Document:

<PAGE>

                                                                   EXHIBIT 10.10

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                              PURCHASE AGREEMENT

                                     AMONG

                          NATIONAL AUTO CREDIT, INC.,

                            NATIONAL CINEMAS, INC.

                                   FA, INC.

                                      and

                          READING ENTERTAINMENT, INC.

                         ______________________________

                           Dated as of April 5, 2000

                         ______________________________

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                               TABLE OF CONTENTS
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ARTICLE I.       DEFINITIONS..........................................................     1

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

ARTICLE II.      PURCHASE AND SALE....................................................     6

     Section 2.1     Transfer of Shares...............................................     6
     Section 2.2     Closing..........................................................     6
     Section 2.3     Purchase Price...................................................     6
     Section 2.4     Certain Indemnitees..............................................     7
     Section 2.5     Newco............................................................     7
     Section 2.6     Option Letters...................................................     7

ARTICLE III      REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PARENT..........     7

     Section 3.1     Organization.....................................................     8
     Section 3.2     Capitalization; Title to the Interests...........................     8
     Section 3.3     Subsidiaries and Investments.....................................     8
     Section 3.4     Authorization and Validity of Agreement..........................     8
     Section 3.5     No Conflict or Violation.........................................     9
     Section 3.6     Consents and Approvals...........................................     9
     Section 3.7     Financial Statements.............................................     9
     Section 3.8     Absence of Certain Changes or Events.............................    10
     Section 3.9     Tax Matters......................................................    11
     Section 3.10    Intentionally Omitted............................................    12
     Section 3.11    Intellectual Property............................................    12
     Section 3.12    Personal Property................................................    12
     Section 3.13    Real Property....................................................    13
     Section 3.14    Licenses, Permits and Governmental Approvals.....................    14
     Section 3.15    Compliance with Law..............................................    14
     Section 3.16    Contracts........................................................    15
     Section 3.17    Intentionally Omitted............................................    16
     Section 3.18    Litigation.......................................................    16
     Section 3.19    Insurance........................................................    16
     Section 3.20    Employee Plans...................................................    16
     Section 3.21    Labor Matters....................................................    16
     Section 3.22    Environmental Matters............................................    17
     Section 3.23    Brokers and Finders..............................................    17
     Section 3.24    Year 2000 Compliance.............................................    17
     Section 3.25    Intentionally Omitted............................................    17
     Section 3.26    Change in Ownership..............................................    18
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     Section 3.27    Intentionally Omitted...........................................   18
     Section 3.28    Absence of Undisclosed Liabilities..............................   18
     Section 3.29    Purchase for Investment.........................................   18
     Section 3.30    Restricted Securities...........................................   18
     Section 3.31    Due Diligence...................................................   19
     Section 3.32    Survival........................................................   19

ARTICLE IV.       REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEWCO..............   19

     Section 4.1     Corporate Organization..........................................   19
     Section 4.2     Subsidiaries and Investments....................................   20
     Section 4.3     Authorization and Validity of Agreement.........................   20
     Section 4.4     Capitalization..................................................   20
     Section 4.5     No Conflict or Violation........................................   21
     Section 4.6     Consents and Approvals..........................................   21
     Section 4.7     Financial Statements............................................   21
     Section 4.8     Absence of Certain Changes or Events............................   21
     Section 4.9     Tax Matters.....................................................   22
     Section 4.10    Real Property...................................................   23
     Section 4.11    Litigation......................................................   25
     Section 4.12    Employee Plans..................................................   25
     Section 4.13    Labor Matters...................................................   28
     Section 4.14    Environmental Matters...........................................   28
     Section 4.15    Purchase for Investment.........................................   29
     Section 4.16    Brokers and Finders.............................................   29
     Section 4.17    Due Diligence...................................................   29
     Section 4.18    Survival........................................................   29

ARTICLE V.        COVENANTS OF THE PARTIES...........................................   30

     Section 5.1     Consents and Approvals Required on Closing Date.................   30
     Section 5.2     Further Assurances..............................................   30
     Section 5.3     Best Efforts....................................................   30
     Section 5.4     Nondisclosure...................................................   30
     Section 5.5     Tax Matters.....................................................   30
     Section 5.6     Cooperation on Tax Matters......................................   31
     Section 5.7     Amendment to Management Agreement...............................   31
     Section 5.8     Amendment to Trademark License Agreement........................   31
     Section 5.9     Notification and Put Rights.....................................   31
     Section 5.10    Amendment to Certificate of Incorporation.......................   32
     Section 5.11    Board Representation............................................   32

ARTICLE VI.       INDEMNIFICATION....................................................   32

     Section 6.1     Indemnification by the Seller and the Parent....................   32
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     Section 6.2     Procedures for Indemnification by the Seller and the Parent.......   33
     Section 6.3     Indemnification by the Buyer and Newco............................   34
     Section 6.4     Procedures for Indemnification by the Buyer and Newco.............   35

ARTICLE VII.      CONDITIONS TO OBLIGATIONS OF THE SELLER AND THE PARENT...............   36

     Section 7.1     Representations and Warranties of the Buyer and Newco.............   36
     Section 7.2     Performance of the Obligations of the Buyer and Newco.............   36
     Section 7.3     Consents and Approvals............................................   36
     Section 7.4     No Violation of Orders............................................   36
     Section 7.5     Registration Rights Agreement.....................................   36
     Section 7.6     Buyer Closing Documents...........................................   36
     Section 7.7     Legal Matters.....................................................   37

ARTICLE VIII.     CONDITIONS TO OBLIGATIONS OF THE BUYER AND NEWCO.....................   37

     Section 8.1     Representations and Warranties of the Seller and the Parent.......   37
     Section 8.2     Performance of the Obligations of the Seller and the Parent.......   37
     Section 8.3     Consents and Approvals............................................   37
     Section 8.4     No Violation of Orders............................................   37
     Section 8.5     Sellers Closing Documents.........................................   38
     Section 8.6     Legal Matters.....................................................   38

ARTICLE IX.       TERMINATION..........................................................   38

     Section 9.1     Conditions of Termination.........................................   38
     Section 9.2     Effect of Termination.............................................   39
     Section 9.3     Intentionally Omitted.............................................   39

ARTICLE X.        MISCELLANEOUS........................................................   39

     Section 10.1    Successors and Assigns............................................   39
     Section 10.2    Governing Law; Jurisdiction.......................................   39
     Section 10.3    Service of Process................................................   39
     Section 10.4    Expenses; Fees....................................................   39
     Section 10.5    Severability......................................................   39
     Section 10.6    Notices...........................................................   39
     Section 10.7    Amendments; Waivers...............................................   40
     Section 10.8    Public Announcements..............................................   41
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     Section 10.9    Entire Agreement..................................................   41
     Section 10.10   Parties in Interest...............................................   41
     Section 10.11   Scheduled Disclosures.............................................   41
     Section 10.12   Specific Performance..............................................   41
     Section 10.13   Section and Paragraph Headings....................................   41
     Section 10.14   Counterparts......................................................   41
</TABLE>

Exhibits
--------

Exhibit A -  Form of Amendment and Waiver
Exhibit B -  Option Letters
Exhibit C -  Company Financial Statements
Exhibit D -  Form of Registration Rights Agreement
Exhibit E -  Form of Amendment to Trademark License Agreement
Exhibit F -  Certificate of Designation, Number, Powers, Preferences and
             Relative, Participating, Optional and Other Special Rights and the
             Qualifications, Limitations, Restrictions, and Other Distinguishing
             Characteristics of the Series A Convertible Preferred Stock of
             National Auto Credit, Inc.

                                      iv
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                              PURCHASE AGREEMENT

     THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as of
this 4/th/ day of April, 2000, by and among National Auto Credit, Inc., a
Delaware corporation (the "Buyer"), National Cinemas, Inc. ("Newco"), FA, Inc.
(d/b/a FA of Delaware), a Delaware corporation (the "Seller"), and Reading
Entertainment, Inc., a Nevada corporation (the "Parent").

                             PRELIMINARY STATEMENT

     WHEREAS, Angelika Film Centers LLC, a Delaware limited liability company
(the "Company"), owns and operates the Angelika Film Center, consisting of a
multiplex cinema and cafe complex, located at 18 W. Houston Street, New York,
New York, in the SOHO District of Manhattan;

     WHEREAS, the Seller owns an 83.34% membership interest in the Company
which, together with the remaining 16.66% membership interest in the Company
owned by Sutton Hill Associates, a California general partnership ("Sutton
Hill"), constitutes all of the outstanding membership interests in the Company
(the "Interests"); and

     WHEREAS, the Parent owns indirectly all of the issued and outstanding
shares of capital stock of the Seller and Buyer owns all of the issued and
outstanding capital stock of Newco; and

     WHEREAS, the Buyer desires to enter into the motion picture exhibition
business in the United States and to purchase a 50% membership interest in the
Company from the Seller (the "Purchased Interests"), and the Seller desires to
sell the Purchased Interests to the Buyer, on the Closing Date (as hereinafter
defined), upon the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the mutual terms, conditions and other
agreements set forth herein, the parties hereto hereby agree as follows:

                                  ARTICLE I.
                                  DEFINITIONS

     Section 1.1.   Definitions. As used in this Agreement (including the
recitals and Schedules hereto), the following terms shall have the following
meanings (such meanings to be applicable equally to both singular and plural
forms of the terms defined):

     "Affiliate" shall mean, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person.  As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of the power to direct or cause the
direction of management, policies or investments (whether through ownership of
securities or partnership or other ownership interests, by management or
advisory contract or otherwise) of such Person.

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     "Agreement" shall have the meaning set forth in the preamble hereto.

     "Amended Trademark License Agreement" shall have the meaning set forth in
Section 5.9 hereof.

     "Amendment and Waiver" means the Amendment and Waiver to the Limited
Liability Company Agreement between the Seller and Sutton Hill to be entered
into among the Seller and Sutton Hill on or prior to the Closing Date in the
form attached hereto as Exhibit A.

     "Benefit Arrangement" shall have the meaning set forth in Section 3.20
hereof.

     "Buyer" shall have the meaning set forth in the preamble hereto.

     "Buyer Common Stock" means the Common Stock, par value $.05 per share, of
the Buyer.

     "Buyer Series A Preferred Stock" means the Series A Convertible Preferred
Stock, par value $.05 per share, of the Buyer, described on Exhibit F hereto.

     "Buyer Employee Plans" shall have the meaning set forth in Section 4.12
hereof.

     "Buyer ERISA Affiliate" shall have the meaning set forth in Section 4.12
hereof.

     "Buyer Events of Breach" shall have the meaning set forth in Section 6.3
hereof.

     "Buyer Indemnitees" shall have the meaning set forth in Section 6.1 hereof.

     "Buyer Leased Property" shall have the meaning set forth in Section 4.10(b)
hereof.

     "Buyer Leases" shall have the meaning set forth in Section 4.10(b) hereof.

     "Buyer Losses" shall have the meaning set forth in Section 6.1 hereof.

     "Buyer Material Adverse Effect" shall mean a material adverse effect on the
business, operations, assets, properties or condition (financial or otherwise)
of the Buyer and its subsidiaries, taken as a whole.

     "Buyer Multiemployer Plan" shall have the meaning set forth in Section
4.12(b) hereof.

     "Buyer Owned Real Property" shall have the meaning set forth in Section
4.10(a) hereof.

     "Buyer Pension Plans" shall have the meaning set forth in Section 4.12
hereof.

     "Buyer Plans" shall have the meaning set forth in Section 4.12 hereof.

     "Buyer Financial Statements" shall have the meaning set forth in Section
4.7 hereof.

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     "CERCLA" shall have the meaning set forth in Section 3.22(b) hereof.

     "Certificate of Designation" shall mean that Certificate of Designation,
Number, Powers, Preferences and Relative, Participating, Optional and Other
Special Rights and the Qualifications, Limitations, Restrictions, and Other
Distinguishing Characteristics of the Series A Convertible Preferred Stock of
National Auto Credit, Inc., the form of which is attached hereto as Exhibit F.

     "Closing" shall have the meaning set forth in Section 2.2 hereof.

     "Closing Date" shall have the meaning set forth in Section 2.2 hereof.

     "Code" shall mean the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.

     "Commission" means the Securities and Exchange Commission.

     "Company" shall have the meaning set forth in the preliminary statement
hereof.

     "Company Balance Sheet" shall have the meaning set forth in Section 3.7
hereof.

     "Company Financial Statements" shall have the meaning set forth in Section
3.7 hereof.

     "Company Material Adverse Effect" shall mean a material adverse effect on
the business, operations, assets, properties or condition (financial or
otherwise) of the Company.

     "Company Permits" shall have the meaning set forth in Section 3.14 hereof.

     "Company Unaudited Financial Statements" shall have the meaning set forth
in Section 3.7 hereof.

     "Contracts" shall have the meaning set forth in Section 3.16 hereof.

     "Employee Plans" shall have the meaning set forth in Section 3.20(a)
hereof.

     "Employment and Labor Agreements" shall have the meaning set forth in
Section 4.13(a) hereof.

     "Environmental Laws" shall have the meaning set forth in Section 3.22(a)
hereof.

     "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated thereunder, as in effect from time to
time.

     "GAAP" shall mean United States generally accepted accounting principles as
in effect on the date on which the document or calculation to which it refers
relates, applied on a consistent basis throughout the periods covered thereby.

                                       3
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     "Government" shall mean any agency, division, subdivision, audit group or
procuring office of the Government of the United States, any state of the United
States or any foreign government, including the employees or agents thereof.

     "Hazardous Materials" shall have the meaning set forth in Section 3.22(c)
hereof.

     "Income Tax" or "Income Taxes" shall mean all Taxes based upon, measured
by, or calculated with respect to (i) gross or net income or gross or net
receipts or profits (including, but not limited to, any capital gains, minimum
taxes and any Taxes on items of tax preference, but not including sales, use,
goods and services, real or personal property transfer or other similar Taxes),
(ii) multiple bases (including, but not limited to, corporate franchise, doing
business or occupation Taxes) if one or more of the bases upon which such Tax
may be based upon, measured by, or calculated with respect to, is described in
clause (i) above or (iii) withholding taxes measured by, or calculated with
respect to, any payments or distributions (other than wages).

     "Indebtedness" shall mean all loan and credit agreements, indentures,
debentures, promissory notes and other evidences of indebtedness, and all
guarantees related thereto, of the Company.

     "Intellectual Property" shall have the meaning set forth in Section 3.11
hereof.

     "Interests" shall have the meaning set forth in the Preliminary Statement
hereof.

     "Leases" shall have the meaning set forth in Section 3.13(b) hereof.

     "Leased Property" shall have the meaning set forth in Section 3.13(b)
hereof.

     "Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien (statutory or other) or conditional sale agreement.

     "Management Agreement" shall mean the Management Agreement, dated as of
August 27, 1996, by and between the Company and City Cinemas Corporation, a New
York corporation.

     "Newco" shall have the meaning set forth in the preamble hereto.

     "NLRB" shall have the meaning set forth in Section 4.13(b) hereof.

     "Option Letters" shall have the meaning set forth in Section 2.6 hereof.

     "Parent" shall have the meaning set forth in the preamble hereto.

     "PBGC" shall have the meaning set forth in Section 4.12(e) hereof.

     "Permits" shall mean licenses, permits, franchises, authorizations and
approvals issued or granted by the Government, any state or local government,
any foreign national or local

                                       4
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government, or any department, agency, board, commission, bureau or
instrumentality of any of the foregoing.

     "Person" shall mean and include any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, any other unincorporated organization or Government.

     "Plans" shall have the meaning set forth in Section 3.20(a) hereof.

     "Proceeding" shall have the meaning set forth in Section 6.2 hereof.

     "Purchased Interests" shall have the meaning set forth in the Preliminary
Statement hereof.

     "Reading Investment" shall have the meaning set forth in Section 5.9
hereof.

     "Registration Rights Agreement" means the Registration Rights Agreement to
be entered into among the Buyer and the Seller on the Closing Date in the form
attached hereto as Exhibit D.

     "SEC Reports" means the registration statements, reports and proxy
statements filed with the Commission.

     "Securities Act" shall mean the Securities Act of 1933, as amended.

     "Seller Events of Breach" shall have the meaning set forth in Section 6.1
hereof.

     "Seller Indemnitees" shall have the meaning set forth in Section 6.3
hereof.

     "Seller Losses" shall have the meaning set forth in Section 6.3 hereof.

     "Seller" shall have the meaning set forth in the preamble hereto.

     "Share Consideration" shall have the meaning set forth in Section 2.3
hereof.

     "Sutton Hill" shall have the meaning set forth in the Preliminary Statement
hereof.

     "Taxes" shall mean any and all federal, state, local, foreign and other
taxes, levies, fees, imposts, duties and charges of whatever kind (including any
interest, penalties or additions to the tax imposed in connection therewith or
with respect thereto), whether or not imposed on the Company, including, without
limitation, taxes imposed on, or measured by, income, franchise, profits or
gross receipts, and also ad valorem, value added, sales, use, service, real or
personal property, capital stock, license, payroll, withholding, employment,
social security, workers' compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premium, windfall profits,
transfer and gains taxes and customs duties.

                                       5
<PAGE>

     "Tax Returns" shall mean returns, reports, information statements and other
documentation (including any additional or supporting material) filed or
maintained, or required to be filed or maintained, in connection with the
calculation, determination, assessment or collection of any Tax and shall
include any amended returns required as a result of examination adjustments made
by the Internal Revenue Service or other Tax authority.

     "Transaction Documents" shall mean this Agreement and the Exhibits and
Schedules hereto, the Registration Rights Agreement, the Option Letters, the
Amendment and Waiver, the Amended Trademark License Agreement and all other
agreements, instruments, certificates and other documents to be entered into or
delivered by any party in connection with the transactions contemplated to be
consummated pursuant to any of the foregoing.

                                  ARTICLE II.
                               PURCHASE AND SALE

     Section 2.1.   Transfer of Interests. On the Closing Date and upon the
terms and subject to the conditions set forth in this Agreement, the Seller
shall sell, assign, transfer, convey and deliver the Purchased Interests, free
and clear of any liens, claims, charges, security interests or other legal or
equitable encumbrances, limitations or restrictions, to the Buyer, and the Buyer
shall purchase and accept the Purchased Interests from the Seller.

     Section 2.2.   Closing. The closing of the sale and purchase of the
Purchased Interests (the "Closing") shall take place on the 5/th/ day of April,
2000, or at such other time and date as the parties hereto shall agree in
writing (the "Closing Date"), at the offices of De Martino Finkelstein Rosen &
Virga, 1818 N Street, N.W., Suite 400, Washington, D.C. 20036, or at such other
place as the parties hereto shall agree. At the Closing, the Seller shall
deliver to the Buyer or its designees instruments of transfer reasonably
acceptable to the Buyer transferring the Purchased Interests, with all stamp or
other taxes attributable to the transfer of such Purchased Interests paid or
provided for as contemplated herein, and the Seller and the Parent shall execute
and deliver the Transaction Documents to which each of them is a party. In full
consideration and exchange for the Purchased Interests, the Buyer shall
thereupon pay to the Seller the purchase price as provided in Section 2.3
hereof, and the Buyer and Newco shall execute and deliver the Transaction
Documents to which each of them is a party.

     Section 2.3.   Purchase Price. Upon the terms and subject to the conditions
set forth in this Agreement, in reliance on the representations, warranties,
covenants and agreements of the parties contained herein, the consideration for
the sale and transfer of the Purchased Interests on the Closing Date shall
consist of (i) 8,999,900 shares of Buyer Common Stock (the "Common Share
Consideration") and (ii) 100 shares of Buyer Series A Preferred Stock (the
"Preferred Share Consideration"). The Buyer shall deliver to the Seller the
certificates representing the Common Share Consideration on the Closing Date,
and the Buyer shall deliver to the Seller the certificates representing the
Preferred Share Consideration promptly following the acceptance for filing under
the Delaware General Corporation Law of the Certificate of Designation. In the
event that the Certificate of Designation for the Buyer's Series A Preferred
Stock has not been filed with the appropriate Delaware authorities at the
Closing Date, the parties will nevertheless

                                       6
<PAGE>

close the transaction, based upon Buyer's covenant to file such Certificate of
Designation and to issue the Buyer Series A Preferred Stock immediately
thereafter. In such case, stock certificates representing such Buyer Series A
Preferred Stock will be conditionally delivered to Seller at the Closing to be
effective immediately upon the filing of the Certificate of Designation. The
failure to file the Certificate of Designation within 48 hours of the Closing
will give to Seller the right, at its election, either (a) to rescind the
transactions provided for in this Agreement or (b) to surrender to Buyer the
Buyer Common Stock received and its rights to receive the Buyer Series A Common
Stock in exchange for cash in the amount of $13.5 million.

     Section 2.4.   Certain Indemnitees. Reference is made to that certain
Guarantee dated August 28, 1996 by Parent in favor of Cable Building Associates,
pursuant to which Parent has guaranteed the obligations of the Company under the
lease between Cable Building Associates and the Company (the "Cable Guarantee").
Effective upon the Closing, NAC agrees to indemnify Parent for 50% of any
liability that Parent may incur under the Cable Guarantee other than any
liability resulting solely from the breach by Parent of its obligations under
the Cable Guarantee. Upon the request of Parent, NAC and Parent will cooperate
and work in good faith to separately document such indemnity, with the intention
that Parent and NAC be, in effect, each responsible for 50% of the obligations
of the guarantor under such guarantee.

     Section 2.5.   Newco. On the Closing Date, the Buyer shall transfer to
Newco the Purchased Interests. Seller hereby consents to the transfer of the
Purchased Interests to Newco. The parties acknowledge and agree that other than
Newco's obligations pursuant to this Agreement, ownership and management of the
Purchased Interests, ownership of any distributions received from the Company
and obligations pursuant to the operating agreement with respect to the Company,
Newco shall not incur any liabilities or obligations or conduct any business.
Buyer hereby covenants and agrees that it will not take, and will cause Newco
not to take, any action that would foreseeably cause Newco to be unable to
satisfy its obligations hereunder or would foreseeably render such obligations
unenforceable, including, without limitation, any action with respect to the
sale or other disposition by Newco of any of its assets, the declaration of
dividends by Newco, the repurchase, redemption or other acquisition by Newco of
any of its stock, the incurrence of indebtedness by Newco, the creation of any
liens or encumbrances by Newco on any of its assets, or the merger,
consolidation, liquidation or dissolution of Newco.

     Section 2.6.   Option Letters. The Buyer and the Parent acknowledge that
they are executing and delivering simultaneously with this Agreement the Option
Letters in the form set forth as Exhibits B-1 and B-2 hereto (the "Option
Letters").

                                 ARTICLE III.
          REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PARENT

     The Seller and the Parent (jointly and severally) represent and warrant to
the Buyer as follows:

                                       7
<PAGE>

     Section 3.1.   Organization. The Company is a limited liability company
duly formed, validly existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority and all governmental
licenses, authorizations, permits, consents and approvals to own its properties
and assets and to conduct its businesses as now conducted and as proposed to be
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority will not, in the aggregate, have a
Company Material Adverse Effect. The Company is duly qualified to do business as
a foreign company and is in good standing in every jurisdiction where the
character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified would not have a Company Material Adverse Effect. The Company is
qualified to do business only in the State of New York. Copies of the Limited
Liability Company Agreement, the Management Agreement of the Company and other
formation documents of the Company, with all amendments thereto to the date
hereof, have been furnished by the Parent to the Buyer or its representatives,
and such copies are accurate and complete as of the date hereof.

     Section 3.2.   Capitalization; Title to the Interests. The authorized and
outstanding capitalization of the Company is as set forth in Schedule 3.2. All
                                                             ------------
of the Purchased Interests are issued and outstanding as of the date of this
Agreement and are owned of record and beneficially by the Seller as set forth in
Schedule 3.2. The Purchased Interests have been duly authorized and validly
------------
issued and no personal liability attaches to the ownership thereof. The
Purchased Interests represent 50% of the issued and outstanding Interests of the
Company. Except for this Agreement and as set forth on Schedule 3.2, there are
                                                       ------------
no outstanding options, warrants, agreements, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire the
Interests, any unissued or treasury shares of capital stock or interests of the
Company, any outstanding obligations of the Company to repurchase, redeem or
otherwise acquire outstanding Interests or any securities convertible into or
exchangeable for any shares of capital stock or interests of the Company. The
Seller owns beneficially and of record and has all of the ownership interests
in, all of the Purchased Interests, free and clear of any mortgage, pledge,
hypothecation, rights of others, claim, security interest, charge, encumbrance,
title defect, title retention agreement, voting trust agreement, interest,
option, lien, charge or similar restriction or limitation (including any
restriction on the right to vote, sell or otherwise dispose of the Purchased
Interests).

     Section 3.3.   Subsidiaries and Investments. The Company does not, directly
or indirectly, own, of record or beneficially, any outstanding voting securities
or other equity interests in or control any corporation, limited liability
company, partnership, trust, joint venture or other entity.

     Section 3.4.   Authorization and Validity of Agreement. Each of the Seller
and the Parent has all requisite corporate or other authority to enter into the
Transaction Documents to which it is a party and to carry out its obligations
thereunder. The execution and delivery of the Transaction Documents to which the
Seller and Parent are parties by the Seller and the Parent and the performance
by the Seller and the Parent of their respective obligations thereunder have
been duly authorized by all necessary action on the part of the Seller and the
Parent, and no other

                                       8
<PAGE>

proceedings on the part of the Seller and the Parent are necessary to authorize
such execution, delivery and performance. The Transaction Documents to which the
Seller and Parent are parties have been duly and validly executed and delivered
by each of the Seller and the Parent and constitute a valid and binding
obligation of each of the Seller and the Parent, enforceable against each of
them in accordance with their terms, except as may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws of general application
relating to or affecting creditors' rights generally and except for the
limitations imposed by general principles of equity.

     Section 3.5.   No Conflict or Violation. Assuming the consents and
approvals listed on Schedule 3.6 are obtained or waived, the execution, delivery
                    ------------
and performance by each of the Seller and the Parent of the Transaction
Documents to which it is a party (i) does not and will not violate or conflict
with the Limited Liability Company Agreement, Operating Agreement, Management
Agreement or any formation documents of the Company, (ii) does not and will not
violate any provision of law, or any order, judgment or decree of any court or
other governmental or regulatory authority binding on the Company, the Seller or
the Parent except which individually or in the aggregate would not have a
Company Material Adverse Effect, (iii) does not violate and will not result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any contract, lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Seller, the Parent or
the Company is a party or by which the Seller, the Parent or the Company is
bound or to which any of their respective properties or assets is subject,
except which in the aggregate would not have a Company Material Adverse Effect,
(iv) will not result in the creation or imposition of any Lien upon any of the
Purchased Interests, and (v) will not result in the cancellation, modification,
revocation or suspension of any of the licenses, franchises, Permits,
authorizations or approvals referred to on Schedule 3.14, except which in the
aggregate would not have a Company Material Adverse Effect.

     Section 3.6.   Consents and Approvals. Except as set forth on Schedule 3.6,
                                                                   ------------
no consent, waiver, authorization or approval of, or declaration or filing with,
any governmental or regulatory authority, domestic or foreign, or other Person
is required in connection with the execution and delivery of the Transaction
Documents by the Seller and the Parent or the performance by the Seller and the
Parent of their respective obligations thereunder.

     Section 3.7.   Financial Statements. The Parent has heretofore furnished to
the Buyer copies of (i) the unaudited consolidated balance sheet of the Company
as of December 31, 1999 (the "Company Balance Sheet"), together with the related
statements of operations, members' equity and cash flows for the twelve month
period then ended and the notes thereto, if any (the "Company Unaudited
Financial Statements"); and (ii) the unaudited consolidated balance sheet of the
Company as of December 31, 1998, together with the related statement of
operations, members' equity and cash flows for the twelve month period then
ended and the notes thereto, if any and (iii) the audited consolidated balance
sheet of the Company as of the fiscal years ended January 1, 1998 and December
31, 1996, together with the related statements of operations, members' equity
and cash flows for the periods then ended and the notes thereto, if any, (the
financial statements listed in clause (i) (ii) and (iii) above being hereinafter
referred to as the "Company Financial Statements"). Except as set forth therein,
the Company Financial

                                       9
<PAGE>

Statements: (i) were prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby; (ii) present fairly in all
material respects the financial position, results of operations and cash flow of
the Company as of such dates and for the periods then ended, except for
customary audit adjustments which are not material to the financial position or
results of operations of the Company; and (iii) are in accordance with the books
of account and records of the Company. The Company Financial Statements are
attached hereto as Exhibit C.

     Section 3.8.   Absence of Certain Changes or Events. Except as contemplated
by this Agreement, or as set forth in Schedule 3.8, since December 31, 1999, the
                                      ------------
business of the Company has been conducted in the ordinary course consistent
with past practices and, other than any of the following actions taken in the
ordinary course of business, there has not been any:

          (a)       Event that has had or is reasonably likely to have a Company
Material Adverse Effect, and no factor or condition exists and no event has
occurred that would be likely to result in a Company Material Adverse Effect;

          (b)       Destruction of, damage to, or loss of, any material asset of
the Company (whether or not covered by insurance);

          (c)       Change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization methods,
policies, or rate) by the Company;

          (d)       Declaration or making of, or agreement to declare or make,
any payment of dividends or distribution of any asset of any kind whatsoever in
respect to any of the Company's interests, nor any purchase, redemption, or
other acquisition or agreement to purchase, redeem, or otherwise acquire, any of
such outstanding interests;

          (e)       Borrowing of, or agreement to borrow, any funds by the
Company, and the Company has not incurred or become subject to any material
obligation or liability (whether absolute, accrued, contingent or otherwise);

          (f)       Payment of any obligation or liability (absolute or
contingent), by the Company other than current liabilities reflected in or shown
on the Company Financial Statements and current liabilities incurred in the
ordinary course of business;

          (g)       Mortgage, pledge, or subjection to lien, charge, or other
encumbrance, of any of the assets, properties, or rights (tangible or
intangible) of the Company, except for mechanics lien and Liens for taxes, in
each case, not yet due and payable;

          (h)       Sale, transfer or disposal of any of the assets, properties,
or rights (tangible or intangible) of the Company;

          (i)       Agreement entered into granting any preferential rights to
purchase any of the assets, properties, or rights (tangible or intangible) of
the Company (including management and control thereof), or requiring the consent
of any party to the transfer and

                                       10
<PAGE>

assignment of any such assets, properties, or rights (including management and
control thereof);

          (j)       Amendment, modification, or termination of any contract,
lease, license, promissory note, commitment, indenture, mortgage, deed of trust,
collective bargaining agreement, employee benefit plan, or any other agreement,
instrument, indebtedness, or obligation to which the Company is a party, or by
which it or any of its assets or properties are bound, except those agreements,
amendments, or terminations effected in the ordinary course of business
consistent with past practices;

          (k)       Capital expenditure by the Company exceeding $25,000, or
additions to property, plant and equipment used in the operations of the Company
other than ordinary repairs and maintenance;

          (l)       Citation received by the Company from any governmental
entity or agency for any violations of any act, law, rule, regulation, or code
of any governmental entity or agency, which citations in the aggregate would be
reasonably likely to result in a Company Material Adverse Effect;

          (m)       Claim against the Company for damages or alleged damages for
any actual or alleged negligence or other tort or breach of contract (whether or
not fully covered by insurance) except as would not have a Company Material
Adverse Effect; or

          (n)       Agreement by the Seller, the Parent or the Company to do any
of the things described in the preceding clauses.

     Section 3.9.   Tax Matters. Except as otherwise disclosed in Schedule 3.9,
                                                                  ------------
(i) the Company has filed (or joined in the filing of) when due all Tax Returns
required by applicable law to be filed with respect to the Company and all Taxes
shown to be due on such Tax Returns have been paid; (ii) all such Tax Returns
were true, correct and complete in all material respects as of the time of such
filing; (iii) all Taxes relating to periods ending on or before the Closing
Date, owed by the Company (whether or not shown on any Tax Return) at any time
on or prior to the Closing Date, if required to have been paid, have been paid
(except for Taxes which are being contested in good faith); (iv) any liability
of the Company for Taxes not yet due and payable, or which are being contested
in good faith, has been provided for on the financial statements of the Company
in accordance with and to the extent required by GAAP; (v) there is no action,
suit, proceeding, investigation, audit or claim now pending against, or with
respect to, the Company in respect of any Tax or assessment, nor is any claim
for additional Tax or assessment asserted by any Tax authority; (vi) no material
claim has been made by any Tax authority in a jurisdiction where the Company
does not currently file a Tax Return that it is or may be subject to Tax by such
jurisdiction, nor to the Company's knowledge is any such assertion threatened;
(vii) there is no outstanding request for any extension of time within which to
pay any Taxes or file any Tax Returns; (viii) there has been no waiver or
extension of any applicable statute of limitations for the assessment or
collection of any Taxes of the Company; (ix) no property of the Company is "tax-
exempt use property" within the meaning of Section 168(h) of the Code; (x) the
Company is not a party to any lease made pursuant to former Section

                                       11
<PAGE>

168(f)(8) of the Internal Revenue Code of 1954; (xi) the Company is currently
and for all periods since its formation has qualified as a "partnership" within
the meaning of Section 7701(a)(2) of the Code; (xii) the Company has a valid
election in effect under Section 754 of the Code or, at the request of Buyer,
will make a timely election under Section 754 of the Code with respect to the
Purchased Interests; (xiii) Seller is not a "foreign person" within the meaning
of Section 1445 of the Code; (xiv) the Company is not a party to any agreement,
whether written or unwritten, providing for the payment of Taxes, payment for
Tax losses, entitlements to refunds or similar Tax matters; and (xiv) the
Company has withheld and paid all material Taxes required to be withheld in
connection with any amounts paid or owing to any employee, creditor, independent
contractor or other third party.

     Section 3.10.  Intentionally Omitted.

     Section 3.11.  Intellectual Property.  Schedule 3.11 sets forth a true and
                                            -------------
complete list of all domestic and foreign trademarks, trademark applications,
patents, registered copyrights (except copyrighted software and theatrical films
and film trailers licensed to the Company in its ordinary course of business)
and patent applications owned by, registered in the name of or licensed to or
from the Company as of the date hereof. The Company owns or possesses adequate
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names or other intellectual property (collectively, "Intellectual
Property") necessary to carry on its business as presently conducted. Except as
set forth on Schedule 3.11, the Company has not received any notice of any
             -------------
infringement of or conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company, and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, individually or in the
aggregate, would result in a Company Material Adverse Effect.

     Section 3.12.  Personal Property.  Except as set forth in Schedule 3.12,
                                                               -------------
the Company owns and has good and marketable title, free and clear of all title
defects and objections, security interests, Liens, charges and encumbrances of
any nature whatsoever to each item of personal property owned or leased by the
Company and reflected on the Company Balance Sheet and all such property
acquired or leased since the date thereof, except for sales and dispositions in
the ordinary course of business since such date. The property owned, leased or
used by the Company is sufficient and adequate to carry on its business as
presently conducted and all items thereof are in good operating condition and
repair. Except as set forth in Schedule 3.12, the Company holds good and
                               -------------
transferable leaseholds under valid and enforceable leases in all of the
personal property leased by it, and none of the property leased by the Company
is subject to any sublease, license or other agreement granting to any person
any right to use such personal property. Except as set forth in Schedule 3.12,
                                                                -------------
the Company is not in breach of or default (and no event has occurred which,
with due notice or lapse of time or both, may constitute such a lapse or
default) of any provision of any of its personal property leases. Except as
disclosed in Schedule 3.12, and except for the personal property of the Seller
             -------------
located at 950 Third Avenue,

                                       12
<PAGE>

New York, New York, the Company does not hold any personal property of the
Seller or any of their respective Affiliates or any other Person.

     Section 3.13.  Real Property.

          (a)  The Company does not own any real property.

          (b)  Schedule 3.13(b) contains a list of all leases and subleases,
               ----------------
together with any amendments thereto and any subordination, nondisturbance and
attornment agreements (the "Leases"), with respect to all real property leased
by the Company (the "Leased Property").  Each Lease is in full force and effect.
The Company has performed all material obligations required to be performed by
it to date under each of the Leases and neither the Company nor, to the best
knowledge of the Parent or the Seller, any other party thereto is (except as set
forth on Schedule 3.13(b)) in material default under any of the Leases (and,
         ----------------
except as set forth on Schedule 3.13(b), no event has occurred which, with due
                       ----------------
notice or lapse of time or both, would constitute such a lapse or default).
Except as set forth on Schedule 3.13(b), no amount due under the Leases remains
                       ----------------
unpaid and no material controversy, claim, dispute or disagreement exists
between the parties to any of the Leases.  The Company has delivered to the
Buyer a copy of each Lease, and all amendments thereto, listed in Schedule
                                                                  --------
3.13(b), except to the extent otherwise noted therein.
-------

          (c)  To the knowledge of the Parent and the Seller, the covenants,
conditions, restrictions, encroachments, encumbrances, easements, rights of way,
licenses, grants, building or use restrictions, exceptions, reservations,
limitations or other impediments affecting the Leased Property do not and will
not, with respect to each Leased Property, materially impair the Company's
ability to use any such Leased Property in the operation of the Company's
business as presently conducted.  There are no pending or, to the knowledge of
the Company, threatened condemnation or similar proceedings affecting the Leased
Property.  The Company has access to public roads, streets or the like or valid
easements over private streets, roads or other private property for such ingress
to and egress from the Leased Property, except as would not materially impair
the Company's ability to use any such Leased Property in the operation of the
Company's business as presently conducted.

          (d)  All brokerage commissions and other compensation and fees payable
by reason of the Leases have been paid in full or are reflected in the Company
Financial Statements except for such commissions and other compensation related
to options or extensions in the Leases which are not yet exercised.

          (e)  No notices of violations have been received with respect to the
improvements on the Leased Property and the operations therein conducted,
including without limitation, health, fire, environmental, safety, zoning and
building laws, ordinances and administrative regulations, except as set forth on
Schedule 3.13(e).
----------------

          (f)  There are no outstanding requirements or recommendations by any
insurance company which has issued to the Company a policy covering the Leased
Property, or

                                       13
<PAGE>

by any board of fire underwriters or other body exercising similar functions,
requiring or recommending any repairs or work to be done on such property.

          (g)  All public utilities required for the operation of the Leased
Property, as it is currently operated, and necessary for the conduct of the
business of the Company, as it is presently conducted, are installed and
operating, and all installation and connection charges are paid in full.

          (h)  Except as set forth in Schedule 3.13(b), the Leased Property is
                                      ----------------
not subject to any lease, sublease, license or other agreement granting to any
person any right to the use, occupancy or enjoyment of such property or any
portion thereof.

          (i)  The plumbing, electrical, heating, air conditioning, elevator,
ventilating and all other mechanical or structural systems for which the Company
is responsible under the Leases in the buildings or improvements are, to the
knowledge of the Company, in good working order and condition, and the roof,
basement and foundation walls of such buildings and improvements for which the
Company is responsible under said Leases are, to the knowledge of the Company,
in good condition and free of leaks and other material defects.  All such
mechanical and structural systems and such roofs, basement and foundation walls
for which others are responsible under said Leases are, to the knowledge of the
Company, in good working order and condition and free of leaks and other
material defects.

     Section 3.14.  Licenses, Permits and Governmental Approvals.  Schedule 3.14
                                                                   -------------
sets forth a true and complete list of all material Permits issued or granted to
the Company (the "Company Permits"), and all pending applications therefor. Such
list contains a summary description of each such item and, where applicable,
specifies the date issued, granted or applied for, the expiration date and the
current status thereof. Except as set forth in Schedule 3.14, each Company
Permit has been duly obtained, is valid and in full force and effect, and is not
subject to any pending or threatened administrative or judicial proceeding to
revoke, cancel or declare such Company Permit invalid in any respect. The
Company Permits have never been suspended, revoked or otherwise terminated,
subject to any fine or penalty, or subject to judicial or administrative review,
for any reason other than the renewal or expiration thereof nor has any
application of any of the Company for any Company Permit ever been denied. The
Company Permits are sufficient and adequate in all material respects to permit
the continued lawful conduct of the Company's business in the manner now
conducted, and none of the operations of the Company are being conducted in a
manner that violates any of the terms or conditions under which any Company
Permit was granted, except for such Company Permits the absence of which would
not have a Company Material Adverse Effect or any non-compliance which will not
have a Company Material Adverse Effect. Except as set forth in Schedule 3.14, no
                                                               -------------
such Company Permit will in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by the Transaction Documents.

     Section 3.15.  Compliance with Law.  Except as set forth in Schedule 3.15
or as would not reasonably be expected to have a Company Material Adverse
Effect, the operations of the Company have been conducted in accordance with all
applicable laws, regulations, orders and

                                       14
<PAGE>

other requirements of all courts and other governmental or regulatory
authorities having jurisdiction over the Company and its assets, properties and
operations. Except as set forth in Schedule 3.15 or as would not reasonably be
                                   -------------
expected to have a Company Material Adverse Effect, the Company has not received
notice of any violation of any such law, regulation, order or other legal
requirement binding on it, and the Company is not in default with respect to any
order, writ, judgment, award, injunction or decree of any federal, state or
local court or governmental or regulatory authority or arbitrator, domestic or
foreign, applicable to it or any of its assets, properties or operations. The
Company does not have knowledge of any proposed change in any such laws, rules
or regulations (other than laws of general applicability) that would materially
and adversely affect the transactions contemplated by the Transaction Documents
or all or a material part of the Company's business.

     Section 3.16.  Contracts.

          (a)  Schedule 3.16 sets forth (subject to the dollar amount
               -------------
limitations of clause (i) below) a true and complete list of all material
contracts, agreements, instruments, commitments and other arrangements to which
the Company is a party or to which the Parent or the Seller is a party and which
otherwise relate to or affect in a material way any of the Company's assets,
properties or operations including, without limitation, all written or oral,
express or implied, (i) contracts, agreements and commitments for the purchase
or sale of products or services which involve a consideration in excess of
$25,000; (ii) contracts, loan agreements, letters of credit, repurchase
agreements, mortgages, security agreements, guarantees, pledge agreements, trust
indentures, promissory notes and other documents or arrangements relating to the
borrowing or lending of money or for lines of credit (including intercompany
Indebtedness); (iii) personal property leases, agreements relating to intangible
assets; (iv) agreements and other arrangements for the sale, pledge, transfer
of, or placing of a Lien on any Interests of the Company, any material assets,
property or rights or for the grant of any options or preferential rights to
purchase any assets, property or rights; (v) documents granting any power of
attorney with respect to the affairs of the Company; (vi) suretyship contracts,
performance bonds, working capital maintenance or other forms of guaranty
agreements; (vii) contracts or commitments limiting or restraining the Company
from engaging or competing in any lines of business or with any person, firm, or
corporation; (viii) partnership or joint venture agreements; (ix) shareholder or
membership agreements or agreements relating to the issuance of any securities
of the Company or the granting of any registrations rights with respect thereto;
and (x) all amendments, modifications, extensions or renewals of any of the
foregoing (the foregoing contracts, agreements and documents are hereinafter
referred to collectively as the "Contracts" and individually as a "Contract").

          (b)  Each Contract is valid, binding and enforceable against the
Company in accordance with its terms, and in full force and effect on the date
hereof.  The Seller, the Parent and the Company have performed all material
obligations, including, but not limited to, the timely making of any rental or
other payments, required to be performed by it under, and is not in default or
in breach of in respect of, any Contract, and no event has occurred which, with
due notice or lapse of time or both, would constitute such a default. To the
Company's knowledge, no other party to any Contract is in default in respect
thereof, and no event has

                                      15
<PAGE>

occurred which, with due notice or lapse of time or both, would constitute such
a default. The Parent has delivered to the Buyer or its representatives true and
complete originals or copies of all the Contracts.

     Section 3.17.  Intentionally Omitted.

     Section 3.18.  Litigation.  Except as set forth in Schedule 3.18, there are
                                                        -------------
no claims, actions, suits, proceedings, labor disputes or investigations pending
or, to the knowledge of the Seller or the Parent, threatened, before any
federal, state or local court or governmental or regulatory authority, domestic
or foreign, or before any arbitrator of any nature, brought by or against any of
the Seller, Parent or, to their knowledge after due inquiry, the Company or any
of its respective officers, directors, employees, agents or Affiliates, except
as would not have a Company Material Adverse Effect.  Schedule 3.18 sets forth a
                                                      -------------
list and a summary description of all such pending actions, suits, proceedings,
disputes or investigations.  None of the Seller, the Parent nor the Company is
subject to any order, writ, judgment, award, injunction or decree which of any
national, state or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, which would have a Company Material Adverse
Effect, or that would interfere with the transactions contemplated by the
Transaction Documents.

     Section 3.19.  Insurance.  Schedule 3.19 sets forth a complete and accurate
                                -------------
list of the insurance policies of the Company as in effect on the date hereof,
including in each case the applicable coverage limits, deductibles and the
policy expiration dates.  No notice of any termination or threatened termination
of any of such policies has been received by the Company and such policies are
in full force and effect.

     Section 3.20.  Employee Plans.

     The Company has no employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974) covering former and current
employees of the Company, or under which the Company has any obligation or
liability.  Schedule 3.20 lists all material plans, contracts, bonuses,
            -------------
commissions, profit-sharing, savings, stock options, insurance, deferred
compensation, or other similar fringe or employee benefits covering former or
current employees of the Company or under which the Company has any obligation
or liability (each, a "Benefit Arrangement"), if any.  The Benefit Arrangements
are and have been administered in substantial compliance with their terms and
with the requirements of applicable federal, state and local laws.

     Section 3.21.  Labor Matters.

     The Company is in material compliance with all laws, if applicable,
regarding employment, wages, hours, equal opportunity, collective bargaining and
payment of social security and other taxes.  The Company is not engaged in any
unfair labor practice or discriminatory employment practice and no complaint of
any such practice against the Company has been filed or, to the best of the
Company's knowledge, threatened to be filed with or by the National Labor
Relations Board, the Equal Employment Opportunity Commission or any other
administrative agency, federal or state, that regulates labor or

                                       16
<PAGE>

employment practices. The Company is in compliance with all applicable federal,
state and local laws and regulations regarding occupational safety and health
standards.

     Section 3.22.  Environmental Matters.  Notwithstanding anything to the
contrary contained in this Agreement and in addition to the other
representations and warranties contained herein:

          (a)  The Company and its operations are in material compliance with
all applicable laws, regulations and other requirements of governmental or
regulatory authorities or duties under the common law relating to Hazardous
Materials (as defined below) or to the protection of health, safety or the
environment (collectively, "Environmental Laws") and has obtained, maintained in
effect and complied in all material respects with all licenses, permits and
other authorizations or registrations required under Environmental Laws except
where such noncompliance or such failure to obtain, maintain in effect or comply
with such licenses, permits and other authorizations or registrations would not
give rise to a Material Adverse Effect.

          (b)  The Company has not performed any act which would reasonably be
expected to give rise to, and has not otherwise incurred, liability to any
person (governmental or not) under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S) 9601 et seq. ("CERCLA"), or any
                                                   -- ----
similar state or municipal law, except in either case where such liability would
not constitute a Material Adverse Effect. nor has the Company received notice of
any such liability or any claim therefor or submitted notice pursuant to Section
103 of CERCLA to any governmental agency.

          (c)  To the knowledge of James A. Wunderle or Robert F. Smerling, no
asbestos, lead, petroleum, hazardous substance, hazardous waste, contaminant,
pollutant or toxic substance (as such terms may be defined in any Environmental
Law and collectively referred to herein as "Hazardous Materials") has been
released, placed, dumped or otherwise come to be located on, at, beneath or
near, and no storage tank containing any Hazardous Materials is located at, any
of the real property and/or improvements currently or formerly owned or leased
by the Company which could subject the Company to a claim or claims pursuant to
Environmental Laws.

     Section 3.23.  Brokers and Finders.  None of the Seller, the Parent, the
Company or any of their respective officers, directors or employees has employed
any broker or finder and none of the Seller, the Parent, the Company or any of
their respective officers, directors or employees has incurred any liability for
any investment banking fees, brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.

     Section 3.24.  Year 2000 Compliance.  To the knowledge of the Seller and
the Parent after due inquiry, the software used by the Company will be year 2000
compliant, which, for purposes of this Agreement, shall mean that the data
outside the range 1900-1999 will be correctly processed.

     Section 3.25.  Intentionally Omitted.

                                       17
<PAGE>

     Section 3.26.  Change in Ownership.  Neither the purchase of the Purchase
Interests by the Buyer nor the consummation of the transactions contemplated by
the Transaction Documents are reasonably likely to result in any material
adverse change in the business operations of the Company or in the loss of the
benefits of any servicing relationship.

     Section 3.27.  Intentionally Omitted.

     Section 3.28.  Absence of Undisclosed Liabilities.  Except as set forth in
Schedule 3.28, the Company has no indebtedness or liability, absolute or
-------------
contingent, direct or indirect, which is not shown or provided for on the
balance sheets of the Company included in the Company Financial Statements other
than liabilities incurred or accrued in the ordinary course of business
(including liens of current taxes and assessments not in default) since December
31, 1999 and other than liabilities which GAAP does not require to be shown or
provided for and there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in such a liability.
Except as shown in such balance sheets or in the Company Financial Statements,
the Company is not, directly or indirectly, liable upon or with respect to (by
discount, repurchase agreements or otherwise), or obligated in any other way to
provide funds in respect of, or to guarantee or assume, any debt, obligation or
dividend of any person.

     Section 3.29.  Purchase for Investment.  Each of the Seller and the Parent
is an accredited investor as defined under Rule 501(a) of the Securities Act.
The Share Consideration will be acquired for investment for the Seller's own
account and not with a view to the resale or distribution of any part thereof,
except in compliance with the registration provisions of the Securities Act or
an exemption therefrom.

     Section 3.30.  Restricted Securities.  Each of the Seller and the Parent
understands that the Share Consideration is characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Buyer in a transaction not involving a public offering and
that under such laws and applicable regulations the Share Consideration may be
resold without registration under the Securities Act only in certain limited
circumstances.

     Each of the Seller and the Parent further agrees that each certificate
representing the Share Consideration shall be stamped or otherwise imprinted
with a legend substantially in the following form:

               "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
          NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
          NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SUCH
          SECURITIES HAVE BEEN REGISTERED UNDER THAT ACT OR AN
          EXEMPTION FROM REGISTRATION IS AVAILABLE."

     A certificate shall not bear such legend if the Seller shall have delivered
to the Buyer an opinion of counsel reasonably satisfactory to the Buyer to the
effect that the securities being sold may be publicly sold without registration
under the Securities Act.  The foregoing shall not be deemed to affect the
obligations of the Buyer under the Registration Rights Agreement.

                                       18
<PAGE>

     Section 3.31.  Due Diligence.  Each of the Seller and the Parent has
sufficient knowledge and experience in investing in companies similar to the
Buyer and is capable of evaluating the merits and risks of its investment in the
Buyer as contemplated by this Agreement and is able to bear the economic risk of
such investment for an indefinite period of time.  Each of the Seller and the
Parent has been given access to full and complete information regarding the
Buyer and has utilized such access to its satisfaction for the purpose of
obtaining information each of the Seller and the Parent desires or deems
relevant to its decision to acquire the Share Consideration.  Each of the Seller
and the Parent has had the opportunity to ask questions of and receive answers
from management and representatives of the Buyer, including the Buyer's
accountants, to discuss the Buyer's business, management and financial affairs
and to obtain any additional information each of the Seller and the Parent
desires or deems relevant.  Each of the Seller and the Parent has obtained, to
the extent it has deemed necessary, professional advice with respect to the
risks inherent in the acquisition of the Share Consideration, including, without
limitation, the matters relating to the Buyer's business and financial condition
set forth in the Buyer's internal reports and public filings.

     Section 3.32.  Survival.  Except where a representation or warranty
expressly refers to another date, in which case such representation or warranty
need be true and correct only as of such date, each of the representations and
warranties set forth in this Section 3 shall be deemed represented and made by
the Seller and the Parent at the Closing as if made at such time and shall
survive the Closing for a period terminating on the later of (a) the date 6
months after the Closing Date, and (b) with respect to claims asserted pursuant
to Section 6.1 of this Agreement before the expiration of the applicable
representation or warranty, on the date such claim is finally liquidated or
otherwise resolved; provided, however, that (x) the representations and
                    --------  -------
warranties in Sections 3.22 hereof shall survive until the third anniversary of
the Closing Date and (y) the representations and warranties in Sections 3.2 and
3.9 hereof shall survive until the applicable statute of limitations for third
party or governmental actions has expired.

                                  ARTICLE IV.
             REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEWCO

     The Buyer and Newco represent and warrant (jointly and severally) to the
Seller as follows:

     Section 4.1.  Corporate Organization.  The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted, except
where the failure to be so organized, existing and in good standing or to have
such power or authority will not, in the aggregate, have a Buyer Material
Adverse Effect.  The Buyer is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the character
of the properties owned or leased by it or the nature of the business conducted
by it makes such qualification necessary, except where the failure to be so
qualified would not have a Buyer Material Adverse Effect.  Newco is a
corporation duly organized, validly existing and in good standing under the laws
of the State of

                                       19
<PAGE>

Delaware, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted.

     Section 4.2.  Subsidiaries and Investments.  Except as set forth in
Schedule 4.2, the Buyer does not, directly or indirectly, own, of record or
------------
beneficially, any outstanding voting securities or other equity interests in or
control any corporation, limited liability company, partnership, trust, joint
venture or other entity.

     Section 4.3.  Authorization and Validity of Agreement.  Each of the Buyer
and Newco has all requisite power and authority to enter into the Transaction
Documents to which it is a party and to carry out its obligations thereunder.
The execution and delivery of the Transaction Documents to which Buyer and Newco
are parties and the performance of the Buyer's and Newco's obligations
thereunder have been duly authorized by all necessary corporate action by the
Buyer and Newco, respectively, and no other proceedings on the part of the Buyer
or Newco are necessary to authorize such execution, delivery and performance.
The Transaction Documents to which the Buyer and Newco are parties have been
duly executed by the Buyer and Newco, respectively, and constitute a valid and
binding obligation of each of them, enforceable against each of them in
accordance with their terms, except as may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws of general application relating to or
affecting creditors' rights generally and except for the limitations imposed by
general principles of equity.  The Buyer has authorized the issuance and
delivery of the Share Consideration in accordance with this Agreement.  For
purposes of Section 203 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Buyer, prior to the execution and delivery of this
Agreement by the Buyer, and as a condition to the parties' reaching agreement
hereunder, has approved the transactions that are the subject hereof as
contemplated by subsection (a)(1) of said Section 203.

     Section 4.4.  Capitalization.  The authorized and outstanding capital stock
of the Buyer is as set forth in Schedule 4.4.  Upon issuance, sale and delivery
                                ------------
as contemplated by this Agreement, the shares which constitute the Share
Consideration will be duly authorized, validly issued, fully paid and non-
assessable shares of the Buyer, free of all preemptive or similar rights, and
entitled to the rights therein described.  Except as set forth in Schedule 4.4,
                                                                  ------------
there are no outstanding options, warrants, agreements, conversion rights,
preemptive or similar rights to subscribe for or purchase shares of capital
stock of the Buyer.  The fair market value of the Buyer's net assets (calculated
net of all liabilities whether or not currently liquidated and whether currently
known or unknown, including, without limitation, all contingent liabilities
which may be asserted against the Buyer by a Person with respect to the actions
of the Buyer, its officers and/or directors during the time that Sam Frankino
was an officer and/or director of the Buyer, all current litigation claims, and
any liabilities, if any, which may result from the current audit of the Buyer by
the Internal Revenue Service) is not less than $1.65 per share.  Notwithstanding
the provisions of Section 4.18 to the contrary, the representation and warranty
set forth in the penultimate sentence of this Section 4.4 shall be deemed
represented and made by the Buyer at the Closing as if made at such time and
shall survive the Closing for a period terminating on the earlier of (a) the
date that the Buyer files its Annual Report on Form 10-K for the fiscal year
ended January 31, 2001 with the Securities and Exchange Commission; or (b) April
1, 2001.

                                       20
<PAGE>

     Section 4.5.  No Conflict or Violation.

          (a)  Assuming the consents and approvals listed on Schedule 4.6 are
obtained or waived, the execution, delivery and performance by the Buyer and
Newco of the Transaction Documents to which it is a party does not and will not
violate or conflict with any provision of the Certificate of Incorporation or
the By-laws of the Buyer or Newco and does not and will not violate any
provision of law, or any order, judgment or decree of any court or other
governmental or regulatory authority, nor violate nor will result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
contract, lease, loan agreement, mortgage, security agreement, trust indenture
or other agreement or instrument to which the Buyer or Newco is a party or by
which either of them is bound or to which any of the Buyer's or Newco's
properties or assets is subject, except for such violations, breaches or
defaults which, in the aggregate, will not have a Buyer Material Adverse Effect.

          (b)  Neither the transfer to Newco of the Purchased Interests and cash
as contemplated in Section 2.5 hereof, nor the payment by Newco to the Seller of
any amount required to be paid pursuant to Section 2.4(a) or (b) hereof, will
render the Buyer or Newco insolvent or be made with the intention to hinder,
delay or defraud creditors of either the Buyer or Newco, nor will any such
transfer or payment contravene any requirement under Delaware or other
applicable law that such payment be made only out of legally available funds.

     Section 4.6.  Consents and Approvals.  Except as set forth in Schedule 4.6,
                                                                   ------------
no consent, waiver, authorization or approval of, or declaration or filing with,
any governmental or regulatory authority, domestic or foreign, or other Person
is required in connection with the execution and delivery of the Transaction
Documents by the Buyer or Newco or the performance by the Buyer or Newco of its
obligations thereunder.

     Section 4.7.  Financial Statements.  The Buyer has heretofore furnished to
the Seller copies of the audited consolidated balance sheets of the Company as
of:  (i) January 31, 1999, 1998 and 1997, together with the related statements
of income, stockholders' equity and cash flows for the twelve month period then
ended and the notes thereto, if any, and (ii) the unaudited consolidated balance
sheet of the Company as of October 31, 1999, together with the related
statements of income, stockholders' equity and cash flows for the nine month
period then ended and the notes thereto, if any, (the "Buyer Financial
Statements").  Except as set forth therein, the Buyer Financial Statements,
including the notes thereto: (i) were prepared in accordance with GAAP; (ii)
present fairly in all material respects the consolidated financial position,
results of operations and changes in cash flows of the Buyer as of such dates
and for the periods then ended; and (iii) are in accordance with the books of
account and records of the Buyer.

     Section 4.8.  Absence of Certain Changes or Events.

          (a)  Except as contemplated by this Agreement or as set forth in
     Schedule 4.8, since October 31, 1999, there has not been:
     ------------

                                       21
<PAGE>

          (i)   Any material adverse change in the business, operations,
     properties, assets, condition (financial or other) or prospects of the
     Buyer, or any event that has had or is reasonably likely to have a Buyer
     Material Adverse Effect, and no factor or condition exists and no event has
     occurred that would be likely to result in any such change;

          (ii)  Any material loss, damage, destruction or other casualty to its
     business (whether or not insurance awards have been received or
     guaranteed); or

          (iii) Any material change in any method of accounting or accounting
     practice of the Buyer.

          (b)  Except as contemplated by the Transaction Documents or as set
     forth in Schedule 4.8, since October 31, 1999, the Buyer has not:
              ------------

               (i)    Incurred any material obligation or liability (whether
     absolute, accrued, contingent or otherwise) relating to the operations of
     Buyer except in the ordinary course of business consistent with past
     practice;

               (ii)   Sold or transferred any assets material to its business or
     canceled any debts or claims or waived any material rights relating to the
     operations of its business, except in the ordinary course of business
     consistent with past practice;

               (iii)  Defaulted on any of its material obligations;

               (iv)   Entered into any material transaction, except in the
     ordinary course of business consistent with past practice;

               (v)    Made any capital expenditure in excess of $25,000, or
     additions to property, plant and equipment used in the operations of its
     business other than ordinary repairs and maintenance;

               (vi)   Entered into any agreement or made any commitment to do
     any of the foregoing.

     Section 4.9.  Tax Matters.  Except as otherwise disclosed in Schedule 4.9,
                                                                  ------------
(i) the Buyer has filed (or joined in the filing of) when due all Tax Returns
required by applicable law to be filed with respect to the Buyer and all Taxes
shown to be due on such Tax Returns have been paid; (ii)  all such Tax Returns
were true, correct and complete in all material respects as of the time of such
filing; (iii) all Taxes relating to periods ending on or before the Closing Date
owed by the Buyer (whether or not shown on any Tax Return) or to which the Buyer
may be liable under Treasury Regulations (S) 1.1502-6 (or analogous state or
foreign provisions) by virtue of having been members of any "affiliated group"
(or other group filing on a combined or unitary basis) at any time on or prior
to the Closing Date, if required to have been paid, have been paid (except for
Taxes which are being contested in good faith); (iv) any liability of the Buyer
for Taxes not yet due and payable, or which are being contested in good faith,
has been provided for

                                       22
<PAGE>

on the financial statements of the Buyer in accordance with and to the extent
required by GAAP; (v) there is no action, suit, proceeding, investigation, audit
or claim now pending against, or with respect to, the Buyer in respect of any
Tax or assessment, nor is any claim for additional Tax or assessment asserted by
any Tax authority; (vi) no material claim has been made by any Tax authority in
a jurisdiction where the Buyer does not currently file a Tax Return that it is
or may be subject to Tax by such jurisdiction, nor to the Buyer's knowledge is
any such assertion threatened; (vii) there is no outstanding request for any
extension of time within which to pay any Taxes or file any Tax Returns; (viii)
there has been no waiver or extension of any applicable statute of limitations
for the assessment or collection of any Taxes of the Buyer; (ix) no property of
the Buyer is "tax-exempt use property" within the meaning of Section 168(h) of
the Code; (x) the Buyer is not a party to any lease made pursuant to former
Section 168(f)(8) of the Internal Revenue Code of 1954; (xi) the Buyer has not
filed any agreement or consent under Section 341(f) of the Code; (xii) the Buyer
is not a "foreign person" within the meaning of Section 1445 of the Code; (xiii)
the Buyer is not a party to any agreement, whether written or unwritten,
providing for the payment of Taxes, payment for Tax losses, entitlements to
refunds or similar Tax matters; and (xiv) the Buyer has withheld and paid all
material Taxes required to be withheld in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third party.

     Section 4.10.  Real Property.

          (a)  Schedule 4.10(a) lists all real property owned by the Buyer or
               ----------------
its subsidiaries (the "Buyer Owned Real Property"). Except as disclosed on
Schedule 4.10(a), the Buyer or its subsidiaries have good and marketable title
----------------
in fee simple to the Buyer Owned Real Property free and clear of any Liens. All
buildings, plants and structures included on the Buyer Owned Real Property lie
wholly within the boundaries of the Buyer Owned Real Property and do not
encroach upon the property of, or otherwise conflict with the property rights
of, any other Person.

          (b)  Schedule 4.10(b) contains a list of all leases and subleases,
               ----------------
together with any amendments thereto and any subordination, nondisturbance and
attornment agreements (the "Buyer Leases"), with respect to all real property
leased by the Buyer or its subsidiaries (the "Buyer Leased Property").  Each
Lease is in full force and effect.  Each of the Buyer or its subsidiaries has
performed all material obligations required to be performed by it to date under
each of the Leases and neither the Buyer or its subsidiaries nor any other party
thereto is, except as set forth on Schedule 4.10(b), in material default under
                                   ----------------
any of the Leases (and, except as set forth on Schedule 4.10(b), no event has
                                               ----------------
occurred which, with due notice or lapse of time or both, would constitute such
a lapse or default).  No amount due under the Leases remains unpaid and no
material controversy, claim, dispute or disagreement exists between the parties
to any of the Leases.  The Buyer has delivered to the Seller a copy of each
Lease, and all amendments thereto, listed in Schedule 4.10(b), except to the
                                             ----------------
extent otherwise noted therein.

          (c)  The covenants, conditions, restrictions, encroachments,
encumbrances, easements, rights of way, licenses, grants, building or use
restrictions, exceptions,

                                       23
<PAGE>

reservations, limitations or other impediments affecting the Buyer Owned Real
Property or Buyer Leased Property do not and will not, with respect to each
Buyer Owned Real Property or Buyer Leased Property, materially impair the
Buyer's or its subsidiaries' ability to use any such Buyer Owned Real Property
or Buyer Leased Property in the operation of the Buyer's and its subsidiaries'
business as presently conducted. There are no pending or, to the knowledge of
the Buyer, threatened condemnation or similar proceedings affecting the Buyer
Owned Real Property. There are no pending or, to the knowledge of the Buyer,
threatened condemnation or similar proceedings affecting the Buyer Leased
Property. The Buyer and its subsidiaries have access to public roads, streets or
the like or valid easements over private streets, roads or other private
property for such ingress to and egress from the Buyer Owned Real Property and
the Buyer Leased Property, except as would not materially impair the Buyer's and
its subsidiaries' ability to use any such Buyer Owned Real Property or Buyer
Leased Property in the operation of the Buyer's and its subsidiaries' business
as presently conducted.

          (d)  All brokerage commissions and other compensation and fees payable
by reason of the Buyer Leases or the Buyer Owned Real Property have been paid in
full or are reflected in the Buyer Unaudited Financial Statements except for
such commissions and other compensation related to options or extensions in the
Buyer Leases which are not yet exercised.

          (e)  No notices of violations have been received with respect to the
improvements on the Buyer Owned Real Property and Buyer Leased Property and the
operations therein conducted, including without limitation, health, fire,
environmental, safety, zoning and building laws, ordinances and administrative
regulations, except as set forth on Schedule 4.10(e).
                                    ----------------

          (f)  There are no outstanding requirements or recommendations by any
insurance company which has issued to the Buyer or its subsidiaries a policy
covering the Buyer Owned Real Property or Buyer Leased Property, or by any board
of fire underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on such property.

          (g)  All public utilities required for the operation of the Buyer
Owned Real Property and the Buyer Leased Property, as they are currently
operated, and necessary for the conduct of the business of the Buyer and its
subsidiaries, as it is presently conducted, are installed and operating, and all
installation and connection charges are paid in full.

          (h)  Except as set forth in Schedule 4.10(b), the Buyer Owned Real
                                      ----------------
Property and the Buyer Leased Property are not subject to any lease, sublease,
license or other agreement granting to any person any right to the use,
occupancy or enjoyment of such property or any portion thereof.

          (i)  The plumbing, electrical, heating, air conditioning, elevator,
ventilating and all other mechanical or structural systems for which the Buyer
or its subsidiaries are responsible under the Buyer Leases in the buildings or
improvements are, to the knowledge of the Buyer, in good working order and
condition, and the roof, basement and foundation walls of such buildings and
improvements for which the Buyer or its subsidiaries are responsible

                                       24
<PAGE>

under said Buyer Leases, to the knowledge of the Buyer, are in good condition
and free of leaks and other material defects. All such mechanical and structural
systems and such roofs, basement and foundation walls for which others are
responsible under said Buyer Leases are, to the knowledge of the Buyer, in good
working order and condition and free of leaks and other material defects.

     Section 4.11.  Litigation.  Except as set forth in the Buyer's public
filings or in Schedule 4.11, there are no claims, actions, suits, proceedings,
              -------------
labor disputes or investigations pending or, to the knowledge of Buyer,
threatened before any federal, state or local court or governmental or
regulatory authority, domestic or foreign, or before any arbitrator of any
nature, brought by or against Buyer, any of its officers, directors, employees,
agents or Affiliates, nor is any basis known to Buyer or its Affiliates for any
such action, suit, proceeding or investigation which would reasonably be
expected to have a Buyer Material Adverse Effect.  The Buyer is not subject to
any order, writ, judgment, award, injunction or decree of any national, state or
local court or governmental or regulatory authority or arbitrator, domestic or
foreign, which would have a Buyer Material Adverse Effect, or that would or
might interfere with the transactions contemplated by the Transaction Documents.

     Section 4.12.  Employee Plans.

          (a)  Schedule 4.12 sets forth: (i) all "employee benefit plans," as
               -------------
defined in Section 3(3) of ERISA, and all other employee benefit arrangements or
payroll practices, including, without limitation, any employment or consulting
agreements, any such arrangements or payroll practices providing severance pay,
sick leave, vacation pay, salary continuation for disability, retirement
benefits, deferred compensation, bonus pay, incentive pay, stock options,
hospitalization insurance, medical insurance, life insurance, scholarships or
tuition reimbursements, maintained by the Buyer or its subsidiaries or to which
the Buyer or its subsidiaries are obligated to contribute thereunder for current
or former employees, consultants and directors of the Buyer or its subsidiaries
(the "Buyer Plans"), and (ii) all "employee pension plans", as defined in
Section 3(2) of ERISA, maintained by the Buyer or its subsidiaries or any trade
or business (whether or not incorporated) which is or has ever been under
control or treated as a single employer with the Buyer or its subsidiaries under
Section 414(b), (c), (m), or (o) of the Code ("Buyer ERISA Affiliate") or to
which the Buyer or its subsidiaries or any Buyer ERISA Affiliate has contributed
or has ever been obligated to contribute thereunder (the "Buyer Pension Plans")
(the Buyer Plans and Buyer Pension Plans are hereafter collectively referred to
as the "Buyer Employee Plans").

          (b)  None of the Buyer Employee Plans is a multiemployer plan, as
defined in Section 3(37) of ERISA ("Buyer Multiemployer Plan"), and neither the
Buyer or its subsidiaries nor any Buyer ERISA Affiliate has withdrawn in a
complete or partial withdrawal from any Buyer Multiemployer Plan, nor has any of
them incurred any liability due to the termination or reorganization of a Buyer
Multiemployer Plan.

          (c)  Each Buyer Employee Plan that is intended to qualify under
Section 401 of the Code has received a determination letter from the Internal
Revenue Service to the effect

                                       25
<PAGE>

that it meets the requirements of Code Section 401(a) and the trust maintained
pursuant thereto is exempt from federal income taxation under Section 501 of the
Code, and nothing has occurred with respect to the operation of any such Buyer
Employee Plan that could cause the loss of such qualification or exemption or
the imposition of any liability, penalty or tax under ERISA or the Code.

          (d)  All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Buyer Employee Plans or by law (without regard to any waivers granted under
Section 412 of the Code) to any funds or trusts established thereunder or in
connection therewith have been made by the due date thereof (including any valid
extension), and all contributions for any period ending on or before the Closing
Date which are not yet due will have been paid or accrued on or prior to the
Closing Date.  No accumulated funding deficiencies exist in any of the Buyer
Employee Plans subject to Section 412 of the Code.

          (e)  There is no "amount of unfunded benefit liabilities" within the
meaning of Section 4001(a)(18) of ERISA in any of the respective Buyer Pension
Plans which are subject to Title IV of ERISA.  Each of the respective Buyer
Pension Plans are fully funded in accordance with the actuarial assumptions used
by the Pension Benefit Guaranty Corporation (the "PBGC") to determine the level
of funding required in the event of the termination of the Buyer Pension Plans.

          (f)  None of the Buyer or its subsidiaries or any Buyer ERISA
Affiliate has terminated any Buyer Pension Plan subject to Title IV, or incurred
any outstanding liability under Section 4062 of ERISA to the PBGC or to a
trustee appointed under Section 4042 of ERISA. All premiums due the PBGC with
respect to the Buyer Pension Plans have been paid. None of the Buyer or its
subsidiaries or any Buyer ERISA Affiliate has engaged in any transaction
described in Section 4069 of ERISA.

          (g)  There has been no "reportable event" within the meaning of
Section 4043 of ERISA with respect to any Buyer Pension Plans subject to Title
IV of ERISA which would require the giving of notice or any other event
requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.

          (h)  There has been no material violation of ERISA or the Code with
respect to the filing of applicable reports, documents and notices regarding the
Buyer Employee Plans with the Secretary of Labor or the Secretary of the
Treasury or the furnishing of required reports, documents or notices to the
participants or beneficiaries of the Buyer Employee Plans.

          (i)  True, correct and complete copies of the following documents,
with respect to each of the Buyer Employee Plans, have been delivered to the
Seller by the Buyer: (i) all plans and related trust documents, and amendments
thereto; (ii) the most recent Forms 5500; (iii) the last IRS determination
letter; (iv) summary plan descriptions; (v) the most recent actuarial report
relating to the Buyer Employee Plans; and (vi) written descriptions of all non-
written agreements relating to the Buyer Employee Plans.

                                       26
<PAGE>

          (j)  There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Buyer Employee Plans, the assets of any of
the trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Buyer Employee Plans with respect to the operation
of such plans (other than routine benefit claims), nor do the Buyer or Newco
have knowledge of facts which could form the basis for any such claim or
lawsuit.

          (k)  All amendments and actions required to bring the Buyer Employee
Plans into conformity in all material respects with all of the applicable
provisions of ERISA, the Code and other applicable laws have been made or taken
except to the extent that such amendments or actions are not required by law to
be made or taken until a date after the Closing Date.

          (l)  Any bonding required with respect to the Buyer Employee Plans in
accordance with applicable provisions of ERISA has been obtained and is in full
force and effect.

          (m)  The Buyer Employee Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA and
the Code (including rules and regulations thereunder) and other applicable
federal and state laws and regulations, and none of the Buyer or its
subsidiaries or any "party in interest" or "disqualified Person" with respect to
the Buyer Employee Plans has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or 4975 of the Code.  No fiduciary has any
liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any Buyer
Employee Plan.

          (n)  None of the Buyer Employee Plans provide retiree life or retiree
health benefits except as may be required under Section 4980B of the Code or
Section 601 of ERISA and at the expense of the participant or the participant's
beneficiary.  The Buyer and its subsidiaries and the Buyer ERISA Affiliates have
at all times complied with the notice and health care continuation requirements
of Section 4980B of the Code and Sections 601 through 608 of ERISA.

          (o)  Except as disclosed on Schedule 4.12, no stock or other security
                                      -------------
issued by the Seller, the Buyer or its subsidiaries or any of their Affiliates
forms or has formed part of the assets of any Buyer Employee Plan.

                                       27
<PAGE>

     Section 4.13.  Labor Matters.

          (a)  Except as set forth in Schedule 4.13:  (i) none of the Buyer or
                                      -------------
its subsidiaries is a party to any outstanding employment, consulting or
management agreements or contracts with officers or employees that provide for
the payment of any bonus or commission; (ii) none of the Buyer or its
subsidiaries is party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Buyer or its subsidiaries
nor do the Seller, the Buyer or its subsidiaries know of any activities or
proceedings of any labor union to organize any such employees.  The Buyer has
furnished to the Seller complete and correct copies of all such agreements
("Employment and Labor Agreements").  The Buyer and its subsidiaries have not
breached or otherwise failed to comply with any provisions of any Employment and
Labor Agreement, and are in full compliance with all terms of any collective
bargaining agreement and there are no grievances outstanding thereunder.

          (b)  The Buyer and its subsidiaries are in compliance with all
applicable laws relating to employment and employment practices, wages, hours,
and terms and conditions of employment and are not engaged in any unfair labor
practice; (ii) there is no unfair labor practice charge or complaint pending
before the National Labor Relations Board ("NLRB"); (iii) there is no labor
strike, material slowdown or material work stoppage or lockout actually pending
or threatened against or affecting the Buyer or its subsidiaries, and the Buyer
and its subsidiaries have not at any time experienced any strike, material slow
down or material work stoppage, lockout or other collective labor action by or
with respect to employees of the Buyer or its subsidiaries; (iv) there is no
representation claim or petition pending before the NLRB or any similar foreign
agency and no question concerning representation exists relating to the
employees of the Buyer or its subsidiaries; (v) there are no charges with
respect to or relating to the Buyer or its subsidiaries pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices; and (vi) the
Buyer and its subsidiaries have no formal notice from any federal, state, local
or foreign agency responsible for the enforcement of labor or employment laws of
an intention to conduct an investigation of the Buyer or its subsidiaries and no
such investigation is in progress.

     Section 4.14.  Environmental Matters. Notwithstanding anything to the
contrary contained in this Agreement and in addition to the other
representations and warranties contained herein:

          (a)  The Buyer and its subsidiaries and their operations are in
compliance with all applicable Environmental Laws and have obtained, maintained
in effect and complied with all licenses, permits and other authorizations or
registrations required under Environmental Laws.

          (b)  The Buyer and its subsidiaries have not performed or suffered any
act which could give rise to, or have otherwise incurred, liability to any
person (governmental or not) under CERCLA or any similar state or municipal law,
nor has the Buyer or its

                                       28
<PAGE>

subsidiaries received notice of any such liability or any claim therefor or
submitted notice pursuant to Section 103 of CERCLA to any governmental agency.

          (c)  No Hazardous Materials have been released, placed, dumped or
otherwise come to be located on, at, beneath or near, and no storage tank
containing any Hazardous Materials is located at, any of the real property
and/or improvements currently or, to the knowledge of the Buyer, formerly owned
or leased by the Company which could subject the Buyer to a claim or claims
pursuant to Environmental Laws.

     Section 4.15.  Purchase for Investment.  Each of the Buyer and Newco is an
accredited investor as defined under Rule 501(a) of the Securities Act.  The
Purchased Interest will be acquired for investment for Buyer's own account and
not with a view to the resale or distribution of any part thereof, except in
compliance with the registration provisions of the Securities Act or an
exemption therefrom.

     Section 4.16.  Brokers and Finders.  None of the Buyer or its subsidiaries
or any of their respective officers, directors or employees has employed any
broker or finder, except for Slusser Associates, Inc., and none of the Buyer or
its subsidiaries or any of their respective officers, directors or employees has
incurred any liability for any investment banking fees, brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement other than fees payable to Slusser Associates, Inc.

     Section 4.17.  Due Diligence.  Each of the Buyer and Newco has sufficient
knowledge and experience in investing in companies similar to the Company and is
capable of evaluating the merits and risks of its investment in the Company as
contemplated by this Agreement and is able to bear the economic risk of such
investment for an indefinite period of time.  Each of the Buyer and Newco has
been given access to full and complete information regarding the Company and has
utilized such access to its satisfaction for the purpose of obtaining
information each of the Buyer and Newco desires or deems relevant to its
decision to acquire the Purchased Interests.  Each of the Buyer and Newco has
had the opportunity to ask questions of and receive answers from management and
representatives of the Company to discuss the Company's business, management and
financial affairs and to obtain any additional information each of the Buyer and
Newco desires or deems relevant.  Each of the Buyer and Newco has obtained, to
the extent it has deemed necessary, professional advice with respect to the
risks inherent in the acquisition of the Purchased Interests, including, without
limitation, the matters relating to the Company's business and financial
condition.

     Section 4.18.  Survival.  Except where a representation or warranty
expressly refers to another date, in which case such representation or warranty
need be true and correct only as of such date, each of the representations and
warranties set forth in this Section 4 shall be deemed represented and made by
the Buyer at the Closing as if made at such time and shall survive the Closing
for a period terminating on the later of (a) date 6 months after the Closing
Date, and (b) with respect to claims asserted pursuant to Section 6.2 of this
Agreement before the expiration of the applicable representation or warranty, on
the date such claim is finally liquidated or otherwise resolved; provided,
                                                                 --------
however, that (x) the representations and warranties in Sections 4.14 hereof
-------

                                       29
<PAGE>

shall survive until the third anniversary of the Closing Date and (y) the
representations and warranties in Sections 4.4 and 4.9 hereof shall survive
until the applicable statute of limitations for third party or governmental
actions has expired.

                                  ARTICLE V.
                           COVENANTS OF THE PARTIES

     The Parties hereto covenant as follows (all covenants of the Seller and the
Parent being joint and several obligations and all covenants of the Buyer and
Newco being joint and several obligations):

     Section 5.1.  Consents and Approvals Required on Closing Date.  Each of the
parties hereto has or will have on or prior to the Closing Date, at its cost and
expense, obtained all necessary consents, waivers, authorizations and approvals
of all governmental and regulatory authorities, domestic and foreign, and of all
other Persons required on the Closing Date in connection with the execution,
delivery and performance by it of the Transaction Documents.

     Section 5.2.  Further Assurances.  Upon the request of another party at any
time after the Closing Date, the Buyer, Newco, the Seller and the Parent shall
forthwith execute and deliver such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other documents as the
requesting party or its counsel may request to perfect title of the Buyer and
its successors and assigns to the Purchased Interests and to perfect title of
the Seller in and to the Share Consideration or otherwise to effectuate the
purposes of the Transaction Documents.

     Section 5.3.  Best Efforts.  Upon the terms and subject to the conditions
of this Agreement, each party shall use its reasonable best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby and in the Transaction Documents.

     Section 5.4.  Nondisclosure.  Except as required under applicable law, from
and after the Closing Date, no party shall use, divulge, furnish or make
accessible to anyone any proprietary, material non-public, confidential or
secret information to the extent relating to the Buyer or its subsidiaries, in
the case of the Seller and the Parent, or relating to the Seller and the Parent,
in the case of the Buyer and Newco (in each case including, without limitation,
customer lists, supplier lists and pricing and marketing arrangements with
customers or suppliers), and each of the parties shall cooperate reasonably with
the others in preserving such proprietary, confidential or secret aspects of the
parties.

     Section 5.5.  Tax Matters.  All transfer, documentary, sales, use, stamp,
registration, value added and other such taxes and fees (including any penalties
and interest) incurred in connection with this Agreement shall be borne and paid
equally by the Parent and the Seller, on the one hand, and the Buyer and Newco,
on the other hand, when due, and the Seller will file all necessary tax returns
and other documentation with respect to all such taxes and fees, and, if

                                       30
<PAGE>

required by applicable law, the Buyer will, and will cause its affiliates to,
join in the execution of any such tax returns and other documentation.

     Section 5.6.  Cooperation on Tax Matters.  The Buyer and the Seller shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the preparation and filing of any tax return, statement,
report or form (including any report required pursuant to Section 6043 of the
Code and all Treasury Regulations promulgated thereunder), any audit, litigation
or other proceeding with respect to taxes.  Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.  The Seller and the Buyer agree (i) to retain, and to cause the
Company to retain, all books and records with respect to tax matters pertinent
to the Company relating to any pre-closing tax period, and to abide by all
record retention agreements entered into with any taxing authority and (ii) to
give the other party reasonable written notice prior to destroying or discarding
any such books and records and, if the party so requests, the Buyer or the
Seller, as the case may be, shall allow the other party to take possession of
such books and records.

     Section 5.7.  Amendment to Management Agreement.  The Parent shall use its
best efforts to cause the Company and City Cinemas Corporation to amend the
Management Agreement so that it provides the Buyer with the same rights as the
Parent pursuant to Section 3.2(b) thereof, and in any event, the Parent shall
deliver to the Buyer the financial statements referenced in such Section
promptly following receipt thereof.

     Section 5.8.  Amendment to Trademark License Agreement.  The Parent shall
cause its affiliate Reading Investment Company, Inc. ("Reading Investment") and
the Company to execute an amended Angelika-SOHO Trademark License Agreement
dated as of April 15, 1997 by and between Reading Investment (as amended, the
"Amended Trademark License Agreement") in the form attached hereto as Exhibit E.

     Section 5.9.  Notification and Put Rights.

          (a)  Buyer covenants and agrees that it shall provide written notice
to Parent at least thirty (30) days prior to the date on which any of the
following is proposed to occur: (i) the issuance of shares of Common Stock or of
any class or series of Preferred Stock (in one or a series of related
transactions) representing more than fifteen percent (15%) of the number or
voting power of the shares of Common Stock or Buyer Preferred Stock, as the case
may be, outstanding immediately prior to such issuance, or (ii) the making of an
investment or series of related investments involving aggregate payments by
Buyer of $10 million or more (calculated on a consolidated basis);

         (b)   Parent shall notify Buyer within thirty (30) days after the date
of the notice in paragraph (a) above whether it agrees with the proposed
issuance or investment described in such notice.  If (x) Parent objects to any
such proposed transaction and (y) Buyer notifies Parent

                                       31
<PAGE>

that Buyer will nonetheless proceed with the proposed transaction, Parent shall
have the option, exercisable within fifteen (15) days after the date of such
written notice, to cause Buyer to repurchase, out of funds legally available
therefor, all of the Common Share Consideration and the Preferred Share
Consideration, for an aggregate purchase price equal to (aa) $13.5 million plus
(bb) interest at a per annum rate of ten percent (10%) calculated on a daily
basis through the date of such repurchase, which repurchase shall be consummated
no later than thirty (30) days after the date of the notice of exercise of the
option provided herein; and

     (c)  The rights of Parent to receive notice and to require the Buyer to
repurchase the Common Share Consideration and the Preferred Share Consideration
shall expire on the date that is thirty (30) days following the date on which
Buyer files with the Securities and Exchange Commission its Annual Report on
Form 10-K for the fiscal year ended January 30, 2001, provided that the parties
shall be obligated to consummate any repurchase for which Parent has provided
notice of exercise of the repurchase option provided in Section 5.9(b) prior to
such expiration date.

     Section 5.10.  Amendment to Certificate of Incorporation.  Buyer hereby
covenants, subject to the fiduciary duty of the Board of Directors of Buyer, to
present to the stockholders of Buyer, at Buyer's next annual or special meeting
of stockholders, a proposed amendment to Buyer's restated Certificate of
Incorporation to eliminate Article SIXTH thereof, and shall use their best
efforts to solicit proxies in favor of such amendment.

     Section 5.11.  Board Representation.  Parent will be entitled to have a
representative attend all meetings of the Board of Directors of the Buyer, and
of any meetings of any executive or other similar committee of the Board of
Directors as may be formed from time to time.   Buyer will give Parent
substantially the same notice of any such meeting as Parent provides to its
directors, so as to allow such representative to attend such meetings in person,
and provide to such representative copies of any materials provided to directors
from time to time, whether or not in connection with any particular Board or
executive committee meeting, contemporaneously with the delivery of such
materials to such directors.  Notwithstanding the above, it is acknowledged and
agreed that such representative will not be entitled to attend any portions of
any such meeting where specific advice is being given by legal counsel to the
directors and where the presence of such representative would result in a waiver
of any otherwise applicable attorney-client communication privilege.

                                  ARTICLE VI.
                                INDEMNIFICATION

     Section 6.1.   Indemnification by the Seller and the Parent.
Notwithstanding the Closing and except to the extent that the Buyer or Newco has
any knowledge or information with respect to such matter on or prior to the
Closing Date, the Seller and the Parent, jointly and severally, shall indemnify
and fully defend, save and hold the Buyer, Newco, and their directors, officers
and employees (the "Buyer Indemnitees"), harmless if any Buyer Indemnitee shall
at any time or from time to time suffer any damage, liability, loss, cost,
expense (including all

                                       32
<PAGE>

reasonable attorneys' fees and expenses of investigation incurred by the Buyer
Indemnitees in any action or proceeding between the Seller or the Parent and the
Buyer Indemnitees or between the Buyer Indemnitees and any third party or
otherwise), deficiency, interest, penalty, impositions, assessments or fines
(collectively, "Buyer Losses") arising out of or resulting from, or shall pay or
become obliged to pay any sum on account of, any and all the Seller Events of
Breach. As used herein, "Seller Events of Breach" shall be and mean any one or
more of the following:

          (a)  any untruth or inaccuracy in any representation of the Seller or
the Parent or the breach of any warranty of the Seller or the Parent contained
in the Transaction Documents written notice of which has been given to the
Seller and the Parent prior to the expiration of any survival period applicable
thereto;

          (b)  any failure of the Seller or the Parent duly to perform or
observe any term, provision, covenant, agreement contained in the Transaction
Documents on the part of such Person to be performed or observed, provided,
however, that, except for Buyer Losses incurred by the Buyer Indemnitees in
connection with the inaccuracy of any representation or the breach of any
warranty of the Seller or the Parent relating to Taxes, the representations and
warranties contained in Section 3.2 or actual fraud by the Seller or the Parent,
the Seller and the Parent shall not have any obligation to make any payment
under Section 6.1(a) hereof with respect to any representation or warranty
unless (i) the Buyer Indemnitees have suffered Buyer Losses by reason of any
particular representation or warranty, together with all other particular claims
arising from the same facts and circumstances, in excess of $50,000 and (ii)
until all Buyer Indemnitees have suffered Buyer Losses (other than Buyer Losses
below the $50,000 threshold referred to in clause (i) above) by reason of all
such claims that exceed $500,000, it being understood that once such amount is
exceeded, the aggregate of all such claims in excess of $500,000 shall be
payable by the Seller and Parent on demand by the Buyer.

     Section 6.2.   Procedures for Indemnification by the Seller and the Parent.
If a Seller's Event of Breach occurs or is alleged and a Buyer Indemnitee
asserts that the Seller or the Parent has become obligated to such Buyer
Indemnitee pursuant to Section 6.1 hereof, or if any suit, action,
investigation, claim or proceeding (a "Proceeding") is begun, made or instituted
by a third party as a result of which the Seller or the Parent may become
obligated to a Buyer Indemnitee hereunder, such Buyer Indemnitee shall give
written notice to the Seller and the Parent.  The Seller and the Parent, jointly
and severally, agree to defend, contest or otherwise protect the Buyer
Indemnitee against any Proceeding at their sole cost and expense.  The Buyer
Indemnitee shall have the right, but not the obligation, to participate at its
own expense in the defense thereof by counsel of the Buyer Indemnitee's choice
and shall in any event cooperate with and assist the Seller and the Parent to
the extent reasonably possible.  If the Seller and the Parent fail timely to
defend, contest or otherwise protect against such Proceeding, the Buyer
Indemnitee shall have the right to do so, including, without limitation, the
right to make any compromise or settlement thereof, and the Buyer Indemnitee
shall be entitled to recover the entire cost thereof from the Seller or the
Parent, including, without limitation, reasonable attorneys' fees, disbursements
and amounts paid as the result of such Proceeding, as such costs are

                                       33
<PAGE>

incurred, and the Seller and the Parent shall be bound by any determination made
in such Proceeding or any compromise or settlement effected by the Buyer. If the
Buyer Indemnitee shall have reasonably concluded upon advice from counsel that
there may be a conflict of interest between the Buyer Indemnitee and the Seller
or the Parent, the Buyer Indemnitee shall have the right to defend, contest or
otherwise protect against such Proceeding, provided that if the Buyer Indemnitee
                                           --------
shall compromise or settle such claims without consent of Seller and Parent,
such compromise or settlement shall not bind Seller or Parent. If the Seller or
the Parent assumes the defense of any Proceeding, (a) it will be conclusively
established for purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to indemnification, (b) no
compromise or settlement of such claims may be effected by the Seller or the
Parent without the Buyer Indemnitee's consent unless (i) there is no finding or
admission of any violation of federal, state, local, municipal, foreign,
international, multinational or other administrative order, law, ordinance,
principal of common law, regulation, statute or treaty or any violation of the
rights of any Person and no effect on any other claims that may be made against
the Buyer Indemnitee and (ii) the sole relief provided is monetary damages that
are paid in full by the Seller or the Parent; and (c) the Buyer Indemnitee will
have no liability with respect to any compromise or settlement of such claims
effected without its consent.

     Section 6.3.   Indemnification by the Buyer and Newco.  Notwithstanding the
Closing, and, with respect to paragraph (a) only, except to the extent that the
Seller or the Parent has any knowledge or information with respect to such
matter on or prior to the Closing Date (it being agreed that the Seller
Indemnitees are entitled to indemnification under this Section 6.3 regardless of
their knowledge of facts giving rise to any litigation referred to in paragraph
(b) hereof or of their knowledge for purposes of the representation and warranty
set forth in the penultimate sentence of Section 4.4 of any liabilities or
claims against the Buyer or any of its Affiliates), the Buyer and Newco shall,
jointly and severally, indemnify and agree to fully defend, save and hold the
Seller, the Parent, or any Affiliate of the Seller or of the Parent and their
directors, officers and employees (the "Seller Indemnitees"), harmless if any
Seller Indemnitee shall at any time or from time to time suffer any damage,
liability, loss, cost, expense (including all reasonable attorneys' fees and
expenses of investigation incurred by the Seller Indemnitees in any action or
proceeding between the Buyer or Newco and the Seller Indemnitees or between the
Seller Indemnitees and any third party or otherwise), deficiency, interest,
penalty, impositions, assessments or fines (collectively, "Seller Losses")
arising out of or resulting from, or shall pay or become obligated to pay any
sum on account of, any and all the Buyer Events of Breach.  As used herein,
"Buyer Events of Breach" shall be and mean any one or more of the following:

          (a)  any untruth or inaccuracy in any representation of the Buyer or
Newco or the breach of any warranty of the Buyer or Newco contained in the
Transaction Documents written notice of which has been given to the Buyer and
Newco prior to the expiration of any survival period applicable thereto;

          (b)  any Proceeding is brought by any stockholder of the Buyer, either
directly or derivatively, challenging any of the transactions contemplated
herein or in any other Transaction Document or asserting any liability on the
part of Parent, any of its affiliates or any of the respective officers or
directors;

                                       34
<PAGE>

          (c)      any failure of the Buyer or Newco duly to perform or observe
any term, provision, covenant, agreement or condition contained herein or in the
Transaction Documents on the part of the Buyer or Newco to be performed or
observed;

provided, however, that, except for Seller Losses incurred by the Seller
Indemnitees in connection with the inaccuracy of any representations or the
breach of any warranty of the Buyer or Newco relating to Taxes, the
representations and warranties contained in Section 5.4 hereof or actual fraud
by the Buyer or Newco, the Buyer and Newco shall have no obligation to make any
payment under Section 6.3(a) hereof with respect to any representation or
warranty unless (i) the Seller Indemnitees have suffered Seller Losses by reason
of any particular representation or warranty, together with all other particular
claims arising from the same facts and circumstances, in excess of $50,000 and
(ii) until all Seller Indemnitees have suffered Seller Losses (other than Seller
Losses below the $50,000 threshold referred to in clause (i) above) by reason of
all such claims that exceed $500,000, it being understood that once such amount
is exceeded, the aggregate of all such claims in excess of $500,000 shall be
payable by the Buyer and Newco on demand by the Seller.

     Section 6.4.  Procedures for Indemnification by the Buyer and Newco.  If a
Buyer Event of Breach occurs or is alleged and a Seller Indemnitee asserts that
the Buyer or Newco has become obligated to such Seller Indemnitee pursuant to
Section 6.3 hereof, or if any Proceeding is begun, made or instituted by a third
party as a result of which the Buyer or Newco may become obligated to a Seller
Indemnitee hereunder, such Seller Indemnitee shall give written notice to the
Buyer and Newco.  The Buyer and Newco, jointly and severally, agree to defend,
contest or otherwise protect the Seller Indemnitee against any Proceeding at
their sole cost and expense.  The Seller Indemnitee shall have the right, but
not the obligation, to participate at its own expense in the defense thereof by
counsel of the Seller Indemnitee's choice and shall in any event cooperate with
and assist the Buyer and Newco to the extent reasonably possible.  If the Buyer
or Newco fail timely to defend, contest or otherwise protect against such
Proceeding, the Seller Indemnitee shall have the right to do so, including,
without limitation, the right to make any compromise or settlement thereof, and
the Seller Indemnitee shall be entitled to recover the entire cost thereof from
the Buyer or Newco, including, without limitation, reasonable attorneys' fees,
disbursements and amounts paid as the result of such Proceeding, as such costs
are incurred, and the Buyer or Newco shall be bound by any determination made in
such Proceeding or any compromise or settlement effected by the Seller.  If the
Seller Indemnitee shall have reasonably concluded upon advice from counsel that
there may be a conflict of interest between the Seller Indemnitee and the Buyer
or Newco, the Seller Indemnitee shall have the right to defend, contest or
otherwise protect against such Proceeding, provided that if the Seller
                                           --------
Indemnitee shall compromise or settle such claims without consent of Buyer and
Newco, such compromise or settlement shall not bind the Buyer or Newco.  If the
Buyer or Newco assumes the defense of any Proceeding, (a) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification, (b) no
compromise or settlement of such claims may be effected by the Buyer or Newco
without the Seller Indemnitee's consent unless (i) there is no finding or
admission of any violation of federal, state, local, municipal, foreign,
international, multinational or other administrative order, law, ordinance,
principal of common law, regulation, statute or treaty or

                                       35
<PAGE>

any violation of the rights of any Person and no effect on any other claims that
may be made against the Seller Indemnitee and (ii) the sole relief provided is
monetary damages that are paid in full by the Buyer or Newco; and (c) the Seller
Indemnitee will have no liability with respect to any compromise or settlement
of such claims effected without its consent. Notwithstanding the above, in the
event of any claim for indemnity under clause 6.3(b) the Seller Indemnitees will
be entitled to retain their own counsel and Buyer will promptly reimburse such
Seller Indemnitees for the reasonable costs and disbursements of such separate
counsel.

                                 ARTICLE VII.
            CONDITIONS TO OBLIGATIONS OF THE SELLER AND THE PARENT

     The obligations of the Seller and the Parent to consummate the transactions
contemplated by the Transaction Documents are subject to the fulfillment, at or
before the Closing Date of the following conditions, any one or more of which
may be waived by the Parent and the Seller in their sole discretion:

     Section 7.1.  Representations and Warranties of the Buyer and Newco. All
representations and warranties made by the Buyer and Newco in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
as if again made by the Buyer and Newco on and as of such date, except for any
warranties made with reference to a specific date, which shall be true and
correct as of such specific date.

     Section 7.2.  Performance of the Obligations of the Buyer and Newco.  The
Buyer and Newco shall have performed in all material respects all obligations
required under this Agreement to be performed by them on or before the Closing
Date.

     Section 7.3.  Consents and Approvals.  All consents, waivers,
authorizations and approvals of any governmental or regulatory authority,
domestic or foreign, and of any Person, other than the Seller, the Parent or
their respective subsidiaries or affiliates, required on the Closing Date in
connection with the execution, delivery and performance of the Transaction
Documents shall have been duly obtained and shall be in full force and effect on
the Closing Date.

     Section 7.4.  No Violation of Orders.  No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that declares any of
the Transaction Documents invalid or unenforceable in any respect or which
prevents the consummation of the transactions contemplated hereby shall be in
effect on the Closing Date.

     Section 7.5.  Registration Rights Agreement.  On the Closing Date, the
Buyer and the Seller shall enter into the Registration Rights Agreement in the
form attached hereto as Exhibit D for the registration of the Buyer Common Stock
included in the Share Consideration.

     Section 7.6.  Buyer Closing Documents. The Buyer shall have delivered to
the Seller or cause Newco to deliver to the Seller the following documents on
the Closing Date:

                                       36
<PAGE>

          (a)      the certificates representing the Share Consideration;

          (b)      a certificate dated the Closing Date of the Secretary of
State of the jurisdiction of incorporation of the Buyer as to its good standing
in such jurisdiction;

          (c)      the Transaction Documents; and

          (d)      such other documents, including legal opinions, or
certificates relating to the transactions contemplated by the Transaction
Documents as the Seller reasonably requests.

     Section 7.7.  Legal Matters.  All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of the
Buyer and Newco under the provisions of the Transaction Documents, and all other
actions and proceedings required to be taken by or on behalf of the Buyer and
Newco in furtherance of the transactions contemplated hereby and thereby, shall
be reasonably satisfactory in form and substance to counsel for the Seller.

                                 ARTICLE VIII.
               CONDITIONS TO OBLIGATIONS OF THE BUYER AND NEWCO

     The obligations of the Buyer to consummate the transactions contemplated by
the Transaction Documents are subject to the fulfillment, at or before the
Closing Date of the following conditions, any one or more of which may be waived
by the Buyer in its sole discretion:

     Section 8.1.  Representations and Warranties of the Seller and the Parent.
All representations and warranties made by the Seller and the Parent in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as if again made by the Seller and the Parent on and as of such
date, except for any warranties made with reference to a specific date, which
shall be true and correct as of such specific date.

     Section 8.2.  Performance of the Obligations of the Seller and the Parent.
The Seller and the Parent shall have performed in all material respects all
obligations required under this Agreement to be performed by them on or before
the Closing Date and the Buyer shall have received a certificate dated the
Closing Date signed by the duly authorized representatives of the Seller and the
Parent to that effect.

     Section 8.3.  Consents and Approvals. All consents, waivers, authorizations
and approvals of any governmental or regulatory authority, domestic or foreign,
and of any Person, other than the Buyer, Newco or their respective subsidiaries
or affiliates, in connection with the execution, delivery and performance of the
Transaction Documents shall have been duly obtained and shall be in full force
and effect on the Closing Date, subject to the proviso in Section 8.4 hereof.

     Section 8.4.  No Violation of Orders. No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor

                                       37
<PAGE>

any statute, rule, regulation, decree or executive order promulgated or enacted
by any government or governmental or regulatory authority, domestic or foreign,
that declares any of the Transaction Documents invalid or unenforceable in any
respect or which prevents the consummation of the transactions contemplated
hereby shall be in effect on the Closing Date; provided that if Buyer or Newco
                                               --------
fail to consummate the transactions contemplated by the Transaction Documents
because of a failure of the conditions specified in Sections 8.3 and 8.4 based
solely upon the entry by the Delaware Court of Chancery in the Chancery Court
Litigation or another court in related litigation of an injunction or other
order barring the Closing, then the parties agree that their contractual rights
under this agreement are not affected.

     Section 8.5.  Seller Closing Documents. The Seller shall have delivered to
the Buyer or caused the Parent to deliver to the Buyer the following documents
on the Closing Date:

          (a)      instruments of transfer duly transferring all the Purchased
Interests on the Closing Date with appropriate transfer stamps, if any, affixed
thereto;

          (b)      a certificate dated the Closing Date of the Secretary of
State of the State of Delaware as to its good standing in such jurisdiction;

          (c)      copies of the consents, waivers and approvals specified on
Schedule 3.6;
------------

          (d)      the Transaction Documents; and

          (e)      such other documents, including legal opinions, or
certificates relating to the transactions contemplated by the Transaction
Documents as the Buyer reasonably requests.

     Section 8.6.  Legal Matters.  All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of the
Seller and the Parent under the provisions of the Transaction Documents, and all
other actions and proceedings required to be taken by or on behalf of the Seller
and the Parent in furtherance of the transactions contemplated hereby and
thereby, shall be reasonably satisfactory in form and substance to counsel for
the Buyer.

                                  ARTICLE IX.
                                  TERMINATION

     Section 9.1.  Conditions of Termination.  Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated at any time before
the Closing (a) by mutual consent of the Seller and the Buyer, (b) by the Seller
if the conditions set forth in Section 8 hereof are not satisfied or waived by
the Closing Date, (c) by the Buyer if the conditions set forth in Section 9
hereof are not satisfied or waived by the Closing Date or (d) by any party
hereto that is not in breach of its material obligations hereunder if the
Closing shall not have occurred on or prior to April 30, 2000, provided that the
                                                               --------
Buyer and Newco shall not have a right to terminate this Agreement pursuant to
clause (d) if they are prohibited from closing because of a preliminary or
permanent injunction binding on them.

                                       38
<PAGE>

     Section 9.2.   Effect of Termination.  In the event of termination pursuant
to Section 9.1 hereof, this Agreement shall become null and void and have no
effect, with no liability on the part of the Seller, the Company or the Buyer,
or their respective directors, officers, agents or stockholders, with respect to
this Agreement, except for the (i) liability of a party for expenses pursuant to
Section 11.3 hereof, (ii) liability for any breach of this Agreement and (iii)
Buyer and Newco's indemnification obligations under Section 6.3(b).

     Section 9.3.   Intentionally Omitted.

                                  ARTICLE X.
                                 MISCELLANEOUS

     Section 10.1.  Successors and Assigns.  Except as otherwise provided in
this Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect, provided that the Buyer may assign its
rights to a wholly-owned subsidiary.  This Agreement shall inure to the benefit
of and shall be binding upon the successors and permitted assigns of the parties
hereto.

     Section 10.2.  Governing Law; Jurisdiction.  This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof.  The parties hereto irrevocably elect as the sole judicial
forum for the adjudication of any matters arising under or in connection with
this Agreement, and consent to the jurisdiction of, the courts of the State of
New York.

     Section 10.3.  Service of Process.  The parties hereto acknowledge and
agree that under this Agreement process may be served, in the case of the Buyer
and Newco, by delivery to CT Corporation, 111 8th Avenue, New York, New York,
10011, in the case of the Seller, the Parent and the Company, by delivery to
Duane, Morris & Heckscher LLP, 380 Lexington Avenue, New York, New York 10168,
Attn: Michael H. Margulis, Esq. or to such other address or to the attention of
such other person in New York City as the parties may provide by notice by given
in accordance with Section 10.6 hereof.

     Section 10.4.  Expenses; Fees.  Except as otherwise provided herein, each
of the parties hereto shall pay its own expenses in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, any legal and accounting fees, whether or not the transactions
contemplated hereby are consummated.

     Section 10.5.  Severability.  In the event that any part of this Agreement
is declared by any court or other judicial or administrative body to be null,
void or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.

     Section 10.6.  Notices.  All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of

                                       39
<PAGE>

service if served personally on the party to whom notice is to be given, (ii) on
the day of transmission if sent via facsimile transmission to the facsimile
number given below, and telephonic confirmation of receipt is obtained promptly
after completion of transmission, (iii) on the day after delivery to Federal
Express or similar overnight courier or the Express Mail service maintained by
the U.S. Postal Service or (iv) on the fifth day after mailing, if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid and properly addressed, to the party as follows:

     If to the Seller:

                            Reading Entertainment, Inc.
                            One Penn Square West
                            30 South Fifteenth Street, Suite 1300
                            Philadelphia, Pennsylvania 19102-4813
                            Attention: James J. Cotter, Chairman
                            Facsimile: (215) 569-2862

     Copy to:
                            Potter Anderson & Corroon LLP
                            Hercules Plaza
                            1313 N. Market Street
                            Wilmington, Delaware 19801
                            Attention: John F. Grossbauer, Esq.
                            Facsimile: (302) 984-1192

     If to the Buyer:
                            National Auto Credit, Inc.
                            30000 Aurora Road
                            Solon, Ohio 44139
                            Attention: David L. Huber, Chairman of the Board
                            Facsimile: (440) 349-0442
     Copy to:
                            National Auto Credit, Inc.
                            30000 Aurora Road
                            Solon, Ohio 44139
                            Attention: Raymond A. Varcho, Esq., Vice President,
                                       Secretary and General Counsel
                            Facsimile: (440) 349-3959

     Any party may change its address for the purpose of this Section by giving
the other party written notice of its new address in the manner set forth above.

     Section 10.7.  Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written

                                       40
<PAGE>

instrument executed by the parties hereto, or in the case of a waiver, by the
party waiving compliance. Any waiver by any party of any condition, or of the
breach of any provision, term, covenant, representation or warranty contained in
this Agreement, in any one or more instances, shall not be deemed to be nor
construed as further or continuing waiver of any such condition, or of the
breach of any other provision, term, covenant, representation or warranty of
this Agreement.

     Section 10.8.  Public Announcements.  The parties agree that after the
signing of this Agreement, neither party shall make any press release or public
announcement concerning the transactions contemplated by the Transaction
Documents without the prior written approval of the other parties unless the
disclosing party is advised by counsel that a press release or public
announcement is required by law.  If any such announcement or other disclosure
is required by law, the disclosing party agrees to give the nondisclosing
parties prior notice and an opportunity to comment on the proposed disclosure.

     Section 10.9.  Entire Agreement.  The Transaction Documents contain the
entire understanding between the parties hereto with respect to the transactions
contemplated hereby and thereby and supersedes and replaces all prior and
contemporaneous agreements and understandings, oral or written, with regard to
such transactions.  All schedules hereto and any documents and instruments
delivered pursuant to any provision hereof are expressly made a part of this
Agreement as fully as though completely set forth herein.

     Section 10.10. Parties in Interest.  Except for the rights granted to the
Buyer Indemnitees and the Seller Indemnitees in Article VI hereof, nothing in
this Agreement is intended to confer any rights or remedies under or by reason
of this Agreement on any persons other than the Seller, the Parent, the Company,
the Buyer and Newco and their respective successors and permitted assigns.
Nothing in this Agreement is intended to relieve or discharge the obligations or
liability of any third persons to the Seller, the Parent, the Company, the Buyer
or Newco.  No provision of this Agreement shall give any third persons any right
of subrogation or action over or against the Seller, the Parent, the Company,
the Buyer or Newco.

     Section 10.11. Scheduled Disclosures.  Disclosure of any matter, fact or
circumstance in a Schedule to this Agreement shall not be deemed to be
disclosure thereof for purposes of any other Schedule hereto.

     Section 10.12. Specific Performance.  The parties recognize that the
Purchased Interests and the Company's principal asset, the Angelika Film Center,
are unique and not capable of duplication.  Accordingly, without limited or
waiving any rights or remedies the parties may have under this Agreement now or
hereinafter existing at law or in equity or by statute, each of the parties
hereto shall be entitled to seek specific performance by the other of the
obligations to be performed by the other in accordance with the provisions of
this Agreement.

     Section 10.13. Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.

     Section 10.14. Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.

                                       41
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
April 5, 2000.

                                        SELLER:

                                        FA, INC.

                                        By:  /s/ S. Craig Tompkins
                                             ---------------------
                                             Name:  S. Craig Tompkins
                                             Title: Vice Chairman

                                        PARENT:

                                        READING ENTERTAINMENT, INC.

                                        By:  /s/ S. Craig Tompkins
                                             ---------------------
                                             Name:  S. Craig Tompkins
                                             Title: Vice Chairman

                                        BUYER:

                                        NATIONAL AUTO CREDIT, INC.

                                        By:  /s/ David L. Huber
                                             ------------------
                                             Name:  David L. Huber
                                             Title: President Chairman CEO

                                        NEWCO:

                                        NATIONAL CINEMAS, INC.

                                        By:  /s/ David L. Huber
                                             ------------------
                                             Name:  David L. Huber
                                             Title: President

                                       42AMENDMENTS TO ASSET PURCHASE AGREEMENT

                                November 23, 1999

The following  amendments dated November 23, 1999 are made to the Asset Purchase
Agreement among Compu-Dawn,  Inc., GPC Acquisition Corp.,  Global PC, Inc., Mark
Bradlee and Brian  Dougherty,  dated July 30, 1999,  as amended on September 24,
1999 and September 26,   1999.
<TABLE>
<CAPTION>
_____________________________________________________________________
SECTION                   AMENDMENT
________________________________________________________________________

<S>  <C>                    <C>
1.   Heading               Change "Kevin" Dougherty to "Brian" Dougherty.

2.   Section 2             Change paragraph to read "Seller is engaged in the business of
     Recitals, First       developing and marketing certain proprietary user interface and
     Paragraph             application computer and Internet software (the "Business"), including
                           a Graphical Operating System called GEOS(R) ("GEOS(R)") which,
                           together with user interface and application software is utilized in a low
                           cost Internet and computing appliance (the "Global PC Device") and
                           associated web portal ("Global PC Online")".

3.   Section 2.3.1         The following sentence is added at the end of the Section:
                           Additionally, the Purchaser or Compu-DAWN shall pay Seller an
                           amount not to exceed the total tax liability amount set forth on
                           Schedule 3.9 plus $10,000 (the "Cash Purchase Price"), which proceeds
                           shall be used by Seller only and specifically to satisfy the tax liabilities
                           set forth on Schedule 3.9.

4.   Section 2.3.2(b)      Reference to delivery of Common Shares and/or Warrants at Closing
                           shall be changed to delivery of Common Shares and/or Warrants within
                           thirty (30) days after Closing.

5.   Section 2.3.2         A new Section 2.3.2(c) is added as follows:  2.3.2(c) the Cash Purchase
                           Price shall be delivered to the Seller at the Closing.

6.   Section 3.10.1        December Balance Sheet refers to December 1998 in all cases.

7.   Section 3.11 and      Insurance Schedule is complete, but policies have lapsed due to the
     Section 5.1(c)        length required to close the asset purchase agreement amendments.
                           Cancelled insurance policies and lapsed policies are listed in Schedule
                           3.11.

8.   Section 3.23(a)       Change the phrase "To the best of Sellers' and/or either Principal
                           Shareholder respective knowledge, Seller is in compliance" to "To the

                                        1

                           best of Seller's and/or either Principal  Shareholder's
                           respective  knowledge,  except as set forth in Schedule
                           3.9, Seller is in compliance".

9.       Section 5.1(i)             Change the opening phrase from "For as long as this Agreement shall
                                    remain in effect and until terminated in accordance with its terms" to
                                    "for as long as this Agreement and any amendments thereto shall
                                    remain in effect and until the earlier of (A) the closing of this
                                    Agreement as amended and as may be amended, or (B) it is terminated
                                    in accordance with its terms".

10.      Section 8.5                Change reference from "without limitation the GEOS(R) License
                                    Agreement" to "without limitation a new GEOS(R) License Agreement".

11.      Section 8.9                Change phrase from "Seller shall be satisfied with the amounts" to
                                    "Except as set forth in Schedule 3.9, Purchaser shall be satisfied with
                                    the amounts".

12.      Section 8.12               Paragraph should be changed to read "Seller shall have agreements
                                    with a sufficient number of its creditors such that its total trade and
                                    accounts payable and other liabilities can be liquidated by the amount
                                    approved by Compu-DAWN.

13.      Section 8.23               Paragraph should be changed to read:

                                    Escrow Agreement.  Seller and the Representative shall have executed
                                    and tendered to Compu-DAWN an escrow agreement (the "Escrow
                                    Agreement") in the form and substance reasonably acceptable to
                                    Compu-DAWN, Purchaser, Seller and the Principal Shareholders,
                                    providing for, among other things, that the Common Shares and
                                    Warrants of Compu-DAWN issuable to the Persons set forth on
                                    Schedule 8.23 on account of a portion of the Purchase Price as provided
                                    in Section 2.3.2(a) hereof, as provided for below (the "Escrow
                                    Securities"), will be placed in escrow with an escrow agent satisfactory
                                    to Compu-DAWN and held in accordance with the terms set forth
                                    below and shall be held as security for the indemnification obligations
                                    of the Principal Shareholders pursuant to Section 12.2.1 hereof for a
                                    period of eleven (11) months from the Closing Date.

14.      Section 10.1               Change the date September 30, 1999 (as amended to November 30,
                                    1999) to December 31, 1999.

                                        2

15.      Section 10.3 (b)           These sections are deleted (because the Closing Common Shares and
         and (c)                    Closing Warrants will be delivered within thirty (30) days after
                                    Closing).

16.      Section 10.3(e)            Replace the reference to "Schedule 10.3(e)" with "Schedule 9.7".

17.      Section 11.4               Paragraph should be changed to read:

                                    Board Position.  The Board of Directors of Compu-DAWN shall be
                                    comprised of seven (7) directors following the Closing.  The two (2)
                                    vacancies currently on the Board shall be filled  by Brian Dougherty
                                    and Mark Bradlee at the Closing.  Compu-DAWN will use best efforts
                                    to cause seat to be vacated by a current Compu-DAWN employee
                                    board member and cause such seat to be filled by a new qualified and
                                    valuable outside board member in the future which would thereafter
                                    make the composition of the board two Compu-DAWN employees, two
                                    former Global PC employees and three outside board members.

18.      Section 11.5(ii)(A)        For the purposes of this restrictive clause, a Competitive Business will
                                    be defined as any Business developing and/or selling a non
                                    Windows/Macintosh PC combined with Internet Portal connectivity
                                    that targets the home market.

                                    For the purposes of this restrictive clause and all other restrictive
                                    clauses in this Agreement, the definition of Competitive Business will
                                    exclude Wink Communications and PlanetWeb.  It was disclosed prior
                                    to the signing of the Letter of Intent that Brian Dougherty is currently
                                    on the Board of Directors and has active participation in both Wink
                                    Communications and PlanetWeb.

19.      Section 11.5(B)            Change restrictive period from "two (2) years" to "one (1) year".

20.      Section 11.7               Change the phrase "fund the pre-rollout market to "rollout market".

21.      Section 15.1               The term "Subscription Agreement" in this Section and where
                                    referenced throughout the Agreement is changed to "Subscription and
                                    Registration Rights Agreement".

22.      Section 16.7               Change Compu-DAWN address to read:
                                    333 North 1st Street, Suite 200
                                    Jacksonville, Florida  32250
                                    Attention:  Chairman of the Board
                                    Telecopier:  (904) 249-7599

                                        3

23.      New Article XVII           A new Article XVII is added to the Asset Purchase Agreement, which
                                    shall read in its entirety as follows:

                                    Registration Rights.  The Subscription and Registration Rights
                                    Agreements shall have the following provisions relating to registration
                                    of the Common Shares and Warrant Shares in, or substantially in, the
                                    form annexed hereto as Schedule 23.

24.      Schedule 2.3.2(a)(i)       Replace original Schedule 2.3.2(a)(i) with Schedule 2.3.2(i) dated Nov.
                                    23, 1999.

25.      Schedule 2.3.2(a)(ii)      Replace original Schedule 2.3.2(a)(ii) with Schedule 2.3.2(a)(ii) dated
                                    Nov. 23, 1999.

26.      Schedule 2.4.1             Replace original Schedule 2.4.1 with Schedule 2.4.1 dated Nov. 23, 1999.

27.      Schedule 3.1               Replace original Schedule 3.1 with Schedule 3.1 dated Nov. 23, 1999.

28.      Schedule 3.2               Replace original Schedule 3.2 with Schedule 3.2 dated Nov. 23, 1999.

29.      Schedule 3.3               Replace original Schedule 3.3 with Schedule 3.3 dated Nov. 23, 1999.

30.      Schedule 3.5               Replace original Schedule 3.5 with Schedule 3.5 dated Nov. 23, 1999.

31.      Schedule 3.6               Replace original Schedule 3.6 with Schedule 3.6 dated Nov. 23, 1999.

32.      Schedule 3.7               Replace original Schedule 3.7 with Schedule 3.7 dated Nov. 23,1999.

33.      Schedule 3.8               Replace original Schedule 3.8 with Schedule 3.8 dated Nov. 23, 1999.

34.      Schedule 3.9               Replace original Schedule 3.9 with Schedule 3.9 dated Nov. 23, 1999.

35.      Schedule 3.10.1            Replace original Schedule 3.10.1 with Schedule 3.10.1 dated Nov. 23,
                                    1999.

36.      Schedule 3.10.2            Replace original Schedule 3.10.2 with Schedule 3.10.2 dated Nov. 23,
                                    1999.

37.      Schedule 3.11              Replace original Schedule 3.11 with Schedule 3.11 dated Nov. 23,
                                    1999.

                                                           4

38.      Schedule 3.12              Replace original Schedule 3.12 with Schedule 3.12 dated Nov. 23,
                                    1999.

39.      Schedule 3.13              Replace original Schedule 3.13 with Schedule 3.13 dated Nov. 23,
                                    1999.

40.      Schedule 3.14              Replace original Schedule 3.14 with Schedule 3.14 dated Nov. 23,
                                    1999.

41.      Schedule 3.16              Replace original Schedule 3.16 with Schedule 3.16 dated Nov. 23,
                                    1999.

42.      Schedule 3.19              Replace original Schedule 3.19 with Schedule 3.19 dated Nov. 23,
                                    1999.

43.      Schedule 3.23              Replace original Schedule 3.23 with Schedule 3.23 dated Nov. 23,
                                    1999.

44.      Schedule 3.25              Replace original Schedule 3.25 with Schedule 3.25 dated Nov. 23,
                                    1999.

45.      Schedule 4.3               Replace original Schedule 4.3 with Schedule 4.3 dated Nov. 23, 1999.

46.      Schedule 8.11              Replace original Schedule 8.11 with Schedule 8.11 dated Nov. 23,
                                    1999.

47.      Schedule 8.23              Replace original Schedule 8.23 with Schedule 8.23 dated Nov. 23,
                                    1999.

48.      Schedule 9.7               Replace original Schedule 9.7 with Schedule 9.7 dated Nov. 23, 1999.

49.      Exhibit 2.3.1(a)           Replace original Exhibit 2.3.1(a) with revised Exhibit 2.3.1(a) (Form of
                                    Class A Warrant) attached hereto.

50.      Exhibit 2.3.1(b)           Replace original Exhibit 2.3.1(b) with revised Exhibit 2.3.1(b) (Form of
                                    Class B Warrant) attached hereto.

51.      Exhibit 2.3.1(c)           Replace original Exhibit 2.3.1(c) with revised Exhibit 2.3.1(c) (Form of
                                    Class C Warrant) attached hereto.

52.  All other terms of the Asset  Purchase  Agreement  as amended on  September
     24,1999 and  September 26, 1999 shall remain and continue in full force and
     effect as amended hereby.

</TABLE>

                                        5

     WITNESS  the  execution  of these  Amendments  as of the date  first  above
written.

                            COMPU-DAWN, INC.

                            By: /s/ Rudy C. Theale
                            ----------------------

                            GPC ACQUISITION CORP.

                            By: /s/ Rudy C. Theale
                            ----------------------

                            GLOBAL P.C.

                            By: /s/ Mark Bradlee
                            --------------------

                            /s/ Mark Bradlee
                            ----------------
                            MARK BRADLEE

                            /s/ Brian Dougherty
                            -------------------
                            BRIAN DOUGHERTY

                                        6

                     AMENDMENTS TO ASSET PURCHASE AGREEMENTS
                                November 23, 1999
                                   SCHEDULE 23

         5.1      Registration Rights

                  (a)      Compu-DAWN Obligations.

                  i.       Registration.

                    A.   If at any time after the date hereof  Compu-DAWN  shall
                         file with the Securities and Exchange  Commission  (the
                         "SEC")  a   registration   statement   (a   "Piggy-back
                         Registration   Statement")  under  the  Securities  Act
                         relating  to an  offering  for its own  account  or the
                         account of others  under the  Securities  Act of any of
                         its equity  securities  (other than on Form S-4 or Form
                         S-8  or  their  then  equivalents  relating  to  equity
                         securities to be issued  solely in connection  with any
                         acquisition   of  any  entity  or  business  or  equity
                         securities  issuable in connection with stock option or
                         other employee benefit plans), Compu-DAWN shall send to
                         the  Subscribers  written notice of such  determination
                         and, if within fifteen (15) days after the date of such
                         notice,  any  Subscriber  shall so request in  writing,
                         Compu-DAWN    shall   include   in   such    Piggy-Back
                         Registration  Statement  all or any part of the  Common
                         Shares  and/or   Warrant   Shares   (collectively   the
                         "Registrable  Securities") such Subscriber  requests to
                         be registered,  except that if, in connection  with any
                         underwritten    public    offering,     the    managing
                         underwriter(s) thereof shall impose a limitation on the
                         number of Registrable  Securities which may be included
                         in   the   Piggy-Back   Registration   Statement   (the
                         "Underwriter Cutback") because, in such underwriter(s)'
                         judgment,  marketing  or  other  factors  dictate  such
                         limitation   is   necessary   to   facilitate    public
                         distribution,  then  Compu-DAWN  shall be  obligated to
                         include in such Piggy-Back  Registration Statement only
                         such limited  portion of the as the  underwriter  shall
                         permit (limited to zero if necessary).

                    B.   The provisions of Section 5.1(a)(i)(a) notwithstanding,
                         if  Compu-  DAWN has not  previously  filed one or more
                         Piggy-back  Registration Statements covering the resale
                         of all  of  the  Registrable  Securities  then,  if (I)
                         Compu-DAWN  receives a request from Subscribers who are
                         holders of at least 100,000 Registrable Securities,  or
                         (II) if all the Subscribers  hold in the aggregate less
                         than   199,999   Registrable   Securities,   Compu-DAWN
                         receives a request from  Subscribers who are holders of
                         a majority of the Registrable Securities, Compu-DAWN

                                        7

                         shall on no  more  than  two  (2)  occassions  in  each
                         calendar   year,  commencing on May 15, 2000,  prepare
                         and  file  with  the SEC a  registration  statement  (a
                         "Mandatory   Registration  Statement"  and  singly  and
                         collectively    with   any    Piggyback    Registration
                         Statement(s) sometimes referred to as the "Registration
                         Statement")  covering  the  resale  of the  Registrable
                         Securities.  The Company may register the resale of any
                         other  of  its   securities   on  any  such   Mandatory
                         Registration   Statement.   The   Company   shall   use
                         reasonable   best   efforts  to  cause  the   Mandatory
                         Registration  Statement to become  effective as soon as
                         is  practicable  after the  filing  thereof,  but in no
                         event  later  than  the  one  hundredth  and  twentieth
                         (120th) day following  the date of the filing  thereof,
                         provided however,  that in no event shall Compu-DAWN be
                         required to file a Mandatory  Registration Statement if
                         it is undertaking an underwritten public offering which
                         has  not  closed,  and in  such  case,  the  date  that
                         Compu-DAWN   is   required   to  file   the   Mandatory
                         Registration  Statement  hereunder  shall  be  extended
                         until the thirtieth  (30th) day after the  underwritten
                         offering  is  closed  and  the   distribution   of  the
                         securities  in such  underwritten  public  offering  is
                         complete.

                    C.   If an offering in  connection  with which an Subscriber
                         is  entitled  to   registration   under  this   Section
                         5.1(a)(i)  is  an  underwritten  offering,   then  such
                         Subscriber   shall,    unless   otherwise   agreed   by
                         Compu-DAWN,  offer and sell such Registrable Securities
                         in an underwritten  offering using the same underwriter
                         or underwriters  and,  subject to the provisions of the
                         Subscription and Registration Rights Agreement relating
                         to the  applicable  Subscriber,  on the same  terms and
                         conditions  as other like  securities  included in such
                         underwritten offering.

               ii.  Amendments   and   Supplements;    Maintain   Effectiveness.
                    Compu-DAWN   shall  prepare  and  file  with  the  SEC  such
                    amendments   (including   post-effective   amendments)   and
                    supplements to the Registration Statement and the prospectus
                    used in connection with the Registration Statement as may be
                    necessary to keep the  Registration  Statement  effective at
                    all  times  for a period  of six (6)  months  following  the
                    effective date thereof (the "Registration  Period"),  except
                    during any  Disclosure  Delay  Period (as defined in Section
                    5.1(a)(iii),  and,  during  such  period,  comply  with  the
                    provisions  of  the  Securities  Act  with  respect  to  the
                    disposition  of all  Registrable  Securities  covered by the
                    Registration  Statement  until  such  time  as all  of  such
                    Registrable  Securities  have been disposed of in accordance
                    with the intended  methods of  disposition by the Subscriber
                    who is the holder  thereof (for the purposes of this Section
                    5  each  a  "Holder")  as  set  forth  in  the  Registration
                    Statement.

               iii. Disclosure  Delay  Period.  If,  at any  time  prior  to the
                    expiration of the

                                        8

                    Registration  Period, in the good faith reasonable  judgment
                    of  Compu-DAWN's  Board of  Directors,  the  disposition  of
                    Registrable   Securities   would   require   the   premature
                    disclosure  of  material  non-public  information  which may
                    reasonably  be  expected  to  have  an  adverse   effect  on
                    Compu-DAWN,   then  Compu-DAWN  shall  not  be  required  to
                    maintain the  effectiveness  of or amend or  supplement  the
                    Registration  Statement  for a period (a  "Disclosure  Delay
                    Period")  expiring upon the earlier to occur of (A) the date
                    on which  such  material  information  is  disclosed  to the
                    public or ceases to be  material  or (B)  subject to Section
                    5.1(a)(iv)  hereof, up to sixty (60) calendar days after the
                    date on which  Compu-DAWN  provides a notice to the  Holders
                    under Section  5.1(a)(iv) hereof stating that the failure to
                    disclose such non-public  information  causes the prospectus
                    included in the Registration  Statement,  as then in effect,
                    to include an untrue statement of a material fact or to omit
                    to state a material  fact  required to be stated  therein or
                    necessary to make the statements therein not misleading.

               iv.  Notice of  Disclosure  Delay  Period.  Compu-DAWN  will give
                    prompt  written  notice,  to each Holder of each  Disclosure
                    Delay Period.  Each Holder agrees that, upon receipt of such
                    notice  prior  to  such  Holder's  disposition  of all  such
                    Registrable    Securities    will   forthwith    discontinue
                    disposition of such Registrable  Securities  pursuant to the
                    Registration Statement,  and will not deliver any prospectus
                    forming a part thereof in  connection  with any sale of such
                    Registrable   Securities   until  the   expiration  of  such
                    Disclosure  Delay Period.  Notwithstanding  anything in this
                    Section 5.1 to the contrary, there shall not be more than an
                    aggregate of One Hundred  Twenty (120)  calendar days in any
                    twelve (12) month  period  during which  Compu-DAWN  is in a
                    Disclosure Delay Period.

               v.   Copies  of  Filings  and  Correspondence.  Compu-DAWN  shall
                    furnish to Holder (A)  promptly  after the same is  prepared
                    and publicly distributed, filed with the SEC, or received by
                    Compu-DAWN,  one copy of the Registration  Statement and any
                    amendment   thereto,   each   preliminary   prospectus   and
                    prospectus  and each  amendment or supplement  thereto,  and
                    each item of correspondence from the SEC or the staff of the
                    SEC which comments upon or requests  information relating to
                    such Holder and/or the  Registrable  Securities  (including,
                    without  limitation,  the  resale  and plan of  distribution
                    hereof),   in  each  case  relating  to  such   Registration
                    Statement  (other than any portion,  if any,  thereof  which
                    contains   information  for  which   Compu-DAWN  has  sought
                    confidential treatment), (B) on the date of effectiveness of
                    the  Registration  Statement  or any  amendment  thereto,  a
                    notice stating that the Registration  Statement or amendment
                    has been declared  effective,  and (C) such number of copies
                    of a prospectus, including a preliminary prospectus, and all
                    amendments and supplements  thereto and such other documents
                    as such Holder may reasonably

                                        9

                    request in order to facilitate the disposition of the Common
                    Shares by Holder.

               vi.  Blue  Sky.  Compu-DAWN  shall  use its best  efforts  to (A)
                    register and qualify the Registrable  Securities  covered by
                    the  Registration  Statement under such other  securities or
                    "blue sky" laws of such  jurisdictions  in the United States
                    as  Holders  of a  majority  of the  Registrable  Securities
                    reasonably   request,   (B)   prepare   and  file  in  those
                    jurisdictions  such  amendments  (including  post- effective
                    amendments)  and  supplements  to  such   registrations  and
                    qualifications   as  may  be   necessary   to  maintain  the
                    effectiveness  thereof during the Registration  Period,  (C)
                    take such other actions as may be necessary to maintain such
                    registrations  and  qualifications  in  effect  at all times
                    during  the  Registration  Period,  and (D) take  all  other
                    actions  reasonably  necessary  or  advisable to qualify the
                    Registrable  Securities  for  sale  in  such  jurisdictions;
                    provided,  however, that Compu-DAWN shall not be required in
                    connection  therewith  or  as a  condition  thereto  to  (A)
                    qualify to do  business in any  jurisdiction  where it would
                    not  otherwise  be required to qualify but for this  Section
                    5.1(a)(vi),  (B) subject  itself to general  taxation in any
                    such jurisdiction,  (C) file a general consent to service of
                    process  in  any  such   jurisdiction,   (D)   provide   any
                    undertakings  that cause Compu-DAWN undue expense or burden,
                    or (E) make any change in its  charter  or bylaws,  which in
                    each case the Board of Directors of Compu-DAWN determines to
                    be  contrary to the best  interests  of  Compu-DAWN  and its
                    stockholders.

               vii. Events  Affecting  Prospectus.  As promptly  as  practicable
                    after becoming aware of such event,  Compu-DAWN shall notify
                    the  Holders  of  the  happening  of  any  event,  of  which
                    Compu-DAWN  has   knowledge,   as  a  result  of  which  the
                    prospectus included in the Registration  Statement,  as then
                    in effect,  includes an untrue  statement of a material fact
                    or omission to state a material  fact  required to be stated
                    therein or  necessary  to make the  statements  therein  not
                    misleading,   and  if   such   Registration   Statement   is
                    supplemented or amended to correct such untrue  statement or
                    omission,  to  deliver  such  number  as  such  Holders  may
                    reasonably request.

               viii.Notification of Amendment or Supplement.  Compu-DAWN  shall,
                    as promptly as practical  after becoming aware of such event
                    described  in Section  5.1(vii),  notify the  Holders of the
                    issuance of such order and the  resolution  thereof  (and if
                    such  Registration  Statement  is  supplemented  or amended,
                    deliver  such  number  of  copies  of  such   supplement  or
                    amendment to such Holders as they may reasonably request).

               ix.  Review by Holders' Counsel. Compu-DAWN shall permit a single
                    firm of counsel designated by the Holders holding a majority
                    of the  Registrable  Securities  to review the  Registration
                    Statement and all amendments and

                                       10

                    supplements  thereto a  reasonable  period of time  prior to
                    their filing with the SEC.

               x.   Holders'  Due  Diligence;   Confidentiality   of  Compu-DAWN
                    Information.  Compu-DAWN shall make available for inspection
                    by (A) the Holders,  (B) one firm of attorneys  and one firm
                    of  accountants  or other  agents  retained  by the  Holders
                    holding   a   majority   of   the   Registrable   Securities
                    (collectively, the "Inspectors") all pertinent financial and
                    other  records,   and  pertinent   corporate  documents  and
                    properties of Compu-DAWN  (collectively,  the "Records"), as
                    shall be reasonably  deemed  necessary by each  Inspector to
                    enable  each   Inspector  to  exercise  its  due   diligence
                    responsibility,  and cause Compu- DAWN's officers, directors
                    and  employees to supply all  information  which the Holders
                    holding  a  majority  of  the  Registrable   Securities  may
                    reasonably  request  for  purposes  of such  due  diligence;
                    provided,   however,  that  each  Inspector  shall  hold  in
                    confidence and shall not make any disclosure  (except to the
                    Holders) of any record or other information which Compu-DAWN
                    determines  in good faith to be  confidential,  and of which
                    determination  the  Inspector  so  notified,  unless (A) the
                    disclosure  of such records is necessary to avoid or correct
                    a misstatement  or omission in any  Registration  Statement,
                    (B) the  release of such  records is ordered  pursuant  to a
                    subpoena or other order from a court or  government  body of
                    competent  jurisdiction,  or (C)  the  information  in  such
                    records  has been made  generally  available  to the  public
                    other than by  disclosure  in violation of this or any other
                    agreement. Compu- DAWN shall not be required to disclose any
                    confidential  information  in such records to any  Inspector
                    until and unless such  Inspector  shall have  entered into a
                    confidentiality  agreements  with  Compu-DAWN  with  respect
                    thereto,   substantially   in  the  form  of  this   Section
                    5.1(a)(x).  ATS agrees  that it shall,  upon  learning  that
                    disclosure  of such  records  is  sought in or by a court or
                    governmental body of competent jurisdiction or through other
                    means,   give  prompt   notice  to   Compu-DAWN   and  allow
                    Compu-DAWN,  at its expense, to undertake appropriate action
                    to prevent  disclosure  of, or to obtain a protective  order
                    for, the records deemed  confidential.  Nothing herein shall
                    be deemed  to limit  the  Holder's  ability  to sell  Common
                    Shares  in a  manner  which  is  otherwise  consistent  with
                    applicable laws and regulations.

               xi.  Confidentiality  of  the  Holder's  Information.  Compu-DAWN
                    shall  hold in  confidence  and not make any  disclosure  of
                    information  concerning  any Holder  provided to  Compu-DAWN
                    unless (A)  disclosure of such  information  is necessary to
                    comply  with  federal  or  state  securities  laws,  (B) the
                    disclosure  of such  information  is  necessary  to avoid or
                    correct  a  misstatement  or  omission  in any  Registration
                    Statement,  (C) the release of such  information  is ordered
                    pursuant  to a  subpoena  or  other  order  from a court  or
                    governmental  body  of  competent  jurisdiction,   (D)  such
                    information has been made generally

                                       11

                    available  to  the  public  other  than  by   disclosure  in
                    violation  of  this  or any  other  agreement,  or  (E)  the
                    applicable  Holder  consents  to the form and content of any
                    such  disclosure.  Compu-DAWN  agrees  that it  shall,  upon
                    learning that disclosure of such information concerning such
                    holder is sought  in or by a court or  governmental  body of
                    competent  jurisdiction or through other means,  give prompt
                    notice to such Holder prior to making such  disclosure,  and
                    allow such Holder, at its expense, to undertake  appropriate
                    action to prevent  disclosure  of, or to obtain a protective
                    order for, such information.

               xii. Compliance  with  Laws.  Compu-DAWN  shall  comply  with all
                    applicable  laws  related to a  Registration  Statement  and
                    offering and sale of securities and all applicable rules and
                    regulations  of   governmental   authorities  in  connection
                    therewith (including, without limitation, the Securities Act
                    and the Securities Exchange Act of 1934, as amended, and the
                    rules and regulations promulgated by the SEC.)

               (b) Obligations of the Holders. In connection with a registration
          of the  Registable  Securities  the Holders  shall have the  following
          obligations:

          i.   Holder's  Information.  It shall be a condition  precedent to the
               obligations of Compu-DAWN to complete the  registration  pursuant
               to Section 5.1 that each Holder shall furnish to Compu-DAWN  such
               information regarding itself, the Registrable  Securities and the
               intended  method of  disposition  of the as shall be  required to
               effect the registration of such Registrable  Securities and shall
               execute such documents in connection  with such  registration  as
               Compu- DAWN may  reasonably  request.  At least five (5) business
               days  prior  to  the  first   anticipated   filing  date  of  the
               Registration  Statement,  Compu-DAWN  shall notify the Holders of
               the information Compu-DAWN requires from the Holders.

          ii.  Cooperation.  Each Holder agrees to cooperate with  Compu-DAWN as
               requested by Compu-DAWN in connection  with the  preparation  and
               filing  of the  Registration  Statement  hereunder,  unless  such
               Holder  does  not  include  any of his,  hers or its  Registrable
               Securities in the Registration Statement.

          iii. Underwritten Offering. In the event a Holder determines to engage
               the services of an underwriter,  such Holder agrees to enter into
               and perform its obligations under an underwriting  agreement,  in
               usual  and  customary  form,   including,   without   limitation,
               customary indemnification and contribution obligations,  with the
               managing underwriter of such offering and take such other actions
               as are reasonably required in order to expedite or facilitate the
               disposition of the Registrable Securities.

                                       12

          iv   No Disposition of Registable Securities. Each Holder agrees that,
               upon receipt of any notice from  Compu-DAWN  of the  happening of
               any  event of the  kind  described  in  Sections  5.1(a)(vii)  or
               5.1(a)(viii),    such   Holder   will   immediately   discontinue
               disposition   of   Registrable   Securities   pursuant   to   the
               Registration  Statement  covering the resale of such  Registrable
               Securities  until  such  Holder's  receipt  of the  copies of the
               supplemented  or  amended  prospectus  contemplated  by  Sections
               5.1(a)(vii)  or  5.1(a)(viii)  and, if so directed by Compu-DAWN,
               each Holder shall  deliver to  Compu-DAWN or destroy (and deliver
               to Compu-DAWN a certificate  of  destruction)  all copies in such
               Holder's  possession,  of the  prospectus  covering  such  Common
               Shares current at the time of receipt of such notice.

          v.   Method  of  Underwritten   Distribution.   Each  Holder  may  not
               participate in any underwritten distribution of the Common Shares
               unless  such  Holder (A) agrees to sell the Common  Shares on the
               basis  provided  in any  underwriting  arrangements  in usual and
               customary  form entered into by Compu-DAWN,  (B) completes,  in a
               manner  reasonably  acceptable  to  Compu-DAWN,  and executes all
               questionnaires,  powers of  attorney,  indemnities,  underwriting
               agreements  and other  documents  reasonably  required  under the
               terms of such  underwriting  arrangements,  and (C) agrees to pay
               its pro rata share of all underwriting  discounts and commissions
               and any  expenses  in  excess  of  those  payable  by  Compu-DAWN
               pursuant to Section 5.1(c) below.

               (c) Expenses of Registration. All reasonable expenses, other than
          underwriting  discounts and  commissions,  incurred in connection with
          registrations,   filings  or  qualifications,   relating  to  two  (2)
          Registration  Statements  pursuant  to Section  5.1,  except that if a
          portion of ATS  Shares are not  permitted  to be  included  in two (2)
          Registration  Statements  by an  underwriter  as  provided  in Section
          5.1(a)(i),   then  relating  to  the  least  number  of   Registration
          Statements  which  will  cover  the  resale  of  all  the  Registrable
          Securities,  including all  registration,  listing and  qualifications
          fees,  printers and  accounting  fees, the fees and  disbursements  of
          counsel for Compu-DAWN hereof, shall be borne by Compu-DAWN.

               (d) Indemnification.  In the event any Registrable Securities are
          included for resale in a Registration Statement under this Agreement:

          i.   Compu-DAWN  Indemnification.  To the  extent  permitted  by  law,
               Compu-  DAWN will  indemnify,  hold  harmless  and defend (A) the
               Holder  and  (B) the  directors,   officers,  partners,  members,
               employees, agents and each person who controls any non-individual
               holder within the meaning of Section 15 of the  Securities Act or
               Section 20 of the Exchange Act, if any,  (each,  an  "Indemnified
               Person"),  against any joint or several losses, claims,  damages,
               liabilities  or expenses  (collectively,  together  with actions,
               proceedings  or inquiries by any  regulatory  or  self-regulatory
               organization, whether

                                       13

               commenced or threatened,  in respect thereof,  "Claims") to which
               any of them may become  subject  insofar as such Claims arise out
               of or are based upon: (A) any untrue  statement or alleged untrue
               statement of a material fact in a  Registration  Statement or the
               omission  or alleged  omission to state  therein a material  fact
               required to be stated or necessary to make the statements therein
               not  misleading,  (B) any  untrue  statement  or  alleged  untrue
               statement  of  a  material  fact  contained  in  any  preliminary
               prospectus  if  used  prior  to  the   effective   date  of  such
               Registration  Statement, or contained in the final prospectus (as
               amended  or  supplemented,  if  Compu-DAWN  files  any  amendment
               thereof or  supplement  thereto  with the SEC) or the omission or
               alleged  omission to state therein any material fact necessary to
               make the statements made therein,  in light of the  circumstances
               under which the statements therein were made, not misleading,  or
               (C) any  violation  or alleged  violation  by  Compu-DAWN  of the
               Securities Act, the Exchange Act, any other applicable securities
               law, including,  without limitation, any state securities law, or
               any rule or regulation  thereunder  relating to the offer or sale
               of the Common  Shares (the matters in the  foregoing  clauses (A)
               through (C) being,  collectively,  "Violations").  Subject to the
               restrictions set forth in Section 5.1(d)(iii) with respect to the
               number of legal counsel,  Compu-DAWN  shall  reimburse the Holder
               and each other Indemnified Person,  promptly as such expenses are
               incurred and are due and payable,  for any reasonable  legal fees
               or other reasonable  expenses incurred by them in connection with
               investigating  or  defending  any  such  Claim.   Notwithstanding
               anything to the contrary  contained herein,  the  indemnification
               agreement  contained  in this  Section  5.1(d)(i):  (A) shall not
               apply to a Claim  arising out of or based upon a Violation  which
               occurs  in  reliance  upon  and in  conformity  with  information
               furnished in writing to  Compu-DAWN  by such  Indemnified  Person
               expressly  for  use in the  Registration  Statement  or any  such
               amendment thereof or supplement  thereto;  (B) shall not apply to
               amounts paid in  settlement  of any Claim if such  settlement  is
               effected without the prior written consent of Compu-DAWN; and (C)
               with respect to any  preliminary  prospectus,  shall not inure to
               the benefit of any Indemnified  Person if the untrue statement or
               omission of material fact contained in the preliminary prospectus
               was  corrected  on a  timely  basis  in the  prospectus,  as then
               amended or supplemented,  if such corrected prospectus was timely
               made  available  by  Compu-DAWN  pursuant  to  Section  5.1(a)(v)
               hereof,  and the  Indemnified  Person  was  promptly  advised  in
               writing  not to use the  incorrect  prospectus  prior  to the use
               giving  rise  to  a  Violation  and  such   Indemnified   Person,
               notwithstanding such advice, used it. Such indemnity shall remain
               in full force and effect regardless of any investigation  made by
               or on behalf of the  Indemnified  Person  and shall  survive  the
               transfer of the Registrable Securities by the Holder.

                                       14

          ii.  Holder's  Indemnification.  In connection  with any  Registration
               Statement  in which the  Holder  is  participating,  each  Holder
               agrees to indemnify, hold harmless and defend, to the same extent
               and  in  the  same   manner  set  forth  in  Section   5.1(d)(i),
               Compu-DAWN, each of its directors, each of its officers who signs
               the  Registration  Statement,  its  employees,  agents  and  each
               person,  if any,  who controls  Compu-DAWN  within the meaning of
               Section 15 of the  Securities  Act or Section 20 of the  Exchange
               Act, and any other stockholder selling securities pursuant to the
               Registration Statement or any of its directors or officers or any
               person who controls  such  stockholder  within the meaning of the
               Securities  Act or the  Exchange Act  (collectively  and together
               with an Indemnified Person, an "Indemnified Party"),  against any
               Claim  to  which  any of  them  may  become  subject,  under  the
               Securities  Act, the Exchange Act or  otherwise,  insofar as such
               Claim arises out of or is based upon any Violation,  in each case
               to the extent (and only to the extent) that such Violation occurs
               in  reliance  upon and in  conformity  with  written  information
               furnished  to Compu-  DAWN by such  Holder  expressly  for use in
               connection  with such  Registration  Statement,  and  subject  to
               Section  5.1(d)(iii),  such  Holder will  reimburse  any legal or
               other  expenses  (promptly as such  expenses are incurred and are
               due and payable)  reasonably  incurred by them in connection with
               investigating  or defending  any such Claim;  provided,  however,
               that the indemnity agreement contained in this Section 5.1(d)(ii)
               shall not apply to  amounts  paid in  settlement  of any Claim if
               such settlement is effected  without the prior written consent of
               such Holder,  which consent shall not be  unreasonably  withheld.
               Such indemnity  shall remain in full force and effect  regardless
               of any  investigation  made by or on behalf  of such  Indemnified
               Party  and  shall   survive  the  transfer  of  the   Registrable
               Securities by such Holder.

          iii. Procedure.  Promptly  after receipt by an  Indemnified  Person or
               Indemnified  Party  under  this  Section  5.1(d) of notice of the
               commencement of any action  (including any governmental  action),
               such Indemnified Person or Indemnified Party shall, if a Claim in
               respect thereof is to made against any  indemnifying  party under
               this Section 5.1(d),  deliver to the indemnifying party a written
               notice of the commencement  thereof,  and the indemnifying  party
               shall have the right to  participate  in,  and, to the extent the
               indemnifying  party so desires,  to assume control of the defense
               thereof with counsel  mutually  satisfactory to the  indemnifying
               party and the Indemnified Person or the Indemnified Party, as the
               case may be;  provided,  however,  that such  indemnifying  party
               shall not be entitled to assume such  defense and an  Indemnified
               Person or  Indemnified  Party  shall have the right to retain its
               own counsel with the  reasonable  fees and expenses to be paid by
               the indemnifying  party, if, in the reasonable opinion of counsel
               retained by the indemnifying  party, the  representation  by such
               counsel of the  Indemnified  Person or Indemnified  Party and the
               indemnifying  party  would  be  inappropriate  due to  actual  or
               potential conflicts of interest between

                                       15

               such Indemnified  Person or Indemnified Party and any other party
               represented  by such counsel in such  proceeding or the actual or
               potential  defendants  in, or targets of, any such action include
               both the  Indemnified  Person  or the  Indemnified  Party and the
               indemnifying party and any such Indemnified Person or Indemnified
               Party  reasonably  determines  that  there may be legal  defenses
               available to such Indemnified  Person or Indemnified  Party which
               are  different  from or in  addition to those  available  to such
               indemnifying party. The indemnifying party shall pay for only one
               separate  legal  counsel  for  the  Indemnified  Persons  or  the
               Indemnified Parties, as applicable,  and such legal counsel shall
               be selected  by such  Holder,  if such Holder or any  Indemnified
               Person  is  entitled   to   indemnification   hereunder,   or  by
               Compu-DAWN,  if Compu-DAWN or an Indemnified Party is entitled to
               indemnification  hereunder, as applicable. The failure to deliver
               written notice to the indemnifying party within a reasonable time
               of the  commencement  of any such action  shall not relieve  such
               indemnifying  party of any liability to the Indemnified Person or
               Indemnified Party under this Section 5.1(d), except to the extent
               that the indemnifying party is actually prejudiced in its ability
               to defend  such  action.  The  indemnification  required  by this
               Section  5.1(d) shall be made by periodic  payments of the amount
               thereof  during the course of the  investigation  or defense,  as
               such  expense,  loss,  damage or liability is incurred and is due
               and payable.

               (e)  Contribution.  To  the  extent  any  indemnification  by  an
          indemnifying  party is prohibited or limited by law, the  indemnifying
          party  agrees to make the  maximum  contribution  with  respect to any
          amounts for which it would otherwise be liable under Section 5.1(d) to
          the  fullest  extent  permitted  by law;  provided,  however,  that no
          contribution shall be made under  circumstances where the indemnifying
          party would not have been liable for  indemnification  under the fault
          standards set forth in Section 5.1(d).

               (f) Exemption from Registration. The provisions of Section 5.1(a)
          through (e)  notwithstanding,  Compu-DAWN  shall have no obligation to
          register  the  resale of the  Common  Shares to the  extent the Common
          Shares may be resold without  registration without violating Section 5
          of the Securities Act pursuant to Rule 144  promulgated  thereunder or
          any  other  exemption  or  exception  from   registration   under  the
          Securities Act.

                                       16

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