EXECUTION COPY



                            ASSET PURCHASE AGREEMENT


                          Dated as of November 3, 2000

                                  by and among

                                 VDI MULTIMEDIA,
                                  as Purchaser

                                       and

                    CREATIVE DIGITAL, INC. and LARRY HESTER,

                                   as Sellers


<PAGE>


                            ASSET PURCHASE AGREEMENT


         THIS ASSET PURCHASE  AGREEMENT  (this  "Agreement") is made and entered
into  as of  November  3,  2000,  by and  among  VDI  MultiMedia,  a  California
corporation  ("Purchaser")  on the  one  hand,  and  Creative  Digital,  Inc.  a
California  corporation (the "Company") and Larry Hester (the  "Shareholder") on
the other hand (the  Company  and the  Shareholder  referred to herein each as a
"Seller" and collectively as "Sellers").

                                 R E C I T A L S
                                 ---------------

         A. The  Shareholder is the only record holder and  beneficial  owner of
 the capital stock of the Company.

         B. The Company is the owner of the Assets (as hereinafter defined).

         C.  Purchaser  desires to purchase  from the  Company,  and the Company
desires to sell, convey,  transfer,  assign and deliver to Purchaser, the assets
of the Company upon the terms and subject to the conditions of this Agreement.

                                A G R E E M E N T
                                -----------------

         NOW,  THEREFORE,  in  consideration of the foregoing and the provisions
set forth below,  and subject to the terms and conditions set forth herein,  the
parties agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         As used in this Agreement,  the following terms shall have the meanings
indicated below:

         "ACCOUNTS RECEIVABLE" shall have the meaning set forth in Section 5.11.

         "ACTION" shall mean any action,  claim, suit,  litigation,  proceeding,
labor  dispute,   arbitral  action,   governmental  audit,   inquiry,   criminal
prosecution, investigation or unfair labor practice charge or complaint.

         "AFFILIATE" shall mean, in respect of any specified  Person,  any other
Person that,  directly or  indirectly,  controls,  is controlled by, or is under
common control with, such specified  Person or if such specified  Person bears a
familial relationship with such other Person.

         "AFFILIATED PARTIES" shall have the meaning set forth in Section 11.2.

         "AGREEMENT" shall have the meaning set forth in the Preamble.

         "AGREEMENT  NOT TO  COMPETE"  shall  mean the  covenants  set  forth in
Section 7.9.

                                       1
<PAGE>

         "ANCILLARY  AGREEMENTS" shall mean the the Employment Agreement and the
Agreement Not to Compete, substantially in the forms attached hereto as Exhibits
A and B, respectively.

         "ASSETS" shall mean all of the right, title and interest in and to all
of the business,  properties, assets and rights of any kind, whether tangible or
intangible,  real or personal,  owned by the Company or in which the Company has
any interest, including without limitation all of the Company's right, title and
interest in the following:

            (1) all accounts and notes receivable and contingent rights relating
         thereto  (whether  current  or  noncurrent),   cash-on-hand,   refunds,
         deposits,  advances,  all advance  payments,  prepaid expense items and
         credits  relating to the Business,  prepayments or prepaid expenses and
         all other receivables arising out of the Business;

            (2) all Contract Rights;

            (3) all Leases and Leasehold Estates and Personal Property Leases;

            (4) all Leasehold Improvements;

            (5) all Fixtures and Equipment;

            (6) all Inventory;

            (7) all Books and Records;

            (8) all Proprietary  Rights,  including the name "Creative  Digital"
         and all derivations thereof;

            (9) all Permits;

            (10) all computers and software;

            (11) all  Insurance  Policies and all rights to  insurance  proceeds
         relating to the Assets and/or the Business;

            (12)  all  supplies,   sales  literature,   promotional  literature,
         customer,  supplier and  distributor  lists,  art work,  display units,
         telephone  and  fax  numbers  and  purchasing  records  related  to the
         Business;

            (13) all rights under or pursuant to all warranties, representations
         and  guarantees  made by  suppliers  in  connection  with the Assets or
         services  furnished  to  the  Company  pertaining  to the  Business  or
         affecting the Assets;

                                       2
<PAGE>

            (14) all  claims,  causes of  action,  choses in  action,  rights of
         recovery and rights of set-off of any kind related to the Assets or the
         Assumed  Liabilities,  against any person or entity,  including without
         limitation any liens,  security  interests,  pledges or other rights to
         payment or to enforce payment in connection with products  delivered by
         the Company on or prior to the  Closing  Date except to the extent that
         any of the foregoing relate to any of the Excluded Liabilities; and

            (15)  all of the  Business  as a  going  concern  and  the  goodwill
         pertaining thereto.

         "AUDIT" shall have the meaning set forth in Section 3.1(a).

         "AUDITED  CLOSING  BALANCE  SHEET"  shall have the meaning set forth in
Section 3.1(a).

         "BALANCE SHEET" or "Balance Sheets" shall have the meaning set forth in
Section 5.7(a).

         "BOOKS AND RECORDS" shall mean (a) all records,  files and lists of the
Company (and the  Shareholder,  if any such  records  exist)  pertaining  to the
Assets,  (b) all  records  and  lists  pertaining  to the  Business,  customers,
suppliers,  vendors,  clients or  personnel  of the  Company,  (c) all  product,
business and  marketing  plans of the Company,  (d) all books,  ledgers,  files,
reports,  plans,  drawings,  merchandise  and  sales  promotion  literature  and
promotional  and  advertising  materials,  all  catalogues,  research  material,
management  information  systems,  software,  technology and  specifications and
operating  records  of every kind  maintained  by the  Company  and (e) true and
correct copies of the Company's minute books,  stock books, books of account and
tax returns.

         "BUSINESS"   shall  mean  the  business  of  the   Company,   including
pre-production and post-production services,  post-production supervision,  film
transfer  services,  visual  effects  supervision,  mix and  voice-over  session
supervision,  video  and  audio  tape  storage,  post-production,   duplication,
distribution, editing and ancillary services.

         "BUSINESS DAY" means any day that is not a Saturday,  a Sunday or other
day on which banks are required or authorized by law to be closed in the City of
Los Angeles.

         "CLOSING" shall have the meaning set forth in Section 4.1.

         "CLOSING  DATE" shall mean (a)  November 3, 2000 or (b) such other date
as Purchaser and the Sellers shall mutually agree upon.

         "COBRA" shall have the meaning set forth in Section 5.16(e).

         "CODE" shall mean the Internal Revenue Code of 1986, as amended.

         "COMPANY" shall have the meaning set forth in the Preamble.

                                       3
<PAGE>

         "CONTRACT" shall mean,  other than any Lease, any agreement,  contract,
note, loan, evidence of indebtedness, purchase order, undertaking, obligation or
commitment  to which the Company is a party or is bound and which relates to the
Business or the Assets, whether oral or written, including,  without limitation,
purchase  commitments for materials and other  services,  whether or not entered
into in the ordinary course of business, relating to the Business, any Company's
rights under any confidentiality  agreements relating to the Business (if and to
the extent  assignable),  all unfilled  sales  orders,  invoices,  contracts and
commitments  with  customers  relating to the  Business,  all unfilled  purchase
orders,  invoices,  contracts and  commitments  with  suppliers  relating to the
Business.

         "CONTRACT   RIGHTS"  shall  mean  all  of  the  Company's   rights  and
obligations  under  the  Contracts,  excluding  any  such  Contracts  evidencing
Financing Obligations.

         "COPYRIGHTS" shall mean registered  copyrights,  copyright applications
and unregistered copyrights.

         "COURT  ORDER"  shall  mean any  judgment,  decision,  consent  decree,
injunction, ruling or order of any federal, state or local court or governmental
agency,  department  or authority  that is binding on any person or its property
under applicable law.

         "DEFAULT"  shall  mean (a) a breach of or default  under any  Contract,
Lease or Permit, (b) the occurrence of an event that with the passage of time or
the giving of notice or both would  constitute a breach of or default  under any
Contract,  Lease or  Permit,  or (c) the  occurrence  of an event  that  with or
without the passage of time or the giving of notice or both would give rise to a
right of termination, renegotiation or acceleration under any Contract, Lease or
Permit.

         "DISCLOSURE  SCHEDULE" shall mean a schedule  executed and delivered by
the Company to Purchaser  as of the date hereof which sets forth the  exceptions
to the representations and warranties  contained in Article V hereof and certain
other information called for by this Agreement. Unless otherwise specified, each
reference  in this  Agreement  to any  numbered  schedule is a reference to that
numbered schedule which is included in the Disclosure Schedule.

         "DISCONTINUED  OPERATIONS"  shall  mean any  businesses  or  operations
previously  sold or otherwise  disposed of by any of the Sellers and any ongoing
indemnification obligations in connection therewith.

         "EARN-OUT"shall have the meaning set forth in Section 2.4(a)(iii).

         "EMPLOYMENT  AGREEMENT"  shall mean the  employment  agreement  between
Purchaser and Larry Hester dated the Closing Date and  substantially in the form
of attached hereto as Exhibit A.

         "ENCUMBRANCE"  shall  mean any claim,  lien,  pledge,  option,  charge,
easement,   security   interest,   deed  of   trust,   mortgage,   right-of-way,
encroachment,   building  or  use  restriction,   conditional  sales  agreement,
encumbrance or other right of third  parties,  whether  voluntarily  incurred or
arising by operation of law, and includes,  without limitation, any agreement to
give any of the foregoing in the future,  and any contingent sale or other title
retention agreement or lease in the nature thereof.

                                       4
<PAGE>

         "ENVIRONMENTAL  LIABILITIES FOR PRE-CLOSING MATTERS" shall mean any and
all  liabilities,   damages,   losses,  costs  and  expenses  arising  from  any
Pre-Closing  Environmental  Matters,  including,  without  limitation,  costs of
investigation,  cleanup, removal,  remedial,  corrective or response action, the
costs  associated  with  posting  financial  assurances  for the  completion  of
investigation,  cleanup,  removal,  remedial,  corrective  or response  actions,
attorneys'  fees, the  preparation of any closure or other necessary or required
plans or  analyses,  or other  necessary  reports or  analyses  submitted  to or
prepared for regulating agencies.

         "ENVIRONMENTAL  PROTECTION LAWS" shall mean all federal,  state,  local
and  foreign  laws,  statutes,  regulations  having the force and effect of law,
permits, court decrees, judgments, injunctions and written orders concerning (i)
public  health and safety  relating to exposure of humans to toxic or  hazardous
substances or otherwise  relating to Regulated  Substances or (ii)  pollution or
protection  of  the  environment  or  natural  resources,   including,   without
limitation,  the  Comprehensive   Environmental  Response,   Compensation,   and
Liability Act ("CERCLA") (42  U.S.C.ss.9601  et seq.);  the Hazardous  Materials
Transportation  Act (49  U.S.C.ss.1801 et seq.);  the Resource  Conservation and
Recovery  Act  ("RCRA")  (42  U.S.C.ss.6901  et seq.);  the Clean  Water Act (33
U.S.C.ss.1251 et seq.); the Safe Drinking Water Act (14  U.S.C.ss.1401 et seq.);
the  Toxic  Substances  Control  Act (15  U.S.C.ss.2601  et seq.),  the  Federal
Insecticide,  Fungicide, and Rodenticide Act (7 U.S.C.ss.136 et seq.), the Clean
Air Act (42  U.S.C.ss.7401  et  seq.);  the  Emergency  Planning  and  Community
Right-to-Know Act (42  U.S.C.ss.ss.11001-11005,  11021-11023,  and 11041-11050);
the      Porter-Cologne      Water     Quality     Act     (California     Water
Codess.ss.13000-13999.19);  the Hazardous Waste Control Law (California Health &
Safety Codess.ss.25100-25250.25);  the Safe Drinking Water and Toxic Enforcement
Act (California Health & Safety Codess.ss.25249.5-25249.13); California Health &
Safety Code  ss.ss.25280-25299.81  (regarding  Underground  Storage of Hazardous
Substances)  andss.ss.25500-25545 (regarding Hazardous Materials Inventories and
Emergency  Plans);  the Hazardous  Substance  Account Act  (California  Health &
Safety    Codess.ss.25300-25393);     and    California    Health    &    Safety
Codess.ss.39000-44384  regarding  Air  Resources;  in each  case  including  the
regulations  promulgated   thereunder,   including,   without  limitation,   the
regulations promulgated by the South Coast Air Quality Management District; each
as supplemented or amended from time to time.

         "EPA" shall mean the United States Environmental  Protection Agency, or
any successor United States governmental agency.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.

         "ERISA  AFFILIATE"  shall  mean  with  respect  to any  person  (a) any
corporation that is a member of a controlled  group of corporations,  within the
meaning of Section 414(b) of the Code, of which that person is a member, (b) any
trade or business (whether or not  incorporated)  that is a member of a group of
trades or businesses under common control,  within the meaning of Section 414(c)
of the  Code,  of which  that  person  is a  member,  and (c) any  member  of an
affiliated  service  group,  within the meaning of Section 414(m) and (o) of the
Code,  of which that  person or any entity  described  in clause (a) or (b) is a
member.

         "ESTIMATED  CLOSING  BALANCE SHEET" shall have the meaning set forth in
Section 2.4.

         "EXCLUDED LIABILITIES" shall have the meaning set forth in Section 2.3.

                                       5
<PAGE>

         "FACILITIES" shall mean all plants, offices,  manufacturing facilities,
stores,  warehouses,  improvements,   administration  buildings,  and  all  real
property  and related  facilities  which are used or held for use in  connection
with the Business.

         "FINAL  CLOSING  BALANCE  SHEET"  shall have the  meaning  set forth in
Section 3.1(a)(4).

         "FINANCIALS" shall have the meaning set forth in Section 5.7(a).

         "FINANCING  OBLIGATIONS"  shall mean (a) indebtedness of any Seller for
borrowed  money,  (b)  obligations  of any  Seller  evidenced  by bonds,  notes,
debentures,  letters of credit or similar  instruments,  (c)  obligations  under
capitalized  leases,  (d) obligations under conditional sale, title retention or
similar  agreements  or  arrangements  creating an obligation of any Seller with
respect to the deferred  purchase price of property  (other than customary trade
credit),  (e) interest rate and currency  obligation  swaps,  hedges and similar
arrangements  and (f) all  obligations  of any  Seller  to  guaranty  any of the
foregoing  types of obligations on behalf of others,  in each case as related to
the Business.

         "FIXTURES  AND  EQUIPMENT"  shall mean all of the (i) all  audiovisual,
audio and visual  recordings  and other  materials  produced by any  technology,
manner or means relating to the Business, including, without limitation, prints,
negatives,  duplicating negatives,  fine grains, music and sound effects tracks,
master tapes and other  duplicating  materials of any kind, all various language
dubbed and  titled  versions,  prints and  negatives  of  stills,  trailers  and
television  spots,  all promos and other  advertising  and publicity  materials,
stock  footage,  trims,  tabs,  outtakes,  cells,  drawings , (ii) all  physical
properties relating to the Business,  including, without limitation, all editing
and duplication equipment, in each case, including,  without limitation,  any of
the foregoing in the  possession,  custody or control of the Company,  or in the
possession of its assigns, or any film laboratories, storage facilities or other
Persons,  (iii) any and all revisionary rights the Company has to the master and
duplicate  masters of any original negative or master tape or elements plus (iv)
furniture, fixtures, furnishings,  machinery,  automobiles, trucks, spare parts,
supplies,  equipment, tooling, molds, patterns, dies and other tangible personal
property  owned by the  Company and used,  held for use or useful in  connection
with the  Business,  wherever  located,  and  including  any such  Fixtures  and
Equipment  in the  possession  of the  Company's  suppliers,  together  with all
warranty rights with respect thereto.

         "FORMER  FACILITY"  shall  mean  each  plant,   office,   manufacturing
facility,  store, warehouse,  improvement,  administrative building and all real
property  and  related  facilities  that were  owned,  leased or operated by the
Company at any time prior to the date  hereof,  but  excluding  any  Facilities.

         "GAAP" shall mean generally accepted accounting principles consistently
applied as in effect at the time in question.

         "HOLDBACK STOCK" shall have the meaning set forth in Section 3.1(d).

         "INDEMNIFIED PARTY" shall have the meaning set forth in Section 11.7.

         "INDEMNIFYING PARTY" shall have the meaning set forth in Section 11.7.

                                       6
<PAGE>

         "INSURANCE  POLICIES" shall mean the insurance  policies related to the
Assets and/or the Business listed in Section 5.23 of the Disclosure Schedule.

         "INTANGIBLE  PERSONAL  PROPERTY"  shall have the  meaning  set forth in
Section 5.14(a).

         "INVENTORY" shall have the meaning set forth in Section 5.18.

         "IRS" shall mean the Internal Revenue Service.

         "LEASE" shall have the meaning set forth in Section 5.12.

         "LEASED PERSONAL  PROPERTY" shall mean all leased property described in
the Personal Property Leases.

         "LEASED REAL PROPERTY" shall mean all leased property  described in the
Leases.

         "LEASEHOLD  ESTATES"  shall  mean  all  of  the  Company's  rights  and
obligations as lessee under the Leases.

         "LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements situated
in or on the Leased Real Property and owned by any Seller.

         "LIABILITIES"  shall  mean any  liability  of the  Sellers,  including,
without limitation, any direct or indirect liability, indebtedness,  obligation,
commitment,  expense,  claim,  deficiency,  guaranty or endorsement of or by any
person of any type, whether accrued, absolute,  contingent,  matured, unmatured,
known, unknown or other, in each case as related to the Business.

         "LICENSES" shall have the meaning set forth in Section 5.14(a).

         "MATERIAL CONTRACTS" shall have the meaning set forth in Section 5.17.

         "MULTI-EMPLOYER  PLANS"  shall  have the  meaning  set forth in Section
5.15(a).

         "NET WORKING  CAPITAL" shall mean, as of a particular date, all current
assets of the  Company,  including  without  limitation  its  account  and trade
receivables,  inventory, cash and cash equivalents,  deposits, prepaid expenses,
less its current (i.e., short-term)  liabilities,  in each case as determined in
accordance with GAAP.

         "ORDINARY  COURSE OF  BUSINESS"  or  "ORDINARY  COURSE" or any  similar
phrase shall mean the ordinary  course of the Business and  consistent  with the
Company's past practices.

         "PATENTS" shall mean all patents and patent applications and registered
designs and registered design applications.

         "PERMITS"  shall mean all  licenses,  permits,  franchises,  approvals,
authorizations,  consents  or  orders  of, or  filings  with,  any  governmental
authority,  whether  foreign,  federal,  state or local,  or any  other  person,
necessary  or  desirable  for the past,  present or  anticipated  conduct of, or
relating to the operation of, the Business.

                                       7
<PAGE>

         "PERSON" shall mean any natural person or any corporation, partnership,
joint venture, limited liability company or other entity.

         "PERSONAL PROPERTY" shall have the meaning set forth in Section 5.27.

         "PERSONAL  PROPERTY LEASES" shall have the meaning set forth in Section
5.27.

         "PLANS" shall have the meaning set forth in Section 5.16(a).

         "PRE-CLOSING ENVIRONMENTAL MATTERS" shall mean (a) the production, use,
generation,  storage,  treatment,  recycling,  disposal  or  other  handling  or
disposition  at  any  time  on  or  prior  to  the  Closing  Date  (collectively
"Handling")  of any  Regulated  Substance,  either  in,  on,  under  or from any
Facility or Former Facility,  including, without limitation, the effects of such
Handling of Regulated  Substances  on resources,  persons or property  within or
outside the  boundaries of any Facility or Former  Facility,  (b) any release of
Regulated  Substances at any time on or prior to the Closing Date  occurring in,
on or under any  Facility or Former  Facility  regardless  of how the  Regulated
Substances came to rest in, on or under the Facility or Former Facility, (c) the
failure on or prior to the Closing  Date of any  Facility or Former  Facility or
any operation of Sellers to be in compliance  with any  Environmental  Laws, and
(d) any other act or omission occurring,  or condition existing, with respect to
the Assets or the  Business on or prior to the Closing  Date which gives rise to
liability under any Environmental Protection Law.

         "PROPRIETARY  RIGHTS"  shall  mean  all  of the  Company's  Copyrights,
Patents,   Trademarks,   technology  rights  and  licenses,   computer  software
(including   without   limitation   any  source  or  object  codes  therefor  or
documentation   relating   thereto),   trade  secrets,   franchises,   know-how,
inventions, designs,  specifications,  plans, drawings and intellectual property
rights.

         "PURCHASE PRICE" shall have the meaning set forth in Section 2.4(a).

         "PURCHASE  PRICE  ADJUSTMENT"  shall  have  the  meaning  set  forth in
Sections 2.4(a).

         "PURCHASER" shall have the meaning set forth in the Preamble.

         "REAL PROPERTY" shall have the meaning set forth in Section 5.12.

         "REGULATED  SUBSTANCE" shall mean any chemical or substance  subject to
or  regulated  under  any  Environmental   Protection  Law  including,   without
limitation,  any "pollutant or  contaminant"  or "hazardous  substance" as those
terms are defined in CERCLA,  any  "hazardous  waste" as that term is defined in
RCRA,  and any  other  hazardous  or toxic  wastes,  substances,  or  materials,
petroleum  (including  crude oil and refined and unrefined  fractions  thereof),
polychlorinated biphenyls ("PCBs"), infectious waste, special waste, pesticides,
fungicides, solvents, herbicides,  flammables, explosives, asbestos and asbestos
containing material, and radioactive materials,  whether injurious by themselves
or in combination with other materials.

                                       8
<PAGE>

         "REGULATIONS" shall mean any laws, statutes,  ordinances,  regulations,
rules, notice requirements,  court decisions and orders of any foreign, federal,
state or local government and any other governmental department or agency.

         "RELEASE  DOCUMENTS"  shall  have the  meaning  set  forth  in  Section
4.2(a)(vi).

         "REPRESENTATIVE" shall mean any officer, director, principal, attorney,
agent, employee or other representative.

         "SUBSIDIARY"   shall  mean  (a)  with  respect  to  the  Company,   any
corporation,  association  or other  business  entity of which  more than  fifty
percent  (50%) of the total  voting  power of  shares  of stock  (or  equivalent
ownership or controlling interest) entitled (without regard to the occurrence of
any  contingency)  to vote in the  election of  directors,  managers or trustees
thereof is at the time  owned or  controlled,  directly  or  indirectly,  by the
Company or one or more of the other Subsidiaries of that Person or a combination
thereof,  (b) any  partnership in which any Seller is a general  partner and any
limited liability company in which any Seller is the managing member, or (c) any
partnership or limited  liability company in which any Seller possesses a 50% or
greater  interest in the total  capital or total income of such  partnership  or
limited liability company.

         "TAX" OR "TAXES" shall mean any and all taxes imposed or required to be
collected by any federal,  state or local taxing authority in the United States,
or by any foreign taxing  authority under any statute or regulation,  including,
without limitation,  all income, gross receipts,  sales, use, personal property,
use and  occupancy,  business  occupation,  mercantile,  ad  valorem,  transfer,
license, withholding,  payroll, employment,  excise, real estate, environmental,
capital stock, franchise,  alternative or add-on minimum, estimated or other tax
of any kind  whatsoever,  including any interest,  penalties and other additions
thereto.

         "TRADEMARKS"  shall  mean  registered  trademarks,  registered  service
marks,  trademark and service mark applications and unregistered  trademarks and
service marks.

         "TRANSACTIONS"  shall mean, in respect of any party,  all  transactions
contemplated  by this  Agreement  that involve,  relate to or affect such party.

"TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section 7.6(a).

         "UNITED  STATES  GOVERNMENT"  shall mean the  government  of the United
States,  including any agencies,  commissions,  branches,  instrumentalities and
departments thereof.

                                   ARTICLE II
                           PURCHASE AND SALE OF ASSETS

          Section  .1  TRANSFER  OF  ASSETS.  Upon the terms and  subject to the
conditions  contained  herein, at the Closing,  the Company shall sell,  convey,
transfer,  assign and deliver to Purchaser, and Purchaser shall acquire from the
Company, the Assets (including,  without limitation, those assets of the Company
listed on Schedule 2.1 hereto), free and clear of all Encumbrances.

                                       9
<PAGE>

          Section .2  ASSUMPTION OF  LIABILITIES.  Upon the terms and subject to
the conditions  contained  herein,  at the Closing,  Purchaser  shall assume the
liabilities  which are listed on Schedule  2.2  attached  hereto  (collectively,
"Assumed Liabilities").

          Section .3 EXCLUDED  LIABILITIES.  Notwithstanding any other provision
of this Agreement,  except for the Assumed  Liabilities  expressly  specified in
Section 2.2,  Purchaser shall not assume,  or otherwise be responsible  for, any
Liabilities of the Company or any Seller, whether liquidated or unliquidated, or
known or unknown,  whether arising out of occurrences  prior to, at or after the
date hereof (the "Excluded  Liabilities"),  which Excluded  Liabilities include,
without limitation, the following:

          (a)  any  Liability  to or in  respect  of  any  employees  or  former
employees  of the  Company  including  without  limitation  (i)  any  employment
agreement,  whether or not written, between the Company and any person, (ii) any
Liability under any Employee Benefit Plan at any time maintained, contributed to
or  required  to be  contributed  to by or with  respect to the Company or under
which the  Company  may  incur  Liability,  or any  contributions,  benefits  or
Liabilities  therefor, or any Liability with respect to the Company's withdrawal
or partial  withdrawal from or termination of any Employee  Benefit Plan,  (iii)
any claim of an unfair labor practice, or any claim under any state unemployment
compensation or worker's  compensation law or regulation or under any federal or
state  employment  discrimination  law or  regulation,  which  shall  have  been
asserted on or prior to the Closing Date or is based on acts or omissions  which
occurred on or prior to the Closing Date and (iv) any liabilities or obligations
under the Worker Adjustment and Retraining Notification Act of 1988, as amended,
including the rules and regulations promulgated thereunder;

          (b) any  Liability  of the Company in respect of (i) any income tax or
any  interest,  penalties or additions  pertaining  thereto,  (ii) any other Tax
relating to any period or portion thereof prior to the Closing Date;

          (c) any warranty  claims and any Liability  arising from any injury to
any  person  or damage  to or  destruction  of any  property,  whether  based on
negligence,  breach of  warranty,  express  or  implied  representation,  strict
liability,  enterprise  liability or any other legal or equitable theory arising
from defects in products manufactured or from services performed by or on behalf
of the Company or any other person or entity on or prior to the Closing Date;

          (d) any  Liability  of any  Seller  arising  out of or  related to any
Action against any Seller or any Action which  adversely  affects the Assets and
which shall have been  asserted on or prior to the Closing  Date or the basis of
which shall have arisen on or prior to the Closing Date;

          (e)  any  Liability  of  any  Seller  resulting  from  entering  into,
performing  its  obligations   pursuant  to  or  consummating  the  transactions
contemplated by, this Agreement  (including  without limitation any Liability of
any Seller for fees or expenses  incurred in connection  with such  transactions
and any Liability of any Seller pursuant to Article XI hereof);

          (f)  any  Liability  related  to  any  Former  Facility  or any of the
Discontinued Operations;

                                       10
<PAGE>

          (g) any Financing Obligation

          (h)  any  Environmental   Liabilities  for  Pre-Closing  Environmental
Matters, whether or not disclosed in the Disclosure Schedule;

          (i) any  Liability  of any Seller  for fees or  expenses  incurred  by
Sellers in connection with the  consummation of the transaction  contemplated by
this Agreement;

          (j) any Liability of any Seller not directly  related or incurred with
respect to the conduct of the Business;

          (k) except to the extent  provided for herein,  any  indebtedness  for
borrowed money;

          (l) any amounts payable to any Affiliate of any Seller;

          (m) any cash overdraft liability; and

          (n) any liabilities accruing prior to the Closing Date.

          Section .4 PURCHASE PRICE.

          (a) PURCHASE  PRICE.  The purchase  price for the Assets and Agreement
Not to Compete (as  adjusted as set forth below,  the  "Purchase  Price")  shall
consist of:

                (i) Five Hundred  Thousand Dollars  ($500,000),  as increased or
decreased  pursuant to Section 3.1(c) (the "Cash Payment") (such net adjustments
are referred to herein collectively as the "Purchase Price  Adjustment"),  which
shall be paid in cash at the Closing;

                (ii) the assumption of the Assumed Liabilities;

                (iii) Three Hundred Fifty Thousand  Dollars  ($350,000) worth of
the Purchaser's  Common Stock (the actual number of shares to be issued based on
the closing price of a share of such common stock on the Closing Date), less Two
Hundred Thousand Dollars  ($200,000) worth of the Purchaser's  Common Stock (the
"Holdback Stock");

                (iv) if earned the Earn-Out Payments,  subject to conditions set
forth in Section 3.2.

          (a)  ALLOCATION OF PURCHASE  PRICE.  Purchaser  shall prepare IRS Form
8594  allocating the Purchase Price in accordance  with Section 1060 of the Code
and shall  forward it within 120 days after the  Closing to the  Company for its
approval,  which approval shall not be unreasonably  withheld. The parties agree
that Two Hundred  Thousand  Dollars  ($200,000) of the aggregate  Purchase Price
will be allocable to the  Agreement  Not to Compete.  Purchaser  and the Company
shall each file with their respective federal income tax return for the tax year
in which the Closing occurs,  IRS Form 8594  containing the  information  agreed
upon by the parties pursuant to the immediately  preceding  sentence.  Purchaser
agrees to report the  purchase  of the Assets,  and Sellers  agree to report the
sale of such Assets for income tax  purposes  (including  but not limited to, on
their respective income tax returns, before any governmental agency charged with
the collection of income tax or in any judicial proceeding concerning the income
tax  consequences  of  Purchaser's  purchase  or  Sellers'  sale  of the  Assets
hereunder)  in a manner  consistent  with  the  information  agreed  upon by the
parties pursuant to this Section 2.4(b) and contained in its IRS Form 8594.

                                       11
<PAGE>

          Section .1 CLOSING COSTS; TRANSFER TAXES AND FEES. The Company and the
Shareholder  shall be responsible for any documentary and transfer taxes and any
sales,  use or other taxes imposed by reason of the transfer of Assets  provided
hereunder and any deficiency, interest or penalty asserted with respect thereto.
The Purchaser and the Company shall each pay fifty percent  (50%)of the fees and
costs of recording or filing all applicable  conveyancing  instruments described
in Section 4.2(a).

                                   ARTICLE I
                     PURCHASE PRICE ADJUSTMENTS AND EARN-OUT

          Section .1 PURCHASE PRICE ADJUSTMENTS.

          (a) AUDITED CLOSING BALANCE SHEET.

                (2)  Within  sixty  (60) days  after  Closing,  Purchaser  shall
conduct a financial  audit of the Company (the  "Audit")  and shall  prepare and
deliver to the Company an audited balance sheet of the Company as of the Closing
Date  (the  "Audited  Closing  Balance  Sheet"),  which  shall set forth the Net
Working  Capital and  liabilities of the Company as of such date, and the amount
of  the  Purchase  Price   Adjustment.   In  the  event  that  the  transactions
contemplated by this Agreement are not  consummated,  Purchaser agrees to return
all  original  documents to the Company at the end of the Audit and to otherwise
comply with the terms and provisions of that certain  confidentiality  agreement
executed by the Company and Purchaser.

                (3) Following  delivery of the Audited  Closing Balance Sheet to
the Company,  the Company  shall have a period of thirty (30) days to present in
writing  to  Purchaser  any  objections  or  disagreement  with  respect  to the
calculation of the Purchase  Price  Adjustment.  Such notice shall  specify,  in
reasonable detail, the nature and extent of such disagreement.

                (4) If the Company and  Purchaser are unable to resolve any such
disagreement  with respect to the  calculation of the Purchase Price  Adjustment
within ten (10) days after delivery by the Company of the notice  referred to in
Section 3.l(a)(2),  the disagreement shall be submitted for final  determination
to a "Big Five" accounting firm mutually acceptable to the Company and Purchaser
(the  "Independent  Accounting  Firm").  The  Independent  Accounting Firm shall
follow such  procedures  as it deems  appropriate  for  obtaining  the necessary
information in considering  the positions of the Company and Purchaser but shall
not conduct an independent  audit. No party may conduct  discovery in connection
with  the  foregoing.   The   Independent   Accounting  Firm  shall  render  its
determination  on the matter  within  thirty (30) days of its  submission by the
Company and Purchaser,  and such  determination  shall be final,  conclusive and
binding upon  Purchaser  and Sellers.  The closing  balance sheet of the Company
finally agreed upon by the parties shall be the Final Closing Balance Sheet (the
"Final Closing Balance Sheet").

                (5) The fees and  expenses of the  Independent  Accounting  Firm
shall be borne by the party whose asserted  Purchase Price Adjustment is more at
variance from the actual Purchase Price Adjustment  ultimately determined by the
Independent Accounting Firm.

                                       12
<PAGE>

          (a)  ESTIMATED  CLOSING  BALANCE  SHEET.  The Company  shall prepare a
balance sheet as of the Closing Date (the  "Estimated  Closing  Balance  Sheet")
which  shall  set  forth,  among  other  things,  the  current  assets,  current
liabilities  and  outstanding  long term debt of the Company in accordance  with
GAAP.  The  Estimated  Closing  Balance  Sheet  shall  be  prepared  in a manner
consistent with the  presentation of the Company's August 24, 2000 Balance Sheet
attached hereto.

          (b)  PURCHASE  PRICE  ADJUSTMENT.  The  Purchase  Price  shall  be (i)
increased or decreased on a  dollar-for-dollar  basis by the amount by which Net
Working Capital reflected on the Final Closing Balance Sheet exceeds, or is less
than,  respectively,  the Net Working Capital reflected on the Estimated Closing
Balance Sheet, and (ii) increased or decreased on a  dollar-for-dollar  basis by
the amount by which the  liabilities  paid or assumed by Purchaser is less than,
or exceeds,  respectively,  the liabilities  reflected on the Estimated  Closing
Balance  Sheet.  If the  Purchase  Price  Adjustment  requires  a payment to the
Company,  Purchaser  shall make such  payment  in cash.  If the  Purchase  Price
Adjustment  requires a payment to  Purchaser,  Purchaser  shall be  entitled  to
deduct such payment from the Holdback Stock, or, if such funds are insufficient,
the Company or the  Shareholder  shall make such  payment to  Purchaser  in cash
(including by way of set-off). In addition to the preceding,  the Purchase Price
shall be  decreased  (on a dollar for dollar basis  against the  Holdback  Stock
otherwise  distributable  to the  Company) by the  amount,  if any, by which the
Company's  Earnings  (defined  below) for the year ending  December 31, 2000 are
less than $250,000.

          (c)  HOLDBACK  STOCK.  In  order to  secure  (but  not to  limit)  the
Company's  payment  obligations  regarding  any Purchase  Price  Adjustment  and
Sellers'  indemnity  obligations in this  Agreement,  Purchaser shall issue into
escrow  (but  not  deliver)  the  Holdback   Stock.   Purchaser   shall  deliver
certificates  representing the Holdback Stock, less an amount of shares equal in
value (expressed in Closing Date, i.e, November 3, 2000,  closing prices) to any
ultimately determined Purchase Price Adjustments or indemnity claims asserted by
Purchaser,  if any, to the  Company on the date one year from the Closing  Date,
unless a dispute then exists in which case Purchaser  shall continue to hold the
Holdback Stock until the dispute is resolved.

          Section .1 EARN-OUT.

          (a) Purchaser shall calculate the revenue and the Earnings (as defined
herein) of the Business for each year during the Earn-Out Period.  Provided that
the Business  achieves the minimum  revenue target for a particular year (as set
forth on Schedule  3.2  hereto),  if the Earnings for such period is equal to or
greater  than the  "Earnings  Target" for such year as set forth on Schedule 3.2
hereto, then Purchaser shall pay the Company one dollar for each dollar by which
Earnings  exceed the Earnings  Target for the first  $200,000 in excess and $.50
for each dollar  thereafter.  If the Earnings  for a particular  year during the
Earn-Out  Period is less than the  corresponding  Earnings  Target  set forth on
Schedule 3.2 or if the minimum  revenue target is not achieved,  Purchaser shall
have no obligation  to make the Earn-Out  Payment in respect of such year. In no
event shall the Earn-Out  Payments,  before giving  effect to any  deductions or
offsets  provided  for  herein,  be greater  than  $3,000,000  in the  aggregate
pursuant  to this  Section  3.2.  "Earnings"  shall  mean the net  income of the
Business before income taxes (i.e.,  revenues (net of any allowances,  discounts
and intra-company sales), less expenses, commissions,  depreciation and interest
attributable to the Business,  as determined in accordance with GAAP.  Purchaser
shall  operate the Business in a manner in which the Earnings can  reasonably be
determined  and (subject to the  discretion of its Board of Directors)  spend at
least $10,000 per year during the Earn-Out  Period on capital  expenditures  for
the Business.  Purchaser shall maintain  accurate  books,  records and documents
reasonably necessary for the calculation of the Earnings. Representatives of the
Company shall, upon reasonable  request delivered to the Chief Financial Officer
of Purchaser in writing,  have reasonable access during normal business hours to
inspect such books and records at its cost.  Purchaser shall provide the Company
with updates  regarding the Earnings of the Business on a quarterly basis,  such
reports to be provided  within thirty (30) days after the end of each quarter in
the Earn-Out Period.

                                       13
<PAGE>

          (b)  Purchaser  shall  pay  to the  Company  the  applicable  Earn-Out
Payment,  if earned,  within forty-five (45) business days after the last day of
the last month of each year  during the  Earn-Out  Period.  If  Purchaser  shall
determine,  after consultation with its independent auditors,  that the Earnings
Target in respect of a particular year was not achieved,  it shall so notify the
Company prior to the date on which an Earn-Out Payment would have otherwise been
due, and include in such  notification  its  calculation  of the  Earnings.  The
Company  shall have a period of  forty-five  (45) days  thereafter to present in
writing  to  Purchaser  any  objections  or  disagreement  with  respect  to the
calculation of Earnings.  Such notice shall specify,  in reasonable  detail, the
nature and extent of such disagreement.

          (c) If the  Company  and  Purchaser  are  unable to  resolve  any such
disagreement  with respect to the  calculation  of the Earnings  within ten (10)
days  after  delivery  by the  Company  of the  notice  referred  to above,  the
disagreement  shall be  submitted  for final  determination  of the  Independent
Accounting Firm. The Independent Accounting Firm shall follow such procedures as
it deems appropriate for obtaining the necessary  information in considering the
positions  of the Company  and  Purchaser  but shall not conduct an  independent
audit nor any  discovery.  The  Independent  Accounting  Firm  shall  render its
determination  on the matter within 30 days of its submission by the Company and
Purchaser,  and such determination  shall be final,  conclusive and binding upon
Purchaser and the Company.

          (d) The fees and expenses of the Independent  Accounting Firm shall be
borne by the party whose asserted Earnings  calculation is more at variance from
the actual Earnings ultimately determined by the Independent Accounting Firm.


                                    ARTICLE I
                                     CLOSING

          Section  .1  CLOSING.  The  Closing of the  transactions  contemplated
herein (the "Closing") shall be held at 8:30 a.m. local time on the Closing Date
at the offices of Katten  Muchin Zavis,  1999 Avenue of the Stars,  Los Angeles,
California, unless the parties hereto otherwise agree.

          Section .1 CONVEYANCES AT CLOSING.

          (a) COMPANY DELIVERIES.  To effect the sale of the Assets, in addition
to the conditions set forth in Article VIII, the Company shall,  at the Closing,
execute and deliver to Purchaser:

                (2) a bill of sale in substantially  the form attached hereto as
Exhibit C;

                                       14
<PAGE>

                (3)  Assignment  of Real  Property  Lease,  in the form attached
hereto as Exhibit D;

                (4) Assignment of Personal  Property Lease, in the form attached
hereto as Exhibit E;

                (5) Assignments of the Company's  rights,  title and interest to
the name "Creative Digital" and all variations thereof);

                (6) the Ancillary Agreements;

                (7) the  Shareholder  Release  in the  form of  Exhibit  F;

                (8)  Releases of any  Encumbrances  on the Assets (the  "Release
Documents"); and

                (9) such other instruments as shall be requested by Purchaser to
vest in Purchaser  title in and to the Assets in accordance  with the provisions
hereof.

          (a)  PURCHASER  DELIVERIES.  To  effect  the  sale of the  Assets  and
assumption  of the  Assumed  Liabilities  referred  to in Article II hereof,  in
addition to the  conditions set forth in Article IX herein,  Purchaser  shall at
the  Closing  deliver to Sellers (i) the Cash  Payment;  (ii) an  instrument  or
instruments  of  assumption  substantially  in the form  attached  as Exhibit G,
evidencing  Purchaser's  assumption,  pursuant  to Section  2.2,  of the Assumed
Liabilities (the "Assumption Document");  (iii) a certified,  irrevocable letter
of instruction to the Company's  transfer agent to immediately issue and deliver
a legended  certificate  representing  the Common Stock  portion of the Purchase
Price  (less  the  Holdback  Stock)  to  the  Company  and  (iv)  the  Ancillary
Agreements.

          (b) FORM OF INSTRUMENTS.  To the extent that a form of any document to
be  delivered  hereunder is not attached as an exhibit  hereto,  such  documents
shall be in form and substance, and shall be executed and delivered in a manner,
satisfactory to Purchaser and the Company.

          (c) CERTIFICATES; OPINIONS. On the Closing Date, Purchaser and Sellers
shall deliver the certificates,  opinions of counsel and other matters described
in Articles VIII and IX.

          (d) CONSENTS. Sellers shall deliver all Permits that are transferrable
and any other third party consents required for the valid transfer of the Assets
as contemplated by this Agreement,  including the consents specified on Schedule
5.4.

                                       15
<PAGE>

                                   ARTICLE I
                    REPRESENTATIONS AND WARRANTIES OF SELLERS

         The  Company  and  the  Shareholder,   jointly  and  severally,  hereby
represent and warrant to Purchaser that:

          Section  .1  ORGANIZATION   AND  GOOD  STANDING.   The  Company  is  a
corporation,  duly  organized,  validly  existing and in good standing under the
laws of the  jurisdiction  of  California,  and the Company is duly qualified or
authorized to do business in each  jurisdiction  in which it does  business,  or
owns  property,  or where  such  qualification  or  authorization  is  otherwise
required by virtue of its  presence  or  activities.  Schedule  5.l sets forth a
complete  and  correct  list of all  jurisdictions  in which  the  Company  does
business or is  otherwise  required to be qualified  or  authorized  to transact
business  or own  property.  The  Shareholder  is the  only  record  holder  and
beneficial owner of the capital stock of the Company.

          Section .1 ASSETS.  Excluding  the Leased Real Property and the Leased
Personal Property, the Company owns, and will transfer good and marketable title
to,  the  Assets  and upon the  consummation  of the  transactions  contemplated
hereby,  Purchaser will acquire good and marketable  title to all of the Assets,
free and clear of any  Encumbrances.  The Assets include without  limitation all
assets  used in the  conduct  of the  Business  or  located  at the  Facilities.
Schedule 2.1 contains  accurate lists and summary  descriptions  of all tangible
Assets.  All tangible assets and properties  which are part of the Assets are in
good  operating  condition  and repair and are usable in the ordinary  course of
business  and conform in all  material  respects to all  applicable  Regulations
(including Environmental Laws) relating to their construction, use and operation
(it being understood by Purchaser that the Equipment is no longer under warranty
from the original manufacturer.)

          Section .2 LICENSES AND PERMITS.  The Company is duly  licensed,  with
all requisite permits and qualifications,  as required by applicable law for the
purpose of  conducting  its business or owning its  properties  or both, in each
jurisdiction  in which  it does  business  or owns  property  or in  which  such
license,  permit or qualification is otherwise required and where the failure to
have such license,  permit or qualification would have a material adverse effect
on the assets,  liabilities (whether absolute, accrued contingent or otherwise),
condition (financial or otherwise), results of operations, prospects or business
of the Company. The Company is in compliance with all such licenses, permits and
qualifications. Schedule 5.3 sets forth a list of all such licenses, permits and
qualifications,  and the  expiration  dates  thereof.  There are no  proceedings
pending  or,  to the  best of  Sellers'  knowledge,  threatened,  to  revoke  or
terminate any such presently existing license, permit or qualification, and each
such presently  existing license,  permit or qualification can be renewed in the
ordinary course of business.

          Section .3 NO BREACH.  Neither  the  execution  and  delivery  of this
Agreement nor the consummation of the Transactions will (A) violate, result in a
breach of any of the terms or provisions of,  constitute a default (or any event
that, with the giving of notice or the passage of time or both, would constitute
a  default)  under,  result in the  acceleration  of any  indebtedness  under or
performance  required by, result in any right of  termination  of,  increase any
amounts payable under,  decrease any amounts receivable under,  change any other
rights pursuant to, or conflict with, any provision of the Company's articles of
incorporation or bylaws,  any agreement,  indenture or other instrument to which
any of the Sellers is a party or by which any of its  properties  are bound,  or
any  judgment,  decree,  order  or  award  of any  court,  governmental  body or
arbitrator  (domestic  or  foreign)  applicable  to any of the  Sellers,  or (B)
require the  Company to obtain any  authorization,  consent,  approval or waiver
from,  or make any filing with,  any Person,  court or public body or authority,
except such consents as are set forth on Schedule 5.4.

                                       16
<PAGE>

          Section  .4  AUTHORITY.  The  Company  has the right to sell,  convey,
transfer,  assign and deliver the Assets to Purchaser hereunder.  This Agreement
and all agreements and  instruments  herein  contemplated  to be executed by any
Seller have been duly authorized, executed and delivered by each such Seller and
constitutes  the valid and binding  obligation  of each Seller,  enforceable  in
accordance with its terms. There exist no options,  warrants, equity securities,
calls, rights, preemptive rights,  commitments or agreements of any character to
which the Company is a party or by which it is bound  obligating  the Company to
issue,  deliver or sell,  or cause to be issued,  delivered or sold,  additional
shares of capital stock of the Company  obligating  the Company to call,  right,
commitment or agreement. There are no voting trusts, proxies or other agreements
or understandings with respect to the shares of capital stock of the Company.

          Section .5  SUBSIDIARIES.  The Company  has no equity  interest in any
corporation, partnership, limited liability company or similar entity.

          Section .6 FINANCIAL STATEMENTS.

          (a) The balance sheets of the Company, at _____________,  ___________,
and ___________ (individually,  a "Balance Sheet" and collectively, the "Balance
Sheets")  and  the  statements  of  operations  and  retained  earnings  and the
statements  of cash flows of the Company for each of the 12 month  periods  then
ended and notes  thereto  (collectively,  the  "Financials"),  true and  correct
copies of which are attached hereto as Schedule  5.7(a),  (i) have been prepared
from the books and records of the Company in accordance  with GAAP  consistently
applied with prior periods, and (ii) are complete and correct and fairly present
the financial condition and results of operations of the Company as of the dates
and for the periods indicated thereon.  The statements of operations included in
the  Financials  do not contain any items of  extraordinary  income or any other
income not earned in the ordinary course of business.

          (b) The unaudited balance sheet as of August 24, 2000 (the "August 24,
2000 Balance  Sheet"),  and the related  statements of  operations  and retained
earnings  and  statements  of cash flows and notes  thereto  (collectively,  the
"August  Financials"),  true and correct copies of which are attached  hereto as
Schedule  5.7(b),  (i) have been  prepared  from the books  and  records  of the
Company in accordance  with GAAP  consistently  applied with prior periods,  and
(ii) are complete and correct and fairly  present the  financial  condition  and
results  of  operations  of the  Company  as of the  dates  and for the  periods
indicated thereon.

          (c) The Financials  have been reviewed by the  independent  accounting
firm of R.A.  Bianchi & Associates  whose  reports  thereon are part of Schedule
5.7. The books of accounts of the Company have been  maintained  in all material
respects in accordance  with sound  business  practices,  and there have been no
transactions  involving  the Company  that  properly  should have been set forth
therein in accordance with generally  accepted  accounting  principles that have
not been accurately so set forth.

                                       17
<PAGE>

          Section .7 ABSENCE OF CERTAIN CHANGES. Since August 1, 2000, there has
not occurred:

          (a) Any adverse change in the assets,  liabilities  (whether absolute,
accrued, contingent or otherwise),  condition (financial or otherwise),  results
of operations,  prospects or business of the Company not reflected in the August
2000 Balance Sheet and that has resulted in or reasonably could result in a loss
to the Company;

          (b) Any  increase  in  indebtedness  over the level  reflected  on the
August  2000  Balance  Sheet,  any  guarantee  by  any  of  the  Sellers  of any
obligation,  or any mortgage,  pledge or encumbrance on any of the properties or
assets of the Company;

          (c) Any amendment or modification of any Material Contract (as defined
below),  or any  termination  of any  agreement  that would have been a Material
Contract were such agreement in existence on the date hereof;

          (d) Any entering  into of any written or oral  agreements,  contracts,
commitments or transactions that extend beyond the first  anniversary  hereof or
have obligations thereunder in excess of $1,000,  including any purchase or sale
of any assets.

          (e) Any increase in the compensation  (including,  without limitation,
the rate of  commissions)  payable  to, or any  payment  of a cash bonus to, any
employee or agent of, or consultant to, the Company;

          (f) Any  alteration  in the manner of keeping  the books,  accounts or
records of the Company, or in the accounting practices therein reflected;

          (g) Any  declaration or payment of any dividends or  distributions  by
the Company,  any  acquisition or redemption by the Company of any of its equity
securities or any loan by any Seller to any other Seller;

          (h) Any loss or  threatened  loss of a customer or  customers to which
the Company had annual  sales in excess of $20,000  during the past two years or
to which  Sellers  expects the Company to have annual sales in excess of $50,000
during calendar years 2000-2001;

          (i) Any material  damage or destruction  to, or loss of, any assets or
property  owned,  leased  or used by the  Company  (whether  or not  covered  by
insurance); or

          (k) Any  agreement to do any of the things  described in the preceding
clauses (a) - (h) of this Section 5.8.

          Section .8  PROJECTIONS.  The  projected  financial  statements of the
Company  attached  hereto as Schedule  5.9 set forth the best  estimates  by the
Company of the  financial  positions and results of operations of the Company at
the dates and for the periods set forth  therein and neither the Company nor any
Seller knows of any reason that any of the assumptions upon which such projected
consolidated financial statements are based is not reasonable.

                                       18
<PAGE>

          Section  .9  ABSENCE  OF   UNDISCLOSED   LIABILITIES.   There  are  no
liabilities of the Company whether absolute,  accrued,  contingent or otherwise,
and whether  due or to become  due,  not  reflected  on or  reserved  for on the
Estimated Closing Balance Sheet, except as set forth in Schedule 5.10 and except
for  executory  obligations  under  Material  Contracts  (as defined  below) and
immaterial  contracts  for the  purchase  of  supplies  or the sale of  products
incurred in the ordinary course of business. There are no commitments, contracts
or  undertakings  covering the  purchases of items of inventory in excess of the
Company's  normal  operating  requirements or covering the purchases of items of
machinery  and  equipment  in excess of the  requirements  of the  Company.  The
Company  is not a party  to,  nor  bound by,  nor has bid upon any  contract  or
agreement  that is adverse to the assets,  condition  (financial or  otherwise),
business or  prospects of the Company,  that will  require  future  expenditures
(including  incurred  costs and  allocated  overhead  and  selling,  general and
administrative  expense) in excess of  reasonably  anticipated  receipts by more
than $10,000 in the aggregate, or on which the Company expects to lose in excess
of $10,000 in the aggregate.

          Section .10 ACCOUNTS RECEIVABLE. Schedule 5.11 is an accurate aging of
the  accounts,  notes  and  other  receivables  of the  Company  (the  "Accounts
Receivable")  at the Closing Date.  The Accounts  Receivable as of such date and
any Accounts  Receivable arising since such date are fully  collectible,  net of
the reserves set forth in the  Estimated  Closing  Balance  Sheet,  all of which
reserves are adequate and in accordance with GAAP.

          Section .11 REAL PROPERTY; REAL PROPERTY LEASES. Schedule 5.12(a) sets
forth a complete and correct summary description of each parcel of real property
(collectively,  the "Real Property")  leased to the Company or otherwise used by
the Company in connection  with the Business,  which  description  consists of a
legal   description   for  each  such  parcel   owned  by  the  Company  and  an
identification  of each  lease (a  "Lease")  of real  property  under  which the
Company is either a lessee, sublessee,  lessor or sublessor. Except as set forth
in Schedule 5.12(a):

          (a) The Company does not own any Real Property;

          (b) Each Lease is a valid and binding  obligation of the Company,  and
each such Lease is a valid and binding  obligation  of each of the other parties
thereto;

          (c) None of the  Company  nor any other party to a Lease is in default
with  respect  to any  material  term or  condition  thereof,  and no event  has
occurred that,  with the passage of time or the giving of notice or both,  would
constitute  a  default  thereunder  or  would  cause  the  acceleration  of  any
obligation  of any party thereto or the creation of a lien or  encumbrance  upon
any asset of any of the Company;

          (d) All of the buildings,  fixtures and other improvements  located on
the Real Property are in good operating condition and repair, and to the best of
the Company's  knowledge the operation  thereof as presently  conducted does not
violate  any  applicable  code,  zoning  ordinance  or other  applicable  law or
regulation;

                                       19
<PAGE>

          (e) The Company holds valid and effective  certificates  of occupancy,
underwriters'  certificates  relating  to  electrical  work,  zoning,  building,
housing,  safety,  fire and health  approvals and all other permits and licenses
required by applicable law relating to the operation of the Real Property; and

          (f) The Company has not experienced during the two years preceding the
date hereof any material  interruption in the delivery of adequate quantities of
any utilities (including, without limitation,  electricity, natural gas, potable
water, and fuel oil) or other public services  (including,  without  limitation,
sanitary and industrial  sewer  service)  required by it in the operation of its
business during such period.

          Section  .12  ENVIRONMENTAL  MATTERS.  Except as set forth in Schedule
5.13:

          (a) To the best of its knowledge, the Company is, and at all times has
been, in full compliance with all Environmental Protection Laws;

          (b) The Company has  obtained or has timely  applied for all  permits,
licenses and other authorizations under Environmental  Protection Laws which are
required in  connection  with its business and  operations,  all of which are in
full force and effect. The Company is in material  compliance with all terms and
conditions of such permits, licenses and authorizations, no action or proceeding
which  reasonably could be expected to result in the revocation or suspension of
any such permits, licenses and authorizations is pending or threatened,  and the
Company  has not engaged in any conduct  which  reasonably  could be expected to
cause revocation or suspension of any of its permits, licenses or authorizations
under Environmental Protection Laws;

          (c) During the period of the Company's  ownership,  lease,  occupation
and  operation  of the Real  Property or any other  property  previously  owned,
leased,  occupied or operated by the Company, no portion of the Real Property or
such other property (i) has been or is being used in any manner for the storage,
disposal,  or treatment of any  Regulated  Substance,  except for the  temporary
storage of  Regulated  Substances  in  material  compliance  with  Environmental
Protection  Laws; (ii) contained or contains  underground  tanks of any type, or
any materials  containing  PCBs or any asbestos;  or (iii) contained or contains
any surface or  sub-surface  conditions  that  constitute,  or that  through the
physical  effects  of the  passage of time may  constitute,  a public or private
nuisance or otherwise caused any liability under Environmental Protection Laws;

          (d) There is not now nor has  there  been any  contamination  of soil,
groundwater or other  environmental media by or with any Regulated Substance on,
in, under or about the Real  Property or any other  property  previously  owned,
leased,  occupied or operated by any of the Sellers which could create liability
under the Environmental Protection Laws;

          (e) Except for air emissions in material compliance with Environmental
Protection Laws, during the period of the Company's ownership, lease, occupation
and  operation  of the Real  Property or any other  property  previously  owned,
leased, occupied or operated by the Company, there has been no spill, discharge,
disposal, leak, emission, injection, escape, dumping or release of any Regulated
Substance on, in, under or about the Real Property or such other property by the
Company or for which the Company has any liability;

                                       20
<PAGE>

          (f) No portion of the Real Property or any other  property  previously
owned, leased, occupied or operated by the Company has been designated,  listed,
or identified in any manner by the EPA, or any other  federal,  state,  local or
other  governmental  agency or  instrumentality,  or under and  pursuant  to any
Environmental  Protection  Law  as a  hazardous  waste  or  hazardous  substance
disposal or removal site, Superfund or clean-up site, or candidate for clean-up,
investigation, removal or closure pursuant to any Environmental Protection Law;

          (g) None of the  Sellers  has  received  at any time prior to the date
hereof a summons,  citation,  notice, directive,  letter or other communication,
written  or  oral,  from the EPA or any  other  federal,  state,  local or other
governmental agency or instrumentality,  authorized pursuant to an Environmental
Protection Law,  concerning any intentional or unintentional  action or omission
(except any  pertaining  to emissions of fugitive  dust and other  non-hazardous
particulates that are routinely  corrected) by any of the Sellers constituting a
violation or potential violation of any Environmental Protection Law, including,
without  limitation,  violations relating to the releasing,  spilling,  leaking,
pumping,  pouring,  emitting,  emptying,  dumping or otherwise  disposing of any
Regulated  Substance into the environment  resulting in damage thereto or to the
wildlife, biota and other natural resources, and there exist no facts that would
form the basis for a finding of such a violation; and

          (h) None of the  Sellers  has  received  at any time prior to the date
hereof any summons, citation, notice, directive,  letter or other communication,
written or oral, of any  potential  claim or liability  under any  Environmental
Protection Law, including, without limitation, any notification as a potentially
responsible  party with respect to any Superfund or other clean-up  site.  There
are no events,  conditions,  circumstances,  activities,  practices,  incidents,
actions or plans at or concerning  the Real Property or the operations of any of
the Sellers which may (i) interfere with or prevent continued  compliance by any
of the Sellers  with any  Environmental  Protection  Law,  (ii) give rise to any
claim or liability  under any  Environmental  Protection  Law, or (iii) form the
basis for any claim,  action, suit,  proceeding,  hearing or investigation under
any Environmental Protection Law.

          (i) Except as set forth on Schedule  5.13(i),  no Seller has  received
any notice from a  governmental  authority or otherwise of any health problem of
any current or former  employee  which in any way is or is alleged to be related
to the operation of the Business.

          Section  .13  INTANGIBLE  PERSONAL  PROPERTY.  Except  as set forth on
Schedule 5.14:

          (a) There are no (i) patent, patent applications, copyright, copyright
applications,  trademark,  trademark  applications  (in any such  case,  whether
registered  or  required  to be  registered  in the United  States of America or
elsewhere),  process,  invention,  trade secret,  trade name,  computer program,
formula and customer list (collectively,  the "Intangible Personal Property") of
Sellers related to, or necessary to continue the operation of, the Business,  or
(ii) licenses or similar agreements or arrangements ("Licenses") to which any of
the Sellers is a party  either as  licensee  or  licensor  for each such item of
Intangible Personal Property.

                                       21
<PAGE>

          (b)  There are no  pending  actions  or other  judicial  or  adversary
proceedings  involving the Company  concerning  any item of Intangible  Personal
Property,  and, no such action or proceeding is threatened and no claim or other
demand  has  been  made or  threatened  by any  Person  relating  to any item of
Intangible Personal Property;

          (c) The  Company  has the  right  and  authority  to use each  item of
Intangible  Personal  Property in connection with the conduct of its business in
the manner presently conducted and to convey such right and authority,  and such
use does not conflict  with,  infringe upon or violate any patent,  trademark or
registration of any other person or entity;

          (d) There are no outstanding or threatened  disputes or  disagreements
with respect to any License; and

          (e) The  conduct  by each of the  Sellers  of its  business  does  not
conflict  with the valid  patents,  trademarks,  trade secrets or trade names of
others.

          Section .14 LABOR AND EMPLOYMENT AGREEMENTS.

          (a)  Schedule  5.15 sets  forth a  complete  and  correct  list of the
following:

                (2)  Each  employment,  consulting,  collective  bargaining  and
similar  agreement,  whether written or oral, to which the Company is a party or
by which it is bound; and

                (3) The name of (A) each  employee of the Company,  and (B) each
agent of or consultant to the Company.

          As used in this Section 5.15, the word "agreement"  includes both oral
and written contracts, understandings, arrangements and other agreements.

          (a) The Company  has  complied  with all  applicable  laws,  rules and
regulations relating to the employment of labor, including,  without limitation,
those  related  to wages,  hours,  collective  bargaining  and the  payment  and
withholding  of taxes and other sums as  required  by  appropriate  governmental
authorities  and has withheld  and paid to the  appropriate  authorities,  or is
holding for payment not yet due to such authorities,  all amounts required to be
withheld from such employees and is not liable for any arrears of wages,  taxes,
penalties or other sums for failure to comply with any of the foregoing.

          (b) No unfair labor practice  complaint is pending against the Company
before the National Labor Relations Board or any federal,  state or local agency
and no labor strike,  grievance or other labor dispute  affecting the Company is
pending or threatened.

          (c) Except as set forth in Schedule  5.15,  no  material  organization
effort, and no sex discrimination,  racial discrimination, age discrimination or
other employment-related allegation, claim, suit or proceeding, has been made or
is pending or  threatened  with  respect to the  employees of the Company and no
such  effort,  allegation,  claim,  suit or  proceeding  has been made,  raised,
brought or  threatened  within the  three-year  period prior to the date of this
Agreement.

                                       22
<PAGE>

          (d) No arbitration  proceeding  arising out of or under any collective
bargaining  agreement  applicable to the Company is pending and no basis for any
such proceeding exists.

          (e) All reasonably  anticipated  obligations  of the Company,  whether
arising  by  operation  of  law,  contract,   past  custom  or  otherwise,   for
unemployment  compensation  benefits,  pension  benefits,   advances,  salaries,
bonuses,  vacation and holiday pay,  sick leave and other forms of  compensation
payable  to the  employees  or agents of any of the  Company  in  respect of the
services  rendered by any of them on or prior to the date of the Financials have
been paid or adequate  accruals therefor have been made in the books and records
of the  Company  and in the  Financials.  All such  obligations  in  respect  of
services  rendered  on or prior to the date hereof have been paid as of the date
hereof,  or adequate  accruals  therefor  have been made on the Interim  Balance
Sheet,  in  accordance  with  GAAP.  All  accrued  obligations  of  the  Company
applicable to its employees, whether arising by operation of law, contract, past
custom  or  otherwise,  for  payments  to  trusts  or  other  funds  or  to  any
governmental agency, with respect to unemployment  compensation benefits, social
security  benefits  or  any  other  benefits  for  employees,  with  respect  to
employment of said employees  through the date of the Financials  have been paid
or  adequate  accruals  therefor  have been made on the books and records of the
Company and in the Financials in accordance with GAAP. All such obligations with
respect to employment of employees  through the date hereof have been paid as of
the date hereof,  or adequate  accruals therefor have been made on the Estimated
Closing Balance Sheet, in accordance with GAAP.

          Section .15 EMPLOYEE BENEFIT PLANS: ERISA.

          (a) Except as set forth in Section 5.16(a) of the Disclosure Schedule,
the Company (i) does not  maintain,  contribute to or have any  obligation  with
respect to, and none of the  employees of the Business is covered by, any bonus,
deferred  compensation,  severance  pay,  pension,  profit-sharing,  retirement,
insurance,  or other fringe benefit plan,  arrangement  or practice,  written or
otherwise,  or any other "employee  benefit plan," as defined in Section 3(3) of
ERISA,  whether formal or informal  (collectively,  the "Plans"),  (ii) is not a
party to a contract  for the  employment  of any employee of the Business or any
other  person  who  renders  services  to the  Business,  or (iii)  has no ERISA
Affiliates  other than another Seller.  None of the Plans is, and the Company or
any of its  ERISA  Affiliates  has  ever  maintained  or  had an  obligation  to
contribute  to,  (i) a plan  subject  to  Section  412 of the  Code or  Title I,
Subtitle B, Part 3 of ERISA, (ii) a "multi employer plan," as defined in Section
3(37) of ERISA (a "Multi- employer Plan"),  (iii) a "multiple employer plan," as
defined in ERISA or the Code, or (iv) a funded welfare  benefit plan, as defined
in  Section  419 of the  Code.  The  Company  does  not have  any  agreement  or
commitment  to create or  contribute  to any  additional  Plan,  enter  into any
additional  employment  agreement  or to modify or change any  existing  Plan or
employment  agreement.  Section  5.16(a) of the Disclosure  Schedule  contains a
complete and accurate list of the following information for each employee of the
Business  (including  each  employee  who is on a leave of  absence or on layoff
status): name, employer, job title(s),  date of hire, current salary and benefit
arrangements, years of service for purposes of eligibility, vesting, and benefit
determination under any of the Plans, and current status (e.g., active employee,
on leave,  etc.). None of the employees of the Business is a "leased  employee,"
as defined in Section 414(n) of the Code.

                                       23
<PAGE>

          (b) With respect to each Plan, the Company has heretofore delivered or
caused to be delivered to Purchaser true, correct and complete copies of (i) all
documents  that  comprise the most current  version of such Plan,  including any
related trust agreements,  insurance  contracts,  or other funding or investment
agreements and any amendments  thereto,  and (ii) with respect to each Plan that
is an  "employee  benefit  plan," as defined in Section  3(3) of ERISA,  (A) the
three most recent Annual Reports (Form 5500 Series) and  accompanying  schedules
for each of the Plans for which such a report is required,  (B) the most current
summary plan  description (and any summary of material  modifications),  (C) the
three most recent certified financial statements for each of the Plans for which
such a statement is required or was prepared,  and (D) for each Plan intended to
be  "qualified"  within the meaning of Section  401(a) of the Code, all Internal
Revenue Service  determination  letters issued with respect to such Plan. Except
as set forth in Section  5.16(b) of the Disclosure  Schedule,  since the date of
the foregoing documents, there has not been any material change in the assets or
liabilities of any of the Plans or any change in their terms and operations that
could  reasonably  be expected  to affect or alter the tax status or  materially
affect the cost of maintaining such Plan, and none of the Plans has been or will
be amended prior to the Closing Date. Each of the Plans can be amended, modified
or  terminated  by the  Purchaser  within a period of thirty (30) days,  without
payment of any additional  compensation  or amount or the additional  vesting or
acceleration  of any such  benefits,  except to the extent that such  vesting is
required  under the Code upon the  complete or partial  termination  of any Plan
intended to be qualified within the meaning of Section 401(a) of the Code.

          (c) The Company has performed and complied in all respects with all of
its obligations  under and with respect to the Plans, and each of the Plans has,
at all times,  in form,  operation and  administration  complied with its terms,
and, where  applicable,  the requirements of all applicable laws. Each Plan that
is intended to be  "qualified"  within the meaning of Section 401(a) of the Code
has been  determined  by the Internal  Revenue  Service to be so  qualified  and
nothing has occurred that reasonably  could be expected to adversely affect such
qualified status.

          (d) The Company has made all contributions with respect to a Plan that
are required to have been made as of the date hereof under the terms thereof, or
under the terms of any related insurance contract, or any applicable law.

          (e) All Plans  that are group  health  plans  have  been  operated  in
compliance with the continuation  coverage  requirements of Section 4980B of the
Code (and any predecessor  provisions) and Part 6 of Title I of ERISA ("COBRA").
The Company has no obligation to provide  health  benefits or other  non-pension
benefits  to any  retired  or other  former  employees,  except as  specifically
required by COBRA.

          (f) None of the Sellers nor any other "disqualified  person" or "party
in interest," as defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively, has engaged in any "prohibited transaction," as defined in Section
4975 of the Code or Section 406 of ERISA,  with respect to any Plan, and none of
the Sellers is aware of any fiduciary violations under ERISA with respect to any
Plan,  that could  subject a Seller (or any  employee  thereof) to any  material
penalty or tax under  Section  502(i) of ERISA or Sections  4971 and 4975 of the
Code.

                                       24
<PAGE>

          (g) Except as set forth in Section 5.16(g) of the Disclosure Schedule,
with respect to any Plan: (i) no filing,  application or other matter is pending
with the Internal Revenue Service, the Pension Benefit Guaranty Corporation, the
United States Department of Labor or any other  governmental body, (ii) there is
no action,  suit or claim  pending  (and the Company is unaware of any basis for
such a claim),  other than routine  claims for benefits,  and (iii) there are no
outstanding liabilities for taxes, penalties or fees.

          (h) The Company has not  incurred  any  liability or taken any action,
and is not  aware of any event  that has  occurred  or is likely to occur,  that
could cause any one of them to incur any  liability (i) under Section 412 of the
Code or Title IV of ERISA with respect to any "single-employer plan" (as defined
in  Section  4001(a)(15)  of ERISA),  (ii) on  account of a partial or  complete
withdrawal  (as defined in Sections 4203 and 4205 of ERISA,  respectively)  with
respect to any Multi-employer  Plan, (iii) on account of unpaid contributions to
any Multi-employer Plan, or (iv) on account of any reorganization, insolvency or
termination of any Multi-employer Plan.

          (i) Neither the  execution  and  delivery  of this  Agreement  nor the
consummation of any or all of the Transactions  will: (i) entitle any current or
former employee of the Business to severance pay,  unemployment  compensation or
any similar payment,  (ii) accelerate the time of payment or vesting or increase
the amount of any compensation  due to any such employee or former employee,  or
(iii)  directly or indirectly  result in any payment made or to be made to or on
behalf of any person to constitute a "parachute  payment"  within the meaning of
Section 280G of the Code.

          Section .16 MATERIAL CONTRACTS AND RELATIONSHIPS.

          (a) Except for agreements  specifically  identified on other schedules
hereto,  Schedule  5.17(a)  sets  forth  a  complete  and  correct  list  of the
following:

                (2) All  agreements  (or groups of  agreements  with one or more
related  entities) between the Company and any customer or supplier in excess of
$5,000 and all agreements and purchase orders extending beyond two (2) months;

                (3) All  agreements  that relate to the  borrowing or lending by
the Company of any money or that create or continue  any material  claim,  lien,
charge or encumbrance  against, or right of any third party with respect to, any
asset of the Company;

                (4)  All  agreements  by  which  the  Company  leases  any  real
property,  has the right to lease any real property or leases capital  equipment
or leases  any other  personal  property,  and all other  leases  involving  the
Company as lessee or lessor;

                (5) All  agreements  to which the  Company is a party not in the
ordinary course of business;

                (6)  All  contracts  or   commitments   relating  to  commission
arrangements with others;

                                       25
<PAGE>

                (7) All license agreements, whether as licensor or licensee;

                (8)  All   agreements   between   the   Company  and  its  sales
representatives;

                (9)  All  agreements  between  the  Company  and  its  customers
relating to volume  rebates or price  reductions;

                (10) All other  agreements to which the Company is a party or by
which it is bound and that involve $5,000 or more or that extend for a period of
two (2) months or more;

                (11) All other  agreements to which the Company is a party or by
which it is bound and that are or may be  material  to the  assets,  liabilities
(whether absolute,  accrued,  contingent or otherwise),  condition (financial or
otherwise), results of operations, business or prospects of the Company; and

                (12) A current list of the Company's active customers.

As used in this  Section  5.17,  the word  "agreement"  includes  both  oral and
written   contracts,   leases,   understandings,   arrangements  and  all  other
agreements.  The term  "Material  Contracts"  means the agreements of any of the
Sellers  required to be  disclosed  on Schedule  5.17(a),  including  agreements
specifically identified in other schedules hereto.

          (a) All of the Material  Contracts  are in full force and effect,  are
valid and binding and are enforceable in accordance with their terms in favor of
the  Company.  There are no material  liabilities  of any party to any  Material
Contract  arising  from any breach or default of any  provision  thereof  and no
event has  occurred  that,  with the  passage of time or the giving of notice or
both, would constitute a breach or default by any party thereto.

          (b) The Company (i) has  fulfilled all material  obligations  required
pursuant to each  Material  Contract to have been  performed  by it prior to the
date  hereof,  and  (ii)  as far as  reasonably  foreseeable  based  on  current
conditions,  will be able to fulfill all of its  obligations  under the Material
Contracts that remain to be performed after the date hereof.

          (c)  Schedules  5.17(b),  (c) and (d) set forth a complete and correct
list of each (i) customer (or related group of customers)  with whom the Company
did  $10,000 or more of  business  during the last  fiscal  year or the  current
fiscal year, (ii) supplier (or related group of suppliers) with whom the Company
did  $10,000 or more of  business  during the last  fiscal  year or the  current
fiscal year, and (iii) agent (or related group of agents) or Representative  (or
related  group of  Representatives)  who was paid $10,000 or more by the Company
during the last fiscal year or the current fiscal year, respectively.

          (d)  Each  Seller  has  maintained  and  continues  to  maintain  good
relations with the Company's customers,  suppliers and agents and, except as set
forth in Schedule  5.17(e),  Sellers do not reasonably  expect that any customer
(to which the Company had annual sales in excess of $10,000  during the past two
years),  supplier  or agent will stop doing  business  with the  Company or will
materially  change the terms on which such customer,  supplier or agent has done
business with the Company in the past.

                                       26
<PAGE>

          Section .17 INVENTORY.  Except for inventory that is excess,  damaged,
obsolete,  or outdated or requires rework, for which the Company has established
an adequate  reserve in the Estimated  Closing  Balance Sheet in accordance with
GAAP the inventory (the "Inventory")  reflected in the Estimated Closing Balance
Sheet and acquired  since the date of such Balance  Sheet (and not sold prior to
the date hereof or reserved for in the Estimated  Closing  Balance Sheet is good
and  merchantable  material,  of a quantity and quality saleable in the ordinary
course of business of the Company at normal profit  margins,  and carried on the
books and records of the Company on the lower of cost (on a first in,  first-out
basis) or market basis consistent with the past practices of the Company.

          Section .18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company
nor any  employee,  agent or other  person  acting on behalf of the Company has,
directly or indirectly,  given or agreed to give any gift or similar  benefit to
any  customer,  supplier,   competitor  or  governmental  employee  or  official
(domestic  or  foreign)  (a) that  would  subject  the  Company to any damage or
penalty in any civil,  criminal or governmental  litigation or proceeding or (b)
that, if not given in the past,  would have had a material adverse effect on the
assets,  liabilities  (whether  absolute,  accrued,  contingent  or  otherwise),
condition (financial or otherwise), results or operations, prospect, or business
of the Company.

          Section  .19  COMPLIANCE  WITH LAWS.  Except as set forth on  Schedule
5.20,  the  operation,  conduct and ownership of the property or business of the
Company  are  being,  and at all times  have been,  conducted,  in all  material
respects, in full compliance with all federal,  state, local and other (domestic
and  foreign)  laws,  rules,   regulations  and  ordinances  (including  without
limitation,  those relating to employment  discrimination,  occupational safety,
conservation  or corrupt  practices)  and all judgments and orders of any court,
arbitrator or  governmental  authority  applicable to it. Except as set forth on
Schedule 5.20, there are no proposed federal,  state,  local and other (domestic
or  foreign)  law,  rule,  regulation,   ordinance,   order,  judgment,  decree,
governmental  taking,  condemnation or other proceeding that would be applicable
to the  business,  operations or properties of the Company and that could have a
material adverse effect on the assets,  liabilities (whether absolute,  accrued,
contingent  or  otherwise),  condition  (financial  or  otherwise),  results  of
operations, business or prospects of the Company.

          Section .20 LITIGATION. Except as set forth on Schedule 5.21, there is
no legal,  administrative,  arbitration or other proceeding, or any governmental
investigation,  pending or threatened against or otherwise affecting the Company
or any of its assets.  The Company has given in a timely  manner to its insurers
all notices required to be given under each of its insurance  policies,  if any,
with respect to all of the claims and actions disclosed on Schedule 5.21, and no
insurer has denied  coverage of any of such claims or actions or rejected any of
the claims with respect thereto.

          Section .21 TAXES. Except as set forth on Schedule 5.22:

          (a) The Company has timely filed all Tax returns and reports  required
to have been filed by it for all taxable  periods ending on or prior to the date
hereof;

                                       27
<PAGE>

          (b) All Taxes of the  Company  for all  taxable  periods  ending on or
prior to the date hereof have been paid or have been adequately  reserved for on
the Estimated  Closing Date Balance Sheet. The Tax returns and reports filed are
true and correct in all material respects; (c) None of such returns contains, or
will  contain,  a disclosure  statement  under  Section 6662 of the Code (or any
predecessor statute) or any similar provision of state, local or foreign law;

          (d) The  Company  has not  received  notice  that the IRS or any other
taxing  authority has asserted  against the Company any  deficiency or claim for
additional Taxes;

          (e) All Tax deficiencies asserted or assessed against the Company have
been paid or finally settled;

          (f) There is no pending or threatened action,  audit,  proceeding,  or
investigation  with respect to (i) the  assessment or collection of Taxes of the
Company  or a claim  for  refund  made by the  Company  with  respect  to  Taxes
previously paid in connection therewith;

          (g) All amounts  that are  required to be collected or withheld by the
Company or with respect to Taxes have been duly collected or withheld;  all such
amounts that are required to be remitted to any taxing  authority have been duly
remitted;

          (h) To the  best of its  knowledge,  neither  the  IRS nor any  state,
foreign or local  taxing  authority  has  examined  any income tax return of the
Company;

          (i) The Company has not waived any statute of  limitations  (that have
not expired as of the date hereof) with respect to the assessment of any Tax;

          (j) The Company has not taken any action not in  accordance  with past
practice  that would  have the  effect of  deferring  any Tax  liability  of the
Company,  from any  taxable  period  ending on or before the date  hereof to any
taxable period ending after such date;

          (k) The  Company  has not filed any consent  agreement  under  Section
341(f) of the Code;

          (l) To the best of its knowledge, there are no liens for Taxes due and
payable upon any assets of the Company;

          (m) The  Company  has not  participated  in, or  cooperated  with,  an
international boycott within the meaning of Section 999 of the Code;

          (n) The  Company is not  currently  required  to include in income any
adjustment  pursuant  to Section  481(a) of the Code (or similar  provisions  of
other law or regulations) by reason of a change in accounting  method,  and does
not have any knowledge that the IRS (or other taxing authority) has proposed, or
is considering, any such change in accounting method;

                                       28
<PAGE>

          (o) The Company is not a party to any agreement, contract, arrangement
or plan that would  result in the  payment  of any  "excess  parachute  payment"
within the meaning of Section 280G of the Code;

          (p) None of the assets of the Company is property  that is required to
be treated as owned by any other  person  pursuant  to the "safe  harbor  lease"
provisions of former Section  168(f)(8) of the Internal  Revenue Code of 1954 as
amended and in effect  immediately  prior to the enactment of the Tax Reform Act
of 1986 and none of the  assets of the  Company  is "tax  exempt  use  property"
within the meaning of Section 168(h) of the Code; and

          (q) None of the assets of the Company secures any debt the interest on
which is tax exempt under Section 103 of the Code.

          Section .22 INSURANCE MATTERS.

          (a) Schedule 5.23 sets forth a complete and correct list of:

                (2) All insurance policies and of all claims made by the Company
on any liability or other insurance  policies during the past three years (other
than worker's compensation claims);

                (3) All insurance  currently in place and accurately  sets forth
the coverages, deductible amounts, carriers and expiration dates thereof; and

                (4) All  insurance  with respect to which the policy  period has
expired,  but for which certain of the coverage years are still subject to audit
or  retrospective  adjustment  by the carrier,  and  accurately  sets forth such
coverage years and the coverages,  deductible  amounts,  carriers and expiration
dates hereof.

          (a) There are no outstanding  requirements or  recommendations  by any
insurance  company  that issued any policy of insurance to the Company or by any
board of underwriters or other similar body exercising  similar  functions or by
any  governmental   authority  exercising  similar  functions  that  require  or
recommend  any  changes in the  conduct of the  Business or any repairs or other
work to be done on or with respect to the Company's assets.

          (b)  Except  as set  forth  on  Schedule  5.23,  no  notice  or  other
communication has been received by the Company from any insurance company within
the two years  preceding  the date hereof  canceling or  materially  amending or
materially  increasing  the annual or other  premiums  payable  under any of its
insurance  policies,  and,  to the  best  of the  Company's  knowledge,  no such
cancellation, amendment or increase of premiums is threatened.

          (c)  During  the  past  five  years,   the   Company  has   maintained
occurrence-based   comprehensive  general  liability  and  completed  operations
insurance  (including product liability insurance) with a single combined annual
limit of at least  $1,000,000,  and no claims  have  been  made or paid,  and no
claims are currently pending,  under any of such comprehensive general liability
insurance policies.

                                       29
<PAGE>

          (d) No  lawsuits  have been filed and no claims  have been made or, to
the best of Sellers'  knowledge,  threatened  against the Company as a result of
accidents  which  occurred  during the one-year  period prior to the date hereof
that would give rise to a claim with  respect  to any  services  provided  by or
products designed, manufactured, or sold by the Company or the operations of the
Company.

          Section .23 No Powers of Attorney or Suretyships.  Except as set forth
on Schedule  5.24,  (i) neither the Company nor,  with respect to the Company or
the Business,  the Seller, has granted any general or special powers of attorney
and (ii) none of the Sellers has any  obligation or liability  (whether  actual,
contingent or otherwise) as guarantor,  surety, co-signer,  endorser,  co-maker,
indemnitor,  obligor on an asset or income maintenance agreement or otherwise in
respect  of  the  obligation  of any  person,  corporation,  partnership,  joint
venture, association, organization or other entity.

          Section .24 BROKERAGE  FEES. No Person is entitled to any brokerage or
finder's  fee or other  commission  from any of the  Sellers  in respect of this
Agreement or the Transactions.

          Section .25 BANKING  FACILITIES.  Schedule  5.26 sets forth a complete
and correct list of:

          (a) Each bank,  savings and loan or similar  financial  institution in
which the Company  has an account or safety  deposit box and the numbers of such
accounts or safety deposit boxes maintained thereat; and

          (b) The names of all persons  authorized  to draw on each such account
or to have access to any such safety deposit box, together with a description of
the  authority  (and  conditions  thereto,  if any) of each person with  respect
thereto.

          Section .26 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY; PERSONAL
PROPERTY  LEASES.  Except as set forth in Schedule 5.27, the Company owns all of
the machinery, equipment, vehicles, furniture, fixtures, leasehold improvements,
repair parts, tools and other property  (collectively,  the "Personal Property")
used by or  relating  to the  Company.  All such  Personal  Property  is in good
operating  condition  and  sufficient to carry on the business of the Company in
the  normal  course  as it is  presently  conducted  and is free  from  material
defects,  whether  patent or latent.  Schedule  5.27 sets  forth a complete  and
correct  summary  description  and  identification  of each  lease (a  "Personal
Property  Lease")  of  personal  property  under  which the  Company is either a
lessee, sublessee, lessor or sublessor. Except as set forth in Schedule 5.27:

          (a) Each Personal Property Lease is a valid and binding  obligation of
the Company that is a party thereto,  and each such Personal Property Lease is a
valid and binding obligation of each of the other parties thereto; and

          (b) Neither  the  Company  nor any other party to a Personal  Property
Lease is in default with respect to any material term or condition thereof,  and
no event has occurred that,  with the passage of time or the giving of notice or
both, would  constitute a default  thereunder or would cause the acceleration of
any  obligation  of any party  thereto or the creation of a lien or  encumbrance
upon any asset of the Company.

                                       30
<PAGE>

          Section .27 PRODUCT  WARRANTY AND  LIABILITY.  Each product  designed,
manufactured,  or sold by the Company and all services  performed by the Company
have been in conformity in all material respects with all applicable contractual
commitments  and  all  express  and  implied  warranties.  The  Company  has  no
liability, and there is no basis for any present or future action, suit or other
proceeding  giving rise to any liability,  (i) for  replacement or repair of any
such product or other  damages in connection  therewith,  or (ii) arising out of
any  injury  to  persons  or  property  as a result of any such  product  or any
services  performed by the Company.  None of the Sellers has received any notice
that an action,  suit or  proceeding  has been,  or in the  future may be,  made
alleging that  products or services of the Company are or were  defective in any
material respect.

          Section  .28  STANDARDS  AND   CERTIFICATIONS.   Products   previously
designed,  manufactured,  sold and leased by the Company met and had received at
the time of their design, manufacture and sale, and products currently designed,
manufactured,  sold and  leased  by the  Company  meet and  have  received,  all
material standards  established by relevant  standard-setting  organizations and
all certifications from all relevant safety and standards testing and certifying
organizations,  if any, as were or are, as the case may be,  necessary  for such
products  to comply  with all  applicable  fire,  safety and  similar  codes and
regulations.

          Section .29 DISCLOSURE.  The  information  provided by Sellers in this
Agreement, including, without limitation, the schedules hereto, and in any other
writing  delivered  pursuant  hereto  does not and will not  contain  any untrue
statement of a material  fact or, omit to state a material  fact  required to be
stated herein or therein or necessary to make the statements and facts contained
herein or therein,  in light of the circumstances under which they are made, not
false or misleading.  Copies of all documents  heretofore or hereafter delivered
or made  available  by  Sellers to  Purchaser  pursuant  hereto  were or will be
complete and accurate records of such documents.

          Section .30  SECURITIES.  The Company is an  "accredited  investor" as
such term is defined in Regulation D  promulgated  under the  Securities  Act of
1933,  as  amended.   The  Company   understands  that  Purchaser  has  made  no
representations  regarding  the  Company  other  than as set forth  herein.  The
Company has made such further  investigation as it deems appropriate to evaluate
the merits and risks of receiving  common stock in  Purchaser.  The Company will
acquire the Common Stock portion of the Purchase Price for its own account,  for
investment  purposes  only,  and not  with a view  towards  the  sale  or  other
distribution  thereof  (other than to a Shareholder  who is also an  "accredited
investor").  The Company  acknowledges that there are restrictions under federal
and state securities laws on the  transferability of the Common Stock portion of
the Purchase Price. The Sellers agree and acknowledge that  certificates for the
Common  Stock  portion  of the  Purchase  Price  shall  bear  substantially  the
following legend:

          The Shares represented by this certificate are subject to restrictions
          on  transferability  and resale any may not be  transferred  or resold
          except as  permitted  under the  Securities  Act of 1933,  pursuant to
          registration  under said Act or  pursuant to an  applicable  exemption
          from the  requirements of said Act. Prior to any transfer,  the holder
          of the Shares  must  deliver an opinion of counsel  acceptable  to the
          Company to the effect that such transfer is either so registered or so
          exempt.

          Section 5.31 EMPLOYEES.  As of the Closing Date, the Company has four
employees, all of whom work within a 75 mile radius of the City of Los Angeles.

                                       31
<PAGE>

                                   ARTICLE I
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

         The Purchaser hereby represents and warrants to the Company that:

          Section VI.1  ORGANIZATION  AND  CORPORATE  AUTHORITY.  Purchaser is a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the State of California. Purchaser has all requisite corporate power and
authority to enter into this Agreement and to consummate the Transactions.  This
Agreement and all agreements and instruments herein  contemplated to be executed
by Purchaser  are the valid and binding  agreements  of  Purchaser,  enforceable
against Purchaser in accordance with their respective  terms.  Purchaser has the
ability to fund the Purchase  Price and has  experience in the industry in which
the Business operates.

          Section .1 BROKERAGE  FEES.  No Person is entitled to any brokerage or
finder's fee or other  commission from Purchaser in respect of this Agreement or
the Transactions.


                                    ARTICLE I
                                    COVENANTS

         Sellers and Purchaser each covenant with the other as follows:

          Section  .1  FURTHER  ASSURANCES.  Upon the terms and  subject  to the
conditions  contained  herein,  the  parties  agree,  both  before and after the
Closing,  (i) to use all reasonable  efforts to take, or cause to be taken,  all
actions  and to do,  or  cause to be  done,  all  things  necessary,  proper  or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which  may  be  reasonably  necessary  or  advisable  to  carry  out  any of the
transactions  contemplated hereunder,  and (iii) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the parties agree
to use their respective  reasonable efforts (A) to obtain all necessary waivers,
consents and  approvals  from other  parties to the  Contracts  and Leases to be
assumed by Purchaser;  PROVIDED, HOWEVER, that neither Purchaser nor the Company
shall  be  required  to make  any  payments,  commence  litigation  or  agree to
modifications of the terms thereof in order to obtain any such waivers, consents
or approvals, (B) to obtain all necessary Permits as are required to be obtained
under any  Regulations,  (C) to give all notices to, and make all  registrations
and filings with third  parties,  including  without  limitation  submissions of
information  requested  by  governmental  authorities,  and (D) to  fulfill  all
conditions to this Agreement.

          Section .2 NO SOLICITATION.

          (a) NO  SOLICITATION.  From the date hereof through the Closing or the
earlier   termination  of  this  Agreement,   each  of  the  Sellers  and  their
Representatives   shall  not,   and  shall   cause  each  of  their   respective
Representatives  (including,  without limitation,  investment bankers, attorneys
and accountants),  not to, directly or indirectly, enter into, solicit, initiate
or continue any discussions or negotiations with, or encourage or respond to any
inquiries or proposals by, or participate in any  negotiations  with, or provide
any  information  to,  or  otherwise  cooperate  in  any  other  way  with,  any
corporation,  partnership, person or other entity or group, other than Purchaser
and its Representatives  concerning,  any sale of all or a portion of the Assets
or the  Business,  or any merger,  consolidation,  liquidation,  dissolution  or
similar  transaction  involving any Seller (each such transaction being referred
to herein as a "Proposed  Acquisition  Transaction");  PROVIDED,  HOWEVER,  that
Sellers  may  disclose  the  transactions  contemplated  by  this  Agreement  to
customers of Sellers in connection  with Sellers'  efforts to obtain the benefit
of any Contract,  Lease or Permit for  Purchaser.  The parties agree that in the
event the Company,  Sellers or any  individual  Seller  breaches its  obligation
under this Section 7.2, the Company shall  immediately  pay to Purchaser the sum
of (a) Purchaser's  expenses incurred in connection with the  Transactions,  and
(b) $200,000;  PROVIDED,  HOWEVER,  that such amount shall not exceed  $300,000.
Each  Seller  hereby  represents  that it is not now engaged in  discussions  or
negotiations  with any party  other than  Purchaser  with  respect to any of the
foregoing.  Each Seller agrees not to release any third party from, or waive any
provision of, any  confidentiality or standstill  agreement to which such Seller
is a party.

          (b) NOTIFICATION.  Sellers shall immediately  notify Purchaser (orally
and in writing) if any discussions or  negotiations  are sought to be initiated,
any inquiry or proposal is made, or any information is requested with respect to
any Proposed Acquisition Transaction.

                                       32
<PAGE>

          Section .3  NOTIFICATION  OF  CERTAIN  MATTERS.  From the date  hereof
through the Closing, Sellers and Purchaser shall give prompt notice to the other
of (a) the  occurrence,  or failure to occur,  of any event which  occurrence or
failure  would be likely to cause any  representation  or warranty  contained in
this  Agreement or in any exhibit or schedule  hereto to be untrue or inaccurate
in any respect and (b) any failure by it to comply with or satisfy any covenant,
condition  or  agreement  to be  complied  with or  satisfied  by it under  this
Agreement  or any  exhibit or  schedule  hereto;  PROVIDED,  HOWEVER,  that such
disclosure shall not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition.

          Section .4  INVESTIGATION  BY PURCHASER.  From the date hereof through
the Closing Date the Company shall, and shall cause any and all of its employees
and agents to,  afford  the  Representatives  of  Purchaser  and its  Affiliates
complete  access  at all  reasonable  times to the  Assets  for the  purpose  of
inspecting  the same,  and to the  employees,  agents,  attorneys,  accountants,
properties,  Books and Records,  Contracts and Leases of the Company,  and shall
furnish  Purchaser and its  Representatives  all financial,  operating and other
data and  information as Purchaser or its Affiliates,  through their  respective
Representatives,  may reasonably request, including unaudited balance sheets and
the related statements of income, retained earnings and cash flow for each month
from the date of the August 2000 Balance  Sheet  through the Closing Date within
ten (10)  calendar days after the end of each month which  financial  statements
shall (i) be true,  correct and complete,  (ii) be in accordance  with the books
and  records  of the  Company,  and  (iii)  accurately  set  forth  the  assets,
Liabilities and financial condition, results of operations and other information
purported  to be  set  forth  therein  in  accordance  with  generally  accepted
accounting principles consistently applied.

          Section .5 CONDUCT  OF  BUSINESS.  From the date  hereof  through  the
Closing,  the Company shall,  except as contemplated  by this  Agreement,  or as
consented  to by  Purchaser  in writing,  operate the  Business in the  ordinary
course of business and in accordance with past practice and use its best efforts
to preserve intact the Business and its goodwill,  and preserve the goodwill and
business relationships with suppliers, distributors, customers and others having
business  relationships  with  the  Company,  and  shall  not  take  any  action
inconsistent  with  this  Agreement  or with the  consummation  of the  Closing.
Without limiting the generality of the foregoing,  the Company shall not, except
as  specifically  contemplated by this Agreement or as consented to by Purchaser
in writing:

          (a) enter into,  extend,  materially  modify,  terminate  or renew any
Contract or Lease, except in the ordinary course of business;

          (b)  sell,  assign,  transfer,  convey,  lease,  mortgage,  pledge  or
otherwise  dispose of or encumber any of the Assets,  or any interests  therein,
except in the ordinary course of business,  and without  limiting the generality
of the foregoing,  each Seller shall continue to operate the Business consistent
with its past practices;

          (c) incur any  indebtedness for borrowed money or commitment to borrow
money,  other than Financing  Obligations,  guarantee the obligations of others,
indemnify others or, except in the ordinary course of business,  incur any other
Liability;

                                       33
<PAGE>

          (d) (1)  take any  action  with  respect  to the  grant of any  bonus,
severance or termination pay or with respect to any increase of benefits payable
under the  Company's  severance or  termination  pay policies or  agreements  in
effect on the date hereof or increase in any manner the  compensation  or fringe
benefits  of any  employee  or pay any  benefit  not  required  by any  existing
Employee Benefit Plan or policy;

                (2) make  any  change  in the key  management  structure  of the
Company,  including  without  limitation  the  hiring of  additional  management
personnel or the termination of existing management personnel;

                (3)  adopt,  enter  into or amend  any  Employee  Benefit  Plan,
agreement (including without limitation any collective  bargaining or employment
agreement),  trust,  fund or other arrangement for the benefit or welfare of any
employee,  except for any such amendment as may be required or, in the Company's
reasonable determination, desirable to comply with applicable Regulations; or

                (4) fail to maintain all Employee  Benefit  Plans in  accordance
with applicable Regulations in any material respect;

          (e) cause the Company to acquire by merger or  consolidation  with, or
merge or consolidate  with, or purchase all or  substantially  all of the assets
of, or  otherwise  acquire any material  assets or business of any  corporation,
partnership, association or other business organization or division thereof;

          (f) declare, set aside, make or pay any dividends;

          (g) expend funds for budgeted capital  expenditures or commitments for
or on behalf of the Company otherwise than in accordance with the capital budget
agreed to by Purchaser and the Company;

          (h) willingly  allow or permit to be done, any act by which any of the
Insurance Policies may be suspended, impaired or canceled;

          (i) (1)  fail to pay  its  accounts  payable  and  any  debts  owed or
obligations  due to it, or pay or  discharge  when due any  Liabilities,  in the
ordinary course of business; or

                (2) fail to collect  its  accounts  receivable  in the  ordinary
course of business;

          (j) fail to maintain the Assets in  substantially  their current state
of repair, excepting normal wear and tear or fail to replace consistent with the
Company's past practice inoperable, worn-out or obsolete or destroyed Assets;

          (k) make  any  loans or  advances  on  behalf  of the  Company  to any
partnership,  firm or  corporation,  or,  except for  expenses  incurred  in the
ordinary course of business, any individual;

          (l) make any income tax election or settlement or compromise  with tax
authorities on behalf of the Company;

                                       34
<PAGE>

          (m) fail to comply with all  Regulations  applicable to it, the Assets
and the Business;

          (n)   intentionally   do  any  other  act   which   would   cause  any
representation  or  warranty  of any  Seller in this  Agreement  to be or become
untrue in any material respect;

          (o)  sell,  transfer,  assign,  pledge  or  encumber  in, or any other
ownership  interests  of, the  Company or  repurchase  or commit to  repurchase,
partnership  interests in, or any other ownership interests of, the Company held
by any of the Sellers;

          (p) fail to use its best efforts to (i) retain the Company's employees
and (ii) maintain the Business so that such employees  will remain  available to
the Company on and after the Closing Date, (iii) maintain existing relationships
with suppliers,  customers and others having  business  dealings with any Seller
and (iv)  otherwise  to  preserve  the  goodwill  of the  Business  so that such
relationships and goodwill will be preserved on and after the Closing Date;

          (q) enter into any agreement, or otherwise become obligated, to do any
action prohibited hereunder;

          (r) make or change any tax election  affecting the Assets in the hands
of Purchaser; or

          (s) fail to pay, or cause to be paid, when due all Taxes for which the
Company is or may become  liable or that are or may become  payable with respect
to any taxable period ending on or prior to the Closing Date.

          Section .6 EMPLOYMENT AGREEMENTS.

          (a)  Purchaser  and  Larry  Hester  shall  enter  into  an  Employment
Agreement,  to be  effective  as of the  Closing  in  substantially  the form of
Exhibit A hereto. Purchaser shall not be required to hire or offer employment to
any other  employee of the Company.  In the event  Purchaser  determines to hire
such  persons,  however,  all  employees of the Business who become  employed by
Purchaser as of the Closing (or upon expiration of an approved leave of absence)
are  hereinafter  referred  to  individually  as a  "Transferred  Employee"  and
collectively as the "Transferred Employees."

          (b)  Effective  as of the Closing  (or the date an employee  becomes a
Transferred  Employee,  if later),  all  Transferred  Employees  shall  cease to
participate in, or accrue benefits under,  any of the Company's  Plans,  and the
Company shall be solely responsible for all of its Plans and all obligations and
liabilities  thereunder.  Purchaser  shall not assume any Plan of the Company or
any obligation or liability thereunder. The Company shall be responsible for (i)
terminating all employees of the Company who are not employed by Purchaser,  and
shall be responsible  for any and all  obligations  and  liabilities  arising in
connection with such terminations,  including without limitation,  any severance
or other  termination pay, accrued  vacation,  retirement and welfare  benefits,
(ii) providing the appropriate notices to the employees of the Business pursuant
to  Section  4980B  of the  Code  and  Part 6 of  Title I of  ERISA,  (iii)  all
liabilities,  including  without  limitation,  the  cost of  extended  insurance
coverage,  for any employee of the Company not actively  employed by the Company
on the Closing  Date until such time,  if ever,  that such  employee  returns to
active employment and is employed by Purchaser.

                                       35
<PAGE>

          (c)  Nothing  contained  in  this  Agreement  shall  confer  upon  any
Transferred  Employee any right with respect to  continuance  of  employment  by
Purchaser,  nor shall anything  herein  interfere with the right of Purchaser to
terminate  the  employment  of any  Transferred  Employee  at any time,  with or
without cause, or restrict Purchaser in the exercise of its independent business
judgment in modifying any of the terms and  conditions of the  employment of the
Transferred Employees after the Closing Date.

          (d) No  provision  of this  Agreement  shall  create  any third  party
beneficiary  rights in any Transferred  Employee,  any beneficiary or dependents
thereof, or any collective  bargaining  representative  thereof, with respect to
the  compensation,  terms and  conditions of employment and benefits that may be
provided to any  Transferred  Employee by  Purchaser  or under any benefit  plan
which Purchaser may maintain.

          (e) Prior to and until Closing, each Shareholder,  that is an employee
of the Company, shall receive his salary and hospitalization, medical, surgical,
dental,  life  insurance and any other welfare and benefits  plans and programs,
comparable to what such Shareholder, as an employee of the Company, is receiving
as of the date of this Agreement.

          Section .7 AGREEMENT NOT TO COMPETE.

          (a) As additional consideration for the payments made or to be made by
Purchaser  hereunder,  from the date  hereof,  the Company  and the  Shareholder
hereby agree that it and he shall not, for any reason,  directly or  indirectly,
engage or be interested in any business that Competes with Purchaser,  and shall
not,  directly  or  indirectly,  have any  interest  in, own,  manage,  operate,
control, be connected with as a stockholder (other than as a stockholder of less
than five percent (5%) of the issued and  outstanding  stock of a  publicly-held
corporation),  joint  venturer,  officer,  partner,  employee or consultant,  or
otherwise  engage  in,  control,  advise  with  respect  to,  manage,  act  as a
consultant  to,  receive any economic  benefit from, or exert any influence upon
the  development,   marketing,  manufacture,  sale,  distribution,  offering  or
promotion of products or services  similar to those performed by the Company for
the one-year  period  prior to the Closing,  any  business  that  Competes  with
Purchaser.  As used  herein,  the term  "Competes"  with  Purchaser  shall  mean
competing  with any of the  businesses  conducted by the Company at any time for
the period Mr. Hester is employed by Purchaser (or for a two-year  period -- six
months if Mr. Hester is terminated without Cause -- following termination of his
employment) in any county or any other political subdivision of any state of the
United  States of America or any of its  possessions  or  territories  where the
Company conducted or contemplated conducting such businesses during the one-year
period preceding the date hereof. All of the parties agree that the duration and
area for which the  covenant  not to compete set forth in this Section 7.7 is to
be effective are  reasonable.  In the event that any court  determines  that the
time period or the geographical  areas provided for in this Section 7.7, or both
of  them,   are   unreasonable   and  that  such  covenant  is  to  that  extent
unenforceable,  such  covenant  shall  remain in full  force and  effect for the
greatest time period and in the greatest geographical area that would not render
it unenforceable.  The parties intend that this covenant shall be deemed to be a
series of separate  covenants,  one for each and every  county of each and every
state of the United States of America and for any other  territory or possession
of the United States of America where this covenant is intended to be effective.

          (b) The parties agree that damages  would be an inadequate  remedy for
Purchaser in the event of a breach or  threatened  breach of this  Agreement and
thus,  in any such event,  Purchaser  may,  either with or without  pursuing any
potential damage remedies and in addition to such remedies,  immediately  obtain
and enforce an injunction, and/or a temporary restraining order, prohibiting any
Seller from violating this  Agreement,  without having to prove actual  damages.
The parties  agree that this  Section  7.7 shall be  enforceable  regardless  of
whether or not any Seller is employed by Purchaser hereunder.

                                       36
<PAGE>

          Section .8 COLLECTION OF ACCOUNTS RECEIVABLE AND LETTERS OF CREDIT. At
the Closing,  Purchaser shall acquire hereunder, and thereafter Purchaser or its
designee  shall have the right and authority to collect for  Purchaser's  or its
designee's  account,  all  receivables,  letters of credit and other items which
constitute  a part of the Assets,  and each Seller  shall  within 48 hours after
receipt of any payment in respect of any of the foregoing,  properly endorse and
deliver to Purchaser any letters of credit,  documents,  cash or checks received
on account of or otherwise  relating to any such receivables,  letters of credit
or other  items  related  to the  Company or the  Business.  Each  Seller  shall
promptly  transfer or deliver to  Purchaser  or its  designee  any cash or other
property  that such  Seller  may  receive in  respect  of any  deposit,  prepaid
expense,  claim, contract,  license,  lease,  commitment,  sales order, purchase
order,  letter of credit or  receivable  of any  character,  or any other  item,
constituting a part of the Assets.

          Section .9 BOOKS AND RECORDS; TAX MATTERS.

          (a) BOOKS AND RECORDS. Purchaser shall retain all Books and Records in
the possession of Purchaser  after the Closing Date relating to the operation of
the  Facilities  and the Business  prior to the Closing in  accordance  with all
applicable  records retention  Regulations,  including without  limitation,  all
Environment Laws and occupational  health and safety laws and regulations.  Each
party agrees that it shall cooperate with and make available to the other party,
during normal business hours,  all Books and Records,  information and employees
(without  substantial  disruption  of  employment)  retained  and  remaining  in
existence after the Closing which are necessary or useful in connection with any
tax,   environmental   or  occupational   health  and  safety  inquiry,   audit,
investigation  or dispute,  any litigation or  investigation or any other matter
requiring  any  such  Books  and  Records,  information  or  employees  for  any
reasonable  business  purpose.  The party requesting any such Books and Records,
information or employees shall bear all of the out-of-pocket  costs and expenses
(including without limitation attorneys' fees) reasonably incurred in connection
with providing such Books and Records, information or employees. All information
received  pursuant to this Section 7.9(a) shall be treated as  confidential  and
not disclosed to any person or entity other than the  Representatives of Sellers
or  Purchaser,  as the  case  may  be,  who  need to know  such  information  in
connection with the proceedings contemplated by this Section 7.10(a).

          (b) COOPERATION AND RECORDS RETENTION. Sellers and Purchaser shall (i)
each provide the other with such  assistance  as may  reasonably be requested by
any of them in connection  with the  preparation of any return,  audit, or other
examination by any taxing  authority or judicial or  administrative  proceedings
relating to Liability for Taxes, (ii) each retain and provide the other with any
records or other  information  that may be  relevant  to such  return,  audit or
examination,  proceeding or determination, and (iii) each provide the other with
any  final  determination  of any such  audit  or  examination,  proceeding,  or
determination  that affects any amount required to be shown on any tax return of
the other for any period.  Without  limiting the  generality  of the  foregoing,
Purchaser and each Seller shall each retain,  until the  applicable  statutes of
limitations (including any extensions) have expired,  copies of all tax returns,
supporting work schedules, and other records or information that may be relevant
to such returns for all tax periods or portions  thereof ending on or before the
Closing  Date and shall not  destroy or  otherwise  dispose of any such  records
without first providing the other party with a reasonable  opportunity to review
and copy the same.

                                       37
<PAGE>

          Section .10 BULK SALES. It may not be practicable to comply or attempt
to comply with the  procedures  of the "Bulk Sales Act" or similar law of any or
all of the states in which the Assets are  situated  or of any other state which
may be  asserted  to be  applicable  to the  transactions  contemplated  hereby.
Accordingly,  to induce  Purchaser to waive any requirements for compliance with
any or all of such laws, each Seller hereby agrees that the indemnity provisions
of  Section  11.2  hereof  shall  apply  to  any  Damages  of  Purchaser  or any
institution  providing  financing to Purchaser  arising out of or resulting from
the failure of any Seller or Purchaser to comply with any such laws.

          Section  .11  CONFIDENTIALITY.  Unless and until the  Closing has been
consummated,  Purchaser  and its officers,  directors and other  representatives
will  hold in  strict  confidence,  and  will  not use to the  detriment  of the
Company,  all data and  information  with  respect to the  Business  obtained in
connection  with this  transaction,  subject to the  requirements of law. In the
event of the  termination  of this Agreement for any reason or the return of the
Assets  pursuant to Section 2 hereof,  Purchaser  will return to the Company all
documents,  work papers, and other materials  (including copies) relating to the
Transactions,  whether  obtained before or after execution of this Agreement and
the confidentiality requirements of this Section 7.12 shall terminate.

          Section .12 RELEASE OF LEASE  GUARANTY.  Purchaser  shall use its best
commercially  reasonable  efforts to obtain the release of the Shareholder  from
his personal  guaranty of the Company's  obligations  in respect of the premises
located at 11755 Wilshire Boulevard, Suite 880, Los Angeles, California 90025.

                                   ARTICLE II
                     CONDITIONS TO THE COMPANY'S OBLIGATIONS

         The obligations of the Company to consummate the transactions  provided
for hereby are subject,  in the discretion of the Company,  to the satisfaction,
on or prior to the Closing  Date, of each of the  following  conditions,  any of
which may be waived by the Company by written notice to Purchaser:

          Section   .1   REPRESENTATIONS,    WARRANTIES   AND   COVENANTS.   All
representations and warranties of Purchaser contained in this Agreement shall be
true and  correct at and as of the date of this  Agreement  and at and as of the
Closing  Date,  except as and to the extent that the facts and  conditions  upon
which such  representations  and warranties are based are expressly  required or
permitted to be changed by the terms hereof,  and Purchaser shall have performed
and satisfied in all material  respects all  agreements  and covenants  required
hereby to be performed by it prior to or on the Closing Date.

          Section .2 NO ACTIONS OR COURT ORDERS.  No Action by any  governmental
authority  or other  person  shall  have been  instituted  or  threatened  which
questions the validity or legality of the transactions  contemplated  hereby and
which could  reasonably  be expected  to damage the  Company  materially  if the
transactions  contemplated  hereby  are  consummated.  There  shall  not  be any
Regulation  or Court Order that makes the  purchase  and sale of the Business or
the Assets contemplated hereby illegal or otherwise prohibited.

          Section .3  ASSUMPTION  DOCUMENT.  Purchaser  shall have  executed the
Assumption Document.


          Section .4 ANCILLARY  AGREEMENTS.  Purchaser  shall have  executed and
delivered the Ancillary Agreements to which it is a party.


                                       38
<PAGE>

                                  ARTICLE III
                      CONDITIONS TO PURCHASER'S OBLIGATIONS

         The  obligations of Purchaser to consummate the  transactions  provided
for hereby are subject, in the discretion of Purchaser, to the satisfaction,  on
or prior to the Closing Date, of each of the following conditions,  any of which
may be waived by Purchaser by written notice to the Company:

          Section   .1   REPRESENTATIONS,    WARRANTIES   AND   COVENANTS.   All
representations  and warranties of Sellers  contained in this Agreement shall be
true and correct in all respects at and as of the date of this  Agreement and at
and as of the  Closing  Date,  except  as and to the  extent  that the facts and
conditions  upon  which  such  representations  and  warranties  are  based  are
expressly  required or permitted to be changed by the terms hereof,  and Sellers
shall have performed and satisfied all agreements and covenants  required hereby
to be performed by them prior to or on the Closing Date.

          Section .2 CONSENTS; REGULATORY COMPLIANCE AND APPROVAL. Any necessary
consents to the assignment of all Contracts and Leases shall have been obtained,
including  the consents  identified  on Schedule  5.4.  All  Permits,  consents,
approvals   and  waivers  from   governmental   authorities   necessary  to  the
consummation  of the  transactions  contemplated  hereby by Purchaser shall have
been obtained.  Purchaser  shall be satisfied that all approvals  required under
any  Regulations to carry out the  transactions  contemplated  by this Agreement
shall have been  obtained  and that the  parties  shall have  complied  with all
Regulations applicable to such transactions.

          Section .3 NO ACTIONS OR COURT ORDERS.  No Action by any  governmental
authority  or other  person  shall  have been  instituted  or  threatened  which
questions the validity or legality of the transactions  contemplated  hereby and
which  could  reasonably  be  expected  to damage  Purchaser,  the Assets or the
Business  materially if the  transactions  contemplated  hereby are consummated,
including without limitation any material adverse effect on the right or ability
of Purchaser to own, operate,  possess or transfer the Assets after the Closing.
There shall not be any  Regulation  or Court Order that makes the  purchase  and
sale of the  Business or the Assets  contemplated  hereby  illegal or  otherwise
prohibited.

          Section .4 OPINION OF COUNSEL.  The Company  shall have  delivered  to
Purchaser an opinion of Cantor &  Weinshenk,  Company  counsel,  dated as of the
Closing Date, in form and substance reasonably satisfactory to Purchaser, to the
effect that:

          (a) The Company is a corporation duly organized,  validly existing and
in good standing under the laws of the State of California;

          (b) Each of the Sellers has  necessary  power and  authority  to enter
into this  Agreement and the  Ancillary  Agreements to which he or it is a party
and to consummate the transactions contemplated hereby and thereby;

                                       39
<PAGE>

          (c) The execution,  delivery and performance of this Agreement and the
Ancillary  Agreements by the Sellers have been duly  authorized by all necessary
action of the Board of Directors and  shareholders,  and this Agreement and each
of the Ancillary  Agreements to which it is a party constitute legally valid and
binding obligations of the Sellers,  enforceable against each of the Company and
the  Sellers,  in  accordance  with  their  terms,  except  as  limited  by  (i)
bankruptcy,  insolvency,  reorganization,   moratorium  or  other  similar  laws
relating to  creditors'  rights  generally or by equitable  principles  (whether
considered  in an action at law or in equity)  and (ii)  limitations  imposed by
federal or state law or equitable  principles upon the  availability of specific
performance, injunctive relief or other equitable remedies;

          (d) The  documents  to be  delivered  by the Company at the Closing to
effect the transfer and assignment to Purchaser of all right, title and interest
in and to the Assets are effective to do so.

          Section .5  CERTIFICATES.  Sellers shall furnish  Purchaser  with such
certificates  to  evidence  compliance  with the  conditions  set  forth in this
Article IX as may be requested by Purchaser.

          Section .6 MATERIAL  CHANGES.  As of the Closing Date, since August 1,
2000,  there shall not have been any actual or threatened  adverse change in the
Business  or the Assets or the  liabilities,  earnings,  results of  operations,
condition (financial or otherwise) or prospects of the Company.

          Section .7 CONVEYANCING  DOCUMENTS;  RELEASE OF ENCUMBRANCES.  Sellers
shall have executed and delivered each of the documents described in Section 4.2
hereof so as to effect the  transfer and  assignment  to Purchaser of all right,
title and  interest in and to the Assets,  and Sellers  shall have filed  (where
necessary)  and delivered to Purchaser  all  documents  necessary to release the
Assets from all  Encumbrances,  which  documents  shall be in a form  reasonably
satisfactory to Purchaser's counsel.

          Section .8 PERMITS.  Purchaser shall have obtained or been granted the
right to use all Permits.

          Section .9 OTHER AGREEMENTS. Sellers shall have executed and delivered
the Ancillary Agreements in the forms attached as exhibits hereto.

          Section .10 CUSTOMER RELATIONS.  Purchaser shall be satisfied with the
business  relationship  of  any  Seller  with  any  customer  named  in  Section
5.17(a)(i) of the Disclosure Schedule.

          Section  .11 DUE  DILIGENCE/FINANCIAL  CONDITION.  Purchaser  shall be
satisfied, in its sole discretion, with the results of its
due diligence investigation.

                                       40
<PAGE>

                                   ARTICLE IV
                                  RISK OF LOSS

          Section .1 RISK OF LOSS.  From the date hereof  through and  including
the  Closing  Date,  all risk of loss or damage to the Assets  shall be borne by
Sellers, and thereafter shall be borne by Purchaser.  If any material portion of
the Assets is destroyed or damaged by fire or any other cause on or prior to the
Closing Date,  other than use, wear or loss in the ordinary  course of business,
Sellers shall give written notice to Purchaser as soon as practicable after, but
in any event  within  five (5)  calendar  days of,  discovery  of such damage or
destruction, which notice shall set forth in detail the nature of such damage or
destruction,  the amount of  insurance,  if any,  covering  such  Assets and the
amount,  if  any,  which  Sellers  are  otherwise   entitled  to  receive  as  a
consequence.  Prior to the Closing, Purchaser shall have the option, which shall
be exercised by written  notice to Sellers  within ten (10)  calendar days after
receipt of Sellers'  notice or if there is not ten (10)  calendar  days prior to
the Closing  Date,  as soon as  practicable  prior to the Closing  Date,  of (a)
accepting  such Assets in their  destroyed  or damaged  condition in which event
Purchaser  shall be entitled to the proceeds of any insurance or other  proceeds
payable with respect to such loss and the Purchase Price shall be reduced by the
amount,  if any,  mutually  agreed upon between the parties,  (b) excluding such
Assets from this  Agreement,  in which event the Purchase Price shall be reduced
by the amount  allocated to such Assets,  as mutually agreed between the parties
or (c) terminating  this Agreement in accordance with Section 12.1. If Purchaser
accepts such Assets,  then after the Closing,  any  insurance or other  proceeds
shall belong,  and shall be assigned to, Purchaser  without any reduction in the
Purchase Price; otherwise, such insurance proceeds shall belong to the Company.

                                    ARTICLE V
                                 INDEMNIFICATION

          Section .1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF SELLERS.  The
representations  and  warranties  made by Sellers in Article V of this Agreement
and any  document,  schedule,  exhibit  or  other  instrument  relating  hereto,
respectively,  shall  survive  the  date  hereof  for a  period  of five  years.
Notwithstanding  anything  contained  in  this  Agreement,   including,  without
limitation,  this Section 11.1, any claims with respect to  representations  and
warranties  made by  Sellers  in this  Agreement  or in any  document  or  other
instrument  relating hereto shall survive and continue  following the expiration
of the survival period stated above (i) if such claim is submitted in writing to
Sellers  prior to the end of the survival  period stated in this Section 11.1 or
otherwise  and  identified  as a  claim  for  indemnification  pursuant  to this
Agreement  or (ii) if such  claim  is based  upon  fraud or  willful  breach  or
misrepresentation  by any Seller.  In either  event,  such claims shall  survive
indefinitely.

          Section .2 INDEMNIFICATION BY SELLERS.  Each Seller shall, jointly and
severally,  indemnify  and  hold  harmless  Purchaser  and  each of  Purchaser's
Affiliates,    directors,    officers,   employees,    attorneys,   agents   and
Representatives  (collectively,  the "Affiliated Parties") in respect of any and
all  claims,  losses,  damages,  liabilities,  declines  in value of the assets,
penalties,   interest,  costs  and  expenses,   including,  without  limitation,
reasonable  attorneys',  accountants' and  consultants'  fees and other expenses
(collectively,  "Damages"),  incurred by  Purchaser  or  Purchaser's  Affiliated
Parties,  together with interest on cash disbursements in connection  therewith,
at an annual  rate equal to the Prime  Rate then in  effect,  from the date such
cash disbursements were made by Purchaser or any of their respective  Affiliated
Parties until paid by such Seller, in connection with, or resulting from, any or
all of the following:

          (a) Any breach or inaccuracy of any representation or warranty made by
such Seller in Article V of this Agreement or in any document, schedule, exhibit
or other instrument relating hereto;

                                       41
<PAGE>

          (b)  Any  misrepresentation  contained  in any  written  statement  or
certificate  furnished  by  such  Seller  pursuant  to  this  Agreement  or  the
Transactions;

          (c) Any failure to perform or comply with any  covenant,  agreement or
obligation of either Seller contained in this Agreement or any document or other
instrument contemplated by this Agreement;

          (d) Any injury to persons or death or property  damage  resulting from
or contributed to by any products designed,  manufactured, sold or leased by any
of the Sellers or any services  performed by any of the Sellers if the accident,
incident or occurrence giving rise to such claim, action,  lawsuit or proceeding
occurred prior to the Closing Date;

          (e) With respect to any claim arising out of the failure of any Seller
to comply  with the bulk  transfer  or bulk  sales laws of any  jurisdiction  in
accordance with Section 7.10; and

          (f) Liabilities of the Sellers  resulting from events occurring before
or on the Closing Date,  other than a liability or obligation  which is included
in the Assumed Liabilities.

Sellers'  obligations  set forth in this Section  shall not apply to any Damages
that arise from or are related to any willful  misconduct or gross negligence by
Purchaser.

          Section .3 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In addition
to, and not by way of limitation on, the  indemnities set forth in Section 11.2,
Sellers  shall,  jointly  and  severally,  indemnify  and  hold  harmless  on an
after-tax  basis  Purchaser  against  all unpaid  Taxes of the  Company  for all
taxable  periods ending on or before the Closing Date or otherwise  attributable
to the  operations,  transactions,  assets,  or  income  of the  Company  or its
predecessors   prior  to  the  Closing  Date  or  otherwise   arising  from  the
consummation  of the  Transactions  as of the  date  hereof,  together  with any
expenses (including, without limitation, reasonable attorneys', accountants' and
consultants'   fees  and  other  expenses)   incurred  in  connection  with  the
contesting,  collection or assessment of such Taxes,  and together with interest
at an annual rate equal to the Prime Rate then in effect.

          Section .4 INDEMNIFICATION BY SELLERS FOR ENVIRONMENTAL MATTERS. For a
period of five (5) years,  in addition to, and not by way of limitation  on, the
indemnities  set forth in Section 11.2,  Sellers  shall,  jointly and severally,
indemnify and hold  harmless  Purchaser and  Purchaser's  Affiliated  Parties in
respect of any and all claims, losses, damages,  liabilities,  declines in value
of  the  Assets  or  the  Business,  penalties,  interest,  costs  and  expenses
(including,  without  limitation,   reasonable  attorneys',   accountants',  and
consultants'  fees and other  expenses)  incurred by  Purchaser  or  Purchaser's
Affiliated  Parties,  together with interest on cash disbursements in connection
therewith,  at an annual  rate equal to the Prime Rate then in effect,  from the
date  such  cash  disbursements  were made by  Purchaser  or any of  Purchaser's
Affiliated Parties until paid by Sellers, in connection with, or resulting from,
any  Environmental  Liabilities  for  Pre-Closing  Matters  including,   without
limitation,  any of the matters  described on Schedule  5.13,  regardless of the
diligence  performed or investigation  made by Purchaser or its  Representatives
with respect thereto.

                                       42
<PAGE>

          Section .5 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify and
hold harmless the Company in respect of any and all Damages reasonably  incurred
by the Company,  together  with  interest on cash  disbursements  in  connection
therewith,  at an annual  rate equal to the Prime Rate then in effect,  from the
date  that such  cash  disbursements  were  made by the  Company  until  paid by
Purchaser, in connection with, or resulting from, any or all of the following:

          (a) Any breach of any  representation or warranty made by Purchaser in
Article VI of this  Agreement  or in any document or other  instrument  relating
hereto;

          (b) Any breach of any  covenant,  agreement or obligation of Purchaser
contained in this Agreement or any document or other instrument  contemplated by
this Agreement; and

          (d)  Liabilities of the Business to parties other than Sellers arising
in  relation  to the Assets or the  Assumed  Liabilities  resulting  from events
occurring after the Closing Date.

Purchaser's obligations set forth in this Section shall not apply to any Damages
that arise from or are related to any willful  misconduct or gross negligence by
any Seller.

          Section .6 CLAIMS FOR INDEMNIFICATION.  Whenever any claim shall arise
for indemnification under this Agreement,  the party entitled to indemnification
(the  "Indemnified  Party") shall promptly notify the party obligated to provide
indemnification  (the  "Indemnifying  Party") of the claim and, when known,  the
facts constituting the basis for such claim; PROVIDED, HOWEVER, that the failure
to so notify the Indemnifying  Party shall not relieve the Indemnifying Party of
its  obligation  hereunder  to the  extent  such  failure  does  not  materially
prejudice the Indemnifying  Party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom.

                                       43
<PAGE>

          Section .7 DEFENSE OF CLAIMS. In connection with any claim giving rise
to indemnity under this Agreement  resulting from or arising out of any claim or
legal  proceeding  by a  person  who is  not a  party  to  this  Agreement,  the
Indemnifying  Party at its sole cost and  expense  and with  counsel  reasonably
satisfactory  to  the  Indemnified   Party  may,  upon  written  notice  to  the
Indemnified  Party,  assume the defense of any such claim or legal proceeding if
(a) the  Indemnifying  Party  acknowledges to the Indemnified  Party in writing,
within fifteen (15) days after receipt of notice from the Indemnified Party, its
obligations to indemnify the  Indemnified  Party with respect to all elements of
such  claim  based  upon the facts then  reasonably  known to such  Indemnifying
Party, (b) the Indemnifying  Party provides the Indemnified  Party with evidence
reasonably  acceptable to the Indemnified Party that the Indemnifying Party will
have the  financial  resources  to defend  against such  third-party  claims and
fulfill its  indemnification  obligations  hereunder,  (c) the third-party claim
involves only money  damages and does not seek an injunction or other  equitable
relief,  and (d) settlement or an adverse  judgment of the third-party  claim is
not, in the good faith judgment of the Indemnified Party,  likely to establish a
pattern  or  practice  adverse  to  the  continuing  business  interests  of the
Indemnified  Party.  The  Indemnified  Party shall be entitled to participate in
(but not control)  the defense of any such  action,  with its counsel and at its
own expense;  PROVIDED,  HOWEVER,  that if there are one or more legal  defenses
available to the  Indemnified  Party that conflict  with those  available to the
Indemnifying  Party, or if the Indemnifying Party fails to take reasonable steps
necessary  to  defend  diligently  the claim  after  receiving  notice  from the
Indemnified  Party that it believes the Indemnifying  Party has failed to do so,
the Indemnified Party may assume the defense of such claim;  PROVIDED,  FURTHER,
that the  Indemnified  Party may not settle such claim without the prior written
consent  of the  Indemnifying  Party,  which  consent  may  not be  unreasonably
withheld.  If the  Indemnified  Party  assumes  the  defense of the  claim,  the
Indemnifying Party shall reimburse the Indemnified Party for the reasonable fees
and expenses of counsel  retained by the Indemnified  Party and the Indemnifying
Party shall be entitled to  participate in (but not control) the defense of such
claim,  with its  counsel  and at its own  expense.  If the  Indemnifying  Party
thereafter seeks to question the manner in which the Indemnified  Party defended
such  third  party  claim or the  amount or nature of any such  settlement,  the
Indemnifying  Party  shall  have the burden to prove by a  preponderance  of the
evidence  that the  Indemnified  Party did not defend or settle such third party
claim in a  reasonably  prudent  manner.  The parties  agree to render,  without
compensation,  to each other such  assistance as they may reasonably  require of
each other in order to insure the proper  and  adequate  defense of any  action,
suit or proceeding,  whether or not subject to indemnification hereunder. If the
indemnification provided for in this Article XI is for any reason unenforceable,
the party  against whom  indemnification  was sought agrees to contribute to the
claims for which such  indemnification is unenforceable in such proportion as is
appropriate  to reflect the relative  fault of such party,  on the one hand, and
the  Indemnified  Party,  on the  other  hand,  as  well as any  other  relevant
equitable considerations.

                                       44
<PAGE>

          Section .8 MANNER OF  INDEMNIFICATION.  All  indemnification  payments
hereunder  shall be effected  by payment of cash or  delivery of a certified  or
official bank check in the amount of the indemnification liability.

          Section  .9 SET OFF.  To the  extent  that  Purchaser  or  Purchaser's
Affiliated  Parties suffer any Damages for which Sellers are liable to Purchaser
or  Purchaser's  Affiliated  Parties  under  the  provisions  of  Section  11.2,
Purchaser  shall have the right to reduce the amount of the  Holdback  Stock and
the Earn-Out  Payments by the amount of such  Damages.  The parties  acknowledge
that  such   reduction   shall  not  be  the   exclusive   method  of  receiving
indemnification from Sellers pursuant to this Article XI.

                                   ARTICLE VI
                                  MISCELLANEOUS

          Section .1 TERMINATION.

          (a) TERMINATION. This Agreement may be terminated at any time prior to
Closing:

                (2) By mutual written consent of Purchaser and the Company;

                (3) By  Purchaser  or  Sellers  if the  Closing  shall  not have
occurred on or before November 12, 2000; PROVIDED,  HOWEVER, that this provision
shall not be available to Purchaser if Sellers have the right to terminate  this
Agreement  under clause (iv) of this Section 12.1, and this provision  shall not
be available to Sellers if Purchaser has the right to terminate  this  Agreement
under clause (iii) of this Section 12.1;

                (4)  By  Purchaser  if  there  is  a  material   breach  of  any
representation  or  warranty  set forth in Article V hereof or any  covenant  or
agreement to be complied  with or performed by any Seller  pursuant to the terms
of this  Agreement  or the failure of a condition  set forth in Article IX to be
satisfied (and such condition is not waived in writing by Purchaser) on or prior
to the Closing  Date,  or the  occurrence  of any event  which  results or would
result in the failure of a condition  set forth in Article IX to be satisfied on
or prior to the Closing Date;

                (5)  By  the  Company  if  there  is a  material  breach  of any
representation  or warranty set forth in Article VI hereof or of any covenant or
agreement to be complied with or performed by Purchaser pursuant to the terms of
this  Agreement  or the failure of a condition  set forth in Article  VIII to be
satisfied  (and such  condition  is not waived in writing by the  Company) on or
prior to the Closing Date, or the occurrence of any event which results or would
result in the failure of a condition  set forth in Article  VIII to be satisfied
on or prior to the Closing Date,  provided  that,  the Company may not terminate
this  Agreement  prior to the Closing Date if Purchaser  has not had an adequate
opportunity (in any event, not to exceed twenty (20) calendar days) to cure such
failure.

          (a) IN THE EVENT OF  TERMINATION.  In the event of termination of this
Agreement:


                (6) Each party shall  redeliver all  documents,  work papers and
other  material of any other party  relating  to the  transactions  contemplated
hereby,  whether so obtained before or after the execution  hereof, to the party
furnishing the same (and shall destroy all copies in their possession); and

                (7) No party hereto shall have any  Liability to any other party
to this Agreement,  except as stated in subsections (i) and (ii) of this Section
12.1(b) and  Sellers'  obligations  under  Section  7.2,  except for any willful
breach of this Agreement occurring prior to the termination of this Agreement.

                                       45
<PAGE>

          Section  .2  NOTICES.  All  notices,   requests,   demands  and  other
communications  hereunder  shall be in  writing  and  shall be  deemed  given if
delivered  personally  or by  facsimile  transmission  (with  subsequent  letter
confirmation  by mail)  or  three  days  after  being  mailed  by  certified  or
registered mail,  postage  prepaid,  return receipt  requested,  to the parties,
their successors in interest or their assignees at the following  addresses,  or
at such other  addresses as the parties may  designate by written  notice in the
manner aforesaid:

If to Purchaser:           VDI MultiMedia
                           7083 Hollywood Boulevard
                           Los Angeles, California  90028
                           Telecopy: (323) 957-7990
                           Attention: Chief Financial Officer

With a concurrent copy to: Katten Muchin Zavis
                           1999 Avenue of the Stars, Suite 1600
                           Los Angeles, California  90067
                           Telecopy: (310) 788-4471
                           Attention: Brian Hoye, Esq.

If to any Seller:          Creative Digital, Inc.
                           11755 Wilshire Boulevard, Suite 880
                           Los Angeles, California 90025
                           Telecopy: (310) 479-0543
                           Attention: Larry Hester

With a concurrent copy to: Cantor & Weinshenk
                           1630 Ventura Boulevard, Suite 350
                           Studio City, California 91436
                           Telecopy: (818) 986-2728
                           Attention: John Cantor, Esq.

          Section .3 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement shall
not be  assignable by any of the parties,  except that  Purchaser may assign its
rights  hereunder  to,  and  have  its  obligations   hereunder   assumed  by  a
wholly-owned subsidiary of Purchaser.  This Agreement shall inure to the benefit
of and be binding upon the parties and their respective permitted successors and
assigns.

          Section .4 GOVERNING  LAW.  This  Agreement  shall be governed by, and
construed and enforced in accordance with, the laws of the State of California.

          Section .5  COUNTERPARTS.  This  Agreement  may be executed in several
counterparts,  each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

          Section .6  COMPLETE  AGREEMENT.  This  Agreement,  the  exhibits  and
schedules hereto and the documents delivered or to be delivered pursuant to this
Agreement  contain or will contain the entire  agreement  among the parties with
respect to the  Transactions  and shall  supersede all previous oral and written
and all contemporaneous oral negotiations, commitments and understandings.

                                       46
<PAGE>

          Section .7 MODIFICATIONS,  AMENDMENTS AND WAIVERS.  This Agreement may
be  modified,  amended or  otherwise  supplemented  only by a writing  signed by
Purchaser and the Company.  No waiver of any right or power  hereunder  shall be
deemed  effective  unless  and until a writing  waiving  such  right or power is
executed by the party waiving such right or power.

          Section .8 EXPENSES.  Except as otherwise expressly provided elsewhere
in this Agreement,  each party shall pay all fees and expenses incurred by it in
connection with the transactions contemplated by this Agreement.

          Section  .9  INVALIDITY.  In the  event  that  any  one or more of the
provisions  contained in this Agreement or in any other  instrument  referred to
herein,  shall, for any reason, be held to be invalid,  illegal or unenforceable
in any respect,  then to the maximum extent  permitted by law, such  invalidity,
illegality  or  unenforceability  shall not affect any other  provision  of this
Agreement or any other such instrument.

          Section .10  PUBLICITY.  Neither  Purchaser,  on the one hand, nor any
Seller,  including  Representatives  or Affiliates  thereof,  on the other hand,
shall  issue  any press  release  or make any  public  statement  regarding  the
transactions  contemplated  hereby,  without prior written approval of the other
parties,  provided that Purchaser may describe the Transactions and the Company,
and include the Financial  Statements,  in any document filed in connection with
the offer and sale of its securities under applicable law.

          Section  .11  LIMIT  ON  INTEREST.  Notwithstanding  anything  in this
Agreement to the contrary, no party shall be obligated to pay interest at a rate
higher than the maximum rate  permitted by applicable  law. In the event that at
any time an interest  rate provided in this  Agreement  exceeds the maximum rate
permitted by applicable law, such interest rate shall be deemed to be reduced to
such maximum permissible rate.

          Section .12 ATTORNEYS'  FEES AND COSTS.  Each party shall bear its own
expenses  arising  from  the  preparation,  negotiation  and  delivery  of  this
Agreement  and  any  other  document  required  to be  delivered  in  connection
herewith;  PROVIDED,  HOWEVER, that Purchaser shall solely bear the costs of the
Audit, unless this Agreement is terminated prior to Closing for any reason other
than the bad  faith or  willful  misconduct  by  Purchaser,  in which  event the
Company, on the one hand, and Purchaser,  on the other hand, shall bear one-half
of the costs of such Audit;  and PROVIDED,  FURTHER,  should any party institute
any arbitration,  action, suit or other proceeding arising out of or relating to
this  Agreement,  the  prevailing  party shall be  entitled to receive  from the
losing  party  reasonable  attorneys'  fees and  costs  incurred  in  connection
therewith.

          Section .13 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any  provision of, or based on any right arising out of, this
Agreement  may be brought  against any of the parties in the courts of the State
of California,  County of Los Angeles, and the parties hereto irrevocably submit
to the  jurisdiction  of such  courts  and waive  any  objection  to venue  laid
therein.  Process  in any  action or  proceeding  referred  to in the  preceding
sentence may be served on any party anywhere in the world.

                                       47
<PAGE>

          Section .14 CONTRACT INTERPRETATION; CONSTRUCTION OF AGREEMENT.

          (a) The  headings  contained  in  this  Agreement  are  for  reference
purposes only and shall not affect in any way the meaning or  interpretation  of
this Agreement. Article, section, exhibit, schedule, preamble, recital and party
references are to this Agreement unless otherwise  stated.  The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation".

          (b) No party, nor its respective counsel,  shall be deemed the drafter
of this Agreement for purposes of construing  the provisions of this  Agreement,
and all language in all parts of this Agreement shall be construed in accordance
with its fair meaning, and not strictly for or against any party.

          (c) Whenever the context may require,  any pronoun  shall  include the
corresponding masculine, feminine and neuter forms.


<PAGE>


         IN WITNESS WHEREOF,  each of the parties has executed this Agreement as
of the date first above written.

<TABLE>
<CAPTION>

                                            CREATIVE DIGITAL, INC. as a Seller


                                            By:
<S>                                              <C>
                                                 ------------------------------------------------------------------
Name:
Title:



                                            Larry Hester, as a Seller



                                            VDI MULTIMEDIA, as Purchaser


                                            By:
<S>                                              <C>
                                                 ------------------------------------------------------------------
Name:
Title:
</TABLE>


                                       48