8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 28, 2002.

International Microcomputer Software, Inc.

(Exact name of registrant as specified in its charter)

California (State or other jurisdiction of incorporation)	0-15949 (Commission File No.)	94-2862863 (IRS Employer Identification No.)
75 Rowland Way, Novato, CA (Address of Principal executive offices)		94945 (Zip Code)

Registrant’s telephone number, including area code: (415) 878-4000

(Former name or former address, if changed since last report)

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TABLE OF CONTENTS

	Item 5. Other Events.
	Item 7. List of Exhibits.
SIGNATURES
EXHIBIT INDEX
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3

Item 5. Other Events.

     On 2/28/02, IMSI and Digital Creative Development Corporation (“DCDC”) terminated the Plan of Merger Agreement between them dated August 31, 2001 and entered into a new agreement pursuant to which DCDC will cancel a $3.6 million promissory note due from IMSI in exchange for 9 million shares of IMSI common stock and a payment from IMSI to DCDC of $250,000 over 15 months.

     IMSI also announced the resignation of 4 of its directors and the addition of two new directors.

     IMSI issued a press release reflecting these matters on March 4, 2002, which is incorporated by reference and is attached as Exhibit 10.1.

Item 7. List of Exhibits.

Exhibit
Number	Description
10.1	IMSI Press Release dated March 4, 2002.
10.2	Mutual Termination Agreement and Release.
10.3	Promissory Note Conversion and General Release

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
By:	/s/ Martin Wade, III
	Martin Wade, III Director , Chief Executive Officer & Chief Financial Officer

Date: March 8, 2002.

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EXHIBIT INDEX

Exhibit
Number	Description
10.1	IMSI Press Release dated March 4, 2002 (incorporated by reference).
10.2	Mutual Termination Agreement and Release.
10.3	Promissory Note Conversion and General Release

3 EX-10.1 3 f79895ex10-1.htm EXHIBIT 10.1

Exhibit 10.1 IMSI Press Release dated March 4, 2002

Company Contact:

Pam Volpe
International Microcomputer Software, Inc.
415.878.4025
E-mail: pr@imsisoft.com

FOR IMMEDIATE RELEASE —

IMSI® TERMINATES MERGER AGREEMENT WITH DCDC

IMSI AND DCDC ENTER INTO ALTERNATIVE AGREEMENT, IMSI ANNOUNCES
CHANGES TO BOARD OF DIRECTORS

March 4, 2002 — IMSI®, (OTC/BB: IMSI), today announced that it has terminated the Merger Agreement dated August 31, 2001 with Digital Creative Development Corporation (DCDC). IMSI and DCDC subsequently have entered into a new agreement whereby DCDC will convert a $3.6 million promissory note from IMSI into 9 million shares of IMSI common stock, and IMSI will agree to pay DCDC $250,000, payable over 15 months. IMSI will register the new shares as soon as practicable.

IMSI also announced the resignation of four board members from the company’s Board of Directors and addition of two new Board members. The four members to resign are Skuli Thorvaldsson, Gary Herman, Maurice Sonnenberg and Sigurour Jon Bjornsson. The two new Board members are Robert Falcone and Richard Berman. Mr. Falcone has over 31 years of management and Board experience, most recently as CFO of Nike, Inc. from 1992 to 1998, and is currently CFO of 800.com, an Internet retailer of consumer electronics and a Board member of Selmet Industries, Inc.

Mr. Berman has over 30 years of experience in acquisitions, restructurings, and divestitures with and on behalf of many Fortune 500 companies. He is currently a Director of the Internet Commerce Corporation (ICC), a publicly traded software company, and Chairman of the KnowledgeCube Group. Mr. Berman has previously worked in M&A and private equity as Senior Vice President for Bankers Trust, and then as Chairman and CEO of American Acquisition Company. For clients including Union Carbide, Eastman Kodak, Time Warner, Disney, American Home Products, Automatic Data Processing and British Aerospace, Mr. Berman has led deals valued over $5 billion. Mr. Berman has also invested in and managed several private companies including Battronics Corp., Voyager Software, Universal Standard Medical Labs and the leveraged buyout of Prestolite Battery.

IMSI’s CEO Martin Wade stated “After several months of working to finalize a transaction between IMSI and DCDC, we believe the termination of the merger agreement and entering into the alternative agreement to convert the DCDC promissory note into IMSI common stock and cash is the best way to increase value for IMSI shareholders.”

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“We are thankful to those Board members who are resigning for their help in continuing IMSI’s progress during these past few months. With their help IMSI’s revenues and profits have grown as evidenced by the company’s results for the quarter ending December 31, 2001 where the company had a 37% increase in revenues from the previous quarter to $3.7 million, along with a $169,000 operating profit.”

“Our new Board members, Richard Berman and Robert Falcone, are excellent additions to the company’s board, and I am confident they will help IMSI achieve its goals for growth and increasing profits in the year ahead,” continued Wade.

About IMSI

Founded in 1982, IMSI has established a tradition of providing innovative technology and high quality software to the professional and home user with easy to use products at affordable prices. The company maintains two business divisions: Graphic Design and Visual Design.

Visual Design Division: Anchored by IMSI’s flagship product, TurboCAD®, computer-aided design for professional and home users, this division develops and markets visual content and design, such as FloorPlan 3D®, TurboProject®, FormTool®, Flow!™, and Org Plus®.

Graphic Design Division: IMSI’s Graphic Design division focuses on providing users with state-of-the-art clipart images, photos, fonts and artistic digital content through its MasterClips® collection and over the Internet at. ArtToday.com, a wholly owned subsidiary of IMSI. This division manages the HiJaak® line of award-winning products. More information about IMSI can be found at www.imsisoft.com.

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of various factors including the ability of the Company to successfully commercialize its new technologies as well as risk factors set forth under “Factors Affecting Future Operating Results” in the Company’s annual report on Form 10-K and such other risks detailed from time to time in the Company’s reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

5 EX-10.2 4 f79895ex10-2.htm EXHIBIT 10.2

Exhibit 10.2 Mutual Termination Agreement and Release.

MUTUAL TERMINATION AGREEMENT AND RELEASE

     This MUTUAL TERMINATION AGREEMENT AND RELEASE dated as of February 28, 2002 (this “Agreement”) is made and entered into by and among Digital Creative Development Corporation, a Utah corporation (“DCDC”), International Microcomputer Software, Inc., a California corporation (“IMSI”), and DCDC Merge, Inc., a California corporation and a wholly owned subsidiary of IMSI (“Merger Sub”). DCDC, Merger Sub and IMSI are collectively referred to herein as the “Parties” and each individually as a “Party.” Unless defined herein, capitalized terms have the meaning given them in the Merger Agreement (as defined below).

     WHEREAS, the Parties entered into an Agreement and Plan of Merger and Reorganization dated as of August 31, 2001 (the “Merger Agreement”), pursuant to which, subject to the terms and conditions stated therein, DCDC was to merge with and into Merger Sub and Merger Sub was to continue as the surviving corporation and a wholly-owned subsidiary of IMSI;

     WHEREAS, pursuant to the Merger Agreement, DCDC purchased all rights as lender and holder under that certain Promissory Note between Union Bank of California and IMSI in the original principal amount of $3,580,000 (the “Note”);

     WHEREAS, Section 7.1(a) of the Merger Agreement provides that the Merger Agreement may be terminated at any time prior to the Effective Time by mutual written consent duly authorized by the Boards of Directors of DCDC and IMSI; and

     WHEREAS, the Boards of Directors of each of DCDC and IMSI have determined to terminate each of the Merger Agreement and any ancillary agreements as provided herein and release each other from all duties, rights, claims, obligations and liabilities arising from, in connection with, or relating to, the Merger Agreement, all as provided herein;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

     1. Termination of Merger Agreement. The Parties agree that, effective immediately, the Merger Agreement is hereby terminated pursuant to Section 7.1(a) of the Merger Agreement together with any and all ancillary agreements, and none of such agreements will be of any further force or effect as of the date hereof.

     2. Conversion of Note. DCDC and IMSI agree to enter into a Promissory Note Conversion and General Release (the “Note Conversion”), pursuant to which

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DCDC shall convert the entire outstanding principal amount and all outstanding interest due under the Note into 9,000,000 shares of common stock of IMSI (the “Shares”), and cash in the amount of $250,000 to be paid in monthly installments over 15 months in the amount of $10,000 per month for the first five installments, with the first installment due on March 1, 2002, and $20,000 per month for the sixth through fifteenth installment. The Shares shall have such registration rights as set forth in the Note Conversion.

     3. Release of IMSI and Merger Sub by DCDC. DCDC does hereby unequivocally release and discharge IMSI, Merger Sub and any of their respective officers, directors, agents, managers, employees, representatives, stockholders, legal and financial advisors, parents, subsidiaries, affiliates, principals or partners, and any heirs, executors, administrators, successors or assigns of any said person or entity (the “IMSI Releasees”), from any and all actions, causes of action, choses in action, cases, claims, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, injuries, harms, damages, judgments, remedies, extents, executions, demands, liens and liabilities whatsoever, in law, equity or otherwise (collectively, “Actions”), arising under, in connection with or relating to the Merger Agreement, the Note, the Note Conversion or any ancillary agreements or the transactions contemplated thereby, or any action or failure to act under the Merger Agreement, the Note, the Note Conversion or any ancillary agreements, or in connection therewith, or in connection with the events leading to the abandonment of the Merger and the termination of the Merger Agreement, the Note, the Note Conversion and any ancillary agreements, or in connection with any press release, public disclosure or private communication relating to the Merger Agreement, the Note, Note Conversion or any ancillary agreements or the transactions contemplated thereby, which have been asserted against the IMSI Releasees or which, whether currently known or unknown, DCDC, or any successors or assigns of any said entity, ever could have asserted or ever could assert, in any capacity, against the IMSI Releasees, relating to any claims, or any transactions and occurrences from any time in connection with the foregoing; provided, however, the IMSI Releasees are not released from any Actions which may arise under this Agreement and, in accordance with Section 5 hereof, from liabilities owed by DCDC as of the date hereof to Lehman & Eilen LLP, a New York limited liability partnership with a principal office at 50 Charles Lindbergh Boulevard, Suite 505, Uniondale, New York 11553, for legal fees and expenses incurred in connection with or relating to the Merger Agreement, the Note, the Note Conversion or any ancillary agreements or the transactions contemplated thereby.

     4. Release of DCDC by IMSI and Merger Sub. IMSI and Merger Sub do hereby unequivocally release and discharge DCDC and any of its officers, directors, agents, managers, employees, representatives, stockholders, legal and financial advisors, parents, subsidiaries, affiliates, principals or partners, and any heirs, executors, administrators, successors or assigns of any said person or entity (the “DCDC Releasees”), from any and all Actions arising under, in connection with or relating to the Merger Agreement, the Note, the Note Conversion or any ancillary agreements or the transactions contemplated thereby, or any action or failure to act under the Merger Agreement, the Note, the Note Conversion or any ancillary agreements or in connection

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therewith, or in connection with the events leading to the abandonment of the Merger and the termination of the Merger Agreement, the Note, the Note Conversion or any ancillary agreements, or in connection with any press release, public disclosure or private communication relating to the Merger Agreement, the Note, the Note Conversion or any ancillary agreements or the transactions contemplated thereby, which have been asserted against the DCDC Releasees or which, whether currently known or unknown, IMSI or Merger Sub, or any successors or assigns of any said entities, ever could have asserted or ever could assert, in any capacity, against the DCDC Releasees, relating to any claims, or any transactions and occurrences from any time in connection with the foregoing; provided, however, the DCDC Releasees are not released from any Actions which may arise under this Agreement.

     5. DCDC Expenses. IMSI hereby agrees to pay Lehman & Eilen LLP on March 1, 2002 all liabilities as of the date hereof owed by DCDC to Lehman & Eilen LLP, a New York limited liability partnership with a principal office at 50 Charles Lindbergh Boulevard, Suite 505, Uniondale, New York 11553, for legal fees and expenses incurred in connection with or relating to the Merger Agreement, the Note, the Note Conversion or any ancillary agreements of the transactions contemplated thereby. Full payment of such liabilities by IMSI shall satisfy DCDC’s obligations thereunder.

     6. Publicity. Attached hereto as Exhibit A is the form of joint press release to be issued by DCDC and IMSI on signing of this Agreement with respect to this Agreement and the termination of the Merger Agreement. Except as required by law or applicable listing agreement with a stock exchange, no other press release shall be issued regarding the termination of the Merger Agreement by either DCDC or IMSI without the prior written consent of the other.

     7. Representations of the Parties. DCDC, on the one hand, and IMSI and Merger Sub, on the other hand, represents to the other Party that: (a) it is duly organized and validly existing under the laws of the jurisdiction of its incorporation and in good standing; (b) it has power to execute and perform its obligations under this Agreement and has taken all necessary action to authorize such execution, delivery and performance; (c) such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its charter or bylaws, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (d) all governmental and other consents that are required to have been obtained by it with respect to this Agreement have been obtained and are in full force and effect and all conditions of any such consents have been complied with; (e) its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms; and (f) it beneficially owns no shares of any other Party (except that IMSI owns all of the shares of Merger Sub).

     8. Waiver. Any term of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any

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one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by any laws or otherwise afforded, will be cumulative and not alternative.

     9. Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each Party hereto.

     10. No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any Party hereto without the prior written consent of the other Parties hereto and any attempt to do so will be void, except for assignments and transfers by operation of any laws. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties and their respective successors and assigns.

     11. Entire Agreement. This Agreement supercedes all prior discussions, representations, warranties and agreements, both written and oral, among the Parties with respect to the subject matter hereof, and contains the sole and entire agreement among the Parties with respect to the subject matter hereof. No prior drafts of this Agreement and no words or phrases from any such prior drafts shall be admissible into evidence in any action, suit or other proceeding involving this Agreement. Notwithstanding the foregoing, this Agreement does not terminate any Non-Disclosure Agreement between IMSI and DCDC.

     12. Third Party Beneficiaries. There are no third party beneficiaries to this Agreement except for the DCDC Releasees, the IMSI Releasees and Lehman & Eilen LLP, a limited liability partnership formed under the laws of New York, with a principal office at 50 Charles Lindbergh Boulevard, Suite 505, Uniondale, New York 11553.

     13. Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

     14. Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future laws, and if the rights or obligations of any Party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. Notwithstanding anything in this Agreement to the contrary, if for any reason any of the releases contained in Sections 3 or 4 hereof are avoided, nullified or otherwise rendered ineffective, then all releases in Section 3 or 4 hereof shall be rendered invalid and unenforceable and this Agreement shall be automatically reformed to delete Sections 3 and 4 herefrom.

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     15. Injunctive Relief. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in accordance with its specified terms or was otherwise breached and that money damages would not be an adequate remedy for any breach of this Agreement. It is accordingly agreed that in any proceeding seeking specific performance each of the Parties will waive the defense of adequacy of a remedy at law. Each of the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

     16. Governing Law. This Agreement shall be interpreted under the laws of the State of California without reference to California conflicts of law provisions.

     17. Waiver of Jury Trial. Each of DCDC, IMSI and Merger Sub hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of DCDC, IMSI or Merger Sub in the negotiation, administration, performance and enforcement thereof.

     18. Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

     IN WITNESS WHEREOF, DCDC, Merger Sub and IMSI have caused this Mutual Termination Agreement and Release to be duly executed as of the date first above written by their respective officers duly authorized.

DIGITAL CREATIVE DEVELOPMENT CORPORATION
By:	/s/ Gary Herman
	Gary Herman Chairman & Chief Executive Officer

DCDC MERGE, INC.
By:	/s/ Martin Wade, III
	Martin Wade, III Chief Executive Officer

INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
By:	/s/ Martin Wade, III
	Martin Wade, III Director, Chief Executive Officer & Chief Financial Officer

10 EX-10.3 5 f79895ex10-3.htm EXHIBIT 10.3

Exhibit 10.3 Promissory Note Conversion and General Release

PROMISSORY NOTE CONVERSION AND GENERAL RELEASE

     This Promissory Note Conversion Agreement and General Release (“Agreement”) is made and entered into this 28th day of February, 2002 by and between Digital Creative Development Corporation, a Utah corporation (“Note Holder”), and International Microcomputer Software, Inc., a California corporation (“IMSI”).

     WHEREAS, Note Holder and IMSI entered into that certain Agreement and Plan of Merger dated August 31, 2001 (the “Merger Agreement”);

     WHEREAS, pursuant to the Merger Agreement, Note Holder acquired all of the rights of the lender under, and became the holder of, a Promissory Note originally entered into between Union Bank of California and IMSI, in the principal sum of $3,580,000 (the “Note”);

     WHEREAS, Note Holder and IMSI have entered into that certain Mutual Termination Agreement and Release of even date herewith, pursuant to which Note Holder and IMSI have agreed to terminate the merger contemplated by the Merger Agreement;

     WHEREAS, Note Holder is currently owed the principal amount of $3,580,000 by IMSI under the terms of the Note;

     WHEREAS, Note Holder and IMSI wish to cancel the Note and in exchange therefore IMSI shall issue to Note Holder cash and shares of common stock of IMSI and terminate all remaining outstanding obligations of IMSI under the Note;

     NOW THEREFORE, in consideration of the premises, mutual covenants, understandings and agreements contained in this Agreement and other good and valuable consideration received pursuant hereto, and to settle all of the parties’ claims against each other, it is hereby agreed by and among the parties as follows:

1. Conversion of Note. Effective as of the date of this Agreement, all of the outstanding principal and accrued interest under the Note shall be converted into 9,000,000 shares of Common Stock of IMSI (the “Shares”), plus cash in the amount of $250,000, to be paid to Note Holder in monthly installments over 15 months in the amount $10,000 per month for the first five installments, with the first installment due on March 1, 2002, and $20,000 per month for the sixth through fifteenth monthly installment. Contemporaneously with the execution of this Agreement, Note Holder shall deliver the Note to the Company for conversion, such conversion to be effective upon the date of this Agreement.

2. Registration Rights. IMSI shall use its best efforts to prepare and file a registration statement registering 2,000,000 of the Shares (the “Demand Shares”) with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, within 30 days of the date hereof and cause such registration as soon as possible, but no later than 120 days from the date hereof.

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IMSI agrees and acknowledges that Note Holder shall have ordinary and customary piggyback registration rights with respect to the remaining 7,000,000 of the Shares (the “Piggyback Shares”), such that IMSI agrees to register the Piggyback Shares on any appropriate registration statement it files with the Securities and Exchange Commission other than on Forms S-4 or S-8 or any successor form.

3. Right of First Refusal. In the event Note Holder desires to offer any or all of the Demand Shares to a third party, it shall first offer in writing to sell such Demand Shares to IMSI at the price offered by the third party. Each such offer shall be in writing setting forth the proposed terms and conditions and shall be delivered by certified mail to IMSI, which shall have a period of 45 days from the date of the mailing of such offer within which to accept.

4. Representations of Note Holder. Note Holder represents and warrants to IMSI as follows:

a- Authorization. All action on the part of the Note Holder and, if applicable, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein has been taken. The Note Holder has all requisite corporate power to enter into this Agreement and to carry out and perform its obligations under the terms of this Agreement.

b- Acquisition for Investment. The Note Holder is acquiring the Shares hereunder for investment, for its own account, and not for resale or with a view to distribution thereof in violation of the Securities Act of 1933, as amended.

c- Accredited Investor. The Note Holder certifies and represents to IMSI that at the time the Note Holder acquires any of the Shares, the Note Holder will be an “Accredited Investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act and was not organized for the purpose of acquiring the Shares. The Note Holder’s financial condition is such that it is able to bear the risk of holding the Shares for an indefinite period of time and the risk of loss of its entire investment. The Note Holder has been afforded the opportunity to ask questions of and receive answers from the management of IMSI concerning this investment and has sufficient knowledge and experience in investing in companies similar to IMSI in terms of IMSI’s stage of development so as to be able to evaluate the risks and merits of its investment in IMSI.

d- No Registration. The Note Holder understands that the Shares and the securities that make up the Shares have not been registered under the Securities Act, by reason of their issuance by IMSI in a transaction exempt from the registration requirements of the Securities Act, and that the Shares must continue to be held by the Note Holder unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration. The Note Holder understands that the exemptions from registration afforded by Rule 144 (the provisions of which are known to it) promulgated under the Securities Act depend on the satisfaction of various conditions, and that, if applicable, Rule 144 may afford the basis for sales only in limited amounts.

e- No Conflict. The execution and delivery of this Agreement by the Note Holder and the consummation of the transactions contemplated hereby will not conflict with or result in any violation of or default by the Note Holder (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under (i) any provision of the organizational documents of the Note Holder or (ii) any agreement or instrument, permit, franchise, license, judgment, order, statute, law, ordinance, rule or regulations, applicable to the Note Holder or its properties or assets.

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f- No Assignment. Note Holder has not assigned or in any other way conveyed, transferred or encumbered all or any portion of the claims or rights covered by this Agreement. Note Holder executes this Agreement voluntarily, after consultation with counsel, and with full knowledge of its significance.

5. Representations of IMSI. IMSI represents and warrants to Note Holder as follows:

a- Authorization. All action on the part of IMSI and, if applicable, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein has been taken. IMSI has all requisite corporate power to enter into this Agreement and to carry out and perform its obligations under the terms of this Agreement.

b- No Conflict. The execution and delivery of this Agreement by IMSI and the consummation of the transactions contemplated hereby will not conflict with or result in any violation of or default by IMSI (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under (i) any provision of the organizational documents of IMSI or (ii) any agreement or instrument, permit, franchise, license, judgment, order, statute, law, ordinance, rule or regulations, applicable to IMSI or its properties or assets.

c- No Assignment. IMSI has not assigned or in any other way conveyed, transferred or encumbered all or any portion of the claims or rights covered by this Agreement.

6. Legends. Each certificate representing any of the Shares shall be endorsed with the legend set forth below, and Note Holder covenants that, except to the extent such restrictions are waived by IMSI, it shall not transfer the Shares represented by any such certificate without complying with the restrictions on transfer described in this Agreement and the legend endorsed on such certificate:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT AND, IF REQUESTED BY IMSI, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IMSI THAT THE PROPOSED TRANSFER IS EXEMPT FROM SAID ACT.”

7. Note Holder’s General Release of Claims. As additional consideration for IMSI’s issuance of the Shares, Note Holder hereby releases and forever discharges IMSI and its directors, officers, employees, attorneys, stockholders and agents, from all actions, and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, counterclaims and offsets of every character, known or unknown, direct and/or indirect, at law or in equity, of whatever kind or nature which have arisen or accrued through the date hereof, including, without limitation, those directly or indirectly arising out of or in any way connected with the sale of Shares through such date, and any rights of Note Holder under the Note or Merger Agreement except as set forth in the Mutual Termination Agreement and Release between the parties hereto of even date herewith.

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     Note Holder hereby waives all rights which it may have under the provisions of California Civil Code § 1542, which reads as follows:

     A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

     Note Holder understands the statutory language of Section 1542 of the California Civil Code, and nevertheless elects to and hereby specifically releases all claims, whether known or unknown, as described above, and specifically waives any rights which he may have under said Civil Code Section.

8. Miscellaneous.

a- Waiver. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or be construed as, a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement.

b- Expenses. Each party will bear its own costs and expenses in connection with this Agreement.

c- Assignment. The rights and obligations of the parties hereto shall inure to the benefit of and shall be binding upon the authorized successors and permitted assigns of each party. Neither party may assign its rights or obligations under this Agreement or designate another person (i) to perform all or part of its obligations under this Agreement or (ii) to have all or part of its rights and benefits under this Agreement, in each case without the prior written consent of the other party. In the event of any assignment in accordance with the terms of this Agreement, the assignee shall specifically assume and be bound by the provisions of the Agreement by executing and agreeing to an assumption agreement reasonably acceptable to the other party.

d- Survival. The respective representations and warranties given by the parties hereto, and the other covenants and agreements contained herein, shall survive the Closing Date and the consummation of the transactions contemplated herein for a period of one year, without regard to any investigation made by any party.

e- Entire Agreement. This Agreement and the Mutual Termination Agreement and Release between the parties hereto of even date herewith constitute the entire agreement between the parties hereto respecting the subject matter hereof and supersedes all prior agreements, negotiations, understandings, representations and statements respecting the subject matter hereof, whether written or oral. No modification, alteration, waiver or change in any of the terms of this Agreement shall be valid or binding upon the parties hereto unless made in writing and duly executed by IMSI and the Note Holder.

f- Counterparts. This Agreement may be executed in a number of counterparts, each of which together, shall for all purposes constitute one Agreement, binding on all of the parties hereto, notwithstanding that all such parties have not signed the same counterpart.

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g- Governing Law. The laws of California will govern this Agreement, its interpretation and construction, and all issues pertaining to it.

h- Binding Effect. This Agreement shall be binding upon and inure to the benefit of the personal representatives and successors of the respective parties hereto.

i- Severability. If any provision of this Agreement is invalid, illegal or unenforceable under any applicable statute or rule of law, it is to that extent to be deemed omitted. The remainder of the Agreement shall be valid and enforceable to the maximum extent possible.

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

ACKNOWLEDGED AND AGREED:

DIGITAL CREATIVE DEVELOPMENT CORPORATION
By:	/s/ Gary Herman
	Gary Herman Chairman & Chief Executive Officer

INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
By:	/s/ Martin Wade, III
	Martin Wade, III Director , Chief Executive Officer & Chief Financial Officer

15 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

ex10-1

EX-10.2

ex10-2

EX-10.3

ex10-3