EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

                      LICENSING AND DISTRIBUTION AGREEMENT


This agreement (" Agreement") is entered into as of July 11, 1995 by and between
Davidson & Associates,  Inc., a California  corporation with its principal place
of business at 19840 Pioneer Avenue, Torrance, CA 90503 ("Davidson") and Capitol
Multimedia,  Inc., a Delaware corporation,  with its principal place of business
at 7315 Wisconsin Avenue, Suite 800E, Bethesda, MD 20814 ("Capitol").

Whereas,  Capitol is a developer  and owner of computer  software and  storybook
content and desires to license same for foreign and domestic distribution; and

Whereas,  Davidson desires to license and distribute computer programs developed
by Capitol; and

Now Therefore,  by reason of the foregoing  premises and in consideration of the
mutual  covenants and premises  hereinafter  set forth,  parties hereto agree as
follows:

1.  Definitions.  As used in this  Agreement,  the following terms will have the
meanings set forth below:

     a) Licensed Territory- Worldwide.

     b) Work-  means  the  deliverables  provided  by  Capitol  to  Davidson  in
accordance with Exhibit A, attached hereto and incorporated herein.

     c) Product(s)- means  collectively  those application  software and related
interactive media products, inclusive of the packaging trademarks, together with
all printed books and booklets,  or other materials which refer or relate to the
Products, and any upgrades, updates, new releases, or other modifications to the
Work provided by Capitol.

     d) MDF- means  marketing  development  funds spent or allocated by Davidson
for the purposes of marketing the Product(s).

     e) Return  Reserve  Allowance-  Davidson  will  withhold a reserve  against
returns,  exchanges,  refunds, credits and the like in the amount of ten percent
(10%) of Gross Receipts. All undispersed portions of the fund will be liquidated
with the  rendition  of each of the  statements  and  payments  nine (9)  months
following  the quarter in which the  respective  Return  Reserve  Allowance  was
originally withheld.

     f) Net Receipts- means Gross Receipts,  less the Return Reserve  Allowance,
cost of goods (approximately $3.50), all public relations expenditures,  all MDF
expenditures,  and all co-op  advertising fund  expenditures.  The deduction for
public  relations,  MDF, and co-op  advertising  expenditures will be limited to
fifteen percent (15%) of the invoiced amounts for all Products actually shipped,
exclusive  of sales or use  taxes and  shipping  charges  monthly.  In the event
public relations, MDF, and co-op advertising expenditures exceed fifteen percent
(15%) of the invoiced amounts for all Products  actually  shipped,  exclusive of
sales or use taxes and shipping  charges  monthly,  the balance shall be carried
forward and added to the allowable expense deductions for future months.

     g) Gross  Receipts-  means the invoiced  amounts for all Products  actually
shipped,  exclusive  of sales or use taxes,  shipping  charges,  bad debts,  and
credits for returns.

     h) Alpha- First  playable Work released for testing.  The Work will have at
least seventy-five  percent (75%)  functionality,  graphics,  sound,  video, and
text.

     i) Beta- Work  released for testing in complete form  (one-hundred  percent
(100% functionality,  graphics, sound, video, and text) and ready to ship in the
opinion of the developer,  with the understanding  that there may be crashes and
performance issues.

================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 1
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB

<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

     j) Script- A written  document  that sets forth the story and describes all
the  graphic  elements  and  animation  present  in  the  Product  and  contains
hand-drawn sketches of the backgrounds and main characters

     k) Functional  Specifications  Document- A written document which describes
how the Product  works and includes  flowcharts,  menus,  specific  features,  a
description  of the user  interface,  on-line  help  requirements,  if any,  and
hardware system requirements.

     l) Final  Audiotape- An audiotape which includes all final dialogue for the
characters and all music and songs to be included in the Title.

                             OBLIGATIONS OF CAPITOL

2. Delivery of Work.  Capitol  agrees to develop at its location and at its sole
expense,  six (6) software programs and related materials based on international
folktale  storybooks created and owned by Capitol  (hereinafter the "Title(s)").
The Titles, delivery schedule, and content specifications for same are described
in Exhibit A. Capitol agrees to comply with the delivery in accordance  with the
content of Exhibit A and the terms and  conditions  contained  herein.  Davidson
must approve the content of a completed milestone before Capitol proceeds to the
next milestone,  such approval not to be unreasonably withheld.  Should Davidson
be unable to approve the final results of all deliverables, and Capitol will not
for any reason make  changes or  modifications  suggested  by Davidson to secure
such  approval,  the parties  agree that senior  executives of both will meet to
attempt to  resolve  any such  disagreement.  If after  such  meeting,  Davidson
continues to be unable to approve the final content of any Work,  Davidson shall
not be required to produce and market the Title derived from such Work.  Capitol
agrees to provide to Davidson, concurrent with the delivery of each Title, text,
artwork, and page-layout in electronic format for same.

3. Grant.

     (a) License.  Capitol hereby grants to Davidson and Davidson hereby accepts
an exclusive,  irrevocable,  worldwide license and right to use,  manufacture or
cause to be manufactured,  reproduce electronically and in text form, market and
distribute  in a CD-ROM for  Macintosh and Windows  formats,  perform,  display,
promote,  advertise,  sell,  and  otherwise  exploit  the Work in a  CD-ROM  for
Macintosh and Windows format,  with the right to sublicense to third parties any
and all  proprietary  rights  contained in or resulting from the Work including,
without limitation, any patents, copyrights,  trademarks, trade secrets or other
proprietary  rights  claimed  by  Capitol  with  respect to the Work only in the
Licensed   Territory  (such  license  being  hereinafter   referred  to  as  the
"License").

     (b) OEM and Bundling. Davidson shall have the right to sell and license the
Product  and the  Work  through  OEM and  bundling  agreements,  subject  to the
payments to Capitol in accordance with the terms of Paragraph 12. Davidson shall
also have the right to  distribute  and to  license  others  to  distribute  the
Product in their entirety through networks and on-line  services.  Davidson will
present all proposed OEM, bundling,  network, and on-line services opportunities
to Capitol for approval, said approval not to be unreasonably withheld.  Capitol
agrees to respond to Davidson's  notice of an opportunity  described within this
Paragraph 3(b) within one (1) business day of receipt of same.


4. Ownership of Intellectual Property.  Capitol shall retain all right and title
to all  copyrights  and  trademarks  contained in the Work.  Davidson  shall not
exploit the intellectual  property  contained in the Work except as specifically
authorized by this  Agreement.  Capitol  hereby  authorizes  Davidson to use the
trademarks  associated with the Work in connection with the content,  packaging,
advertising and sale of the Product.

================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 2
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB

<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

5.  Localization  Kit.  Capitol agrees to provide to Davidson in accordance with
the schedule included within Exhibit A, a localization kit for each Title of the
Work. The  localization  kit will be inspected and approved by Davidson prior to
acceptance, such approval to not be unreasonably withheld.

6. Product Quality.  Capitol will use commercially  reasonable efforts to ensure
the Work is of high quality and free of defects in material and workmanship.

                             OBLIGATIONS OF DAVIDSON

7. Marketing and Distribution.

     (a)  Expenditures.  Davidson shall use commercially  reasonable  efforts to
promote  and  distribute  the  Product(s)   under  Davidson's  name  within  the
Territory.  Such promotion shall include,  but not be limited to advertising the
Product,  participating  in  appropriate  trade shows,  and directly  soliciting
orders from customers for the Product(s).  Davidson  commits to spending between
seven  percent  (7%) and ten percent  (10%) of Gross  Receipts in MDF to support
each Title within a set, but not less than a total of three hundred, twenty-five
thousand  dollars  ($325,000)  in MDF  expenditures  to support an entire set of
three (3) Titles  within  the first nine (9) months of release of a set  without
prior  written  approval  by  Capitol,  such  approval  not  to be  unreasonably
withheld.  A  preliminary  marketing  launch  plan is  attached  as Exhibit B as
representative  of the  type of  expenditures  includable  for the  purposes  of
calculating Net Receipts,  it may be amended in whole or part at Davidson's sole
discretion.  In addition to the MDF,  Davidson agrees to spend five percent (5%)
of Gross  Receipts  for the  purpose  of a co-op  advertising  program  with its
distributors and dealers.

     (b) Published Pricing. Davidson from time to time publishes prices at which
it sells its  products to its  customers  ("Net  Pricing").  The Titles shall be
included in Davidson's Net Pricing at twenty-four dollars ($24.00). In the event
of a change in a Title's  published net price,  Davidson  will obtain  Capitol's
prior written approval.

8. Storybook Printing. Davidson agrees to print and include with each Product, a
printed storybook  version of the Title that is the subject of the Product.  The
storybook  will be printed from the Work provided by Capitol in accordance  with
Paragraph 2 herein.

9. Packaging and Credits.

     (a)  Davidson  will be  responsible  for the  production  of all  sales and
marketing  materials  and  the  manufacture  of  all  packaging  and  associated
materials  for the Titles,  said  packaging  to be  approved  by  Capitol,  such
approval not to be unreasonably withheld.

     (b)  Davidson  will  display  appropriate  credit to Capitol for  Capitol's
contribution  to the  Product.  This  credit  will  appear  in the  "About  Box"
contained within the Product and on the outside of the Product packaging. Credit
will include the use of the  CapDisc(R)  name and logo.  The tradename  "Grandpa
Mouse Tales(R)" will be printed on the outside packaging of all Titles.

10.  Ownership of  Intellectual  Property.  Davidson shall retain all rights and
     title to all copyrights and trademarks  contained in the Product,  with the
     exception of the copyrights  and  trademarks  owned by Capitol and licensed
     hereunder. It is agreed and understood that Davidson shall create and use a
     tradename  for a line of products  within which it will publish the Titles.
     The tradename shall be owned by Davidson.

================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 3
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB


<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

                                  MISCELLANEOUS

11. Term and Renewal.

     (a) Initial Term. This Agreement  shall become  effective on the date first
above  written  and shall  continue in full force and effect for three (3) years
following the earlier of: (i) initial  shipment of the sixth and final Title; or
(ii)  forty-five  (45) days after  receipt of a gold master with  respect to the
second  Title,  unless  earlier  terminated  in  accordance  with the  terms and
conditions hereof.

     (b)  Automatic  Renewal.  Unless  this  Agreement  has been  terminated  as
provided  herein or one or both of the parties has served the other with written
notice  to the  contrary  upon  no less  than  ninety  (90)  days  prior  to the
expiration of the term of the  Agreement,  this  Agreement  shall  automatically
renew for an additional period of one (1) year.

     (c) Renewal as of Right. If Davidson  reaches a sales goal of three hundred
fifty thousand (350,000) units in total sales of all Products, excluding OEM and
bundled units,  prior to ninety (90) days before expiration of the initial term,
it  shall  be  entitled,  at its  discretion,  to  renew  the  Agreement  for an
additional one (1) year term.

12. Payments and Advances.  As consideration for the grant of License,  delivery
of Work, and the further obligations of Capitol as described hereunder, Davidson
and Capitol will share equally the Net Receipts.  To effectuate  this,  Davidson
shall pay to Capitol in accordance  with  Paragraph 11 a payment on the domestic
and  international  sales of all Products and localized Product in the amount of
one-half  (1/2) of Net  Receipts.  Capitol  acknowledges  that sales volumes are
speculative and that Davidson  therefore makes no  representations or warranties
that it or its  customers  will achieve any  particular  level of sales  volume.
Furthermore, Davidson shall pay Capitol a non-refundable advance, against future
payments  resulting from  localized  Product,  in the amount of  ninety-thousand
dollars  ($90,000)  for each  Product  localization  kit accepted by Davidson in
accordance with Paragraph 5 and Exhibit A. Any compensation  paid by Davidson to
Capitol shall not be reimbursable.

13.  Payments and  Statements.  Davidson shall account to Capitol with regard to
all Net  Receipts  within  thirty (30) days  following  the  conclusion  of each
calendar  quarter in which  Products are  reported  sold.  Each such  accounting
("Statement(s)")  shall  contain the  appropriate  calculations  relating to the
computation  of  payments  payable to  Capitol  under  this  Agreement  and such
payments  shall be remitted  and paid to Capitol with the  particular  Statement
indicating  such amount due. Each  Statement  shall  provide  detail by country,
including Gross Receipts,  COGS, applicable Return Reserve Allowance,  bad debt,
MDF and co-op  expenditures  (including any carry-overs),  and the amount of Net
Receipts retained by Davidson. All Statements hereunder shall be deemed rendered
when deposited, postage prepaid, in the United States mail, addressed to Capitol
at the notice address described in Paragraph 25 herein below. Each Statement and
all items contained  therein shall be deemed correct and shall be conclusive and
binding upon Capitol upon the expiration of one (1) year from the date rendered,
unless,  within such one (1) year period,  Capitol  delivers  written  notice to
Davidson  objecting  to one or more  items of such  Statement  and  such  notice
specifies in reasonable detail the items to which Capitol objects and the nature
of and  reason for  Capitol's  objection  thereto.  In such  event  Capitol  may
exercise  its audit  rights  under  Paragraph  14  below,  provided  said  audit
commences  within six (6) months from the date Davidson  receives written notice
objecting to the Statement.

14. Books of Account and Audits.  Davidson shall keep books of account  relating
to expenses and the  distribution  of Products on the same basis and in the same
manner  and  for the  same  periods  as such  records  are  customarily  kept by
Davidson.  Capitol may, upon reasonable notice and at its own expense, audit the
applicable  records at  Davidson's  office,  in order to verify  any  Statements
rendered hereunder. Any such audit shall be conducted only by a certified public
accountant  whom is not held on retainer by Capitol nor 


================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 4
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB


<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

working  on a  contingency  fee and shall  take  place  only  during  reasonable
business hours and in such manner so as not to interfere with Davidson's  normal
business  activities.  However, no audit may be conducted during the first three
(3)  weeks  of  any  calendar  quarter.  All  of the  information  contained  in
Davidson's  books and records  shall be kept  confidential  except to the extent
necessary to permit  enforcement  of  Capitol's  rights  hereunder,  and Capitol
agrees  that such  information  inspected  and/or  copied  on behalf of  Capitol
hereunder shall be used only for the purposes of determining the accuracy of the
Statements,  and  shall  be  revealed  only to  such  employees,  agents  and/or
representatives of Capitol as necessary to verify the accuracy of the Statements
except  to the  extent  necessary  to permit  enforcement  of  Capitol's  rights
hereunder.  Davidson shall be furnished with a copy of Capitol's  auditor report
within thirty (30) days after the  completion of such report.  In no event shall
an audit with respect to any Statement  rendered  hereunder  commence  after the
date on which such Statement has become  incontestable  pursuant to Paragraph 13
above nor shall any audit continue for longer than ten (10) consecutive business
days nor shall audits be made hereunder more  frequently  than once annually nor
shall the records  supporting any such  Statements be audited more than once. In
addition,  Davidson shall be responsible  for all  reasonable  documented  costs
incurred by Capitol to conduct such an  examination  should an  underpayment  of
five (5%) percent or greater be discovered.

15. Sequels,  Other Formats,  New Titles based on International  Folktales,  and
Other Media.

     (a)  Right of First  Negotiation.  If  during  the term of this  Agreement,
Capitol  determines that it wishes to develop and  distribute:  (i) any Title or
Titles capable of running on other operating system(s) and/or on other media; or
(ii) any sequel to a Title or Titles in any form; or (iii) any new titles in the
Kid  Venture  Series,  Davidson  shall have the first  right of  negotiation  to
provide services to Capitol.

     (b) Notice and Election.  If Capitol  decides to develop or distribute  any
product described in Paragraph 15(a) above,  Capitol shall so notify Davidson in
writing ("New Product  Notice").  Davidson  shall have the right for a period of
twenty (20) business days after receipt of the New Product Notice,  to elect, by
written notice to Capitol, to negotiate to provide services for the product.

     (c) Failure to Respond or Agree.  If within  twenty (20) business days from
receipt of the New Product Notice,  Davidson does not elect by written notice to
Capitol to provide services,  Capitol shall be released from any obligation with
respect to  negotiation  with  Davidson in  connection  with such  product,  and
Capitol shall be free to negotiate  with third  parties in connection  with such
product.

16.  Termination.

     (a) Termination by Either Party: This Agreement may be terminated forthwith
by either  party  upon the  occurrence  of the  following,  by one party  giving
written  notice  thereof to the other party by registered or certified  mail, in
which this Agreement shall  terminate on the date set forth in such notice.  The
date of mailing said written  notice shall be deemed the date on which notice of
termination of this Agreement shall have been given.

          (i) If any  proceeding in bankruptcy or in  reorganization  or for the
     appointment of a receiver or trustee or any other  proceeding under any law
     for the relief of debtors  shall be  instituted by or against the Dealer or
     if the Dealer shall make an assignment for the benefit of creditors;

          (ii) A  material  breach by  either  party of any of the terms of this
     Agreement  which breach is not remedied by the breaching party to the other
     party's  satisfaction  within  thirty  (30) days of the  breaching  party's
     receipt  of notice of such  breach  from the other  party in the event of a
     breach of Paragraph 13 hereunder  and within ninety (90) days for all other
     breaches.

     (b) Effects of Termination or Non-Renewal.  Following the effective date of
any  termination  of this  Agreement  or  expiration  of the initial term or any
renewal term:  (i) the License  granted in Paragraph 3 of this Agreement will be
revoked in accordance with the time period specified  within this  subparagraph;
and (ii) each party will  cooperate with the other in order to effect an orderly
termination of the  relationship


================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 5
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB


<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

created by this Agreement,  including without  limitation,  the prompt return of
the  masters;   and  (iii)  Davidson  may  continue  to  manufacture   from  all
raw-materials in its possession and sell all Products created during the term of
the  Agreement  for a period of six (6) months.  Davidson  will  continue to pay
Capitol  payments on any Product(s)  produced under this Agreement  according to
the terms and conditions  contained  herein,  but shall cease all efforts toward
the purchase of further  raw-materials,  and future  development of new Products
relating to the Work,  except as described  within this Paragraph  16(b). At its
sole  discretion,  Capitol may elect to purchase  from  Davidson,  at Davidson's
cost,  all raw and finished  goods in Davidson's  possession at  termination  or
expiration of the initial or renewal term of this Agreement.  Davidson will have
no further  obligation,  whether  financial or otherwise,  to Capitol after such
termination.

17. Support and Bug Fixes.

     (a) Davidson agrees:  (i) that its technical  representatives,  or those to
whom it designates  its  technical  support  responsibilities,  will provide all
support  and  assistance  with  respect  to the  Products;  and (ii)  that  such
technical  representatives will use commercially  appropriate efforts to resolve
the  problem(s)  presented  to them.  Only to the  extent  that  such  technical
representatives  are,  after  the  exercise  of  such  commercially  appropriate
efforts,  unable to resolve a problem(s) so presented  will  Davidson  refer the
problem(s) to Capitol for a resolution or workaround.

     (b) For  matters  referred  to Capitol by such  technical  representatives,
Capitol will endeavor to identify the cause of the alleged malfunction.  Capitol
will advise  Davidson of a workaround for the problem that will allow  continued
utilization  of  the  Products  in  the  manner   contemplated  by  the  Product
documentation,  or a permanent  procedure  to correct,  avoid,  or preclude  the
occurrence of the problem in the future.  If the solution provided by Capitol is
a workaround,  Capitol will  thereafter  provide a permanent  resolution for the
malfunction as soon as possible.

     (c) Capitol will have no technical support responsibilities whatsoever with
respect to the Products except as to Davidson.

     (d) Capitol will fix all reported bugs, for no additional compensation,  on
a priority  basis for the first two (2) months after final delivery of any Work,
and on a normal priority basis for the following ten (10) months. Priority basis
to mean Capitol will  allocate at least  seventy-five  percent (75%) of a senior
programmer's  time to repair  the  reported  bug(s)  until  such  repair(s)  are
complete.

18.  Promotional and  Complimentary  Copies.  Davidson shall supply Capitol with
twenty-four  (24)  commercial  copies of each  Product at no charge to  Capitol.
Additionally,   upon  request  by  Capitol,  Davidson  will  provide  additional
commercial  copies of the Product to Capitol at a price of four dollars ($4) per
copy,  plus  applicable  shipping  charges.  Capitol  agrees  not to resell  any
software copies obtained under this Paragraph 16. No payment shall be payable to
Capitol for units of the Product  distributed  by Davidson to any third  parties
free of charge for marketing, demonstration, and/or promotional purposes.

19. Assignment.  This Agreement will be binding upon and inure to the benefit of
the  successors  and assigns of the  parties  hereto.  Anything to the  contrary
notwithstanding,  neither party may assign this Agreement  without prior written
approval of the other party.

20. Independent  Contractor.  The relationship  established between Davidson and
Capitol by this Agreement is that of a licensor and a  licensee/distributor  and
nothing  herein  contained  shall be deemed to establish  or otherwise  create a
relationship  of  principal  and  agent  between  Davidson  and  Capitol;  it is
understood  that both parties are  independent  contractors who cannot and shall
not be deemed  an agent of the  other  party  for any  purpose  whatsoever,  and
neither  party  nor any of its  agents  or  employees  shall  have any  right or

================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 6
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB


<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

authority  to assume or  create  obligation  of any  kind,  whether  express  or
implied, on behalf of the other party.

21. Confidentiality. In the course of this Agreement, it is anticipated that the
parties will learn  confidential  or  proprietary  information  about the other.
Capitol and  Davidson  will keep  confidential  this  information  and any other
information  which  Capitol and Davidson may acquire with respect to the other's
business,  including,  but not limited to, information developed and relating to
new products, customers, pricing, know-how, processes, and practices, unless and
until the other party  consents to  disclosure,  or unless  such  knowledge  and
information otherwise becomes generally available to the public through no fault
of the other party.  Neither party will disclose to others,  without the other's
consent,  the fact that it is  acting on behalf of the other  party and will not
publish on the subject of this  relationship  without first  providing the other
party with the  opportunity  to review  and offer  reasonable  objection  to the
contemplated publication. This undertaking to keep information confidential will
survive the termination of this Agreement. Both parties will require each of his
employees   performing   Services  to  execute  a  Nonemployee   Confidentiality
Agreement,  if  requested  by the  other  party.  At  the  termination  of  this
Agreement,  both parties will return to the other all drawings,  specifications,
manuals and other printed or reproduced material  (including  information stored
on machine readable media) provided by the other party.

22.  Competing  Products.  Capitol  represents  that it has advised  Davidson in
writing  prior to the date of signing this  Agreement of any  relationship  with
third parties, including competitors of Davidson, which would present a conflict
of interest with the Services and Work or Product or which would prevent Capitol
from carrying out the terms of this Agreement.

23. Limitation of Liability.  THE LIABILITY OF EITHER PARTY, IF ANY, FOR DAMAGES
FOR ANY CLAIM OF ANY KIND  WHATSOEVER AND  REGARDLESS OF THE LEGAL THEORY,  WITH
REGARD TO THE LICENSE  GRANTED  HEREUNDER OR THE SERVICES  PERFORMED  HEREUNDER,
SHALL NOT INCLUDE COMPENSATION,  REIMBURSEMENT OR DAMAGES ON ACCOUNT OF THE LOSS
OF PRESENT OR PROSPECTIVE  PROFITS,  EXPENDITURES,  INVESTMENTS OR  COMMITMENTS,
WHETHER MADE IN  ESTABLISHMENT,  DEVELOPMENT  OR  MAINTENANCE  OF  REPUTATION OR
GOODWILL OR FOR ANY OTHER REASON  WHATSOEVER.  IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES.

24. Representations and Warranties. Capitol warrants and represents that Capitol
has full  right and power to enter  into this  Agreement;  that the Work will be
original;  that the Work will not contain any  libelous  or  otherwise  unlawful
material or violate any copyright or personal or proprietary right of any person
or entity.  Davidson warrants and represents that it has full right and power to
enter into this Agreement.


25. Indemnification.

     (a)  Davidson  shall  defend,  indemnify  and hold  harmless  Capitol,  its
          officers, directors, employees and agents from and against any and all
          liabilities,  damages costs and fees ( including reasonable attorney's
          fees ) for  any  claims  or  actions  arising  out of or  relating  to
          Davidson's  distribution  of  the  Product(s),   and  any  obligations
          Davidson  has  undertaken  to  perform  for  Capitol  hereunder.  Such
          indemnification  obligation  of Davidson is  conditioned  upon Capitol
          immediately notifying Davidson in a writing that sets

================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 7
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB


<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

          forth   with   specificity   the  claim  or   action  to  which   such
          indemnification  obligation  applies.  Davidson will have the right to
          control  the  defense  of each such  claim or  lawsuit  or  proceeding
          arising therefrom without the prior written approval of Licensee.

     (b)  Capitol  shall  defend,  indemnify  and hold  harmless  Davidson,  its
affiliated  companies  and partners and their  respective  officers,  directors,
employees and agents from and against any and all  liabilities,  damages,  costs
and fees  (including  reasonable  attorney's  fees) for any  claims  or  actions
arising out of or relating to the License(s)  granted  hereunder and any and all
obligations   Capitol   has   undertaken   to  perform   for   Davidson  or  any
representations and warranties Capitol has made hereunder.  Such indemnification
obligation of Capitol is conditioned upon Davidson immediately notifying Capitol
in a writing that sets forth with  specificity the claim or action to which such
indemnification  obligation applies.  Capitol will have the right to control the
defense of each such claim and any lawsuit or proceeding arising  therefrom.  In
no event will Davidson  settle any such claim or lawsuit or  proceeding  arising
therefrom  without the prior written approval of Capitol.  In defending  against
such claim or action,  Capitol may (i) contest;  (ii) settle;  (iii) procure for
Davidson  and its  customers  the  right to  continue  using  the  Products,  as
applicable;  or (iv) modify or replace the Products, as applicable, so that they
no longer infringe. Capitol acknowledges that the warranties and representations
herein shall survive the termination of this Agreement.

26.  Governing  Law. This  Agreement  shall be construed in accordance  with the
substantive law of the State of New York.

27.  Notices.  Any notice  required  under this Agreement will be given by first
class United States mail, postage prepaid with return receipt  requested,  or by
facsimile,  telex,  overnight courier or personal delivery to the address of the
receiving  party given below.  Notices will be deemed  effective  three (3) days
after the date of mailing  thereof;  notice by  personal  delivery  or  recorded
delivery shall be deemed given on the day of actual delivery.  Copies of notices
sent by mail may be sent simultaneously by fax for information purposes only.

   To Davidson:      Attn.: Nargess Fassih,               with a copy to:
                     Director, New Business Development   Attn.: Paula V. Duffy,
                     Davidson & Associates                V.P.- General Counsel 
                     19840 Pioneer Avenue
                     Torrance, CA 90503
                     Fax: (310) 793-0601


   To Capitol:       Attn.                                with a copy to:
                     President                            Attn.: Chief Financial
                     Capitol Multimedia, Inc.             Officer
                     7315 Wisconsin Avenue
                     Suite 800 East
                     Bethesda, MD  20814
               Fax: (301) 907-7005/6

28. Equitable Relief.  Because of the uniqueness of the services to be performed
by the parties,  in addition to the other  rights and remedies  that the parties
may have for a breach of this  Agreement,  the  parties  shall have the right to
enforce  this  contract,  in all  of its  provisions,  by  injunction,  specific
performance, or other relief in a court of equity.

================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 8
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB

<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

29.  Survival.  The rights and  obligations  set forth in  Paragraphs  4, 8, 11,
14(b),  15,  17, 18,  19,  21,  22,  23,  24,  27, 28 and 31 shall  survive  the
termination  or  expiration  of this  Agreement or any  determination  that this
Agreement or any portion hereof or exhibit hereto is void or voidable.

30. Waiver. No waiver of any default or breach of this Agreement by either party
shall be deemed a continuing  waiver or a waiver of any other breach or default,
no matter how similar.

31. Force Majeure. The obligations of Capitol and Davidson hereunder are subject
to and contingent  upon the absence of  interference  or  interruptions  such as
strikes, riots, war, invasion,  fire, explosion,  accident,  delays in carriers,
acts of God and all other delays beyond the party's reasonable control,  and any
interference  with the  obligation  of either of the  parties by any such reason
shall not be deemed a breach  thereof,  but shall  suspend this  Agreement for a
reasonable  period to allow the effected party to recover from said interference
of  interruption.  The term of the  Agreement  as stated in Paragraph 9 shall be
extended by a time period equal to any suspension of the Agreement in accordance
with this Paragraph.

32. Severability.  If a provision herein contained shall be held by any court of
competent  jurisdiction  to be illegal,  void or  unenforceable,  such provision
shall be of no force or  effect  while  such  infirmity  shall  exist,  but such
infirmity   shall  have  no  effect   whatsoever   upon  the  binding  force  or
effectiveness of any of the other provisions  hereof,  it being the intention of
the parties  hereto that had they, or either of them,  known of such  infirmity,
they would have entered into a contract,  each with the other, containing all of
the other  provisions  hereof.  In the event the infirmed  provision  causes the
contract to fail of its essential purpose,  then the entire Agreement shall fail
and become void.

33.  Entire  Agreement.  This  Agreement  including  all  Schedules and Exhibits
constitute and contain the entire agreement  between the parties with respect to
the subject  matter hereof and  supersede any prior oral or written  agreements.
Nothing herein  contained shall be binding upon the parties until this Agreement
has been executed by each and has been delivered to the parties.  This Agreement
may not be changed, modified, amended or supplemented,  except in writing signed
by all parties to this Agreement.  Each of the parties  acknowledges  and agrees
that the other has not made any representations, warranties or agreements of any
kind, except as may be expressly set forth herein.

IN WITNESS  WHEREOF,  the parties have executed this Agreement as of the day and
year first above written.


DAVIDSON & ASSOCIATES                        CAPITOL MULTIMEDIA

/s/ Robert M. Davidson                       /s/ Robert I. Bogin
----------------------------------           --------------------------------
Robert M. Davidson, Chairman & CEO           Robert I. Bogin, President


July 13, 1995                                July 13, 1995
-------------                                -------------
Date                                         Date

================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 9
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB

<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.






















================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 10
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB

<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.

                                    EXHIBIT A


Capitol shall develop the following  Titles in accordance  with the  Development
Schedules  set forth below.  Capitol  agrees it will not proceed to a subsequent
milestone  until the previous  milestone  has been  accepted by  Davidson,  said
approval not to be unreasonably withheld.

Title 1:          Baba Yaga and the Magic Geese
Title 2:          Imo and the King
Title 3:          The Little Samurai
Title 4:          TBD by January 15, 1996
Title 5:          TBD by January 15, 1996
Title 6:          TBD by January 15, 1996

Capitol shall have the obligation of including  Davidson's  animated logo in the
splash screen (introductory sequence) of all Titles.

DEVELOPMENT SCHEDULES (FOR ALL TITLES):

Title 1: Baba Yaga and the Magic Geese

    Date        Milestones
    ----        ----------

 Delivered,     Delivery of the Product Development Schedule
   Pending
  Approval
 Delivered,     Delivery of final Script and Functional Specifications Document
   Pending
  Approval
 Delivered,     Delivery of Final Audiotape
   Pending
  Approval
  07-28-95      Delivery of storybook materials with page layouts
 Delivered,     Delivery of Alpha version to Davidson QA department
   Pending
  Approval
  07-28-95      Delivery of Beta version and user instruction manual to Davidson
                QA department, excluding WIN95
  08-11-95      Delivery  of Beta  version  and user  instruction
                manual to Davidson QA department- WIN 95 platform
  08-18-95      Delivery of Golden Master to Davidson

*Dates listed above are for informational purposes only

Title 2: Imo and the King

    Date        Milestones

 Delivered,     Delivery of the Product Development Schedule
   Pending
  Approval
 Delivered,     Delivery of final Script and Functional Specifications Document
   Pending
  Approval


================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 11
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB

<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.



      
  07-14-95      Delivery of Final Audiotape
  08-18-95      Delivery  of  storybook  materials  with page  layouts  
  08-04-95      Delivery of Alpha version to Davidson QA department  
  08-18-95      Delivery of Beta version and user instruction manual to Davidson
                QA department
  09-01-95      Delivery of Golden  Master to Davidson 

* Dates  listed above are for informational purposes only.

Title 3:  The Little Samurai

  Date          Milestones
  ----          ----------

 Delivered,     Delivery of the Product Development Schedule
   Pending
  Approval
 Delivered,     Delivery of final Script and Functional Specifications Document
   Pending
  Approval
  07-21-95      Delivery of Final Audiotape
  08-18-95      Delivery  of  storybook  materials  with page  layouts  
  08-18-95      Delivery of Alpha version to Davidson QA department  
  09-01-95      Delivery of Beta version and user instruction manual to Davidson
                QA department
  09-15-95      Delivery of Golden  Master to Davidson

* Dates listed above are for informational purposes only.

Title 4: TBD

  Date          Milestones
  ----          ----------

   1-16-96      Delivery of the Product Concept
  __-__-9_      Delivery of final Script and Functional Specifications Document
  __-__-9_      Delivery of Final Audiotape
  __-__-9_      Delivery of Final Product Specifications including minimum
                hardware configurations
  __-__-9_      Delivery of storybook material with page layouts
  __-__-9_      Delivery of Alpha version to Davidson QA department
  __-__-9_      Delivery of Beta version and user instruction manual to Davidson
                QA department
  __-__-9_      Delivery of Golden Master to Davidson
* Dates listed above are for informational purposes only.

Title 5: TBD

  Date          Milestones
  ----          ----------

   1-16-96      Delivery of the Product Concept
  __-__-9_      Delivery of final Script and Functional Specifications Document
  __-__-9_      Delivery of Final Audiotape
  __-__-9_      Delivery of Final Product Specifications including minimum
                hardware configurations
  __-__-9_      Delivery of storybook material with page layouts
  __-__-9_      Delivery of Alpha version to Davidson QA department


================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 12
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB

<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.


  __-__-9_      Delivery of Beta version and user instruction manual to Davidson
                QA department
  __-__-9_      Delivery of Golden Master to Davidson

* Dates listed above are for informational purposes only.

Title 6:  TBD

  Date          Milestones

   1-16-96      Delivery of the Product Concept
  __-__-9_      Delivery of final Script and Functional Specifications Document
  __-__-9_      Delivery of Final Audiotape
  __-__-9_      Delivery of Final Product Specifications including minimum
                hardware configurations
  __-__-9_      Delivery of storybook material with page layouts
  __-__-9_      Delivery of Alpha version to Davidson QA department
  __-__-9_      Delivery of Beta version and user instruction manual to Davidson
                QA department
  __-__-9_      Delivery of Golden Master to Davidson

* Dates listed above are for informational purposes only.


================================================================================
DAVIDSON & ASSOCIATES, INC.                                           Page 13
Page Acknowledgment DAVIDSON /s/ RMD CAPITOL /s/ RB

<PAGE>


EXHIBIT 10.54
LICENSING AND DISTRIBUTION AGREEMENT WITH DAVIDSON & ASSOCIATES, INC.
           
                                    EXHIBIT B



--------------------------------------------------------------------------------
Marketing Activity                                                 $'s Allocated
--------------------------------------------------------------------------------
Print Advertising                                                    $55,000.00
--------------------------------------------------------------------------------
Direct Mail                                                           $5,000.00
--------------------------------------------------------------------------------
Promotions                                                           $25,000.00
--------------------------------------------------------------------------------
Packaging                                                            $78,000.00
--------------------------------------------------------------------------------
Public Relations                                                      $3,200.00
--------------------------------------------------------------------------------
Consumer Sales Efforts                                               $98,500.00
--------------------------------------------------------------------------------
Marketing Manpower                                                   $21,000.00
--------------------------------------------------------------------------------
                                                        Total*      $325,800.00*
                                                                   -------------