Exhibit 10.12
                             SETTLEMENT AGREEMENT


      THIS SETTLEMENT AGREEMENT (the "Agreement") is entered into this 24 day of
July, 1998, by and between:  (i) THINK NEW IDEAS,  INC., a Delaware  corporation
("THINK") and SCOTT A. MEDNICK  ("Mednick")  (each, a "Party" and  collectively,
the "Parties") and (ii) X-CEED,  INC., a New York  corporation  ("X-ceed") as to
Section 7(b) and Section 9 only.

                                  RECITALS:

      WHEREAS,  THINK and Mednick are parties to a certain Settlement Agreement,
effective May 15, 1998 (the "Settlement Agreement");

      WHEREAS, each of the Parties has alleged that the other Party has breached
certain provisions of the Settlement Agreement,  and THINK also has alleged that
X-ceed may have assisted Mednick in wrongful conduct;

      WHEREAS,  each Party disputes any and all allegations  that such Party has
breached the provisions of the Settlement  Agreement,  and X-ceed denies that it
has engaged in wrongful conduct;

      WHEREAS, each Party hereto desires to resolve the matters in dispute under
the Settlement Agreement upon mutually acceptable terms;

      WHEREAS,  the Parties have therefore  determined to amend the terms of the
Settlement Agreement pursuant to the terms and conditions hereinafter set forth;
and

      WHEREAS,  THINK and Mednick  have agreed not to pursue the legal  remedies
otherwise  available to them in exchange for Mednick's and THINK's  agreement to
enter into, be bound by and to perform in accordance with the provisions hereof.

      NOW,  THEREFORE,  in consideration  of the premises and mutual  covenants,
conditions  and agreements set forth herein and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the



<PAGE>

Parties and X-ceed (as to Section 7(b) and Section 9 only), each intending to be
legally bound, hereby agree as follows:

       1. PAYMENT UNDER SETTLEMENT AGREEMENT;  HEALTH INSURANCE.  From and after
the date hereof,  Mednick  shall not be entitled to receive any further  payment
from THINK under Section 2(a) of the Settlement Agreement or otherwise and THINK
shall have no further  obligation  of any kind  whatsoever  to make any  further
payment to Mednick pursuant thereto. Further,  Mednick's right to participate in
THINK's health insurance program under Section 2(b) of the Settlement  Agreement
shall terminate on July 24, 1999.

       2. PRESS RELEASE. Mednick shall cause X-ceed, within one (1) business day
of the date hereof,  to issue the press  release  attached  hereto as Exhibit A.
Such press  release  shall be  distributed  to and through  the same  network of
distribution  which that certain press release issued by X-ceed on July 20, 1998
(the "X-ceed Press  Release") was  distributed.  Mednick hereby  represents that
attached  hereto as Exhibit B is a complete  and  accurate  list of the  network
participants  to and through  which the X-ceed  Press  Release was  distributed.
Mednick shall provide, or cause X-ceed to provide,  upon distribution of the new
press  release,  written  confirmation  that  the new  press  release  has  been
distributed as required herein.

       3. REGISTRATION OF STOCK OPTIONS; VESTING OF STOCK OPTIONS.

             (a) REGISTRATION. Section 7(b) of the Settlement Agreement shall be
hereby  amended to provide  that THINK shall  cause the 20,000  shares of common
stock of THINK (the "THINK  Common  Stock")  underlying  the  options  issued to
Mednick as a director of THINK (the  "Director  Options")  to be included in any
registration  statement (a "Registration  Statement")  filed on its behalf under
the Securities Act of 1933, as amended,  relating to the offer and sale by it of
any of its securities  solely for cash (other than on Form S-4 or any form which
does not include  substantially  the same information as would be required to be
included in a registration  statement covering the sale by Mednick of the Common
Stock underlying the Director Options). THINK shall use its best efforts to file
the  Registration  Statement as soon as  practicable  after the date hereof.  In
addition,  THINK  shall  use its best  efforts  to use Form S-8 to  fulfill  its
obligations  hereunder  and  shall  attempt  to do so prior to the  filing  of a
Registration  Statement  relating  to  an  underwritten  offering.  The  Parties
acknowledge  that in the event  that the  Registration  Statement  relates to an
underwritten  offering,  the  underwriter may limit the number of shares of such
THINK  Common  Stock then owned by Mednick to be  included  in the  Registration
Statement.  THINK  represents  that no shareholder of THINK Common Stock will be
allowed  to sell  securities  in  said  Registration  Statement  if  Mednick  is
precluded  from  including his  securities in said  Registration  Statement as a
result of such  underwriter's  decision  to limit  the  number of shares of such
THINK  Common  Stock  then owned by Mednick  to be  included  in such  offering.
Further,  in the event Mednick is excluded from  participating  in the foregoing
offering,  THINK will file a Registration Statement relating to the THINK Common
Stock underlying the Director Options within six months of the  effectiveness of
the Registration Statement from which Mednick's securities were excluded. In the
event that the foregoing offering is terminated,  THINK will file a Registration
Statement  relating to the THINK Common Stock  underlying  the Director  Options
within sixty days of said termination.



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<PAGE>

             (b)  VESTING.  THINK hereby  acknowledges  that Section 7(b) of the
Settlement  Agreement  remains in full force and Mednick may exercise the Eighty
Thousand  (80,000)  options that were granted to him under the 1997 Stock Option
Plan.

       4. TERMINATION OF RIGHTS  AGREEMENT.  Mednick hereby  acknowledges  that,
pursuant the terms of the  Settlement  Agreement,  Mednick was provided with the
opportunity, in accordance with a certain rights agreement,  effective as of May
15, 1998 (the "Rights  Agreement"),  to include the securities of THINK owned by
him  in a  Registration  Statement  and  declined  such  inclusion  in  writing.
Therefore,  it is hereby agreed that the Rights Agreement shall be terminated as
of the date  hereof,  that THINK  shall have no  further  obligation  to Mednick
whatsoever  thereunder  and  that  all  references  thereto  in  the  Settlement
Agreement shall be deleted.

       5.  TERMINATION  OF  NON-COMPETE  PROVISION;  DURATION  OF SECTION  6(b).
Section 6(a) of the Settlement  Agreement  containing the non-compete  provision
shall be hereby  terminated.  Section  6(b) of the  Settlement  Agreement  shall
terminate on December 31, 1998.

       6.  TERMINATION  OF  CONSULTING  AGREEMENT.  It is hereby agreed that the
consulting  agreement,  effective May, 15, 1998,  between Mednick and THINK (the
"Consulting Agreement") which was entered into in accordance with the Settlement
Agreement  shall be  terminated  as of the date  hereof  and  Section  15 of the
Settlement  Agreement and all references to the  Consulting  Agreement set forth
therein shall be hereby deleted.

       7.     MUTUAL RELEASE AND WAIVER.

          (a)  PARTIES  MUTUAL  RELEASE AND  WAIVER.  Except as provided  for in
Section 9, the Parties hereby release and waive any and all claims they may have
against each other  (including  any claims  Mednick may have  against  THINK its
parents,  subsidiaries,  affiliates,  predecessors and assigns, past or present,
and each of them and its and their  officers,  directors,  agents,  servants and
employees) from and against any and all rights, claims, demands,  controversies,
causes of action and liabilities of every kind and character  whatsoever,  known
or unknown,  in law or in equity,  occurring  prior to and including the date of
the execution of this Agreement and in particular, but without limitation of the
general  terms  herein.  This  release and waiver  applies to any and all claims
whether  the claims are past or present,  whether  they arise from common law or
statute.  Mednick and THINK further agree and covenants  that should any person,
organization or other entity file,  charge,  claim, sue or cause or permit to be
filed any civil action, suit or legal proceeding  involving any matter occurring
at any time in the past,  neither Party will seek or accept any personal  relief
in such civil action, suit or legal proceeding.  Further,  the Parties do hereby
expressly  waive and  relinquish,  to the fullest  extent  permitted by law, the
provisions, rights, and benefits of ss. 1542 of the California Civil Code, which
provides --

            "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."



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<PAGE>

and any and all provisions,  rights and benefits of any similar state,  federal,
or other law, rule or regulation or the common law.

        (b) X-CEED AND THINK MUTUAL  RELEASE AND WAIVER.  Except as provided for
in Section 9, THINK and  X-ceed  release  and waive any and all claims  they may
have against each other, its parents, subsidiaries, affiliates, predecessors and
assigns,  past  or  present,  and  each of them  and  its  and  their  officers,
directors,  agents, servants and employees, from and against any and all rights,
claims, demands,  controversies,  causes of action and liabilities of every kind
and character whatsoever, known or unknown, in law or in equity, occurring prior
to and including the date of the execution of this  Agreement and in particular,
but without  limitation  of the general  terms  herein.  This release and waiver
applies to any and all claims  whether the claims are past or  present,  whether
they arise from  common  law or  statute,  or  whether  they arise  directly  or
indirectly  as a result of Mednick's  activities.  THINK and X-ceed each further
agrees and covenants that should any person,  organization or other entity file,
charge,  claim,  sue or cause or permit to be filed  any civil  action,  suit or
legal  proceeding  involving  any matter  occurring at any time in the past with
regard to the matters described herein, neither will seek or accept any personal
relief in such civil action, suit or legal proceeding. Further, THINK and X-ceed
do hereby  expressly  waive and relinquish,  to the fullest extent  permitted by
law, the provisions,  rights,  and benefits of ss. 1542 of the California  Civil
Code, which provides --

            "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."

and any and all provisions,  rights and benefits of any similar state,  federal,
or other law, rule or regulation or the common law.

       8. FINAL  SETTLEMENT.  The Parties hereby agree that this Agreement is in
compromise and final settlement  between the Parties of all disputed matters and
constitutes  full  satisfaction  of all  claims  made or which  could be made of
whatsoever  kind or  character  which the Parties have or had against each other
from the beginning of time.

       9.  RETENTION  OF  CERTAIN  CLAIMS.  The  Parties  and  X-ceed  expressly
acknowledge  that this  Agreement is in the nature of a settlement of claims and
counterclaims  which  each  either  has or had  against  the other for legal and
equitable relief. The Parties and X-ceed acknowledge further, however, that each
expressly retains, and does not waive, any and all of its or his rights relative
to  equitable  and/or  legal  relief  under this  Agreement  and the  Settlement
Agreement, as amended hereby.

       10. NON-DISPARAGEMENT. The Parties represent, agree, covenant and promise
that they will refrain from  disparaging each other in connection with Mednick's
departure, the Settlement Agreement and this Agreement.



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<PAGE>

       11. CONFIDENTIALITY.  Section 14(b) of the Settlement Agreement is hereby
renumbered  Section  14(d)  and  Section  14(a)  and  Section  14(a)(i)  of  the
Settlement  Agreement shall be hereby deleted and the following provisions shall
replace such deleted provisions from the date hereof:

          (A) ACKNOWLEDGMENT.  The parties recognize that: (i) it is fundamental
to the business and operation of THINK to preserve the confidential  information
(defined  below) of THINK;  and (ii) the disclosure of any of such  confidential
information to a competitor of think would be beneficial to such competitors and
detrimental to THINK, by reason of his being an employee of THINK, in the course
of his employment, Mednick had access to, and obtained confidential information.
Therefore,  except as provided below, for a period of one (1) year from July 24,
1998,  Mednick  hereby  agrees  that he shall  keep  secret and retain in strict
confidence,  and shall not use,  disclose to others, or publish any confidential
information.

          (b) CONFIDENTIAL  INFORMATION DEFINED. For purposes of this Agreement,
this term Confidential Information shall mean:

                        (i)   trade secrets  concerning (A) technologies  used
in the  business  of THINK,  including  such  items as  product  specifications,
know-how, formulae,  compositions,  processes,  designs, sketches,  photographs,
graphs, drawings,  samples, and inventions,  (B) information system technologies
used in the  business of THINK,  including  such items as computer  software and
programs (including object code and source code), computer software and database
technologies,  systems,  structures and  architectures  (and related  processes,
formulae,  composition,  improvements,  devices, know-how, inventions,  designs,
methods and information); and

                        (ii)  historical   financial   statements,   financial
projections  and budgets,  historical  and  projected  sales,  capital  spending
budgets and plans, price lists, market studies, written business plans, customer
lists and personnel training materials.

          (c) NON-CONFIDENTIAL  INFORMATION.  Confidential Information shall not
include information that:

                        (i) is or becomes  part of the public  domain  through
no fault or breach on the part of Mednick;

                        (ii)        is  subsequently  rightfully  obtained  by
Mednick  from a third party who has the legal right to disclose  it,  without an
obligation to keep such information confidential;

                        (iii) is approved for public release by THINK; or



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<PAGE>

                        (iv) is required to be  disclosed  by judicial  action
provided  that  Mednick  has  first  given  THINK  reasonable   notice  of  such
requirement  and  reasonably  cooperates  with  THINK  in  seeking  confidential
treatment for any such disclosure.

       12. JOINT  PREPARATION.  This Agreement was jointly prepared by THINK and
Mednick and is not to be construed against either Party. Should any provision of
this Agreement be found to be illegal or unenforceable by any court of competent
jurisdiction  and cannot be modified to be  enforceable,  such  provision  shall
immediately  become null and void  leaving the  remainder  of this  Agreement in
effect.

      13.  GOVERNING  LAW.  This  agreement  and any  disputes or  questions  of
interpretation  arising  hereunder shall be resolved by applying the laws of the
state of california, excluding its conflict of laws principles.

      14.    REPRESENTATIONS  OF PARTIES.  IN EXECUTING  THIS  AGREEMENT,  THE
PARTIES HEREBY REPRESENT THAT:

             (a)   THEY HAVE COMPLETELY AND CAREFULLY READ THIS AGREEMENT;
             (b)   THEY HAVE CONSULTED ATTORNEYS CONCERNING THIS AGREEMENT;
             (c)   THEY KNOW AND  UNDERSTAND  THE CONTENTS OF THIS  AGREEMENT,
AND THAT THE TERMS OF THIS  AGREEMENT  ARE FULLY  UNDERSTOOD  AND  VOLUNTARILY
ACCEPTED THEREBY;
             (d)   THEY  HAVE  SIGNED  THIS  AGREEMENT  IN  EXCHANGE  FOR  THE
CONSIDERATION  DESCRIBED  HEREIN  WHICH  THEY  ACKNOWLEDGES  IS  ADEQUATE  AND
SATISFACTORY TO EACH PARTY;
             (e)   OTHER THAN THE  CONSIDERATION SET FORTH HEREIN, NO PROMISES
OR REPRESENTATIONS OF ANY KIND HAVE BEEN MADE THERETO;
             (f)   THEY  EXECUTE  THIS  AGREEMENT  AS THEIR  OWN FREE ACTS AND
DEEDS; AND
             (g)   THIS AGREEMENT WAS ENTERED INTO WITHOUT FRAUD,  DURESS,  OR
COERCION.

      15.  SEVERABILITY.  The provisions of this  agreement  shall be considered
severable  in the  event  that  any of such  provisions  are  held by a court of
competent  jurisdiction  to be invalid,  void or otherwise  unenforceable.  Such
invalid,  void or  otherwise  unenforceable  provisions  shall be  automatically
replaced by other  provisions  which are valid and  enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise  unenforceable.  Notwithstanding the foregoing,  the remaining
provisions  hereof shall remain  enforceable to the fullest extent  permitted by
law.



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<PAGE>

       16.  COUNTERPARTS.  This  Agreement  may  be  executed  in  two  or  more
counterparts  and signature  pages may be delivered by facsimile,  each of which
shall be deemed an original,  but all of which together shall constitute one and
the same instrument.

       17.  ENTIRE  AGREEMENT;  AMENDMENT.  This  Agreement  contains the entire
agreement  between of the Parties with respect to the subject  matter hereof and
thereof. This Agreement may not be amended, changed, modified or discharged, nor
may any provision hereof be waived,  except by an instrument in writing executed
by or on behalf of the party against whom enforcement of any amendment,  waiver,
change,  modification  or discharge  is sought.  No course of conduct or dealing
shall be construed to modify,  amend or otherwise  affect any of the  provisions
hereof.

       18.  NOTICES.  All  notices,  request,  demands and other  communications
hereunder  shall be in  writing  and shall be deemed to have been duly  given if
physically  delivered,  delivered by express mail or other expedited  service or
upon receipt if mailed, postage prepaid, via first class mail as follows:

            (a)   To the Company:         THINK New Ideas, Inc.
                                          45 West 36th Street
                                          12th Floor
                                          New York, NY 10018
                                          Attention:  President

                  With an additional copy
                  by like means to:       Kirkpatrick & Lockhart LLP
                                          1800 Massachusetts Ave., N.W.
                                          Washington, D.C.  20036
                                          Attn:  Lawrence Coe  Lanpher

            (b)   To the Mednick:         Mr. Scott Mednick
                                          7972 Mulholland Drive
                                          Los Angeles, California  90046

                  With an additional copy
                  by like means to:       Riordan & McKinzie
                                          California Plaza
                                          300 South Grand Ave.
                                          29th Floor
                                          Los Angeles, California  90071
                                          Attn:  Jeffrey L. Glassman

            (c)   To X-ceed:              X-ceed, Inc.
                                          488 Madison Avenue
                                          3rd Floor
                                          New York, New York 10022
                                          Attention: President



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and/or to such  other  persons  and  addresses  as any party  hereto  shall have
specified in writing to the other.

      19.  ASSIGNABILITY.  This agreement shall not be assignable by Mednick but
shall be binding  upon and shall inure to the  benefit of his heirs,  executors,
administrators and legal representatives.  This agreement shall be assignable by
think to any affiliate,  subsidiary or division  thereof and to any successor in
interest;  provided,  however, such assignment shall not relieve think of any of
its obligations hereunder.

      20. WAIVER AND FURTHER AGREEMENT. Any waiver of any breach of any terms or
conditions of this  agreement  shall not operate as a waiver of any other breach
of such terms or conditions as any other term or condition hereof, nor shall any
failure to enforce any provision hereof operate as a waiver of such provision or
of any other  provision  hereof.  Each of the parties agrees to execute all such
further  instruments  and documents  and to take all such further  action as the
other party may reasonably require in order to effectuate the terms and purposes
of this agreement.

       21. HEADINGS OF NO EFFECT.  The headings  contained in this Agreement are
for  reference  purposes  only and shall not in any way  affect  the  meaning or
interpretation of this Agreement.



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

                                    THINK NEW IDEAS, INC.

                                    By:    /s/ Ronald Bloom
                                          ----------------------------
                                    Name: RONALD BLOOM
                                    Its: CHIEF EXECUTIVE OFFICER




                                           /s/ Scott Mednick
                                          ----------------------------
                                            Scott A. Mednick



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As to Section 7(b) and Section 9 only:


                                    X-CEED, INC.

                                    By:    /s/ Werner Haase
                                          ----------------------------
                                    Name: WERNER HAASE
                                    Its:  CHIEF EXECUTIVE OFFICER








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                                  EXHIBIT A
                                PRESS RELEASE

<PAGE>


                             [X-ceed Letterhead]

Scott Mednick, Chairman of X-ceed, issued the following statement:

"On May 15,  1998,  I left THINK New  Ideas,  Inc.,  a company  that I helped to
found. Leaving was a difficult decision.  However, at that time it was my desire
to pursue  more fully my many  charitable  endeavors.  My duties at THINK and my
day-to-day involvement in the business precluded me from pursuing that goal."

"Very  recently,  I was  presented  with a challenging  opportunity  to consider
joining X-ceed. This was a new opportunity - one that I had not considered until
well after I left THINK.  I decided to accept  this  wonderful  opportunity.  Of
course, I will devote time to charitable endeavors."

"I look  forward  to being a part of  X-ceed  and its  exciting  future.  I look
forward as well to the future  potential  to work with THINK,  particularly  the
possibility of using some of its state of the art technologies  such as E corp.,
Moat,  and Web  Mechanic.  I am  enthusiastic  about  the  incredible  future of
interactive  communications  and look forward to the  tremendous  opportunity at
X-ceed as well as exploring a continuation of a relationship with THINK."


<PAGE>


EXHIBIT B
PRESS RELEASE DISTRIBUTION LIST

      New York Times, Wall Street Journal,  Silicon Alley Reporter,  @ New York,
Business 2.0, CNN fn., Dow Jones business wire, Associated Press, Reuters.