8-K

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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


                                    FORM 8-K


   Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange 
                               Act of 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)  December 15, 1997


                           CINEMASTAR LUXURY THEATERS, INC.
                (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


         California                    0-25252                  33-0451054
- ----------------------------    ------------------------    -------------------
(STATE OR OTHER JURISDICTION    (COMMISSION FILE NUMBER)      (IRS EMPLOYER
     OF INCORPORATION)                                      IDENTIFICATION NO.)


                                431 College Boulevard
                          Oceanside, California  92057-5435
             (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)


REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (760) 630-2011




Item 1.  Changes of Control of Registrant.

     (a)  On December 15, 1997, Registrant consummated a financing 
transaction (the "Closing") whereby CinemaStar Acquisition Partners, L.L.C. 
("CAP") acquired a majority equity interest in Registrant through a $15 
million purchase of newly issued shares of Registrant's common stock.

     Pursuant to a Stock Purchase Agreement, dated as of September 23, 1997, 
CAP purchased 17,684,464 shares of common stock for a purchase price of 
$0.848202 per share.  CAP also received at Closing for an aggregate purchase 
price of $1,000, warrants to purchase 1,630,624 shares of common stock at an 
exercise price of $0.848202 per share.  The Stock Purchase Agreement was 
filed as Exhibit 4.1 to the Registrant's Form 8-K, dated September 23, 1997 
(the "September Report"), and is incorporated herein by reference.  Upon 
execution of the Stock Purchase Agreement, CAP received an additional warrant 
to purchase one million shares of common stock at an exercise price of 
$0.848202.  The Warrant to Purchase Common Stock was filed as Exhibit 4.3 to 
the September Report and is incorporated herein by reference.

     Pursuant to the terms of the Stock Purchase Agreement, Registrant may be 
obligated to issue additional shares of common stock to CAP with respect to 
certain expenses, liabilities and operating losses of Registrant arising or 
disclosed after August 31, 1997.  

     Upon Closing, CAP acquired a 68.8% beneficial ownership of Registrant 
based on 25,703,646 issued and outstanding shares of Registrant common stock 
immediately following Closing.  In the event that CAP exercised all of its 
warrants to purchase common stock of the Registrant, CAP's ownership interest 
would be increased to 71.7% of the issued and outstanding shares of 
Registrant common stock. 

     At the time of execution of the Stock Purchase Agreement, Registrant 
received a $3 million bridge loan from Reel Partners, L.L.C. ("Reel 
Partners"), an affiliate of CAP, to complete existing projects and to pay off 
certain indebtedness.  Such bridge loan was repaid in its entirety from the 
proceeds received by the Company at Closing.  The Convertible Secured 
Promissory Note evidencing the bridge loan was filed as Exhibit 4.4 to the 
September Report and is incorporated herein by reference.

     In connection with the bridge loan, Registrant issued a warrant to Reel 
Partners to purchase 3,000,000 shares of common stock at an exercise price of 
$0.848202 per share.  The warrant is filed as Exhibit 4.8 to the September 
Report and is incorporated herein by reference.

     Upon Closing, Russell Seheult and Jerry Willits, directors of the 
Registrant, resigned as directors of the Registrant.  Pursuant to the 
requirements of the Stock Purchase Agreement, the remaining members of the 
Registrant's 

                                      2



Board of Directors have appointed the following persons as directors of 
Registrant, each of whom is a designee of CAP: Winston J. Churchill, Jack R. 
Crosby, Thomas G. Rebar, and Wayne B. Weisman.

     The proceeds of the $15 million financing have and will be used to 
retire debt and for general working capital purposes.  In this regard, the 
Registrant used approximately $3,000,000 to repay the bridge loan from Reel 
Partners, and $1.2 million to repay and cure defaults under the Registrant's 
obligations to First National Bank, Registrant's primary bank lender (a 
letter of confirmation of repayment of such bank loan is filed as Exhibit 
99.1 hereto).  In addition, the Registrant repaid approximately $2.7 million 
of outstanding indebtedness to Pacific Concessions, Inc. ("PCI") and 
delivered notice of termination of its concession lease arrangements with 
PCI.  In connection with such termination, Registrant was required to pay 
approximately $1.9 million in termination fees and other costs.

     Attached hereto as Exhibit 99.2 and incorporated herein by this 
reference, is a Pro Forma Condensed Consolidated Balance Sheet After Equity 
Financing (unaudited) showing the Registrant's unaudited balance sheet 
information as of November 30, 1997 after giving effect to the completion of 
the $15 million equity financing with CAP and the application of the net 
proceeds of such equity financing. 

                                      3



ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS

     (c)  Exhibits.
          
3.1       Amended and Restated Bylaws of CinemaStar Luxury Theaters, Inc. (1)

3.2       Amended and Restated Articles of Incorporation of CinemaStar Luxury
          Theaters, Inc. (1)

4.1       Stock Purchase Agreement, dated as of September 23, 1996, by and among
          CinemaStar Luxury Theaters, Inc., Reel Partners, L.L.C., and
          CinemaStar Acquisition Partners, L.L.C. is incorporated by reference
          to Exhibit 4.1 to the Registrant's Form 8-K dated September 23, 1997.

4.2       Warrant to Purchase Common Stock, dated September 23, 1997 is
          incorporated by reference to Exhibit 4.3 to the Registrant's Form 8-K
          dated September 23, 1997.

4.3       Convertible Secured Promissory Note, dated September 23, 1997 is
          incorporated by reference to Exhibit 4.4 to the Registrant's Form 8-K
          dated September 23, 1997.

4.4       Warrant to Purchase Common Stock, dated September 23, 1997 is
          incorporated by reference to Exhibit 4.8 to the Registrant's Form 8-K
          dated September 23, 1997.

99.1      Letter to CinemaStar Luxury Theaters, Inc., dated December 17, 1997,
          from First National Bank regarding repayment of loans. (1)

99.2      Pro Forma Condensed Consolidated Balance Sheet After Equity Financing
          (Unaudited), dated as of November 30, 1997. (1)

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

(1)  Filed herewith

                                      4



                                  SIGNATURES  

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Dated:  December 22, 1997              CINEMASTAR LUXURY THEATERS, INC.



                                       By: /s/ Alan Grossberg
                                           -------------------------------------
                                           Alan Grossberg, Senior Vice President
          
                                      5



                                    EXHIBIT INDEX

Exhibit        
Number             Description

3.1  Amended and Restated Bylaws of CinemaStar Luxury Theaters, Inc. (1)

3.2  Amended and Restated Articles of Incorporation of CinemaStar Luxury
     Theaters, Inc. (1)

4.1  Stock Purchase Agreement, dated as of September 23, 1996, by and among
     CinemaStar Luxury Theaters, Inc., Reel Partners, L.L.C., and CinemaStar
     Acquisition Partners, L.L.C. is incorporated by reference to Exhibit 4.1 to
     the Registrant's Form 8-K dated September 23, 1997.

4.2  Warrant to Purchase Common Stock, dated September 23, 1997 is incorporated
     by reference to Exhibit 4.3 to the Registrant's Form 8-K dated
     September 23, 1997.

4.3  Convertible Secured Promissory Note, dated September 23, 1997 is
     incorporated by reference to Exhibit 4.4 to the Registrant's Form 8-K dated
     September 23, 1997.

4.4  Warrant to Purchase Common Stock, dated September 23, 1997 is incorporated
     by reference to Exhibit 4.8 to the Registrant's Form 8-K dated
     September 23, 1997.

99.1 Letter to CinemaStar Luxury Theaters, Inc., dated December 17, 1997, from
     First National Bank regarding repayment of loans. (1)

99.2 Pro Forma Condensed Consolidated Balance Sheet After Equity Financing
     (Unaudited), dated as of November 30, 1997. (1)

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

(1)   Filed herewith

EX-3.1

                                 AMENDED AND RESTATED
                                        BYLAWS
                                          OF

                           CINEMASTAR LUXURY THEATERS, INC.
                              (A CALIFORNIA CORPORATION)


                                      ARTICLE I

                                       OFFICES

    SECTION 1.  PRINCIPAL OFFICES.  The board of directors shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of California.  If the principal executive office is
located outside this state, and the corporation has one or more business offices
in this state, the board of directors shall fix and designate a principal
business office in the State of California.

    SECTION 2.  OTHER OFFICES.  The board of directors may establish other
business offices at any place or places where the corporation is qualified to do
business.

                                      ARTICLE II

                               MEETING OF SHAREHOLDERS

    SECTION 1.  PLACE OF MEETINGS.  Meetings of shareholders shall be held at
any place within or outside the State of California designated by the board of
directors.  In the absence of any such designation, shareholders' meetings shall
be held at the principal executive office of the corporation.

    SECTION 2.  ANNUAL MEETINGS.  Annual meetings of the shareholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings shall be held at
such place, time and date as the Board shall determine by resolution.

    SECTION 3.  SPECIAL MEETING.  A special meeting of the shareholders may be
called at any time by (i) the board of directors, (ii) the chairman of the
board, (iii) the president or (iv) one or more shareholders holding shares in
the aggregate entitled to cast not less than ten percent (10%) of the votes at
that meeting.

    If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted.  Such
request shall be delivered personally, sent by registered mail, or sent by
telegraphic or other facsimile transmission to the chairman of the board, the
president, any vice president or the 




secretary of the corporation.  The officer receiving the request shall cause 
notice to be promptly given to the shareholders entitled to vote (in 
accordance with the provisions of Sections 4 and 5 of this Article II) that a 
meeting will be held at the time requested by the person or persons calling 
the meeting, not less than thirty-five (35) nor more than sixty (60) days 
after the receipt of the request.  If the notice is not given within twenty 
(20) days after receipt of the request, the person or persons requesting the 
meeting may give the notice.  Nothing contained in this paragraph of this 
Section 3 shall be construed as limiting, fixing or affecting the time when a 
meeting of shareholders called by action of the board of directors may be 
held.

    SECTION 4.  NOTICE OF SHAREHOLDERS' MEETINGS.  All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than ten (10) (or, if sent by third class mail, thirty
(30)) days, nor more than sixty (60) days before the date of the meeting.  The
notice shall specify the place, date and hour of the meeting and (i) in the case
of a special meeting, the general nature of the business to be transacted, or
(ii) in the case of the annual meeting, those matters which the board of
directors, at the time of giving the notice, intends to present for action by
shareholders.  The notice of any meeting at which directors are to be elected
shall include the name of any nominee or nominees whom, at the time of the
notice, the board of directors intends to present for election.

    If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the California Corporations Code, (ii) an
amendment of the articles of incorporation, pursuant to Section 902 of that
Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of
that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section
1900 of that Code, or (v) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, pursuant to Section 2007 of
that Code, the notice shall also state the general nature of that proposal.

    SECTION 5.  MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.  Notice of any 
meeting of shareholders shall be given either (i) personally, (ii) by 
first-class mail, (iii) if the corporation has outstanding shares held of 
record by 500 or more persons (determined as provided in Section 605 of the 
California Corporations Code) on the record date for the shareholders' 
meeting, by third-class mail, or (iv) by any other means of written 
communication.  Such notice shall be addressed to each shareholder at the 
address of that shareholder appearing on the books of the corporation or 
given to the corporation by that shareholder for the purpose of notice.  If 
no such address appears on the corporation's books or is given, notice shall 
be deemed to have been given if sent to that shareholder by first-mail or by 
telegraphic or other written communication to the corporation's principal 
executive office, or if published at least once in a newspaper of general 
circulation in the county where that office is located.  Notice shall be 
deemed to have been given at the time when delivered personally, 

                                      -2-



deposited in the mail, or sent by telegram, telecopier or other means of 
written communication.

    If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the shareholder at that address, all
future notices or reports shall be deemed to have been duly given (without
further mailing) if they are available to the shareholder on written demand of
the shareholder at the principal executive office of the corporation for a
period of one (1) year from the date of the giving of the notice.

    An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the corporation giving the notice, and shall be filed and
maintained in the minute book of the corporation.

    SECTION 6.  QUORUM.  The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting of shareholders shall
constitute a quorum for the transaction of business.  The shareholders present
at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.

    SECTION 7.  ADJOURNED MEETING; NOTICE.  Any shareholders' meeting, annual
or special, whether or not a quorum is present, may be adjourned from time to
time by the vote of a majority of the shares represented at that meeting, either
in person or by proxy, but in the absence of a quorum, no other business may be
transacted at that meeting, except as provided in Section 6 of this Article II.

    When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at a meeting at which the adjournment is taken,
unless a new record date for the adjourned meeting is fixed, or unless the
adjournment is for more than forty-five (45) days from the date set for the
original meeting, in which case the board of directors shall set a new record
date.  Notice of any such adjourned meeting shall be given to each shareholder
of record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 4 and 5 of this Article II.  At any adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting.

    SECTION 8.  VOTING.  The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section 11
of this Article II, subject to the provisions of Sections 702 to 704, inclusive,
of the California Corporations Code (relating to voting shares held by a
fiduciary, in the name of a 

                                     -3-



corporation or in joint ownership).  The shareholders' vote may be by voice 
vote or by ballot; provided, however, that any election for directors must be 
by ballot if demanded by any shareholder before the voting has begun.  On any 
matter other than election of directors, any shareholder may vote part of the 
shares in favor of the proposal and refrain from voting the remaining shares 
or vote them against the proposal, but, if the shareholder fails to specify 
the number of shares which the shareholder is voting affirmatively, it will 
be conclusively presumed that the shareholder's approving vote is with 
respect to all shares that the shareholder is entitled to vote.  If a quorum 
is present, the affirmative vote of the majority of the shares represented at 
the meeting and entitled to vote on any matter (other than the election of 
directors) shall be the act of the shareholders, unless the vote of a greater 
number or voting by classes is required by California General Corporation Law 
or by the articles of incorporation.

    At a shareholders' meeting at which directors are to be elected, no 
shareholder shall be entitled to cumulate votes (i.e., cast for any one (1) 
or more candidates a number of votes greater than the number of the 
shareholder's shares) unless the candidates' names have been placed in 
nomination prior to commencement of the voting and a shareholder has given 
notice prior to commencement of the voting of the shareholder's intention to 
cumulate votes.  If any shareholder has given such a notice, then every 
shareholder entitled to vote may cumulate votes for candidates in nomination 
and give one (1) candidate a number of votes equal to the number of directors 
to be elected multiplied by the number of votes to which that shareholder's 
shares are entitled, or distribute the shareholder's votes on the same 
principle among any or all of the candidates, as the shareholder deems fit.  
The candidates receiving the highest number of votes, up to the number of 
directors to be elected, shall be elected.

    SECTION 9.  WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.  The 
transactions of any meeting of shareholders, either annual or special, 
however called and noticed, and wherever held, shall be as valid as though a 
meeting had been duly held after regular call and notice, if a quorum be 
present either in person or by proxy, and if, either before or after the 
meeting, each person entitled to vote, who was not present in person or by 
proxy, signs a written waiver of notice or a consent to the holding of the 
meeting, or an approval of the minutes.  The waiver of notice or consent need 
not specify either the business to be transacted or the purpose of any annual 
or special meeting of shareholders, except that if action is taken or 
proposed to be taken for approval of any of those matters specified in the 
second paragraph of Section 4 of this Article II, the waiver of notice or 
consent shall state the general nature of the proposal.  All such waivers, 
consents or approvals shall be filed with the corporate records or made a 
part of the minutes of the meeting.

    Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened, and except that attendance at a meeting is
not a waiver of any right 

                                     -4-



to object to the consideration of matters not included in the notice of the 
meeting if that objection is expressly made at the meeting.

    SECTION 10.  SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT MEETING.  Any
action which may be taken at any annual or Special meeting of shareholders may
be taken without a meeting and without prior notice, if a consent in writing is
prepared, setting forth the action so taken, signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take that action at a meeting at which all shares
entitled to vote on that action were present and voted.  In the case of election
of directors, such a consent shall be effective only if signed by the holders of
all outstanding shares entitled to vote for the election of directors; provided,
however, that a director may be elected at any time to fill a vacancy on the
board of directors that has not been filled by the directors, by the written
consent of the holders of a majority of the outstanding shares entitled to vote
for the election of directors.  All such consents shall be filed with the
secretary of the corporation and shall be maintained in the corporate records. 
Any shareholder giving a written consent, or the shareholder's proxy holder(s),
or a transferee of the shares, or a personal representative of the shareholder
or their respective proxy holder(s), may revoke the consent by a writing
received by the secretary of the corporation before written consents of the
number of shares required to authorize the proposed action have been filed with
the secretary.

    If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the secretary shall give prompt
notice of the corporate action approved by the shareholders without a meeting. 
This notice shall be given in the manner specified in Section 5 of this
Article II.  In the case of approval of (i) contracts or transactions in which a
director has a direct or indirect financial interest, pursuant to Section 310 of
the California Corporations Code, (ii) indemnification of agents of the
corporation, pursuant to Section 317 of that Code, (iii) a reorganization of the
corporation, pursuant to Section 1201 of that Code, or (iv) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of that Code, the notice shall be given at
least ten (10) days before the consummation of any action authorized by that
approval.

    SECTION 11.  RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
CONSENTS.  For purposes of determining the shareholders entitled to notice of
any meeting or to vote or entitled to give consent to corporate action without a
meeting, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) days nor less than ten (10) days before the date of
any such meeting nor more than sixty (60) days before any such action without a
meeting, and in this event only shareholders of record on the date so fixed are
entitled to notice and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares after the record date, except as
otherwise required by law.

                                     -5-



    If the board of directors does not so fix a record date:

    (a)  The record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held.

    (b)  The record date for determining shareholders entitled to give consent
to corporate action in writing without a meeting, (i) when no prior action by
the board has been taken, shall be the day on which the first written consent is
given, or (ii) when prior action of the board has been taken, shall be at the
close of business on the day on which the board adopts the resolution relating
to that action, or the sixtieth (60th) day before the date of such other action,
whichever is later.

    SECTION 12.  PROXIES.  Every person entitled to vote for directors or on
any other matter shall have the right to do so either in person or by one (1) or
more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation.  A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney in fact.  A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless
(i) revoked by the person executing it, before the vote pursuant to that proxy,
by a writing delivered to the corporation stating that the proxy is revoked, or
by a subsequent proxy executed by, or attendance at the meeting and voting in
person by, the person executing the proxy; or (ii) written notice of the death
or incapacity of the maker of that proxy is received by the corporation before
the vote pursuant to that proxy is counted; provided, however, that no proxy
shall be valid after the expiration of eleven (11) months from the date of the
proxy, unless otherwise provided in the proxy.  The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
Sections 705(e) and 705(f) of the California Corporations Code.

    SECTION 13.  INSPECTORS OF ELECTION.  Before any meeting of shareholders,
the board of directors may appoint any persons (other than nominees for office)
to act as inspectors of election at the meeting or its adjournment.  If no
inspectors of election are so appointed, the chairman of the meeting may, and on
the request of any shareholder or shareholder's proxy shall, appoint inspectors
of election at the meeting.  The number of inspectors shall be either one (1) or
three (3).  If inspectors are appointed at a meeting on the request of one (1)
or more shareholders or proxies, the holders of a majority of shares or their
proxies present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed.  If any person appointed as inspector fails to
appear or fails or refuses to act, the chairman of the meeting may, and upon the
request of any shareholder or a shareholder's proxy shall, appoint a person to
fill that vacancy.

                                     -6-



These inspectors shall:

    (a)  Determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;

    (b)  Receive votes, ballots or consents;

    (c)  Hear and determine all challenges and questions in any way arising in
connection with the right to vote;

    (d)  Count and tabulate all votes or consents;

    (e)  Determine when the polls shall close;

    (f)  Determine the result; and

    (g)  Do any other acts that may be proper to conduct the election or vote
with fairness to all shareholders.

    SECTION 14.    BUSINESS CONDUCTED AT, AND SHAREHOLDER PROPOSALS FOR,
MEETINGS OF THE SHAREHOLDERS.

    (a)  At an annual or special meeting of the shareholders, only such
business shall be conducted as shall have been properly brought before the
meeting.  To be properly brought before a shareholders' annual or special
meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors; (ii)
otherwise properly brought before the meeting by or at the direction of the
board of directors; or (iii) otherwise properly brought before the meeting by a
shareholder.  In addition to any other applicable requirements, and subject to
any limitations on business which may be proposed or transacted at such meeting,
for business to be properly brought before an annual or special meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the secretary of the corporation.  To be timely with respect to an annual
meeting, a shareholder's notice must be received at the principal executive
office of the Corporation not less than sixty (60) days nor more than one
hundred twenty (120) days prior to the date of such annual meeting; provided,
however, that in event that the first public disclosure  (whether by mailing of
a notice to shareholders or to an exchange on which the stock of the Corporation
is listed, by press release or otherwise) of the date of the annual meeting is
made less than sixty-five (65) days prior to the date of the meeting, notice by
the shareholder will be timely received not later than the close of business on
the tenth (10th) day following the day on which such public disclosure was first
made.  To be timely with respect to a special meeting, a shareholder's notice
must be received at the principal executive office of the corporation not later
than the close of business on the tenth (10th) day following the day on which
the first public 

                                     -7-



disclosure (whether by mailing of a notice to shareholders or to an exchange 
on which the stock of the Corporation is listed, by press release or 
otherwise) of the date of the special meeting is made.

    (b)  A shareholder's notice to the Secretary shall set forth, as to each
matter the shareholder proposes to bring before the annual or special meeting;
(i) a reasonably detailed description of any proposal to be made at such
meeting; (ii) the name and address, as they appear on the Corporation's stock
register, of the shareholder proposing such business; (iii) the class and number
of shares of capital stock of the Corporation which are beneficially owned by
the shareholder; (iv) any material interest of the shareholder in such business;
and (v) such other information relating to the shareholder or the proposal as is
required to be disclosed under the rules of the Securities and Exchange
Commission governing the solicitation of proxies whether or not such proxies are
in fact solicited by the shareholder.  Notwithstanding anything in these Bylaws
to the contrary, no business shall be conducted at an annual or special
shareholders' meeting except in accordance with the procedures set forth in this
Section 14; provided, however, that nothing in this Section 14 shall be deemed
to preclude discussion by any shareholder of any business properly brought
before the annual or special meeting in accordance with said procedures.  The
chairman of an annual or special meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 14, and if he should
so determine, any such business not properly brought before the meeting shall
not be transacted.

    Section 15.    CONDUCT OF MEETING.  The chairman of a meeting of the
shareholders, as determined pursuant to Article V of these Bylaws, shall conduct
such meeting in a businesslike and fair manner, but shall not be obligated to
follow any technical, formal, or parliamentary rules or principles of procedure.
The chairman's ruling on procedural matters shall be conclusive and binding on
all shareholders, unless at the time of a ruling a request for a vote is made to
the shareholders entitled to vote and represented in person or by proxy at the
meeting, in which case the decision of a majority of such shares shall be
conclusive and binding on all shareholders.  Without limiting the generality of
the foregoing, the chairman shall have all of the powers usually vested in the
chairman of a meeting of shareholders.


                                   ARTICLE III

                                    DIRECTORS

    SECTION 1.  POWERS.  Subject to the provisions of the California General
Corporation Law and any limitations in the articles of incorporation and these
Bylaws relating to action required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.

                                     -8-



    SECTION 2.  NUMBER AND QUALIFICATION OF DIRECTORS.  The number of directors
of the corporation shall not be less than four (4) nor more than seven (7).  The
exact number of directors shall be seven (7) until changed, within the limits
specified above, by a resolution amending this Section 2, duly adopted by the
board of directors or by the shareholders.  The indefinite number of directors
may be changed, or a definite number fixed without provision for an indefinite
number, by a duly adopted amendment to the articles of incorporation or by an
amendment to this bylaw duly adopted by the vote or written consent of holders
of a majority of the outstanding shares entitled to vote.  No amendment may
change the stated maximum number of authorized directors to a number greater
than two (2) times the stated minimum number of directors minus one (1).

    SECTION 3.  ELECTION AND TERM OF OFFICE OF DIRECTORS.  Directors shall be
elected at each annual meeting of the shareholders to hold office until the next
annual meeting.  At each election the persons receiving the greatest number of
votes, up to the number of directors then to be elected, shall be the persons
then elected.  Each director, including a director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.

    SECTION 4.  VACANCIES.  Vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director, except that a vacancy created by the removal of a
director by the vote or written consent of the shareholders or by court order
may be filled only by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present, or by the
written consent of holders of a majority of the outstanding shares entitled to
vote.  Each director so elected shall hold office until the next annual meeting
of the shareholders and until a successor has been elected and qualified.

    A vacancy or vacancies in the board of directors shall be deemed to exist
(i) in the event of the death, resignation or removal of any director, (ii) if
the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, (iii) if the authorized number of directors is increased, or (iv) if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be voted for at that
meeting.

    The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election by
written consent (other than to fill a vacancy created by removal) shall require
the consent of a majority of the outstanding shares entitled to vote.

    Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective.  If the resignation of a 

                                     -9-



director is effective at a future time, the board of directors may elect a 
successor to take office when the resignation becomes effective.

    No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.

    SECTION 5.  PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.  Regular meetings
of the board of directors may be held at any place within or outside the State
of California that has been designated from time to time by resolution of the
board.  In the absence of such designation, regular meetings shall be held at
the principal executive office of the corporation.  Special meetings of the
board may be held at any place within or outside the State of California that
has been designated in the notice of meeting or, if not stated in the notice or
if there is no notice, at the principal executive office of the corporation. 
Any meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all directors participating in the meeting
can hear one another, and all such directors shall be deemed to be present in
person at the meeting.

    SECTION 6.  ANNUAL MEETING.  Immediately following each annual meeting of
shareholders, the board of directors shall hold a regular meeting for the
purpose of organization, any desired election of officers and the transaction of
other business.  Notice of this meeting shall not be required.

    SECTION 7.  OTHER REGULAR MEETINGS.  Other regular meetings of the board of
directors shall be held without call at such time as shall, from time to time,
be fixed by the board of directors.  Such regular meeting may be held without
notice.

    SECTION 8.  SPECIAL MEETINGS.  Special meetings of the board of directors
for any purpose or purposes shall be called at any time by the chairman of the
board, the president, any vice president, the secretary or any two (2)
directors.

    Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, or telecopier, addressed to each director at that
director's address as it is shown on the records of the corporation.  In case
the notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting.  In case the notice
is delivered personally or by telephone, telegram or telecopier, it shall be
received at least forty-eight (48) hours before the time of the holding of the
meeting.  Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director.  The notice need not specify the purpose of the meeting or the
place if the meeting is to be held at the principal executive office of the
corporation.

                                     -10-



    SECTION 9.  QUORUM.  A majority of the authorized number of directors 
shall constitute a quorum for the transaction of business, except to adjourn 
as provided in Section 11 of this Article III.  Every act or decision done or 
made by a majority of the directors present at a meeting duly held at which a 
quorum is present shall be regarded as the act of the board of directors, 
subject to the provisions of Section 310 of the California Corporations Code 
(as to approval of contracts or transactions in which a director has a direct 
or indirect material financial interest), Section 311 of that Code (as to 
appointment of committees), and Section 317(e) of that Code (as to 
indemnification of directors).  A meeting at which a quorum is initially 
present may continue to transact business notwithstanding the withdrawal of 
directors, if any action taken is approved by at least a majority of the 
required quorum for that meeting.

    SECTION 10.  WAIVER OF NOTICE.  The transactions of any meeting of the
board of directors, however called and noticed or wherever held, shall be as
valid as a meeting duly held after regular call and notice if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting or an
approval of the minutes.  The waiver of notice or consent need not specify the
purpose of the meeting.  All such waivers, consents and approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.  Notice
of a meeting shall also be deemed given to any director who attends the meeting
without protesting before or at its commencement, the lack of notice to that
director.

    SECTION 11.  ADJOURNMENT.  A majority of the directors present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.

    SECTION 12.  NOTICE OF ADJOURNMENT.  Notice of the time and place of
holding an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four (24) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting, in the manner specified
in Section 8 of this Article III, to the directors who were not present at the
time of the adjournment.

    SECTION 13.  ACTION WITHOUT MEETING.  Any action required or permitted to
be taken by the board of directors may be taken without a meeting, if all
members of the board shall individually or collectively consent in writing to
that action.  Such action by written consent shall have the same force and
effect as a unanimous vote of the board of directors.  Such written consent or
consents shall be filed with the minutes of the proceedings of the board.

    SECTION 14.  FEES AND COMPENSATION OF DIRECTORS.  Subject to any
limitations imposed by law, directors and members of committees may receive such
compensation, if any, for their services, and such reimbursement of expenses, as
may be fixed or determined by resolution of the board.  This Section 14 shall
not be construed to preclude any director from serving the corporation in any
other capacity as an officer, 

                                     -11-



agent, employee or otherwise, and receiving additional compensation for those 
services.

    SECTION 15.    NOTICE OF DIRECTOR NOMINATIONS.

    (a)  Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the corporation. 
Nominations of persons for election to the board of directors may be made at a
meeting of shareholders (i) by or at the direction of the board of directors by
any nominating committee or person appointed by the board of directors or (ii)
by any shareholder of the corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 15.  In addition to any other applicable requirements, and subject
to any limitations on business which may be proposed or transacted at such
meeting, such shareholder nominations, other than those made by or at the
direction of the board of directors, shall be made pursuant to timely notice in
writing to the secretary of the corporation of the shareholder's intention to
make such nomination.  To be timely with respect to an annual meeting, such a
shareholder's notice must be received at the principal executive office of the
Corporation not less than sixty (60) days nor more than one hundred and twenty
(120) days prior to the date of such annual meeting; provided, however, that in
the event that the first public disclosure (whether by mailing of a notice to
shareholders or to the exchange on which the stock of the Corporation is listed,
by press release or otherwise) of the date of the annual meeting is made less
than sixty-five (65) days prior to the date of the meeting, notice by the
shareholder will be timely if received not later than the close of business on
the tenth (10th) day following the day on which such public disclosure was first
made.  To be timely with respect to a special meeting, a shareholder's notice
must be received at the principal executive office of the Corporation not later
than the close of business on the tenth (10th) day following the day on which
the first public disclosure (whether by mailing of a notice to shareholders or
to the exchange on which the stock of Corporation is listed, by press release or
otherwise) of the date of the special meeting is made.

    (b)  Such shareholder's notice shall set forth (i) as to each person whom
the shareholder proposes to nominate for election or re-election as a director,
(A) the name, age, business address and residence address of the person; (B) the
principal occupation or employment of the person; (C) the class and number of
shares of capital stock of the corporation which are beneficially owned by the
person; and (D) such other information relating to the person as would be
required under the rules of the Securities and Exchange Commission in a proxy
statement soliciting proxies for the election of such person whether or not such
proxies are in fact solicited for the election of such person; and (ii) as to
the shareholder giving the notice (A) the name and address, as they appear on
the corporation's stock register, of the shareholder; (B) the class and number
of shares of capital stock of the corporation which are beneficially owned by
the shareholder; and (C) such other information relating to the shareholder or
the nomination required to be disclosed under the rules of the Securities and
Exchange 

                                     -12-



Commission governing the solicitation of proxies whether or not such proxies 
are in fact solicited by the shareholder.  Such notice must also include a 
signed consent of each such nominee to serve as a director of the 
corporation, if elected or re-elected.  The corporation may require any 
proposed nominee to furnish such other information as may reasonably be 
required by the corporation to determine the eligibility for election as a 
director of the corporation.  In the event that a person is validly 
designated as a nominee in accordance with the procedures specified above and 
shall thereafter become unable or unwilling to stand for election to the 
board of directors, the board of directors or the shareholder who proposed 
such nominee, as the case may be, may designate a substitute nominee; 
provided, however, that in the case of persons not nominated by the board of 
directors, such a substitution may only be made if notice as provided above 
in this Section 15 is received at the principal executive office of the 
corporation no later than the earlier of (A) thirty (30) days prior to the 
date of the annual meeting or (B) ten (10) days after the shareholder 
proposing the original nominee has learned that such original nominee has 
become unable or unwilling to stand for election.  The chairman of the 
meeting shall, if the facts warrant, determine and declare to the meeting 
that a director nomination was not made in accordance with the foregoing 
procedure, and if he should so determine, the defective nomination shall be 
disregarded.


                                  ARTICLE IV

                                  COMMITTEES

    SECTION 1.  COMMITTEES OF DIRECTORS.  The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one (1) or more committees, each consisting of two (2) or more
directors, to serve at the pleasure of the board.  The board may designate one
(1) or more directors as alternate members of any committee who may replace any
absent member at any meeting of the committee.  Any committee, to the extent
provided in the resolution of the board, shall have all the authority of the
board, except with respect to:

    (a)  the approval of any action which (i) under the General Corporation Law
of California, also requires shareholders' approval or approval of the
outstanding shares, or (ii) under other applicable law, requires approval by the
shareholders;

    (b)  the filling of vacancies on the board of directors or in any
committee;

    (c)  the fixing of compensation of the directors for serving on the board
or on any committee;

    (d)  the amendment or repeal of bylaws or the adoption of new bylaws;

    (e)  the amendment or repeal of any resolution of the board of directors
which by its express terms is not so amendable or repealable;

                                     -13-



    (f)  a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the board of
directors; or

    (g)  the appointment of any other committees of the board of directors or
the members of these committees.

    SECTION 2.  MEETINGS AND ACTION OF COMMITTEES.  Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Sections 5 (place of meeting), 7 (regular meetings), 8 (special
meetings and notice), 9 (quorum), 10 (waiver of notice), 11 (adjournment), 12
(notice of adjournment) and 13 (action without meeting) of Article III of these
Bylaws, with such changes in context of those bylaws as are necessary to
substitute the committee and its members for the board of directors and its
members, except that the time of regular meetings of committees may be
determined either by resolution of the board of directors or by resolution of
the committee; special meetings of committees may also be called by resolution
of the board of directors; and notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee.  The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.


                                   ARTICLE V

                                   OFFICERS

    SECTION 1.  OFFICERS.  The officers of the corporation shall be a 
president, a secretary and a chief financial officer.  The corporation may 
also have, at the discretion of the board of directors, a chairman of the 
board, one (1) or more vice presidents, one (1) or more assistant 
secretaries, one (1) or more assistant treasurers and such other officers as 
may be appointed in accordance with the provisions of Section 3 of this 
Article V.  Any number of offices may be held by the same person.

    SECTION 2.  ELECTION OF OFFICERS.  The officers of the corporation, 
except such officers as may be appointed in accordance with the provisions of 
Section 3 or Section 5 of this Article V, shall be chosen by the board of 
directors, and each shall serve at the pleasure of the board, subject to the 
rights, if any, of an officer under any contract of employment.

    SECTION 3.  SUBORDINATE OFFICERS.  The board of directors may appoint, 
and may empower the president to appoint, such other officers as the business 
of the corporation may require, each of whom shall hold office for such 
period, have such authority and perform such duties as are provided in the 
bylaws or as the board of directors may from time to time determine.

    SECTION 4.  REMOVAL AND RESIGNATION OF OFFICERS.  Subject to the rights, if
any, of an officer under any contract of employment, any officer may be removed,
either 

                                     -14-



with or without cause, by the board of directors, at any regular or special 
meeting of the board, or by any officer upon whom such power of removal may 
be conferred by the board of directors.

    Any officer may resign at any time by giving written notice to the
corporation.  Any such resignation shall take effect at the date of the receipt
of that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective.  Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.

    SECTION 5.  VACANCIES IN OFFICE.  A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these bylaws for regular appointments to that office.

    SECTION 6.  CHAIRMAN OF THE BOARD.  The chairman of the board, if such an
officer is elected, shall, if present, preside at meetings of the board of
directors and exercise and perform such other powers and duties as may be from
time to time assigned to such officer by the board of directors or prescribed by
the bylaws.  If there is no president, the chairman of the board shall in
addition be the chief executive officer of the corporation and shall have the
powers and duties prescribed in Section 7 of this Article V.

    SECTION 7.  PRESIDENT.  Subject to such supervisory powers, if any, as may
be given by the board of directors to the chairman of the board, if there is
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and affairs of the
corporation.  The president shall preside at all meetings of the shareholders
and, in the absence of the chairman of the board, or if there is none, at all
meetings of the board of directors.  He shall be ex-officio a member of all the
standing committees, including the executive committee, if any, and shall have
the general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the board of directors or the bylaws.

    SECTION 8.  VICE PRESIDENT.  In the absence or disability of the president,
the vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president.  The vice presidents shall have such other powers and perform such
other duties as, from time to time, may be prescribed for them respectively by
the board of directors or the bylaws, and the president or the chairman of the
board.

                                     -15-



    SECTION 9.  SECRETARY.  The secretary shall keep or cause to be kept, at 
the principal executive office or such other place as the board of directors 
may direct, a book of minutes of all meetings and actions of directors, 
committees of directors and shareholders, with the time and place of holding, 
whether regular or special, and, if special, how authorized, the notice 
given, the names of those present at directors' meetings, the number of 
shares present or represented at shareholders' meetings and the proceedings.

    The secretary shall keep, or cause to be kept, at the principal executive 
office or at the office of the corporation's transfer agent or registrar, as 
determined by resolution of the board of directors, a share register, or a 
duplicate share register, showing the names of all shareholders and their 
addresses, the number and classes of shares held by each, the number and date 
of certificates issued for the same, and the number and date of cancellation 
of every certificate surrendered for cancellation.

    The secretary shall give, or cause to be given, notice of all the 
meetings of the shareholders and of the board of directors required by the 
bylaws to be given.  The secretary shall keep the seal of the corporation, if 
one is adopted, in safe custody, and shall have such other powers and perform 
such other duties as may be prescribed by the board of directors or by the 
bylaws.

    SECTION 10.  CHIEF FINANCIAL OFFICER.  The chief financial officer shall 
keep and maintain, or cause to be kept and maintained, adequate and correct 
books and records of accounts of the properties and business transactions of 
the corporation, including accounts of its assets, liabilities, receipts, 
disbursements, gains, losses, capital, retained earnings and shares.  The 
books of account shall at all reasonable times be open to inspection by any 
director.

    The chief financial officer shall deposit all monies and other valuables 
in the name and to the credit of the corporation with such depositories as 
may be designated by the board of directors.  He shall disburse the funds of 
the corporation as may be ordered by the board of directors, shall render to 
the president and directors, upon request, an account of all of his 
transactions as chief financial officer and of the financial condition of the 
corporation, and shall have such other powers and perform such other duties 
as may be prescribed by the board of directors or the bylaws.


                                 ARTICLE VI

                   INDEMNIFICATION OF DIRECTORS, OFFICERS,
                          EMPLOYEES AND OTHER AGENTS

    SECTION 1.  DEFINITIONS.  For the purposes of this Article, the following
terms have the following meaning:

                                     -16-



    (a)  "agent" means any person who is or was a director, officer, 
employee, trustee or other agent of this corporation, or that, being or 
having been such a director, officer, employee, trustee or other agent, he or 
she is or was serving at the request of this corporation as a director, 
officer, employee, trustee or agent of another foreign or domestic 
corporation, partnership, joint venture, trust or other enterprise, or was a 
director, officer, employee or agent of a foreign or domestic corporation 
which was a predecessor corporation of this corporation or of another 
enterprise at the request of such predecessor corporation;

    (b)  "proceeding" means any threatened, pending or completed action, 
proceeding or investigation, whether civil, criminal or administrative;

    (c)  "expenses" include, without limitation, attorneys' fees and any 
expenses of establishing a right to indemnification under Section 5 of this 
Article;

    (d)  references to "the corporation" include all constituent corporations 
absorbed in a consolidation or merger as well as the resulting or surviving 
corporation, so that any person who is or was a director, officer, employee, 
trustee, or other agent of such a constituent corporation or who, being or 
having been such a director, officer, employee, trustee, or other agent, is 
or was serving at the request of such constituent corporation as a director, 
officer, employee, trustee or other agent of another corporation as a 
director, officer, employee, trustee or other agent of another corporation, 
partnership, joint venture, trust or other enterprise shall stand in the same 
position under the provisions of this Article with respect to the resulting 
or surviving corporation as such person would if he or she had served the 
resulting or surviving corporation in the same capacity;

    (e)  references to "other enterprise" shall include employee benefit 
plans;

    (f)  references to "fines" shall include any excise taxes assessed on a 
person with respect to any employee benefit plan; and

    (g)  references to "serving at the request of the corporation" shall 
include any service by an agent of the corporation as director, officer, 
employee, trustee or agent of the corporation which imposes duties on, or 
involves services by, such agent with respect to any employee benefit plan, 
its participants, or beneficiaries; and a person who acted in good faith and 
in a manner he or she reasonably believed to be in the interest of the 
participants and beneficiaries of an employee benefit plan shall be deemed to 
have acted in a manner "not opposed to the best interests of the corporation" 
as referred to in this Article.

    SECTION 2.  ACTION, ETC. OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. 
This corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding, whether external or internal to
this corporation (other than a judicial action or suit brought by or in the
right of the Corporation), by reason 

                                     -17-



of the fact that such person is or was an agent of this corporation, against 
expenses, judgments, fines, settlements and other amounts actually and 
reasonably incurred by him or her in connection with such proceeding, or any 
appeal therein, if such person acted in good faith and in a manner he or she 
reasonably believed to be in or not opposed to the best interests of this 
corporation, and with respect to any criminal action or proceeding, had no 
reasonable cause to believe such conduct was unlawful.  The termination of 
any proceeding -- whether by judgment, order, settlement, conviction, or upon 
a plea of NOLO CONTENDERE or its equivalent -- shall not, of itself, create a 
presumption that the person did not act in good faith and in a manner which 
he or she reasonably believed to be in or not opposed to the best interests 
of this corporation, and, with respect to any criminal action or proceeding, 
that such person had reasonable cause to believe that his or her conduct was 
unlawful.

    SECTION 3.  ACTIONS, ETC. BY OR IN THE RIGHT OF THE CORPORATION.  This
corporation shall indemnify any person who was or is a party, or is threatened
to be made a party, to any proceeding by or in the right of this corporation to
procure a judgment in its favor because that person is or was an agent of this
corporation, against expenses actually and reasonably incurred by that person in
connection with the defense, settlement or appeal of that action if that person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation.  No indemnification shall
be made under this Section 3 in respect of any claim, issue or matter as to
which that person shall have been adjudged to be liable for gross negligence or
willful misconduct in the performance of that person's duty to this corporation,
unless and only to the extent that the court in which that action was brought
shall determine upon application that, in view of all the circumstances of the
case, that person is fairly and reasonably entitled to indemnity for the
expenses which the court shall determine.

    SECTION 4.  DETERMINATION OF RIGHT OF INDEMNIFICATION.  Any indemnification
under Section 2 or 3 (unless ordered by a court) shall be made by this
corporation unless a determination is reasonably and promptly made (i) by the
board by a majority vote of a quorum consisting of directors who were not
parties to such proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable, if a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the shareholders, that such
person acted in bad faith and in a manner that such person did not believe to be
in or not opposed to the best interests of this corporation, or, with respect to
any criminal proceeding, that such person believed or had reasonable cause to
believe that his conduct was unlawful.

    SECTION 5.  INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY. 
Notwithstanding the other provisions of this Article, to the extent that an
agent of this corporation has been successful on the merits or otherwise,
including, without limitation, the dismissal of an action without prejudice or
the settlement of an action without admission of liability, in defense of any
proceeding or in defense of any claim, issue or 

                                     -18-



matter therein, or on appeal from any such proceeding, action, claim or 
matter, such agent shall be indemnified against all expenses incurred in 
connection therewith.

    SECTION 6.  ADVANCES OF EXPENSES.  Except as limited by Section 7 of this
Article, costs, charges and expenses incurred by any agent of the corporation in
any proceeding or any appeal therefrom shall be paid by the corporation in
advance of the final disposition of such matter, if said agent shall undertake
to repay such amount in the event that it is ultimately determined, as provided
herein, that such person is not entitled to indemnification.  Notwithstanding
the foregoing, no advance shall be made by this corporation if a determination
is reasonably and promptly made by the board of directors by a majority vote of
a quorum of disinterested directors, or (if such a quorum is not obtainable or,
even if obtainable, a quorum of disinterested directors so directs) by
independent legal counsel in a written opinion, that, based upon the facts known
to the board or counsel at the time such determination is made, such person
acted in bad faith and in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation, or, with respect to any
criminal proceeding, that such person believed or had reasonable cause to
believe his conduct was unlawful.  In no event shall any advance be made in
instances where the board or independent legal counsel reasonably determines
that such person deliberately breached his or her duty to the corporation or its
shareholders.

    SECTION 7.  RIGHT OF AGENT TO INDEMNIFICATION UPON APPLICATION; PROCEDURE
UPON APPLICATION.  Any indemnification under Sections 2, 3 and 5, or advance
under Section 6 of this Article, shall be made promptly, and in any event within
ninety (90) days, upon the written request of an agent of the corporation,
unless with respect to applications under Sections 2, 3 or 6, a determination is
reasonably and promptly made by the board of directors by a majority vote of a
quorum of disinterested directors that such agent acted in a manner set forth in
such Sections as to justify the corporation not indemnifying or making
an advance to the agent.  In the event no quorum of disinterested directors is
obtainable, the board of directors shall promptly direct that independent legal
counsel shall decide whether the agent acted in the manner set forth in such
Sections as to justify the corporation not indemnifying or making an advance to
the agent.  The right to indemnification or advances as granted by this Article
shall be enforceable by the agent in any court of competent jurisdiction, if the
board or independent legal counsel denies the claim, in whole or in part, or if
no disposition of such claim is made within ninety days.  The agent's costs and
expenses incurred in connection with successfully establishing his or her right
to indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the corporation.

    SECTION 8.  OTHER RIGHTS AND REMEDIES.  The indemnification provided by
this Article shall not be deemed exclusive of, and shall not affect, any other
rights to which an agent of this corporation seeking indemnification may be
entitled under any law, Bylaw, or charter provision, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to 

                                     -19-



be an agent of the corporation and shall inure to the benefit of the heirs, 
executors and administrators of such a person.  All rights to indemnification 
under this Article shall be deemed to be provided by a contract between the 
corporation and the agent who serves in such capacity at any time while these 
bylaws and other relevant provisions of the general corporation law and other 
applicable law, if any, are in effect.  Any repeal or modification thereof 
shall not affect any rights or obligations then existing.

    SECTION 9.  INSURANCE.  Upon resolution passed by the board, the
corporation may purchase and maintain insurance on behalf of any person who is
or was an agent of the corporation against any liability asserted against such
person and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article.  The corporation may create a trust fund, grant a security interest or
use other means (including, without limitation, a letter of credit) to ensure
the payment of such sums as may become necessary to effect indemnification as
provided herein.

    SECTION 10.  SAVINGS CLAUSE.  If this Article or any portion thereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each agent as to expenses, judgments,
fines and amounts paid in settlement with respect to any action, suit, appeal,
proceeding or investigation, whether civil, criminal or administrative, and
whether internal or external, including a grand jury proceeding and an action or
suit brought by or in the right of the corporation, to the full extent permitted
by any applicable portion of this Article that shall not have been invalidated,
or by any other applicable law.


                                 ARTICLE VII

                             RECORDS AND REPORTS

    SECTION 1.  MAINTENANCE AND INSPECTION OF SHARE REGISTER.  The 
corporation shall keep at its principal executive office, or at the office of 
its transfer agent or registrar, if either is appointed and as determined by 
resolution of the board of directors, a record of its shareholders, giving 
the names and addresses of all shareholders and the number and class of 
shares held by each shareholder.

    A shareholder or shareholders of the corporation holding at least five 
percent (5%) in the aggregate of the outstanding voting shares of the 
corporation may (i) inspect and copy the records of shareholders' names and 
addresses and shareholdings during usual business hours on five (5) days 
prior written demand on the corporation, and (ii) obtain from the transfer 
agent of the corporation, on written demand and on the tender of such 
transfer agent's usual charges for such list, a list of the shareholders' 
names and addresses who are entitled to vote for the election of directors, 
and their shareholdings, as of the most recent record date for which that 
list has been compiled or as of a date specified by the shareholder after the 
date of demand.  

                                     -20-



This list shall be made available to any such shareholder by the transfer 
agent on or before the later of five (5) days after the demand is received or 
the date specified in the demand as of the date on which the list is to be 
compiled.  The record of shareholders shall also be open to inspection on the 
written demand of any shareholder or holder of a voting trust certificate, at 
any time during usual business hours, for a purpose reasonably related to the 
holder's interests as a shareholder or as the holder of a voting trust 
certificate.  Any inspection and copying  under this Section 1 may be made in 
person or by an agent or attorney of the shareholder or holder of a voting 
trust certificate making the demand.

    SECTION 2.  MAINTENANCE AND INSPECTION OF BYLAWS.  The corporation shall 
keep at its principal executive office, or if its principal executive office 
is not in the State of California, at its principal business office in this 
state, the original or a copy of the bylaws as amended to date, which shall 
be open to inspection by the shareholders at all reasonable times during 
office hours.  If the principal executive office of the corporation is 
outside the State of California and the corporation has no principal business 
office in this state, the secretary shall, upon the written request of any 
shareholder, furnish to that shareholder a copy of the bylaws as amended to 
date.

    SECTION 3.  MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.  The 
accounting books and records and minutes of proceedings of the shareholders 
and the board of directors and any committee or committees of the board of 
directors shall be kept at such place or places designated by the board of 
directors, or, in the absence of such designation, at the principal executive 
office of the corporation.  The minutes shall be kept in written form and the 
accounting books and records shall be kept either in written form or in any 
other form capable of being converted into written form.  The minutes and 
accounting books and records shall be open to inspection upon the written 
demand of any shareholder or holder of a voting trust certificate, at any 
reasonable time during usual business hours, for a purpose reasonably related 
to the holder's interests as a shareholder or as the holder of a voting trust 
certificate.  The inspection may be made in person or by an agent or attorney 
and shall include the right to copy and make extracts.  These rights of 
inspection shall extend to the records of each subsidiary corporation of the 
corporation.

    SECTION 4.  INSPECTION BY DIRECTORS.  Every director shall have the 
absolute right at any reasonable time to inspect and copy all books, records 
and documents of every kind and the physical properties of the corporation 
and each of its subsidiary corporations.  This inspection by a director may 
be made in person or by an agent or attorney and the right of inspection 
includes the right to copy and make extracts of documents.

    SECTION 5.  ANNUAL REPORT TO SHAREHOLDERS.  The annual report to
shareholders referred to in Section 1501 of the California General Corporation
Law is expressly dispensed with, but nothing herein shall be interpreted as
prohibiting the board of 

                                     -21-



directors from issuing annual or other periodic reports to the shareholders 
of the corporation as they consider appropriate.


                                 ARTICLE VIII

                           GENERAL CORPORATE MATTERS

    SECTION 1.  RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.  For 
purposes of determining the shareholders entitled to receive payment of any 
dividend or other distribution or allotment of any rights or entitled to 
exercise any rights in respect of any other lawful action (other than action 
by shareholders by written consent without a meeting), the board of directors 
may fix, in advance, a record date, which shall not be more than sixty (60) 
days before any such action, and in that case only shareholders of record on 
the date so fixed are entitled to receive the dividend, distribution or 
allotment of rights or to exercise the rights, as the case may be, 
notwithstanding any transfer of any shares after the record date so fixed, 
except as otherwise provided in the California General Corporation Law.

    If the board of directors does not so fix a record date, the record date 
for determining shareholders for any such purpose shall be at the close of 
business on the day on which the board adopts the applicable resolution or 
the sixtieth (60th) day before the date of that action, whichever is later.

    SECTION 2.  CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS.  All checks, 
drafts or other orders for payment of money, notes or other evidences of 
indebtedness, issued in the name of or payable to the corporation, shall be 
signed or endorsed by such person or persons and in such manner as, from time 
to time, shall be determined by resolution of the board of directors.

    SECTION 3.  CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.  The board 
of directors, except as otherwise provided in these bylaws, may authorize any 
officer or officers, agent or agents, to enter into any contract or execute 
any instrument in the name of and on behalf of the corporation, and this 
authority may be general or confined to specific instances; and, unless so 
authorized or ratified by the board of directors or within the agency power 
of an officer, no officer, agent or employee shall have any power or 
authority to bind the corporation by any contract or engagement or to pledge 
its credit or to render it liable for any purpose or for any amount.

    SECTION 4.  CERTIFICATES FOR SHARES.  A certificate or certificates for 
shares of the capital stock of the corporation shall be issued to each 
shareholder when any of these shares are fully paid, and the board of 
directors may authorize the issuance of certificates or shares as partly paid 
provided that these certificates shall state the amount of the consideration 
to be paid for them and the amount paid.  All certificates shall be signed in 
the name of the corporation by the chairman of the board, the president or 
vice president and by the chief financial officer, an assistant treasurer, 
the secretary or 

                                     -22-



any assistant secretary, certifying the number of shares and the class or 
series of shares owned by the shareholder.  Any or all of the signatures on 
the certificate may be facsimile.  In case any officer, transfer agent or 
registrar who has signed or whose facsimile signature has been placed on a 
certificate shall have ceased to be that officer, transfer agent or registrar 
before that certificate is issued, it may be issued by the corporation with 
the same effect as if that person were an officer, transfer agent or 
registrar at the date of issue.

    SECTION 5.  LOST CERTIFICATES.  Except as provided in this Section 5, no 
new certificates for shares shall be issued to replace an old certificate 
unless the latter is surrendered to the corporation and cancelled at the same 
time. The board of directors may, in case any share certificate or 
certificate for any other security is lost, stolen or destroyed, authorize 
the issuance of a replacement certificate on such terms and conditions as the 
board may require, including provision for indemnification of the corporation 
secured by a bond or other adequate security sufficient to protect the 
corporation against any claim that may be made against it, including any 
expense or liability, on account of the alleged loss, theft or destruction of 
the certificate or the issuance of the replacement certificates.

    SECTION 6.  REPRESENTATION OF SHARES OF OTHER CORPORATIONS.  The chairman 
of the board, the president, any vice president, or any other person 
authorized by resolution of the board of directors or by any of the foregoing 
designated officers, is authorized to vote on behalf of the corporation any 
and all shares of any other corporation or corporations, foreign or domestic, 
standing in the name of the corporation.  The authority granted to these 
officers to vote or represent on behalf of the corporation any and all shares 
held by the corporation in any other corporation or corporations may be 
exercised either by such officers in person or by any other person authorized 
so to do by proxy duly executed by these officers.

    SECTION 7.  CONSTRUCTION AND DEFINITIONS.  Unless the context requires 
otherwise, the general provisions, rules of construction and definitions in 
the California General Corporation Law shall govern the construction of these 
bylaws.  Without limiting the generality of this provision, wherever the 
context so indicates, the singular number shall include the plural, the 
plural number shall include the singular, and the term "person" shall include 
both a corporation and a natural person.


                                 ARTICLE IX

                                 AMENDMENTS

    SECTION 1.  AMENDMENT BY SHAREHOLDERS.  New bylaws may be adopted or 
these bylaws may be amended or repealed by the vote or written consent of 
holders of a majority of the outstanding shares entitled to vote.

                                     -23-



    SECTION 2.  AMENDMENT BY DIRECTORS.  Subject to the right of shareholders 
as provided in Section 1 of this Article IX to adopt, amend or repeal bylaws, 
bylaws may be adopted, amended or repealed by the board of directors; 
provided, however, that the board of directors may adopt a bylaw or amendment 
of a bylaw changing the authorized number of directors only for the purpose 
of fixing the exact number of directors within the limits specified in the 
articles of incorporation or in Section 2 of Article III of these bylaws.


                                  ARTICLE X

                             EMERGENCY PROVISIONS

    SECTION 1.     GENERAL.  The provisions of this Article shall be 
operative only during a national emergency declared by the President of the 
United States or the person performing the President's functions, or in the 
event of a nuclear, atomic, or other attack on the United States or a 
disaster making it impossible or impracticable for the corporation to conduct 
its business without recourse to the provisions of this Article.  Said 
provisions in such event shall override all other Bylaws of the corporation 
in conflict with any provisions of this Article, and shall remain operative 
so long as it remains impossible or impracticable to continue the business of 
the corporation otherwise, but thereafter shall be inoperative; provided that 
all actions taken in good faith pursuant to such provisions shall thereafter 
remain in full force and effect unless and until revoked by action taken 
pursuant to the provisions of the Bylaws other than those contained in this 
Article.

    SECTION 2.     UNAVAILABLE DIRECTORS.  All directors  of the corporation 
who are not available to perform their duties as directors by reason of 
physical or mental incapacity or for any other reason or who are unwilling to 
perform their duties or whose whereabouts are unknown shall automatically 
cease to be directors, with like effect as if such persons had resigned as 
directors, so long as such unavailability continues.

    SECTION 3.     AUTHORIZED NUMBER OF DIRECTORS.  The authorized number of 
directors shall be the number of directors remaining after eliminating those 
who have ceased to be directors pursuant to Section 2 of this Article, or the 
minimum number required by law, whichever is greater.

    SECTION 4.     QUORUM.  The number of directors necessary to constitute a 
quorum shall be one-third of the authorized number of directors as specified 
in Section 3 of this Article, or such other minimum number as, pursuant to 
the law or lawful decree then in force, it is possible for the Bylaws of the 
corporation to specify.

    SECTION 5.     CREATION OF EMERGENCY COMMITTEE.  In the event the number 
of directors remaining after eliminating those who have ceased to be 
directors pursuant to Section 2 of this Article is less than the minimum 
number of authorized directors 

                                     -24-



required by law, then until the appointment of additional directors to make 
up such required minimum, all the powers and authorities which the board of 
directors could by law delegate, including all powers and authorities which 
the board of directors could delegate to a committee, shall be automatically 
vested in an emergency committee, and the emergency committee shall 
thereafter manage the affairs of the corporation pursuant to such powers and 
authorities and shall have all such other powers and authorities as may by 
law or lawful decree be conferred on any person or body of persons during a 
period of emergency.

    SECTION 6.     CONSTITUTION OF EMERGENCY COMMITTEE.  The emergency 
committee shall consist of all the directors remaining after eliminating 
those who have ceased to be directors pursuant to Section 2 of this Article, 
provided that such remaining directors are not less than three in number.  In 
the event such remaining directors are less than three in number, the 
emergency committee shall consist of three persons, who shall be the 
remaining director or directors and either one or two officers or employees 
of the corporation, as the remaining director or directors may in writing 
designate.  If there is no remaining director, the emergency committee shall 
consist of the three most senior officers of the corporation who are 
available to serve, and if and to the extent that officers are not available, 
the most senior employees of the corporation. Seniority shall be determined 
in accordance with any designation of seniority in the minutes of the 
proceedings of the board of directors, and in the absence of such 
designation, shall be determined by rate of remuneration.  In the event that 
there are no remaining directors and no officers or employees of the 
corporation available, the emergency committee shall consist of three persons 
designated in writing by the shareholder owning the largest number of shares 
of record as of the date of the last record date.

    SECTION 7.     POWERS OF EMERGENCY COMMITTEE.  The emergency committee, 
once appointed, shall govern its own procedures and shall have the power to 
increase the number of members thereof beyond the original number, and in the 
event of a vacancy or vacancies therein, arising at any time, the remaining 
member or members of the emergency committee shall have the power to fill 
such vacancy or vacancies.  In the event at any time after its appointment 
all members shall die or resign or become unavailable to act for any reason 
whatsoever, a new emergency committee shall be appointed in accordance with 
the foregoing provisions of this Article.

    SECTION 8.     DIRECTORS BECOMING AVAILABLE.  Any person who has ceased 
to be a director pursuant to the provisions of Section 2 of this Article and 
who thereafter becomes available to serve as a director shall automatically 
become a member of the emergency committee.

    SECTION 9.     ELECTION OF BOARD OF DIRECTORS.  The emergency committee 
shall, as soon after its appointment as is practicable, take all requisite 
action to secure the election of a board of directors, and upon election all 
the powers and authorities of the emergency committee shall cease.

                                     -25-



    SECTION 10.    TERMINATION OF EMERGENCY COMMITTEE.  In the event, after 
the appointment of any emergency committee, a sufficient number of persons 
who ceased to be directors pursuant to Section 2 of this Article become 
available to serve as directors, so that if they had not ceased to be 
directors as aforesaid, there would be enough directors to constitute the 
minimum number of directors required by law, then all such persons shall 
automatically be deemed to be reappointed as directors and the powers and 
authorities of the emergency committee shall end.

                                     -26-

EX-3.2

                                       
                              AMENDED AND RESTATED
                           ARTICLES OF INCORPORATION
                                       OF
                        CINEMASTAR LUXURY THEATERS, INC.


    JOHN ELLISON, JR. and JON MELOAN hereby certify that:

    1.   They are the duly elected and acting President and Secretary, 
respectively, of CinemaStar Luxury Theaters, Inc. (the "Corporation"), a 
California corporation.

    2.   The Articles of Incorporation of this Corporation are hereby amended 
to read as set forth in full below and restated as so amended (with the 
omissions mandated by California Corporations Code Section 910(a)) as follows:

FIRST.   The name of the corporation is:
                                       
                         CINEMASTAR LUXURY THEATERS, INC.

SECOND.  The purpose of the corporation is to engage in any lawful act or 
activity for which a corporation may be organized under the General 
Corporation Law of California other than the banking business, the trust 
company business or the practice of a profession permitted to be incorporated 
by the California Corporations Code.

THIRD:   The corporation is authorized to issue Sixty Million (60,000,000) 
shares of capital stock, all of which are designated "Common Stock," and 
shall be without par value. 

FOURTH.  The liability of the directors of the corporation for monetary 
damages shall be eliminated to the fullest extent permissible under 
California law.

FIFTH.   The corporation is authorized to provide indemnification of agents 
(as defined in Section 317 of the California Corporations Code) for breach of 
duty to the corporation and its shareholders through bylaw provisions or 
through agreements with the agents, or both, in excess of the indemnification 
otherwise permitted by Section 317 of the California Corporations Code, 
subject to the limits on such excess indemnification set forth in Section 204 
of the California Corporations Code."

    3.   The foregoing amendment and restatement of articles of incorporation 
has been duly approved by the Board of Directors of this Corporation.

    4.   The foregoing amendment and restatement of articles of incorporation 
has been duly approved by the required vote of shareholders in accordance 
with Section 902 of the California Corporations Code.  The total number of 
outstanding shares of Common Stock of the corporation is 8,019,182.  There 
are no outstanding shares of Preferred Stock of the corporation.  The number 
of shares voting in favor of the amendments equaled or exceeded the vote 
required. The percentage vote required was more than 50% of the outstanding 
shares.

                                       


    We further declare under penalty of perjury under the laws of the State 
of California that the matters set forth in the foregoing certificate are 
true and correct of our own knowledge.  

Dated:  December 10, 1997


                            /s/ John Ellison, Jr.                       
                           ---------------------------------------------
                           John Ellison, Jr., President


                            /s/ Jon Meloan                              
                           ---------------------------------------------
                           Jon Meloan, Secretary


                                      -2- 

EX-99.1

                                 [LOGO]


December 17, 1997



Mr. John Ellison, Jr., President
CinemaStar Luxury Theaters, Inc.
431 College Boulevard
Oceanside, CA  92057-5435

       Re:   Loans No. 790304333, 790304643 and 790304937

Dear John:

This letter confirms that all 3 of the subject loans from First National Bank 
to CinamaStar Luxury Theaters, Inc. ("CinemaStar"), have been paid in full as 
of today's date.

CinemaStar no longer has any loan liability to First National Bank. 
CinemaStar is no longer required by First National Bank to maintain 
compliance with any covenants, terms or conditions which may have been 
contained in any documentation or agreements relating to the subject loans.

If you have any questions, or need further information regarding the 3 fully 
repaid loans, please give me a call at (619) 338-1473.

We appreciate your communicating regularly with First National Bank and 
keeping us informed regarding your pending equity transaction with an 
investment group. We are pleased for you that the transaction is now nearing 
its final completion and wish you the very best success during the years 
ahead.

Best regards,
FIRST NATIONAL BANK

/s/ ROBERT SILIDES
- -------------------------
Robert O. Silides
Vice President
Corporate Banking Group


CC: Norman Dowling, Chief Financial Officer CinemaStar Luxury Theaters, Inc.




                                    

EX-99.2

                                     EXHIBIT 99.2

        PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AFTER EQUITY FINANCING 
                                     (UNAUDITED)


        On December 15, 1997, Registrant consummated a financing transaction 
(the "Closing") whereby CinemaStar Acquisition Partners, L.L.C. ("CAP") 
acquired a majority equity interest in Registrant through a $15 million 
purchase of newly issued shares of Registrant's common stock.  Such purchase 
was completed pursuant to the terms of a Stock Purchase Agreement, dated as 
of September 23, 1997.  At the Closing, CAP purchased 17,684,464 shares of 
common stock for a purchase price of $0.848202 per share.  CAP also received 
at Closing, for an aggregate purchase price of $1,000, warrants to purchase 
1,630,624 shares of common stock at an exercise price of $0.848202 per share.

       The accompanying condensed consolidated balance sheet is based on the 
historical balance sheet of the Company as of November 30, 1997 and assumes 
that the $15 million equity financing was completed, and the net proceeds 
from such transaction applied as described in the notes thereto, on that date.



CINEMASTAR LUXURY THEATERS, INC. AND SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET AFTER EQUITY FINANCING
UNAUDITED



                                                 30-NOV                                  PROFORMA AFTER
                                                  1997                                  EQUITY FINANCING
                                                 ($'000)         ADJUSTMENTS                ($'000)
                                                                                     
ASSETS
  CURRENT ASSETS 
  Cash                                              615               4,221  (note 1)          4,836
  Commissions & other receivables                   285                                          285
  Prepaid expenses                                  287                                          287
  Other current assets                              606                (300) (note 2)            306
                                               ----------           ---------               ----------
  TOTAL CURRENT ASSETS                            1,793               3,921                    5,714

  Property and equipment, net                    13,361                 125  (note 3)         13,486
  Deposits and other assets                         670                                          670
                                               ----------           ---------               ----------
TOTAL ASSETS                                     15,824               4,046                   19,870
                                               ----------           ---------               ----------
                                               ----------           ---------               ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
  CURRENT LIABILITIES
  Current portion of long-term debt and
   capital lease obligations                      4,772              (4,447) (note 4)            325
  Accounts payable                                2,751              (1,100) (note 5)          1,651
  Accrued expenses                                  292                                          292
  Deferred revenue                                  186                                          186
  Advanced from stockholders                         94                 (94) (note 6)            -
                                               ----------           ---------               ----------
  TOTAL CURRENT LIABILITIES                       8,095              (5,641)                   2,454


  Long term debt and capital lease
   obligations, net of current portion            3,821              (2,438) (note 4)          1,383
  Deferred rent liability                         2,873                                        2,873
                                               ----------           ---------               ----------
TOTAL LIABILITIES                                14,789              (8,079)                   6,710

STOCKHOLDERS' EQUITY                              1,035              12,125  (note 7)         13,160

                                               ----------           ---------               ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       15,824               4,046                   19,870
                                               ----------           ---------               ----------
                                               ----------           ---------               ----------



NOTE 1
  CHANGE IN CASH REFLECTS THE FOLLOWING ADJUSTMENTS:

    Proceeds of equity financing              15,000

    Repayment of debt                         (6,885)
    Reduction in accounts payable             (1,100)
    Penalty / termination fees pursuant
      to concession agreements                (1,825)
    Fixed asset purchase pursuant 
      to concession agreements                  (125)
    Fees related to equity financing            (750)
    Repayment of shareholder notes               (94)

                                            ---------
NET CHANGE IN CASH                             4,221
                                            ---------
                                            ---------

NOTE 2
  Represents expensing of prepayments for professional fees pursuant to
  the equity financing agreement.

NOTE 3
  Represents fixed assets acquired pursuant to the notice of termination of
  the concession agreements issued by the Company.

NOTE 4


                                                       CURRENT         NON-CURRENT        TOTAL
                                                                                 
  Debt & capital lease obligations at 11/30/97          4,772             3,821            8,593

  Notes repaid from proceeds
    PCI                                                (1,235)          (1,436)           (2,671)
    Reel Partners                                      (3,000)                0           (3,000)
    First National Bank                                  (212)          (1,002)           (1,214)
                                                     ----------       ---------         ----------
  Total - Notes Repaid                                 (4,447)          (2,438)           (6,885)
                                                     ----------       ---------         ----------

                                                     ----------       ---------         ----------
  Balance after repayment of notes above                  325            1,383             1,708
                                                     ----------       ---------         ----------
                                                     ----------       ---------         ----------


NOTE 5

  Represents use of proceeds of equity financing for reduction of accounts 
  payable.

NOTE 6

  Represents use of proceeds of equity financing for repayment of notes 
  from shareholders.

NOTE 7

  Adjustments to stockholders' equity are as follows:

    Proceeds of issuance of stock              15,000
    
    Penalties / termination fees               (1,825)
    Fees paid pursuant to equity financing       (750)
    Prepayments expensed                         (300)
                                             ----------
                                               12,125
                                             ----------
                                             ----------