assignment to Fox of the Granted  
   Rights, Fox will be the only owner of the Granted Rights, free and clear of
   all claims, liens (with the exception of customary guild liens with respect
to the payment of residuals and BVI's lien), rights and interests of any
person or entity.                                                       

 (d)  ALL REQUIRED DOCUMENTATION HAS BEEN SUPPLIED:  All necessary
    information has already been supplied to Fox regarding payment of residuals,
and that the pages from the BVI Agreement provided to Fox are the only  
 materially relevant pages thereof with respect to the Granted Rights, and
that there are no other materially relevant documents which would in any
 manner effect the transfer of the Granted Rights to Fox. Exhibit "D" is a
   true and accurate representation of (i) all license agreements with respect
  to the Summit Rights, and (ii) all material information thereon including,
  without limitation, the "trigger dates" and "expiry dates" of each license
agreement listed thereon.                                               

   7.  FOX'S REPRESENTATIONS:  Fox hereby represents and warrants that each of
the following statements is true and correct as of the date hereof and as of the
payment of the Purchase Price at the Closing:                                   

(a)  EXISTENCE:  Twentieth Century Fox Film Corporation (i) is a
  corporation duly organized and validly existing in good standing under the
   laws of the State of Delaware and (ii) has the corporate power and adequate
authority to make and carry out the transactions contemplated by this   
Assignment Agreement.                                                   

      (b)  AGREEMENT AUTHORIZED:  The execution, delivery and performance of
this Assignment Agreement has been duly authorized by all necessary     
    corporate action on the part of Fox. This Assignment Agreement has been duly
  executed and delivered by Fox and is a legal, valid and binding obligation
of Fox, enforceable against Fox in accordance with its terms, except as 
    Fox's obligations may be affected by bankruptcy, insolvency, reorganization,
receivership, moratorium or similar laws, or by equitable principles    
relating to or limiting creditors' rights or remedies generally.        

8.  FULL INVESTIGATION:  Fox hereby confirms that no representation or  
warranty relating to the Granted Rights has been made by Cinergi other than as  
set forth in this Assignment Agreement and that Fox is entering into this       
Assignment Agreement based on (a) Fox's review of the exhibits and schedules    
hereto, (b) Fox's own evaluation of the Granted Rights, and (c) Cinergi's       
representations and warranties as set forth in this Assignment Agreement.       

  9.  COOPERATION:  Cinergi may request that Fox provide certain information
to Cinergi regarding Fox and the transactions contemplated by this Assignment   
Agreement in connection with the preparation by Cinergi of a proxy statement (or
similar materials) to be distributed to Cinergi's stockholders, and Fox will use
reasonable good faith efforts to supply such information to Cinergi, as is      
reasonably required by Cinergi. In connection with Cinergi's preparation of such
proxy materials, Fox shall be entitled to review and make recommendations with  
respect to the description of Fox and the description of the transactions       
contemplated by this Assignment Agreement to be contained in the proxy          
materials.                                                                      

10.  PUBLIC ANNOUNCEMENTS:  Fox and Cinergi will consult with each other
before issuing any press release or any public statement with respect to this   
Assignment Agreement and, except as may be required by applicable law or stock  
exchange regulations, will not issue any such press release or make any such    
public statement prior to such consultation.                                    

  11.  CONSIDERATION:  As consideration in full for the foregoing assignment
of rights and for the representations, warranties and agreements made herein by 
Cinergi, Fox agrees to pay Cinergi the sum of $11,250,000 ("PURCHASE PRICE"),   
payable to Cinergi at Closing by wire transfer of immediately available funds to
an account designated by Cinergi.                                               

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12.  INDEMNIFICATION:                                                   

 (a) Cinergi hereby agrees to indemnify, defend, and hold harmless the Fox
Parties against all third party claims, demands, causes of action, losses,      
liabilities, damages, judgments, deficiencies, costs and expenses, including    
without limitation reasonable attorneys', accountants' and expert witnesses'    
fees and the costs and expenses of enforcing this indemnification (whether or   
not litigation is commenced) incurred, arising out of or resulting from: (i)    
Cinergi's exploitation of the Cinergi Rights prior to the time that Fox has the 
right to commence exploitation thereof, respectively; (ii) any breach by Cinergi
of any of Cinergi's representations, warranties and/or agreements contained in  
this Assignment Agreement; (iii) the assertion of any claim or demand, or the   
commencement or prosecution of any suit, action or other proceeding against any 
of the Fox Parties based on or arising from any obligation or liability of      
Cinergi which Fox has not expressly agreed to assume under the terms of this    
Assignment Agreement; and (iv) the assertion of any claim or demand, or the     
commencement or prosecution of any suit, action or other proceeding against any 
of the Fox Parties respecting or relating to this Assignment Agreement or the   
assignment of the Granted Rights hereunder, by or on behalf of Cinergi, any     
creditor or shareholder of Cinergi, any representative (including, without      
limitation, a trustee or receiver) of Cinergi, or any representative of         
creditors or shareholders of Cinergi, other than an action to enforce this      
Assignment Agreement.                                                           

 (b) Fox hereby agrees to indemnify, defend, and hold harmless the Cinergi
Parties against all third party claims, demands, causes of action, losses,      
liabilities, damages, judgments, deficiencies, costs and expenses, including    
without limitation reasonable attorneys', accountants' and expert witnesses'    
fees and the costs and expenses of enforcing this indemnification (whether or   
not litigation is commenced) incurred, arising out of or resulting from: (i)    
Fox's exploitation of the Fox Rights; (ii) Fox's exploitation of the Cinergi    
Rights subsequent to the time that Fox has the right to commence exploitation   
thereof, respectively; (iii) any breach by Fox of any of Fox's representations, 
warranties and/or agreements contained in this Assignment Agreement; (iv) the   
assertion of any claim or demand, or the commencement or prosecution of any     
suit, action or other proceeding against Cinergi based on or arising from any   
obligation or liability assumed by Fox pursuant to this Assignment Agreement.   

13.  SECURITY FOR CINERGI'S OBLIGATIONS:  Cinergi or its successor in   
interest shall at all times for a period of 5 years from the Fox Closing        
maintain liquid assets of at least $500,000 to provide additional security to   
Fox to secure Cinergi's obligations hereunder. If the liquid assets of Cinergi  
or Cinergi's successor in interest fall below such level during such 5 year     
period, Cinergi shall grant Fox a security interest in $250,000 worth of        
collateral, subject to the mutual approval of Fox and Cinergi, or in lieu       
thereof, at Cinergi's election, either a letter of credit in favor of Fox in the
amount of $250,000 from a bank with $200,000,000 or more of assets, or Andy     
Vajna's personal guarantee in the amount of $250,000.                           

    14.  INSURANCE:  Cinergi will continue to maintain for 5 years from the date
hereof a policy of errors and omissions insurance for the Picture naming Fox and
it's parents, subsidiaries affiliates and licensees as additional insureds.     
Cinergi will also maintain directors and officers insurance for 4 years from the
date hereof, with coverage up to $10,000,000, naming the Fox Parties as         
additional insureds, and Cinergi will provide Fox with satisfactory certificates
of insurance evidencing same.                                                   

    15.  ADDITIONAL DOCUMENTATION:  Both parties agree to perform such other and
further acts and to execute, acknowledge and deliver such other and further     
documents and instruments as may reasonably be deemed necessary or appropriate  
by the other to carry out the intent of this Assignment Agreement.              

16.  OBLIGATIONS VESTING ON SIGNATURE:  Notwithstanding anything to the 
contrary contained in this Assignment Agreement, prior to the Closing, upon     
signature of this Assignment Agreement the parties shall perform certain        
obligations in accordance with Paragraphs 1.(a), 9., 10., 12.(a)(iv), 14., and  
15.                                                                             

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17.  QUIET ENJOYMENT:  Fox shall not take any actions which in any way  
disturb or interfere with BVI's full and unencumbered exercise of the BVI Rights
pursuant to the BVI Agreement or in any way disturb or interfere with Cinergi's 
sublicensees full and unencumbered exercise of the Summit Rights pursuant to the
Summit Agreements. In addition, Cinergi and Cinergi's exclusive licensees may   
continue to use all marketing materials (in their possession) for the Picture   
during their respective license terms, notwithstanding the assignment of rights 
in such materials to Fox pursuant to Paragraph 3.                               

 18.  RETURN OF MATERIALS:  Cinergi has give Summit and BVI written notice
that upon termination of the current Summit Terms and the BVI Term,             
respectively, all right, title interest and possession in and to the physical   
materials delivered to each licensee shall be transferred to Fox, and that      
Summit and BVI are obligated to return all physical materials to Fox, including 
without limitation, all internegatives, neutral backgrounds, alternative        
language tracks and dubbed or subtitled versions, as well as video cassettes or 
video discs remaining unsold. All physical materials shall be delivered to      
Twentieth Century Fox Film Corporation, Library Services, 10201 Pico Boulevard, 
Los Angeles California, 90035.                                                  

19.  MISCELLANEOUS:                                                     

 (a)  INTERPRETATION:  This Assignment Agreement may be amended or
    modified only by the written agreement of Cinergi and Fox. Nothing contained
herein shall require the commission of any act or the payment of any    
   compensation which is contrary to any law, governmental rule or regulation.
   If there shall exist any conflict between this Assignment Agreement and any
    such law, governmental rule or regulation, the latter shall prevail, and the
   provision(s) hereof affected shall be curtailed, limited or eliminated only
 to the extent necessary to remove such conflict and, as so modified, this
Assignment Agreement shall continue in full force and effect. This      
    Assignment Agreement shall be deemed to have been drafted by all the parties
 hereto, since all parties were assisted by their counsel in reviewing and
 agreeing thereto, and no ambiguity shall be resolved against any party by
 virtue of its participation in the drafting of this Assignment Agreement.

      (b)  GOVERNING LAW:  This Assignment Agreement shall be deemed to have
   been negotiated and entered into, and shall be construed in accordance with
  the laws of the State of California (or United States federal law if there
is no California law applicable) as to agreements which are fully       
    negotiated, signed and performed within California. All actions, proceedings
    or litigation arising from this Assignment Agreement shall be instituted and
prosecuted solely within the State of California. Fox and Cinergi hereby
consent to the jurisdiction of the state courts of California and the   
  federal courts located in the State of California as to any matter arising
out of or relating to this Assignment Agreement.                        

      (c)  REMEDIES:  Cinergi recognizes and confirms that in the event of a
failure or omission by Cinergi constituting a breach of its obligations 
 under this Assignment Agreement, whether or not material, the damages, if
   any, caused Cinergi are not irreparable or sufficient to entitle Cinergi to
injunctive or other equitable relief. Consequently, Cinergi's rights and
    remedies shall be limited to the right, if any, to obtain damages at law and
   Cinergi shall not have any right in such event to terminate or rescind this
Assignment Agreement or any of the rights granted to Fox hereunder or to
  enjoin or restrain the advertising, promotion, distribution, exhibition or
exploitation of the rights granted hereunder and/or any of Fox's rights 
pursuant to this Assignment Agreement. Notwithstanding the foregoing the
parties hereto acknowledge and agree that (1) the termination of the    
    Assignment Agreement pursuant to Paragraph 2., shall not constitute a breach
 of this Assignment Agreement; (2) if all of the Conditions Precedent have
  been satisfied and thereafter Fox fails to pay the Purchase Price, Cinergi
 can bring an action for specific performance for the Fox Closing to occur
and for payment of the Purchase Price, or a remedy at law for damages.  

(d)  ASSIGNMENT:  This Assignment Agreement is non-assignable by
   Cinergi, except to another company wholly-owned by Cinergi or the survivors
 in-interest of Cinergi. This Assignment Agreement may be assigned by Fox,
provided that Fox will remain liable for all of the obligation's of     

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Fox hereunder, including payment of the Purchase Price if all of the    
Conditions Precedent have been satisfied.                               

20.  ENTIRE AGREEMENT:  Except as expressly amended by this Assignment  
Agreement, the Fox Agreement, as amended, and the One Picture License remain in 
full force and effect and together with this document expresses the binding and 
entire agreement between Fox and Cinergi and shall replace and supersede all    
prior arrangements and representations, either oral or written, as to the       
subject matter hereof.                                                          

The parties have signed this Assignment Agreement as of the day and year
written above.                                                                  

                                                        [Enlarge/Download Table]
                                                                                                
CINERGI PICTURES ENTERTAINMENT INC.              TWENTIETH CENTURY FOX FILM CORPORATION         
                                       ("CPEI")                                          ("Fox")

                   /s/ RANDY PAUL                                /s/ ROBERT B. COHEN            
      ----------------------------------------         ---------------------------------------- 
            Title SENIOR VICE PRESIDENT                            Robert B. Cohen              
By                                               By                                             
                                                         Title EXECUTIVE VICE PRESIDENT LEGAL   
                                                                       AFFAIRS                  

CINERGI PRODUCTIONS N.V. INC.                                                                   
                             ("CPNV")                                                           

                   /S/ RANDY PAUL                                                               
      ----------------------------------------                                                  
                  Randolph M. Paul                                                              
BY                                                                                              
            Title SENIOR VICE PRESIDENT                                                         

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SHORT FORM ASSIGNMENT 
"DIE HARD WITH A VENGEANCE" 

    ASSIGNMENT:  For good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned, CINERGI PRODUCTIONS INC. now named CINERGI       
PICTURES ENTERTAINMENT INC. and CINERGI PRODUCTIONS N.V. now named CINERGI      
PRODUCTIONS N.V. INC. (COLLECTIVELY, "CINERGI"), does hereby transfer and assign
to TWENTIETH CENTURY FOX FILM CORPORATION ("FOX"), its successors and assigns   
forever, all of Cinergi's present and future right, title and interest in and to
"DIE HARD WITH A VENGEANCE" (the "PICTURE") ("GRANTED RIGHTS"), including (a)   
the copyright in the Picture and all elements thereof, (b) the copyright in all 
advertising, promotional and marketing materials in connection with the Picture 
(e.g., press kits, EPKs, movie posters, web sites, and promotional films), (c)  
all sequel and remake rights and other analogous and allied rights, and all     
copyrights in connection therewith, (d) all tangible and intangible properties  
respecting the Picture whether in existence or known now or in the future, and  
(e) all of Cinergi's present and future right, title and interest in and to any 
of the literary material or underlying properties upon which the Picture was    
based, including and any and all synopses, treatments, scenarios, screenplays   
(but excluding the right to license certain international rights of distribution
to the Picture, which have limited terms, as well as the right to receive       
proceeds in connection with such international distribution rights).            

CONTROLLING DOCUMENT: This transfer and assignment is subject to all the
terms and conditions of the Assignment Agreement dated as of July 14, 1997      
between Cinergi and Fox.                                                        

IN WITNESS WHEREOF, the undersigned has executed this document on       
         , 199 , effective as of               , 199 , the date of the
closing of the aforesaid Assignment Agreement between Cinergi and Fox.          

CINERGI PICTURES ENTERTAINMENT INC.                                             

By  ______________________________________                                      
Title                                                                   

CINERGI PRODUCTIONS N.V. INC.                                                   

By  ______________________________________                                      
Title                                                                   

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EXHIBIT "A" 
FOX RIGHTS

  "FOX RIGHTS":  All rights not specifically granted to Cinergi are retained
by Fox, including:                                                              

      (a)  Distribution Rights:  Fox shall have the sole and exclusive right
under copyright to exercise in the Licensed Territory all rights of     
Theatrical Distribution, Theatricial Exhibition, Non-Theatrical         
   Distribution, Non-Theatrical Exhibition, Free Television Distribution, Free
Television Exhibition, Pay Television Distribution, Pay Television      
Exhibition, and Home Video Distribution and Home Video Exhibition with  
respect to the Picture and trailers thereof and excerpts and clips      
therefrom, in any and all languages and versions, including dubbed,     
subtitled and narrated versions, using any form of Motion Picture Copy. 

  (b)  Other Rights:  Fox shall have the sole and exclusive right to
exercise worldwide all other rights in addition to the Fox Distribution 
Rights with respect to Picture including, without limitation, Commercial
Tie-In Rights; Legitimate Stage Rights; Literary Publishing Rights; Live
Television Rights; Merchandising Rights; Music Publishing Rights; Radio 
Rights; Remake Rights; Sequel Motion Picture Rights; and Soundtrack     
   Recording Rights; and the right to license clips from the Picture for other
   Motion Pictures (collectively, "OTHER RIGHTS", also known as "ANCILLARIES")
  with respect to the Picture, and any Literary Material or musical material
upon which the Picture is based.                                        

   (c)  "Licensed Territory":  The Licensed Territory shall consist of
  Japan, the United States and Canada including territories and possessions,
Bahamas, Bermuda, Panama Canal Zone and all ships and airlines owned by 
entities whose principal offices for licensing rights of Non-Theatrical 
Exhibition are located in the Licensed Territory. With respect to       
Ancillaries, the Licensed Territory will be the entire world.           

    All capitalized words herein are as defined in the Fox Glossary, attached to
the Memorandum of Agreement.                                                    

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EXHIBIT "B" 
CINERGI RIGHTS

"CINERGI RIGHTS":  Cinergi shall have the sole and exclusive right under
copyright to exercise in all areas of the world other than the Licensed         
Territory all rights of Theatrical Distribution, Theatrical Exhibition,         
Non-Theatrical Distribution, Non-Theatrical Exhibition, Free Television         
Distribution, Free Television Exhibition, Pay Television Distribution, Pay      
Television Exhibition, and Home Video Distribution and Home Video Exhibition    
with respect to the Picture and trailers thereof and excerpts and clips         
therefrom (solely for marketing purposes), in any and all languages and         
versions, including dubbed, subtitled and narrated versions, using any form of  
Motion Picture Copy.                                                            

    All capitalized words herein are as defined in the Fox Glossary, attached to
the Memorandum of Agreement.                                                    

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EXHIBIT "C" 
BVI RIGHTS

                                                            As of August 1, 1994

Cinergi Productions, N.V.                                                       
Polarisweg 35. St. 6                                                            
Willemstad, Curacao                                                             
Netherlands, Antilles                                                           

Gentlemen:                                                                      

   The following sets forth the principal terms of the agreement between Buena
Vista International, Inc. ("BVI") and Cinergi Productions, N.V. ("Cinergi") with
respect to the acquisition of exclusive distribution and other rights by BVI to 
the full length theatrical motion picture tenantively entitled "Die Hard III"   
(the "Picture").                                                                

1.  Intentionally Omitted.                                              

2.  Distribution.                                                       

a.  Cinergi does hereby irrevocably grant, assign and license to BVI the
exclusive right, title and interest in and to the Picture and each of its       
elements and all exclusive rights to distribute, exhibit, market and exploit the
Picture in any and all manner and in all media, now known or hereafter devised  
including, without limitation, theatrical, non-theatrical, all forms of home    
video cassettes/discs, cartridges, tapes or similar devices now known or        
hereafter devised to be used in conjunction with a reproduction apparatus which 
causes the picture to be visible on the screen of a television receiver,        
television monitor or comparable device now known or hereafter devised in a     
private residence for viewing at the place of origin of such exhibition ("Home  
Video Devices") and all forms of television including, without limitation,      
standard, non-standard, subscription, pay television, cable and basic cable,    
satellite, etc. (including pay-per-view), fiber optic and digital delivery      
systems, etc. ("Television"); the right to advertise, publicize and promote the 
Picture including, without limtiation, the right to excerpt and/or synopsize the
Picture and/or screenplay for the Picture [provided, that any such excerpt      
and/or synopsis shall not exceed Two Thousand Five Hundred (2,500) words in     
length]; commercial tie-ins (subject to (i) the rights of Fox under the Fox     
Agreement and (ii) the rights of principal talent under their respective        
agreements with Cinergi [copies of which Cinergi agrees to deliver pursuant to  
the delivery provisions of subparagraph 3.a. below]); subject to the prior      
consent of Cinergi and Fox, the right to change the title of the Picture; the   
right to finance, produce and distribute a "making of" promotional film (subject
to the rights and approvals of all persons who provide services to the Picture  
[of which Cinergi shall deliver a written account pursuant to the delivery      
provisions of subparagraph 3.a. below], the applicable rights of Fox [of which  
Cinergi shall deliver a written account pursuant to the delivery provisions of  
subparagraph 3.a. below] and applicable guild and union requirements); the right
to cut or edit the Picture for legal and censorship reasons, time parameters and
standards and practices requirements of airlines, television stations and       
broadcasters; the right to subtitle and dub the Picture into foreign languages; 
the right with respect to all persons appearing in the Picture or performing    
production services therein to issue and authorize publicity concerning such    
persons and the right to use, reproduce, transmit, broadcast, exploit, publicize
and exhibit their names and likenesses (subject to third party agreements with  
Cinergi, of which Cinergi shall deliver a written account of pertinent points   
pursuant to the delivery provisions of subparagraph 3.a. below) in              
transcriptions, advertising, distribution and exploitation of the Picture in the
following territories: (i) Benelux (i.e. Belgium, the Netherlands and           
Luxembourg) (in the French, German, Dutch and Flemish languages); (ii)          
Scandinavia (i.e. Finland, Sweden, Norway, Iceland and Denmark); (iii) Central  
and South America (i.e. Antigua, Argentina, Barbuda, Belize, Bolivia, Brazil,   
Cayman Islands, Chile, Columbia, Costa Rica,                                    

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Dominica, Dominican Republic, Ecuador, El Salvador, French Guiana, Grenada,     
Guadeloupe, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Mexico,    
Montserrat, Netherlands Antilles, Nicaragua, Panama (excluding the Canal Zone), 
Peru, Saint Lucia, St. Kitts & Nevis, St. Vincent/Grenadines, Surinam, Tobago,  
Trinidad, Turks and Caicos Islands, and Venezuela); (iv) French-speaking Europe 
and Africa (i.e. Algeria, Andorra, Benin, Bukina Faso, Burundi, Cameroon,       
Central African Empire, Chad, Congo, Corsica, Dahomey, Djibouti, France, French 
military forces stationed in West Germany, Gabon, Guinea, Ivory Coast, Mali,    
Mauritania, Monaco (Monte Carlo), Morocco, Nigeria (English language excluded), 
Ruanda, Senegal, Togo, Tunisia, Zaire); (v) German-speaking Europe (i.e.        
Germany, Austria); (vi) the United Kingdom and Eire and (vii) Spain, Switzerland
(in the Italian, French and German languages, excluding Italian language Home   
Video Device rights and Italian language Television rights), Taiwan, Portgual,  
Greece, and all of the respective territories, protectorates and possessions of 
all of the aforementioned, including planes and ships owned by entities whose   
principal offices for licensing rights of planes and ships are located in the   
respective nations (altogether, the "BVI Territory"). Cinergi shall have the    
right to distribute the Picture in all media, throughout the world, except for  
the BVI Territory ("Cinergi Territory"). Each party shall be solely responsible 
for all distribution costs and expenses in connection with the Picture in its   
respective territory including, without limitation, advertising costs and costs 
associated with the manufacture of prints and Home Video Devices.               

  b.  The terms of this Agreement (the "Term") shall commence as of the date
hereof and terminate Twenty Five (25) years from the initial theatrical release 
of the Picture in any country of the BVI Territory.                             

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EXHIBIT "D" 

   DATE: 7 July 1997   Last Contract Log #97-2834   Last Amendment = EE433

                                                                [Download Table]

   PICTURE              TERRITORY                          DISTRIBUTOR     
--------------  --------------------------             --------------------
                                                                           
Die Hard WAV    Africa--East                       AF                      
Die Hard WAV    Africa--West                       AF                      
Die Hard WAV    Albania                            EE                      
Die Hard WAV    Australia/N.Z.                     FE  Village Roadshow    
Die Hard WAV    Baltics (LAT, LITH, EST)           EE  Nika-L Ltd.         
Die Hard WAV    Bangladesh                         FE  Star TV (PSTV)      
Die Hard WAV    Bulgaria                           EE                      
Die Hard WAV    Burma                              FE  Star TV (PSTV)      
Die Hard WAV    China                              FE  Mairim              
Die Hard WAV    C.I.S.                             EE  Ekaterinburg Art    
Die Hard WAV    Croatia                            EE  Oscar Vision (TH/V) 
Die Hard WAV    Czech Republic                     EE  Lumiere (Intersonic)
Die Hard WAV    Hong Kong                          FE  Intercontinental    
Die Hard WAV    Hungary                            EE  Intercom            
Die Hard WAV    India, Nepal, Bhutan               FE  Distant Horizon Ltd.
Die Hard WAV    India, Nepal, Bhutan               FE  Star TV (PSTV)      
Die Hard WAV    Indonesia                          FE  Crystal Corporation 
Die Hard WAV    Israel                             EU  A.D. Matalon        
Die Hard WAV    Italy                              EU  Cecchi Gori         
Die Hard WAV    Malaysia                           FE  Sunny Film          
Die Hard WAV    Middle East                        EU  Jaguar              
Die Hard WAV    Middle East                        EU  Paramount Pictures  
Die Hard WAV    Middle East                        EU  Star TV (PSTV)      
Die Hard WAV    Pakistan/Afganistan                FE  Star TV (PSTV)      
Die Hard WAV    Philippines                        FE  Solar Films         
Die Hard WAV    Poland                             EE  Filmwell Int'l      
Die Hard WAV    Romania                            EE  Media Pro           
Die Hard WAV    Romania                            EE  CME (FTTV)          
                                                       Scenecast           
Die Hard WAV    Serbia&Mont Only                   EE  (Tuckvision)        
Die Hard WAV    Singapore/Brun.                    FE  Shaw Renters        
Die Hard WAV    Singapore/Brun.                    FE  TCS (FTV)           
Die Hard WAV    Slovakia                           EE  Lumiere (Intersonic)
Die Hard WAV    Slovakia                           EE  CME (FTTV)          
Die Hard WAV    Slovenia & Macedonia               EE  Oscar (TH/V)        
Die Hard WAV    Slovenia                           EE  CME (FTTV)          
Die Hard WAV    South Africa/Zim                   AF  Ster-Kinekor        
Die Hard WAV    South Korea                        FE  Dong-A (Dai-Ichi)   
Die Hard WAV    Sri Lanka                          FE  Lakshmi Pictures    
Die Hard WAV    Sri Lanka                          FE  Star TV (PSTV)      
Die Hard WAV    Switz--Italian                     EU  Cecchi-gori--V.Tv.  
Die Hard WAV    Thailand                           FE  Apex International  
Die Hard WAV    Turkey                             EU  Ozen Film           

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                                                                                            PAY TV              
                                                 S                             ---------------------------------
   TH         NT         PV         CV       A   -      H         HV      PPV     TER        CAB         SAT    
---------  ---------  ---------  ---------  ---     ---------  ---------  ---     ---        ---     -----------
                                                                                                                
                                            NR                                                                  
                                            NR                                                                  
                                            NR                                                                  
    X          X          X          X      NR          X          X       X       X          X           X     
    X          X          X                 NR          X          X                                            
                                            NR                                                          STAR*   
                                            NR                                                                  
                                            NR                                                          STAR*   
    X          X          X          X      NR          X          X       X       X          X                 
    X          X          X          X      NR          X          X                                            
   OSC        OSC        OSC        OSC     NR         OSC        OSC                                           
   LUM        LUM        LUM        LUM     NR         LUM        LUM                                           
    X          X          X          X      NR          X          X       X       X          X                 
    X          X          X          X      NR          X          X               X          X           X     
   DH         DH         DH         DH      NR         DH         DH                                    STAR*   
   DH         DH         DH         DH      NR         DH         DH                                    STAR*   
    X          X          X          X      NR          X          X               X          X           X     
    X          X          X          X      NR          X          X               X          X                 
    X          X          X          X      NR          X          X       X       X          X           X     
    X          X          X          X      NR          X          X               X          X                 
   JAG        JAG        JAG        JAG     NR         JAG        JAG             JAG        JAG      PPI/STAR* 
   JAG        JAG        JAG        JAG     NR         JAG        JAG             JAG        JAG         PPI    
   JAG        JAG        JAG        JAG     NR         JAG        JAG             JAG        JAG        STAR*   
                                            NR                                                          STAR*   
    X          X          X          X      NR          X          X       X       X          X           X     
    X          X          X          X      NR          X          X               X          X           X     
   MP         MP         MP         MP      NR         MP         MP                                            
   MP         MP         MP         MP      NR         MP         MP                                            
    X          X          X          X      NR          X          X                                            
  SHAW       SHAW       SHAW       SHAW     NR        SHAW       SHAW                                           
  SHAW       SHAW       SHAW       SHAW     NR        SHAW       SHAW                                           
   LUM        LUM        LUM        LUM     NR         LUM        LUM                                           
   LUM        LUM        LUM        LUM     NR         LUM        LUM                                           
   OSC        OSC        OSC        OSC     NR         OSC        OSC                                           
   OSC        OSC        OSC        OSC     NR         OSC        OSC                                           
    X          X          X          X      NR          X          X       X       X          X           X     
    X          X          X          X      NR          X          X               X          X           X     
   LAK        LAK        LAK        LAK     NR         LAK        LAK                                   STAR*   
   LAK        LAK        LAK        LAK     NR         LAK        LAK                                   STAR*   
                                            NR                     X               X          X           X     
    X          X          X          X      NR          X          X               X          X                 
    X          X          X          X      NR   X      X          X       X       X          X           X     


                         FTV                                                                                    
           -------------------------------                                                                      
   TH         TER        CAB        SAT                                                                         
---------  ---------     ---        ---                                                                         
                                                                                                                

    X          X          X          X                                                                          
    X                                                                                                           

    X          X          X          X                                                                          
    X                                                                                                           
   OSC                                                                                                          
   LUM                                                                                                          
    X          X          X                                                                                     
    X          X          X          X                                                                          
   DH                                                                                                           
   DH                                                                                                           
    X          X          X          X                                                                          
    X          X          X                                                                                     
    X          X          X          X                                                                          
    X          X          X                                                                                     
   JAG        JAG        JAG                                                                                    
   JAG        JAG        JAG                                                                                    
   JAG        JAG        JAG                                                                                    

    X          X          X          X                                                                          
    X          X          X          X                                                                          
   MP        CME*                                                                                               
   MP        CME*                                                                                               
    X                                                                                                           
  SHAW        TCS        TCS        TCS                                                                         
  SHAW        TCS        TCS        TCS                                                                         
   LUM                                                                                                          
   LUM       CME*                                                                                               
   OSC       CME*                                                                                               
   OSC       CME*                                                                                               
    X          X          X          X                                                                          
    X          X          X          X                                                                          
   LAK                                                                                                          
   LAK                                                                                                          
               X          X          X                                                                          
    X          X          X                                                                                     
    X          X          X          X                                                                          

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                           TERM EXPIRY                                                               TBD = TO BE DETERMINED
                        -----------------               # OF TV                TRIGGER     TRIGGER   ----------------------
        NOTES             TRIGGER EVENT      * YRS       RUNS     (IN DAYS)     DATE        TYPE     EXPIRY DATE  EST/ ACT 
----------------------  -----------------  ----------  ---------  ---------  -----------  ---------  -----------  ---------
                                                                                                                           
                        DEL F & T              12                            16-May-95          DEL  16-May-07            A
                        NOD PRINT              5                             18-Aug-95          PAY  18-Aug-00            E
                        START DATE         10 months                         1-Apr-97                1-Feb-98             A
                        START DATE         10 months                         1-Apr-97                1-Feb-98             A
                        DEL PRINT              11                            26-May-95          DEL  26-May-06            A
                        DEL PRINT              5                             20-Feb-97          PAY  20-Feb-02            E
                        NOD PRINT              5                             22-May-95          NOD  22-May-00            A
                        NOD PRINT              5                             19-May-95          NOD  19-May-00            A
                        NOD PRINT              7                             17-May-95          NOD  17-May-02            A
                        NOD PRINT              7                             8-Jun-95           DEL  8-Jun-02             A
                        NOD PRINT              7                             19-May-95          NOD  19-May-02            A
                        START DATE         10 months                         1-Apr-97                1-Feb-98             A
                        NOD PRINT              7                             30-May-95          NOD  30-May-02            A
                        NOD PRINT              7                             22-May-95          NOD  22-May-02            A
                        DEL FS by L/C          25                            9-Jun-95           DEL  9-Jun-20             A
                        DEL PRINT              7                             1-Jun-95           DEL  1-Jun-02             A
                        DEL PRINT              5                             16-Jun-95          DEL  16-Jun-00            A
                        START DATE         15 months                         18-Nov-96               18-Feb-98            A
                        START DATE         10 months                         1-Apr-97                1-Feb-98             A
                        START DATE         10 months                         1-Apr-97                1-Feb-98             A
                        DEL PRINT              7                             30-May-95          DEL  30-May-02            A
                        NOD PRINT              7                             22-May-95          NOD  22-May-02            A
                        NOD PRINT              5                             26-Jul-95          NOD  26-Jul-00            A
                        NOD                    3               2             TBA                NOD  TBA                   
                        NOD PRINT              5                             19-May-95          NOD  19-May-00            A
                        NOD F & T              5                             18-May-95          NOD  18-May-00            A
                               \\\            \\\            \\\        \\\      \\\         \\\     19-Nov-99            A
                        NOD PRINT              5                             19-May-95          NOD  19-May-00            A
                        NOD                    3               2             TBA                NOD  TBA                   
                        NOD PRINT              5                             22-May-95          NOD  22-May-00            A
                        NOD                    3               2             TBA                NOD  TBA                   
                        DEL PRINT              7                             8-Jun-95           DEL  8-Jun-02             A
                        DEL PRINT & D          7                             30-May-95          DEL  30-May-02            A
                        NOD PRINT              5                             15-Jan-97          PAY  15-Jan-02            E
                        NOD PRINT              5                             15-Jan-97          PAY  15-Jan-02            E
                        DEL FS by L/C          25                            9-Jun-95           DEL  9-Jun-20             A
                        NOD PRINT              7                             18-May-95          NOD  18-May-02            A
                        DEL F & T              7                             30-Aug-95          PAY  30-Aug-02            A


        NOTES             NOTES                                                                                            
----------------------  ---------                                                                                          
                                                                                                                           

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AMENDMENT TO
ASSIGNMENT AGREEMENT

This is an Amendment dated August 26, 1997 ("Amendment") to that certain        
Assignment Agreement dated as of July 14, 1997 ("Assignment Agreement") between 
TWENTIETH CENTURY FOX FILM CORPORATION, a Delaware corporation ("Fox"), on the  
one hand, and CINERGI PRODUCTIONS INC. now named CINERGI PICTURES ENTERTAINMENT 
INC., a Delaware corporation ("CPEI") and CINERGI PRODUCTIONS N.V. INC., a      
Delaware corporation ("CPNV"), previously known as CINERGI PRODUCTIONS N.V., on 
the other hand (collectively, "Cinergi"), with respect to "DIE HARD WITH A      
VENGEANCE" f/k/a "DIE HARD 3" ("Picture")                                       

Fox and Cinergi wish to amend the insurance provision of the Assignment 
Agreement. Therefore, in consideration of the following covenants and for other 
good and valuable consideration, the receipt and adequacy of which are hereby   
acknowledged, the parties hereto agree as follows:                              

1. Paragraph 14. of the Assignment Agreement is hereby amended so that the      
obligation of Cinergi to maintain directors and officers insurance will be      
reduced to coverage in the amount of $500,000.                                  

2. Except as expressly amended by this Amendment, the Assignment Agreement shall
remain in full force and effect. This Amendment shall in all respects be        
governed by the law of the State of California applicable to agreements executed
in and to be wholly performed within the State of California.                   

The parties have signed this Amendment to the Assignment Agreement as of the day
and year first written above.                                                   

                                                        [Enlarge/Download Table]
                                                                                                
CINERGI PICTURES ENTERTAINMENT INC.              TWENTIETH CENTURY FOX FILM CORPORATION         
                                       ("CPEI")                                          ("Fox")

                /s/ WARREN BRAVERMAN                             /s/ ROBERT B. COHEN            
      ----------------------------------------         ---------------------------------------- 
           Title EXECUTIVE VICE PRESIDENT                          Robert B. Cohen              
By                                               By                                             
                                                         Title EXECUTIVE VICE PRESIDENT LEGAL   
                                                                       AFFAIRS                  

CINERGI PRODUCTIONS N.V. INC.                                                                   
                         ("CPNV")                                                               

                /s/ RANDOLPH M. PAUL                                                            
      ----------------------------------------                                                  
                  Randolph M. Paul                                                              
By                                                                                              
            Title SENIOR VICE PRESIDENT                                                         

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                                                                      APPENDIX C
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

AGREEMENT OF MERGER 
AMONG 
ANDREW G. VAJNA,
VALDINA CORPORATION N.V., 
CPEI ACQUISITION INC. 
AND 
CINERGI PICTURES ENTERTAINMENT INC. 
DATED AS OF SEPTEMBER 2, 1997 

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

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TABLE OF CONTENTS 

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                                                                                                            PAGE   
                                                                                                            -----  
                                                                                                                   
ARTICLE I  THE MERGER......................................................................................       1
  SECTION 1.1.  MERGER.....................................................................................       1
  SECTION 1.2.  EFFECTS OF THE MERGER......................................................................       1
  SECTION 1.3.  CERTIFICATE OF INCORPORATION AND BYLAWS....................................................       1
  SECTION 1.4.  DIRECTORS..................................................................................       1
  SECTION 1.5.  OFFICERS...................................................................................       1
  SECTION 1.6.  CONVERSION OF SHARES.......................................................................       2
  SECTION 1.7.  ADJUSTMENTS TO PURCHASE PRICE..............................................................       2
  SECTION 1.8.  STOCKHOLDERS' MEETING OF THE COMPANY.......................................................       4
  SECTION 1.9.  CONSUMMATION OF THE MERGER.................................................................       5

ARTICLE II  DISSENTING SHARES; PAYMENT FOR SHARES..........................................................       5
  SECTION 2.1.  DISSENTING SHARES..........................................................................       5
  SECTION 2.2.  PAYMENT FOR SHARES.........................................................................       5
  SECTION 2.3.  CLOSING OF THE COMPANY'S TRANSFER BOOKS....................................................       6

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................       6
  SECTION 3.1.  CORPORATE ORGANIZATION.....................................................................       6
  SECTION 3.2.  CAPITALIZATION.............................................................................       6
  SECTION 3.3.  AUTHORITY RELATIVE TO THIS AGREEMENT.......................................................       7
  SECTION 3.4.  CONSENTS AND APPROVALS; NO VIOLATIONS......................................................       7
  SECTION 3.5.  COMMISSION FILINGS AND FINANCIAL STATEMENTS................................................       8
  SECTION 3.6.  PROXY STATEMENT; SCHEDULE 13E-3............................................................       8
  SECTION 3.7.  NO BROKER OR FINDER FEES...................................................................       8

ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF BUYER AND VAJNA..............................................       9
  SECTION 4.1.  CORPORATE ORGANIZATION.....................................................................       9
  SECTION 4.2.  AUTHORITY RELATIVE TO THIS AGREEMENT.......................................................       9
  SECTION 4.3.  CONSENTS AND APPROVALS; NO VIOLATIONS......................................................       9
  SECTION 4.4.  OTHER DOCUMENTS; PROXY STATEMENT; SCHEDULE 13E-3...........................................      10

ARTICLE V  COVENANTS.......................................................................................      10
  SECTION 5.1.  CONDUCT OF BUSINESS OF THE COMPANY.........................................................      10
  SECTION 5.2.  NOTIFICATION OF CERTAIN MATTERS............................................................      10
  SECTION 5.3.  INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE........................................      11
  SECTION 5.4.  EMPLOYEE PLANS.............................................................................      11
  SECTION 5.5.  WARRANTS...................................................................................      11
  SECTION 5.6.  PUBLICITY..................................................................................      11
  SECTION 5.7.  BEST EFFORTS...............................................................................      11
  SECTION 5.8.  TERMINATION OF VAJNA EMPLOYMENT AGREEMENT; SEVERANCE ARRANGEMENTS..........................      12
  SECTION 5.9.  VAJNA RECEIVABLES..........................................................................      12
  SECTION 5.10. VALDINA PROMISSORY NOTE....................................................................      13

ARTICLE VI  CONDITIONS.....................................................................................      13
  SECTION 6.1.  CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER................................      13
  SECTION 6.2.  CONDITIONS TO THE OBLIGATIONS OF BUYER, VAJNA AND VALDINA TO EFFECT THE MERGER.............      14
  SECTION 6.3.  CONDITIONS TO THE OBLIGATIONS OF THE COMPANY...............................................      14

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ARTICLE VII  TERMINATION, AMENDMENT AND WAIVER.............................................................      14
  SECTION 7.1.  TERMINATION................................................................................      14
  SECTION 7.2.  EFFECT OF TERMINATION......................................................................      14
  SECTION 7.3.  AMENDMENT..................................................................................      15
  SECTION 7.4.  EXTENSION, WAIVER..........................................................................      15

ARTICLE VIII  MISCELLANEOUS................................................................................      15
  SECTION 8.1.  NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.................................      15
  SECTION 8.2.  FEES AND EXPENSES..........................................................................      15
  SECTION 8.3.  NOTICES....................................................................................      15
  SECTION 8.4.  APPLICABLE LAW.............................................................................      17
  SECTION 8.5.  INTERPRETATION.............................................................................      17
  SECTION 8.6.  ENTIRE AGREEMENT; ASSIGNMENT...............................................................      17
  SECTION 8.7.  SEVERABILITY...............................................................................      17
  SECTION 8.8.  PARTIES IN INTEREST........................................................................      17
  SECTION 8.9.  SPECIFIC PERFORMANCE.......................................................................      17
  SECTION 8.10. COUNTERPARTS...............................................................................      17

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AGREEMENT OF MERGER 

 AGREEMENT OF MERGER (this "Agreement"), dated as of September 2, 1997, by
and among Andrew G. Vajna ("Vajna"), Valdina Corporation N.V., a Netherlands    
Antilles corporation ("Valdina"), CPEI Acquisition Inc., a Delaware corporation 
("Buyer"), and Cinergi Pictures Entertainment Inc., a Delaware corporation (the 
"Company").                                                                     

WHEREAS, the Board of Directors of the Company, based in part on the    
recommendation of a Special Committee of the Board of Directors of the Company  
(the "Special Committee"), and the Board of Directors and stockholders of Buyer 
have each approved the acquisition of the Company by Buyer upon the terms and   
subject to the conditions set forth herein;                                     

WHEREAS, in furtherance thereof, the Board of Directors of the Company, 
based in part on the recommendation of the Special Committee, and the Board of  
Directors and stockholders of Buyer have each approved the merger (the "Merger")
of Buyer with and into the Company in accordance with the General Corporation   
Law of the State of Delaware (the "GCL"), pursuant to which the shares (the     
"Shares") of Company common stock, $.01 par value per share ("Common Stock")    
(other than Shares owned by Vajna, Valdina or the Company and Shares owned by   
holders of Dissenting Shares (as defined in Section 2.1 hereof)), shall be      
converted into the right to receive the Merger Consideration (as defined in     
Section 1.6 hereof); and                                                        

WHEREAS, the Board of Directors of the Company, based in part on the    
recommendation of the Special Committee, has (i) determined that the Merger is  
fair to and in the best interests of the stockholders of the Company (other than
Vajna, Valdina or Buyer), and (ii) resolved to approve and adopt this Agreement 
and the transactions contemplated hereby and, subject to the terms and          
conditions set forth herein, to recommend that the stockholders of the Company  
approve and adopt this Agreement and the transactions contemplated hereby,      
including without limitation, the Merger.                                       

NOW, THEREFORE, in consideration of the foregoing and the respective    
representations, warranties, covenants, agreements and conditions herein        
contained, and intending to be legally bound hereby, Vajna, Valdina, Buyer and  
the Company hereby agree as follows:                                            

ARTICLE I 
THE MERGER

   SECTION 1.1.  MERGER.  Upon the terms and subject to the conditions hereof,
Buyer will be merged with and into the Company (the "Merger") in accordance with
the applicable provisions of the GCL as soon as practicable after the           
satisfaction or waiver of the conditions to the Merger set forth in Article VI  
hereof. Following the Merger, the Company shall be the surviving corporation    
(sometimes hereinafter referred to as the "Surviving Corporation") and the      
separate existence of Buyer shall cease. The name of the Surviving Corporation  
shall be "Cinergi Pictures Entertainment Inc."                                  

   SECTION 1.2.  EFFECTS OF THE MERGER.  The Merger shall have the effects set
forth in Section 259 of the GCL. As of the Effective Time (as defined in Section
1.9 hereof), the Company shall be wholly owned by Vajna and Valdina.            

SECTION 1.3.  CERTIFICATE OF INCORPORATION AND BYLAWS.  At the Effective
Time, (i) the Certificate of Incorporation of the Company, as amended and       
restated pursuant to the Restated Certificate of Incorporation attached hereto  
as Exhibit A, shall be the Certificate of Incorporation of the Surviving        
Corporation, and (ii) the Bylaws of the Company shall be the Bylaws of the      
Surviving Corporation.                                                          

 SECTION 1.4.  DIRECTORS.  The directors of Buyer immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified in the  
manner provided in the Certificate of Incorporation and Bylaws of the Surviving 
Corporation, or otherwise as provided by law.                                   

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SECTION 1.5.  OFFICERS.  The officers of Buyer immediately prior to the 
Effective Time shall be the initial officers of the Surviving Corporation until 
their respective successors are duly elected or appointed and qualified in the  
manner provided in the Certificate of Incorporation and Bylaws of the Surviving 
Corporation, or otherwise as provided by law.                                   

    SECTION 1.6.  CONVERSION OF SHARES.  At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of Shares, (i) each     
Share issued and outstanding immediately prior to the Effective Time (other than
Shares owned by Vajna, Valdina and any Dissenting Shares) shall be converted    
into and represent the right to receive $2.30 in cash (the "Purchase Price"),   
subject to adjustment as provided in Section 1.7 hereof (as adjusted, the       
"Adjusted Purchase Price"); (ii) each Share owned and held in the treasury of   
the Company immediately prior to the Effective Time, shall be canceled and      
extinguished, and no payment will be made in respect of those Shares; and (iii) 
each share of common stock, par value $.01 per share, of Buyer then issued and  
outstanding shall be canceled. All Shares owned by Vajna and Valdina shall      
remain outstanding. For purposes of this Agreement, the term "Merger            
Consideration" shall mean the Purchase Price or Adjusted Purchase Price, as the 
case may be.                                                                    

SECTION 1.7.  ADJUSTMENTS TO PURCHASE PRICE.                            

    (a) For purposes hereof, "Adjustment Date" shall mean that date which is ten
business days before the date of the special meeting (the "Special Meeting") of 
the Company's stockholders called by the Company to consider and vote upon the  
approval and adoption of this Agreement, as such date of the Special Meeting is 
initially set by the Board of Directors of the Company, or as such date may be  
changed due to the adjournment, delay or other rescheduling of the Special      
Meeting; provided, however, that if, after the Adjustment Date, the Special     
Meeting is adjourned, delayed or otherwise rescheduled to a date which is less  
than ten business days from the date on which it is determined that the Special 
Meeting will be adjourned, delayed or otherwise rescheduled, then, in such case,
the Adjustment Date shall not be changed but shall remain the date which is ten 
business days before the date the Special Meeting was set to occur prior to such
adjournment, delay or other rescheduling of the Special Meeting.                

(b) The Purchase Price payable pursuant to Section 1.6 hereof shall be  
adjusted upwards:                                                               

 (i) In the event the Company enters into an agreement (the "Stone
Agreement") prior to the Adjustment Date (A) to sell the development    
   projects listed on Schedule 1.7(b) (i) hereto (the "Stone Projects") or (B)
to settle its obligations pursuant to its "first look" arrangement with 
Oliver Stone and certain of his affiliates. In such event, the Purchase 
Price shall be adjusted upwards by an amount equal to the sum of (X) the
aggregate purchase price, if any, payable to the Company pursuant to the
Stone Agreement, and (Y) the aggregate amount of liabilities and other  
  obligations assumed or forgiven by the purchaser (or party or parties with
   which the Company settles its obligations) pursuant to the Stone Agreement,
divided by the total number of issued and outstanding Shares as of the  
Adjustment Date (including Shares held by Vajna and Valdina);           

   (ii) In the event the sum of (A) the aggregate amount of all monies
received by the Company (as royalties or otherwise) in respect of the   
soundtrack for EVITA (the "Soundtrack") from the date hereof through the
   Adjustment Date and (B) the aggregate purchase price payable to the Company
pursuant to any agreement for the sale of the Company's rights in the   
  Soundtrack (an "Evita Agreement") entered into by the Company prior to the
    Adjustment Date, exceeds $1,500,000 (such excess being referred to herein as
the "Soundtrack Amount"). In such event, the Purchase Price shall be    
   adjusted upwards by an amount equal to the Soundtrack Amount divided by the
total number of issued and outstanding Shares as of the Adjustment Date 
  (including Shares held by Vajna and Valdina). Any Evita Agreement shall be
 approved by the Board of Directors of the Company (with the assent of the
 Special Committee). In the event the Company does not enter into an Evita
Agreement prior to the Adjustment Date, the Special Committee and the   
    Company shall use their best efforts to monetize the Company's rights in the
    Soundtrack and distribute, subsequent to the Effective Time, the proceeds in

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    connection therewith to the stockholders of the Company immediately prior to
the Effective Time; and                                                 

(iii) In the event the aggregate amount of monies collected by the
Company in connection with the outstanding accounts receivable listed on
  Schedule 1.7(b)(iii) hereto (the "Non-Alan Smithee Receivables") from July
   1, 1997 through the Adjustment Date (the "Measurement Period") is in excess
    of $1,573,000 (such excess amount being referred to as the "Non-Alan Smithee
 Receivables Amount"). In such event, the Purchase Price shall be adjusted
upwards by an amount equal to the Non-Alan Smithee Receivables Amount   
divided by the total number of issued and outstanding Shares as of the  
Adjustment Date (including Shares held by Vajna and Valdina).           

   (c) The Purchase Price payable pursuant to Section 1.6 hereof shall also be
adjusted upwards in accordance with Section 1.7(e) in the event the sum of the  
possible adjustments (whether positive or negative) set forth in subparagraphs  
(i), (ii) and (iii) below result in a positive number.                          

        (i) There shall be a positive adjustment equal to the amount, if any, by
 which the Company Expense Amount is less than $6,493,000. If instead, the
    Company Expense Amount is greater than $6,493,000, there shall be a negative
adjustment equal to the amount by which the Company Expense Amount is   
    greater than $6,493,000. For purposes hereof, "Company Expense Amount" shall
  mean the aggregate Expenses paid or incurred during the Measurement Period
  by the Company, and "Expenses" shall consist of the following: salaries of
    Company personnel, severance payments, rent, utilities, accounting and legal
   fees and expenses, and other expenses which have generally been included as
selling, general and administrative expenses in the Company's audited   
  financial statements. "Expenses" will not include, among other things, (A)
any expenses incurred by the Company with respect to the Company's      
   development projects, (B) any expenses incurred by the Company with respect
to (or funds provided by the Company to) Cinergi Productions Inc.       
   (California), a California corporation and a wholly owned subsidiary of the
   Company ("CPI"), or the visual effects facility operated by CPI, or (C) any
   expenses incurred by CPI. The Company Expense Amount shall be computed on a
  consolidated basis (but excluding for such purpose CPI) and otherwise in a
manner generally consistent with preparation of the Company's financial 
statements for the fiscal year ended December 31, 1996; and             

      (ii) There shall be a positive adjustment equal to the amount, if any,
   by which the aggregate amount of monies collected by the Company during the
   Measurement Period with respect to the outstanding accounts receivable with
 respect to AN ALAN SMITHEE FILM listed on Schedule 1.7(c)(ii) hereto (the
"Alan Smithee Receivables") is in excess of $8,690,000. If instead, the 
  aggregate amount of monies collected by the Company during the Measurement
    Period with respect to the Alan Smithee Receivables is less than $8,690,000,
there shall be a negative adjustment equal to the amount by which the   
  aggregate amount of monies collected by the Company during the Measurement
    Period with respect to the Alan Smithee Receivables is less than $8,690,000.

     (iii) There shall be a positive adjustment equal to the amount, if any,
by which the MassIllusion Expense Amount is less than $1,300,000. If    
  instead, the MassIllusion Expense Amount is greater than $1,300,000, there
    shall be a negative adjustment equal to the amount by which the MassIllusion
Expense Amount is greater than $1,300,000. For purposes hereof,         
   "MassIllusion Expense Amount" shall mean (a) the aggregate amount of monies
provided by the Company, directly or indirectly, to CPI or to any third 
parties on behalf of CPI during the Measurement Period ("Disbursed      
 Amounts"), plus (b) the aggregate amount of expenses borne by the Company
    during the Measurement Period with respect to CPI (including with respect to
   the visual effects facility operated by CPI) ("Borne Expenses"), less (from
the sum of (a) and (b)) the recovery by the Company, in any manner      
whatsoever (including, without limitation, reimbursements by CPI to the 
Company), of any of the Disbursed Amounts or Borne Expenses.            

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  (d) The Company's chief financial officer, or other appropriate accounting
officer, as the case may be, shall calculate both the Expenses and the          
MassIllusion Expense Amount for the Measurement Period as contemplated herein   
and forward such calculation to Vajna and the Special Committee no later than   
6:00 p.m., Los Angeles time, on the day after the Adjustment Date. To the extent
there is a disagreement between Vajna and the Special Committee with respect to 
the calculation of Expenses and/or the MassIllusion Expense Amount, the parties 
shall immediately forward such calculation(s) to the Company's independent      
accountants, whose determination as to the proper calculation of Expenses and/or
the MassIllusion Expense Amount shall be rendered no later than six business    
days prior to the Special Meeting and shall be final and binding on all the     
parties hereto.                                                                 

 (e) To the extent the sum of the adjustments as provided in subparagraphs
(i), (ii) and (iii) of Section 1.7(c) above result in a positive amount (such   
number being referred to as the "Adjustment Amount"), the Purchase Price shall  
be adjusted upwards by an amount equal to the Adjustment Amount divided by the  
total number of issued and outstanding Shares as of the Adjustment Date         
(including Shares held by Vajna and Valdina). To the extent the sum of the      
adjustments as provided in (i), (ii) and (iii) above results in a negative      
amount, there shall be no adjustment to the Purchase Price (it being understood 
that under no circumstances shall any "negative amount" resulting from Section  
1.7(c) reduce any positive adjustment resulting from Section 1.7(b)). Except as 
set forth in Section 1.7(b) and 1.7(c) there shall be no other positive         
adjustments to the Purchase Price.                                              

(f) In the event of an adjustment to the Purchase Price resulting from a
transaction contemplated by Section 1.7(b)(i) or (ii), the Company and Vajna    
shall promptly thereafter issue a press release through a nationally recognized 
news wire service setting forth, among other things, the material terms         
underlying the particular transaction giving rise to the adjustment and the     
specific dollar amount of the adjustment to the Purchase Price. In addition, the
Company and Vajna shall issue a press release no later than five business days  
prior to the Special Meeting, setting forth the exact dollar amount of the      
Merger Consideration.                                                           

   SECTION 1.8.  STOCKHOLDERS' MEETING OF THE COMPANY.  (a) In connection with
the Merger, the Company shall, in accordance with applicable law and its        
Certificate of Incorporation and Bylaws:                                        

      (i) duly call, give notice of, convene and hold the Special Meeting as
  soon as practicable after the execution of this Agreement, to consider and
vote upon the approval and adoption of the Agreement;                   

      (ii) prepare and file with the Securities and Exchange Commission (the
  "Commission") a preliminary proxy statement relating to this Agreement and
 the Merger and use its best efforts (A) after consultation with Buyer, to
 respond promptly to any comments made by the staff of the Commission with
respect to such preliminary proxy statement and cause a definitive proxy
    (together with any amendments or supplements thereto, the "Proxy Statement")
  to be mailed to its stockholders at the earliest practicable time, and (B)
   to obtain the necessary approvals by its stockholders of this Agreement and
   the Merger, except to the extent that the Board of Directors of the Company
shall have determined in good faith, based on the recommendation of the 
Special Committee and upon advice of the Company's outside counsel, that
    obtaining such approvals would violate its fiduciary duties under applicable
law; and                                                                

     (iii) include in the Proxy Statement the recommendations of the Special
   Committee and the Company's Board of Directors that the stockholders of the
    Company vote in favor of the approval and adoption of this Agreement, except
to the extent that the Board of Directors of the Company shall have     
determined in good faith, based on the recommendation of the Special    
Committee and upon advice of the Company's outside counsel, that such   
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    (b) Buyer will provide the Company with the information concerning Buyer and
its affiliates required under the Securities Exchange Act of 1934, as amended,  
and the rules and regulations promulgated thereunder (the "Exchange Act"), to be
included in the Proxy Statement.                                                

   (c) Each of Vajna and Valdina will vote or cause to be voted at the Special
Meeting all Shares owned by such party (and any of their affiliates) in favor of
the approval and adoption of this Agreement.                                    

    SECTION 1.9.  CONSUMMATION OF THE MERGER.  Upon the terms and subject to the
conditions of this Agreement, as soon as practicable after the satisfaction or  
waiver of the conditions to the Merger set forth in Article VI hereof, the      
Company (or Buyer, if appropriate) shall execute in the manner required by the  
GCL and file with the Secretary of State of the State of Delaware a certificate 
of merger, as required by the GCL, and the parties shall take all such other and
further actions as may be required by law to make the Merger effective. Prior to
the filing referred to in this Section 1.9, a closing (the "Closing") will be   
held at the offices of Gipson Hoffman & Pancione, P.C., Los Angeles, California 
(or such other place as the parties may agree) for the purpose of confirming all
of the foregoing. The time the Merger becomes effective in accordance with      
applicable law is referred to herein as the "Effective Time."                   

ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES 

    SECTION 2.1.  DISSENTING SHARES.  Notwithstanding anything in this Agreement
to the contrary, Shares which are outstanding immediately prior to the Effective
Time and which have not been voted for approval and adoption of this Agreement  
and the Merger and with respect to which appraisal shall have been properly     
demanded in accordance with Section 262 of the GCL ("Dissenting Shares") shall  
not be converted into the right to receive the Merger Consideration at or after 
the Effective Time unless and until the holder of such Shares withdraws his or  
her demand for such appraisal (in accordance with Section 262(k) of the GCL) or 
becomes ineligible for such appraisal. If a holder of Dissenting Shares shall   
withdraw (in accordance with Section 262(k) of the GCL) his or her demand for   
such appraisal or shall become ineligible for such appraisal, then, as of the   
Effective Time or the occurrence of such event, whichever last occurs, such     
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be     
converted into and represent the right to receive the Merger Consideration. The 
Company shall give Buyer (a) prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other instruments served pursuant  
to Section 262 of the GCL and received by the Company and (b) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal   
under Section 262. The Company will not voluntarily make any payment with       
respect to any demands for appraisal and will not, except with the prior written
consent of Buyer, settle or offer to settle any such demands.                   

   SECTION 2.2.  PAYMENT FOR SHARES.  Prior to the Effective Time, Buyer shall
authorize the Company's transfer agent or a commercial bank organized under the 
laws of the United States or any state thereof with capital, surplus and        
undivided profits of at least $50,000,000 to act as Paying Agent hereunder (the 
"Paying Agent"). As soon as practicable after the Effective Time, the Paying    
Agent shall mail to each record holder, as of the Effective Time, of an         
outstanding certificate or certificates which immediately prior to the Effective
Time represented Shares (the "Certificates") a form letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the   
Paying Agent) and instructions for use in effecting the surrender of the        
Certificates for payment therefor. Each holder of a Certificate or Certificates 
shall be entitled to receive, upon surrender to the Paying Agent of the         
Certificate or Certificates for cancellation, together with such letter of      
transmittal duly executed, and subject to any required backup withholding       
(within the meaning of Section 3406 of the Internal Revenue Code of 1986, as    
amended (the "Code")), the aggregate amount of cash into which the Shares       
previously represented by such Certificate or Certificates shall have been      
converted in the Merger. When and as needed, Buyer shall make available to the  
Paying Agent                                                                    

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sufficient funds to make all payments pursuant to the preceding sentence. Until 
surrendered to the Paying Agent, each Certificate (other than Dissenting Shares,
Shares held in the treasury of the Company and Shares owned by Vajna and        
Valdina) shall be deemed for all corporate purposes to evidence only the right  
to receive upon such surrender the aggregate amount of cash into which the      
Shares represented thereby shall have been converted, subject to any required   
backup withholding (within the meaning of Section 3406 of the Code). No interest
shall accrue or be paid on the cash payable upon the surrender of the           
Certificate or Certificates. If payment is to be made to a person other than the
person in whose name the Certificate surrendered is registered, it shall be a   
condition of payment that the Certificate so surrendered shall be properly      
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the    
payment to a person other than the registered holder of the Certificate         
surrendered or establish to the satisfaction of the Surviving Corporation that  
such tax has been paid or is not applicable. Any cash delivered or made         
available to the Paying Agent pursuant to this Section 2.2 and not exchanged for
Certificates representing Shares within six months after the Effective Time     
pursuant to this Section 2.2 shall be returned by the Paying Agent to the       
Surviving Corporation, which shall thereafter act as Paying Agent subject to the
rights of holders of unsurrendered Certificates representing Shares under this  
Article II. Notwithstanding the foregoing, neither the Paying Agent nor any     
party hereto shall be liable to a holder of Shares for any cash delivered to a  
public official pursuant to applicable abandoned property laws, or for any      
interest thereon. If Certificates are not surrendered prior to four years after 
the Effective Time (or, in any particular case, prior to such earlier date on   
which the consideration payable in respect of such Shares would otherwise       
escheat to or become the property of any governmental unit or agency), any      
consideration payable in respect of such Certificate shall, to the extent       
permitted by applicable law, become the property of the Surviving Corporation,  
free and clear of all claims of interest of any person previously entitled      
thereto.                                                                        

SECTION 2.3.  CLOSING OF THE COMPANY'S TRANSFER BOOKS.  At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
Shares shall thereafter be made. If, after the Effective Time, Certificates are 
presented to the Surviving Corporation or the Paying Agent, they shall be       
canceled and exchanged for cash as provided in Section 2.2 hereof, subject to   
applicable law in the case of Dissenting Shares.                                

ARTICLE III 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

 The Company hereby represents and warrants to Buyer, Vajna and Valdina as
follows:                                                                        

   SECTION 3.1.  CORPORATE ORGANIZATION.  Each of the Company and, to the best
of its knowledge, its subsidiaries is a corporation duly organized, validly     
existing and in good standing under the laws of the jurisdiction of its         
incorporation and has the requisite corporate power to carry on its business as 
it is now being conducted. To the best knowledge of the Company, the Company and
its subsidiaries are duly qualified as foreign corporations to do business, and 
are in good standing, in each jurisdiction where the character of their         
properties owned or leased or the nature of their activities makes such         
qualification necessary, except for failures to be so qualified or in good      
standing which would not, in the aggregate, have a material adverse effect on   
the financial condition, assets or liabilities of the Company and its           
subsidiaries taken as a whole (a "Material Adverse Effect").                    

SECTION 3.2.  CAPITALIZATION.  (a) The authorized capital stock of the  
Company consists of 20,000,000 shares of common stock, par value $.01 per share,
and 5,000,000 shares of preferred stock, par value $.01 per share. To the best  
knowledge of the Company, as of September 2, 1997, (i) 13,446,874 Shares were   
issued and outstanding, all of which were validly issued, fully paid,           
nonassessable and free of preemptive rights, (ii) pursuant to the Option Plans  
(as defined in Section 5.4 hereof), there were outstanding Employee Options (as 
defined in Section 5.4 hereof) to purchase an aggregate of 82,250 Shares, (iii) 
there were outstanding warrants, calls, rights and other securities to purchase 
an aggregate of                                                                 

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200,000 Shares, (iv) 744,682 Shares were held in the Company's treasury, and    
(iv) no shares of preferred stock were issued or outstanding. To the best       
knowledge of the Company, since December 31, 1996, the Company has not (x)      
issued any shares of its capital stock (y) granted any Employee Options, or (z) 
granted any options, warrants, calls, rights, or other securities convertible or
exchangeable into shares of capital stock. Except as set forth in this Section  
3.2 and except for this Agreement and the transactions contemplated hereby, to  
the best knowledge of the Company, there are not now, and at the Effective Time 
there will not be, any shares of capital stock of the Company issued or         
outstanding or any subscriptions, options, warrants, calls, rights, convertible 
or exchangeable securities or other agreements, commitments or rights of any    
character relating to issued or unissued capital stock or other securities of   
the Company, or otherwise obligating the Company to issue, transfer or sell, or 
cause to be issued, transferred or sold, or to make any payments in respect of, 
shares of capital stock or other securities of the Company.                     

    (b) To the best knowledge of the Company, Exhibit 21 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 sets forth the  
name and jurisdiction of incorporation of each significant subsidiary of the    
Company. To the best knowledge of the Company, all of the outstanding shares of 
capital stock of each subsidiary have been validly issued and are fully paid and
non-assessable and free of preemptive rights and are owned, directly or         
indirectly, by the Company free and clear of all liens, charges, claims or      
encumbrances. To the best knowledge of the Company, there are not now, and at   
the Effective Time there will not be, any subscriptions, options, warrants,     
calls, rights, convertible or exchangeable securities or other agreements,      
commitments or rights of any character relating to issued or unissued capital   
stock or other securities of any subsidiary, or otherwise obligating the Company
or any subsidiary to issue, transfer or sell, or cause to be issued, transferred
or sold, or to make any payments in respect of, shares of capital stock or other
securities of any subsidiary other than as may be required by the Library Sale  
Agreement (as defined in Section 6.1(g) hereof).                                

   (c) Except as set forth on Schedule 3.2(c) hereto, to the best knowledge of
the Company, there are not now, and at the Effective Time there will not be, any
voting trusts or other agreements or understandings to which the Company or any 
subsidiary is a party or is bound with respect to the voting of capital stock of
the Company or any subsidiary.                                                  

SECTION 3.3.  AUTHORITY RELATIVE TO THIS AGREEMENT.  The Company has the
requisite corporate power and authority to execute and deliver this Agreement,  
to perform its obligations hereunder and to consummate the transactions         
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by it of the transactions contemplated hereby have been    
duly authorized by the Board of Directors of the Company and no other corporate 
proceedings on the part of the Company are necessary to authorize the execution,
delivery and performance by the Company of this Agreement or the consummation by
the Company of the transactions contemplated hereby (other than, with respect to
the Merger, the approval of this Agreement and the Merger by the stockholders of
the Company, to the extent required by applicable law). This Agreement has been 
duly and validly executed and delivered by the Company and constitutes a valid  
and binding obligation of the Company, enforceable against the Company in       
accordance with its terms except (i) as its obligations may be affected by      
bankruptcy, insolvency, reorganization, receivership, moratorium or similar     
laws, or by equitable principles relating to or limiting creditors' rights or   
remedies generally, and (ii) that the remedies of specific performance,         
injunction and other forms of equitable relief are subject to certain tests of  
equity jurisdiction, equitable defenses and the discretion of the court before  
which any proceeding therefor may be brought.                                   

SECTION 3.4.  CONSENTS AND APPROVALS; NO VIOLATIONS.  (a) Except for (i)
compliance with applicable federal securities laws, (ii) compliance with any    
applicable state securities, takeover or "blue sky" laws, (iii) the filing of a 
certificate of merger and other appropriate merger documents, if any, as        
required by the GCL, and (iv) compliance with the Hart-Scott-Rodino Antitrust   
Improvement Act of 1976, as amended, and the rules and regulations promulgated  
thereunder (the "HSR Act"), including, without limitation, the filing of a      
pre-merger notification report thereunder, if applicable, the execution,        
delivery and performance                                                        

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by the Company of this Agreement and the consummation by the Company of the     
transactions contemplated hereby require no notice to, filing with, or          
authorization, consent or approval of, any domestic or foreign public body or   
authority, except for notices, filings, authorizations, consents or approvals   
the failure of which to obtain would not, in the aggregate (x) have a Material  
Adverse Effect, or (y) materially impair or delay the ability of the Company to 
perform its obligations hereunder or to consummate the transactions contemplated
hereby.                                                                         

   (b) Neither the execution, delivery or performance of this Agreement by the
Company, nor the consummation by the Company of the transactions contemplated   
hereby, will (i) conflict with or result in a breach of any provision of the    
charter documents or bylaws of the Company or any subsidiary, or (ii) subject to
compliance with the statutes and regulations referred to in Section 3.4(a)      
hereof, to the best knowledge of the Company, violate any judgment, ruling,     
order, writ, injunction, decree, statute, rule or regulation applicable to the  
Company or any subsidiary or any of their respective properties or assets,      
except, in the case of clause (ii) above, for such violations which would not,  
in the aggregate (x) have a Material Adverse Effect, or (y) materially impair or
delay the ability of the Company to perform its obligations hereunder or to     
consummate the transactions contemplated hereby.                                

SECTION 3.5.  COMMISSION FILINGS AND FINANCIAL STATEMENTS.  To the best 
knowledge of the Company, the Company has heretofore filed all forms, reports,  
statements, schedules and other materials with the Commission required to be    
filed pursuant to the Exchange Act or other federal securities laws since June  
17, 1994 (the "SEC Reports"). To the best knowledge of the Company, as of their 
respective dates, the SEC Reports (including, without limitation, all financial 
statements included therein, exhibits and schedules thereto and documents       
incorporated by reference therein) complied in all material respects with all   
applicable requirements of the Exchange Act and other federal securities laws   
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the   
statements made therein, in light of the circumstances under which they were    
made, not misleading. To the best knowledge of the Company, the audited         
consolidated financial statements and unaudited consolidated interim financial  
statements of the Company and its subsidiaries (including the related notes)    
included or incorporated by reference in the SEC Reports fairly present the     
consolidated financial position of the Company and its consolidated subsidiaries
as of the respective dates thereof and the consolidated statements of income and
cash flows for the respective periods then ended, in each case in accordance    
with generally accepted accounting principles applied on a consistent basis     
during the periods involved except as otherwise noted therein and except for    
normal year-end adjustments and accruals in the case of unaudited financial     
statements.                                                                     

    SECTION 3.6.  PROXY STATEMENT; SCHEDULE 13E-3.  To the best knowledge of the
Company, the Proxy Statement and related materials distributed to the Company's 
stockholders in connection with the Merger will comply in all material respects 
with the provisions of applicable federal securities laws and will not, at the  
date of filing with the Commission, at the time of the first mailing and at the 
time of the Special Meeting, contain any untrue statement of a material fact or 
omit to state any material fact required to be stated therein or necessary in   
order to make the statements made therein, in light of the circumstances under  
which they were made, not misleading, except that no representation is made by  
the Company with respect to information supplied by Buyer, Vajna or Valdina for 
inclusion in the Proxy Statement or related materials. None of the information  
supplied by the Company for inclusion in the Rule 13e-3 Transaction Statement on
Schedule 13E-3 with respect to the Merger (the "Schedule 13E-3"), at the time   
such Schedule 13E-3 or any amendments or supplements thereto are filed with the 
Commission, will contain any untrue statement of a material fact or omit to     
state any material fact required to be stated therein or necessary in order to  
make the statements made therein, in light of the circumstances under which they
were made, not misleading. The Company agrees to correct promptly any           
information in the Proxy Statement or related materials or any information      
provided by it for use in the Schedule 13E-3 if and to the extent that it shall 
have become false or misleading in any material respect and further agrees to   
take all steps necessary to cause the Proxy Statement or related materials as so
corrected to be filed with the                                                  

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Commission and disseminated to the holders of Shares, in each case as and to the
extent required by applicable federal securities laws.                          

SECTION 3.7.  NO BROKER OR FINDER FEES.  The Company represents, as to  
itself, its subsidiaries and its affiliates, that no agent, broker, investment  
banker or other firm or person is or will be entitled to any broker's or        
finder's fee or any other commission or similar fee in connection with any of   
the transactions contemplated by this Agreement, except (a) the fees and        
expenses payable by the Company to Jefferson Capital Group, Ltd., and Alice P.  
Neuhauser and Frank Stewart as specified in the Company's agreements with such  
persons, and (b) any agents brokers, investment bankers and other firms and     
persons retained by Buyer, Vajna or Valdina, the fees and expenses of which will
be paid by Buyer.                                                               

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND VAJNA 

   Buyer, Vajna and Valdina hereby jointly and severally represent and warrant
to the Company as follows:                                                      

SECTION 4.1.  CORPORATE ORGANIZATION.  Buyer is a corporation duly      
organized, validly existing and in good standing under the laws of the State of 
Delaware.                                                                       

SECTION 4.2.  AUTHORITY RELATIVE TO THIS AGREEMENT.  Each of Buyer and  
Valdina has the requisite corporate power and authority to execute and deliver  
this Agreement, to perform its obligations hereunder and to consummate the      
transactions contemplated hereby. The execution and delivery of this Agreement  
by each of Buyer and Valdina and the consummation of the transactions           
contemplated hereby have been duly and validly authorized by the Board of       
Directors (or comparable governing body with respect to Valdina) and            
stockholders of Buyer and Valdina, and no other corporate proceedings on the    
part of Buyer or Valdina are necessary to authorize the execution, delivery and 
performance of this Agreement by Buyer or Valdina or the consummation by Buyer  
or Valdina of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Buyer, Vajna and Valdina and      
constitutes a valid and binding obligation of each of Buyer, Vajna and Valdina, 
enforceable against each of Buyer, Vajna and Valdina in accordance with its     
terms except (i) as their respective obligations may be affected by bankruptcy, 
insolvency, reorganization, receivership, moratorium or similar laws, or by     
equitable principles relating to or limiting creditors' rights or remedies      
generally, and (ii) that the remedies of specific performance, injunction and   
other forms of equitable relief are subject to certain tests of equity          
jurisdiction, equitable defenses and the discretion of the court before which   
any proceeding therefor may be brought.                                         

SECTION 4.3.  CONSENTS AND APPROVALS; NO VIOLATIONS.  (a) Except for (i)
compliance with applicable federal securities laws, (ii) compliance with any    
applicable state securities, takeover or "blue sky" laws, (iii) the filing of a 
certificate of merger and other appropriate merger documents, if any, as        
required by the GCL, and (iv) compliance with the HSR Act, including, without   
limitation, the filing of a pre-merger notification report thereunder, if       
applicable, the execution, delivery and performance by Buyer, Vajna and Valdina 
of this Agreement and the consummation by Buyer, Vajna and Valdina of the       
transactions contemplated hereby require no notice to, filing with, or          
authorization, consent or approval of, any domestic or foreign public body or   
authority, except for notices, filings, authorizations, consents or approvals   
the failure of which to obtain would not, in the aggregate, materially impair or
delay the ability of Buyer, Vajna or Valdina to perform their obligations       
hereunder or to consummate the transactions contemplated hereby.                

    (b) Neither the execution, delivery or performance of this Agreement by each
of Buyer, Vajna and Valdina, nor the consummation of the transactions           
contemplated hereby, will (i) conflict with or result in a breach of any        
provision of the charter documents or bylaws of Buyer or the comparable         
organizational and governing documents of Valdina, or (ii) result in a breach or
violation of any provision of, or constitute a                                  

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default (or an event which, with notice or lapse of time or both, would         
constitute a default) under, or result in the termination or amendment of, or   
accelerate the performance required by, or result in the creation of any lien,  
security interest, charge or encumbrance upon any of the properties or assets of
Buyer, Vajna or Valdina, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, contract, agreement or
other instrument or obligation to which Buyer, Vajna or Valdina is a party or to
which Buyer, Vajna or Valdina or any of their properties or assets may be       
subject, or (iii) subject to compliance with the statutes and regulations       
referred to in Section 4.3(a) hereof, to the best knowledge of Buyer, Vajna and 
Valdina, violate any judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer, Vajna or Valdina, or any of their       
properties or assets, except, in the case of each of clauses (ii) and (iii)     
above, for such violations, conflicts, breaches, defaults, terminations,        
amendments, accelerations or creations of liens, security interests, charges or 
encumbrances which would not, in the aggregate, materially impair or delay the  
ability of Buyer, Vajna or Valdina to perform their obligations hereunder or to 
consummate the transactions contemplated hereby.                                

    SECTION 4.4.  OTHER DOCUMENTS; PROXY STATEMENT; SCHEDULE 13E-3.  None of the
information supplied by Buyer, Vajna or Valdina for inclusion in the Proxy      
Statement or related materials or the Schedule 13E-3, at the respective times   
such Proxy Statement and Schedule 13E-3, or any amendments or supplements       
thereto, are filed with the Commission and, in the case of the Proxy Statement, 
at the time of the first mailing and at the time of the Special Meeting, will   
contain any untrue statement of a material fact or omit to state any material   
fact necessary in order to make the statements made therein, in light of the    
circumstances under which they were made, not misleading. Buyer, Vajna and      
Valdina agree to correct promptly any information provided by them for use in   
the Proxy Statement or related materials or the Schedule 13E-3 if and to the    
extent that it shall have become false or misleading in any material respect and
further agree to take all steps necessary to cause the Schedule 13E-3 as so     
corrected to be filed with the Commission, as and to the extent required by     
applicable federal securities laws.                                             

ARTICLE V 
COVENANTS 

    SECTION 5.1.  CONDUCT OF BUSINESS OF THE COMPANY.  The Company covenants and
agrees that prior to the Effective Time, unless Buyer shall otherwise agree in  
writing or unless such action shall have been approved by a majority of the     
entire Board of Directors of the Company or except as otherwise expressly       
contemplated by this Agreement, the Library Sale Agreement or the Fox Assignment
Agreement (as defined in Section 6.1(h) hereof), or as set forth on Schedule 5.1
hereto, none of the Company or any of its subsidiaries shall directly or        
indirectly: (i) declare or pay any dividend or make any distribution with       
respect to any shares of its capital stock; (ii) purchase or otherwise acquire, 
or propose to purchase or otherwise acquire, any outstanding shares of its      
capital stock; (iii) propose or adopt any amendments to its charter documents or
bylaws; (iv) issue, sell, pledge, dispose of or encumber any capital stock of   
the Company or of any of its subsidiaries (other than pursuant to Employee      
Options outstanding on the date hereof); (v) except in the ordinary and usual   
course of business consistent with past practice, sell, pledge, dispose of or   
encumber any material asset of the Company or of any of its subsidiaries        
(including, without limitation, any material indebtedness owed to them or any   
material claims held by them); (vi) incur any long-term indebtedness for        
borrowed money or issue any debt securities in a material amount or assume,     
guarantee or endorse any material obligations of any other person except for    
obligations of any wholly owned subsidiary; (vii) approve, adopt or amend any   
agreement, plan, program or arrangement which provides any benefits to any      
employee of the Company; (viii) except in the ordinary and usual course of      
business consistent with past practice, increase, directly or indirectly, the   
compensation of any employee of the Company; or (ix) authorize or propose any of
the foregoing, or enter into any contract, agreement, commitment or arrangement 
to do any of the foregoing.                                                     

SECTION 5.2.  NOTIFICATION OF CERTAIN MATTERS.  The Company shall give  
prompt notice to Buyer, and Buyer shall give prompt notice to the Company, of   
the occurrence, or failure to occur, of any event                               

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which occurrence or failure to occur would be likely to cause (a) any           
representation or warranty contained in this Agreement to be untrue or          
inaccurate in any material respect or (b) any material failure of the Company,  
on the one hand, or Buyer, Vajna or Valdina, on the other hand, as the case may 
be, to comply with or satisfy any covenant, condition or agreement to be        
complied with or satisfied by it under this Agreement; provided, however, that  
no such notification shall affect the representations or warranties of the      
parties or the conditions to the obligations of the parties hereunder.          

SECTION 5.3.  INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.  (a) 
Buyer and the Company agree that all rights to indemnification now existing in  
favor of the present or former directors or officers of the Company or any of   
its subsidiaries as provided in the Company's Certificate of Incorporation and  
Bylaws, or in the certificate or articles of incorporation, bylaws or similar   
documents of any of such subsidiaries, in effect as of the date hereof shall,   
with respect to matters occurring prior to the Effective Time, survive the      
Merger and continue in full force and effect. Vajna, Buyer and the Company      
further agree that all rights to indemnification now existing in favor of the   
present or former directors or officers of the Company or any of its            
subsidiaries in any indemnification agreement between such person and the       
Company or any such subsidiary, as the case may be, shall also survive the      
Merger and continue in full force and effect in accordance with the terms of    
such agreement. Prior to the Closing, the Company shall purchase, to the extent 
available, a policy of directors' and officers' liability insurance with        
material terms of coverage as set forth on Schedule 5.3 hereto, which policy    
shall cover, among other things, matters occurring prior to the Effective Time. 
Vajna shall cause the Company to maintain such insurance policy for a period of 
four years from the Effective Time. To the extent the Company purchases         
insurance which covers matters relating to the activities of the Surviving      
Corporation following the Effective Time, Vajna or Buyer shall reimburse the    
Company for the premiums paid in respect thereof.                               

   SECTION 5.4.  EMPLOYEE PLANS.  (a) The Company shall terminate, at or prior
to the Effective Time (the date of such termination being hereafter referred to 
as the "Termination Date"), the Company's (i) 1994 Basic Stock Option Plan and  
Stock Appreciation Rights Plan and (ii) 1994 Special Stock Option and Stock     
Appreciation Rights Plan (collectively, the "Option Plans"), and any options    
issued thereunder ("Employee Options") which have not been exercised as of the  
Termination Date.                                                               

  (b) Prior to the Effective Time, the Company shall use its best efforts to
terminate all employee benefit plans, programs or arrangements and to take any  
other action reasonably necessary in connection therewith.                      

    SECTION 5.5.  WARRANTS.  Prior to the Effective Time, the Company shall take
all action necessary to terminate and cancel all warrants, rights, calls and    
other securities exchangeable or convertible into Shares ("Warrants") which are 
issued and outstanding as of the date hereof.                                   

 SECTION 5.6.  PUBLICITY.  Neither the Company nor Buyer, Vajna or Valdina
shall issue or cause the publication of any press release or other public       
announcement with respect to this Agreement, the Merger or the other            
transactions contemplated hereby without prior consultation with the other      
parties, except as may be required by law or any listing agreement with the     
National Association of Securities Dealers, Inc.                                

SECTION 5.7.  BEST EFFORTS.  Subject to the terms and conditions hereof,
each of the parties hereto agrees to use its best efforts to take, or cause to  
be taken, all actions and to do, or cause to be done, all things necessary,     
proper or advisable to consummate and make effective as promptly as practicable 
the transactions contemplated by the Merger and this Agreement, and to cooperate
with each other in connection with the foregoing, including, without limitation,
using its best efforts to (a) obtain all necessary waivers, consents and        
approvals from other parties to material agreements, leases and other contracts,
(b) obtain all necessary consents, approvals and authorizations as are required 
to be obtained under any federal, state or foreign law or regulation, (c) lift  
or rescind any injunction or restraining order or other order adversely         
affecting the ability of the parties to consummate the transactions contemplated
hereby, (d) effect any necessary registrations and filings and submissions of   
information requested by governmental authorities, including, without           
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securities laws, and (e) fulfill all conditions to this Agreement. In           
furtherance of and not in limitation of the foregoing, (X) the Company shall    
permit Buyer to participate in the defense and settlement of any claim, suit or 
cause of action relating to the Merger, this Agreement or the other transactions
contemplated hereby and the Company shall not settle or compromise any such     
claim, suit or cause of action without Buyer's prior written consent, and (Y)   
Vajna shall assist the Company in good faith and using commercially reasonable  
best efforts to collect the Alan Smithee Receivables and the Non-Alan Smithee   
Receivables.                                                                    

SECTION 5.8.  TERMINATION OF VAJNA EMPLOYMENT AGREEMENT; SEVERANCE      
ARRANGEMENTS.  The Company and Vajna are parties to that certain Employment     
Agreement, dated as of January 1, 1994, between Vajna and the Company (then     
known as "Cinergi Productions Inc."), as amended by that certain letter         
agreement, dated as of December 16, 1994, from the Company to Vajna and accepted
by Vajna as of January 3, 1995, with a term ending December 31, 1998 (as        
amended, the "Employment Agreement"). The Company and Vajna mutually agree to   
terminate the Employment Agreement effective, automatically and without any     
further action on the part of the parties hereto, as of the Effective Time.     
Notwithstanding anything in the Employment Agreement to the contrary, all of the
terms and provisions of the Employment Agreement (including, without limitation,
all provisions regarding termination and compensation upon termination) shall   
terminate as of the Effective Time and neither the Company nor Vajna will have  
any further obligation to the other with respect to the Employment Agreement    
except as hereinafter expressly set forth in this Agreement.                    

(b) Upon termination of the Employment Agreement at the Effective Time, 
Vajna shall be paid an amount, subject to applicable legal wage withholdings and
deductions, equal to the sum of (i) one hundred percent of the Fixed Annual     
Compensation that would otherwise have been payable to Vajna in the ordinary    
course from the Effective Time through December 31, 1997 had the Employment     
Agreement not been terminated at the Effective Time, (ii) $500,000 (representing
fifty percent of the Fixed Annual Compensation that would otherwise have been   
payable to Vajna in the ordinary course from January 1, 1998 through December   
31, 1998 had the Employment Agreement not been terminated at the Effective      
Time), and (iii) producer's performance fees in the amount of $344,666 in       
connection with DIE HARD WITH A VENGEANCE.                                      

(c) Prior to consummation of the Merger or earlier termination of this  
Agreement, (i) Vajna shall continue to receive his Fixed Annual Compensation in 
accordance with the terms of the Employment Agreement, and (ii) Vajna may enter 
into a producers agreement, employment agreement, consulting agreement or other 
similar agreement which provides that Vajna will render services to a third     
party; provided, however, that, without the prior written consent of the Special
Committee, (a) all Vajna's obligations under such an agreement to render        
services to a third party must be subject to consummation of the Merger, and (b)
Vajna's Production Services and all other services shall remain exclusive to the
Company to the extent provided by the Employment Agreement. The Employment      
Agreement shall continue in full force and effect if the Merger is not          
consummated or this Agreement is otherwise terminated.                          

 (d) Capitalized terms used in Sections 5.8(a), (b) or (c) and not defined
therein shall have the meanings assigned to them in the Employment Agreement.   

    (e) On or prior to the Closing, the Company shall make any and all payments,
and take any and all actions required pursuant to the terms of any other        
severance arrangements approved by the Board of Directors of the Company with   
respect to persons other than Vajna (including, without limitation, the         
severance arrangements relating to Warren Braverman, Chief Operating Officer,   
Chief Financial Officer and Executive Vice President of the Company).           

 SECTION 5.9.  VAJNA RECEIVABLES.  On or prior to the Closing, Vajna shall
pay to the Company all monies owed to the Company and its subsidiaries by him,  
and shall cause to be paid to the Company all monies owed to the Company and its
subsidiaries by his affiliates and related parties. Vajna acknowledges          

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and agrees that, as of June 30, 1997, the aggregate amount of his obligations to
the Company and the obligations of his affiliates and related parties to the    
Company was $710,000, and that such amount may change after such date if any    
additional monies become owed by Vajna, his affiliates and/or his related       
parties or if such parties repay any owed amounts.                              

SECTION 5.10.  VALDINA PROMISSORY NOTE.  On or prior to the Closing, the
Company shall pay in full to Valdina the principal amount outstanding (and any  
accrued interest thereon) under that certain promissory note payable to Valdina,
originally dated January 17, 1994, as subsequently amended and extended.        

ARTICLE VI
CONDITIONS

SECTION 6.1.  CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE      
MERGER.  The respective obligations of Buyer, Vajna, Valdina and the Company to 
consummate the Merger are subject to the satisfaction or waiver at or prior to  
the Effective Time of each of the following conditions:                         

(a) This Agreement shall have been approved and adopted by the  
affirmative vote of the holders of a majority of the outstanding Shares 
entitled to vote thereon;                                               

 (b) The consummation of the Merger shall not be prohibited by any
    statute, rule or regulation enacted, promulgated or deemed applicable to the
Merger by any government or governmental agency that prohibits or makes 
illegal consummation of the Merger;                                     

  (c) No court of competent jurisdiction shall have issued (and such
issuance shall not be threatened or pending) any injunction, restraining
 order or other order which prohibits the consummation of the transactions
   contemplated by this Agreement and which is in effect as of the Closing and
    no governmental action or proceeding shall have been commenced or threatened
seeking an injunction, restraining order or other order which seeks to  
prohibit the consummation of the transactions contemplated by this      
Agreement;                                                              

(d) No litigation, proceeding or investigation shall be pending,
   threatened or in existence which, if adversely determined, could result in:

          (i) the issuance of a preliminary or permanent injunction or other
order which would restrain, prevent or require rescission of this 
Agreement or the transactions contemplated hereby;                

   (ii) liability to the Company, Vajna, Valdina, Buyer or any
       officers, directors, employees or agents of any of them arising from this
Agreement or the transactions contemplated hereby; or             

          (iii) the consummation of the transactions contemplated hereby being
unlawful; and                                                     

       (e) The Company shall have obtained, in connection with the Merger, the
 affirmative vote of a majority of the Shares voted (including abstentions
  but excluding broker non-votes) at the Special Meeting with respect to the
    proposal to approve this Agreement, without taking into account those Shares
owned by Vajna, Valdina or any affiliate of Vajna or Valdina.           

     (f) The percentage of Dissenting Shares to the total number of Shares
issued and outstanding immediately prior to the Effective Time shall not
exceed 15%.                                                             

   (g) The transactions contemplated by that certain Purchase and Sale
Agreement between the Company, Cinergi Productions, N.V. Inc. and Walt  
Disney Pictures and Television, dated April 3, 1997, as amended (the    
"Library Sale Agreement"), shall have been consummated in all material  
respects; and                                                           

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      (h) The transactions contemplated by that certain Assignment Agreement
    dated as of July 14, 1997 between Twentieth Century Fox Film Corporation, on
the one hand, and the Company and Cinergi Productions N.V. Inc., on the 
    other hand, as amended (the "Fox Assignment Agreement"), (including, without
limitation, the payment by Twentieth Century Fox Film Corporation to the
Company of $11,250,000 in immediately available funds) shall have been  
consummated in all material respects.                                   

  SECTION 6.2.  CONDITIONS TO THE OBLIGATIONS OF BUYER, VAJNA AND VALDINA TO
EFFECT THE MERGER. The obligations of Buyer, Vajna and Valdina to consummate the
Merger pursuant to this Agreement are further subject to the satisfaction or    
waiver at or prior to the Effective Time of the following conditions:           

  (a) The Option Plans, and all Employee Options which have not been
    exercised as of the Termination Date, shall have been terminated as provided
in Section 5.4 hereof; and                                              

     (b) The Company shall have performed in all material respects each of
 its obligations under this Agreement required to be performed by it on or
   prior to the Effective Time, including without limitation, the cancellation
and termination of Warrants as required pursuant to Section 5.5 hereof. 

    SECTION 6.3.  CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.  The Obligations
of the Company to consummate the Merger pursuant to this Agreement are further  
subject to the satisfaction or waiver at or prior to the Effective Time of the  
following conditions:                                                           

 (a) Buyer, Vajna and Valdina shall have performed in all material
 respects their respective obligations under this Agreement required to be
performed by them on or prior to the Effective Time;                    

   (b) All of the representations and warranties of Vajna, Valdina and
  Buyer in this Agreement shall be true and correct as of the Effective Time
as if such representations and warranties were made as of such time; and

     (c) Buyer shall have deposited with the Paying Agent, the cash amount
required pursuant to Section 2.2 hereof.                                

ARTICLE VII 
TERMINATION, AMENDMENT AND WAIVER 

   SECTION 7.1.  TERMINATION.  This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,   
whether prior to or after approval by the stockholders of the Company:          

      (a) by mutual written consent of the Board of Directors of the Company
   (with the assent of the Special Committee) on behalf of the Company and the
Board of Directors of Buyer, on behalf of Buyer, Vajna and Valdina;     

      (b) by the Company or Buyer, on behalf of Buyer, Vajna and Valdina, if
the Library Sale Agreement terminates or is terminated;                 

  (c) by the Company acting through the Board of Directors (with the
assent of the Special Committee) on the one hand, or Buyer, on behalf of
Buyer, Vajna and Valdina, on the other hand, if, without a breach or    
   violation of this Agreement by the terminating party or parties, the Merger
shall not have been consummated by December 31, 1997 (the "Expiration   
Date"); provided, however, that if the date by which the transactions   
  contemplated by the Library Sale Agreement must be consummated as provided
   in the Library Sale Agreement is extended by the parties to such agreement,
    then the Expiration Date shall automatically, without any action required on
  the part of the parties hereto, be extended by the same period of time; or

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     (d) by the Company if the Board of Directors of the Company, based on
    the recommendation of the Special Committee, shall have failed to recommend,
 or withdrawn, modified or amended in any material respect its approval or
   recommendation of the Merger or failed to hold the Special Meeting prior to
December 31, 1997.                                                      

SECTION 7.2.  EFFECT OF TERMINATION.  In the event of the termination of
this Agreement as provided in Section 7.1 hereof, except as provided in Section 
8.1 hereof, this Agreement shall forthwith become void and have no effect, and  
there shall be no liability on the part of Buyer, Vajna, Valdina or the Company.
Nothing contained in this Section 7.2 shall relieve any party from liability for
any willful breach of this Agreement.                                           

    SECTION 7.3.  AMENDMENT.  This Agreement may not be amended except by action
by the Board of Directors of the Company (with the assent of the Special        
Committee) on behalf of the Company and the Board of Directors of Buyer, on     
behalf of Buyer, Vajna and Valdina. Any such amendment shall be set forth in a  
written instrument signed on behalf of each of the parties hereto; provided,    
however, that after any approval of this Agreement by the stockholders of the   
Company, no amendment may be made without the further approval of the           
stockholders of the Company which would: (i) decrease the Merger Consideration; 
or (ii) change any other terms and conditions of this Agreement if any of the   
changes, alone or in the aggregate, would materially adversely affect the       
stockholders of the Company.                                                    

  SECTION 7.4.  EXTENSION, WAIVER.  At any time prior to the Effective Time,
whether before or after approval of this Agreement by the stockholders of the   
Company, any party hereto may (a) extend the time for the performance of any of 
the obligations or other acts of any other party hereto, (b) waive any          
inaccuracies in the representations and warranties of the other party contained 
herein or in any document, certificate or writing delivered pursuant hereto, or 
(c) waive compliance with any of the agreements of the other party or with any  
conditions to its own obligations. Any agreement on the part of a party hereto  
to any such extension or waiver shall be valid only if set forth in an          
instrument in writing signed on behalf of such party by a duly authorized       
officer of the Company, Buyer or Valdina, or with respect to Vajna, only if     
signed by Vajna individually. Notwithstanding the foregoing, the parties agree  
that, under no circumstances shall Buyer, Vajna or Valdina (collectively, the   
"Vajna Parties") be permitted to extend the time for performance of any         
obligation of, waive any inaccuracy in any representation or warranty of, or    
waive compliance with any agreement or condition with respect to any Vajna      
Party. Any extension or waiver granted by the Company pursuant to this Section  
7.4 shall be approved by the Board of Directors of the Company (with the assent 
of the Special Committee).                                                      

ARTICLE VIII
MISCELLANEOUS 

SECTION 8.1.  NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND           
AGREEMENTS.  Subject to the last sentence of Section 7.2 hereof, the            
representations, warranties and agreements in this Agreement shall terminate at 
the Effective Time or the termination of this Agreement pursuant to Section 7.1 
hereof, as the case may be, except that the agreements set forth in Section 5.3 
shall survive the Closing and the agreement set forth in Section 8.2 hereof     
shall survive the Closing or termination. Notwithstanding the foregoing, this   
Section 8.1 shall not limit any covenant or agreement of the parties hereto     
which by its terms contemplates performance after the Effective Time.           

SECTION 8.2.  FEES AND EXPENSES.  All costs and expenses incurred in    
connection with the Merger, this Agreement and the consummation of the          
transactions contemplated hereby shall be paid by the party incurring such      
expenses, regardless of whether the Merger shall be consummated.                

    SECTION 8.3.  NOTICES.  All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered          
personally or sent by cable, telegram, telecopy or telex, or by registered or   
certified mail (postage prepaid, return receipt requested), or by overnight     
delivery                                                                        

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service (capable of verified receipt), to the respective parties at the         
following addresses or at such other addresses as shall be specified by the     
parties by like notice and such notice, or communication shall be deemed to have
been given or made as of the date so delivered or mailed:                       

(a) If to Buyer, Vajna or Valdina:                                      

Cinergi Pictures Entertainment Inc.                                             
2308 Broadway                                                                   
Santa Monica, California 90404                                                  
Attention: Andrew G. Vajna                                                      
Telecopy No.: (310) 315-6015                                                    

with copies to:                                                                 

Valdina Corporation N.V.                                                        
Castorweg 22-24, Suite 10                                                       
P.O. Box 155                                                                    
Curacao, Netherlands Antilles                                                   
Attention: Myron Dania                                                          
Telecopy No.: (011) 599-94615948                                                

Ziffren, Brittenham, Branca & Fischer                                           
2121 Avenue of the Stars, 32nd Floor                                            
Los Angeles, California 90067                                                   
Attention: Skip Brittenham                                                      
Telecopy No.: (310) 553-7068                                                    

Blanc Williams Johnston & Kronstadt                                             
1900 Avenue of the Stars, Suite 1700                                            
Los Angeles, California 90067                                                   
Attention: Ronald L. Blanc                                                      
Telecopy No.: (310) 552-1191                                                    

(b) If to the Company:                                                  

Cinergi Pictures Entertainment, Inc.                                            
2308 Broadway                                                                   
Santa Monica, California 90404                                                  
Attention: Warren Braverman, Chief Operating Officer                            
Telecopy No.: (310) 898-3861                                                    

Gregory R. Paul                                                                 
Managing Director                                                               
BT Securities Corporation                                                       
One Bankers Trust Plaza                                                         
130 Liberty Street, 30th Floor                                                  
New York, New York 10006                                                        
Telecopy No.: (212) 250-7218                                                    

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with copies to:                                                                 

Cahill, Gordon & Reindel                                                        
80 Pine Street                                                                  
New York, New York 10005                                                        
Attention: John Schuster                                                        
Telecopy No.: (212) 269-5420                                                    

Gipson Hoffman & Pancione, P.C.                                                 
1901 Avenue of the Stars, Suite 1100                                            
Los Angeles, California                                                         
Attention: John R. McHale                                                       
Telecopy No.: (310) 556-8945                                                    

SECTION 8.4.  APPLICABLE LAW.  This Agreement shall be governed by and  
construed in accordance with the laws of the State of Delaware, regardless of   
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.                                                                   

    SECTION 8.5.  INTERPRETATION.  When a reference is made in this Agreement to
subsidiaries of the Company, the word "subsidiaries" means any corporation more 
than 50 percent of whose outstanding voting securities, or any partnership,     
joint venture or other entity more than 50 percent of whose total equity        
interest, is directly or indirectly owned by the Company; provided, however,    
that for purposes of this Agreement, the Company shall not be deemed to be an   
affiliate or a subsidiary of Buyer, Vajna or Valdina. The descriptive headings  
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.                     

    SECTION 8.6.  ENTIRE AGREEMENT; ASSIGNMENT.  This Agreement (a) contains the
entire agreement among Buyer, Vajna, Valdina and the Company with respect to the
Merger and the other transactions contemplated hereby and supersedes all prior  
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to these matters; and (b) shall not be assigned to any third 
party by any party hereto.                                                      

  SECTION 8.7.  SEVERABILITY.  Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, 
be ineffective to the extent of such invalidity or unenforceability without     
rendering invalid or unenforceable the remaining terms and provisions of this   
Agreement or affecting the validity or enforceability of any of the terms or    
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.                                          

    SECTION 8.8.  PARTIES IN INTEREST.  This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective           
successors, legal representatives and assigns, and, except for any third party  
rights conferred by virtue of Section 5.3 hereof, nothing in this Agreement,    
express or implied, is intended to or shall confer upon any other person any    
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.                                                                      

    SECTION 8.9.  SPECIFIC PERFORMANCE.  The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their    
specific terms or were otherwise breached, irreparable damage would occur, no   
adequate remedy at law would exist, and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms     
hereof, in addition to any other remedy at law or equity.                       

   SECTION 8.10.  COUNTERPARTS.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which 
shall constitute one and the same agreement.                                    

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  IN WITNESS WHEREOF, each of the parties hereto has executed or caused this
Agreement to be executed as of the date first written above.                    

                                   /s/ ANDREW G. VAJNA
                                   -----------------------------------------
                                   Andrew G. Vajna

        VALDINA CORPORATION N.V.

                 By:               /s/ MYRON DANIA
                                   -----------------------------------------
                                   Name: Myron Dania
                                    Title: MANAGING DIRECTOR

     CPEI ACQUISITION INC.

                   By:             /s/ ANDREW G. VAJNA
                                   -----------------------------------------
                                   Name: Andrew G. Vajna
                                    Title: PRESIDENT

                   CINERGI PICTURES ENTERTAINMENT INC.

                    By:             /s/ WARREN BRAVERMAN
                                   -----------------------------------------
                                    Name: Warren Braverman
                                   Title: CHIEF OPERATING OFFICER, CHIEF
                                    FINANCIAL OFFICER AND EXECUTIVE VICE
                                   PRESIDENT

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LIST OF SCHEDULES AND EXHIBITS

                                                                [Download Table]
                                                                            
Exhibit A          Restated Certificate of Incorporation of Cinergi Pictures
                     Entertainment Inc.                                     

Schedule           Stone Projects                                           
1.7(b)(i)                                                                   

Schedule           Non-Alan Smithee Receivables                             
1.7(b)(iii)                                                                 

Schedule           Alan Smithee Receivables                                 
1.7(c)(ii)                                                                  

Schedule 3.2(c)    Agreements with Respect to the Voting of Capital Stock   

Schedule 5.1       Conduct of Business of the Company                       

Schedule 5.3       Directors' and Officers' Insurance                       

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EXHIBIT A 
RESTATED CERTIFICATE
OF
INCORPORATION 
OF
CINERGI PICTURES ENTERTAINMENT INC. 
(Original Certificate of Incorporation Filed November 22, 1989) 

(Pursuant to Section 245 of the 
Delaware General Corporation Law) 

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

 CINERGI PICTURES ENTERTAINMENT INC., a corporation organized and existing
under the Delaware General Corporation Law:                                     

DOES HEREBY CERTIFY:                                                    

That this Restated Certificate of Incorporation was duly adopted in     
accordance with Sections 242 and 245 of the Delaware General Corporation Law,   
and that its original Certificate of Incorporation, as filed with the Secretary 
of State of the State of Delaware on November 22, 1989, and as previously       
amended and restated on April 1, 1994, is hereby further amended and restated to
read in its entirety as follows:                                                

 FIRST: The name of the corporation (hereinafter called the "Corporation")
is:                                                                             

Cinergi Pictures Entertainment Inc. 

 SECOND: The registered office of the Corporation and place of business in
the State of Delaware is to be located at 15 East North Street, in the City of  
Dover 19903-0899, County of Kent. The name of its registered agent at that      
address is Paracorp Incorporated.                                               

   THIRD: The nature of the business, and the objects and purposes proposed to
be transacted, promoted and carried on, are to do any and all things herein     
mentioned, as fully and to the same extent as natural persons might or could do,
and in any part of the world, including without limitation:                     

To engage in any lawful act or activity for which corporations may be   
organized under the General Corporation Law of the State of Delaware.   

FOURTH: The Corporation is authorized to issue one class of stock,      
designated "Common Stock." The total number of shares of Common Stock which the 
Corporation is authorized to issue is Seven Million (7,000,000) shares, par     
value $0.01 per share, itemized as follows:                                     

                                                                [Download Table]

  CLASS       NUMBER OF SHARES         PAR VALUE PER SHARE    
----------  ---------------------  ---------------------------
                                                              
Common             7,000,000                $    0.01         

 FIFTH: In furtherance and not in limitation of the power conferred by the
laws of the State of Delaware:                                                  

       A. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the Bylaws of the Corporation.                   

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  B.  Election of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.                             

    C.  The books of the Corporation may be kept at such place within or
  without the State of Delaware as the Bylaws of the Corporation may provide
  or as may be designated from time to time by the Board of Directors of the
Corporation.                                                            

  SIXTH: The Corporation reserves the right to amend or repeal any provision
contained in this certificate of incorporation, in the manner now or hereafter  
prescribed by status, and all rights conferred upon a stockholder herein are    
granted subject to this reservation.                                            

SEVENTH: The personal liability of the directors of the Corporation is  
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General Corporation Law of the State of Delaware, as  
the same may be amended and supplemented.                                       

EIGHTH: Whenever a compromise or arrangement is proposed between this   
Corporation and its creditors or any class of them and/or between this          
Corporation and its stockholders or any class of them, any court of equitable   
jurisdiction within the State of Delaware may, on the application in a summary  
way of this Corporation or of any creditor or stockholder thereof or on the     
application of any receiver or receivers appointed for this Corporation under   
the provisions of Section 291 of Title 8 of the Delaware Code or on the         
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the      
Delaware Code, order a meeting of the creditor or class of creditors, and/or of 
the stockholders or class of stockholders of this Corporation, as the case may  
be, to be summoned in such manner as the said court directs. If a majority in   
number representing three-fourths in value of the creditors or class of         
creditors, and/or of the stockholders or class of stockholders of this          
Corporation, as the case may be, agree to any compromise or arrangement and to  
any reorganization of this Corporation as a consequence of such compromise or   
arrangement, the said compromise or arrangement and the said reorganization     
shall, if sanctioned by the court to which the said application has been made,  
be binding on all creditors or class of creditors, and/or on all the            
stockholders or class of stockholders of this Corporation, as the case may be,  
and also on this Corporation.                                                   

    NINTH: The Corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as the same may be     
amended and supplemented, indemnify any and all persons whom it shall have the  
power to indemnify under said section from and against any and all of the       
expenses, liabilities or other matters referred to in or covered by said        
section, and the indemnification provided for herein shall not be deemed        
exclusive of any other rights to which those indemnified may be entitled under  
any bylaw, agreement, vote of stockholders or disinterested directors or        
otherwise, both as to action in his official capacity and as to action in       
another capacity while holding such office, and shall continue as to a person   
who has ceased to be a director, officer, employee or agent and shall inure to  
the benefit of the heirs, executors and administrators of such person.          

  IN WITNESS WHEREOF, the undersigned has executed this Restated Certificate
of Incorporation this     day of            , 1997.                             

                                                                [Download Table]
                                              
CINERGI PICTURES ENTERTAINMENT INC.           

By:                                           
     -----------------------------------------
     Name: Andrew G. Vajna                    
     Title: Chief Executive Officer           

ATTEST:                                                                         

------------------------                                                        
Name:                                                                           
Title: Secretary                                                                

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                                                                      APPENDIX D

TITLE 8, DELAWARE CODE

Section 262 of the Delaware General Corporation Law. Appraisal rights.          

    (a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the     
effective date of the merger or consolidation, who has otherwise complied with  
subsection (d) of this section and who has neither voted in favor of the merger 
or consolidation nor consented thereto in writing pursuant to Section 228 of    
this title shall be entitled to an appraisal by the Court of Chancery of the    
fair value of his shares of stock under the circumstances described in          
subsections (b) and (c) of this section. As used in this section, the word      
"stockholder" means a holder of record of stock in a stock corporation and also 
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or      
membership interest of a member of a nonstock corporation; and the words        
"depository receipt" mean a receipt or other instrument issued by a depository  
representing an interest in one or more shares, or fractions thereof, solely of 
stock of a corporation, which stock is deposited with the depository.           

(b) Appraisal rights shall be available for the shares of any class or  
series of stock of a constituent corporation in a merger or consolidation to be 
effected pursuant to Section 251 (other than a merger effected pursuant to      
Section 251(g) of this title), Section 252, Section 254, Section 257, Section   
258, Section 263 or Section 264 of this title:                                  

        (1) Provided, however, that no appraisal rights under this section shall
    be available for the shares of any class or series of stock, which stock, or
    depository receipts in respect thereof at the record date fixed to determine
    the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were 
either (i) listed on a national securities exchange or designated as a  
 national market system security on an interdealer quotation system by the
  National Association of Securities Dealers, Inc. or (ii) held of record by
    more than 2,000 holders; and further provided that no appraisal rights shall
be available for any shares of stock of the constituent corporation     
  surviving a merger if the merger did not require for its approval the vote
  of the stockholders of the surviving corporation as provided in subsection
(f) of Section 251 of this title.                                       

      (2) Notwithstanding paragraph (1) of this subsection, appraisal rights
   under this section shall be available for the shares of any class or series
    of stock of a constituent corporation if the holders thereof are required by
 the terms of an agreement of merger or consolidation pursuant to Sections
   251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:                                                        

        a.  Shares of stock of the corporation surviving or resulting from
      such merger or consolidation, or depository receipts in respect thereof;

          b.  Shares of stock of any other corporation, or depository receipts
  in respect thereof, which shares of stock (or depository receipts in
  respect thereof) or depository receipts at the effective date of the
    merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an 
    interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;       

    c.  Cash in lieu of fractional shares or fractional depository
 receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or                                                     

         d.  Any combination of the shares of stock, depository receipts and
 cash in lieu of fractional shares or fractional depository receipts
       described in the foregoing subparagraphs a., b. and c. of this paragraph.

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      (3) In the event all of the stock of a subsidiary Delaware corporation
  party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
 shall be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any    
class or series of its stock as a result of an amendment to its certificate of  
incorporation, any merger or consolidation in which the corporation is a        
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision, 
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.                   

(d) Appraisal rights shall be perfected as follows:                     

        (1) If a proposed merger or consolidation for which appraisal rights are
   provided under this section is to be submitted for approval at a meeting of
  stockholders, the corporation, not less than 20 days prior to the meeting,
 shall notify each of its stockholders who was such on the record date for
    such meeting with respect to shares for which appraisal rights are available
    pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall 
   include in such notice a copy of this section. Each stockholder electing to
   demand the appraisal of his shares shall deliver to the corporation, before
   the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the 
  stockholder intends thereby to demand the appraisal of his shares. A proxy
or vote against the merger or consolidation shall not constitute such a 
   demand. A stockholder electing to take such action must do so by a separate
  written demand as herein provided. Within 10 days after the effective date
of such merger or consolidation, the surviving or resulting corporation 
shall notify each stockholder of each constituent corporation who has   
   complied with this subsection and has not voted in favor of or consented to
    the merger or consolidation of the date that the merger or consolidation has
become effective; or                                                    

  (2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before the      
effective date of the merger or consolidation or within 10 days thereafter,     
shall notify each of the holders of any class or series of stock of such        
constituent corporation who are entitled to appraisal rights of the approval of 
the merger or consolidation and that appraisal rights are available for any or  
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the      
notice is given on or after the effective date of the merger or consolidation,  
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are   
entitled to appraisal rights. Such notice may, and, if given on or after the    
effective date of the merger or consolidation, shall, also notify such          
stockholders of the effective date of the merger or consolidation. Any          
stockholder entitled to appraisal rights may, within 20 days after the date of  
mailing of the notice, demand in writing from the surviving or resulting        
corporation the appraisal of such holder's shares. Such demand will be          
sufficient if it reasonably informs the corporation of the identity of the      
stockholder and that the stockholder intends thereby to demand the appraisal of 
such holder's shares. If such notice did not notify stockholders of the         
effective date of the merger or consolidation, either (i) each such constituent 
corporation shall send a second notice before the effective date of the merger  
or consolidation notifying each of the holders of any class or series of stock  
of such constituent corporation that are entitled to appraisal rights of the    
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10 
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second   
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this  
subsection. An affidavit of the secretary or assistant secretary or of the      
transfer agent of the corporation that is required to give either notice that   
such notice has been                                                            

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given shall, in the absence of fraud, be prima facie evidence to the facts      
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date  
that shall be not more than 10 days prior to the date the notice is given;      
provided, that if the notice is given on or after the effective date of the     
merger or consolidation, the record date shall be such effective date. If no    
record date is fixed and the notice is given prior to the effective date, the   
record date shall be the close of business on the day next preceding the day on 
which the notice is given.                                                      

    (e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with 
subsections (a) and (d) hereof and who is otherwise entitled to appraisal       
rights, may file a petition in the Court of Chancery demanding a determination  
of the value of the stock of all such stockholders. Notwithstanding the         
foregoing, at any time within 60 days after the effective date of the merger or 
consolidation, any stockholder shall have the right to withdraw his demand for  
appraisal and to accept the terms offered upon the merger or consolidation.     
Within 120 days after the effective date of the merger or consolidation, any    
stockholder who has complied with the requirements of subsections (a) and (d)   
hereof, upon written request, shall be entitled to receive from the corporation 
surviving the merger or resulting from the consolidation a statement setting    
forth the aggregate number of shares not voted in favor of the merger or        
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10    
days after expiration of the period for delivery of demands for appraisal under 
subsection (d) hereof, whichever is later.                                      

    (f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall  
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and   
addresses of all stockholders who have demanded payment for their shares and    
with whom agreements as to the value of their shares have not been reached by   
the surviving or resulting corporation. If the petition shall be filed by the   
surviving or resulting corporation, the petition shall be accompanied by such a 
duly verified list. The Register in Chancery, if so ordered by the Court, shall 
give notice of the time and place fixed for the hearing of such petition by     
registered or certified mail to the surviving or resulting corporation and to   
the stockholders shown on the list at the addresses therein stated. Such notice 
shall also be given by 1 or more publications at least 1 week before the day of 
the hearing, in a newspaper of general circulation published in the City of     
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and   
the costs thereof shall be borne by the surviving or resulting corporation.     

(g) At the hearing on such petition, the Court shall determine the      
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an   
appraisal for their shares and who hold stock represented by certificates to    
submit their certificates of stock to the Register in Chancery for notation     
thereon of the pendency of the appraisal proceedings; and if any stockholder    
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.                                                               

  (h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or        
consolidation, together with a fair rate of interest, if any, to be paid upon   
the amount determined to be the fair value. In determining such fair value, the 
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of 
interest which the surviving or resulting corporation would have had to pay to  
borrow money during the pendency of the proceeding. Upon application by the     
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery 
or other pretrial proceedings and may proceed to trial upon the appraisal prior 
to the final determination of the stockholder entitled to an appraisal. Any     
stockholder whose name appears on                                               

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the list filed by the surviving or resulting corporation pursuant to subsection 
(f) of this section and who has submitted his certificates of stock to the      
Register in Chancery, if such is required, may participate fully in all         
proceedings until it is finally determined that he is not entitled to appraisal 
rights under this section.                                                      

(i) The Court shall direct the payment of the fair value of the shares, 
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court 
may direct. Payment shall be so made to each such stockholder, in the case of   
holders of uncertificated stock forthwith, and the case of holders of shares    
represented by certificates upon the surrender to the corporation of the        
certificates representing such stock. The Court's decree may be enforced as     
other decrees in the Court of Chancery may be enforced, whether such surviving  
or resulting corporation be a corporation of this State or of any state.        

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon        
application of a stockholder, the Court may order all or a portion of the       
expenses incurred by any stockholder in connection with the appraisal           
proceeding, including, without limitation, reasonable attorney's fees and the   
fees and expenses of experts, to be charged pro rata against the value of all   
the shares entitled to an appraisal.                                            

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d) 
of this section shall be entitled to vote such stock for any purpose or to      
receive payment of dividends or other distributions on the stock (except        
dividends or other distributions payable to stockholders of record at a date    
which is prior to the effective date of the merger or consolidation); provided, 
however, that if no petition for an appraisal shall be filed within the time    
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60 
days after the effective date of the merger or consolidation as provided in     
subsection (e) of this section or thereafter with the written approval of the   
corporation, then the right of such stockholder to an appraisal shall cease.    
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery 
shall be dismissed as to any stockholder without the approval of the Court, and 
such approval may be conditioned upon such terms as the Court deems just.       

    (l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to   
the merger or consolidation shall have the status of authorized and unissued    
shares of the surviving or resulting corporation.                               

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AVAILABLE INFORMATION 

   The Company is subject to the information and reporting requirements of the
Exchange Act, and in accordance therewith files periodic reports, proxy         
statements and other documents and information with the SEC. The Company's      
officers, directors and principal stockholders are also presently subject to    
filing requirements, as well as certain restrictions, imposed under the Exchange
Act. Such reports, proxy statements and other documents and information may be  
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549, and  
at the regional offices of the SEC located at 7 World Trade Center, 13th Floor, 
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison       
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be     
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W. 
Washington, D.C. 20549 at prescribed rates. In addition, copies of such material
can be obtained from the SEC's Web Site (http://www.sec.gov).                   

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

  The following documents heretofore filed by the Company under the Exchange
Act with the SEC (File No.: 0-23958) are incorporated herein by reference.      

        (1) The Company's Annual Report on Form 10-K for the year ended December
31, 1996;                                                               

  (2) The Company's Quarterly Reports on Form 10-Q for the quarterly
   periods ended March 31, 1997 and June 30, 1997 (as amended by a Form 10-Q/A
(Amendment No. 1) filed with the SEC on August 21, 1997); and           

    (3) The Company's Current Report on Form 8-K dated December 30, 1996
 (filed with the SEC on January 9, 1997), Current Report on Form 8-K dated
   April 3, 1997 (filed with the SEC on April 4, 1997), Current Report on Form
8-K dated June 24, 1997 (filed with the SEC on June 24, 1997), Current  
   Report on Form 8-K dated July 9, 1997 (filed with the SEC on July 17, 1997)
   and Current Report on Form 8-K dated August 25, 1997 (filed with the SEC on
September 5, 1997).                                                     

The Company will provide without charge to each person, including any   
beneficial owner of such person, to whom a copy of this Proxy Statement has been
delivered, on written or oral request, a copy of any and all of the documents   
referred to above that have been or may be incorporated by reference herein     
other than exhibits to such documents (unless such exhibits are specifically    
incorporated by reference herein). Requests for such copies should be directed  
to: Cinergi Pictures Entertainment Inc., Attention: Secretary, 2308 Broadway,   
Santa Monica, California 90404 (telephone number: (310-315-6000).               

 All documents filed by the Company pursuant to Sections 13(a) or 15(d) of
the Exchange Act subsequent to the date of this Proxy Statement shall be deemed 
to be incorporated by reference herein and to be a part hereof from the date of 
filing of such documents. Any statement contained in a document incorporated or 
deemed to be incorporated by reference herein shall be deemed to be modified or 
superseded for purposes of this Proxy Statement to the extent that a statement  
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such       
statement. Any such statement so modified or superseded shall not be deemed,    
except as so modified or superseded, to constitute a part of this Proxy         
Statement.                                                                      

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Cinergi Pictures Entertainment Inc.   
Special Meeting of Stockholders     
December 4, 1997      

THIS REVOCABLE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE   
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 4, 1997.                 

The undersigned stockholder of Cinergi Pictures Entertainment Inc. (the         
"Company") hereby nominates, constitutes and appoints Warren Braverman and      
Randolph M. Paul, and each of them, the agent and proxy of the undersigned,     
each with full power of substitution, to vote all shares of Common Stock of     
the Company which the undersigned is entitled to vote at the Special Meeting    
of Stockholders of the Company to be held at _________________, California on   
December 4, 1997 at 10:00 a.m. Pacific Standard time, and at any and all        
postponements or adjournments thereof, as fully and with the same force and     
effect as the undersigned might or could do if personally present thereat.      

THE PROXY WILL BE VOTED AS DIRECTED BELOW.  IN THE ABSENCE OF ANY DIRECTION,    
THIS PROXY WILL BE VOTED FOR PROPOSAL 1 (THE ASSET SALE PROPOSAL) AND FOR       
PROPOSAL 2 (THE MERGER PROPOSAL).                                               

(CONTINUED ON REVERSE SIDE) 

IMPORTANT:  PLEASE DATE AND SIGN THE PROXY CARD ON REVERSE SIDE   

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This revocable proxy will be voted as directed below.  In the absence of any    
direction, this proxy will be voted FOR (i) the Asset Sale Proposal and (ii)    
the Merger Proposal.                                                            

Please mark your vote as indicated in this example.      X                      

The Board of Directors recommends a vote "FOR" the Asset Sale Proposal.         

1. Asset Sale Proposal.  The Sale of substantially all of the Company's         
 assets, including substantially all of the Company's Film Library, pursuant
to the Library Sale Agreement and the Assignment Agreement.               

For                   Against               Abstain     
[ ]                     [ ]                   [ ]       

The Board of Directors recommends a vote "FOR" the Merger Proposal.             

2.   Merger Proposal.  The merger of CPEI Acquisition Inc., a corporation       
 wholly owned by Andrew G. Vajna and Valdina Corporation, N.V., with and
into the Company.                                                     

For                   Against               Abstain     
[ ]                     [ ]                   [ ]       

           Mark this box if you plan to attend the Special Meeting.        [ ]

Signature                                                                       
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Signature                                                                       
        --------------------------------------------------------------------
Date                                                                            
        --------------------------------------------------------------------

Note:  Please sign as name appears hereon.  Joint owners should each sign.      
When signing as attorney, executor, administrator, trustee or guardian,         
please give full title as such.