<PAGE>
 
                                 EXHIBIT 10.37
 
                                 AMENDMENT TO
                                 ------------

                                ANGELIKA THEATRE
                                ----------------

                       ASSET PURCHASE AND SALE AGREEMENT
                       ---------------------------------


          This Amendment (the "Amendment Agreement") to the Angelika Theatre
Asset Purchase and Sale Agreement dated as of July 1, 1996 (the "Sale
Agreement") is made and entered into as of this 27th day of August, 1996 by and
among READING INVESTMENT COMPANY, INC., a Delaware corporation ("Reading"),
ANGELIKA FILM CENTERS, INC., a New York corporation ("Seller"), and HOUSTON
CINEMA, INC., a New York corporation ("Houston").

                                    RECITALS
                                    --------

          A.    The Sale Agreement was previously modified by Letter Agreements
   dated July 9, 1996 and July 24, 1996 between the attorneys for Reading and
   Seller with the prior approval and authority of their respective Clients.

          B.   The parties are simultaneously herewith Closing the Sale
Agreement and in connection therewith, wish to further amend the Sale Agreement
so as to defer the "Closing Audit" of Seller by the "Closing Auditors" as
required under Section 1.03 (as defined therein) until a date which is sixty
(60) days after the Closing Date in order for the parties to continue their good
faith discussions and negotiations and allow sufficient time for the parties to
agree upon not only Seller's "actual Pre-Closing Earnings" (as defined therein),
but also allow the parties to seek agreement upon any further necessary and
appropriate adjustments to the final Purchase Price.

                              AMENDMENT AGREEMENT
                              -------------------

          NOW, THEREFORE, in consideration of the foregoing recitals and the
representations, warranties and covenants herein set forth, the parties hereto
agree as follows:

          1.   The first clause of the second sentence of Section 1.03 of the
Sale Agreement, which provides "On or immediately after the Closing Date,",
shall be deleted and the following shall be substituted in lieu thereof:  "On or
immediately following the first business day which is sixty (60) days after the
Closing Date,".

          2.   The Seller has recently received an audit notice from the
Department of Labor (the "Department of Labor Audit"), which Department of Labor
Audit will review and determine whether Seller has underpaid any of its
employees during the period beginning with the last quarter of 1994 to date.
The parties 
<PAGE>
 
recognize and acknowledge that the initial "Purchase Price" stated in the Sale
Agreement for the Angelika Theatre "Assets" being sold and transferred under the
Sale Agreement was, in large part, predicated upon a formula (the "Formula"),
which Formula represented an initial Purchase Price (subject to certain agreed
upon adjustments) based upon six times (6 x) the "net income" of the Angelika
Theatre for the twelve (12) month period ended December 31, 1995. In the event
and to the extent the Department of Labor Audit finally determines that the
Seller materially underpaid its employees during calendar year 1995 and thus the
Seller not only concomitantly materially understated its labor costs, but also
to the same extent overstated its earnings under the Formula referred to above,
then the parties wish to provide and equitable post-closing adjustment to the
Purchase Price based upon the results of the Department of Labor Audit as
finally determined for calendar year 1995.

          a.        If the Department of Labor Audit for calendar year 1995
finally determines by order or settlement that the Seller's employees were
either not underpaid or if underpaid then by a sum not greater than $35,000
(exclusive of interest, penalties or fines), then and in such event, there shall
be no further adjustment to the Purchase Price.

          b.        If the Department of Labor Audit for calendar year 1995
finally determines by order or settlement that the Seller's employees were
underpaid by a sum greater than $35,000, then and in such event, for each one
dollar ($1.00) in excess of $35,000 (exclusive of interest, penalties or fines),
the Purchase Price shall be adjusted and reduced six times (6 x) the amount of
underpayment in excess of $35,000, which adjustment and reduction in Purchase
Price shall in no event exceed the total adjustment or reduction of $150,000.

          c.        Seller hereby instructs either its accountant, Andrew Siegel
of Miller & Co., P.C., or its attorney, Ralph R. Hochberg, Esq. of Skolnick &
Hochberg, P.C., to advise Purchaser's attorney, Donald S. Snider, Esq. of Baer
Marks & Upham, LLP, of any settlement or final determination of the Department
of Labor Audit.

          d.        If by reason of the Department of Labor Audit referred to
above, Purchaser is entitled to an equitable adjustment and reduction of the
Purchase Price, as provided herein, Purchaser shall have the automatic right to
offset the amount by which the Purchase Price has been reduced from any sum
which may become due and owing under the Holdback Note and in addition thereto,
instruct the Escrow Agent to pay the Purchaser such amount from the Escrow
Account securing the Holdback Note.

                                       2
<PAGE>
 
          3.   Except as expressly provided herein, the Sale Agreement, as
previously amended, is hereby ratified and in full force and effect.

          IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.


                    Purchaser:


                        READING INVESTMENT COMPANY, INC., a 
                        Delaware corporation

 

                              By: /s/ Charles S. Groshon
                                  -------------------------------
                                  Charles S. Groshon

                              Title:  Vice President
                                     ----------------------------

                    Seller:


                        ANGELIKA FILM CENTERS, INC., a New York

                         corporation


                              By: 
                                  -------------------------------
                              Joseph J.M. Saleh, its authorized
                              agent


                              By: /s/ Angelika T. Saleh
                                  -------------------------------
                              Angelika T. Saleh, its authorized
                              agent


                              By: /s/ Jessica Saleh Hunt
                                  -------------------------------
                              Jessica Saleh Hunt, its authorized
                              agent

                                       3
<PAGE>
 
                              By: /s/ Eva Saleh
                                  -------------------------------
                              Eva Saleh, its authorized agent


                        HOUSTON CINEMA, INC., a

                         New York corporation


                              By: /s/ Joseph JM Saleh
                                  -------------------------------
                              Joseph J.M. Saleh, its
                              authorized agent


                              By: /s/ Angelika T. Saleh
                                  -------------------------------
                              Angelika T. Saleh, its
                              authorized agent


                              By: /s/ Jessica Saleh Hunt
                                  -------------------------------
                              Jessica Saleh Hunt, its
                              authorized agent


                              By: /s/ Eva Saleh
                                  -------------------------------
                              Eva Saleh, its authorized agent

 

                             Solely in their capacity as shareholders of the
                             Seller and for the sole purpose of consenting that
                             the Seller may enter into this Agreement and
                             effectuate the transactions contemplated thereby.

 
                                       4
<PAGE>
 
                                              Saleh Family Members:
                                
                                
                                               /s/ Joseph JM Saleh
                                               -----------------------------
                                               Joseph J.M. Saleh
                                
                                              Address: 240 Central Park So
                                                      ----------------------
                                                       New York, NY
                                                      ----------------------
                                                       10019
                                                      ----------------------
                                
                                
                                               /s/ Angelika T. Saleh
                                               -----------------------------
                                               Angelika T. Saleh
                                
                                              Address: 1261 Madison Ave.
                                                      ----------------------
                                                       NYC
                                                      ----------------------
                                                       10023
                                                      ----------------------
                                
                                
                                               /s/ Jessica Saleh Hunt  
                                               -----------------------------
                                               Jessica Saleh Hunt
                                
                                              Address: 330 West End Ave. St.
                                                      ----------------------
                                                       NY NY
                                                      ----------------------
                                                       10023
                                                      ----------------------
                                
                                
                                               /s/ Eva Saleh
                                               -----------------------------
                                               Eva Saleh
                                
                                              Address: 35 W. 90 St.
                                                      ----------------------
                                                       NYC  10024
                                                      ----------------------


                                       5