EXHIBIT 10.01
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. 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.
(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.
Note Holder hereby waives all rights which it may have under the provisions of
California Civil Code Section 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.
(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
(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:
INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
By:_______________________________
Title:_______________________________
___/____/____
Signature Date
DIGITAL CREATIVE DEVELOPMENT CORPORATION
By: ______________________________
Title:____________________________
____/____/____
Signature Date
