<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from ______ to ______
Commission file number: 0-20102
CAPITOL MULTIMEDIA, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 52-1283993
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
7315 WISCONSIN AVE., SUITE 800 E
BETHESDA, MD 20814
(Address of principal executive office)
(301) 907-7000
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Number Outstanding Shares
Title of Class as of November 11, 1996
-------------- -----------------------
Common Stock, $.10 Par Value 4,832,065
Transitional Small Business Disclosure Format: Yes No X
----- -----
Exhibit Index on Page 15
Page 1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAPITOL MULTIMEDIA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 MARCH 31
1996 1996
--------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,341,216 $ 1,961,393
Short-term investments 2,440,930 2,362,975
Accounts receivable, less allowance for doubtful accounts of
$6,000 and $12,500 at
September 30, 1996 and March 31, 1996 570,913 503,306
Notes and guaranteed royalties receivable 500,000 500,000
Prepaid expenses and other current assets 60,726 174,441
--------------------------------------
Total current assets 4,913,785 5,502,115
Property and equipment:
Technical equipment 1,157,150 1,070,337
Leasehold Improvements 24,956 -
Furniture and fixtures 44,163 44,163
Other equipment 110,501 94,176
--------------------------------------
1,336,770 1,208,676
Less: accumulated depreciation and amortization (933,876) (841,861)
--------------------------------------
402,894 366,815
Notes and guaranteed royalties receivable 1,283,086 1,244,074
Other long-term assets 32,481 32,481
--------------------------------------
Total assets $ 6,632,246 $ 7,145,485
======================================
</TABLE>
See accompanying notes
Page 2
<PAGE> 3
CAPITOL MULTIMEDIA, INC.
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30 MARCH 31
1996 1996
---------------------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 656,523 $ 173,019
Unearned revenue and deferred rent 21,343 66,160
---------------------------------------
Total current liabilities 677,866 239,179
Other long-term liabilities 90,221 97,115
---------------------------------------
Total liabilities 768,087 336,294
Commitments - -
Shareholders' equity:
Common stock, $.10 par value; 25,000,000 and 10,000,000
shares authorized and 5,657,153 shares issued at
September 30, 1996 and March 31, 1996
565,715 565,715
Additional paid-in capital 15,817,202 15,817,202
Accumulated deficit (8,468,414) (7,523,382)
---------------------------------------
7,914,503 8,859,535
Less treasury stock, at cost, 825,088 shares at
September 30, 1996 and March 31, 1996 (2,050,344) (2,050,344)
---------------------------------------
Total shareholders' equity 5,864,159 6,809,191
---------------------------------------
Total liabilities and shareholders' equity $ 6,632,246 $ 7,145,485
=======================================
</TABLE>
See accompanying notes
Page 3
<PAGE> 4
CAPITOL MULTIMEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
-------------------------------- --------------------------------
-----(Unaudited)----- -----(Unaudited)-----
<S> <C> <C> <C> <C>
Net sales $ 327,161 $ 1,059,162 $ 1,339,710 $ 2,455,343
Operating expenses:
Research and development 619,042 521,823 1,168,194 1,318,091
Depreciation and amortization 48,389 80,552 92,015 266,709
General and administrative 299,602 381,657 683,236 880,037
Consolidation charges 462,566 - 462,566 -
-------------------------------- --------------------------------
Total operating expenses 1,429,599 984,032 2,406,011 2,464,837
Operating income (loss) (1,102,438) 75,130 (1,066,301) (9,494)
Other income:
Interest and other income, net 75,666 99,205 135,669 214,328
Gain on sale of assets - 2,539,820 - 2,539,820
-------------------------------- --------------------------------
Income (loss) before income taxes (1,026,772) 2,714,155 (930,632) 2,744,654
Income taxes - 53,240 14,400 53,240
-------------------------------- --------------------------------
Net income (loss) $ (1,026,772) $ 2,660,915 $ (945,032) $ 2,691,414
================================ ================================
Net income (loss) per share (.21) .48 (.20) .49
Weighted average shares outstanding 4,832,065 5,650,842 4,832,065 5,645,442
</TABLE>
See accompanying notes
Page 4
<PAGE> 5
CAPITOL MULTIMEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30
1996 1995
-------------------------------------
- - - - - (Unaudited)- - - - -
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (945,032) $ 2,691,414
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization of property and
equipment and goodwill 92,015 266,709
Gain on sale of assets - (2,539,820)
Changes in assets and liabilities (net of effect from
disposition):
Accounts receivable (67,607) (396,847)
Prepaid expenses and other current assets 113,715 (105,016)
Long-term notes, royalties, and other assets (39,012) (36,328)
Accounts payable and accrued liabilities 483,504 (547,759)
Unearned revenue and deferred rent (51,711) (328,961)
-------------------------------------
Net cash used in operating activities (414,128) (996,608)
INVESTING ACTIVITIES
Purchases of short-term investments (404,165) (1,422,738)
Proceeds from sales of short-term investments 326,210 2,910,757
Proceeds from sale of assets - 500,000
Capital expenditures (128,094) (52,753)
-------------------------------------
Net cash (used in) provided by investing activities (206,049) 1,935,266
FINANCING ACTIVITIES
Proceeds from sale of common stock - 33,150
-------------------------------------
Net cash provided by financing activities - 33,150
-------------------------------------
Net (decrease) increase in cash and cash equivalents (620,177) 971,808
Cash and cash equivalents at beginning of period 1,961,393 1,685,540
-------------------------------------
Cash and cash equivalents at end of period $ 1,341,216 2,657,348
=====================================
</TABLE>
See accompanying notes.
Page 5
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CAPITOL MULTIMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. STATEMENT OF INFORMATION PROVIDED
The accompanying unaudited financial statements have been prepared in
accordance with Form 10-QSB instructions and in the opinion of management
contain all adjustments (consisting of only normal recurring entries) necessary
to present fairly the financial position as of September 30, 1996 and March 31,
1996, the results of operations for the three and six months ended September
30, 1996 and 1995, and the cash flows for the six months ended September 30,
1996 and 1995. These results have been determined on the basis of generally
accepted accounting principles and practices applied consistently with those
used in the preparation of the Company's June 30, 1996 Quarterly Report on Form
10-QSB and March 31, 1996 Annual Report on Form 10-KSB.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles, but which are not required for interim reporting purposes, have
been condensed or omitted. The results of operations for the three and six
months ended September 30, 1996 are not necessarily indicative of results to be
expected for the full fiscal year. It is suggested that the accompanying
financial statements be read in conjunction with the financial statements and
related notes in the Company's June 30, 1996 Quarterly Report on Form 10-QSB
and March 31, 1996 Annual Report on Form 10-KSB.
2. RECLASSIFICATIONS
Certain amounts in the September 30, 1995 Statements of Operations and
Statement of Cash Flows have been reclassified to conform to the September 30,
1996 presentation.
3. NET INCOME (LOSS) PER SHARE
Primary earnings (loss) per share is computed using the weighted average number
of common shares and dilutive common share equivalents outstanding during the
period. Common share equivalents consist of options and warrants to purchase
common stock using the treasury stock method. Common share equivalents have
been excluded from the computation of net loss per share for the periods ended
September 30, 1996 as their effect is anti-dilutive. Fully diluted earnings
per share for the periods ended September 30, 1995 are not materially different
from primary earnings per share.
The following table presents the components of the shares used to compute net
income (loss) per share at September 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding during
the period 4,832,065 4,821,677 4,832,065 4,818,316
Incremental shares outstanding prior to the
sale of assets - 367,702 - 596,394
Incremental shares issuable pursuant to
outstanding options and warrants - 461,463 - 230,732
------------------------------- -------------------------------
Number of shares used in the computation of
net income per share 4,832,065 5,650,842 4,832,065 5,645,442
=============================== ===============================
</TABLE>
In computing net income per share using the treasury stock method, net income
has been increased by $74,500 in interest for the periods ended September 30,
1995.
Page 6
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CAPITOL MULTIMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
4. SALE OF ASSETS
In August 1995, the Company entered into an Asset Purchase Agreement ("the
Agreement") with Philips Media, Inc. ("Philips") to sell certain assets used by
its professional CD-i operations. The terms of the sale provided for the
return of all of Philips' 825,088 shares of Capitol Multimedia, Inc. Common
Stock, a $500,000 cash payment at closing, and the payment of certain royalties
to the Company for a four year period, including minimum royalty guarantees of
$500,000 in year one and $250,000 in year two. In connection with the sale,
the Company recognized a gain of approximately $2,500,000.
Pro forma statements of operations for the three and six months ended September
30, 1996 and 1995, assuming the sale of assets was consummated on April 1,
1995, are presented below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
------------------------------------ ----------------------------------
-----(Unaudited)----- -----(Unaudited)-----
<S> <C> <C> <C> <C>
Net sales $ 327,161 $ 1,029,467 $ 1,339,710 $ 2,073,598
Operating expenses:
Research and development 619,042 468,400 1,168,194 980,382
Depreciation and amortization 48,389 29,968 92,015 63,982
General and administrative 299,602 352,212 683,236 760,882
Consolidation charges 462,566 - 462,566 -
----------------------------------- ----------------------------------
Total operating expenses 1,429,599 850,580 2,406,011 1,805,246
Operating income (loss) (1,102,438) 178,887 (1,066,301) 268,352
Other income:
Interest and other income, net 75,666 79,432 135,669 144,556
----------------------------------- ----------------------------------
Income (loss) before income taxes (1,026,772) 258,319 (930,632) 412,908
Income taxes - 5,166 14,400 8,258
----------------------------------- ----------------------------------
Net income (loss) $ (1,026,772) $ 253,153 $ (945,032) $ 404,650
Net income (loss) per share (.21) .05 (.20) .08
Weighted average shares outstanding 4,832,065 4,821,677 4,832,065 4,818,316
</TABLE>
Common share equivalents have been excluded from the computation of net income
(loss) per share for the periods ended September 30, 1996 and 1995 as their
effect is anti-dilutive.
Page 7
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CAPITOL MULTIMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
5. CAPITAL STOCK
WARRANTS
At September 30, 1996, the Company had outstanding warrants to purchase 578,200
shares of its common stock, as follows:
In April 1992, the Company issued Series A Warrants to purchase 375,500 shares
(344,500 warrants, each of which entitles the holder to purchase 1.09 shares of
Common Stock) at an exercise price of $5.72 per share through March 31, 1997.
In addition, the Company issued 30,000 warrants to an underwriter to purchase
30,000 units, each unit consisting of three shares of common stock and one
Series A Warrant, at an exercise price of $18.45 per unit, exercisable for a
four year period commencing March 31, 1993.
In April 1993, in connection with the Regulation S offering, the Company issued
a warrant to purchase 80,000 shares of common stock to the placement agent at a
price of $8.25 per share, exercisable for a four year period commencing April
9, 1994.
STOCK OPTIONS
At September 30, 1996, the Company had outstanding options to purchase
1,334,261 shares of its Common Stock, as follows:
GRANTS PURSUANT TO ARRANGEMENTS
The Company has outstanding options, granted pursuant to various arrangements,
to purchase 107,500 shares of its common stock at exercise prices of $3.75 and
$6.625 per share. At September 30, 1996, 17,500 of these options were
exercisable. 7,500 and 100,000 of these options expire in 1999 and 2006,
respectively.
NON-QUALIFIED EMPLOYEE STOCK OPTION PLAN
In 1993, the Company adopted the Amended and Restated 1991 Non-Qualified
Capitol Multimedia, Inc. Employee Stock Option Plan (the Employee Plan).
Pursuant to an amendment adopted in 1996, the Employee Plan permits the Company
to grant options for 1,500,000 shares of common stock to its employees and
consultants. Options are granted at no less than the fair market value of the
Company's common stock on the date of grant. The following table sets forth
employee stock options granted, exercised, canceled, and outstanding under the
Employee Plan:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-------------------
NUMBER OF EXERCISE
OPTIONS PRICE
-----------------------------------------
<S> <C> <C>
Balance at March 31, 1995 343,018 $2.83 - $10.50
Granted 334,761 $3.75 - $6.25
Exercised (20,616) $2.83
Canceled (240,402) $2.83 - $10.50
-----------------------------------------
Balance at March 31, 1996 416,761 $3.75 - $6.375
Granted 756,476 $2.65 - $6.375
Exercised - -
Canceled (166,476) $3.75 - $6.375
-----------------------------------------
Balance at September 30, 1996 1,006,761 $2.65 - $6.375
=========================================
</TABLE>
At September 30, 1996, 201,785 options outstanding under the Employee Plan were
exercisable and 363,954 option shares were available for grant.
Page 8
<PAGE> 9
CAPITOL MULTIMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
In 1995, the Company adopted the Amended and Restated 1992 Non-Qualified Stock
Option Plan for Non-Employee Directors (the Director Plan). The Director Plan
permits the Company to grant options to purchase 300,000 shares of common stock
to its non-employee directors. Grants of options to purchase 15,000 shares of
common stock at fair market value are automatic upon a director's election to
the Board and on the date of each subsequent annual meeting during a director's
tenure. Each option granted under the Director Plan is exercisable for five
years from the date of grant. The following table sets forth non-employee
director stock options granted, exercised, canceled, and outstanding under the
Director Plan:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-------------------
NUMBER OF EXERCISE
OPTIONS PRICE
-------------------------------------------
<S> <C> <C>
Balance at March 31, 1995 275,000 $6.25 - $11.625
Granted 175,000 $3.916
Exercised - -
Canceled (290,000) $3.916 - 11.625
-------------------------------------------
Balance at March 31, 1996 160,000 $3.916
Granted 90,000 $2.92 - $3.916
Exercised - -
Canceled (30,000) $2.92 - $3.916
-------------------------------------------
Balance at September 30, 1996 220,000 $2.92 - $3.916
===========================================
</TABLE>
At September 30, 1996, 220,000 options outstanding under the Director Plan were
exercisable and 80,000 option shares were available for grant.
6. SIGNIFICANT CUSTOMERS
For the three and six months ended September 30, 1996, the Company had sales of
approximately $92,000 and $675,000 to two customers which represented 23% and
50% of net sales, respectively. For the three and six months ended September
30, 1995 the Company had sales of approximately $637,000 and $1,438,000 to one
customer which represented 60% and 59% of net sales, respectively.
Page 9
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CAPITOL MULTIMEDIA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
BUSINESS DEVELOPMENTS
During the quarter ended June 1996, the Company entered into an
agreement with Davidson & Associates, Inc. (ODavidsonO) to develop an animated
CD-ROM game for the adult market. The title is based upon Blizzard
Entertainment's (a division of Davidson) WarCraft software series. Under the
agreement, the Company retains ownership of the underlying software engine and
receives a residual royalty interest in the product after a certain level of
sales is achieved.
In July 1996, the Company announced the release of Gregory and the Hot
Air Balloon and Darby The Dragon, two of its interactive animated adventures,
by Broderbund Software, Inc., a leading publisher and distributor of
interactive children's entertainment and educational software for both the home
and school markets. These titles are part of a Broderbund line of products
known as StoryQuestsa. In September 1996, three of the Company's international
folk tale titles -- Liam Finds a Story, an Irish folk tale; Sleeping Cub's Test
of Courage, a Native American folk tale; and The Princess and the Crab, an
Italian folk tale, were released for distribution by Davidson & Associates,
Inc., a subsidiary of CUC International, Inc., another industry leader, under
its Magic Talesa product line.
In September 1996, the Company announced that it would be
consolidating its Bethesda, Maryland headquarters with current operations in
Massachusetts by the end of 1996. In addition, the Company disclosed that its
President and Chief Executive Officer, Robert I. Bogin, and its Chief Financial
Officer and Secretary / Treasurer, Catherine K. Hoopes, had chosen not to
relocate to Massachusetts. Mr. Bogin resigned as President and CEO effective
September 12, 1996. He will remain employed by the Company through December
1996 and continue to serve as a director of the Company. Ms. Hoopes'
resignation is effective February 28, 1997. The Company's Board of Directors
selected Igor R. Razboff, previously Vice President of Production and one of
the Company's largest shareholders, as Chairman of the Board and Chief
Executive Officer. The Board of Directors also selected Luda Kopeikina, most
recently Vice President of GE Information Services, as President. Ms.
Kopeikina is married to Mr. Razboff.
PRESENTATION
Since the Company's August 1995 sale of assets relating to its CD-i
professional business, it has focused solely on the creation and development of
consumer multimedia software products. Accordingly, the discussion and
analysis of the Company's results of operations compares results for the three
and six months ended September 30, 1996 to pro forma results for the three and
six months ended September 30, 1995. The Company believes such comparison
provides a more meaningful analysis of current and prior fiscal year results.
Page 10
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CAPITOL MULTIMEDIA, INC.
NET SALES
The composition of net sales for the three and six months ended
September 30, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
% %
1996 1995 Change 1996 1995 Change
----------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Software development revenue $ 100,409 $ 498,445 (80%) $ 723,909 $ 1,279,595 (43%)
Consumer software sales and
royalties 266,752 375,347 (40%) 615,801 561,387 10%
Licensing and distribution
fees - 155,675 (100%) - 232,616 (100%)
----------------------------------------- ----------------------------------------
Total net sales $ 327,161 $1,029,467 (68%) $ 1,339,710 $ 2,073,598 (35%)
========================================= ========================================
</TABLE>
Software development revenue decreased $398,000 or 80% and $556,000 or
43% for the three and six months ended September 1996 due to decreases of
$477,000 and $1,176,000 in software development revenue from Philips Media,
Inc. ("Philips") offset by increases in work-for-hire revenues from other
customers, including Simon & Schuster Interactive and Davidson & Associates,
Inc. During fiscal year 1996, the Company developed titles for Philips on a
work-for-hire basis. The Company; however, does not expect to perform any
development services for Philips during fiscal year 1997. Further, due to
software publisher reductions in third party title development, the Company
expects current year software development revenues to be less than those
generated during fiscal year 1996.
During the quarter ended September 1996, two of the Company's
interactive animated adventures were released by Broderbund Software, Inc. and
three of the Company's international folk tale titles were released by Davidson
& Associates, Inc. Due however to lower order and higher return rates,
consumer software sales and royalties decreased $148,500 or 40% during the
three months ended September 1996. Primarily as a result of the recognition of
$250,000 in revenue relating to the June 1996 shipment of Darby The Dragon to
Broderbund Software, Inc., the product's distributor, fiscal year 1996
year-to-date consumer software sales and royalties remained relatively
constant. The Company expects slowed growth in the consumer software market and
the oversupply of children's CD-ROM software titles to result in an overall
decrease in fiscal year 1997 consumer software sales and royalties.
Historically, the Company received licensing and distribution fees
from Philips as consideration for the exclusive right to distribute the
Company's consumer CD-i titles. As a result of the Company's fiscal year 1995
decision to discontinue CD-i consumer publishing activities, it does not expect
to receive any material licensing and distribution fees in future periods.
The level of net sales realized in any quarter is principally
dependent on the percentage of completion of work-for-hire projects and the
number of titles shipped and / or sold for published products. As a result of
the intense competition for sales of children's animated and story adventure
titles, the Company cannot currently predict any seasonal consumer software
sales fluctuations. Quarterly results may fluctuate as a result of product
mix, the number and timing of new product completions, and product returns.
Page 11
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CAPITOL MULTIMEDIA, INC.
RESEARCH AND DEVELOPMENT
Research and development increased $151,000 or 32% and $188,000 or 19%
for the three and six months ended September 1996. These increases are due
primarily to a liquidation of $94,000 of inventory associated with CD-ROM and
Sega CD products no longer distributed by the Company and expansion of the
Company's development and production capabilities.
The Company does not expect fiscal year 1997 research and development
expenses to be materially different than those incurred during fiscal year
1996; however, as a result of an estimated decrease in net sales, the Company
expects research and development as a percentage of net sales to increase.
Although the Company does not anticipate any significant change at its
St. Petersburg, Russia facility, the current political and economic future of
Russia is uncertain. Economic conditions in Russia, including lower wage rates
and lower standards of living, allow the Company to transact business in St.
Petersburg at a relatively low cost structure. Changes in the political,
social, or economic stability, or significant changes in the exchange rate of
the Russian Ruble, could result in increased research and development costs and
significant delays in the completion of new products. Any such changes could
have a material adverse affect on the Company's operating results and/or
financial condition.
DEPRECIATION AND AMORTIZATION
The Company expects depreciation and amortization to increase during
fiscal year 1997 as a result of expansion of its development and production
capabilities; however, the Company does not expect depreciation and
amortization as a percentage of net sales to materially change during fiscal
year 1997.
GENERAL AND ADMINISTRATIVE
General and Administrative decreased $53,000 or 15% and $77,500 or 10%
for the three and six months ended September 1996 primarily due to a reversal
of a pro rata accrual of fiscal year 1997 management bonuses. The Company
expects to incur approximately $100,000 in one-time general and administrative
charges, the majority of which will be recognized during the quarter ended
December 1996, relating to the consolidation of its Bethesda, Maryland
headquarters with current operations in Massachusetts.
A significant portion of the Company's operating expenses are fixed, and
planned expenditures in any given quarter are based on sales and revenue
forecasts. Accordingly, if products are not completed and/or shipped on
schedule and net sales do not meet the Company's expectations in any given
quarter, operating results and financial condition could be adversely affected.
CONSOLIDATION CHARGES
During the quarter ended September 1996, the Company recognized
$462,500 in one-time consolidation charges consisting of severance benefits and
fees relating to subleasing its facilities in Maryland.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are its cash, cash
equivalents, and short-term investments. During the six months ended September
1996, cash, cash equivalents, and investments decreased $542,000 or 13% to
$3,782,000. This decrease relates to $128,000 in capital expenditures and
$414,000 used to fund operating activities.
Page 12
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CAPITOL MULTIMEDIA, INC.
Accounts receivable increased $68,000 or 13% to $571,000 at September
1996 due primarily to the recognition of revenue relating to several of the
Company's software development contracts.
Prepaid expenses and other current assets decreased $114,000 or 65% to
$61,000 primarily as a result of liquidation of $94,000 in inventory associated
with CD-ROM and Sega CD products no longer distributed by the Company.
Accounts payable and accrued liabilities increased $483,500 or 279% to
$656,500 primarily due to the accrual of $462,500 in one-time charges
associates with the Company's consolidation of its Bethesda, Maryland
headquarters with current operations in Massachusetts.
Unearned revenue and deferred rent decreased by $45,000 or 68% to
$21,000 due to recognition of revenue on software development contracts
accounted for under the percentage of completion method.
The Company will use its working capital to finance ongoing
operations. Management expects its existing cash and short-term investments
and the collection of a $500,000 minimum royalty guarantee in November 1996 to
be sufficient to meet the Company's expected liquidity and capital needs for
the coming year.
At September 30, 1996, the Company had outstanding Series A Warrants
to purchase 408,200 shares of Common Stock at $5.72 per share. These warrants
expire March 31, 1997, subject to extension by the Company. Pursuant to the
redemption provision in the Warrant Agreement, the Company has the option of
redeeming the warrants on an "all or nothing basis," and, given favorable
market conditions, may do so. Exercise of these warrants would generate
approximately $2,335,000 in cash.
The Company continues to consider investments in or acquisitions of
compatible businesses. However, there can be no assurance that the Company
will make investments in or enter into business combinations with other
entities. In the event that the Company engages in such transactions, it may
require additional financial resources.
FORWARD LOOKING INFORMATION
Except for the historical information contained in this Form 10-QSB,
the information set forth herein includes forward looking statements that are
dependent on certain risks and uncertainties. Important factors that could
cause the actual results to differ materially from the anticipated results
include, but are not limited to, the anticipated slowed growth of certain
market segments; the positioning, release dates, and consumer acceptance of
Company products; quarterly fluctuations and seasonality; political, social and
economic stability in Russia; the competitive environment and technological
change in the software industry; and dependence on distribution channels and
key personnel, all of which are difficult to predict and many of which are
beyond the control of the Company. Additional information on these and other
factors which could affect the Company's financial condition and/or results of
operations are included in the Company's March 31, 1996 Form 10-KSB and
Registration Statements on Form S-3 (Registration Nos. 33-45725-A and 333-2476)
filed with the Securities and Exchange Commission.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
Page 13
<PAGE> 14
CAPITOL MULTIMEDIA, INC.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on August 22, 1996. The
following voting matters were approved at the meeting:
<TABLE>
<CAPTION>
Against/ Broker
For Withheld Abstain Non-Votes
--- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
1. Election of six persons to the Board of Directors to
hold office until the next Annual Meeting or until
their successors have been elected and qualified or
their earlier resignation or removal:
Robert I. Bogin 3,371,483 421,378 - -
Bernard M. Frank 3,712,733 80,128 - -
Nico B.M. Letschert 3,712,633 80,228 - -
Philip R. Redmond 3,712,733 80,128 - -
Igor R. Razboff 3,712,733 80,128 - -
Craig J. Cox 3,712,733 80,128 - -
2. Ratification and Approval of an Amendment to the
Company's Amended and Restated 1992 Non-Qualified
Stock Option Plan for Non-Employee Directors
extending the period during which a director may
exercise an option following resignation or other
termination of service. 3,184,576 167,240 17,800 423,245
3. Ratification and Approval of an Amendment to the
Company's Amended and Restated 1991 Non-Qualified
Employee Stock Option Plan increasing the number of
authorized shares of Common Stock issuable under the
Plan from 616,000 to 1,500,000. 1,262,375 256,599 14,100 2,259,787
4. Ratification and Approval of an Amendment to the
Company's Certificate of Incorporation increasing the
authorized number of shares of Common Stock from
10,000,000 to 25,000,000. 3,127,032 274,604 16,350 374,875
5. Ratification of Ernst & Young LLP as independent
accountants for the 1997 fiscal year. 3,784,261 4,500 4,100 -
</TABLE>
ITEM 5. OTHER INFORMATION
Not Applicable.
Page 14
<PAGE> 15
CAPITOL MULTIMEDIA, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Certificate of Incorporation, as amended on September 2, 1996.
4.5 Amended and Restated 1991 Non-Qualified Capitol Multimedia,
Inc. Employee Stock Option Plan.
4.6 Amended and Restated 1992 Non-Qualified Stock Option Plan for
Non-Employee Directors.
10.46 Employment Agreement between Capitol Multimedia, Inc. and Luda
Kopeikina.
10.47 Severance Agreement between Capitol Multimedia, Inc. and
Robert I. Bogin.
10.48 Severance Agreement between Capitol Multimedia, Inc. and
Catherine K. Hoopes.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
On October 4, 1996, the Company filed a Form 8-K disclosing that it
would be consolidating its Bethesda, Maryland headquarters with current
operations in Massachusetts by the end of 1996. In addition, the Company
disclosed that its President and Chief Executive Officer, Robert I. Bogin, and
its Chief Financial Officer and Secretary / Treasurer, Catherine K. Hoopes, had
chosen not to relocate to Massachusetts. Mr. Bogin resigned as President and
CEO effective September 12, 1996. He will remain employed by the Company
through December 1996 and continue to serve as a director of the Company. Ms.
Hoopes' resignation is effective February 28, 1997. The Company's Board of
Directors selected Igor R. Razboff, previously Vice President of Production and
one of the Company's largest shareholders, as Chairman of the Board and Chief
Executive Officer. The Board of Directors also selected Luda Kopeikina, most
recently Vice President of GE Information Services, as President. Ms.
Kopeikina is married to Mr. Razboff. The Form 8-K was dated September 12,
1996.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CAPITOL MULTIMEDIA, INC.
------------------------
(Registrant)
Date: November 14, 1996 /s/ Catherine K. Hoopes
-------------------------
Catherine K. Hoopes
Chief Financial Officer &
Secretary / Treasurer
Page 15
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CAPITAL VIDEO COMMUNICATIONS, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and know, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is
CAPITAL VIDEO COMMUNICATIONS, INC.
SECOND: The address, including street, number, city, and county, of
the registered office of the corporation in the State of Delaware is 229 South
State Street, City of Dover, County of Kent, and the name of the registered
agent of the corporation in the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is Five Million (5,000,000). The par value of
each of such shares is Ten Cents ($.10). All such shares are of one class and
are shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator are as
follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
R. G. Dickerson 229 South State Street, Dover, Delaware
</TABLE>
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
<PAGE> 2
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the By-Laws. The phrase
"whole Board" and the phrase "total number of directors" shall be
deemed to have the same meaning, to wit, the total number of directors
which the corporation would have if there were no vacancies. No
election of directors need be by written ballot.
2. After the original or other By-Laws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with
the provisions of Section 109 of the General Corporation Law of the
State of Delaware, and, after the corporation has received any payment
for any of its stock, the power to adopt, amend or repeal the By-Laws
of the corporation may be exercised by the Board of Directors of the
corporation provided, however, that any provision for the
classification of directors of the corporation for staggered terms
pursuant to the provisions of subsection (d) of Section 141 of the
General Corporation Law of the State of Delaware shall be set forth in
an initial By-Law or in a By-Law adopted by the stockholders entitled
to vote of the corporation unless provisions for such classification
shall be set forth in this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders.
Whenever the corporation shall be authorized to issue more than one
class of stock, no outstanding share of any class of stock which is
denied voting power under the provisions of the certificate of
incorporation shall entitle the holder thereof to the right to vote at
any meeting of stockholders except as the provisions of paragraph (c)
(2) of section 242 of the General Corporation Law of the State of
Delaware shall otherwise require; provided, that no share of any such
class which is otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the number of
authorized shares of said class.
NINTH: The corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have
power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
sections, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the corporation
by this certificate of incorporation are granted subject to the provisions of
this Article TENTH.
Signed on June 28, 1982.
/s/ R. G. Dickerson
-------------------
R. G. Dickerson
Incorporator
-2-
<PAGE> 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CAPITAL VIDEO COMMUNICATIONS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
CAPITAL VIDEO COMMUNICATIONS, INC.
2. The Certificate of Incorporation of the Corporation is hereby amended
by striking out Article First thereof and by substituting in lieu of
said Article the following new Article:
"First: The name of the corporation (hereinafter called the
"corporation") is CAPITOL VIDEO COMMUNICATIONS, INC."
3. The amendment of the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Section 228 and
242 of the General Corporation Law of the State of Delaware. Written
notice of the adoption of the amendment herein certified has been
given to those stockholders who have not consented in writing thereto,
as provided in Section 228 of the General Corporation Law of the State
of Delaware.
Signed and attested to on November 29, 1983.
/s/ Douglas A. Weiss
--------------------
Douglas A. Weiss
President
Attest:
/s/ Robert I. Bogin
- -------------------
Robert I. Bogin
Secretary
<PAGE> 4
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION OF
CAPITOL VIDEO COMMUNICATIONS, INC.
Capitol Video Communications, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation adopted a
resolution at a meeting of the Board of Directors in November 1988, proposing
and declaring advisable amending and restating the first sentence of Article
FOURTH to increase the number of shares authorized so that Article FOURTH shall
be amended to read as follows:
"FOURTH: The total number of shares which the Corporation shall have the
authority to issue is Six Million (6,000,000) with a par value of Ten Cents
($.10) each, amounting to Six Hundred Thousand Dollars ($600,000.00)."
SECOND: That said amendment to the Certificate of Incorporation has been
consented to and authorized by the holders of a majority of the issued and
outstanding stock entitled to vote at the Annual Meeting of the Shareholders
held on November 17, 1989, after waiving notice required for such vote.
THIRD: That said amendment to the Certificate of Incorporation of the
Corporation had been duly adopted in accordance with the applicable provisions
of Section 141, 228 and 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Corporation has caused its corporate seal to be
affixed and this Certificate to be signed by the officers whose respective
names and offices appear below, this 20th day of February, 1990.
CAPITOL VIDEO COMMUNICATIONS, INC.
BY: /s/ Robert I. Bogin
-------------------
Robert I. Bogin
Secretary / Executive Vice President
ATTEST:
BY: /s/ Zee Jacobs
--------------
Zee Jacobs
Assistant Secretary
[Corporate Seal]
<PAGE> 5
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION OF
CAPITOL VIDEO COMMUNICATIONS, INC.
Capitol Video Communications, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation") DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation ratified and adopted
a resolution at a meeting of the Board of Directors on December 3, 1991,
proposing and declaring advisable amending and restating Article FIRST to
change the name of the Corporation so that Article FIRST shall read as follows:
"FIRST: The name of the corporation (hereinafter called the
"corporation") is
CAPITOL MULTIMEDIA, INC."
SECOND: That the Board of Directors of the Corporation ratified and
adopted a resolution at a meeting of the Board of Directors on December 3,
1991, proposing and declaring advisable amending and restating Article FOURTH
(previously amended on February 20, 1990 to increase the number of authorized
shares) to increase the number of shares authorized and to provide for a
reverse stock split so that Article FOURTH shall read as follows:
"FOURTH: The total number of shares which the Corporation shall have
the authority to issue is Ten Million (10,000,000). The Par Value of each such
shares in Ten Cents ($.10). All such shares are of one class and are shares of
Common Stock. The shares of Common Stock of the Corporation issued and
outstanding immediately prior to the time this amendment becomes effective,
shall be and are hereby automatically reclassified and changed (without further
act) into 2,160,000 fully paid and non-assessable shares of the Common Stock of
the Corporation without increasing or decreasing the amount of state capital or
paid-in surplus of the Corporation."
THIRD: That the Board of Directors of the Corporation ratified and adopted
a resolution at a meeting of the Board of Directors on December 3, 1991,
proposing and declaring advisable amending and restating Article EIGHTH to
limit the personal liability of directors to the fullest extent allowed by law
so that Article EIGHTH shall read as follows:
"4. A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director except (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit."
FOURTH: That said amendments to the Certificate of Incorporation have been
consented to and authorized by the holders of a majority of the issued and
outstanding stock entitled to vote at the annual meetings of shareholders held
on November 17, 1989, and December 3, 1991.
FIFTH: That said amendments to the Certificate of Incorporation have been
duly adopted in accordance with the applicable provisions of Sections 141, 228
and 242 of the General Corporation Law of the State of Delaware.
<PAGE> 6
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed
and this Certificate to be signed by its President and attested by its
Secretary, whose respective names and offices appear below, this 31st day of
December, 1991.
CAPITOL VIDEO COMMUNICATIONS, INC.
By: /s/ Robert I. Bogin
-------------------
Robert I. Bogin,
President
ATTEST:
By: /s/ Catherine Hoopes
---------------------
Catherine Hoopes,
Secretary and Chief Financial Officer
[Corporate Seal]
-2-
<PAGE> 7
CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION
OF
CAPITOL MULTIMEDIA, INC.
Capitol Multimedia, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation adopted a
resolution at a meeting of the Board of Directors on June 5, 1996, proposing
and declaring advisable amending and restating Article FOURTH (previously
amended on December 31, 1991 to increase the number of authorized shares) to
increase the number of shares authorized so that Article FOURTH shall read as
follows:
"FOURTH: The total number of shares of stock which the Corporation
shall have the authority to issue is Twenty Five Million (25,000,000).
The par value of each of such shares is Ten Cents ($.10). All such
shares are of one class and are shares of Common Stock.
SECOND: That said amendment to the Certificate of Incorporation has
been consented to and authorized by the holders of a majority of the issued and
outstanding stock entitled to vote at the Annual Meeting of Shareholders held
on August 22, 1996.
THIRD: That said amendment to the Certificate of Incorporation has
been duly adopted in accordance with the applicable provisions of Section 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be affixed and this Certificate to be signed by its President and attested by
its Secretary, whose respective names and offices appear below, this 2nd day of
September, 1996.
CAPITOL MULTIMEDIA, INC.
BY: /s/ Robert I. Bogin, President
------------------------------
Robert I. Bogin, President
Attest:
BY: /s/ Catherine K. Hoopes
-----------------------
Catherine K. Hoopes, Secretary
<PAGE> 1
EXHIBIT 4.5
THE AMENDED AND RESTATED 1991 NON-QUALIFIED
CAPITOL MULTIMEDIA, INC. EMPLOYEE STOCK OPTION PLAN
The following amends and restates the 1991 Non-Qualified Capitol
Multimedia, Inc. Employee Stock Option Plan in its entirety.
1. Purpose of the Plan.
The purpose of the 1991 Non-Qualified Stock Option Plan of Capitol
Multimedia, Inc., a Delaware corporation (the "Company"), is to further
promote the interests of the Company by enhancing the Company's ability
to attract, motivate and retain new and existing employees and
consultants and to encourage the highest level of performance by
providing these employees and consultants with a proprietary interest
in the Company's growth and financial success through grants of stock
options and shares of restricted stock in the future.
2. Definitions.
(a) "Board" shall mean the board of directors of the Company, as
duly elected from time to time.
(b) "Change in Control" shall be deemed to have occurred at such
time as either (i) the Company is merged or consolidated with
or into another entity (the "Merger Partner") and as a result
of such merger or consolidation less than fifteen percent (15%)
of the outstanding voting securities of the surviving or
resulting entity shall be beneficially owned in the aggregate,
either directly or indirectly, by the stockholders of the
Company immediately prior to the effective date of such merger
or consolidation, or (ii) in the event that any person, other
than the Company, a wholly-owned subsidiary of the Company, an
employee benefit plan of the Company or one of its
subsidiaries, or an officer or director of the Company or an
affiliate of an officer or director, becomes the beneficial
owner of fifty percent (50%) or more of the Company's Common
Stock.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and as interpreted by the regulations thereunder.
(d) "Committee" shall mean the Compensation Committee of the
Company, or such other committee as may be appointed by the
Board from time to time.
(e) "Common Stock" shall mean the common stock of the Company, par
value $.10 per share.
(f) "Company" shall mean Capitol Multimedia, Inc., a Delaware
corporation.
- 1 -
As amended 8/22/96
<PAGE> 2
(g) "Consultant" shall mean any individual that is expressly
designated as a consultant of the Company or its Subsidiaries
by the Committee in its sole discretion.
(h) "Date of Grant" shall mean the date as of which the Committee
resolves to grant an Option to an Optionee or grant Restricted
Stock to a Participant, as the case may be.
(i) "Disinterested Director" shall mean a member of the Board who
is not, during the one year prior to service as an
administrator under this Plan (as described in Section 4 of
this Plan), granted or awarded an Option or Restricted Stock
pursuant to the terms of this Plan (or any other plan of the
Company or any of its Subsidiaries) except (i) participation in
a formula plan meeting the conditions of Rule 16b-3(c)(2)(ii)
under the Exchange Act, (ii) participation in an ongoing
securities acquisition plan meeting the conditions in Rule
16b-3(d)(2)(i) under the Exchange Act, (iii) an election to
receive an annual retainer fee in either cash or an equivalent
amount of securities of the Company, or partly in cash and
partly in securities, or (iv) that participation in this Plan
shall not disqualify a director for the purpose of
administering another plan that does not permit participation
by the Board; provided, that the scope of the exceptions in
this paragraph shall automatically be reduced or expanded to
the extent that Rule 16b-3 under the Exchange Act is amended to
reduce or expand the scope of the exceptions thereunder.
(j) "Employee" shall include every individual performing services
to the Company or its Subsidiaries if the relationship between
such individual and the Company or its Subsidiaries is the
legal relationship of employer and employee. This definition
of "Employee" is qualified in its entirety and is subject to
the definition set forth in Section 3401(c) of the Code and the
regulations thereunder.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and as interpreted by the rules and regulations
promulgated thereunder.
(l) "Exercise Price" shall mean the amount for which one Share may
be purchased upon exercise of an Option, as specified by the
Committee in the applicable Stock Option Agreement, but in no
event less than the par value per Share.
(m) "Fair Market Value" shall mean the average of the last trade
price of the Common Stock on all domestic exchanges on which
the Common Stock may at the time be listed or admitted to
trading, or, if the Common Stock, shall not be so listed or
admitted to trading, the average of the last trading price in
the domestic over-the-counter market, in each such case
averaged over a period of 20 consecutive business days prior to
the day as of which Fair Market Value is being
- 2 -
As amended 8/22/96
<PAGE> 3
determined; provided that if the Common Stock is listed on any
domestic exchange, the term "business days" as used in this
sentence shall mean business days on which such exchange is
open for trading. If the Common Stock is neither listed or
admitted to trading on any domestic exchange nor quoted in the
domestic over-the counter market, the Fair Market Value shall
mean the last trade price as furnished by any dealer in
securities dealing in the Common Stock.
(n) "Option" shall mean the right granted to purchase Common Stock
under the Plan.
(o) "Optionee" shall mean a Participant who holds an Option.
(p) "Participants" shall mean those individuals described in
Section 1 of this Plan selected by the Committee who are
eligible under Section 6 of this Plan for grants of either
Options or Restricted Stock under this Plan.
(q) "Permanent and Total Disability" shall mean that an individual
is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period
of not less than twelve (12) months. An individual shall not
be considered to suffer from Permanent and Total Disability
unless such individual furnishes proof of the existence thereof
in such form and manner, and at such times, as the Committee
may reasonably require. The scope of this definition shall
automatically be reduced or expanded to the extent that Section
22(e)(3) of the Code is amended to reduce or expand the scope
of the definition of Permanent and Total Disability thereunder.
(r) "Plan" shall mean this 1991 Non-Qualified Capitol Multimedia,
Inc. Employee Stock Option Plan, as amended from time to time.
(s) "Plan Award" shall mean the grant of either an Option or
Restricted Stock, as the context requires.
(t) "Restricted Stock" shall have that meaning set forth in Section
6(a) of this Plan.
(u) "Restricted Stock Account" shall have that meaning set forth in
Section 6(a)(iii) of this Plan.
(v) "Restricted Stock Criteria" shall have that meaning in Section
6(a)(iv) of this Plan.
(w) "Restriction Period" shall have that meaning in Section 6(a)(v)
of this Plan.
- 3 -
As amended 8/22/96
<PAGE> 4
(x) "Securities Act" shall mean the Securities Act of 1933, as
amended, and as interpreted by the rules and regulations
promulgated thereunder.
(y) "Services" shall mean services rendered to the Company or any
of its Subsidiaries by an Employee or Consultant, as the
context requires.
(z) "Share" shall mean one share of Common Stock, as adjusted in
accordance with Sections 8 and 9 of this Plan (if applicable).
(aa) "Stock Option Agreement" shall mean the agreement executed
between the Company and an Optionee that contains the terms,
conditions and restrictions pertaining to the granting of an
Option.
(bb) "Subsidiary" shall mean any corporation as to which more than
fifty percent (50%) of the outstanding voting stock or shares
shall now or hereafter be owned or controlled, directly by a
person, any Subsidiary of such person, or any Subsidiary of
such Subsidiary.
(cc) "Vest Date" shall have that meaning in Section 6(a)(v) of this
Plan.
3. Shares of Common Stock Subject to the Plan.
(a) Subject to the provisions of Sections 8 and 9, the aggregate
number of Shares that may be issued or transferred pursuant to
an exercise of Option or a grant of Restricted Stock under the
Plan shall not exceed one million five hundred thousand
(1,500,000) Shares. Such Shares may be either authorized, but
unissued shares, or Shares issued and thereafter acquired by
the Company. The Committee shall not issue more Shares than
are available for issuance under this Plan. The number of
Shares that are subject to unexercised Options at any time
under this Plan shall not exceed the number of Shares that
remain available for issuance under this Plan. The Company,
during the term of this Plan, shall at all times reserve and
keep available sufficient Shares to satisfy the requirements of
this Plan.
(b) In the event that an Option previously granted shall for any
reason expire or be terminated without being exercised in whole
or in part, the unpurchased shares of Common Stock subject to
the Option shall be restored to the total number of shares of
Common Stock with respect to which Options may be granted under
the Plan.
(c) Plan Awards may be granted under the Plan from time to time in
substitution of Options or Restricted Stock held by Consultants
for thirty two thousand five hundred (32,500) Shares which were
issued prior to July 20, 1993. Unless expressly stated
otherwise, any provision in the Plan applying to Options or
Restricted Stock granted
- 4 -
As amended 8/22/96
<PAGE> 5
under the Plan shall also apply to Options or Restricted Stock
granted to Consultants under prior Option Agreements.
4. Administration of the Plan.
(a) This Plan shall be administered by the Committee, which shall
consist of at least two (2) persons, each of whom shall be
Disinterested Directors. The members of the Committee shall be
appointed by the Board for such terms as the Board may
determine. The Board may from time to time remove members from,
or add members to, the Committee. Vacancies on the Committee,
however caused, may be filled by the Board.
(b) The Board shall designate one of the members of the Committee
as chairman. The Committee may hold meetings at such times and
places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists,
or acts reduced to or approved in writing by a majority of all
Committee members, shall be valid acts of the Committee. A
majority of the Committee shall constitute a quorum.
(c) This Plan shall be administered by, or under the direction of,
the Committee constituted in such a manner as to comply at all
times with Rule 16b-3 (or any successor rule) under the
Exchange Act. The Committee shall administer this Plan so as
to comply at all times with the Exchange Act and, subject to
the Code, shall otherwise have absolute and final authority to
interpret this Plan and to make all determinations specified in
or permitted by this Plan or deemed necessary or desirable for
its administration or for the conduct of the Committee's
business including without limitation the authority to take the
following actions:
(i) To interpret this Plan and to apply its
provisions;
(ii) To adopt, amend or rescind rules, procedures and
forms relating to this Plan;
(iii) To authorize any person to execute, on behalf of
the Company, any instrument required to carry out
the purposes of this Plan;
(iv) To determine when Plan Awards are to be granted
under this Plan;
(v) To select the Optionees and Participants;
(vi) To determine the number of Shares to be made
subject to each Plan Award;
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<PAGE> 6
(vii) To prescribe the terms, conditions and
restrictions of each Plan Award, including
without limitation the Exercise Price of an
Option;
(viii) To amend any outstanding Stock Option Agreement
or the terms, conditions and restrictions of a
grant of Restricted Stock, subject to applicable
legal restrictions and the consent of the
Optionee or Participant, as the case may be, who
entered into such agreement;
(ix) To establish procedures so that an Optionee may
obtain a loan through a registered broker-dealer
under the rules and regulations of the Federal
Reserve Board, for the purpose of exercising an
Option;
(x) To establish procedures for an Optionee (1) to
have withheld from the total number of Shares to
be acquired upon the exercise of an Option that
number of Shares having a Fair Market Value,
which, together with such cash as shall be paid
in respect of fractional shares, shall equal the
Exercise Price, and (2) to exercise a portion of
an Option by delivering that number of Shares
already owned by an Optionee having a Fair Market
Value which shall equal the partial Exercise
Price and to deliver the Shares thus acquired by
such Optionee in payment of Shares to be received
pursuant to the exercise of additional portions
of the Option, the effect of which shall be that
an Optionee can in sequence utilize such newly
acquired shares in payment of the Exercise Price
of the entire Option, together with such cash as
shall be paid in respect of fractional shares;
(xi) To establish procedures whereby a number of
Shares may be withheld from the total number of
Shares to be issued upon exercise of an Option,
to meet the obligation of withholding for federal
and state income and other taxes, if any,
incurred by the Optionee upon such exercise; and
(xii) To take any other actions deemed necessary or
advisable for the administration of this Plan.
All interpretations and determinations of the
Committee made with respect to the granting of
Plan Awards shall be final, conclusive, and
binding on all interested parties. The Committee
may make grants of Plan Awards on an individual
or group basis. No member of the Committee shall
be liable for any action that is taken or is
omitted to be taken if such action or omission is
taken in good faith with respect to this Plan or
grant of any Plan Award.
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<PAGE> 7
(d) The Committee may in its sole discretion require
as a condition to the granting of any Plan Award,
that a Participant agree not to sell or otherwise
dispose of a Plan Award, any Shares acquired
pursuant to a Plan Award or any other "derivative
security" (as defined by Rule 16a-1(c) under the
Exchange Act) for a period of six (6) months
following the later of (i) the date of the grant
of such Plan Award, or (ii) the date when the
Exercise Price of an Option is fixed if such
Exercise Price is not fixed on the Date of Grant.
(e) The Committee may in its sole discretion
designate officers or employees of the Company to
assist the Committee in the administration of the
Plan and to execute documents on behalf of the
Committee, and the Committee may delegate to such
officers and employees such other ministerial and
limited discretion duties as it sees fit.
5. Eligibility.
(a) Options and/or Restricted Stock may be granted
under the Plan to any Employee or Consultant
(including Employees who are also directors of
the Company); provided, however, that no person
shall be eligible for any Plan Awards if the
granting of a Plan Award to such person would
prevent the satisfaction by this Plan of the
general exemptive conditions of Rule 16b-3 under
the Exchange Act. Determinations by the
Committee as to the identity of the persons to
whom Options shall be granted hereunder shall be
conclusive. Directors who are also Employees
shall not be eligible to receive Options under
both employee and director's plans.
(b) [Intentionally omitted.]
6. Restricted Stock.
(a) The Committee shall have the authority to grant
to Participants certain Shares that are subject
to certain terms, conditions and restrictions
(the "Restricted Stock"). The Restricted Stock
may be granted by the Committee either separately
or in combination with Options. The terms,
conditions and restrictions of the Restricted
Stock shall be determined from time to time by
the Committee without limitation, except as
otherwise provided in this Plan; provided,
however, that each grant of Restricted Stock
shall require the Participant to remain an
Employee of (or otherwise provide Services to)
the Company or any of its Subsidiaries for at
least six (6) months from the Date of Grant. The
granting, vesting and issuing of the Restricted
Stock shall also be subject to the following
provisions:
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<PAGE> 8
(i) Restricted Stock shall be granted to Participants
for Services rendered and at no additional cost
to Participant; provided, however, that the value
of the Services performed must, in the opinion of
the Committee, equal or exceed the par value of
the Restricted Stock to be granted to the
Participant.
(ii) The Company shall establish a restricted stock
account (the "Restricted Stock Account") for each
Participant to whom Restricted Stock is granted,
and such Restricted Stock shall be credited to
such account. No certificates will be issued to
the Participant with respect to the Restricted
Stock until the Vest Date as provided herein.
Every credit of Restricted Stock under this Plan
to a Restricted Stock Account shall be considered
"contingent" and unfunded until the Vest Date.
Such contingent credits shall be considered
bookkeeping entries only, notwithstanding the
"crediting" of "dividends" as provided herein.
Such accounts shall be subject to the general
claims of the Company's creditors. The
Participant's rights to the Restricted Stock
Account shall be no greater than that of a
general creditor of the Company. Nothing
contained herein shall be construed as creating a
trust or fiduciary relationship between the
Participants and the Company, the Board or the
Committee.
(iii) The terms, conditions and restrictions of the
Restricted Stock shall be determined by the
Committee on the Date of Grant. The Restricted
Stock may not be sold, assigned, transferred,
redeemed, pledged or otherwise encumbered during
the period in which the terms, conditions and
restrictions apply (the "Restriction Period").
More than one grant of Restricted Stock may be
outstanding at any one time, and the Restriction
Periods may be of different lengths. Receipt of
the Restricted Stock is conditioned upon
satisfactory compliance with the terms,
conditions and restrictions of this Plan and
those imposed by the Committee.
(iv) At the time of each grant of Restricted Stock,
the Committee in its sole discretion may
establish certain criteria to determine the times
at which restrictions placed on Restricted Stock
shall lapse (i.e., the termination of the
Restriction Period), which criteria may include,
without limitation, performance measures, targets
and holding period requirements (the "Restricted
Stock Criteria"). The Committee may establish a
corresponding relationship between the Restricted
Stock Criteria and (i) the number of Shares of
Restricted Stock that may be earned, and (ii) the
extent to which the terms, conditions and
restrictions on the Restricted Stock shall lapse.
Restricted Stock Criteria may vary among grants
of Restricted Stock; provided, however, that once
the Restricted Stock Criteria are established for
a grant of
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<PAGE> 9
Restricted Stock, the Restricted Stock Criteria
shall not be modified with respect to such grant.
(v) On the date the Restriction Period terminates,
the Restricted Stock shall vest in the
Participant (the "Vest Date"), who may then
require the Company to issue certificates
evidencing the Restricted Stock credited to the
Restricted Stock Account of such Participant.
(vi) The Committee may provide from time to time that
amounts equivalent to dividends shall be payable
with respect to the Restricted Stock held in the
Restricted Stock Account of a Participant. Such
amounts shall be credited to the Restricted Stock
Account and shall be payable to the Participant
on the Vest Date.
(vii) If a Participant (x) with the consent of the
Committee, ceases to be an Employee or Consultant
of, or otherwise ceases to provide Services to,
the Company or any of its Subsidiaries, or (y)
dies or suffers from Permanent and Total
Disability, the vesting or forfeiture (including
without limitation the terms, conditions and
restrictions) of any grant under this Section 6
shall be determined by the Committee in its sole
discretion, subject to any limitations or terms
of this Plan. If the Participant ceases to be an
Employee or Consultant of, or otherwise ceases to
provide Services to, the Company or any of its
Subsidiaries for any other reason, all grants of
Restricted Stock under this Plan shall be
forfeited (subject to the terms of this Plan).
(b) The Committee may establish procedures by which a Participant
may elect to defer the transfer of Restricted Stock to the
Participant. The Committee shall determine the terms and
conditions of such deferral in its sole discretion.
7. Terms and Conditions of Options.
(a) The purchase price of Common Stock under each Option granted
under the Plan shall be the Fair Market Value of the Common
Stock on the date the Option is granted.
(b) Subject to the provision of Section 12, an Option granted under
the Plan shall become exercisable at such a time as the
Committee in its sole discretion shall determine and shall
specify in a Stock Option Agreement to be entered into with the
Participant. In servicing its discretion hereunder, the
Committee may determine that all Options granted shall become
exercisable immediately or that the Participant's right to
exercise such Options shall vest over a period of time and in
such increments as are specified by the Committee.
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<PAGE> 10
(c) The exercise of Options shall be subject to the following
requirements:
(i) An Option shall be deemed to be exercised when
written notice of such exercise has been given to
the Company in accordance with the terms of the
Stock Option Agreement by the Optionee entitled to
exercise the Option and full payment for the Shares
with respect to which the Option is exercised has
been received by the Company. Full payment may, as
authorized by the Committee, consist of any form of
consideration and method of payment allowable under
this Plan. Upon the receipt of notice of exercise
and full payment for the Shares, the Shares shall be
deemed to have been issued and the Optionee shall be
entitled to receive such Shares and shall be a
stockholder with respect to such Shares, and the
Shares shall be considered fully paid and
nonassessable. No adjustment will be made for a
dividend or other right for which the record date is
prior to the date on which the stock certificate is
issued, except as provided in Sections 8 or 9 of
this Plan. An Option may not be exercised for a
fraction of a Share. Each exercise of an Option
shall reduce, by an equal number, the total number
of Shares that may thereafter be purchased under
such Option.
(ii) Except as provided in Subsections 7(c)(iii) and
7(c)(iv), an Option held by an Optionee shall
terminate on the date the Optionee ceases to be an
Employee or Consultant of the Company in the event
the Optionee is terminated for cause (as determined
in the sole discretion of the Committee). If the
employment of the Optionee is terminated other than
for cause, then the Optionee may, but only within
ninety (90) days after such termination, exercise
the Option to the extent that the Optionee was
entitled to exercise the Option on such date;
provided, however, the Committee may in its sole
discretion extend such date on which the Optionee
may exercise such Option. To the extent the
Optionee is not entitled to exercise an Option on
such date or if the Optionee does not exercise it
within the time specified in this subclause, the
Option shall terminate.
(iii) Notwithstanding the provisions of Section 7(c)(i)
and (ii) above, in the event an Optionee is unable
to continue to perform Services for the Company or
any of its Subsidiaries as a result of such
Optionee's Permanent and Total Disability, such
Optionee may exercise an Option in whole or in part
notwithstanding that such Option may not be fully
exercisable, but only until the earlier of the date
(i) the Option held by the Optionee expires, or (ii)
twelve (12) months from the date of termination of
Services due to such Permanent and Total Disability.
To the extent the Optionee is not entitled to
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<PAGE> 11
exercise an Option on such date or if the Optionee
does not exercise it within the time specified
herein, such Option shall terminate.
(iv) Upon the death of an Optionee, any Option held by an
Optionee shall terminate and be of no further
effect; provided, however, notwithstanding the
provisions of Section 7(c)(ii) above, in the event
an Optionee's death occurs during the term of an
Option held by such Optionee and, at the time of
death, the Optionee was an Employee or Consultant,
the Option may be exercised in whole or in part
notwithstanding that such Option may not have been
fully exercisable on the date of the Optionee's
death, at any time until the earlier of the date (i)
the Option held by the Optionee expires, or (ii)
twelve (12) months from the date of the Optionee's
death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest
or inheritance. To the extent the Option is not
entitled to be exercised on such date or if the
Option is not exercised within the time specified
herein, such Option shall terminate.
(v) If an Optionee retires at an age at which he would
be eligible to receive old-age benefits under the
Federal Social Security Act or retires with the
consent of the Company, such Optionee's Options
shall expire six (6) months after the retirement
date.
(d) Any Option granted under this Plan may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and
distribution, and is not assignable by operation of law or
subject to execution, attachment or similar process. Any
Option granted under this Plan can only be exercised during the
Optionee's lifetime by such Optionee. Any attempted sale,
pledge, assignment, hypothecation or other transfer of the
Option contrary to the provisions hereof and the levy of any
execution, attachment or similar process upon the Option shall
be null and void and without force or effect. No transfer of
the Option by will or by the laws of descent and distribution
shall be effective to bind the Company unless the Company shall
have been furnished written notice thereof and an
authenticated copy of the will and/or such other evidence as
the Committee may deem necessary to establish the validity of
the transfer and the acceptance by the transferee or
transferees of the terms and conditions of the Option. The
terms of any Option transferred by will or by the laws of
descent and distribution shall be binding upon the executors,
administrators, heirs and successors of Optionee.
(e) Any Option granted hereunder shall be deemed to be granted on
the Date of Grant. Written notice of the Committee's
determination to
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As amended 8/22/96
<PAGE> 12
grant an Option to an Employee or Consultant, evidenced by a
Stock Option Agreement, dated as of the Date of Grant, shall be
given to such Employee or Consultant within a reasonable time
after the Date of Grant.
(f) Within the limitations of this Plan, the Committee may modify,
extend or renew outstanding Options or may accept the
cancellation of outstanding Options (to the extent not
previously exercised) for the granting of new Options in
substitution therefor. The foregoing notwithstanding, no
modification of an Option shall, without the consent of the
Optionee, alter or impair the Optionee's rights or obligations
under such Option.
8. Adjustment Provisions.
If any subdivision or combination of shares of Common Stock or any
stock dividend, capital reorganization or recapitalization occurs after
the adoption of the Plan, the Committee shall make such proportionate
adjustments as are appropriate in the number of shares of Common Stock
that may be issued under Section 3 and in the purchase price of, and
the number of shares underlying, outstanding Options in order to
prevent the dilution or enlargement of the rights of any Option holder.
9. Effect of Merger or Other Reorganization.
If the Company shall be the surviving corporation in a merger,
consolidation or other reorganization, the holder of an Option shall be
entitled to receive an option to purchase the same number of shares (or
a fraction of a share) in the surviving corporation that a holder of a
corresponding number of shares of Common Stock will be entitled to
receive under the terms of the merger, consolidation or other
reorganization. If the company dissolves, sells substantially all of
its assets, is acquired in a stock for stock or securities exchange, or
is a party to a merger, consolidation or other reorganization in which
it is not the surviving corporation, then each Option shall be
exercisable in full for a period of 60 days commencing upon the date
the action of the stockholders (or of the Board, if stockholder action
is not required) is taken to approve the transaction, and upon the
expiration of that period all Options and all rights thereto shall
automatically terminate.
10. General Provisions.
(a) No provision of this Plan, under any Stock Option Agreement or
under any grant of Restricted Stock shall be construed to give
any Participant any right to remain an Employee or Consultant
of, or provide Services to, the Company or any of its
Subsidiaries or to affect
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<PAGE> 13
the right of the Company to terminate any Participant's service
at any time, with or without cause.
(b) As a condition to the transfer of any Shares issued under this
Plan, the Company may require an opinion of counsel,
satisfactory to the Company, to the effect that such transfer
will not be in violation of the Securities Act or any other
applicable securities laws, rules or regulations, or that such
transfer has been registered under federal and all applicable
state securities laws. The Company may refrain from delivering
or transferring Shares issued under this Plan until the
Committee has determined that the Participant has tendered to
the Company any and all applicable federal, state or local tax
owed by the Participant as the result of the receipt of a Plan
Award, the exercise of an Option or the disposition of any
Shares issued under this Plan, in the event that the Company
reasonably determines that it might have a legal liability to
satisfy such tax. The Company shall not be liable to any
person or entity for damages due to any delay in the delivery
or issuance of any stock certificate evidencing any Shares for
any reason whatsoever.
(c) No participant shall be entitled to the rights and privileges
of stock ownership relation to any shares of Common Stock
underlying an Option until such Option is exercised and the
shares are issued.
(d) Each Option is personal to the grantee, is not transferable by
the Participant other than by will or by the laws of descent
and distribution, and is exercisable, during the Participant's
lifetime, only by the Participant or his legal representative.
(e) This Plan and any and all Stock Option Agreements and
agreements relating to the grant of Restricted Stock executed
in connection with this Plan shall be governed by and construed
in accordance with the laws of the State of Delaware, without
regard to conflicts of laws principles.
11. Amendment and Termination.
(a) The Board shall have the power, in its sole discretion, to
amend, suspend or terminate the Plan at any time. No such
amendment shall, without approval of the stockholders of the
Company, except as provided in Sections 8 and 9 or the Plan:
(i) change the class of person eligible to receive
Options under the Plan;
(ii) materially increase the benefits accruing to
Participants under the Plan;
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As amended 8/22/96
<PAGE> 14
(iii) increase the number of shares of Common Stock
subject to the Plan; or
(iv) amend this Section 11.
(b) No amendment, suspension or termination of the Plan shall,
without the consent of the Participant alter, terminate, impair
or adversely affect any right or obligations under any Option
previously granted under or made a party of the Plan.
12. Effective Date and Duration of Plan.
The Plan was originally adopted by the Board of Directors and took
effect on October 23, 1990. This Amended and Restated Plan shall be
effective as of the date of its approval and adoption by the Board of
Directors subject only to the approval of the holders of a majority of
the Company's Common Stock present or represented and entitled to vote
at a meeting of stockholders. All Options outstanding under the Plan
as of the effective date of this Amended and Restated Plan shall
continue in full force and effect in accordance with their terms as
granted pursuant to the Plan. No Option shall be granted under the
Plan after the tenth anniversary of the effective date of the Amended
and Restated Plan.
- 14 -
As amended 8/22/96
<PAGE> 1
EXHIBIT 4.6
CAPITOL MULTIMEDIA, INC.
THE AMENDED AND RESTATED 1992 NON-QUALIFIED STOCK OPTION
PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this Non-Qualified Stock Option Plan For Non-Employee
Directors (the "Plan") is to improve the ability of CAPITOL MULTIMEDIA,
INC. (the "Company") to attract and retain highly qualified non-employee
directors by encouraging such directors of the Company to acquire a
proprietary stake in the Company and its future growth. It is the view
of the Company that it may achieve this goal by granting stock options
under the Plan.
2. OPTION SHARES
Three hundred thousand (300,000) shares of the Common Stock of the
Company, par value $.10 per share (the "Stock"), are hereby reserved for
issuance upon the exercise of the stock options granted under the Plan
(the "Options"). The Stock may be issued pursuant to such Options either
from the Company's authorized, but unissued, Stock or from the Company's
issued but not outstanding Stock (treasury stock). Should any Options
granted hereunder not be exercised in the time allowed for such exercise,
the shares of Stock relating to such lapsed Options shall be available
for issuance pursuant to Options subsequently granted under the Plan.
3. ELIGIBILITY
All non-employee directors of the Company shall be eligible to receive
Options under the Plan.
4. TERMS AND CONDITIONS
(a) Grant of Options: Subject to the provisions of the Plan, each
non-employee director of the Company shall be granted an Option
for the purchase of shares of Stock on each Date of Grant (as such
term is defined in paragraph (c) below) occurring during such
director's tenure as a director of the Company.
(b) Option Agreement: Each Option shall be evidenced by a written
agreement between the Company and the non-employee director
specifying the number of shares of Stock that may be purchased by
its exercise.
(c) Date of Grant: The date on which an Option is granted to a
non-employee director (the "Date of Grant") shall be: (1) the
date of each annual meeting of shareholders of the Company at
which a director is elected or re-elected to serve on the Board of
Directors commencing with the annual meeting of shareholders for
the fiscal year ended March 31, 1995, and (2) the date on which a
director who is not also an employee is first elected by the Board
of Directors to fill a vacancy on the Board of Directors.
(d) Number of Shares Granted: Each non-employee director shall
receive an Option to purchase 15,000 shares of Common Stock on
each Date of Grant during such director's service on the Board of
Director's of the Company. In addition, on the date of the annual
meeting of shareholders for the fiscal year ended March 31, 1995,
each director who is not also an employee of the Company and who
has served as a director of the Company for at least three years
as of such date shall be granted an Option to purchase 37,500
shares of Common Stock. Non-employee directors who have served
between two and three years as of such date shall be granted an
Option to purchase 25,000 shares of Common Stock.
1
<PAGE> 2
(e) Exercise of Options: Each Option issued hereunder shall be fully
vested as of the Date of Grant and each Option shall be
exercisable for a five year period commencing on the Date of
Grant; provided, however, that no Option granted hereunder may be
exercised during the six month period immediately following the
Date of Grant pursuant to Rule 16b-3(c) (1).
(f) Modification or Substitution of Options: Subject to the terms and
conditions and within the limitations of the Plan, the members of
the Board of Directors of the Company who are not eligible to
participate in the Plan may modify, extend or renew outstanding
Options granted under the Plan and accept the surrender and
cancellation of outstanding Options (to the extent not theretofore
exercised) and authorize the granting of new Options in
substitution therefor or Options as amended.
(g) Amendment: No amendment to this Section 5 of the Plan may be made
more than once every six (6) months, other than to comport with
changes in the Internal Revenue Code of 1986, as amended (the
"Code"), the Employee Retirement Income Security Act, or the rules
promulgated thereunder.
5. OPTION PRICE
The purchase price per share of Stock placed under an Option pursuant to
this Plan (the "Option Price") shall be equal to the Market Price of the
stock on the Date of Grant. "Market Price" shall mean the average of the
last trade price of the Common Stock on all domestic exchanges on which
the Common Stock may at the time be listed or admitted to trading, or, if
the Common Stock, shall not be so listed or admitted to trading, the
average of the last trading price in the domestic over-the-counter
market, in each such case averaged over a period of 20 consecutive
business days prior to the day as of which Market Price is being
determined; provided that if the Common Stock is listed on any domestic
exchange, the term "business days" as used in this sentence shall mean
business days on which such exchange is open for trading. If the Common
Stock is neither listed or admitted to trading on any domestic exchange
nor quoted in the domestic over-the counter market, the Market Price
shall mean the last trade price as furnished by any dealer in securities
dealing in the Common Stock.
6. DURATION OF OPTION
Each Option granted hereunder may be exercised only by the individual to
whom it is issued. An Option granted hereunder shall be effective upon
the Date of Grant, and shall be exercisable for a five year period (the
OOption PeriodO) from the Date of Grant; provided, however, that no
Option granted hereunder may be exercised during the six month period
immediately following the Date of Grant pursuant to Rule 16b-3(c)(1). If
such holder dies before fully exercising any portion of an Option then
exercisable, such Option may be exercised by such holder's legal
representative's, heir(s) or devisee(s) at any time within the six (6)
month period following his or her death.
7. NON TRANSFERABILITY OF OPTIONS
No Option granted pursuant to this Plan may be transferred by any
Optionee otherwise than by will or by the laws of descent and
distribution; further, during the lifetime of any Optionee, Options
granted hereunder may be exercised only by such Optionee.
8. TERMINATION OF THE PLAN
This Plan shall terminate upon the close of business ten (10) years from
the Adoption Date unless it shall have been sooner terminated by reason
of there having been granted and fully exercised Options covering the
entire three hundred thousand (300,000) shares of Stock subject to this
Plan. Upon such termination, no further Options may be granted hereunder.
If, after termination of this Plan as provided above, there are
outstanding Options which have not been
2
<PAGE> 3
fully exercised, such Options shall remain in effect in accordance with
their terms and shall remain subject to the terms of this Plan.
9. EXERCISE OF OPTIONS
An Option granted pursuant to this Plan shall be exercisable at any time
within the Option Period, subject to the terms and conditions of such
Option. Exercise of any Option shall be made by the delivery, during the
period that such Option is exercisable, to the Company, in person or by
mail, of (i) written notice from the Optionee stating that the Optionee
is exercising such Option and (ii) the payment of the aggregate purchase
price of all shares as to which such Option is then exercised and the
payment of any required federal income tax withholding. Such aggregate
purchase price shall be paid to the Company in cash, Stock or any other
class of equity securities of the Company (such Stock and other class of
equity securities of the company are hereinafter collectively referred to
as the "Company Stock"), or in a combination of cash or Company Stock at
the time of exercise.
There may not, however, be any payment by an Optionee of the exercise
price in whole or in part with shares of Company Stock at a time when the
Company is Insolvent (as hereafter defined) or when such payment would
make the Company Insolvent, or as such payment may otherwise be
prohibited by any applicable state or Federal statute, rule or
regulation, or any rule or regulation of any stock exchange upon which
Company Stock is traded, or if Company Stock is traded on a recognized
stock quotation service, which may be the National Association of
Securities Dealers Automated Quotations System ("NASDAQ"), any rule or
regulation of NASDAQ. For the purposes of this Plan, "Insolvent' shall
mean the inability of the company to pay its debts as they become due in
the usual course of its business. Company Stock utilized in full or
partial payment of the exercise price shall be valued at the Market Price
(as defined in paragraph 5 herein) on the date of exercise of the Option.
Notwithstanding anything to the contrary contained herein, no written
notice shall be effective under this Section 9 unless it requests the
exercise of Options for one hundred (100) shares or an integral multiple
thereof; except to the extent necessary to make full exercise of the
Options in the event that only an odd lot remains. Upon the exercise of
an Option in compliance with the provisions of the Section, and upon the
receipt by the Company of the payment for the Stock so taken up, the
Company shall (i) deliver or cause to be delivered to the Optionee so
exercising his Option a certificate or certificates for the number of
shares of Stock with respect to which the Option is so exercised and
payment is so made, and (ii) register or cause such shares to be
registered in the name of the exercising Optionee in the corporate books
and records.
10. CONTROLLING TERMS
Options granted pursuant hereto may include conditions that are more (but
not less) restrictive to the Optionee than the conditions contained
herein and, in such event, the more restrictive conditions shall apply.
11. REQUIREMENTS OF LAW
If any law, regulation or order of the United States Securities and
Exchange Commission, or of any other commission or agency having
jurisdiction, shall require the Company or the exercising Optionee to
take any action with respect to the shares of Stock acquired by the
exercise of an Option, then the date upon which the Company shall deliver
or cause to be delivered the certificate or certificates for the shares
of Stock shall be postponed until full compliance has been made with all
such requirements of law or regulation. Further, in the event that the
Company shall determine that, in compliance with the Securities Act or
any other applicable statute or regulation, it is necessary to register
any of the shares of Stock with respect to which an exercise of an Option
has been made, or to qualify any such shares for exemption from any of
the requirements of the Securities Act or such other applicable statute
or regulation, it will do so at the Company's expense. Not until such an
action has been
3
<PAGE> 4
completed shall the Option shares be delivered to the exercising
Optionee. Further, in the event that at the time of exercise of the
Option the shares of Stock shall be listed on any stock exchange, then if
required by law or the exchange to do so, the Company shall register the
Option shares of Stock with respect to which exercise is so made in
accordance with the provisions of the Securities Act, any other
applicable law or regulation or any rules or regulations of any such
exchange, and the Company shall make prompt application for the listing
of Option shares on such exchange at the expense of the Company.
12. NO RIGHTS CONFERRED UPON GRANTING OF OPTIONS
The Optionee shall not have any rights as a shareholder of the Company
with respect to any shares of Stock prior to the date of issuance to the
Optionee of the certificate or certificates for such shares. Neither the
Plan nor the Option confer on the Optionee any right to be employed by
the Company.
13. ADJUSTMENTS
In the event of any reorganization, merger, consolidation, acquisition,
separation, recapitalization, split-up, combination, exchange of shares
or stock dividend of the Stock or shares convertible into the Stock or
similar corporate action, the number and class of shares of Stock
available pursuant to this Plan and any Options granted pursuant to this
Plan, together with the Option Prices, shall be adjusted by appropriate
modifications in this Plan and in any Options outstanding pursuant to
this Plan. Any such adjustment to the Plan or to Options or Option
Prices shall be made by notice of the Company's Board of Directors, whose
determination shall be conclusive.
14. AMENDMENT OR DISCONTINUANCE OF THE PLAN
The Company's Board of Directors may at any time suspend or discontinue
the Plan, but no amendment shall be authorized without shareholder
approval which (i) materially increases the benefits accruing to
participants under the Plan; (ii) materially increases the number of
securities which may be issued under the Plan, except as otherwise
provided in Section 13; or (iii) materially modifies the requirements as
to eligibility for participation in the Plan.
In addition, notwithstanding any other provision in the Plan, in the
event of a change in federal or state law or regulation which would make
the exercise of all or part of an existing Option unlawful or subject the
Company to a penalty, the Company's Board of Directors may restrict such
exercise without the consent of the Optionee or other holder thereof in
order to comply with such law or regulation or to avoid such penalty.
15. LIQUIDATION OF THE COMPANY
In the event of the complete liquidation or dissolution of the Company,
other than as an incident to a merger, reorganization or other adjustment
referred to in Section 13 above, any Options granted pursuant to this
Plan and remaining unexercised shall be deemed canceled without regard to
or without being limited by any other provisions of this Plan.
16. UNSECURED OBLIGATION
Optionees shall not have any interest in any fund or special asset of the
Company by reason of the Plan. No trust fund shall be created in
connection with the Plan or any award thereunder, and there shall be no
required funding of amounts which may become payable to any Optionee.
17. GOVERNING LAW
The Plan shall be governed by, construed and enforced in accordance with
the laws of the State of Delaware.
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<PAGE> 5
18. COMPLIANCE WITH RULE 16b-3
It is the intent of the Company that all Options granted hereunder comply
with the applicable provisions of Rule 16b-3, as amended, promulgated
pursuant to the Securities Exchange Act of 1934, as amended. As a
result, this Plan may be amended by the Company's Board of Directors in
any manner necessary or desirable to meet any provision or condition of
Rule 16b-3. In addition, all Options shall be granted in such a manner
as to comply with the applicable requirements of Rule 16b-3.
19. APPROVAL
This Amended and Restated Plan shall take effect upon approval by the
holders of a majority of the Company's Common Stock present or
represented and entitled to vote at a meeting of stockholders, which
approval must occur within twelve (12) months after the date the Amended
and Restated Plan is adopted by the Board of Directors.
5
<PAGE> 1
EXHIBIT 10.46
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 18th day of September,
1996 (the "Effective Date"), by and between Capitol Multimedia, Inc., a
Delaware corporation ("Employer" or "Company"), and Luda Kopeikina
("Employee").
WITNESSETH
WHEREAS, Employee desires to serve as President of the Company, the
Company desires to employ Employee as President of the Company, and Employee
and the Company desire to embody in this Agreement the terms and conditions
under which Employee shall be employed;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Employee and the Company,
intending to be legally bound hereby, AGREE AS FOLLOWS:
1. EMPLOYMENT, DUTIES AND RESPONSIBILITIES OF EMPLOYEE
(a) Duties of Employee. Employee shall perform such services and
assume such duties and responsibilities as are prescribed for the President of
the Company, subject to the general supervision of the Board of Directors of
the Company, and in all respects use her best efforts to further enhance and
develop the Company's business, affairs, interests, welfare and value.
(b) Full Time and Attention. Employee shall not, without prior
written consent of the Employer, render services of a business, commercial, or
professional nature to any other person or organization or take on
responsibilities that would otherwise materially interfere in any way with the
Employee's obligations under this Agreement.
2. TERM OF AGREEMENT
The term of this agreement shall be the period commencing on the
Effective Date and terminating on September 30, 1997 (the "Initial Term"). This
Agreement may be terminated by either party at any time before the end of the
Initial Term with ninety days prior written notice. In the event this
Agreement is not terminated at the end of the Initial Term, the Agreement will
automatically renew for a three-year term beginning October 1, 1997 and ending
October 1, 2000 (the "Second Term"). The Initial Term and the Second Term
shall be referred to as the "Term."
3. TERMINATION OF EMPLOYMENT
(a) Termination by the Company For Cause. The Employer may terminate
this Agreement prior to the expiration of either the Initial Term or the Second
Term by sending Employee written notice of such termination for Cause. The date
of such notice shall be the date of Employee's termination. If the
<PAGE> 2
Company terminates Employee's employment for Cause, Employee shall not receive
any pay or benefits described herein. For purposes of this Agreement, "Cause"
shall mean: (1) dishonesty or fraud resulting in injury to the business of the
Company; (2) embezzlement or theft of assets of the Company; (3) breach of
Section 7 of this Agreement; (4) a substantial breach of this Agreement; (5)
conviction for a felony resulting in damage to the business of the Company or
its Affiliates; or (6) any other willful misconduct by Employee which is
materially injurious to the Company, monetarily or otherwise. Employee may be
terminated for Cause only by the affirmative vote of a majority of the Board of
Directors, provided that Employee shall have at least ten days written notice
of the meeting at which the Board of Directors will consider such Employee's
termination and will be afforded the opportunity to address the Board of
Directors and present evidence regarding the absence of cause.
(b) Termination by the Company or Employee Without Cause. The
Company may terminate this Agreement without cause only during the Initial
Term, effective upon 90 days written notice to the Employee.
The Employee may terminate her employment with the Company, at any
time, with not less than 90 days written notice.
Upon the termination of employment under this subparagraph by either
Employee or Company, all wages and benefits to which Employee would otherwise
be entitled shall terminate.
(c) Death. This Agreement shall terminate upon the death or
disability of Employee for a period of not less than ninety (90) days. Any
compensation payable pursuant to this Agreement from and after Employee's death
shall be paid to Employee's estate or one or more beneficiaries as designated
in writing by Employee.
(d) Delivery of Material. Employee agrees that upon the termination
of this Agreement, she will deliver to the Company all documents, papers,
materials and other property of the Company relating to its affairs which may
then be in her possession or under her control.
4. COMPENSATION OF EMPLOYEE
As compensation and consideration for the performance by Employee of
her obligations under this Agreement, Employee shall be entitled to the
following:
(a) Base Salary. During the Term, the Company shall pay to Employee a
base salary totaling One Hundred Sixty-Five Thousand Dollars ($165,000) per
annum (the "Base Salary") effective as of the date first written above.
Termination of Employee's employment under Section 3 of this Agreement shall
discharge the Company from its obligation to pay Base Salary for the remainder
of the Term, except as otherwise provided herein. The Base Salary shall be
payable in regular bi-weekly intervals, and shall be subject to such
withholding and other normal employee deductions as may be required by law.
This Base Salary may be increased by the Compensation Committee of the Board of
Directors in its sole discretion.
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<PAGE> 3
(b) Benefits. Employee shall be eligible to participate (or
continue participating, if already participating on the effective date of this
Agreement) during the Term in such life insurance, health, disability and major
medical insurance benefits, pension, and such other employee benefit plans and
programs for the benefit of the employees of the Company, as may be maintained
from time to time, in each case to the extent and in the manner available to
other employees of the Company, and subject to the terms and provisions of such
plan or programs. The level of benefits to which Employee shall be entitled,
if determined by the level of Employee's annual compensation, shall include for
purposes of such calculation any performance bonus payments to be made to
Employee pursuant to paragraph (c) below.
(c) Annual Bonus. The Employee shall be eligible for an annual
bonus to be determined by the Compensation Committee of the Board of Directors
of the Company.
(d) Vacations and Holidays.
A. The Employee shall be entitled to four weeks paid
vacation and two weeks paid sick leave during the year of her employment under
the Agreement.
B. Employee shall be entitled to all holidays applicable
to all other company employees.
(e) Automobile and Parking. The Employee shall receive a $500 per
month car allowance and a parking space at or near the Company premises fully
paid for by the Company.
(f) Non-Qualified Stock Options. The Company shall grant options to
the Employee, pursuant to the Company's Employee Stock Option Plan, for the
purchase of 320,000 shares of common stock at a per share price equal to the
market price of the Company's common stock on the effective date of this
Agreement. A total of 64,000 options shall vest on the effective date of this
Agreement, and an additional 64,000 options shall vest on each October 1 of
1997, 1998, 1999, and 2000. Such options shall expire five years from their
respective vesting dates.
5. PURCHASE OF EMPLOYEE WORK PRODUCT
The Company agrees, subject to Board approval and the good-faith
negotiation of a definitive agreement, to purchase from Employee all right,
title and interest in, and to, all work product of Employee relating to
TestAdvantage for that number of shares of the Company's common stock, the fair
market value of which shall equal $127,500.
6. CONFIDENTIALITY
(a) Confidentiality. Employee acknowledges that during the course
of her employment with the Company she will, from time to time, be invested
with confidential information relating to the business practices, products,
product plans, development ideas and schedules and other confidential and
proprietary
3
<PAGE> 4
information regarding the Company. Employee hereby agrees to keep all such
information confidential. Employee also agrees that she will not, except as
required in the conduct of Company business, or as authorized in writing by the
Company, publish, disclose or make use of any such information or knowledge
unless and until such information or knowledge shall have ceased to be secret
or confidential without her fault.
(b) Exclusive Property. All business records, papers and other
documents kept or made by Employee relating to the business of the Company or
an Associated Company shall be and remain the property of the Company. Upon
the termination of her employment with the Company or upon the request of the
Company at any time, Employee shall promptly deliver to the Company, and shall
retain no copies of, any written materials, records and documents made by
Employee or coming into her possession concerning the business or affairs of
the Company or an Associated Company other than personal notes or
correspondence of Employee not containing proprietary information relating to
such business or affairs.
(c) Inventions, Rights to Improvements. Employee hereby sells,
transfers and assigns to the Company any right, title and interest in any and
all inventions, improvements, discoveries, and ideas (whether or not patentable
or copyrightable) (collectively the "Intellectual Property") which Employee may
make or conceive during the term of this Agreement, and which relate to or are
applicable to any phase of the Company's business. Employee hereby agrees to
communicate promptly and disclose to the Company all information, details and
data pertaining to the aforementioned Intellectual Property and to execute any
document and do any act reasonably necessary to perform Employee's duties under
this Section 6(c). Employee also affirms that if any such Intellectual
Property shall be deemed confidential by the Company, she will not disclose any
such Intellectual Property without prior written authorization from a majority
of the members of the Company's Board of Directors.
(d) Survival of Section. The provisions of this Section 6 shall
survive the termination of this Agreement for any reason whatsoever.
7. EXCLUSIVITY / NON-COMPETITION
(a) Exclusivity / Non Competing Employment. The Employee agrees that
for a period of twelve months subsequent to her termination of employment for
any reason other than non-renewal of this Agreement after the Initial Term, she
will not compete directly or be employed in any way by individuals, companies,
interests or entities that compete directly with the Company. The Employee
also acknowledges that for six months subsequent to her termination of
employment for any reason other than non-renewal of this Agreement, that she
will not utilize the Company's customer lists for any business related purpose.
(b) No Interference. During the six months subsequent to
termination, Employee shall not, whether for her own account or for the account
of any other individual, partnership, firm, corporation or other business
organization which is engaged in marketing or selling a product or products
4
<PAGE> 5
similar to any product sold by the Company, intentionally solicit, endeavor to
entice away from the Company, or otherwise interfere with the relationship of
the Company with any person who is employed by the Company, or any person or
entity who is, or was within the most recent twelve-month period, a customer or
client of the Company.
(c) Stock Ownership. Nothing in this Agreement shall prohibit
Employee from acquiring or holding any securities of any company listed on a
national securities exchange or quoted on the automated quotation system of the
National Association of Securities Dealers, Inc., provided that during
employment and for the six months subsequent to termination, Employee and
members of her immediate family do not own more than five percent (5%) of any
voting securities of any company engaged in the same type of business of the
Company.
(d) Survival of Section. The provisions of this Section 7 shall
survive the termination of this Agreement for any reason whatsoever.
8. REMEDIES
(a) Specific Performance. Employee hereby acknowledges that a
breach of Sections 6 or 7 of this Agreement may result in material irreparable
injury to the Company for which there is no adequate remedy at law, that it
will not be possible to measure damages for such a breach, and that in the
event of such a breach or threat thereof the Company shall be entitled to
obtain a temporary restraining order, a preliminary injunction, and a permanent
injunction restraining Employee from engaging in activities prohibited by this
Agreement. Employee further acknowledges that in the event of such a breach or
threat thereof the Company shall be entitled to obtain such other or further
relief as may be required to specifically enforce any of the covenants of this
Agreement. Employee hereby agrees and consents that such injunctive or other
relief may be sought ex parte in any state or federal court in the Commonwealth
of Massachusetts or in the state and county in which such violation may occur
or in any other court having jurisdiction, at the election of the Company.
Employee agrees to and hereby does submit to in personam jurisdiction before
each and every such court for that purpose.
(b) Suspension of Payments. Employee hereby acknowledges that
should a breach of Sections 6 or 7 of this Agreement occur, the Company shall
be entitled to offset against payments otherwise due Employee hereunder any
damages incurred by the Company with respect to such breach.
(c) Remedies not Exclusive. The remedies of this Section shall be
cumulative and not exclusive, and shall be in addition to any other remedy
which the Company may have.
(d) Survival of Remedies. This Section 8 shall survive the
termination of this Agreement for any reason whatsoever.
9. NOTICES
All notices given hereunder shall be in writing and shall be deemed
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<PAGE> 6
delivered when served personally or on the third business day after being
deposited in the United States mail, certified or registered mail, postage
prepaid, addressed as follows:
If to the Company:
Capitol Multimedia, Inc.
200 Baker Avenue, Suite 300
Concord, MA 01742
Attention: CFO
Telecopier: (508) 287-4222
If to Employee:
Luda Kopeikina
985 North Road,
Carlisle, MA 01741
fax: (508) 287 6131__________________
___________________
Any party may change its address for notices by communicating its new
address in writing to the other party.
10. MISCELLANEOUS
(a) Agreement is Non-Assignable. This Agreement is a personal
service contract and shall not be assignable by Employee or by the Company,
except that the Company may assign this Agreement to a Person which succeeds to
the Company's rights and liabilities by merger, sale of assets as a going
concern, or consolidation with the Company.
(b) Binding Effect. All rights and obligations and agreements of
the parties under this Agreement shall be binding upon and enforceable against,
and inure to the benefit of the parties and their personal representatives,
heirs, legatees and devises, and any Person succeeding by operation of law to
their rights under this Agreement, except that such personal representatives,
heirs, legatees, devises and other persons shall have no obligation to perform
Employee's duties described in Section 1 hereof.
(c) Representations. Employee and the Company each represent and
warrant that there are no restrictions, agreements or limitations on their
rights or ability to enter into and perform the terms of this Agreement.
(d) Further Assurances. Employee and the Company, as the case may
be, shall execute and deliver such further instruments and do such further acts
and things as may be required to carry out the terms or conditions of this
Agreement or as may be consistent with the intent and purpose of this
Agreement.
(e) Rights of Third Parties. Nothing in this Agreement, expressed
or implied, is intended to confer upon any person other than the parties hereto
any rights or remedies under or by reason of this Agreement.
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<PAGE> 7
(f) Effect of Waiver. A waiver of, or failure to exercise, any
rights provided for in this Agreement, in any respect, shall not be deemed a
waiver of any further or future rights hereunder. Except for rights which must
be exercised within a specified time period under this Agreement, no rights
herein shall be considered as waived, whether intentionally or not, unless
waived in a writing signed by the party to be charged with the waiver.
(g) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts made and performed in that jurisdiction, without regard to the
principles of conflicts of laws.
(h) Amendments. This Agreement may not be changed or amended orally,
but only by an agreement in writing signed by all parties hereto.
(i) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, and such counterparts shall
together constitute but one and the same instrument.
(j) Severability. If a court of competent jurisdiction declares that
any term or provision of this Agreement is invalid or unenforceable, then:
(1) the remaining terms and provisions hereof shall be
unimpaired, and
(2) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
(k) Captions. The captions to the Sections contained in this
Agreement are for reference only, do not form a substantive part of this
Agreement, and shall not restrict or enlarge any substantive provision of this
Agreement.
(l) Entire Agreement. This Agreement supersedes all prior
agreements, oral or written, between the parties hereto with respect to the
employment of Employee by the Company. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof, and the
parties shall not be bound by any terms, conditions, statements, covenants,
representations or warranties, oral or written, not herein contained.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement effective as of the date first written above.
Capitol Multimedia, Inc.,
a Delaware corporation
By: /s/ Robert Bogin /s/ L. Kopeikina
---------------- ----------------
Luda Kopeikina
Its: Director
--------
7
<PAGE> 1
EXHIBIT 10.47
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement"), entered into on this 28th day of
October, 1996, by and between Capitol Multimedia, Inc., a Delaware corporation
(the "Company"), and Robert I. Bogin ("Employee")
WITNESSETH
WHEREAS, Employee has been a key employee of the Company and has
announced his intention to resign from the Company;
WHEREAS, Employee acknowledges that the consideration provided him
under this Agreement is over and above the compensation currently earned by
Employee;
WHEREAS, Employee and the Company intend the terms and conditions of
this Agreement to govern all issues related to Employee's employment with and
resignation from the Company;
THE EMPLOYEE AND COMPANY THEREFORE AGREE AS FOLLOWS:
1. Severance. The Employee and the Company agree that Employee's
employment with the Company and that certain employment agreement dated January
27, 1992 between the Company and the Employee will, at the discretion of
Employee, terminate not later than December 31, 1996 ("Termination Date").
Assuming such Termination Date is December 31, 1996, Employee shall receive,
subject to Employee's execution of a letter in the form attached hereto (a
"Waiver Letter") as required by Section 11 hereof, a lump sum cash payment
equal to $258,550 plus any earned and unused vacation. Should the Termination
Date be sometime between the date of this Agreement and December 31, 1996,
Employee will receive, also subject to Employee's execution of a Waiver Letter,
a lump sum cash payment equal to $258,550, plus Employee's salary and Company's
cost of providing Employee with non-medical benefits from Termination Date to
December 31, 1996, plus any earned and unused vacation. In either case, the
Company will provide medical benefits, comparable to those Employee currently
has, at no cost to Employee from Termination Date until March 31, 1998.
2. Options. In substitution for the options previously granted
to Employee, the Company hereby grants to Employee under the Company's Amended
and Restated 1991 Non-Qualified Employee Stock Option Plan options to purchase
250,000 shares of Common Stock at the exercise prices set forth in the attached
schedule. Such options shall become fully exercisable on December 31, 1996
unless Employee shall have resigned as an employee of the Company effective as
of a date prior to December 31, 1996. Once vested, such options shall be
exercisable, notwithstanding the termination of Employee's employment with the
Company, for the periods set forth in the schedule attached hereto. Employee
hereby consents to the issuance of such options in
1
<PAGE> 2
substitution for the options previously granted to Employee by the Company and
identified in the schedule attached hereto.
3. Termination. The option grants to be made pursuant to Section
2 of this Agreement shall not be made in the event that Employee voluntarily
resigns or terminates his employment prior to such date.
4. Payment. The Company shall pay Employee all amounts owed to
the Employee under this Agreement not later than fifteen (15) days after the
date of Employee's termination; provided that the Employee has executed and
delivered to the Company a Waiver Letter. If for any reason, Employee is not
paid any or all amounts owed to Employee under this Agreement within the
aforementioned fifteen (15) days, then interest shall accrue on the unpaid
balance at 18% per annum. In addition, the Company will be responsible for the
payment of all costs, including reasonable attorney fees, if any, incurred in
connection with Employee enforcing his rights to be paid under this Agreement.
5. Governing Law. This Agreement shall be construed and
governed in all aspects by the laws of the State of Delaware (exclusive of
conflicts of law principles).
6. Modification. This Agreement shall not be modified or
amended except as agreed to in writing signed by each party or an authorized
representative of each party.
7. No Waiver. The failure of either party to this Agreement to
insist upon the performance of any of the terms and conditions of this
Agreement, or the waiver of any breach of any of the terms and conditions of
this agreement, shall not be construed as thereafter waiving any such terms and
conditions, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred.
8. Headings. Titles to the sections of this Agreement are solely
for the convenience of the parties and shall not be used to explain, modify,
simplify, or aid in the interpretation of the provisions of this Agreement.
9. Entire Agreement. This Agreement constitutes the entire
agreement and understanding, and merges and supersedes all prior discussions,
agreements and understandings between the parties regarding the subject matter
described herein.
10. Survival of Indemnification. All indemnification obligations
undertaken by the Company on behalf of Employee whereby the Company has agreed
to indemnify Employee against and in respect of any damages, losses, claims, or
liabilities, including, where applicable, any costs, expenses, and reasonable
fees incident or related thereto (including reasonable attorney's fees) whether
arising by contract or under the Articles of Incorporation or Bylaws of the
Company or otherwise shall survive the execution of this Agreement, the
termination of Employee's employment and the execution by Employee of a Waiver
Letter.
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<PAGE> 3
11. Condition to Receipt of Benefits. As a condition precedent to
receiving the benefits provided for under this Agreement, Employee must sign
the attached Waiver Letter on the date of Employee's termination.
12. This Agreement shall supersede and render null and void any
prior termination agreement between the Company and Employee.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first above written.
/s/ Robert I. Bogin
-------------------
Robert I. Bogin
Capitol Multimedia, Inc.,
a Delaware corporation
/s/ Igor R. Razboff
-------------------
By: Igor R. Razboff
Its: Chief Executive Officer
3
<PAGE> 4
Robert I. Bogin
Severance Agreement Option Schedule
<TABLE>
<CAPTION>
Options Granted per Severance Agreement and pursuant to the
Options Previously Granted Company's Amended and Restated 1991 Employee Stock Option Plan
-------------------------- --------------------------------------------------------------
Number of Shares Exercise Price Date Expiration Number of Shares Exercise Price Date Expiration
Underlying Option Per Share Exercisable Date Underlying Option Per Share Exercisable Date
- ----------------- -------------- ----------- ---------- ----------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
25,000 $3.9625 9/13/95 3/31/00 25,000 $3.9625 12/31/96 3/31/00
25,000 $3.9625 4/1/96 3/31/01 25,000 $3.9625 12/31/96 3/31/01
100,000 $3.9625 9/13/95 3/30/02 100,000 $3.9625 12/31/96 3/30/02
100,000 $3.9625 4/1/97 3/31/03 100,000 $3.9625 12/31/96 3/31/03
- ----------------- -----------------
250,000 250,000
</TABLE>
<PAGE> 5
WAIVER LETTER
Mr. Robert I. Bogin
[Home Address]
________
Dear Mr. Bogin:
In connection with your termination as an employee of Capitol
Multimedia, Inc. (the "Company"), you and the Company have agreed to the terms
and conditions as contained in the Severance Agreement (to which the form of
this letter is an attachment) concerning your termination from employment no
later than December 31, 1996 (the "Termination Date").
In consideration of the Company's agreement to provide the benefits,
payments, and other items described in the Severance Agreement, some of which
are in addition to anything which you would otherwise be entitled to receive
and the receipt and sufficiency of which is hereby acknowledged, you hereby
release and forever discharge the Company, its officers, directors, agents,
servants, and employees, their successors, assigns, and insurers, and their
parents, subsidiaries and affiliates, and any and all other persons, firms
organizations, and corporations from any and all damage, losses, causes of
action, expenses, demands, liabilities, and claims on behalf of yourself, your
heirs, executors, administrators, and assigns with respect to all matters
relating to the Company and you hereby accept the cash payments, benefits, and
other items described in the Severance Agreement in full settlement of all such
damages, losses, causes of action, expenses, demands, liabilities, and claims
you now have or may have with respect to such matters.
This release includes, but is not limited to, claims arising under the
Age Discrimination in Employment Act, the Older Workers' Benefit Protection
Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act, the Family and Medical Leave Act, any claims for breach of contract, tort
or personal injury of any sort, and any claim under any other state or federal
statute or regulation. Further, by accepting the payments described in the
Severance Agreement, you agree not to sue the Company or the related persons
and entities described above. You affirm and agree that as of the Termination
Date your employment relationship has ended and waive all rights in connection
with such
<PAGE> 6
relationship except to vested benefits and the payments and benefits described
in the Severance Agreement. You acknowledge that you have been advised in
writing to consult with an attorney prior to signing this letter agreement and
have had an adequate opportunity to seek advice of your own choosing. You
acknowledge that you have read this letter agreement, have had an opportunity
to ask questions and have it explained to you and that you understand that this
letter agreement will have the effect of knowingly and voluntarily waiving any
action you might pursue, including breach of contract, personal injury,
retaliation discrimination on the basis of race, age, sex, national origin, or
disability and any other claims arising prior to the date of this letter
agreement. Notwithstanding the foregoing, as provided in Section 10 of the
Severance Agreement, the execution of this letter agreement by you will not
constitute the waiver of any indemnification rights that may otherwise be
available to you.
The purpose of the arrangements described in this letter and the
Severance Agreement is to arrive at a mutually agreeable and amicable basis
upon which to separate your employment with the Company. You and the Company
agree to refrain from any criticisms or disparaging comments about each other
or in any way relating to your termination from employment. Furthermore, you
agree that you have returned or will return immediately, and to maintain in
strictest confidence and not to use in any way, any proprietary, confidential,
or other nonpublic information or documents relating to the business and
affairs of Company and its affiliates.
Very truly yours,
Capitol Multimedia, Inc.
/s/ Igor R. Razboff
-------------------
By: Igor R. Razboff
Its: Chief Executive Officer
AGREED TO AND ACCEPTED this
______ day of __________, ___.
- -----------------------------
Robert I. Bogin
<PAGE> 1
EXHIBIT 10.48
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement"), entered into on this 28th day
of October, 1996, by and between Capitol Multimedia, Inc., a Delaware
corporation (the "Company"), and Catherine K. Hoopes ("Employee").
WITNESSETH
WHEREAS, Employee has been a key employee of the Company and has made
outstanding contributions to the Company;
WHEREAS, the Company desires to reward Employee for Employee's loyalty
and distinguished service to the Company prior to the Employee's resignation
from the Company;
WHEREAS, the Company desires to provide Employee, as additional
compensation for her service to the Company, with a severance package over and
above the compensation currently earned by Employee;
NOW, THEREFORE, in consideration of the above recitals, the terms and
covenants of this agreement, and other valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:
1. Severance. Employee and the Company agree that Employee's
employment with the Company and that certain employment agreement dated August
18, 1992, as amended and modified, between the Company and the Employee will
terminate on February 28, 1997 (the "Termination Date"). Upon the termination
of the Employee's employment on such date, Employee shall receive, subject to
Employee's execution of a letter in the form attached hereto (a "Waiver
Letter") as required by Section 11 hereof and provided Employee has not
resigned prior to such date, a lump sum cash payment equal to $61,250 plus any
earned and unused vacation.
2. Options. In substitution for the options previously granted
to Employee, the Company hereby grants to Employee under the Company's Amended
and Restated 1991 Non-Qualified Employee Stock Option Plan options to purchase
102,176 shares of Common Stock at the exercise prices set forth in the attached
schedule. Such options shall become fully exercisable on the Termination Date
unless Employee shall have resigned as an employee of the Company effective as
of a date prior to the Termination Date. Once vested, such options shall be
exercisable, notwithstanding the termination of Employee's employment with the
Company, for the periods set forth in the schedule attached hereto. Employee
hereby consents to the issuance of such options in substitution for the options
previously
1
<PAGE> 2
granted to Employee by the Company and identified in the schedule attached
hereto.
3. Termination. The severance payment and option grants to be
made pursuant to Sections 1 and 2 of this Agreement shall not be payable in the
event that Employee is terminated by the Company for Cause prior to February
28, 1997 or voluntarily resigns or terminates her employment prior to such
date. For the purposes of this Agreement, the Company shall have "Cause" for
termination of Employee's employment only (i) if Employee is convicted of or
pleads guilty to any felony (except if committed upon advice from counsel to
the Company), or (ii) if Employee has engaged in conduct or activities
involving moral turpitude materially damaging to the business or reputation of
the Company or (iii) if Employee knowingly or willfully violates any law, rule,
regulation or order of any governmental authority, thereby exposing the Company
to potential material civil or criminal penalties unless the Employee has done
so upon advice from counsel to the Company; or (iv) in the event of Employee's
gross misfeasance, intentional misconduct or fraud in the performance of her
responsibilities to the Company as set forth by the Board of Directors of the
Company, or (v) if Employee knowingly misappropriates for her own purpose and
benefit, any property of the Company or unlawfully appropriates any corporate
opportunity of the Company.
4. Payment. The Company shall pay Employee all amounts owed to
Employee under this Agreement not later than fifteen (15) days after the date
of Employee's termination; provided that Employee has executed and delivered to
the Company a Waiver Letter.
5. Governing Law. This Agreement shall be construed and
governed in all aspects by the laws of the State of Delaware (exclusive of
conflicts of law principles).
6. Modification. This Agreement shall not be modified or
amended except as agreed to in writing signed by each party or an authorized
representative of each party.
7. No Waiver. The failure of either party to this Agreement to
insist upon the performance of any of the terms and conditions of this
Agreement, or the waiver of any breach of any of the terms and conditions of
this agreement, shall not be construed as thereafter waiving any such terms and
conditions, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred.
8. Headings. Titles to the sections of this Agreement are solely
for the convenience of the parties and shall not be used to
2
<PAGE> 3
explain, modify, simplify, or aid in the interpretation of the provisions of
this Agreement.
9. Entire Agreement. This Agreement constitutes the entire
agreement and understanding, and merges and supersedes all prior discussions,
agreements and understandings between the parties regarding the subject matter
described herein.
10. Survival of Indemnification. All indemnification obligations
undertaken by the Company on behalf of the Employee whereby the Company has
agreed to indemnify Employee against and in respect of any damages, losses,
claims, or liabilities, including, where applicable, any costs, expenses, and
reasonable fees incident or related thereto (including reasonable attorney's
fees) whether arising by contract or under the Articles of Incorporation or
Bylaws of the Company or otherwise shall survive the execution of this
Agreement, the termination of Employee's employment and the execution by
Employee of a Waiver Letter.
11. Condition to Receipt of Benefits. As a condition precedent to
receiving the benefits provided for under this Agreement, Employee must sign
the attached Waiver Letter on the date of Employee's termination.
12. This Agreement shall supersede and render null and void any
prior termination agreement between the Company and Employee.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first above written.
/s/ Catherine K. Hoopes
-----------------------
Catherine K. Hoopes
Capitol Multimedia, Inc.,
a Delaware corporation
/s/ Igor R. Razboff
-------------------
By: Igor R. Razboff
Its: Chief Executive Officer
<PAGE> 4
Catherine K. Hoopes
Severance Agreement Option Schedule
<TABLE>
<CAPTION>
Options Granted per Severance Agreement and pursuant to the
Options Previously Granted Company's Amended and Restated 1991 Employee Stock Option Plan
-------------------------- --------------------------------------------------------------
Number of Shares Exercise Price Date Expiration Number of Shares Exercise Price Date Expiration
Underlying Option Per Share Exercisable Date Underlying Option Per Share Exercisable Date
- ----------------- -------------- ----------- ---------- ----------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1,172 $3.9625 9/13/95 4/1/97 1,172 $3.9625 2/28/97 4/1/97
1,004 $3.9625 9/13/95 4/1/98 1,004 $3.9625 2/28/97 4/1/98
15,000 $3.9625 9/13/95 3/31/00 15,000 $3.9625 2/28/97 3/31/00
15,000 $3.9625 4/1/96 3/31/01 15,000 $3.9625 2/28/97 3/31/01
15,000 $3.9625 9/13/95 2/2/03 15,000 $3.9625 2/28/97 2/2/03
7,500 $3.9625 9/13/95 3/31/03 7,500 $3.9625 2/28/97 3/31/03
7,500 $3.9625 9/13/95 3/31/04 7,500 $3.9625 2/28/97 3/31/04
40,000 $3.7500 4/1/97 3/31/05 40,000 $3.7500 2/28/97 3/31/05
- ---------------- -----------------
102,176 102,176
</TABLE>
<PAGE> 5
WAIVER LETTER
Ms. Catherine K. Hoopes
[Home Address]
Dear Ms. Hoopes:
In connection with your termination as an employee of Capitol
Multimedia, Inc. (the "Company"), you and the Company have agreed to the terms
and conditions as contained in the Severance Agreement (to which the form of
this letter is an attachment) concerning your termination from employment as of
February 28, 1997 (the "Termination Date").
In consideration of the Company's agreement to provide the benefits,
payments, and other items described in the Severance Agreement, some of which
are in addition to anything which you would otherwise be entitled to receive
and the receipt and sufficiency of which is hereby acknowledged, you hereby
release and forever discharge the Company, its officers, directors, agents,
servants, and employees, their successors, assigns, and insurers, and their
parents, subsidiaries and affiliates, and any and all other persons, firms
organizations, and corporations from any and all damage, losses, causes of
action, expenses, demands, liabilities, and claims on behalf of yourself, your
heirs, executors, administrators, and assigns with respect to all matters
relating to the Company and you hereby accept the cash payments, benefits, and
other items described in the Severance Agreement in full settlement of all such
damages, losses, causes of action, expenses, demands, liabilities, and claims
you now have or may have with respect to such matters.
This release includes, but is not limited to, claims arising under the
Age Discrimination in Employment Act, the Older Workers' Benefit Protection
Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act, the Family and Medical Leave Act, any claims for breach of contract, tort
or personal injury of any sort, and any claim under any other state or federal
statute or regulation. Further, by accepting the payments described in the
Severance Agreement, you agree not to sue the Company or the related persons
and entities described above. You affirm and agree that as of the Termination
Date your employment relationship has ended and waive all rights in connection
with such relationship except to vested benefits and the payments and
<PAGE> 6
Catherine K. Hoopes
Page 2
benefits described in the Severance Agreement. You acknowledge that you have
been advised in writing to consult with an attorney prior to signing this
letter agreement and have had an adequate opportunity to seek advice of your
own choosing. You acknowledge that you have read this letter agreement, have
had an opportunity to ask questions and have it explained to you and that you
understand that this letter agreement will have the effect of knowingly and
voluntarily waiving any action you might pursue, including breach of contract,
personal injury, retaliation discrimination on the basis of race, age, sex,
national origin, or disability and any other claims arising prior to the date
of this letter agreement. Notwithstanding the foregoing, as provided in
Section 10 of the Severance Agreement, the execution of this letter agreement
by you will not constitute the waiver of any indemnification rights that may
otherwise be available to you.
The purpose of the arrangements described in this letter and the
Severance Agreement is to arrive at a mutually agreeable and amicable basis
upon which to separate your employment with the Company. You and the Company
agree to refrain from any criticisms or disparaging comments about each other
or in any way relating to your termination from employment. Furthermore, you
agree that you have returned or will return immediately, and to maintain in
strictest confidence and not to use in any way, any proprietary, confidential,
or other nonpublic information or documents relating to the business and
affairs of Company and its affiliates.
Very truly yours,
Capitol Multimedia, Inc.
/s/ Igor R. Razboff
-------------------
By: Igor R. Razboff
Its: Chief Executive Officer
AGREED TO AND ACCEPTED this
28th day of February, 1997
- -----------------------------
Catherine K. Hoopes
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1996 (UNAUDITED) AND THE
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,341,216
<SECURITIES> 2,440,930
<RECEIVABLES> 576,913
<ALLOWANCES> 6,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,913,785
<PP&E> 1,336,770
<DEPRECIATION> (933,876)
<TOTAL-ASSETS> 6,632,246
<CURRENT-LIABILITIES> 677,866
<BONDS> 0
0
0
<COMMON> 565,715
<OTHER-SE> 5,298,444
<TOTAL-LIABILITY-AND-EQUITY> 6,632,246
<SALES> 1,339,710
<TOTAL-REVENUES> 1,475,379
<CGS> 0
<TOTAL-COSTS> 2,406,011
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (930,632)
<INCOME-TAX> 14,400
<INCOME-CONTINUING> (945,032)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (945,032)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
