-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qv9Ycf+gf3zdVpfVZRm7oc2HqXHaVStR8OukiVpZwlIhPjfTr0Dn76JN7pnkcKOZ GzR1yW416vK8YqibH0cIww== 0000891836-94-000058.txt : 19940801 0000891836-94-000058.hdr.sgml : 19940801 ACCESSION NUMBER: 0000891836-94-000058 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19940729 GROUP MEMBERS: PHILIPS ELECTRONICS N V GROUP MEMBERS: PHILIPS INTERACTIVE MEDIA OF AMERICA, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CAPITOL MULTIMEDIA INC /DE/ CENTRAL INDEX KEY: 0000884142 STANDARD INDUSTRIAL CLASSIFICATION: 7812 IRS NUMBER: 521283993 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-43269 FILM NUMBER: 94540919 BUSINESS ADDRESS: STREET 1: 7315 WISCONSIN AVE., 800-E STREET 2: SUITE 330 CITY: WASHINGTON STATE: DC ZIP: 20814 BUSINESS PHONE: 2029077000 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PHILIPS ELECTRONICS N V CENTRAL INDEX KEY: 0000313216 STANDARD INDUSTRIAL CLASSIFICATION: 3600 STATE OF INCORPORATION: P7 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: GROENEVOUDSEWEG 1 STREET 2: 5621 BA EINDHOVEN CITY: THE NETHERLANDS STATE: P7 BUSINESS PHONE: 0113140791111 MAIL ADDRESS: STREET 1: SULLIVAN & CROMWELL 125 BROAD ST STREET 2: C/O W LOEBER LANDAU CITY: NEW YORK STATE: NY ZIP: 10004 SC 13D 1 PHILIPS ELECTRONICS N.V. SCHEDULE 13-D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. _____)* Capitol Multimedia, Inc. (Name of Issuer) Common Stock, par value $0.10 (Title of Class of Securities) 140628 10 8 (CUSIP Number) Craig Cox Philips Interactive Media of America 11111 Santa Monica Boulevard, Suite 700 Los Angeles, California 90025 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 31, 1992 (Date of Event which Requires Filing of this Statement) If a filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Check the following box if a fee is being paid with this statement [X]. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 - --------------------- CUSIP NO. 140628 10 8 - --------------------- - ------------------------------------------------------------ 1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Philips Interactive Media of America, Inc. - ------------------------------------------------------------ 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X ] - ------------------------------------------------------------ 3. SEC USE ONLY - ------------------------------------------------------------ 4. SOURCE OF FUNDS WC, OO - ------------------------------------------------------------ 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [ ] - ------------------------------------------------------------ 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------ 7. SOLE VOTING POWER NUMBER OF 825,088 SHARES ---------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 20,000 EACH ---------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 825,088 WITH ---------------------------------------- 10. SHARED DISPOSITIVE POWER 20,000 - ------------------------------------------------------------ 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 845,088 - ------------------------------------------------------------ 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ------------------------------------------------------------ 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.1% - ------------------------------------------------------------ 14. TYPE OF REPORTING PERSON CO - ------------------------------------------------------------ 3 - --------------------- CUSIP NO. 140628 10 8 - --------------------- - ------------------------------------------------------------ 1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Philips Electronics N.V. - ------------------------------------------------------------ 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X ] - ------------------------------------------------------------ 3. SEC USE ONLY - ------------------------------------------------------------ 4. SOURCE OF FUNDS OO, WC - ------------------------------------------------------------ 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [ ] - ------------------------------------------------------------ 6. CITIZENSHIP OR PLACE OF ORGANIZATION The Netherlands - ------------------------------------------------------------ 7. SOLE VOTING POWER NUMBER OF SHARES ---------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 845,088 EACH ---------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON WITH ---------------------------------------- 10. SHARED DISPOSITIVE POWER 845,088 - ------------------------------------------------------------ 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 845,088 - ------------------------------------------------------------ 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ------------------------------------------------------------ 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.1% - ------------------------------------------------------------ 14. TYPE OF REPORTING PERSON CO - ------------------------------------------------------------ 4 SCHEDULE 13D ITEM 1. Security and Issuer. This statement relates to the acquisition by Philips Interactive Media of America (formerly known as American Interactive Media, Inc. and herein referred to as "PIMA") of Common Stock, par value $.10 per share ("Common Stock"), of Capitol Multimedia, Inc. (formerly known as Capitol Video Communications, Inc.), a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 2121 Wisconsin Avenue, N.W., Suite 300, Washington, D.C. 20007. ITEM 2. Identity and Background. This statement is being filed by Philips Electronics N.V. ("Philips"), a Netherlands corporation, and by Philips Interactive Media of America, a Delaware corporation and a wholly-owned indirect subsidiary of Philips, who together are sometimes referred to herein as the "Reporting Persons." Philips acts as the holding company of the Philips Group. The Philips Group is engaged primarily in the manufacture and distribution of electronic and electrical products, systems and equipment. The principal office and business address of Philips is Groenewoudseweg 1, 5621 BA, Eindhoven, The Netherlands. The principal office and business address of PIMA are located at 11111 Santa Monica Boulevard, Suite 700, Los Angeles, California 90025. The principal business of PIMA is the development, production and distribution of entertainment and educational software products in the compact disc interactive ("CD-I") format, CD-ROM format and other formats. All of the issued and outstanding shares of capital stock of PIMA are owned by Philips (62.6%) and by Philips Interactive Media International Limited, a wholly-owned indirect subsidiary of Philips (37.4%). Attached as Schedule I hereto and incorporated by reference is a list of the members of the Supervisory Board and the members of the Board of Management and the Group Management Committee of Philips and the Directors and executive officers of PIMA. Schedule I sets forth each of such persons' name, business address, present principal occupation or employment and citizenship and the name, principal business and address of the corporation or other organization in which such employment is conducted. 5 Schedule I also sets forth the number of shares of the Issuer's Common Stock, if any, beneficially owned by such persons described therein. The total number of such shares beneficially owned by such persons and, thereby, by the Reporting Persons is 12,500. During the past five years, neither the Reporting Persons nor any of their directors, executive officers or controlling persons have (a) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or (b) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding were or are subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws. ITEM 3. Source and Amount of Funds or Other Consideration. In September 1988, PIMA and the Issuer entered into a Warrant Purchase Agreement, dated September 14, 1988 (the "Warrant Purchase Agreement"), providing for the formation of a CD-I production facility. PIMA agreed to provide funding for 50% of the equipment purchased in connection with the establishment of such facility in consideration of the right to receive one-third of the net revenue after recovery of its investment. In connection with such transaction, warrants to purchase up to 200,000 shares (subject to certain anti- dilutive provisions) of Common Stock (the "Warrants") were issued to PIMA. By letter agreement dated April 1, 1990 and by the Modification to Warrant Purchase Agreement, dated as of March 30, 1992, the Warrants were amended to provide PIMA with rights to purchase an aggregate of 285,088 shares of Common Stock. On July 10, 1989, the Issuer and Philips Interactive Media Corporation, a wholly-owned indirect subsidiary of Philips ("PIMC"), entered into a joint venture agreement, dated July 10, 1989 (the "Joint Venture Agreement"), defining the terms and conditions of a joint venture to market CD-I software and hardware to the professional market in the U.S. (the "Joint Venture"). PIMC contributed $596,347 and the Issuer contributed $640,585 to the Joint Venture. PIMC funded such contribution out of its working capital. On December 31, 1991, PIMC and the Issuer entered into an Assignment and Stock Transfer Agreement (the "Assignment and Stock Transfer Agreement") whereby PIMC assigned all of its right, title and interest in the Joint Venture to the Issuer in exchange for 15% of the Common 6 Stock of the Issuer (calculated on the basis of the issued and outstanding shares prior to the Issuer's initial public offering (the "Offering") plus the 900,000 shares to be sold as part of such Offering excluding any over-allotment) and payment by the Issuer to PIMC of $96,347 (which represented 50% of the Joint Venture's accounts payable to PIMC, excluding PIMC's capital contribution). On June 1, 1992, PIMC sold its ownership interest in the Issuer to PIMA for $596,347. PIMA funded such purchase out of its working capital. The effective date of the Offering was March 31, 1992. After the conclusion of the Offering, as part of the Issuer's purchase price of PIMC's interest in the Joint Venture (subsequently transferred to PIMA), PIMA was issued an additional 158,924 shares of Common Stock to maintain the Reporting Persons' 15% ownership interest in the Issuer, resulting in the ownership by the Reporting Persons of an aggregate of 540,000 shares of Common Stock. On April 8, 1993, PIMA exercised Warrants to purchase 125,000 shares of Common Stock at an exercise price of $6.25 per share. On February 8, 1994, the Reporting Person exercised the remainder of the Warrants (the "February Exercise") to purchase 108,919 shares of Common Stock at an exercise price of $3.21 per share and 51,169 shares of Common Stock at an exercise price of $3.59 per share. The purchase price for all shares issued upon exercise of Warrants was paid out of the working capital of PIMA. ITEM 4. Purpose of Transaction. The Reporting Persons acquired the shares of Common Stock for investment purposes. All of such shares are "restricted securities" within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended. Notwithstanding the foregoing, the Reporting Persons reserve the right to dispose of some or all of the shares of Common Stock, to maintain margin accounts with respect to the Common Stock and to acquire additional shares of Common Stock in the open market or in privately negotiated transactions to or from third parties or otherwise, although it is not the present intention of the Reporting Persons to acquire additional shares of Common Stock. Pursuant to the terms of the Warrant Purchase Agreement, dated September 14, 1988, the Reporting Persons have obtained certain "piggy-back" registration rights with respect to the 285,088 shares of Common Stock acquired by them pursuant to the exercise of the Warrants. Except as set forth above, the Reporting Persons have no present plan or proposal required to be described in 7 Item 4 of Schedule 13D. The possible activities of the Reporting Persons enumerated herein are subject to change at any time as the Reporting Persons intend to review the investment in the Issuer on a continuing basis and may increase or decrease such investment. ITEM 5. Interest in Securities of the Issuer. Beneficial Ownership. As of the date hereof, the Reporting Persons beneficially owned a total of 845,088 shares of Common Stock, constituting approximately 17.1% of the 4,930,425 shares of Common Stock outstanding as disclosed in the Issuer's Annual Report on Form 10-KSB for the annual period ended March 31, 1994 as adjusted for the issuance of shares pursuant to the February Exercise. PIMA has sole power to vote or direct the vote and to dispose or to direct the disposition of 825,088 of the shares of Common Stock beneficially owned by the Reporting Persons. PIMA has shared power to vote or direct the vote and to dispose or to direct the disposition of 12,500 of the shares of Common Stock beneficially owned by the Reporting Persons. As the ultimate parent entity of PIMA, Philips is deemed to be the beneficial owner of the 837,588 shares of Common Stock beneficially owned by PIMA. Transactions Within the Past 60 Days. During the past 60 days, the Reporting Persons have not acquired any shares of Common Stock. Right to Receive Certain Funds. To the best knowledge of the Reporting Persons, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any shares of Common Stock which the Reporting Persons may be deemed to beneficially own. ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect to the Securities of the Issuer. The Reporting Persons have certain registration rights with respect to the shares of Common Stock acquired by them pursuant to the exercise of the Warrants, which rights are more fully described in the response to Item 4 hereto. In connection with the acquisition by the Issuer of PIMA's interest in the Joint Venture, and pursuant to the 8 provisions of the Assignment and Stock Transfer Agreement, dated December 31, 1991, PIMA obtained the right to nominate for election one member to the Issuer's Board of Directors. Nobel Investment Co. has agreed to use its best effort, including voting any stock of the Issuer, to cause the Philips nominee to be elected and continue in office as a Director of the Issuer. Likewise, Philips has also agreed to vote its shares in favor of Nobel Investment Co.'s nominee to the Issuer's Board of Directors through March 30, 1997. To the best knowledge of the Reporting Persons, other than as set forth in the preceding paragraph and the agreements referred to therein, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the Reporting Persons and any other person with respect to any securities of the Issuer. The summaries of certain provisions of agreements referred to herein do not purport to be complete and are qualified in their entirety by reference to the detailed provisions of the agreements incorporated by reference herein. ITEM 7. Materials to be Filed as Exhibits. 1. Warrant Purchase Agreement, dated September 14, 1988, by and between American Interactive Media, Inc. and Capitol Video Communications, Inc. 2. Amendment to Letter Agreement, dated April 1, 1990. 3. Supplement to Amended Letter Agreement, dated April 1, 1990. 4. Assignment and Stock Transfer Agreement, dated December 31, 1991. 5. Modification to Warrant Purchase Agreement, dated March 30, 1992. 9 SIGNATURES After reasonable inquiry and to the best of the knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 29, 1994 PHILIPS INTERACTIVE MEDIA OF AMERICA By: /s/ Craig C. Cox Name: Craig C. Cox Title: Senior Vice President, Treasurer and Chief Financial Officer 10 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 29, 1994 PHILIPS ELECTRONICS N.V. By: /s/ J.D. Timmer By: /s/ D.G. Eustace Name: J. D. Timmer Name: D. G. Eustace Title: President Title: Executive Vice-President 11 SCHEDULE I The following sets forth certain information as to the directors and executive officers of Philips Interactive Media of America: NAME: SCOTT C. MARDEN Position: Chairman of the Board, Director Business Address: Philips Interactive Media of America 11111 Santa Monica Boulevard Suite 700 Los Angeles, California 90025 Principal Occupation: President and CEO of Philips Media Employer: Philips Media Employer's Address: 825 8th Avenue, 25th Floor New York, New York 10019 Principal Business of Manufacturing Organization Employer: Country of Citizenship: U.S.A. Number of shares of Issuer's Common Stock beneficially owned: 12,500 NAME: JOHN HAWKINS Position: Director Business Address: Philips Interactive Media of America 11111 Santa Monica Boulevard Suite 700 Los Angeles, California 90025 Principal Occupation: President and General Manager Philips Media Management Information Systems and President, Philips Media Distribution Employer: Philips Media Management Information Systems 12 Employer's Address: Building SFH 6 P.O. Box 80002 5600 JB Eindhoven Netherlands Principal Business of Media Development and Employer: Distribution Country of Citizenship: United Kingdom Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: MARC SEVENANS Position: Director Business Address: Philips Interactive Media of America 11111 Santa Monica Boulevard Suite 700 Los Angeles, California 90025 Principal Occupation: Chief Financial Officer, Philips Media Employer: Philips Media Employer's Address: 188 Tottenham Court Road London W1P 9LP England Principal Business of Media Development and Employer: Distribution Country of Citizenship: Belgium Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: CRAIG C. COX Business Address: Philips Interactive Media of America 11111 Santa Monica Boulevard Suite 700 Los Angeles, California 90025 Position: Senior Vice President, Finance and Administration and Chief Financial Officer 13 Principal Occupation: Senior Vice President, Finance and Administration and Chief Financial Officer Employer: Philips Interactive Media of America Employer's Address: 11111 Santa Monica Boulevard Suite 700 Los Angeles, California 90025 Principal Business of Software development and Employer: distribution Country of Citizenship: U.S.A. Number of shares of Issuer's Common Stock beneficially owned: 7,500 NAME: BRADFORD C. AUERBACH Business Address Philips Interactive Media of America 11111 Santa Monica Boulevard Suite 700 Los Angeles, California 90025 Position: Vice President of Business Affairs, General Counsel and Secretary Principal Occupation: Vice President of Business Affairs, General Counsel and Secretary Employer: Philips Interactive Media of America Employer's Address: 11111 Santa Monica Boulevard Suite 700 Los Angeles, California 90025 Principal Business of Software development and Employer: distribution Country of Citizenship: U.S.A. Number of shares of Issuer's Common Stock beneficially owned: 0 14 The following sets forth certain information as to the directors and executive officers of Philips Electronics N.V. NAME: F.A. MALJERS Position: Chairman of the Supervisory Board and Chairman of the Board of Dr. A.F. Philips Stichting Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Chairman of the Supervisory Board and Chairman of the Board of Dr. A.F. Philips Stichting Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: The Netherlands Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: A. LEYSEN Position: Vice Chairman of the Supervisory Board Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: President of the Board of Directors Employer: Agfa-Gevaert Employer's Address: Septestraat 27, Mortsel, Belgium Principal Business of Manufacturing Organization Employer: Country of Citizenship: Belgium 15 Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: SIR PETER CAREY Position: Secretary of the Supervisory Board Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Retired Employer: N/A Employer's Address: N/A Principal Business of N/A Employer: Country of Citizenship: United Kingdom Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: F.X. ORTOLI Position: Member of the Supervisory Board Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: President Director General Employer: Compagnie Francaise des Petroles Total Employer's Address: 24 Cours Michelet, 92800- Puteaux, France Principal Business of Petroleum Exploration Employer: Country of Citizenship: France Number of shares of Issuer's Common Stock beneficially owned: 0 16 NAME: M. KUILMAN Position: Member of the Supervisory Board Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Retired Employer: N/A Employer's Address: N/A Principal Business of N/A Employer: Country of Citizenship: The Netherlands Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: J.F. BENNETT Position: Member of the Supervisory Board Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Retired Employer: N/A Employer's Address: N/A Principal Business of N/A Employer: Country of Citizenship: U.S.A. Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: P.G. GYLLENHAMMER Position: Member of the Supervisory Board Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Chairman of the Board 17 Employer: A.B. Volvo Employer's Address: S-405 08 Goteborg, Sweden Principal Business of Automobile Manufacturing Employer: Country of Citizenship: Sweden Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: W. HILGER Position: Member of the Supervisory Board Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Chairman of the Board of Hoechst A.G. Employer: Hoechst A.G. Employer's Address: Bruningstrasse 64, 6230 Frankfurt/Main, Germany Principal Business of Chemical Manufacturing Employer: Country of Citizenship: Germany Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: G. JEELOF Position: Member of the Supervisory Board Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Retired Employer: N/A Employer's Address: N/A Principal Business of N/A Employer: 18 Country of Citizenship: The Netherlands Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: L.C. VAN WACHEM Position: Member of the Supervisory Board Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Retired Employer: N/A Employer's Address: N/A Principal Business of N/A Employer: Country of Citizenship: The Netherlands Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: J.D. TIMMER Position: President and Chairman of the Board of Management and the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: President and Chairman of the Board of Management and the Group Management Committee Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: The Netherlands 19 Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: F.P. CARRUBBA Position: Executive Vice-President, Member of the Board of Management and the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Executive Vice-President and member of the Board of Management and the Group Management Committee Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: The Netherlands Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: D.G. EUSTACE Position: Executive Vice-President/Chief Financial Officer, Member of the Board of Management and the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Executive Vice-President/Chief Financial Officer, Member of the Board of Management and the Group Management Committee Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands 20 Principal Business of Manufacturing Organization Employer: Countries of United Kingdom, Canada Citizenship: Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: H. BODT Position: Executive Vice-President, Member of the Board of Management and the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Executive Vice-President and member of the Board of Management and the Group Management Committee Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: The Netherlands Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: P.J. EVERAERT Position: Executive Vice-President, Member of the Board of Management and the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Executive Vice-President, Member of the Board of Management and the Group Management Committee Employer: Philips Electronics N.V. 21 Employer's Address: c/o Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: U.S.A. Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: W. DE KLEUVER Position: Chairman of the Management Committee of the Components Division and Member of the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Chairman of the Management Committee of the Components Division and Member of the Group Management Committee Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: The Netherlands Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: T. MEYER Position: Member of the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Member of the Group Management Committee 22 Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: Switzerland Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: C. BOONSTRA Position: Chairman of the Management Committee of the Lighting Division and Member of the Board of Management and the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Chairman of the Management Committee of the Lighting Division and Member of the Board of Management and the Group Management Committee Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: The Netherlands Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: A.M. LEVY Position: Chief Executive Officer of PolyGram N.V. (a majority-owned subsidiary of Philips Electronics N.V.) and Member of the Group Management Committee 23 Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Member of the Group Management Committee and Chief Executive Officer of Polygram N.V. Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: France Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: M.P. MOAKLEY Position: Chairman of the Management Committee of the Medical Systems Division and Member of the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Chairman of the Management Committee of the Medical Systems Division and Member of the Group Management Committee Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: U.S.A. Number of shares of Issuer's Common Stock beneficially owned: 0 24 NAME: L.G. NYBERG Position: Chairman of the Management Committee of the Communication Systems Division and Member of the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Chairman of the Management Committee of the Communication Systems Division and Member of the Group Management Committee Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: Sweden Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: J.C. TOLLENAAR Position: Member of the Group Management Committee and Chairman of the Management Committee of the Sound & Vision Division Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Member of the Group Management Committee and Chairman of the Management Committee of the Sound & Vision Division Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Employer: Manufacturing Organization Country of Citizenship: The Netherlands 25 Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: K. KENNEDY Position: Chairman of the Management Committee of the Domestic Appliances and Personal Care Division and Member of the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Chairman of the Management Committee of the Domestic Appliances and Personal Care Division and Member of the Group Management Committee Employer: Philips Electronics N.V. Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Employer: Manufacturing Organization Country of Citizenship: United Kingdom Number of shares of Issuer's Common Stock beneficially owned: 0 NAME: D.J. DUNN Position: Chairman of the Management Committee of the Semiconductors Division and Member of the Group Management Committee Business Address: c/o Philips Electronics N.V. Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Occupation: Chairman of the Management Committee of the Semiconductors Division and Member of the Group Management Committee Employer: Philips Electronics N.V. 26 Employer's Address: Groenewoudseweg 1, 5621 BA Eindhoven, The Netherlands Principal Business of Manufacturing Organization Employer: Country of Citizenship: United Kingdom Number of shares of Issuer's Common Stock beneficially owned: 0 EX-99.1 2 EXHIBIT - WARRANT PURCHASE AGREEMENT 1 Exhibit 99.1 WARRANT PURCHASE AGREEMENT Agreement made this 14th day of September, 1988 by and between AMERICAN INTERACTIVE MEDIA, INC., a Delaware corporation with its principal place of business at 11111 Santa Monica Boulevard, Suite 1000, Los Angeles, California 90025 ("AIM") , and CAPITOL VIDEO COMMUNICATIONS, INC. a Delaware corporation with its principal place of business at 2121 Wisconsin Avenue N.W., Washington, D.C., 20007 ("Company"). W I T N E S S E T H: Simultaneously with the execution hereof, AIM and Company are entering into (i) a Production and Distribution Agreement (the General Terms and Conditions and Specific Terms) (the "Agreement") pursuant to which AIM and Company have agreed to develop, produce, market and distribute compact disc interactive ("CD-I") programs for the CD-I player and (ii) a CD-I Facility Agreement ("Facility Agreement") pursuant to which AIM and Company have agreed to co-finance certain equipment, hardware and software necessary to develop and produce CD-I programs for the CD-I player. In order to induce AIM to enter into the Agreement and the Facility Agreement, Company has agreed to issue and deliver a stock purchase warrant to AIM, and to issue and deliver additional stock purchase warrants to AIM on the terms and conditions hereinafter set forth. NOW THEREFORE, it is agreed as follows: 1. Issue of Stock Purchase Warrants (a) Initial Warrant On the effective date hereof (the "Closing Date"), and subject to the terms and conditions hereof, Company shall issue and deliver to AIM a stock purchase warrant in the form annexed hereto as Exhibit A (the "Initial Warrant") to purchase Two Hundred Thousand (200,000) shares of Common Stock of Company ("Common Stock") (subject to adjustment as provided in the Initial Warrant) at an initial purchase price of $2.00 per share. The Initial Warrant shall expire five (5) years after the date of execution thereof, or two (2) years after the 2 expiration of the Production Term (as defined in the Agreement) of the Agreement, whichever shall occur last. (b) Additional Warrants Company further agrees to issue and deliver additional stock purchase warrants (each an "Additional Warrant"), at the times and on the conditions herein specified: (i) An Additional Warrant to purchase Fifty Thousand (50,000) shares of Common Stock at an initial purchase price of $2.00 per share, to be issued on the date on which Company delivers (as hereinafter defined) the first of the CD-I Programs (as defined in the Agreement); (ii) An Additional Warrant to purchase Fifty Thousand (50,000) shares of Common Stock at an initial purchase price of $2.00 per share, to be issued on the date on which Company delivers the second of the CD-I Programs. As used herein, the term "delivers" shall mean Company's delivery to AIM of the final, accepted master tapes of the CD- I Program in question. In the event that funding of the Production Costs (as defined in the Agreement) of any CD-I Program is terminated by AIM, no Additional Warrant(s) shall be issued for such CD-I Program or with respect to any subsequent CD-I Program. All such Additional Warrants shall be in the form of Exhibit A hereto and shall expire two (2) years after the date of issuance thereof. 2. Representations and Warranties of Company In order to induce AIM to enter into this Warrant Purchase Agreement, Company hereby makes the following representations and warranties to AIM: (a) Corporate Status Company is a corporation duly organized and in good standing under the laws of the State of Delaware and is duly qualified to do business and is in good standing in the District of Columbia. (b) No Violation This Warrant Agreement and the issuance of the Initial Warrant and Additional Warrants do not violate any 3 provision of any charter, bylaw, mortgage, lien, agreement, instrument, order, judgment or decree to which Company is a party or by which Company is bound. (c) Due Authorization; Validity This Warrant Agreement (including all instruments executed and delivered by Company pursuant to this Warrant Agreement and all acts to be performed hereunder) has been duly and validly authorized, executed, and delivered by Company and is a valid and binding agreement of Company enforceable in accordance with its terms. (d) No Further Action Except for compliance with any applicable state securities or "blue sky" laws, no consent, approval, authorization, or order of any court or governmental agency or body is required in connection with the consummation of the transactions contemplated by this Warrant Agreement. It is understood and agreed that the issuance of the Initial Warrant, Additional Warrants and Warrant Shares (as hereinafter defined) will take place in the District of Columbia. (e) Reservation of Shares There have been reserved, and Company shall at all times keep reserved, out of Company's authorized and unissued shares of Common Stock, a number of shares of Common Stock sufficient to accommodate the exercise of the rights of purchase represented by any of the outstanding Initial Warrant and/or Additional Warrants. (f) Issuance of the Warrant Shares Upon payment of the respective exercise prices for the Initial Warrant and/or Additional Warrants, the shares of Common Stock delivered upon the exercise of any of the Initial Warrant and/or Additional Warrants ("Warrant Shares") issued hereby shall be validly issued, fully paid, and nonassessable and Company will pay all taxes, if any, in respect of the issuance of any of such Initial Warrant and/or Additional Warrants or the Warrant Shares. All corporate actions required to be taken for the authorization, issuance and sale of the 4 Warrant Shares, to the best of its knowledge, have been validly and sufficiently taken. 3. Representations and Warranties of AIM In order to induce Company to enter into this Warrant Purchase Agreement, AIM hereby makes the following representations and warranties to Company: (a) Corporate Status. AIM is a corporation duly organized and in good standing under the laws of the State of Delaware and is duly qualified to do business and is in good standing as a foreign corporation in the State of California and in all other jurisdictions in which such qualification is required. (b) No Violation. This Warrant Agreement and the issuance of the Initial Warrant and Additional Warrants do not, and the issuance of the Warrant Shares will not, violate any provision of any charter, bylaw, mortgage, lien, agreement, instrument, order, judgment or decree to which AIM is a party or by which AIM is bound. (c) Due Authorization; Validity. This Warrant Agreement (including all instruments executed and delivered by AIM pursuant to this Warrant Agreement and all acts to be performed hereunder) has been duly and validly authorized, executed and delivered by AIM and is a valid and binding agreement of AIM enforceable in accordance with its terms. (d) Acquisition for Investment. AIM is acquiring the Initial Warrant and Additional Warrants and will acquire the Warrant Shares for investment for its own account only and not with a view to distribution thereof and AIM has no present intention of dividing any interest in such Initial Warrant, Additional Warrants and/or the Warrant Shares (if and when acquired) with others, or of reselling or otherwise disposing all or any part of such Initial Warrant, Additional Warrants and/or Warrant Shares, or any interest therein, or participating, directly or indirectly, in a distribution of such Initial Warrant, Additional Warrants and/or Warrant Shares, or any interest therein. 5 (e) No Registration. AIM understands and agrees that the Initial Warrant, Additional Warrants and/or Warrant Shares (if and when acquired) or any interest therein may not be sold, assigned or otherwise transferred in the absence of an effective registration statement under the Securities Act of 1933 covering the transfer or an opinion of counsel satisfactory to Company that registration under the Securities Act of 1933 is not required. (f) The Company Documents. Prior to the execution of this Agreement, AIM has had the opportunity to review, ask questions and receive answers from Company concerning the terms and conditions of the transactions contemplated by the issuance of the Initial Warrant, Additional Warrants and Warrant Shares (if and when acquired) and concerning Company, its business and any of the documents listed in items (i) - (ii) below and to obtain such additional further information from Company as it has deemed necessary to verify the accuracy of the information contained in the following documents or any other information furnished to it: (i) Company's audited financial statements for the years ended March 31, 1986 and 1987; and (ii) Company's Certificate of Incorporation, as amended to date. 4.1 Company Registration. (a) If (but without any obligation to do so) the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the holders of Registrable Securities) any of its Capital Stock under the Securities Act of 1933 (the "1933 Act") in connection with the public offering of such securities solely for cash, the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of any Holder given within twenty (20) days after mailing of such notice by the Company, 6 the Company shall, subject to the provisions of Section 4.5, effect a registration of all of the Registrable Securities that each such Holder has requested to be registered, subject to the right of the Company to withdraw such registration in its entirety. (b) The Company shall not, however, be required to give notice or to include such Registrable Securities in any such registration if the proposed registration relates solely to: (i) securities to be offered to employees pursuant to a stock option, stock savings, or other employee benefit plan, (ii) securities proposed to be issued in exchange for securities or assets of, or in connection with a merger or consolidation with, another corporation, (iii) securities to be offered by the Company generally to any class of its then existing security holders, (iv) securities issuable upon conversion of securities which are the subject of an underwritten redemption, or (v) securities to be offered or issued pursuant to a combination of transactions referred to in clauses (i) through (iv). 4.2 Request for Registration. The Company covenants and agrees as follows: (a) If the Company shall receive at any time subsequent to the effective date of any registration of the Capital Stock of the Company under either the 1933 Act or the Securities Exchange Act of 1934 ("1934 Act"), a written request from the Holders of Fifty Percent (50%) or more of the Warrant Shares issued under or pursuant to the Initial Warrant and the Additional Warrants (on a fully converted and exercised basis) (collectively the "Registrable Securities") that the Company register any Registrable Securities then outstanding under the 1933 Act ("Demand Registration"), then the Company shall effect the registration under the 1933 Act of all Registrable Securities which the Holders shall in writing request to be included in such registration. 7 (b) If the Holders initiating the registration request hereunder intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 4.2. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders of Registrable Securities proposing to distribute their securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Holders, provided that such underwriter or underwriters must be reasonably satisfactory to the Company. Neither the Company nor any person who is not a Holder may participate in the offering covered by the registration statement to be filed hereunder without the consent of a majority in interest of the Holders. Notwithstanding any other provision of this Section 4.2, if the underwriter advises the Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Holders shall so advise all participating Holders and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated pro rata among all participating holders (including the Holders) thereof. (c) Notwithstanding anything to the contrary in this Section 4.2, at any time after a request for registration is made under Section 4.2(a) any Holder who has requested registration of its Registrable Securities or has notified the Company of its desire to include its Registrable Securities in such registration may withdraw from such registration by giving written notice to such effect to the Company, provided that such Holder shall be liable for his pro rata share of registration expenses charged to all Holders requesting 8 registration to the extent incurred prior to the date of withdrawal. (d) The Company is obligated to effect only one (1) such registration pursuant to this Section 4.2. 4.3 Obligations of the Company and Holders. (a) Obligations of Company and Holders Whenever required under this Section 4 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (i) Prepare and file with the SEC a registration statement with respect to such Registrable Securities, promptly prepare and file any amendments or supplements thereto, use its best efforts to cause such registration statement to become effective and keep such registration statement effective until the Holders participating therein have informed the Company in writing that the distribution of their securities has been completed, provided, however, that the date by which any such Demand Registration under Section 4.2 shall be filed or declared effective may be extended by the Company once for up to an additional sixty (60) days in the event that the Company is engaged in negotiations looking towards its participation in a material merger, acquisition or other form of business combination or, if in the good faith judgment of the Company by reason of such transaction or other event, the Company is not in a position to timely prepare and file such registration statement (a "Material Event"). If, after a Demand Registration is effective, a Material Event occurs, the Company may notify the Holders of Registrable Securities not to sell any Registrable Securities pursuant 9 to such registration statement for a period up to ninety (90) days and, after receiving such notice the Holders of Registrable Securities hereby agree not to sell any Registrable Securities pursuant to such registration statement during such period, in which event the Company shall extend the period during which such Demand Registration shall be maintained effective pursuant to this Agreement by the number of days during such period, from and including the date of the giving of such notice. (ii) Furnish to the Holders copies of a prospectus, including a preliminary prospectus and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (iii) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders. (iv) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. (v) List the securities being registered on the national securities exchange on which the same class of the Company's equity securities are listed or, if the Company does not then have a class of equity securities listed on any national securities exchange, use its best efforts to qualify the securities being registered for 10 inclusion on the automated quotation system of the National Association of Securities Dealers, Inc. or any successor automated quotation system. (b) Obligations of Holders Any request for registration of Registrable Securities by any Holder under Section 4.1 or Section 4.2 hereof shall specify, in writing, the name and address of the Holder, the amount of Registrable Securities held by such Holder, the number of Registrable Securities the Holder desires to sell, and contain the undertaking of such Holder to provide all such information as may be reasonably required by the Company in connection with the preparation of any registration statement or prospectus and in order to permit the Company to comply with all applicable requirements of the federal, state and District securities authorities and to obtain acceleration of the effective date of the registration statement, identify any proposed underwriters and specify the proposed method of offering and sale. 4.4 Expenses of Registration. All expenses (other than underwriting discounts and commissions relating to Registrable Securities) incurred in connection with the registration, filing and related qualifications pursuant to Section 4.1 shall be borne by the Company including, without limitation, all registration, filing and qualification fees, printing and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and dis- bursements of one counsel for the selling Holders. All such expenses (including underwriting discounts and commissions relating to Registrable Securities) incurred in connection with the registration, filing and related qualifications pursuant to Section 4.2 shall be borne by the selling Holders and any and all other persons participating in such Registration, pro rata based on the number of Registrable Securities included in such Registration. 4.5 Underwriting Requirements. In connection with any offering involving an underwriting of Securities being issued by the Company, the Company shall not be required under Section 4.1 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it and then only in such quantity 11 (if any) as, in the opinion of the underwriters, can be successfully offered, or is feasible to offer in connection with the offering. The Company shall, however, in all events, seek to include the Holders' Registrable Securities on a pro-rata basis with the inclusion of any other securities of any other person (the Registrable Securities so included to be apportioned pro-rata among the selling Holders, or in such other apportions as shall be mutually agreed to by such selling Holders). 4.6 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 4 may be assigned by a Holder to a transferee or assignee of Registrable Securities if the Company is, within a reasonable time prior to such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned, subject to the provisionf of Section 12 hereof. 4.7 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any other securities of the Company relating to registration rights unless such agreement provides (a) that the rights of such holder to participate in a registration under Section 4.1 hereof shall not be on a senior or more favorable basis than that of the Holders; and (b) that such holder is prohibited from including his securities in any registration filed under Section 4.2 hereof without the approval of the Holders of a majority of the Registrable Securities included in such request for registration. 4.8 Waiver. Compliance by the Company with any requirement to register any and all securities pursuant to this Section 4 may be waived at any time by an affirmative vote of Holders of a majority of the Registrable Securities. 5. Indemnification of AIM. (a) In the event AIM exercises the Initial Warrant and/or either of the Additional Warrants and is issued Warrant Shares and Company registers any of the Warrant Shares under the 1933 Act, Company will indemnify and hold AIM harmless from any and all losses, claims, damages, expenses or liabilities, joint or several, to which AIM becomes subject under the 1933 Act or under 12 any other statute or common law or otherwise and, except as hereinafter provided will reimburse AIM for any reasonable legal or other direct out-of-pocket expenses reasonably incurred by AIM in connection with defending any actions, whether or not resulting in any liability, provided that any such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the registration statement or prospectus as from time to time amended or supplemented by Company), or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading or any material violation by Company of any rule or regulation promulgated under the Securities Act of 1933 applicable to Company and relating to action or inaction reasonably required of Company in connection with such registration, unless such untrue statement or omission was made in such registration statement, preliminary or amended, preliminary prospectus, or prospectus in reliance upon and in conformity with information furnished in writing to Company by AIM. (b) Promptly after receipt by AIM of notice of the commencement of any action in respect to which indemnity may be sought against Company under Paragraph (a) hereinabove, AIM will notify Company in writing of the commencement thereof and, subject to the provisions hereinafter stated, Company shall assume the defense of such action and all costs thereof (including the employment of legal counsel, who shall be reasonably satisfactory to AIM). AIM shall have the right to employ separate legal counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall not be at the expense of Company unless the employment of such counsel has been specifically authorized by Company. Company 13 shall not be liable to indemnify any person for any settlement of any such action effected without Company's consent. Company shall not, except with the approval of each party being indemnified under this Paragraph, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation. 6. Indemnification of Company. (a) In the event that AIM exercises the Initial Warrant and/or either of the Additional Warrants and is issued Warrant Shares and the Company registers any of the Warrant Shares under the Securities Act of 1933, AIM will indemnify and hold harmless Company, each of its directors, each of its officers who have signed the registration statement, each underwriter of Warrant Shares so registered (including any broker or dealer through whom such of the shares may be sold) and each person, if any, who controls Company within the meaning of Section 15 of the Securities Act of 1933 from and against any and all losses, claims, damages, expenses or liabilities, joint or several, to which they or any of them may become subject under the Securities Act of 1933 or under any other statute or at common law or otherwise and, except as hereinafter provided, will reimburse Company and each such director, officer, underwriter or controlling person for any legal or other expenses reasonably incurred by any of them in connection with defending any such actions whether or not resulting in any liability, provided that any such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the registration statement or prospectus as from time to time amended or supplemented) or arise out of or are based upon the omission or alleged 14 omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading but, in each case, only insofar as any such statement or omission was made in reliance upon information furnished in writing to Company by AIM, or any parent, subsidiary or Affiliate thereof. (b) Promptly after receipt of notice of the commencement of any action in respect of which indemnity may be sought against AIM, Company will notify AIM in writing of the commencement thereof and AIM shall, subject to the provisions hereinafter stated, assume the defense and costs thereof such action and all costs thereof (including the employment of legal counsel who shall be reasonably satisfactory to Company). Company and each such director, officer, underwriter or controlling person shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall not be at the expense of AIM unless employment of such counsel has been specifically authorized by AIM. AIM shall not be liable to indemnify any person for any settlement of any such action effected without its consent. AIM shall not, except with the approval of each party being indemnified under this Paragraph, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation. 7. Antidilution and Adjustment (a) No Dilution or Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, any "Extraordinary Event" (as hereinafter defined), or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrant, but will at all times in good faith 15 assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to prtect the rights of the Holder of the Warrant against dilution or other impairment. For purposes of this Paragraph 7(a), an "Extraordinary Event" shall occur in the event that Company (i) shall issue additional shares of the Common Stock as a dividend or other distribution on outstanding shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, or (iii) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock. Without limiting the generality of the foregoing, Company will (a) not increase the par value of any shares of stock above the amount to be received by the Company as the exercise of this Warrant, (b) take all such action as may be necessary or appropriate in order that Company may validly and legally issue fully paid and non-assessable shares of stock on the exercise of this warrant and (c) will not consolidate with or merge into any other person or permit any such person to consolidate with or merge into Company (if Company is not the surviving person), unless such other person shall expressly assume in writing and will be bound by all the terms of this Warrant. The parties hereby acknowledge that as of the date hereof, there are Five Million (5,000,000) shares of Company Common Stock authorized, at ten cents par value, there are Three Million, Six Hundred Forty-Five Thousand, Seven Hundred Sixty-Seven (3,645,767) shares of said Common Stock issued and outstanding and there are Four Hundred Thirty-Nine Thousand, Nine Hundred Eighty-Four (439,984) warrants issued and outstanding for the purchase of Common Stock. (b) Reorganization, Reclassification or Recapitalization of Company. In case of any capital reorganization or reclassification or recapitalization of the capital stock of the Company or in case of the consolidation or merger of the Company with or into another corporation, or in case of the sale or transfer of the property of the Company as an entirety or substantially as an entirety, 16 there shall thereafter be deliverable upon the exercise of the Warrant or any portion thereof (in lieu of or in addition to the number of shares of Common Stock theretofore deliverable, as appropriate) the number of shares of stock or other securities or property to which the holder of the number of shares of Common Stock which would otherwise have been deliverable upon the exercise of the Warrant or any portion thereof at the time would have been entitled upon such capital reorganization or reclassification of capital stock, consolidation, merger or sale, and at the same aggregate purchase price. Prior to and as a condition of the consummation of any transaction described in the preceding sentence, the Company shall make equitable, written adjustments in the application of the provisions herein set forth, so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any shares of stock or other securities or other property thereafter deliverable upon exercise of the Warrant. (c) Splits and Combinations. In case the Company, after the date hereof, splits or sub-divides any of its outstanding shares of common stock into a greater number of shares, or if the Company shall declare a dividend on shares of its outstanding common stock payable in shares of Common Stock, the number of shares of Common Stock issuable upon exercise of the Warrant in exchange for payment of the Purchase Price per share shall be adjusted such that the Holder will receive the same number of shares of Common Stock as such Holder would have held had the Holder exercised the Warrant on the date hereof as to the number of shares for which the Purchase Price per share is tendered. Conversely, in case of a Combination of shares of Common Stock or a reverse stock split, the number of shares of Common Stock deliverable upon exercise of the Warrant shall be adjusted such that the Holder will receive the number of shares of Company Stock 17 that the Holder would hold had the Holder exercised the Warrant on the date hereof as the number of shares for which the Purchase Price is tendered. (d) Extraordinary Corporate Events. In case the Company after the date hereof shall propose to (i) pay any dividend payable in stock to the holders of shares of Common Stock or to make any other distribution of securities, or rights, warrants or options to purchase securities, of the Company to the holders of shares of Common Stock, (ii) make any distribution of cash or property (other than shares of Common Stock), (iii) offer to the holders of shares of Common Stock rights to subscribe for or purchase any additional shares of any class of stock or any other rights or options or (iv) effect any reclassification of the Common Stock (other than a reclassification involving merely the subdivision or combination of outstanding shares of Common Stock), or any redemption, capital reorganization or any consolidation or merger (other than a merger in which no distribution of securities or other property is to be made to holders of shares of Common Stock), or any sale, transfer or other disposition of its property, assets and business as an entirety or substantially as an entirety, or the liquidation, dissolution or winding up of the Company, then in each such case, the Company shall mail to the holder of the Warrant notice of such proposed action, which shall specify the date on which the books of the Company shall close, or a record shall be taken, for determining the holders of Common Stock entitled to receive such stock dividends or other distribution or such rights or options, or the date on which such reclassification, reorganization, consolidation, merger, sale, transfer, other disposition, liquidation, dissolution or winding up shall take place or commence, as the case may be, and the date as of which it is expected that holders of Common Stock of record shall be entitled to receive securities or other property deliverable upon such action, if any such date is to be fixed. Such notice shall be mailed in the case of any action covered by clause (i), (ii) or 18 (iii) above at least fifteen (15) days prior to the record date for determining holders of Common Stock for purposes of receiving such payment or offer, or in the case of any action covered by clause (iv) above at least thirty (30) days prior to any record date to determine holders of Common Stock entitled to receive such securities or other property. (d) Effect of Failure. Failure to file any certificate or notice or to mail any notice or any defect in any certificate or notice, pursuant to Section 7 shall not affect the legality or validity of the adjustment of the number of shares purchasable upon exercise of the Warrant, or any transaction giving rise thereto nor shall the exercise by any holder of any rights or remedies based on such failure affect the holder's rights to exercise the Warrant. (e) Application. Except as otherwise expressly provided in this Section 7, all sub-sections of Section 7 are intended to operate independently of one another. If an event occurs that requires the application of more than one subsection, all applicable sub-sections shall be given independent effect. 8. Notices, etc. All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered or mailed by first-class, registered or certified mail, postage prepaid, addressed (a) if to Company, attention of the Chairman, at 2121 Wisconsin Avenue N.W., Washington, D.C. 20007 and (b) if to AIM, attention of the Chairman, 1111 Santa Monica Boulevard, Suite 1000, Los Angeles, CA 90025. 9. Entire Agreement The parties hereto agree that this Warrant Agreement, including all of the Exhibits hereto, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between them as to such subject matter. 10. Waivers and Further Agreements Any waiver of any terms or conditions of this Warrant Agreement shall not operate as a waiver of any other branch of such terms or conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver 19 of such provision or of any other provision hereof. Each of the parties hereto agrees to execute all such further instruments and documents and to take all such further action as the other party may reasonably require in order to effectuate the terms and purposes of this Warrant Agreement. 11. Amendments The terms and provisions of this Warrant Agreement may not be modified or amended, or any of the provisions hereof or thereof waived, except pursuant to the written consent of Company and AIM. 12. Assignment, Successors and Assigns This Warrant Agreement and any rights and obligations hereunder shall be assignable by any party other than to any competitor of the Company. All of the terms of this Warrant Agreement shall be fully binding upon any such assigns of the parties. Notwithstanding anything herein to the contrary, in the event that, at any time AIM proposes to effect a sale or other transfer of all or a portion of the Initial Warrant and/or any Additional Warrant and/or any of the Warrant Shares (in each such case, the "Offered Securities") then, in each such case AIM shall provide the Company with written notice, specifying the terms (including, without limitation, number of securities proposed to be sold, the name and address of each purchaser and the purchase price therefor) of such proposed sale (the "Sale Notice"). In the event of any proposed sale or transfer at any time prior to the earlier to occur of: (i) the Company effecting a registration of any of its securities under the 1933 Act; or (ii) the Company otherwise becoming subject to the registration requirements of the 1934 Act, then AIM shall also provide Company with an opinion of counsel reasonably satisfactory to Company that compliance with the registration provisions of the 1933 Act is not required for any such sale or transfer. Upon receipt of the Sale Notice, the Company shall have a right of first refusal to purchase all such Offered Securities from AIM upon the terms and conditions contained in the Sale Notice (except for such sales or transfers as are either: (a) proposed in connection with any registration or public offering of Company securities; or (b) to any affiliate, subsidiary, parent or successor-in-interest to AIM, whether by merger, asset sale or any other business combination or acquisition). The Company shall notify AIM in writing, within twenty (20) days of the Company's receipt of the Sale Notice, whether the Company elects to purchase the Offered Securities. If the Company so notifies AIM of its election not to purchase the Offered Securities, or if the Company fails to provide AIM with written notice of its intentions within such twenty (20) day period, AIM shall be free to sell or transfer such Offered Securities to the prospective 20 purchaser thereof, in accordance with the terms of the Sale Notice, provided however, that if AIM does not sell the Offered Securities to such prospective purchaser on substantially the same terms as set forth in the Sale Notice, AIM shall not effect any other sale or transfer of Company securities without again complying with the provisions of this Section 12. If the Company has notified AIM within such twenty (20) day period of the Company's election to purchase such Offered Securities, the parties shall consummate such transaction within thirty (30) days of AIM's receipt of such notice, on the terms and conditions contained in the Sale Notice. Each party shall indemnify and hold the other party harmless from any and all losses and damages, costs and other expenses which the indemnified party may incur or suffer as a result of the indemnifying party's failure to comply fully with its obligations under this Section 13 including, without limitation, reasonable legal costs and expenses in connection with any action or lawsuit by the indemnified party against the indemnifying party. 13. Severability In case any one or more of the provisions or parts of a provision contained in this Warrant Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or part in a provision of this Warrant Agreement or any other jurisdiction, but this Warrant Agreement shall be reformed and construed in any such jurisdiction as if such valid or illegal or unenforceable provision or part of a provision had never been contained herein and such provisions or part reformed so that it would be valid, legal and enforceable to the maximum extent permitted in such jurisdiction. 14. Counterparts This Warrant Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 15. Delaware Law to Govern This Warrant Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware. 21 16. Effective Date This Warrant Agreement shall be deemed to have become effective on the Effective Date as specified in the CD-I Facility Agreement. IN WITNESS WHEREOF, the parties have executed this agreement a sealed instrument on the date first above written. CAPITOL VIDEO COMMUNICATIONS, INC. ("Company") By:_____________________________ Title:__________________________ AMERICAN INTERACTIVE MEDIA, INC. ("AIM") By:_____________________________ Title:__________________________ Recommended By: ________________ EX-99.2 3 EXHIBIT - AMENDMENT TO LETTER AGREEMENT 1 Exhibit 99.2 AMERICAN INTERACTIVE MEDIA, INC. 11111 Santa Monica Boulevard, Suite 700 Los Angeles, CA 90025 Effective Date: April 1, 1990 Capitol Video Communications, Inc. 2121 Wisconsin Avenue N.W. Washington, D.C. 20007 Re: Amendment to Letter Agreement Gentlemen: This will confirm that the Letter Agreement dated September 14, 1988 (the "Letter Agreement") between American Interactive Media, Inc. ("AIM") and Capitol Video Communications, Inc. ("Capitol") with respect to the establishment of a compact disc interactive pre-mastering facility and authoring system (the "Facility") is hereby amended in the following respects: Notwithstanding anything to the contrary contained in the Letter Agreement, AIM and Capitol hereby agree as follows: 1. (a) Subject to AIM's continuing Security Interest, AIM's interest in the Facility is terminated, effective upon execution of this amendment on the terms set forth below. (b) AIM shall have no further obligation to share in the cost of purchasing any additional tools pursuant to paragraph 2 of the Letter Agreement, to furnish any additional Emulation Components pursuant to paragraph 9 of the Letter Agreement or to share in any way in any additional costs, expenses, liabilities or obligations of any kind or nature heretofore or hereafter arising in connection with the Facility, and Capitol shall protect, defend, indemnify and hold AIM harmless from and against any such costs, expenses, liabilities and/or obligations. (c) AIM shall have no further right to share in net receipts derived from use of the Facility pursuant to paragraph 7(a) of the Letter Agreement or to receive accountings pursuant to paragraph 7(b) of the Letter Agreement. Nor shall AIM have the right to participate in 2 the establishment of any additional facility with Capitol pursuant to paragraph 7(c) of the Letter Agreement. 2. In consideration of AIM's termination of its interest in the Facility pursuant to paragraph 1 above, Capitol agrees to pay AIM the sum of Two Hundred Seventy Five Thousand Dollars ($275,000), payable as follows: (a) Seventy Five Thousand Dollars ($75,000) shall be paid upon execution hereof; and (b) The remaining balance of Two Hundred Thousand Dollars ($200,000) shall be paid in monthly installments over a period of sixty (60) months with interest accruing on the unpaid balance at the rate of Eight Percent (8%) per annum. Concurrently with the execution of this amendment, Capitol shall execute a promissory note in the form of Exhibit "A" attached hereto and incorporated herein by reference (the "Note"), which sets forth in greater detail the terms upon which such sum shall be paid. 3. The Security Interest granted to AIM and all of AIM's rights in connection therewith pursuant to paragraph 10 of the Letter Agreement shall continue in full force and effect. However, the Security Period will end upon the later of Capitol's payment to AIM of all sums due to AIM under the Note or completion of all of the CD-I programs currently being developed or produced with the involvement of AIM at the Facility, which are as follows: "Treasures of the Smithsonian", "Children's Musical Theater", "Rand McNally Atlas", "Windows on the World", "Sesame St. Numbers", "Sesame St. Letters" and "Time-Life Photography" (collectively, the "Current Programs"). The Security Interest shall be security for (i) the performance by Capitol of its obligations to AIM under the Note and the Letter Agreement as modified by this amendment, and (ii) Capitol's agreement that AIM will have full right to utilize and have access to the Facility in accordance with the Letter Agreement, as modified by this amendment. It is the intent of the parties that the Security Interest shall be a continuing security interest with full effect and priority from the date it was originally granted to AIM. 4. AIM shall continue to have first priority use of the Facility for the Current Programs pursuant to paragraph 5 of the Letter Agreement, but not for any future CD-I programs developed with the involvement of AIM. AIM's right of priority shall apply to both the personnel and the equipment at the Facility location. 3 5. The "rate card" for the Current Programs shall be revised as of the Effective Date of this amendment to exclude any charge for the use of the prototype and MRS systems. Moreover, AIM will not be charged at all for the use of any software tools developed at AIM's expense in the course of work done on CD-I programs, and AIM will be charged in accordance with the reduced rate card, which is attached hereto as Exhibit "B" and incorporated herein by reference, for the balance of production and any subsequent testing and/or revision of the Current Programs. 6. Capitol shall have the right to bid on any future CD-I production undertaken by AIM in the Washington, D.C. area on the same basis accorded by AIM to the owners of other comparable facilities. 7. AIM's entitlement to warrants to purchase Two Hundred Thousand (200,000) shares of Capitol's common stock pursuant to the Letter Agreement and paragraph 1(a) of the Warrant Purchase Agreement is hereby modified as follows: (a) The number of shares which AIM is entitled to purchase pursuant to the Initial Warrant (as defined in the Warrant Purchase Agreement) is hereby reduced from Two Hundred Thousand (200,000) to Seventy-Five Thousand (75,000). (b) A new subparagraph 1(b)(iii) is hereby added to the Warrant Purchase Agreement as follows: "An Additional Warrant to purchase an additional Twelve Thousand Five Hundred (12,500) shares of Common Stock at an initial purchase price of $2.00 per share for each additional CD-I program (up to a maximum of ten additional CD-I programs) which AIM elects to develop or produce at the facility described in the Facility Agreement and which commence development or production on or before December 31, 1992, to be issued on the date(s) when AIM gives written notice that it has elected to use the facility for the applicable CD-I program(s). Notwithstanding the foregoing, for warrants issued in 1992 pursuant to this subparagraph 1(b)(iii), the initial purchase price shall be $3.00 per share. Each such Additional Warrant shall expire unless exercised on or before September 14, 1993." 4 8. Undefined capitalized terms used in this amendment shall have the same meaning as in the Letter Agreement or the Warrant Purchase Agreement, as applicable. Except as expressly modified by this amendment, the Letter Agreement and the Warrant Purchase Agreement shall remain unchanged and in full force and effect. The amendment shall not be deemed to modify any of the terms of the PDA Agreement, which shall remain unchanged and in full force and effect notwithstanding anything contained in this amendment. Please indicate your acceptance of the foregoing by signing in the place indicated below. Very truly yours, AMERICAN INTERACTIVE MEDIA, INC. ("AIM") By: Title: AGREED TO AND ACCEPTED: CAPITOL VIDEO COMMUNICATIONS, INC. ("Capitol") By: Title: EX-99.3 4 EXHIBIT - SUPPLEMENT TO AMENDED LETTER AGREEMENT 1 Exhibit 99.3 AMERICAN INTERACTIVE MEDIA, INC. 11111 Santa Monica Boulevard, Suite 700 Los Angeles, CA 90025 Effective Date: 4/1/90 Capitol Video Communications, Inc. 2121 Wisconsin Avenue N.W. Washington, D.C. 20007 Re: Supplement to Amended Letter Agreement Gentlemen: This will confirm that the Letter Agreement dated September 14, 1988 between American Interactive Media, Inc. ("AIM") and Capitol Video Communications, Inc. ("Capitol") with respect to the establishment of a compact disc interactive pre-mastering facility and authorizing system (the "Facility"), as amended by an amendment having an effective date of April 1, 1990, is hereby supplemented with respect to the seven CD-I Programs currently in production at the Facility -- i.e., "Treasures of the Smithsonian", "Children's Musical Theater", "Rand McNally Atlas", "Windows on the World", "Sesame St. Numbers", "Sesame St. Letters" and "Time- Life Photography" (collectively, the "Current Programs") -- as follows: 1. During the period from delivery of the Alpha test version of each Current Program until completion thereof (the "Test Phase"), Capitol will cause all of the project specific software engineers working on the applicable Current Program to remain available on a first priority basis to work on AIM's Current Programs. "First priority" means that the project specific software engineers will be available to work on AIM projects no later than two (2) business days after notification. 2. During the Test Phase, Capitol will submit to AIM on a weekly basis written schedules setting forth the anticipated availability of the project specific software engineers as far in advance as possible to enable AIM to determine how to best use their services. 2 3. In consideration of Capitol's agreement to keep the project specific engineers available for AIM's first priority use during the Test Phase, AIM will pay Capitol a monthly retainer fee of $8,000 per month per engineer. To the extent these engineers perform services in connection with a Current Program in excess of $8,000 a month based on the Capitol Video rate care (Exhibit B), AIM will be invoiced and will pay the overage. In the event the project specific engineer is assigned by Capitol to another paying customer, AIM will receive a credit against its retainer up to $8,000, less the actual cost of the services performed by that engineer in connection with a Current AIM Program. Please indicate your acceptance of the foregoing by signing in the place indicated below. Very truly yours, AMERICAN INTERACTIVE MEDIA, INC. ("AIM") By: Title: AGREED TO AND ACCEPTED: CAPITOL VIDEO COMMUNICATIONS, INC. ("Capitol") By: Title: EX-99.4 5 EXHIBIT - ASSIGNMENT AND STOCK TRANSFER AGREEMENT 1 Exhibit 99.4 ASSIGNMENT AND STOCK TRANSFER AGREEMENT THIS ASSIGNMENT AND STOCK TRANSFER AGREEMENT is entered into this 31st day of December, 1991, by and between PHILIPS INTERACTIVE MEDIA CORP., a Delaware corporation ("PHILIPS"), One Philips Drive, Knoxville, TN 37914-1810 and CAPITOL MULTIMEDIA, INC. (formerly CAPITOL VIDEO COMMUNICATIONS, INC.) ("CMI"), a Delaware corporation, 2121 Wisconsin Avenue, N.W., Washington, DC 20007. WHEREAS, the parties hereto executed a certain joint venture agreement entitled Capitol Disc Interactive Joint Venture Agreement, effective as of July 10, 1989, and attached hereto as Exhibit A, and incorporated herein by this reference ("the Joint Venture Agreement"); WHEREAS, the Joint Venture Agreement has governed the relationship of the parties in their joint effort to create a business of producing and marketing information systems with hardware and interactive software in the compact disc interactive format to institutional and professional users; WHEREAS, CMI has entered into a certain Letter of Intent with Noble Investment Co. of Palm Beach (hereinafter the "Underwriter") dated November 7, 1991, and anticipates executing a firm Underwriting Agreement sometime in early 1992, to effectuate an initial public offering of its stock, 2 the capital of which will be used to expand its CD-I Division (the "Public Offering"); WHEREAS, in light of the Public Offering the parties hereto believe the business of the joint venture would be better served were it part of CMI's CD-I Division rather than as an independent business and accordingly desire to terminate the joint venture and recast their relationship; WHEREAS, in furtherance of that desire, Philips will transfer, as of December 31, 1991, all of its rights, title and interest in and to the assets, properties and rights of every description in the joint venture to CMI; WHEREAS, in consideration of said transfer, CMI shall among other things (i) continue the business of the joint venture as part of CMI's CD-I Division, (ii) assume the payment and discharge of all liabilities and obligations of Philips in connection with the joint venture, except as may be specifically excluded herein, (iii) issue Philips fifteen percent (15%) of the common stock of CMI as of a certain date and subject to the provisions set forth herein; and (iv) grant Philips the right to designate for election one Board member on the Board of CMI; and WHEREAS, in consideration of this restructured relationship Philips further agrees that CMI will continue to be the primary provider for Philips for CD-I programs in the institutional and professional market in the United States, pursuant to the nonexclusive arrangement set forth 3 in Sections 2(c) and 2(d) of the Joint Venture Agreement; as provided in Article 4 of this Agreement NOW, THEREFORE, in consideration of the foregoing, and of other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Philips and CMI hereby agree as follows: ARTICLE I. ASSIGNMENT 1.1 As of December 31, 1991, Philips hereby assigns, transfers, sets over and delivers to CMI, its successors and assigns, all of its right, title and interest in and to all of the assets and liabilities of the joint venture as established by the Joint Venture Agreement excluding the employment agreement of John Gray, which will remain in effect as negotiated between Philips and John Gray (hereinafter the "Property"); and to have and to hold the Property hereby assigned, transferred, set over and delivered or intended so to be unto CMI, its successors and assigns forever. 1.2 Philips hereby covenants and agrees with CMI, and its successors and assigns, to execute, acknowledge and deliver such further conveyances and instruments or documents and to do such further acts as may be necessary or appropriate to assure CMI, and its successors and assigns, all Philips' right, title and interest in and to the 4 Property hereby assigned, transferred, set over and delivered or intended so to be, to aid and assist CMI in collecting and reducing to possession any and all of the Property hereby assigned, transferred, set over and delivered or intended so to be, or in connection with the settlement of any obligations or liabilities to Philips. 1.3 Philips hereby assigns to CMI all rights, powers and privileges of Philips in and to all the covenants and warranties by others heretofore given or made in respect of any and all of the Property and substitutes CMI in its name, place and stead. 1.4 Philips hereby constitutes and appoints CMI its true and lawful attorney, with full power of substitution, for it and in its name and stead, but on behalf of and for the benefit of CMI: 1.4.1 to demand, receive and collect from time to time any and all monies, credits, claims or rights due or to become due relating to the Property hereby assigned, transferred, set over and delivered or intended so to be, by this Agreement or by any other instruments of conveyance or assignment from Philips to CMI, and to give receipts and releases for and in respect of the same or any part thereof; 1.4.2 to collect, for the account of CMI, all receivables and other items of Philips transferred to CMI as provided herein and to endorse in the name of Philips or in 5 the name of CMI any checks received on account of any such receivables or other items; 1.4.3 [Intentionally omitted] 1.4.4 to collect, assert, protect and enforce any claim, right, title, debt, account or interest of any kind in or to any of the Property and to defend, compromise, settle and release any and all claims, actions, suits or proceedings in relation thereto; and 1.4.5 to do all such further and other acts and things in relation to the Property as CMI shall deem desirable. 1.4.6 Philips hereby declares that the appointment made and the powers granted by this paragraph are coupled with an interest and are and shall be irrevocable by Philips and shall extend to CMI's successors and assigns. Philips will transfer and deliver to CMI any cash or other property that Philips may receive in respect of any items transferred to CMI as provided herein. 1.5 CMI accepts the assignments and transfers set forth herein and in consideration thereof, assumes and agrees to pay, perform and discharge all the liabilities and obligations of Philips in connection with the Joint Venture of every kind and description, whatsoever, except as may be excluded herein, whether fixed or contingent, known or unknown, including the satisfaction of any judgment, order 6 or decree which may be entered against Philips in any pending suit. 1.6 CMI agrees that (a) Article 2 of the Uniform Commercial Code as in effect in the applicable jurisdiction will not apply to any goods transferred and waives any rights thereunder, except for those rights with respect to which such waiver is expressly prohibited; (b) to accept such assets, property and rights in an "as is" condition, and that no representations or warranties shall have been made by Philips of such assets, property, or rights as to title to, or to the physical condition, fitness for a particular use, merchantability, or state of repair of the assets, property or rights conveyed; and (c) to be bound by all covenants, terms, conditions, or provisions pertaining to the assets, property, and rights stated herein. ARTICLE II. STOCK TRANSFER 2.1 CMI shall issue and deliver to Philips, within a reasonable time after the Public Offering, anticipated to commence and be completed sometime in the first quarter of 1992 by the Underwriter, a stock certificate representing that numerical amount of common stock in CMI necessary to give Philips a fifteen percent (15%) interest in the common stock of CMI at the conclusion of the Public Offering. Philips' 15% interest will be calculated after taking into 7 account the common stock (but not the warrants) sold in the public offering but can be diluted, pro rata, with all existing CMI shareholders by the following events: (a) exercise of outstanding warrants held by Philips' sister corporation, Philips Interactive Media of America, Corp. ("PIMA"); (b) exercise of outstanding warrants held by existing shareholders prior to the Public Offering; (c) exercise of warrants offered in the Public Offering; (d) exercise of Warrants given to Underwriter as compensation for Public Offering; (e) exercise of over-allotment option given to Underwriter as part of Public Offering; (f) any future stock or warrants sold, transferred, or allocated as part of an employee stock option plan in CMI or pursuant to an employment agreement with CMI; and (g) any future stock or warrants sold or otherwise transferred in CMI that will increase the number of shares issued and outstanding. 2.2 Philips' assignment of its interest in the joint venture to CMI shall be subject to the condition subsequent of CMI's delivery of its stock as set forth in 2.1. 2.3 The transfer of the stock from CMI to Philips pursuant to this Agreement will vest good and valid title to said stock to Philips, as of December 31, 1991, free and 8 clear of all liens, encumbrances, restrictions and claims of any kind and nature except (i) such as may be imposed under Delaware corporate law, (ii) such as may be imposed under the Securities Act of 1933 with specific reference to Rule 144, and (iii) such as is imposed by the Underwriter as part of the Public Offering which restriction will preclude Philips from selling its stock in the public market for a period of twelve months from the effective date of the Public Offering. Philips' signature below shall serve as evidence that it agrees to be bound by said restrictions and further agrees that its stock shall have a legend thereon evidencing said restrictions. 2.4 CMI shall also pay to Philips an amount equal to fifty percent of the amount of money listed as an accounts payable to Philips as stated in the Joint Venture's Balance Sheet as of December 31, 1991. CMI shall pay said principal amount in nine equal monthly installments plus interest beginning April 1, 1992 and ending December 1, 1992. Said obligation shall bear interest at prime which prime rate shall be the prime rate at large U.S. money center commercial banks as listed in the Wall Street Journal in the column entitled "Money Rates." 9 ARTICLE III. BOARD MEMBERS 3.1 Each year Philips shall have the right to nominate for election one Board member to CMI's Board representing Philips' Interest in CMI. As of December 31, 1991, Bernard S. Luskin, President of PIMA, shall fill the Board seat allocated to Philips and approved by the current shareholders of CMI at CMI's annual shareholder meeting of December 3, 1991. 3.2 From the effective date of the Public Offering for a period of five years, Philips agrees to vote its shares in favor of the Underwriter's nomination for election of one Board Member to CMI's Board representing the Underwriter's interest. ARTICLE IV. JOINT VENTURE AGREEMENT 4.1 As of December 31, 1991, the Joint Venture Agreement shall terminate, except that the agreement that CMI shall be the primary provider for Philips* of CD-I programs in the institutional and professional markets in the United States set forth in Sections 2(c) and 2(d) of the Joint Venture Agreement shall remain in force, and the Joint * which shall for the purposes of this Article 4 be defined as the Professional Interactive Media Systems Department of Philips Consumer Electronics Company. 10 Venture Agreement shall survive this Agreement and the delivery of stock contemplated herein to the extent necessary to define CMI's role as primary provider. ARTICLE V. MISCELLANEOUS 5.1 Number and Gender. The terms and words used in this Agreement, regardless of the number and gender in which they are used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context or sense of this Agreement or any paragraph or clause herein may require, the same as if such words had been fully and properly written in the number and gender. 5.2 Severability. This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations of the jurisdiction in which the Corporation is organized or qualified to do business. If any provision of this Agreement, or the application thereof to any person or circumstance shall fail for any reason and to any extent, be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law. 11 5.3 Captions. Any paragraph title or captions contained in this Agreement are for convenience only and shall not be deemed part of the context of this Agreement. 5.4 Counterparts. This Agreement may be executed in any number of counterparts, each of which, but all of which together, shall constitute only one Agreement. 5.5 Waiver. Failure of either party to complain of any act or omission on the part of the other party, no matter how long the same may continue, shall not be deemed to be a waiver by such party of any of its rights hereunder. No waiver by any party at any time, express or implied, of any breach of any provision of this Agreement shall be deemed a waiver of breach of any other provision of this Agreement or a consent to any subsequent breach of the same or any other provision hereunder. If any act or omission by any party shall require the consent or approval of another party, such consent or approval of such act or omission on any one occasion shall not be deemed a consent to or approval of said act or omission on any subsequent occasion or consent to or approval of any other act or omission on the same or any subsequent occasion. 5.6 Assignment and Binding Effect. Philips shall have the right to assign the CMI stock it receives pursuant to this Agreement to PIMA without CMI's consent, provided PIMA agrees to be bound by the terms and conditions of this Agreement. Philips shall not assign its obligation to honor 12 CMI as its primary provider as set forth in Article IV without CMI's prior consent. 5.7 Entire Agreement. This Agreement and the Exhibit attached hereto embody the entire agreement among the parties in connection with the transaction embodied herein and supersedes all prior agreements, understandings and communications of any nature whatsoever except as may be set forth in Article IV herein, and there are no oral or parole agreements existing between the parties relating to this transaction which are not expressly set forth herein and covered hereby. This Agreement may not be modified, except in writing signed by all parties. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Stock Transfer Agreement to be duly executed as of the day and year first above written. ATTEST PHILIPS INTERACTIVE MEDIA CORP. __________________________ By:________________________ ATTEST CAPITOL MULTIMEDIA, INC., (formerly Capitol Video Communications, Inc.) By:________________________ 13 _________________________ By:________________________ : : : BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Gerald S. Calabrese, known to me to be the person whose name is subscribed to the foregoing instrument, and known to me to be the Vice President for Philips Interactive Media Corp., a Delaware corporation, and acknowledged to me that he executed the same for the purposes and consideration therein expressed and in the capacity therein set forth. GIVEN UNDER MY HAND AND SEAL of office, this 16th day of January, 1991. ______________________________ NOTARY PUBLIC My Commission expires: My commission expires May 23, 1994 WASHINGTON : : DISTRICT OF COLUMBIA : BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Robert Bogin, known to me to be the person whose name is subscribed to the foregoing instrument, and known to me to be the President for Capitol Multimedia, Inc. (formerly Capitol Video Communications, Inc.), a Delaware corporation, and acknowledged to me that he executed the same for the purposes and consideration therein expressed and in the capacity therein set forth. 14 GIVEN UNDER MY HAND AND SEAL of office, this 17th day of January, 1992. ______________________________ NOTARY PUBLIC My Commission expires: 4-30-94 EX-99.5 6 EXHIBIT - MODIFICATION TO WARRANT PURCHASE AGREEMENT 1 Exhibit 99.5 March 30, 1992 MODIFICATION TO WARRANT PURCHASE AGREEMENT WHEREAS, Philips Interactive Media of America (PIMA) (formerly American Interactive Media) and Capitol Multimedia, Inc. (Capitol) (formerly Capitol Video Communications, Inc.) entered into a Warrant Purchase Agreement dated September 14, 1988; WHEREAS, such Warrant Purchase Agreement was modified by Paragraph 7 of the Amendment to Letter Agreement dated April 1, 1990; WHEREAS, implementation of the Warrant Purchase Agreement will have unexpected and detrimental consequences to Capitol and to PIMA; THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, PIMA and Capitol agree to modify the Warrant Purchase Agreement as follows: 1. As of March 30, 1992, Paragraph 7 of the Purchase Warrant Agreement shall be deleted. 2. As of March 30, 1992, Capitol agrees that as long as PIMA has warrants outstanding, Capitol will not issue any stock, warrants, options or securities convertible into any of the foregoing below the then fair market value of such securities and/or which provide for the issuance of stock upon exercise or conversion for a price below the then fair market value of the stock. In the event of such an occurrence, PIMA will be afforded the same anti- dilution protection as has been provided the Series A Warrant Holders. 3. In addition to the 108,919 outstanding warrants PIMA already holds at an exercise price of $3.21 expiring in February 1994, Capitol will issue as of April 1, 1992 to PIMA an additional 51,169 warrants at an exercise price of $3.59 expiring in February 1994 and 125,000 warrants at an exercise price of $6.25 expiring February 1996. The warrants issued to PIMA by Capitol as of April 1, 1992 and the shares issuable pursuant to those warrants will together constitute an additional class of Registrable Securities 2 under the Warrant Purchase Agreement and, in addition to any other rights PIMA may have to cause the registration of Registrable Securities under the Warrant Purchase Agreement, PIMA shall also have the right, on the same terms and conditions contained in the Warrant Purchase Agreement to cause the Company to register this additional class of Registrable Securities upon the request of the Holders of 50% or more of such additional class of Registrable Securities. 4. Except as expressly modified by this agreement, the Warrant Purchase Agreement as previously modified shall remain unchanged and in full force and effect and is hereby ratified and confirmed. Agreed: By: ______________________ By: _______________________ Title: ___________________ Title: ____________________ -----END PRIVACY-ENHANCED MESSAGE-----