-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KPCQvCKsilQfgPGp0/6MEriL7YW/PcBJY38AS061xJIByPkeFwR0vdat1N0rvF4h LPhzmKt2+TBXd9gs70Cx/A== 0000944209-97-000041.txt : 19970116 0000944209-97-000041.hdr.sgml : 19970116 ACCESSION NUMBER: 0000944209-97-000041 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961231 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970115 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: METATOOLS INC CENTRAL INDEX KEY: 0000919794 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 954102687 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27168 FILM NUMBER: 97505973 BUSINESS ADDRESS: STREET 1: 6303 CARPINTERIA AVENUE CITY: CARPINTERIA STATE: CA ZIP: 93013 MAIL ADDRESS: STREET 1: 6303 CARPINTERIA AVE CITY: CARPINTERIA STATE: CA ZIP: 93013 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): December 31, 1996 Commission file number 0-27168 METATOOLS, INC. (Exact name of registrant as specified in its charter) Delaware 95-4102687 (State of incorporation) (I.R.S. Employer Identification Number) 6303 Carpinteria Ave., Carpinteria, CA 93013 (Address of principal executive offices) (805) 566-6200 (Registrant's telephone number, including area code) 1 Item 2. Acquisition or Disposition of Assets On December 31, 1996, MetaTools, Inc. (the "Company") completed the acquisition of Real Time Geometry Corporation ("RTG"), a privately held company based in Princeton, New Jersey, specializing in real time 3D graphics and visualization technologies, pursuant to the Stock Purchase Agreement, dated as of December 23, 1996 (the "Purchase Agreement"). Under the terms of the Purchase Agreement, the stockholders and optionholders of RTG received a combination of shares of the Company's common stock and options to purchase shares of the Company's common stock valued at approximately $12 million at December 31, 1996, the closing date. The acquisition will be accounted for by the Company under the purchase method of accounting. RTG's existing operations will remain in Princeton, New Jersey as the Company's Real Time Geometry research and development lab, led by Alexander Migdal, Vice President and Chief Scientist, and Robert Rice, Vice President of Business Development. In connection with the acquisition, the Company entered into employment agreements with both Alexander Migdal and Robert Rice, entered into a noncompetition agreement with Alexander Migdal, and amended and restated its Investors' Rights Agreement. The terms of the Purchase Agreement were derived through arm's-length negotiations between the parties. Item 7. Financial Statements and Exhibits (a) Financial Statements As of the date of filing of this Current Report on Form 8-K, it is impracticable for the Registrant to provide the financial statements required by this Item 7(a). In accordance with Item 7(a)(4) of Form 8-K, such financial statements shall be filed by amendment to this Form 8-K no later than 60 days after January 14, 1997. (b) Pro Forma Financial Information As of the date of filing of this Current Report on Form 8-K, it is impracticable for the Registrant to provide the pro forma financial information required by this Item 7(b). In accordance with Item 7(b) of Form 8-K, such financial statements shall be filed by amendment to this Form 8-K no later than 60 days after January 14, 1997. 2 (c) Exhibits
Exhibit Number Exhibit Title ------- ------------- 2.2 Stock Purchase Agreement between the Registrant and Real Time Geometry Corporation dated December 23, 1996 (the exhibits listed therein have been omitted and filed separately as Exhibits 10.22, 10.23, 10.24, and 10.25) 10.22 Employment Agreement between the Registrant and Alexander Migdal dated December 31, 1996 10.23 Employment Agreement between the Registrant and Robert Rice dated December 31, 1996 10.24 Noncompetition Agreement between the Registrant and Alexander Migdal dated December 31, 1996 10.25 Amended and Restated Investors' Rights Agreement 99.1 Press Release
3 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, thereunto duly authorized. METATOOLS, INC. (Registrant) Date: January 14, 1997 /s/ TERANCE A. KINNINGER ------------------------ Terance A. Kinninger Vice President and Chief Financial Officer 4 EX-2.2 2 STOCK PURCHASE AGREEMENT EXHIBIT 2.2 ----------- STOCK PURCHASE AGREEMENT BY AND AMONG METATOOLS, INC. AND CERTAIN STOCKHOLDERS AND OPTION HOLDERS OF REAL TIME GEOMETRY CORP. DATED AS OF DECEMBER 23, 1996 TABLE OF CONTENTS
PAGE ---- ARTICLE I PURCHASE AND SALE OF STOCK........................................................................................ 2 1.1 Sale of Stock................................................................................................... 2 1.2 Exchange of Options............................................................................................. 2 1.3 Closing......................................................................................................... 2 1.4 Consideration and Payment...................................................................................... 2 1.5 Surrender of Certificates...................................................................................... 3 1.6 Tax Consequences............................................................................................... 3 1.7 Taking of Necessary Action; Further Action..................................................................... 3 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS................................................................... 4 2.1 Organization of the Company..................................................................................... 4 2.2 Company Capital Structure....................................................................................... 4 2.3 Subsidiaries.................................................................................................... 5 2.4 No Conflicts and Consents....................................................................................... 5 2.5 Company Financial Statements.................................................................................... 5 2.6 No Undisclosed Liabilities...................................................................................... 5 2.7 No Changes...................................................................................................... 6 2.8 Tax and Other Returns and Reports............................................................................... 7 2.9 Restrictions on Business Activities............................................................................. 9 2.10 Title to Properties; Absence of Liens and Encumbrances.......................................................... 9 2.11 Intellectual Property........................................................................................... 10 2.12 Agreements, Contracts and Commitments........................................................................... 11 2.13 Interested Party Transactions................................................................................... 12 2.14 Compliance with Laws............................................................................................ 13 2.15 Litigation...................................................................................................... 13 2.16 Insurance....................................................................................................... 13 2.17 Minute Books.................................................................................................... 13 2.18 Environmental Matters........................................................................................... 13 2.19 Brokers' and Finders' Fees; Third Party Expenses................................................................ 14 2.20 Employee Matters and Benefit Plans.............................................................................. 14 2.21 Section 280(g).................................................................................................. 17 2.22 Representations Complete........................................................................................ 17 ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH SELLER........................................................ 17 3.1 Authority....................................................................................................... 18 3.2 Good and Marketable Title....................................................................................... 18 3.3 Investment Representations...................................................................................... 18 3.4 Standstill and Restrictions on Transfer......................................................................... 19 3.5 Maximum Net Worth............................................................................................... 19 3.6 Tax Matters..................................................................................................... 19
-i- TABLE OF CONTENTS (continued)
PAGE ---- ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.......................................................................... 20 4.1 Organization, Standing and Power................................................................................ 20 4.2 Authority....................................................................................................... 21 4.3 Capital Structure............................................................................................... 21 4.4 SEC Documents; Buyer Financial Statements....................................................................... 21 4.5 No Material Adverse Change...................................................................................... 22 4.6 Litigation...................................................................................................... 22 4.7 Brokers' and Finders' Fees...................................................................................... 22 4.8 Continuity of Business Enterprise; Section 368 Reorganization................................................... 22 4.9 Employee Benefit Plans; ERISA................................................................................... 22 ARTICLE V CONDUCT PRIOR TO THE CLOSING...................................................................................... 23 5.1 Conduct of Business of the Company.............................................................................. 23 5.2 No Solicitation................................................................................................. 25 5.3 No Encumbrance.................................................................................................. 26 ARTICLE VI ADDITIONAL AGREEMENTS............................................................................................ 26 6.1 Access to Information........................................................................................... 26 6.2 Confidentiality................................................................................................. 27 6.3 Expenses........................................................................................................ 27 6.4 Public Disclosure............................................................................................... 27 6.5 Consents........................................................................................................ 27 6.6 FIRPTA Compliance............................................................................................... 28 6.7 Legal Requirements.............................................................................................. 28 6.8 Notification of Certain Matters................................................................................. 28 6.9 Certain Benefit Plans........................................................................................... 28 6.10 Buyer Stock Options............................................................................................. 29 6.11 Additional Documents and Further Assurances..................................................................... 29 6.12 Form S-8........................................................................................................ 29 6.13 Company's Auditors.............................................................................................. 29 6.14 Arrangements with Wexford....................................................................................... 29 6.15 Company Agreements.............................................................................................. 30 ARTICLE VII CONDITIONS TO THE PURCHASE...................................................................................... 30 7.1 Conditions to Obligations of Each Party to Effect the Purchase.................................................. 30 7.2 Additional Conditions to Obligations of the Sellers............................................................. 30 7.3 Additional Conditions to the Obligations of Buyer............................................................... 31
-ii- TABLE OF CONTENTS (continued)
PAGE ---- ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.................................................... 33 8.1 Survival of Representations and Warranties...................................................................... 33 8.2 Indemnity for Representations of Founders....................................................................... 33 8.3 Indemnity for Representations of Each Seller.................................................................... 33 ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................................................................ 34 9.1 Termination..................................................................................................... 34 9.2 Effect of Termination........................................................................................... 34 9.3 Amendment....................................................................................................... 35 9.4 Extension; Waiver............................................................................................... 35 ARTICLE X GENERAL PROVISIONS................................................................................................ 35 10.1 Notices......................................................................................................... 35 10.2 Interpretation.................................................................................................. 36 10.3 Counterparts.................................................................................................... 37 10.4 Entire Agreement; Assignment.................................................................................... 37 10.5 Severability.................................................................................................... 37 10.6 Other Remedies.................................................................................................. 37 10.7 Governing Law................................................................................................... 37 10.8 Rules of Construction........................................................................................... 37 10.9 Specific Performance............................................................................................ 37 10.10 Unified Disclosure Schedules.................................................................................... 38
-iii- INDEX OF EXHIBITS
EXHIBIT DESCRIPTION - ------- ----------- Exhibit A-1 Form of Migdal Employment Agreement Exhibit A-2 Form of Rice Employment Agreement Exhibit B Form of Migdal Noncompete Exhibit C Form of Amended and Restated Investors' Rights Agreement Schedule I Allocation of Buyer Common Stock and Buyer Options
-iv- STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of December 23, 1996 among MetaTools, Inc., a Delaware corporation ("Buyer"), Alexander Migdal ("Migdal"), Robert Rice ("Rice", and collectively with Migdal, the "Founders"), Wexford Capital Partners II, LP ("Wexford Capital") and Wexford Overseas Partners I, LP ("Wexford Overseas", and collectively with Wexford Capital, "Wexford") and certain other stockholders of (the "Other Stockholders," and collectively with Migdal and Wexford, the "Stockholders"), and certain holders of options, warrants or other rights to acquire capital stock of (the "Option Holders," and collectively with the Stockholders, the "Sellers") of Real Time Geometry Corp., a Delaware corporation (the "Company"). RECITALS A. The parties believe it is in their respective best interests that Buyer acquire the Company through the purchase (the "Purchase") by Buyer from the Sellers of all capital stock of the Company ("Company Capital Stock") held by them, together with all (subject to certain exceptions) outstanding options, warrants or other rights to acquire or receive shares of Company Capital Stock from the Company or from Migdal ("Company Options"), in exchange for shares of voting Common Stock of Buyer ("Buyer Common Stock"), or options, warrants or other rights to acquire or receive Buyer Common Stock, as applicable. B. The Stockholders are collectively the owners of and have good and valid title to approximately 97% of the Company Capital Stock, free and clear of any legal or equitable encumbrances. The Option Holders and Wexford are collectively the owners of and have good and valid title to all Company Options, free and clear of any legal or equitable encumbrances. C. Buyer and the Sellers desire to make certain representations and warranties and other agreements in connection with the Purchase. NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, intending to be legally bound hereby the parties agree as follows: -1- ARTICLE I PURCHASE AND SALE OF STOCK 1.1 Sale of Stock. At the Closing (as defined in Section 1.3 hereof) and ------------- subject to and upon the terms and conditions of this Agreement, each Stockholder will sell, transfer, convey, assign and deliver to Buyer, and Buyer will purchase and acquire from each Stockholder, good and valid title to all shares of Company Capital Stock held by such Stockholder (collectively, the "Purchased Shares"), free and clear of any liens, claims, charges, restrictions, pledges, security interests, options, rights of any nature or other legal or equitable encumbrances. At the Closing, each Stockholder will deliver to Buyer duly executed instruments of transfer and assignment of the Purchased Shares sufficient to vest in Buyer all right, title and interest in the Purchased Shares in accordance with the terms of this Agreement. Except as set forth in Section 1.5(c), Buyer will bear the cost of any documentary, stamp, sales, excise, transfer or other taxes payable in respect of the sale of the Purchased Shares. Each Stockholder's obligation to sell such Stockholder's Purchased Shares to Buyer is a separate obligation. 1.2 Exchange of Options. At the Closing and subject to and upon the terms and ------------------- conditions of this Agreement, the Option Holders will agree to cancel their entire outstanding and unexercised Company Options, whether vested, unvested, exercisable or unexercisable, in exchange for the grant by Buyer of new, fully vested and immediately exercisable options, under the Buyer's 1996 Nonstatutory Stock Option Plan, to acquire a number of shares of Buyer Common Stock as set forth on Schedule I hereto. Such new options shall have a per share option exercise price equal to the per share exercise price as set forth on Schedule I hereto. 1.3 Closing. Unless this Agreement is earlier terminated pursuant to Article ------- IX hereof, the closing of the purchase and sale of the Purchased Shares (the "Closing") will take place as promptly as practicable, but no later than five (5) business days, following satisfaction or waiver of the conditions set forth in Article VII hereof, at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California, unless another place or time is agreed to by Buyer and the Founders. The date upon which the Closing actually occurs is herein referred to as the "Closing Date"). Subsequent to the Closing, the Company is sometimes referred to herein as the "Surviving Corporation"). 1.4 Consideration and Payment. ------------------------- (a) Common Stock Purchase Price. The consideration to be paid by Buyer --------------------------- to each Stockholder selling Common Stock of the Company ("Company Common Stock"), with respect to such Common Stock, shall be as set forth on Schedule I hereto. (b) Preferred Stock Purchase Price. The consideration to be paid by ------------------------------ Buyer to each Stockholder selling Preferred Stock of the Company ("Company Preferred Stock"), with respect to such Preferred Stock, shall be as set forth on Schedule I hereto. -2- (c) No Adjustment for Subsequent Issuances. No adjustment shall be made -------------------------------------- in the number of shares of Buyer Common Stock issued as a result of any cash proceeds received by the Company from the date hereof to the Closing pursuant to the exercise of any Company Options. (d) Fractional Shares. No fraction of a share of Buyer Common Stock will ----------------- be issued, but, in lieu thereof, each Stockholder who would otherwise be entitled to a fraction of a share of Buyer Common Stock (after aggregating all fractional shares of Buyer Common Stock to be received by such stockholder) shall be entitled to receive from Buyer an amount of cash (rounded to the nearest whole cent) equal to the product of (i) such fraction, multiplied by (ii) the average closing price of a share of Buyer Common Stock for the five (5) consecutive trading days ending on the trading day immediately prior to the Closing Date, as reported on the Nasdaq National Market (the "Closing Fair Market Value"). 1.5 Surrender of Certificates. ------------------------- (a) Surrender of Certificates. Each Stockholder shall deliver to Buyer ------------------------- at the Closing all certificates, duly endorsed for transfer, representing all shares of Company Capital Stock held by such Stockholder (the "Certificates"). (b) Lost, Stolen or Destroyed Certificates. In the event any -------------------------------------- Certificates evidencing Purchased Shares shall have been lost, stolen or destroyed, the Stockholder shall deliver to the Buyer an affidavit of that fact and a bond in such sum as Buyer may reasonably request as indemnity against any claim that may be made against Buyer with respect to the Certificates alleged to have been lost, stolen or destroyed. (c) Transfers of Ownership. If any certificate for shares of Buyer ---------------------- Common Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it will be a condition of the issuance thereof that the Certificate so surrendered will be properly endorsed and otherwise in proper form for transfer and that the person requesting such exchange will have paid to Buyer or any agent designated by it any transfer or other taxes required by reason of the issuance of a certificate for shares of Buyer Common Stock in any name other than that of the registered holder of the Certificate surrendered, or established to the satisfaction of Buyer or any agent designated by it that such tax has been paid or is not payable. 1.6 Tax Consequences. It is intended by the parties hereto that the Purchase ---------------- shall constitute a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"). 1.7 Taking of Necessary Action; Further Action. If, at any time after the ------------------------------------------ Closing, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest Buyer with full right, title and possession to all Purchased Shares, each Stockholder agrees to promptly, at its own expense, take all such lawful and necessary action. -3- ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS The Founders hereby represent and warrant to Buyer subject to such exceptions as are specifically disclosed in the schedules (referencing the appropriate section number) supplied by the Founders to Buyer (the "Company Schedules") and dated as of the date hereof, as follows: 2.1 Organization of the Company. The Company is a corporation duly organized, --------------------------- validly existing and in good standing under the laws of the State of Delaware. The Company has the corporate power to own its properties and to carry on its business as now being conducted and as proposed to be conducted by the Company. The Company is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a Material Adverse Effect (as defined below). (As used in this Agreement, the term "Material Adverse Effect" means a material adverse effect on the business, assets (including intangible assets), financial condition or results of operations of the Company or the Buyer, as applicable). The Company has delivered a true and correct copy of its Certificate of Incorporation and Bylaws, each as amended to date, to Buyer. 2.2 Company Capital Structure. ------------------------- (a) The authorized capital stock of the Company consists of 1,500 shares of authorized Common Stock, of which 825 shares are issued and outstanding, and 200 shares of authorized Series A Preferred Stock, of which 200 shares are issued and outstanding. The Company Capital Stock is held of record by the persons, with the addresses of record and in the amounts set forth on Schedule 2.2(a). All outstanding shares of Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, the Certificate of Incorporation or Bylaws of the Company or any agreement to which the Company is a party or by which it is bound. (b) The Company has reserved 250 shares of Common Stock for issuance upon exercise of the Company Options. Schedule 2.2(b) sets forth for each outstanding Company Option, the name of the holder of such Company Option, the domicile address of such holder, the number of shares of Common Stock subject to such Company Option, the exercise price of such Company Option and the vesting schedule for such Company Option, including the extent vested to date and whether the exercisability of such Company Option will be accelerated and become exercisable by reason of the transactions contemplated by this Agreement. Except for the Company Options described in Schedule 2.2(b), there are no options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which the Company or any stockholder of the Company is a party or by which the Company is bound obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of the Company or obligating the Company to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. The holders of Company Options have been or will be given, or shall have properly waived, any required notice prior to the Purchase. -4- (c) As a result of the Purchase, Buyer will be the record and sole beneficial owner of at least 97% of the Company Capital Stock and all rights to acquire or receive Company Capital Stock. 2.3 Subsidiaries. The Company does not have and has never had any subsidiaries ------------ or affiliated companies and does not otherwise own and has never otherwise owned any shares of capital stock or any interest in, and does not control, directly or indirectly, any other corporation, partnership, association, joint venture or other business entity. 2.4 No Conflicts and Consents. Except as set forth on Schedule 2.4, the ------------------------- execution and delivery of this Agreement by the Sellers does not, and, as of the Closing, the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (any such event, a "Conflict") (i) any provision of the Certificate of Incorporation or Bylaws of the Company or (ii) any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or its properties or assets. No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other federal, state, county, local or foreign governmental authority, instrumentality, agency or commission ("Governmental Entity") or any third party, including a party to any agreement with the Company (so as not to trigger any Conflict) is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws, and (ii) such other consents, waivers, authorizations, filings, approvals and registrations which are set forth on Schedule 2.4. 2.5 Company Financial Statements. Schedule 2.5(a) sets forth the Company's ---------------------------- unaudited balance sheet as of November 30, 1996 (the "Balance Sheet") and the related unaudited statements of operations and cash flows for the eleven-month period then ended (collectively, the "Company Financials"). The Company Financials are complete and correct in all material respects and have been prepared on a modified accrual basis which is consistent with financial statements prepared under generally accepted accounting principles ("GAAP"), except as disclosed in footnote 2 of the company Financials in accordance with GAAP, applied on a basis consistent throughout the periods indicated and consistent with each other. The Company Financials present fairly the financial condition and operating results of the Company as of the dates and during the periods indicated therein, subject, to normal year-end adjustments, which adjustments will not be material in amount or significance. 2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6, the -------------------------- Company does not have any liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of any type, whether accrued, absolute, contingent, matured, unmatured or other (whether or not required to be reflected in financial statements in accordance with generally accepted accounting -5- principles), which individually or in the aggregate, (i) has not been reflected in the Balance Sheet, or (ii) has not arisen in the ordinary course of the Company's business since the date of the Balance Sheet, consistent with past practices. 2.7 No Changes. Except as set forth in Schedule 2.6 or Schedule 2.7, since ---------- the date of the Balance Sheet, there has not been, occurred or arisen any: (a) transaction by the Company except in the ordinary course of business as conducted on the date of the Balance Sheet and consistent with past practices; (b) amendments or changes to the Certificate of Incorporation or Bylaws of the Company; (c) capital expenditure or commitment by the Company, either individually in excess of $5,000 or in the aggregate exceeding $50,000; (d) destruction of, damage to or loss of any assets (including intangible assets), business or customer of the Company (whether or not covered by insurance); (e) labor trouble or claim of wrongful discharge or other unlawful labor practice or action; (f) change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by the Company; (g) revaluation by the Company of any of its assets; (h) declaration, setting aside, or payment of a dividend or other distribution with respect to the capital stock of the Company, or any direct or indirect redemption, purchase or other acquisition by the Company of any of its capital stock; (i) increase in the salary or other compensation payable or to become payable to any of its officers, directors, employees, consultants or advisors, or the declaration, payment or commitment or obligation of any kind for the payment of a bonus or other additional salary or compensation to any such person; (j) sale, lease, license or other disposition of any of the assets or properties of the Company, except in the ordinary course of business as conducted on that date and consistent with past practices; (k) amendment or termination of any material contract, agreement or license to which the Company is a party or by which it is bound; -6- (l) loan by the Company to any person or entity, incurring by the Company of any indebtedness, guaranteeing by the Company of any indebtedness, issuance or sale of any debt securities of the Company or guaranteeing of any debt securities of others, except for advances to employees for travel and business expenses in the ordinary course of business, consistent with past practices; (m) waiver or release of any right or claim of the Company, including any write-off or other compromise of any account receivable of the Company; (n) commencement or notice or threat of commencement of any lawsuit or proceeding against or investigation of the Company or its affairs; (o) notice of any claim of ownership by a third party of any Company Intellectual Property Rights (as defined in Section 2.11 below) or of infringement by the Company of any third party's intellectual property rights; (p) issuance or sale by the Company of any of its shares of capital stock, or securities exchangeable, convertible or exercisable therefor, or of any other of its securities (except as contemplated by this Agreement); (q) change in pricing or royalties set or charged by the Company to its customers or licensees or in pricing or royalties set or charged by persons who have licensed Intellectual Property to the Company; (r) event or condition of any character that has or could be reasonably expected to have a Material Adverse Effect on the Company; or (s) negotiation or agreement by the Company or any officer, employee or agent thereof to do any of the things described in the preceding clauses (a) through (r) (other than negotiations with Buyer and its representatives regarding the transactions contemplated by this Agreement). 2.8 Tax and Other Returns and Reports. --------------------------------- (a) Definition of Taxes. For the purposes of this Agreement, "Tax" or, ------------------- collectively, "Taxes", means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity. -7- (b) Tax Returns and Audits. ---------------------- (i) The Company as of the Closing will have prepared and filed all required federal, state, local and foreign returns, estimates, information statements and reports ("Returns") relating to any and all Taxes concerning or attributable to the Company or its operations and such Returns, if any, are true and correct and have been completed in accordance with applicable law. (ii) The Company as of the Closing: (A) will have paid or accrued all Taxes it is required to pay or accrue and (B) will have withheld with respect to its employees all federal and state income taxes, The Federal Insurance Contribution Act ("FICA"), the Federal Unemployment Tax Act ("FUTA") and other Taxes required to be withheld. (iii) The Company has not been delinquent in the payment of any Tax nor is there any Tax deficiency outstanding, proposed or assessed against the Company, nor has the Company executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. (iv) No audit or other examination of any Return of the Company is currently in progress, nor has the Company been notified of any request for such an audit or other examination. (v) The Company does not have any liabilities for unpaid federal, state, local and foreign Taxes which have not been accrued or reserved against in accordance with GAAP on the Balance Sheet, whether asserted or unasserted, contingent or otherwise, and the Company has no knowledge of any basis for the assertion of any such liability attributable to the Company, its assets or operations. (vi) The Company has provided to Buyer copies of all federal and state income and all state sales and use Tax Returns for all periods since the date of Company's incorporation. (vii) There are (and as of immediately following the Closing there will be) no liens, pledges, charges, claims, security interests or other encumbrances of any sort ("Liens") on the assets of the Company relating to or attributable to Taxes, except for Liens for taxes not yet due and payable. (viii) The Company has no knowledge of any basis for the assertion of any claim relating or attributable to Taxes which, if adversely determined, would result in any Lien on the assets of the Company. (ix) None of the Company's assets are treated as "tax-exempt use property" within the meaning of Section 168(h) of the Code. -8- (x) The Company has not filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the Company. (xi) The Company is not a party to a tax sharing or allocation agreement nor does the Company owe any amount under any such agreement. (xii) The Company is not, and has not been at any time, a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (xiii) The Company's tax basis in its assets for purposes of determining its future amortization, depreciation and other federal income tax deductions is accurately reflected on the Company's tax books and records. 2.9 Restrictions on Business. There is no agreement (noncompete or ------------------------ otherwise), commitment, judgment, injunction, order or decree to which the Company is a party or otherwise binding upon the Company which has or reasonably could be expected to have the effect of prohibiting or impairing any business practice of the Company, any acquisition of property (tangible or intangible) by the Company or the conduct of business by the Company. Without limiting the foregoing, the Company has not entered into any agreement under which the Company is restricted from selling, licensing or otherwise distributing any of its products to any class of customers, in any geographic area, during any period of time or in any segment of the market. 2.10 Title to Properties; Absence of Liens and Encumbrances. ------------------------------------------------------ (a) The Company owns no real property, nor has it ever owned any real property. Schedule 2.10(a) sets forth a list of all real property currently, or at any time in the past, leased by the Company, the name of the lessor, the date of the lease and each amendment thereto and, with respect to any current lease, the aggregate annual rental and/or other fees payable under any such lease. All such current leases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event of default (or event which with notice or lapse of time, or both, would constitute a default). (b) The Company has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, real, personal and mixed, used or held for use in its business, free and clear of any Liens, except as reflected in the Company Financials or in Schedule 2.10(b) and except for liens for taxes not yet due and payable and such imperfections of title and encumbrances, if any, which are not material in character, amount or extent, and which do not materially detract from the value, or materially interfere with the present use, of the property subject thereto or affected thereby. -9- 2.11 Intellectual Property. --------------------- (a) The Company owns, or is licensed or otherwise possesses legally enforceable rights to use, all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, net lists, schematics, technology, know-how, computer software programs or applications (in both source code and object code form as to software programs and applications owned by the Company and in object code form as to software programs and applications licensed by the Company), and tangible or intangible proprietary information or material that are used in the business of the Company (the "Company Intellectual Property Rights"). (b) Schedule 2.11(a) sets forth a complete list of all patents, registered and material unregistered trademarks, registered copyrights, trade names and service marks, and any applications therefor, included in the Company Intellectual Property Rights, and specifies, where applicable, the jurisdictions in which each such Company Intellectual Property Right has been issued or registered or in which an application for such issuance and registration has been filed, including the respective registration or application numbers and the names of all registered owners. Schedule 2.11(b) sets forth a complete list of all licenses, sublicenses and other agreements as to which the Company is a party and pursuant to which the Company or any other person is authorized to use any Company Intellectual Property Right or trade secret of the Company, and includes the identity of all parties thereto, a description of the nature and subject matter thereof, the applicable royalty or other fees and the term thereof. The execution and delivery of this Agreement by the Company, and the consummation of the transactions contemplated hereby, will neither cause the Company to be in violation or default under any such license, sublicense or agreement, nor entitle any other party to any such license, sublicense or agreement to terminate or modify such license, sublicense or agreement. Except as set forth in Schedules 2.11(a) or 2.11(b), the Company is the sole and exclusive owner or licensee of, with all right, title and interest in and to (free and clear of any liens or encumbrances), the Company Intellectual Property Rights, and has sole and exclusive rights (and is not contractually obligated to pay any compensation to any third party in respect thereof) to the use thereof or the material covered thereby in connection with the services or products in respect of which the Company Intellectual Property Rights are being used. (c) No claims with respect to the Company Intellectual Property Rights have been asserted or are threatened by any person, nor is the Company aware of any valid grounds for any bona fide claims, (i) to the effect that the manufacture, sale, licensing or use of any of the products of the Company infringes on any copyright, patent, trade mark, service mark, trade secret or other proprietary right of others, (ii) against the use by the Company of any trademarks, service marks, trade names, trade secrets, copyrights, maskworks, patents, technology, know-how or computer software programs and applications used in the Company's business as currently conducted or as proposed to be conducted by the Company, or (iii) challenging the ownership by the Company or the validity or effectiveness of any of the Company Intellectual Property Rights. All registered trademarks, service marks and copyrights held by the Company are valid and subsisting. To the best of the Company's knowledge, the Company has not infringed, and the business of the Company as currently conducted or as proposed to be conducted does not infringe, any copyright, patent, trademark, service mark, trade secret or other proprietary right of any third party. The Company is not aware of any material unauthorized use, infringement or misappropriation of any of the Company -10- Intellectual Property Rights by any third party, including any employee or former employee of the Company. No Company Intellectual Property Right or product of the Company is subject to any outstanding decree, order, judgment, or stipulation restricting in any manner the licensing thereof by the Company. Each employee, consultant or contractor of the Company has executed a proprietary information and confidentiality agreement substantially in the Company's standard forms. All software included in the Company Intellectual Property Rights is original with the Company and has been either created by employees of the Company on a work-for-hire basis or by consultants or contractors who have created such software themselves and have assigned all rights they may have had in such software to the Company. 2.12 Agreements, Contracts and Commitments. Except as set forth on Schedule ------------------------------------- 2.12(a), the Company does not have, is not a party to nor is it bound by: (i) any collective bargaining agreements, (ii) any agreements or arrangements that contain any severance pay or post-employment liabilities or obligations, (iii) any bonus, deferred compensation, pension, profit sharing or retirement plans, or any other employee benefit plans or arrangements, (iv) any employment or consulting agreement, contract or commitment with an employee or individual consultant or salesperson or any consulting or sales agreement, contract or commitment under which any firm or other organization provides services to the Company, (v) any agreement or plan, including, without limitation, any stock option plan, stock appreciation rights plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement, (vi) any fidelity or surety bond or completion bond, (vii) any lease of personal property having a value individually in excess of $10,000, (viii) any agreement of indemnification or guaranty, (ix) any agreement, contract or commitment containing any covenant limiting the freedom of the Company to engage in any line of business or to compete with any person, -11- (x) any agreement, contract or commitment relating to capital expenditures and involving future payments in excess of $10,000, (xi) any agreement, contract or commitment relating to the disposition or acquisition of assets or any interest in any business enterprise outside the ordinary course of the Company's business, (xii) any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit, including guaranties referred to in clause (viii) hereof, (xiii) any purchase order or contract for the purchase of raw materials involving $10,000 or more, (xiv) any construction contracts, (xv) any distribution, joint marketing or development agreement, (xvi) any agreement pursuant to which the Company has granted or may grant in the future, to any party, a source-code license or option or other right to use or acquire, contingent or otherwise, source-code, or (xvii) any other agreement, contract or commitment that involves $10,000 or more or is not cancelable without penalty within thirty (30) days. The Company has not breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under, any of the terms or conditions of any agreement, contract or commitment to which it is bound (including those set forth in any of the Company Schedules) (any such agreement, contract or commitment, a "Contract") in any manner which could reasonably be expected to have a Material Adverse Effect. Each Contract is in full force and effect and is not subject to any default thereunder of which the Company has knowledge by any party obligated to the Company pursuant thereto. 2.13 Interested Party Transactions. Except as set forth in Schedule 2.13, no ----------------------------- officer, director or stockholder of the Company (nor any ancestor, sibling, descendant or spouse of any of such persons, or any trust, partnership or corporation in which any of such persons has or has had an interest), has or has had, directly or indirectly, (i) an economic interest in any entity which furnished or sold, or furnishes or sells, services or products that the Company furnishes or sells, or proposes to furnish or sell, (ii) an economic interest in any entity that purchases from or sells or furnishes to the Company any goods or services or (iii) a beneficial interest in any Contract; provided, that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly-traded corporation shall not be deemed an "economic interest in any entity" for purposes of this Section 2.13. -12- 2.14 Compliance with Laws. The Company has complied in all respects with, is -------------------- not in violation of, and has not received any notices of violation with respect to, any foreign, federal, state or local statute, law or regulation, the violation of which could reasonably be expected to have a Material Adverse Effect. 2.15 Litigation. Except as set forth in Schedule 2.15, there is no action, ---------- suit or proceeding of any nature pending or to the Company's knowledge threatened against the Company, its properties or any of its officers or directors, in their respective capacities as such. Except as set forth in Schedule 2.15, there is no investigation pending or threatened against the Company, its properties or any of its officers or directors by or before any governmental entity. Schedule 2.15 sets forth, with respect to any pending or threatened action, suit, proceeding or investigation, the forum, the parties thereto, the subject matter thereof and the amount of damages claimed or other remedy requested. No governmental entity has at any time challenged or questioned the legal right of the Company to manufacture, offer or sell any of its products in the present manner or style thereof. Schedule 2.15 also lists all suits and legal actions initiated by the Company. 2.16 Insurance. With respect to the insurance policies and fidelity bonds --------- covering the assets, business, equipment, properties, operations, employees, officers and directors of the Company, there is no claim by the Company pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid, and the Company is otherwise in material compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage). The Company has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies. Such policies of insurance and bonds are the type and in the amounts customarily carried by persons conducting businesses similar to those of the Company. 2.17 Minute Books. The minute books of the Company made available to counsel ------------ for Buyer are the only minute books of the Company and contain an accurate summary of all meetings of directors (or committees thereof) and stockholders or actions by written consent since the time of incorporation of the Company. 2.18 Environmental Matters. --------------------- (a) Hazardous Material. The Company has not operated any underground ------------------ storage tanks, and has no knowledge of the existence, at any time, of any underground storage tank (or related piping or pumps), at any property that the Company has at any time owned, operated, occupied or leased. The Company has not released any amount of any substance that has been designated by any Governmental Entity or by applicable federal, state or local law to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including, without limitation, PCBs, asbestos, oil and petroleum products, urea-formaldehyde and all substances listed as a "hazardous substance," "hazardous waste," "hazardous material" or "toxic substance" or words of similar import, under any law, including but not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended; the Resource Conservation and Recovery Act of 1976, as amended; the Federal Water Pollution Control Act, as amended; the Clean -13- Air Act, as amended, and the regulations promulgated pursuant to such laws, (a "Hazardous Material"). No Hazardous Materials are present as a result of the actions or omissions of the Company, or, to the Company's knowledge, as a result of any actions of any third party or otherwise, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that the Company has at any time owned, operated, occupied or leased. (b) Hazardous Materials Activities. The Company has not transported, ------------------------------ stored, used, manufactured, disposed of, released or exposed its employees or others to Hazardous Materials in violation of any law in effect on or before the Closing, nor has the Company disposed of, transported, sold, or manufactured any product containing a Hazardous Material (any or all of the foregoing being collectively referred to as "Hazardous Materials Activities") in violation of any rule, regulation, treaty or statute promulgated by any Governmental Entity in effect prior to or as of the date hereof to prohibit, regulate or control Hazardous Materials or any Hazardous Material Activity. (c) Permits. The Company currently holds all environmental approvals, ------- permits, licenses, clearances and consents (the "Environmental Permits") necessary for the conduct of the Company's Hazardous Material Activities and other businesses of the Company as such activities and businesses are currently being conducted. (d) Environmental Liabilities. No action, proceeding, revocation ------------------------- proceeding, amendment procedure, writ, injunction or claim is pending or threatened concerning any Environmental Permit, Hazardous Material or any Hazardous Materials Activity of the Company. The Company is not aware of any fact or circumstance which could involve the Company in any environmental litigation or impose upon the Company any environmental liability. 2.19 Brokers' and Finders' Fees; Third Party Expenses. Other than pursuant ------------------------------------------------ to a Letter Agreement dated November 1, 1996 (executed by the Company on November 7, 1996) between the Company and Hambrecht & Quist, the Company has not incurred, nor will incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. Schedule 2.19 sets forth the Founders' current reasonable estimate of all Third Party Expenses (as defined in Section 5.4) expected to be incurred by the Company in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby. 2.20 Employee Matters and Benefit Plans. ---------------------------------- (a) Definitions. With the exception of the definition of "Affiliate" set ----------- forth in Section 2.20(a)(i) below (which definition shall apply only to this Section 2.20), for purposes of this Agreement, the following terms shall have the meanings set forth below: (i) "Affiliate" shall mean any other person or entity under common --------- control with the Company within the meaning of Section 414(b) or (c) of the Code and the regulations thereunder; -14- (ii) "ERISA" shall mean the Employee Retirement Income Security Act ----- of 1974, as amended; (iii) "Company Employee Plan" shall refer to any plan, program, --------------------- policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, performance awards, stock or stock- related awards, fringe benefits or other employee benefits or remuneration of any kind, whether formal or informal, funded or unfunded, including without limitation, each "employee benefit plan", within the meaning of Section 3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by the Company or any Affiliate for the benefit of any "Employee" (as defined below), and pursuant to which the Company or any Affiliate has or may have any material liability; (iv) "Employee" shall mean any current, former, or retired employee, -------- officer, or director of the Company or any Affiliate; (v) "Employee Agreement" shall refer to each management, employment, ------------------ severance, consulting, relocation, repatriation, expatriation, visas, work permit or similar agreement or contract between the Company or any Affiliate and any Employee or consultant; (vi) "IRS" shall mean the Internal Revenue Service; --- (vii) "Multiemployer Plan" shall mean any "Pension Plan" (as defined ------------------ below) which is a "multiemployer plan", as defined in Section 3(37) of ERISA; and (viii) "Pension Plan" shall refer to each Company Employee Plan ------------ which is an "employee pension benefit plan", within the meaning of Section 3(2) of ERISA. (b) Schedule. Schedule 2.20(b) contains a complete list of each Company -------- Employee Plan and each Employee Agreement. The Company does not have any legally binding plan or commitment to establish any new Company Employee Plan or Employee Agreement, to modify any Company Employee Plan or Employee Agreement (except to the extent required by law or to conform any such Company Employee Plan or Employee Agreement to the requirements of any applicable law, or as required by this Agreement), or to enter into any Company Employee Plan or Employee Agreement, nor does it have any present intention to do any of the foregoing. (c) Documents. The Company has provided to Buyer (i) correct and --------- complete copies of all documents embodying each Company Employee Plan and each Employee Agreement including all amendments thereto; (ii) the most recent annual actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the most recent annual report (Series 5500 and all schedules thereto), if any, required under ERISA or the Code in connection with each Company Employee Plan or related trust; (iv) if the Company Employee Plan is funded, the most recent annual and periodic accounting of Company Employee Plan assets; (v) the most recent summary plan description together with the most recent summary of material modifications, if any, required under ERISA with respect to each Company Employee Plan; (vi) all IRS determination letters and rulings relating to -15- Company Employee Plans; and (vii) all communications material to any Employee or Employees relating to any Company Employee Plan and any proposed Company Employee Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events which would result in any material liability to the Company. (d) Employee Plan Compliance. Except as set forth on Schedule 2.20(d), ------------------------ (i) the Company has performed in all material respects all obligations required to be performed by it under each Company Employee Plan, and each Company Employee Plan has been established and maintained in all material respects in accordance with its terms and in compliance with all applicable laws, statutes, orders, rules and regulations, including but not limited to ERISA or the Code; (ii) no non-exempt "prohibited transaction", within the meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to any Company Employee Plan which would have a Material Adverse Effect; (iii) there are no actions, suits or claims pending, or, to the knowledge of the Company, threatened or anticipated (other than routine claims for benefits) against any Company Employee Plan or against the assets of any Company Employee Plan; (iv) there are no inquiries or proceedings pending or, to the knowledge of the Company threatened by the IRS or the Department of Labor with respect to any Company Employee Plan; and (v) the Company is not subject to any material penalty or tax with respect to any Company Employee Plan under Section 502(i) of ERISA or Section 4976 through 4980 of the Code. (e) Pension Plans. The Company does not now, nor has it ever, ------------- maintained, established, sponsored, participated in, or contributed to, any Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code. (f) Multiemployer Plans. At no time has the Company contributed to any ------------------- Multiemployer Plan. (g) No Post-Employment Obligations. Except as set forth in Schedule ------------------------------ 2.20(g), no Company Employee Plan provides, or has any obligation to provide, life insurance, medical or other employee benefits to any Employee upon his or her retirement or termination of employment for any reason, except as may be required by applicable law, rule or regulation, and the Company has never represented, promised or contracted (whether in oral or written form) to any Employee (either individually or to Employees as a group) that such Employee(s) would be provided with life insurance, medical or other employee welfare benefits upon their retirement or termination of employment, except to the extent required by statute. (h) Effect of Transaction. ---------------------- (i) Except as set forth on Schedule 2.20(h), the execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Employee Plan, Employee Agreement, trust or loan that will or may result in any payment (whether -16- of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Employee. (ii) Except as set forth on Schedule 2.20(h), no payment or benefit which will or may be made by the Company or Buyer or any of their respective affiliates with respect to any Employee will be characterized as an "excess parachute payment", within the meaning of Section 280G(b)(1) of the Code. (i) Employment Matters. The Company (i) is in compliance in all material ------------------ respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees; (ii) is not liable for material amounts in respect of any arrears of wages or any material penalty for failure to comply with any of the foregoing; and (iii) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the normal course of business and consistent with past practice). (j) Labor. No work stoppage or labor strike against the Company is ----- pending or, to the best knowledge of the Company, threatened. The Company is not involved in or, to the best knowledge of the Company, threatened with, any labor dispute, grievance, or litigation relating to labor, safety or discrimination matters involving any Employee, including, without limitation, charges of unfair labor practices or discrimination complaints, which, if adversely determined, would, individually or in the aggregate, result in material liability to the Company. Neither the Company nor any of its subsidiaries has engaged in any unfair labor practices within the meaning of the National Labor Relations Act which would, individually or in the aggregate, directly or indirectly result in a material liability to the Company. The Company is not presently, nor has it been in the past, a party to, or bound by, any collective bargaining agreement or union contract with respect to Employees and no collective bargaining agreement is being negotiated by the Company. 2.21 Section 280(g). The Company has obtained all stockholder consents -------------- necessary to exempt any payments contemplated pursuant to this Agreement from Section 280(g) of the Code. 2.22 Representations Complete. None of the representations or warranties made ------------------------ by the Founders (as modified by the Company Schedules), nor any statement made in any schedule or certificate furnished by the Founders pursuant to this Agreement contains or will contain at the Closing, any untrue statement of a material fact, or omits or will omit at the Closing to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH SELLER -17- Each Seller severally and not jointly hereby represents, warrants and covenants to Buyer as follows: 3.1 Authority. Such Seller has all requisite power and authority to enter into --------- this Agreement and to consummate the transactions contemplated hereby. If such Seller is not an individual, the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate or partnership action on the part of the Seller. If applicable, the Board of Directors (or comparable managing body) of Seller has unanimously approved this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and constitutes the valid and binding obligation of the Seller, enforceable in accordance with its terms except as such enforceability may be limited by principles of public policy and subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. The execution and delivery of this Agreement by the Seller does not, and as of the Closing Date the consummation of the transactions contemplated hereby will not, result in any Conflict with (i) any provision of the Certificate of Incorporation, Articles of Organization or Bylaws (or comparable organizational document) of the Seller, if applicable, or (ii) any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Seller. No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or any third party (so as not to trigger any Conflict), is required by or with respect to the Seller in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. 3.2 Good and Marketable Title. ------------------------- (a) Company Capital Stock. In the case of a Stockholder, Seller is the --------------------- sole owner, beneficially and of record, of all Purchased Shares to be sold by Seller hereunder and has not granted any other person any interest therein. Seller has good and marketable title to all Purchased Shares, free and clear of any and all liens, encumbrances, equities, security interests, and claims whatsoever, with full right and authority to deliver the same hereunder, and upon delivery of such Purchased Shares and payment of the consideration therefor as contemplated hereby, will convey to Buyer good and marketable title to the Purchased Shares free and clear of all liens, claims, encumbrances, equities, security interests, preemptive rights, rights of first refusal, and any other claim of any third party; (b) Company Options. In the case of the Option Holders and Wexford, --------------- Seller is the sole owner, beneficially and of record, of all Company Options to be canceled by such person pursuant hereto and has not granted any other person any interest therein. Seller has good and marketable title to all such Company Options, free and clear of any and all liens, encumbrances, equities, security interests, and claims whatsoever, with full right and authority to cancel the same hereunder, and upon such cancellation and payment of the consideration therefor as contemplated hereby, such Company Options will be extinguished and of no further force or effect. 3.3 Investment Representations. -------------------------- -18- (a) Investment Intent. The Seller is acquiring the Buyer Common Stock or ----------------- in the case of the Option Holders options therefor (collectively, the "Securities") for the Seller's own account for investment purposes only and not with a view to, or for resale in connection with any "distribution" thereof in violation of the Securities Act of 1933, as amended (the "Securities Act"). (b) Information About Buyer. The Seller is aware of Buyer's business ----------------------- affairs and financial condition and has acquired sufficient information about Buyer to reach an informed and knowledgeable decision to acquire the Securities (based in part on the representations and warranties of Buyer contained in Article IV). (c) High Risk. The Seller realizes that investment in the Securities --------- involves a high degree of risk. The Seller is able to bear the risk of the investment, to hold the Securities for an indefinite period of time and to suffer a complete loss of the investment. (d) Securities Not Registered. The Seller understands that the ------------------------- Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom. (e) Held Indefinitely. The Seller further understands that the ----------------- Securities may be disposed of only if subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. In addition, the Seller understands that the certificate(s) evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to Buyer. (f) Rule 144. The Seller is familiar with the provisions of Rule 144 -------- promulgated under the Securities Act. (g) No Public Market. The Seller further understands that at the time ---------------- the Seller wishes to sell the Securities there may be no public market upon which to make such a sale, and that, even if such a public market then exists, Buyer may not be satisfying the current public information requirements of Rule 144, and that, in such event, the Seller would be precluded from selling the Securities under Rule 144 even if the two-year minimum holding period had been satisfied. 3.4 Standstill and Restrictions on Transfer. Seller agrees to abide by the --------------------------------------- provisions of Sections 2.15 and 2.16 of the Rights Agreement (as defined herein) with regard to any transfers of Buyer Common Stock, or other securities of Buyer, by Seller. 3.5 Maximum Net Worth. In the case of any Seller who will acquire voting ----------------- securities of Buyer having a Closing Fair Market Value of at least $15 million, Seller (and any "ultimate parent entity" of Seller, as such term is defined in the regulations to the Hart-Scott Rodino Antitrust Improvements Act of 1976) has a net worth less than $100 million. 3.6 Tax Matters. ----------- -19- (a) Seller is the beneficial owner of all Company Capital Stock held by such persons (including Company Capital Stock issuable upon exercise of Company Options) and did not acquire any of the Company Capital Stock in contemplation of the Purchase. (b) Seller has not engaged in a Sale (as defined below) of any shares of Company Capital Stock in contemplation of the Purchase. (c) Seller has no current plan or intention (a "Plan") to engage in a sale, exchange, transfer, redemption or reduction in any way of Seller's risk of ownership by short sale or otherwise, or other disposition, directly or indirectly (such actions being collectively referred to herein as a "Sale") of any of Buyer Common Stock (on a fully diluted basis, giving effect to all options) to be received by Seller hereunder. (d) If Seller is a partnership, then the term "Sale" as used in paragraph (c) above shall not be deemed to include any distribution to Seller's partners, provided that if any recipient of any such distribution will receive shares of Buyer Common Stock having a fair market value of 1% or more of the fair market value of all the shares of Company Capital Stock presently outstanding, Seller is not aware of any Plan on the part of such recipient to engage in a Sale of any of the shares of Buyer Common Stock (on a fully diluted basis, giving effect to all options) to be received by such recipient in such distribution. (e) Seller is not aware of, or participating in, any Plan on the part of the stockholders of the Company to engage in a Sale or Sales of the Buyer Common Stock to be received hereunder such that the aggregate fair market value, as of the Closing of the shares subject to such Sales would exceed 50% of the aggregate fair market value of all shares of outstanding Company Capital Stock immediately prior to such Closing. (f) Seller understands that Buyer and its affiliates, as well as legal counsel to Company and Buyer (in connection with rendering their opinions that the Purchase will be a "reorganization" within the meaning of Section 368 of the Code) will be relying on (a) the truth and accuracy of the representations contained herein and (b) Seller's performance of the obligations set forth herein. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to the Sellers as follows: 4.1 Organization, Standing and Power. Buyer is a corporation duly organized, -------------------------------- validly existing and in good standing under the laws of the State of Delaware. Buyer has the corporate power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified would have a material adverse effect on Buyer and its subsidiaries, taken as a whole. -20- 4.2 Authority. Buyer has all requisite corporate power and authority to --------- enter into this Agreement and the Rights Agreement (as defined below) and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the Rights Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement and the Rights Agreement have been duly executed and delivered by Buyer and constitute the valid and binding obligations of Buyer, enforceable in accordance with its terms. 4.3 Capital Structure. ----------------- (a) The authorized stock of Buyer consists of 30,000,000 shares of Common Stock, of which approximately 11,895,614 shares were issued and outstanding as of November 8, 1996, and 5,000,000 shares of Preferred Stock, none of which is issued or outstanding. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. (b) The shares of Buyer Common Stock to be issued hereunder when issued, will be duly authorized, validly issued, fully paid, non-assessable and, subject to the accuracy of the representations of the Sellers as set forth in Article III hereof, issued in compliance with applicable federal and state securities laws. 4.4 SEC Documents; Buyer Financial Statements. Buyer has furnished or made ----------------------------------------- available to the Founders or legal counsel to the Company true and complete copies of all reports or registration statements filed by it with the SEC since December 12, 1995, all in the form so filed (all of the foregoing being collectively referred to as the "SEC Documents"). As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent corrected by a document subsequently filed with the SEC. The financial statements of Buyer, including the notes thereto, included in the SEC Documents (the "Buyer Financial Statements") comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP consistently applied (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and present fairly the consolidated financial position of Buyer at the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal audit adjustments). There has been no change in Buyer accounting policies except as described in the notes to Buyer Financial Statements; provided, however, Buyer may have restated or may restate one or more of Buyer Financial Statements to reflect acquisitions entered into subsequent to the respective dates thereof. -21- 4.5 No Material Adverse Change. Since the date of the balance sheet included -------------------------- in Buyer's most recently filed report on Form 10-Q, Buyer has conducted its business in the ordinary course and there has not occurred: (a) any material adverse change in the financial condition, liabilities, assets or business of Buyer; (b) any amendment or change in the Certificate of Incorporation or Bylaws of Buyer (other than restatements of the Certificate or Incorporation which did not require stockholders' approval); or (c) any damage to, destruction or loss of any assets of Buyer, (whether or not covered by insurance) that materially and adversely affects the financial condition or business of Buyer. 4.6 Litigation. There is no action, suit, proceeding, claim, arbitration or ---------- investigation pending, or as to which Buyer has received any notice of assertion against Buyer, which in any manner challenges or seeks to prevent, enjoin, alter or materially delay any of the transactions contemplated by this Agreement or, if adversely determined, is reasonably likely to have a material adverse effect on the financial condition or business of Buyer as a whole. 4.7 Brokers' and Finders' Fees. Other than pursuant to a Letter Agreement -------------------------- dated December [__], 1996 between the Buyer and Cowen & Co., Buyer has not incurred, now will incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. 4.8 Continuity of Business Enterprise; Section 368 Reorganization. It is ------------------------------------------------------------- the present intention of Buyer to cause the Surviving Corporation to continue at least one significant historic business line of the Company, or to use at least a significant portion of the Company's historic business assets in a business, in each case within the meaning of Treasury Regulation Section 1.368-1(d). Buyer will use all reasonable efforts, and will cause the Surviving Corporation to use all reasonable efforts, to take no action that would cause the Purchase not to constitute a reorganization within the meaning of Section 368 of the Code. 4.9 Employee Benefit Plans; ERISA. ----------------------------- (a) Except as described in the Buyer's SEC Documents filed prior to the date of this Agreement or as would not have a material adverse effect on Buyer and its subsidiaries taken as a whole, all Buyer Employee Benefit Plans (as defined below) are in compliance with all applicable requirements of law, including (without limitation) ERISA and the Code. (b) As used herein: (i) "Buyer Employee Benefit Plan" means any Plan (as defined below) --------------------------- entered into, established, maintained, sponsored, contributed to or required to be contributed to by Buyer or any of its subsidiaries for the benefit of the current or former employees or directors of Buyer or any of its subsidiaries and existing on the date of this Agreement or at any time subsequent thereto and on or prior to the Closing and, in the case of a Plan which is subject to Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA, at any time during the five-year period preceding the date of this Agreement; and -22- (ii) "Plan" means any employment, bonus, incentive compensation, ---- deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, medical, accident, disability, workmen's compensation or other insurance, severance, separation, termination, change of control or other benefit plan, agreement, practice, policy, program or arrangement of any kind, whether written or oral, including, but not limited to any "employee benefit plan" within the meaning of Section 3(3) of ERISA. ARTICLE V CONDUCT PRIOR TO THE CLOSING 5.1 Conduct of Business of the Company. ---------------------------------- (a) Company Conduct. During the period from the date of this Agreement --------------- and continuing until the earlier of the termination of this Agreement and the Closing, the Founders agree to cause the Company (except to the extent that Buyer shall otherwise consent in writing) to carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted, to pay its debts and Taxes when due, to pay or perform other obligations when due, and, to the extent consistent with such business, to use all reasonable efforts consistent with past practice and policies to preserve intact its present business organization, keep available the services of its present officers and key employees and preserve their relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, all with the goal of preserving unimpaired its goodwill and ongoing businesses at the Closing. The Founders shall promptly notify Buyer of any event or occurrence or emergency not in the ordinary course of its business, and any material event involving or adversely affecting the Company or its business. Except as expressly contemplated by this Agreement, the Founders shall not permit the Company, without the prior written consent of Buyer: (i) Enter into any commitment, activity or transaction not in the ordinary course of business; (ii) Transfer to any person or entity any rights to any Company Intellectual Property Rights; (iii) Enter into or amend any agreements pursuant to which any other party is granted manufacturing, marketing, distribution or similar rights of any type or scope with respect to any products of the Company; (iv) Amend or otherwise modify (or agree to do so), except in the ordinary course of business, or violate the terms of, any of the agreements set forth or described in the Company Schedules; -23- (v) Commence any litigation; (vi) Declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of the Company, or repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock (or options, warrants or other rights exercisable therefor); (vii) Except for the issuance of shares of Company Capital Stock upon exercise or conversion of presently outstanding Options or Preferred Stock, issue, grant, deliver or sell or authorize or propose the issuance, grant, delivery or sale of, or purchase or propose the purchase of, any shares of its capital stock or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities; (viii) Cause or permit to be made any amendments to its Certificate of Incorporation or Bylaws; (ix) Acquire or agree to acquire by merging or consolidating with, or by purchasing any assets or equity securities of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to the business of the Company; (x) Sell, lease, license or otherwise dispose of any of its properties or assets, except in the ordinary course of business and consistent with past practice; (xi) Incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities of the Company or guarantee any debt securities of others, including, without limitation, pursuant to that certain Revolving Credit and Security Agreement described in Section 5.17 hereof; (xii) Grant any severance or termination pay to any director, officer employee or consultant; (xiii) Adopt or amend any employee benefit plan, program, policy or arrangement, or enter into any employment contract, extend any employment offer, pay or agree to pay any special bonus or special remuneration to any director, employee or consultant, or increase the salaries or wage rates of its employees; (xiv) Revalue any of its assets, including without limitation writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business and consistent with past practice; -24- (xv) Take any action, including the acceleration of vesting of any options, warrants, restricted stock or other rights to acquire shares of the capital stock of the Company, that could jeopardize the tax-free reorganization hereunder; (xvi) Pay, discharge or satisfy, in an amount in excess of $5,000, in any one case, or $10,000, in the aggregate, any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business of liabilities reflected or reserved against in the Company Financial Statements or incurred in the ordinary course of business since November 30, 1996; (xvii) Make or change any material election in respect of Taxes, adopt or change any accounting method in respect of Taxes, enter into any closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; (xviii) Enter into any strategic alliance, joint development or joint marketing arrangement or agreement; (xix) Fail to pay or otherwise satisfy its monetary obligations as they become due, except such as are being contested in good faith; (xx) Waive or commit to waive any rights with a value in excess of $5,000, in any one case, or $10,000, in the aggregate; (xxi) Cancel, materially amend or renew any insurance policy other than in the ordinary course of business; (xxii) Alter, or enter into any commitment to alter, its interest in any corporation, association, joint venture, partnership or business entity in which the Company directly or indirectly holds any interest on the date hereof; or (xxiii) Take, or agree in writing or otherwise to take, any of the actions described in Sections 4.1(i) through (xxii) above, or any other action that would prevent the Company from performing or cause the Company not to perform its covenants hereunder. (b) Buyer Conduct. Buyer shall promptly notify the Company of any event ------------- or occurrence which is not in the ordinary course of business of Buyer and which is material and adverse to the business of Buyer. 5.2 No Solicitation. Until the earlier of the Closing and the date of --------------- termination of this Agreement pursuant to the provisions of Section 9.1 hereof, each of the Sellers will not (nor will the Founders permit the Company or any of the Company's officers, directors, stockholders, agents, representatives or affiliates to) directly or indirectly, take any of the following actions with any party other than Buyer and its designees: (a) solicit, initiate, entertain, or encourage any proposals or offers from, or conduct discussions with or engage in negotiations with, any person relating to any -25- possible acquisition of the Company (whether by way of merger, purchase of capital stock, purchase of assets or otherwise), any material portion of its or their capital stock or assets or any equity interest in the Company, (b) provide information with respect to it to any person, other than Buyer, relating to, or otherwise cooperate with, facilitate or encourage any effort or attempt by any such person with regard to, any possible acquisition of the Company (whether by way of merger, purchase of capital stock, purchase of assets or otherwise), any material portion of its or their capital stock or assets or any equity interest in the Company, (c) enter into an agreement with any person, other than Buyer, providing for the acquisition of the Company (whether by way of merger, purchase of capital stock, purchase of assets or otherwise), any material portion of its or their capital stock or assets or any equity interest in the Company, or (d) make or authorize any statement, recommendation or solicitation in support of any possible acquisition of the Company (whether by way of merger, purchase of capital stock, purchase of assets or otherwise), any material portion of its or their capital stock or assets or any equity interest in the Company by any person, other than by Buyer. To the extent within such Seller's power, each Seller shall immediately cease and cause to be terminated any such contacts or negotiations made by or entered into by the Company or such Seller with third parties relating to any such transaction or proposed transaction. In addition to the foregoing, if the Company or any Seller receives prior to the Closing or the termination of this Agreement any offer or proposal relating to any of the above, to the extent within such Seller's knowledge, such Seller shall immediately notify Buyer thereof, including information as to the identity of the offeror or the party making any such offer or proposal and the specific terms of such offer or proposal, as the case may be, and such other information related thereto as Buyer may reasonably request. Except as contemplated by this Agreement, disclosure by the Company or any Seller of the terms of this Agreement (other than the prohibition of this section) shall be deemed to be a violation of this Section 5.2. Nothing contained in this Section 5.2 shall prohibit or restrict any of the Company's directors and officers from fulfilling his or her fiduciary obligations in such capacity. 5.3 No Encumbrance. Until the earlier of the Closing Date or the date of -------------- termination of this Agreement, each Seller will not (and such Seller will not permit any of its officers, directors, agents, representatives or affiliates to) directly or indirectly, take any action which could in any way and at any time impair such Seller's good and valid title to all shares of Company Capital Stock or Company Options or could cause or lead to the creation of any lien, claim, charge, restriction, pledge, security interest, option, right of any nature or other legal or equitable encumbrance with regard to any share or shares of Company Capital Stock or Company Options. ARTICLE VI ADDITIONAL AGREEMENTS 6.1 Access to Information. Each party shall afford the others and its --------------------- accountants, counsel and other representatives, reasonable access during normal business hours during the period prior to the Closing to (a) all of its properties, books, contracts, commitments and records, and (b) all other information concerning the business, properties and personnel (subject to restrictions imposed by applicable law) of it as the others may reasonably request, subject, in the case of Buyer, to reasonable limits on access to its technical and other nonpublic information. No information or knowledge obtained in any investigation pursuant to this Section 6.1 shall affect or be deemed to modify any -26- representation or warranty contained herein or, except as provided by Section 7.3(h), the conditions to the obligations of the parties to consummate the Purchase. 6.2 Confidentiality. Each of the parties hereto hereby agrees to keep such --------------- information or knowledge obtained in any investigation pursuant to Section 6.1, or pursuant to the negotiation and execution of this Agreement or the effectuation of the transactions contemplated hereby, confidential; provided, however, that the foregoing shall not apply to information or knowledge which (a) a party can demonstrate was already lawfully in its possession prior to the disclosure thereof by the other party, (b) is generally known to the public and did not become so known through any violation of law, (c) becomes known to the public through no fault of such party, (d) is later lawfully acquired by such party from other sources, (e) is required to be disclosed by order of court or government agency with subpoena powers or (f) which is disclosed in the course of any litigation between any of the parties hereto. 6.3 Expenses. -------- (a) If the Purchase is not consummated, all fees and expenses incurred in connection with the Purchase, including without limitation, all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties ("Third Party Expenses") incurred by Buyer, on the one hand, or by the Company or the Sellers, on the other hand, in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby, shall be the obligation of the respective party incurring such fees and expenses. (b) If the Purchase is consummated, all Third Party Expenses incurred by Buyer or the Company (but not the Sellers individually and apart from the Company) shall be the obligation of Buyer; provided, however, that Buyer shall not be responsible for Third Party Expenses of the Company exceeding $175,000, in addition to the $400,000 payable to Hambrecht & Quist pursuant to the agreement referred to in Section 2.19 hereof, which shall be paid as provided in Section 7.2(f). 6.4 Public Disclosure. Unless otherwise required by law (including, without ----------------- limitation, federal and state securities laws) or, as to Buyer, by the rules and regulations of the National Association of Securities Dealers, Inc., prior to the Closing, no disclosure (whether or not in response to an inquiry) of the subject matter of this Agreement shall be made by any party hereto unless approved by Buyer and the Founders and Wexford prior to release, provided that such approval shall not be unreasonably withheld. 6.5 Consents. The Sellers shall use their best efforts to obtain the -------- consents, waivers and approvals under any of the Contracts or as may be required in connection with the Purchase (all of which consents, waivers and approvals are set forth in Schedule 7.3(c)) so as to preserve all rights of and benefits to the Company under such contracts or to consummate the transactions contemplated hereby. -27- 6.6 FIRPTA Compliance. On or prior to the Closing Date, the Sellers shall ----------------- cause the Company to deliver to Buyer a properly executed statement in a form reasonably acceptable to Buyer for purposes of satisfying Buyer's obligations under Treasury Regulation Section 1.1445-2(c)(3). 6.7 Legal Requirements. Subject to the terms and conditions provided in ------------------ this Agreement, each of the parties hereto shall use its reasonable efforts to take promptly, or cause to be taken, all reasonable best actions, and to do promptly, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated hereby, to obtain all necessary waivers, consents and approvals, to effect all necessary registrations and filings and to remove any injunctions or other impediments or delays, legal or otherwise, in order to consummate and make effective the transactions contemplated by this Agreement for the purpose of securing to the parties hereto the benefits contemplated by this Agreement; provided that Buyer shall not be required to agree to any divestiture by Buyer or the Company or any of Buyer's subsidiaries or affiliates of shares of capital stock or of any business, assets or property of Buyer or its subsidiaries or affiliates or the Company or its affiliates, or the imposition of any material limitation on the ability of any of them to conduct their businesses or to own or exercise control of such assets, properties and stock. 6.8 Notification of Certain Matters. Each Seller shall give prompt notice ------------------------------- to Buyer, and Buyer shall give prompt notice to the Sellers, of (i) the occurrence or non-occurrence of any event, the occurrence or non-occurrence of which is likely to cause any representation or warranty of such Seller or Buyer, respectively, contained in this Agreement to be untrue or inaccurate at or prior to the Closing and (ii) any failure of such Seller or Buyer, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.8 shall not limit or otherwise affect any remedies available to the party receiving such notice. 6.9 Certain Benefit Plans. Following the Closing, Buyer shall take such --------------------- reasonable actions as are necessary to allow eligible employees of the Company to participate in the benefit programs of Buyer, or alternative benefits programs substantially comparable to those applicable to employees of Buyer on similar terms, as soon as practicable after the Closing. Without limiting the generality of the above, Buyer shall, with respect to all employees of the Company who become employees of Buyer or Surviving Corporation, or who are employees of the Company, in each case, on or after the Closing (the "Employees"), provide coverage under welfare benefit plans, programs and arrangements (the "Welfare Plans") providing benefits not substantially less favorable in the aggregate to the Employees than the Welfare Plans covering the other similarly situated employees of Buyer as in effect immediately prior to the Closing, including (without limitation) group health plans which do not exclude or limit the coverage of the Employees on account of waiting periods or preexisting conditions, and which have in all material respects identical or superior coverage in terms of employee participation. The Employees shall be subject to the other personnel and compensation policies and practices of the Buyer in the same manner as Buyer's similarly situated employees. For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service under any Welfare Plans or other plans for which an -28- Employee may be eligible after the Closing, Buyer shall ensure that service by such Employee with the Company shall be treated in the same manner as service with the Buyer. 6.10 Buyer Stock Options. ------------------- (a) After the date hereof, but prior to the Closing Date, Buyer and Company shall agree upon the allocation to certain directors, officers and other employees of the Company of options to purchase an aggregate of 500,000 shares of Buyer Common Stock (the "Employee Options"). (b) At the Closing, Buyer shall grant the Employee Options in accordance with such previously agreed upon allocation under Buyer's 1996 Nonstatutory Stock Option Plan. Each such option granted to any of the Sellers shall vest and become exercisable at a rate of 1/3rd of the shares subject thereto on each of the first, second and third anniversaries of the date of grant. Each such option granted to any other person shall vest in accordance with Buyer's standard vesting schedule of 25% of such options vesting upon the one-year anniversary of the date of grant and 1/48th vesting monthly thereafter, except for each such option granted to any of the Sellers, which shall vest and become exercisable as to one-third of such options upon each of the first three anniversaries of this Agreement. The exercise price of each such option shall be equal to the closing sale price of Buyer's Common Stock, as traded on the Nasdaq National Market and reported by the Wall Street Journal, on the last business day immediately preceding the Closing Date. 6.11 Additional Documents and Further Assurances. Each party hereto, at the ------------------------------------------- request of the other party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be reasonably necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby. 6.12 Form S-8. Promptly after the Closing, Buyer shall file a registration -------- statement on Form S-8 covering, and any necessary application to qualify for trading on the principal market for the Buyer Common Stock, the shares of Buyer Common Stock issuable with respect to the Employee Options and the options issuable to the Option Holders pursuant to Section 1.2. 6.13 Company's Auditors. The Company will use its best efforts to cause its ------------------ management and its independent auditors to facilitate on a timely basis (i) the preparation of financial statements (including pro forma financial statements if required) as required by Buyer to comply with applicable SEC regulations and (ii) the review of the Company's audit work papers for up to the past three years, including the examination of selected interim financial statements and data. 6.14 Arrangements with Wexford. At the Closing, Buyer shall pay all ------------------------- outstanding principal amounts, together with all accrued and unpaid interest thereon, due under the Revolving Credit and Security Agreement, dated August 6, 1996, among the Company, as borrower, Wexford Capital and Wexford Overseas, as lenders, and Wexford Management LLC, as Agent. The aggregate amount outstanding thereunder as of December 16, 1996 was $1,200,000 plus accrued interest of $21,944.44. At the Closing, Buyer (or the Surviving Corporation) shall execute and deliver an Instrument of Assignment and Assumption with respect to certain office premises in Short Hills, -29- New Jersey satisfactory to Wexford. At the closing, Buyer or the Surviving Corporation shall pay to Wexford $45,000 in reimbursement of internal and external counsel fees and $25,000 in payment for accounting and Schedules preparation services in respect of this Agreement and the transactions contemplated hereby; provided, however, that such aggregate amounts of $70,000 shall be deemed to be Third Party Expenses for the purposes of Section 6.3 (notwithstanding anything to the contrary contained in Section 6.3). Simultaneously, Wexford shall deliver all necessary documents requested by Buyer to terminate all security interests, reconvey all pledged or assigned assets and release all collateral pledged in connection with the foregoing agreement. 6.15 Company Agreements. The Sellers hereby waive all rights they may have ------------------ under that certain Stockholders Agreement, dated as of August 6, 1996, among any or all of them or between or among any or all of them and the Company, and any other rights they may have under any other agreements, that are inconsistent with their rights and obligations under the Agreement and hereby agree that all such agreements shall terminate without further action on the part of the Sellers upon the Closing. ARTICLE VII CONDITIONS TO THE PURCHASE 7.1 Conditions to Obligations of Each Party to Effect the Purchase. The -------------------------------------------------------------- respective obligations of each party to this Agreement to effect the Purchase shall be subject to the satisfaction at or prior to the Closing of the following conditions: (a) No Injunctions or Restraints; Illegality. No temporary restraining ---------------------------------------- order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Purchase shall be in effect. (b) Allocation of Buyer Options. The Company and Buyer shall have agreed --------------------------- upon the allocation of the Buyer Options. (c) Employment Agreements. Buyer shall have entered into (i) employment --------------------- agreements substantially in the form attached hereto as Exhibits A-1 and A-2 (the "Employment Agreements") with Migdal and Rice, respectively, and (ii) the Noncompete Agreement substantially in the form attached hereto as Exhibit B with Migdal. 7.2 Additional Conditions to Obligations of the Sellers. The obligations of --------------------------------------------------- each Seller to consummate the Purchase and the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by the Founders and Wexford: -30- (a) Representations and Warranties. The representations and warranties ------------------------------ of Buyer contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date, except for changes contemplated by this Agreement and except for those representations and warranties which address matters only as of a particular date (which shall remain true and correct as of such date), with the same force and effect as if made on and as of the Closing Date; and the Sellers shall have received a certificate to such effect signed on behalf of Buyer by a duly authorized officer of Buyer. (b) Agreements and Covenants. Buyer shall have performed or complied in ------------------------ all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing; and the Sellers shall have received a certificate to such effect signed on behalf of Buyer by a duly authorized officer of Buyer. (c) Third Party Consents. The Company shall have been furnished with -------------------- evidence satisfactory to it that Buyer has obtained the consents, approvals and waivers set forth in Schedule 7.2(c). (d) Amended and Restated Investors' Rights Agreement. Buyer, each Seller ------------------------------------------------ and the other parties to that certain Investors' Rights Agreement, dated January 24, 1994, as amended on September 30, 1994 and on October 25, 1995, shall have entered into an Amended and Restated Investors' Rights Agreement in the form attached hereto as Exhibit D (the "Rights Agreement"). (e) Legal Opinion. The Sellers shall have received a legal opinion from ------------- Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to Buyer, in form and substance satisfactory to the Founders. (f) H&Q Fees and Expenses. Buyer shall pay to H&Q the amount of --------------------- $400,000.00 owing to H&Q by the Company under the agreement referred to in Section 2.19 for investment banking services rendered to the Company. 7.3 Additional Conditions to the Obligations of Buyer. The obligations of ------------------------------------------------- Buyer to consummate the Purchase and the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by Buyer: (a) Representations and Warranties. The representations and warranties ------------------------------ of the Founders and the Sellers contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date, except for changes contemplated by this Agreement and except for those representations and warranties which address matters only as of a particular date (which shall remain true and correct as of such date), with the same force and effect as if made on and as of the Closing Date; and Buyer shall have received a certificate to such effect signed by each Founder and each Seller. -31- (b) Agreements and Covenants. The Founders and the Sellers shall have ------------------------ performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing; and Buyer shall have received a certificate to such effect signed by each Founder and each Seller. (c) Third Party Consents. Buyer shall have been furnished with evidence -------------------- satisfactory to it that the consents, approvals and waivers set forth in Schedule 7.3(c) have been obtained. (d) Legal Opinion. Buyer shall have received a legal opinion from ------------- Milbank, Tweed, Hadley & McCloy, legal counsel to the Company and the Sellers, in form and substance satisfactory to Buyer. (e) Resignation of Directors. All directors of the Company shall have ------------------------ tendered their resignations effective as of the Closing. (f) Material Adverse Effect. Since the date of the Balance Sheet, no ----------------------- event or condition of any character shall have occurred that has or could be reasonably expected to have a Material Adverse Effect on the Company. (g) Minimum Participation. Stockholders holding at least 97% of the --------------------- outstanding shares of Company Capital Stock shall have executed this Agreement and be prepared to tender all of their shares of Company Capital Stock at the Closing. (h) Due Diligence Investigation. Buyer shall have completed its due --------------------------- diligence investigation of the Company to Buyer's satisfaction, provided that no information or knowledge obtained in such investigation shall affect or be deemed to modify any representation or warranty of the Founders or the Sellers contained herein. (i) Cancellation of Wexford Options. Immediately prior to the Closing, ------------------------------- that certain Stock Purchase Option, dated April 4, 1996, to purchase up to 162 shares of the Company's Common Stock held by Wexford Capital and that certain Stock Purchase Option, dated April 4, 1996, to purchase up to 38 shares of the Company's Common Stock held by Wexford Overseas (collectively, the "Wexford Options") shall be canceled and shall be of no further force or effect. (j) Fairness Opinion. Buyer shall have received a fairness opinion from ---------------- Cowen & Co. stating that the consideration to be issued to the Sellers hereunder is fair to Buyer and its stockholders from a financial point of view. (k) Termination of Wexford Management Agreement. The Company shall ------------------------------------------- deliver to Buyer evidence of the termination of any existing management agreement or relationship, or evidence of the absence of any such agreement or relationship, in such form as is reasonably satisfactory to Buyer. -32- ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 8.1 Survival of Representations and Warranties. All representations and ------------------------------------------ warranties of the Founders and the Sellers (other than the representations of the Sellers in Sections 3.1 and 3.2) in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Purchase and continue until 5:00 p.m., California time, on the date which is one year following the Closing Date (the "Expiration Date"). The representations of the Sellers contained in Sections 3.1 and 3.2 shall survive the Closing indefinitely. 8.2 Indemnity for Representations of Founders. Each of the Founders ----------------------------------------- agrees to indemnify and hold harmless each of Buyer and its affiliates for any claims, losses, liabilities, damages, deficiencies, costs and expenses, including reasonable attorneys' fees and expenses, and expenses of investigation and defense (hereinafter individually a "Loss" and collectively "Losses") ---- incurred by Buyer, its officers, directors, or affiliates (including the Surviving Corporation) directly or indirectly as a result of any inaccuracy or breach of a representation or warranty of the Founders contained herein or any failure by the Founders to perform or comply with any covenant contained herein; provided, however that the indemnification obligation of each Founder under this Section 8.2 shall be limited to the Closing Fair Market Value of the total consideration received by each pursuant to Article I of this Agreement (which value in the case of Rice shall be calculated based upon the difference between the exercise price per share of the option granted to Rice pursuant to Section 1.2 and the Closing Fair Market Value); provided that each Founder shall be obligated for that portion of a Loss that is commensurate with the portion received by such Founder of the aggregate Closing Fair Market Value of the consideration received by both Founders pursuant to Section 1.2 (calculated as aforesaid in the case of Rice), that such obligation may be satisfied by the transfer to Buyer of shares of Buyer Common Stock delivered to Migdal in accordance with Section 1.4(a), in the case of Migdal, or a portion or all of the option granted pursuant to Section 1.2, in the case of Rice, having an aggregate Closing Fair Market Value (calculated as aforesaid in the case of Rice), equal to such obligation, and that the Founders shall have customary rights to participate in (at their own expense) but not to control the defense against, or any settlement of, any third party claim that could result in a Loss, which control shall be exercised by Buyer or the Surviving Corporation reasonably and in good faith in view of the indemnification obligation of each Founder under this Section 8.2. 8.3 Indemnity for Representations of Each. Each Seller, severally and not ------------------------------------- jointly, agrees to indemnify and hold harmless each of Buyer and its affiliates for any incurred by Buyer, its officers, directors or affiliates (including the Surviving Corporation) directly or indirectly as a result of any inaccuracy or breach of a representation or warranty of such Seller contained in Section 3 or any failure of such Seller to perform or comply with any covenant contained herein; provided, however, that the indemnification obligation of each Seller under this Section 8.3 shall be limited to the Closing Fair Market Value of the total consideration received by such Seller pursuant to Article I of this Agreement (and may be satisfied as provided in Section 8.2 with respect to indemnification obligations of the Founders). -33- ARTICLE IX TERMINATION, AMENDMENT AND WAIVER 9.1 Termination. Except as provided in Section 8.2 below, this Agreement ----------- may be terminated and the Purchase abandoned at any time prior to the Closing: (a) by mutual consent of Buyer and a majority in interest of the Sellers; (b) by Buyer or a majority in interest of the Sellers if: (i) the Closing has not occurred before 5:00 p.m. (Pacific time) on December 31, 1996 (provided that the right to terminate this Agreement under this clause 9.1(b)(i) shall not be available to any party whose willful failure to fulfill any obligation hereunder has been the cause of, or resulted in, the failure of the Closing to occur on or before such date); (ii) there shall be a final nonappealable order of a federal or state court in effect preventing consummation of the Purchase; or (iii) there shall be any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Purchase by any governmental entity that would make consummation of the Purchase illegal; (c) by Buyer if there shall be any action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Purchase, by any Governmental Entity, which would: (i) prohibit Buyer's or the Company's ownership or operation of all or any portion of the business of the Company or (ii) compel Buyer or the Company to dispose of or hold separate all or a portion of the business or assets of the Company or Buyer as a result of the Purchase; (d) by Buyer if it is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of a Founder or a Seller and (i) such breach has not been cured within five (5) business days after written notice to the Sellers (provided that no cure period shall be required for a breach which by its nature cannot be cured), and (ii) as a result of such breach the conditions set forth in Section 7.3(a) or 7.3(b), as the case may be, would not then be satisfied; (e) by a majority in interest of the Sellers if the Founders and the Sellers are not in material breach of their respective obligations under this Agreement and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of Buyer and (i) such breach has not been cured within five (5) business days after written notice to Buyer (provided that no cure period shall be required for a breach which by its nature cannot be cured), and (ii) as a result of such breach the conditions set forth in Section 7.2(a) or 7.2(b), as the case may be, would not then be satisfied. 9.2 Effect of Termination. In the event of termination of this Agreement as --------------------- provided in Section 9.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Buyer, the Founders or any Seller, or their respective officers, directors or stockholders, provided that each party shall remain liable for any breaches of this Agreement prior to -34- its termination; and provided further that, the provisions of Sections 6.2 and 6.3 and Article IX of this Agreement shall remain in full force and effect and survive any termination of this Agreement. 9.3 Amendment. This Agreement, this Agreement may be amended by the parties --------- hereto at any time by execution of an instrument in writing signed on behalf of each of the parties hereto. 9.4 Extension; Waiver. At any time prior to the Closing, Buyer on the one ----------------- hand, and the Sellers, on the other, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations of the other party hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE X GENERAL PROVISIONS 10.1 Notices. All notices and other communications required or permitted ------- hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed: -35- (a) if to Buyer to: MetaTools, Inc. 6303 Carpinteria Avenue Carpinteria, CA 93013 Attention: John J. Wilczak Telephone No.: (805) 566-6200 Facsimile No.: (805) 566-6384 with a copy to: Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304 Attention: Jeffrey D. Saper, Esq. Telephone No.: (415) 493-9300 Facsimile No.: (415) 493-6811 (b) if to the Founders or the Sellers, to: Robert E. Rice Real Time Geometry Corp. 51 John F. Kennedy Parkway Suite 303 Short Hills, NJ 07078 Telephone No.: (201) 379-9888 Facsimile No.: (201) 379-0441 with a copy to: Milbank, Tweed, Hadley & McCloy One Chase Manhattan Plaza New York, NY 10005 Attention: Guil W. Gaylord, Esq. Telephone No.: (212) 530-5000 Facsimile No.: (212) 539-5219 10.2 Interpretation. The words "include," "includes" and "including" when -------------- used herein shall be deemed in each case to be followed by the words "without limitation." The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References to the knowledge or awareness of the Company used herein shall be deemed to include the knowledge and awareness of the Founders and any other officers of the Company. -36- 10.3 Counterparts. This Agreement may be executed in one or more ------------ counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. 10.4 Entire Agreement; Assignment. This Agreement, the Schedules and ---------------------------- Exhibits hereto, and the documents and instruments and other agreements among the parties hereto referenced herein: (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; (b) are not intended to confer upon any other person any rights or remedies hereunder; and (c) shall not be assigned by operation of law or otherwise except as otherwise specifically provided, except that Buyer may assign their respective rights and delegate their respective obligations hereunder to their respective affiliates. 10.5 Severability. In the event that any provision of this Agreement or the ------------ application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect, and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 10.6 Other Remedies. Except as otherwise provided herein, any and all -------------- remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. 10.7 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of California, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Each of the parties hereto agrees that process may be served upon them in any manner authorized by the laws of the State of California for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction and such process. 10.8 Rules of Construction. The parties hereto agree that they have been --------------------- represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 10.9 Specific Performance. The parties hereto agree that irreparable damage -------------------- would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that 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 the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. -37- 10.10 Unified Disclosure Schedules. The disclosure made in any Schedule to ---------------------------- this Agreement shall be deemed to be made in each other Schedule to this Agreement. -38- IN WITNESS WHEREOF, Buyer, the Company and the Sellers have caused this Agreement to be signed by their duly authorized respective officers, all as of the date first written above. METATOOLS, INC.: By /s/ JOHN WILCZAK ------------------------------ Name: John Wilczak Title: Chairman and CEO SELLERS: FOUNDERS: WEXFORD CAPITAL PARTNERS II, LP: /s/ ALEXANDER MIGDAL By /s/ ROBERT HOLTZ - -------------------------------- ----------------------------- Name: Alexander Migdal Name: Robert Holtz Title: Sr. Vice President /s/ ROBERT RICE - -------------------------------- Name: Robert Rice WEXFORD OVERSEAS PARTNERS I, LP: By /s/ ROBERT HOLTZ ----------------------------- OTHER STOCKHOLDERS: Name: Robert Holtz Title: Sr. Vice President /s/ ALEXEI LEBEDEV - ------------------------------- Name: Alexei Lebedev /s/ BORIS LIPOVSKY - ------------------------------- Name: Boris Lipovsky /s/ MICHAEL PETROV - ------------------------------- Name: Michael Petrov OPTION HOLDER: /s/ DMIRY PAPERNEY - -------------------------------- Name: Dmitry Paperney ***STOCK PURCHASE AGREEMENT*** -39- SCHEDULE I ---------- Allocation of Buyer Common Stock and Buyer Options -------------------------------------------------- - ------------------------------------------------------------------------------- SHARE AND OPTION EXCHANGE IN ACQUISITION - -------------------------------------------------------------------------------
NUMBER OF NUMBER OF SHARES OF RTG SHARES CLASS METATOOLS CURRENTLY OF COMMON STOCK STOCKHOLDERS HELD STOCK TO BE ISSUED - ------------------------------------------------------------------------------- Alexander Migdal 700 Common 815,469 Alexei Lebedev 75 Common 91,283 Michael Petrov 25 Common 30,427 Boris Lipovsky 25 Common 30,427 Wexford Overseas 38 Preferred 69,207 Partners I, L.P. Wexford Capital 162 Preferred 295,043 Partners II, L.P. NUMBER OF OPTIONS TO PURCHASE NUMBER OF EXERCISE RTG RTG SHARES METATOOLS PRICE OPTION CURRENTLY OPTIONS TO PER HOLDERS HELD BE ISSUED SHARE - ------------------------------------------------------------------------------- Robert E. Rice 75 90,165 $5.03 Dmitry Paperny 5 6,011 $0.08
-40- EX-10.22 3 EMPLOYMENT AGMT FOR A. MIGDAL EXHIBIT 10.22 ------------- EMPLOYMENT AGREEMENT -------------------- AGREEMENT, dated as of December 31, 1996 by and between MetaTools, Inc., a Delaware corporation (the "Company"), and Alexander Migdal ("Executive"). WHEREAS, concurrently with the execution and delivery of this Agreement, the Company is acquiring by means of a merger transaction all of the shares of capital stock to be issued and outstanding of Real Time Geometry Corp., a Delaware corporation ("RTG"), of which Executive has been an executive officer and a holder of shares of capital stock; and WHEREAS, the Company desires to employ Executive as an executive officer of the Company, and Executive desires so to serve the Company, upon the terms and conditions contained in this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. Prior Agreements. Executive hereby represents and warrants to the Company ---------------- that all agreements, understandings or arrangements between Executive and any other person or entity contain no terms that would be breached by Executive as a result of, or that would in any way preclude or prohibit Executive from, entering into this Agreement with the Company or performing any of the responsibilities provided for in this Agreement. 2. Employment and Responsibilities. ------------------------------- (a) General. Upon the terms and conditions herein set forth, the Company ------- hereby agrees to employ Executive and Executive agrees to serve as Vice President, Senior Scientist of the Company, for the Term of Employment (as defined in Section 3 hereof). In such capacity, Executive shall be responsible for the research and development activities and other operations of the Princeton Laboratory of RTG and shall have authority over the hiring and terminating of personnel of RTG or the Company employed at the Princeton Laboratory and over all other activities conducted by or at the Princeton Laboratory, provided that he shall exercise such authority consistent with the budget for the Princeton Laboratory in effect from time to time. It is the Company's present intention that the current activity levels of the Princeton Laboratory be maintained during the Term of Employment. (b) Nature of Services. Except as provided in Sections 2(c) and 2(d) ------------------ hereof, during the Term of Employment Executive shall, except as from time to time may be otherwise agreed to in writing by the Company, devote his full time and attention during -1- normal business hours to carrying out his responsibilities hereunder, shall diligently serve the Company, shall in all respects conform to, comply with and execute the lawful directions and instructions given to him by the Company, and shall diligently use his best efforts, skills and abilities to promote the interests of the Company. (c) Covenant Not to Compete. ----------------------- (i) Executive shall sign a Noncompetition Agreement concurrently with this Agreement and shall abide by the terms and conditions of the Noncompetition Agreement. Failure to abide by the terms of the Noncompetition Agreement shall be considered a material breach of this Agreement. (ii) Executive represents that he (i) is familiar with the foregoing covenants not to solicit and not to compete, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants. (iii) Executive shall sign and abide by the Company's standard invention assignment agreement. (d) Charitable or other Activities. Subject to the restrictions contained ------------------------------ in Section 2(c) hereof, Executive may (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (iii) manage personal and immediate family investments, so long as such activities do not interfere with the fulfillment of Executive's responsibilities hereunder. (e) Place of Performance. The principal place of employment of -------------------- Executive shall be at offices maintained by the Company (or RTG) in Princeton, New Jersey or another location within 10 miles of Princeton, New Jersey, and the Company understands that Executive and his family shall have their permanent residence in or around Princeton, New Jersey. Subject to the foregoing, Executive realizes that his responsibilities hereunder shall require travel to and the rendering of services in Carpenteria, California, where the headquarters offices of the Company are located, and other locations. 3. Term of Employment. Subject to the provisions of Section 5 hereof, ------------------ Executive's term of employment under this Agreement shall commence on January 1, 1997 (the "Commencement Date") and shall terminate on December 31, 1999 (the "Term of Employment"). 4. Compensation and Other Benefits. The Company shall pay and provide the ------------------------------- following compensation and other benefits to Executive during the Term of Employment (except as otherwise provided in Section 4(b) hereof) for the services to be provided hereunder: -2- (a) Base Salary. The Company shall pay to Executive a base salary (the ----------- "Base Salary") at the rate of $150,000 per annum, payable in approximately equal installments in accordance with the customary payroll practices of the Company. If the rate per annum of the base salary paid to Executive is increased during the Term of Employment, such increased rate shall thereafter constitute the Base Salary for all purposes of this Agreement. (b) Stock Option and Employee Benefit Plans. During the Term of --------------------------------------- Employment, Executive shall be entitled to participate in such stock option, pension, retirement, life insurance, health and other welfare plans, programs and benefits as are maintained by the Company from time to time for the benefit of its executive employees (the "Plans"). (c) Vacation; Fringe Benefits. During the Term of Employment, ------------------------- Executive shall be entitled to four weeks of vacation per year and to any other fringe benefits and perquisites that are accorded to its executive employees generally by the Company from time to time (the "Fringe Benefits"). (d) Carpenteria Living Stipend; Reimbursement of Expenses. As referred ----------------------------------------------------- to in Section 2(e) hereof, the parties anticipate that Executive's responsibilities hereunder shall require the rendering of services in Carpenteria, California, where the headquarters offices of the Company are located. The Company shall pay Executive a monthly stipend of $3,000 in lieu of reimbursement of Executive for accommodations, meals and other living expenses (but not travel expenses) in respect of his rendering of services in Carpenteria, California (the "Carpenteria Living Expenses"). The parties also anticipate that in the course of fulfilling his responsibilities under this Agreement, Executive will incur other reasonable travel, entertainment and other out-of-pocket business expenses for the account of the Company. Executive shall be entitled to reimbursement for all reasonable out-of-pocket business expenses so incurred (other than Carpenteria Living Expenses), upon submission to the Company of an adequate, written accounting which complies with the Company's policies regarding reimbursement for business expenses. The travel expense policy applicable to Executive shall be that applicable to the most senior executives of the Company. (e) Company Loan. At the Closing, the Company shall loan to Employee the ------------ principal amount of $2,000,000 pursuant to a note and other instruments and agreements as shall be consistent with the terms of this Section 4(e) (the "Loan"). The Loan shall be repayable on January 15, 2000, shall be prepayable without penalty in whole or in part (including all accrued interest on the principal amount prepaid), and shall bear interest at the Applicable Federal Rate under Section 1274(d) of the Internal Revenue Code of 1986, as amended, as reported by the Internal Revenue Service, on the date the loan is made, payable at maturity or upon prepayment as aforesaid, and compounded semi-annually. The Loan shall be secured by shares of Common Stock owned by Executive having a fair market value on the date the Loan is made of not less than $2,000,000, pursuant to arrangements that permit the release of such shares in order to permit the sale or pledge thereof to raise after-tax proceeds to pay or prepay principal and accrued interest on the Loan at maturity or from time -3- to time before maturity. Executive shall not be personally obligated to pay any principal of or interest on the Loan nor shall any of his assets secure payment of the principal of and interest on the Loan, except for such shares, solely from which the Company shall seek to realize payment in the event of any failure of payment on the part of Executive. 5. Termination of the Term of Employment. ------------------------------------- (a) Termination for Cause or Without Good Reason. -------------------------------------------- (i) The Company shall have the right to terminate the Term of Employment for Cause (as defined in Section 5(a)(ii) hereof) prior to December 31, 1999, and Executive shall have the right to terminate the Term of Employment without Good Reason (as defined in Section 5(b)(ii) hereof) prior to December 31, 1999. If the Term of Employment is so terminated, Executive shall be entitled to receive payment of the pro rata portion of the Base Salary through and including the date of such termination and payment when due of the non- competition consideration (the "Non-Competition Payments") during the non- competition period set forth in the Non-Competition Agreement, dated as of December 20, 1996, by and between Executive and the Company (the "NonCompetition Agreement") unless Executive is in breach of the Non-Competition Agreement. Executive shall not be eligible to receive Base Salary or to participate in any of the Plans or to receive any of the Fringe Benefits with respect to any periods after the date of such termination, except for the right to receive vested or statutorily available benefits under any of the Plans in which Executive participates in accordance with the terms of such Plans. (ii) "Cause" shall mean (A) The commission of an act of fraud or embezzlement which results in loss, damage or injury to the Company, whether directly or indirectly; (B) Executive's use of narcotics, liquor or illicit drugs has had a detrimental effect on the performance of his employment responsibilities, as determined by the Company's Board of Directors; (C) The arrest, indictment or filing of charges relating to a felony or misdemeanor, either in connection with the performance of the Executive's obligations to the Company or which shall adversely affect the Executive's ability to perform such obligations; (D) Gross negligence, dishonesty, breach of fiduciary duty or material breach of the terms of the Noncompetition Agreement or any other agreement in favor of the Company; or (E) The commission of an act which constitutes unfair competition with the Company. "Good Reason" shall mean a material breach by the Company of its obligations under this Agreement which is not remedied within 30 calendar days after receipt by the Company of written notice of such breach from Executive, including without limitation any diminution in the responsibilities of Executive hereunder, any change in the principal place of employment of Executive or any reduction of or failure to pay when due the Base Salary. (iii) The date of termination of the Term of Employment by the Company under this Section 5(a) shall be the date specified in a written notice of termination delivered by the Company to Executive (which date shall not be earlier than the date of such written notice), unless no such date is specified in such notice, in which case the date of termination shall be the date of receipt by Executive of written notice of termination. The -4- date of termination of the Term of Employment by Executive under this Section 5(a) shall be 60 calendar days after receipt by the Company of written notice of termination. (b) Termination Without Cause or for Good Reason. -------------------------------------------- (i) The Company shall have the right to terminate the Term of Employment without Cause prior to December 31, 1999, and Executive shall have the right to terminate the Term of Employment for Good Reason prior to December 31, 1999. If the Term of Employment is so terminated, Executive shall be entitled to receive (A) payment when due under Section 4 hereof of the Base Salary and bonus, if any, through December 31, 1999, (B) payment when due of the NonCompetition Payments pursuant to the Non-Competition Agreement, (C) such benefits and payments as may be provided in the event of termination of employment or resignation under the terms and provisions of any of the Plans in which Executive participates, (D) reimbursement in accordance with Section 4(e) hereof of all business expenses incurred through the date of termination, (E) payment of all vacation pay not previously paid, and (F) continuation of such coverage for Executive and Executive's immediate family as was in effect on the date of termination under any of the Plans, or comparable benefits, commencing on the date of such termination and ending on December 31, 1999; provided, however, that such coverage shall cease, with respect to any or all of the Plans, when Executive is covered by an employee plan or program providing substantially similar or more generous benefits. After such termination of the Term of Employment, Executive shall no longer be entitled to any of the Fringe Benefits. Any obligations of the Company pursuant to this Section are contingent on Executive signing a Release of Claims. A "Release of Claims" shall mean a waiver by Executive, in a form reasonably satisfactory to the Company, of all employment related obligations of and claims and causes of action against the Company. (ii) The amounts provided for in Section 5(b)(i) hereof are intended to be liquidated damages in lieu of any other liability or obligations of the Company in respect of termination of the Term of Employment by the Company without Cause or by Executive for Good Reason. (iii) The date of termination of the Term of Employment by the Company under this Section 5(b) shall be the date specified in a written notice of termination delivered by the Company to Executive (which date shall not be earlier than the date of such written notice), unless no such date is specified in such notice, in which case the date of termination shall be the date of receipt by Executive of written notice of termination. The date of termination of the Term of Employment by Executive under this Section 5(b) shall be 30 calendar days after receipt by the Company of written notice of termination, provided that the Good Reason specified in such notice shall not have been remedied by the Company during such 30 calendar day period. (c) Death. If Executive dies during the Term of Employment, the Term of ----- Employment and any non-competition period shall terminate on the date of death and Executive's beneficiary or estate shall be entitled to receive (i) payment of the pro rata portion -5- of the Base Salary and the Non-Competition Payments pursuant to the Non- Competition Agreement through and including the date of death, (ii) payment (promptly, rather than when normally due) of a pro rata portion of any bonus corresponding to the portion of the year occurring prior to the date of death, and (iii) such survivor benefits and payments for Executive's family as Executive is entitled to under any of the Plans. (d) Disability. If Executive becomes Permanently Disabled (as defined ---------- below in this Section 5(d)) during the Term of Employment, the Company shall be entitled to terminate the Term of Employment and any non-competition period by written notice to Executive specifying the reason for and date of such termination (which date shall not be earlier than the date of such written notice). In the event of such termination, Executive shall be entitled to receive (i) payment of the pro rata portion of the Base Salary and the Non- Competition Payments pursuant to the Non-Competition Agreement through and including the date of termination, (ii) payment (promptly, rather than when normally due) of a pro rata portion of any bonus corresponding to the portion of the year occurring prior to the date of death, and (iii) such disability and other benefits and payments as Executive is entitled to under any of the Plans. Executive shall be deemed "Permanently Disabled" when, and only when, he is, and has for a period of six consecutive months been, unable by reason of illness or accident to substantially perform his responsibilities hereunder. 6. Confidentiality; Company Property. --------------------------------- (a) Confidentiality. Executive recognizes that the services to be --------------- performed by him hereunder are special, unique and extraordinary in that, by reason of his employment hereunder and his association with the Company, he may acquire or has acquired Confidential Information concerning the Company the use or disclosure of which could cause the Company substantial loss which could not be readily calculated and for which no remedy at law would be adequate. Accordingly, Executive agrees that he will not at any time, except in fulfillment of his responsibilities hereunder or with the written consent of the Company disclose any Confidential Information that he may learn or has learned by reason of his employment or association with the Company or use any such information for his own personal benefit or gain. The term "Confidential Information" means information not previously disclosed to the public or to the trade by the Company's management with respect to the Company's products, facilities and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, price information, customer lists, financial information (including the revenues, costs or profits associated with any of the Company's activities or products), business plans, prospects, opportunities or other information. Confidential Information shall not include information which (i) is or becomes generally available to the public other than as a result of disclosure by Executive in violation of this Section 6(a) or (ii) Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law. Executive understands and agrees that the rights and obligations set forth in this Section 6(a) shall extend beyond the Term of Employment. -6- (b) Company Property. Executive confirms that all Confidential ---------------- Information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company or any Confidential Information shall be and remain the property of the Company. Upon the termination of the Term of Employment or upon the request of the Company at any time, Executive shall promptly deliver to the Company, and shall not without the prior express written consent of the Company retain, all copies of (i) any written materials not previously made available to the public, or (ii) records and documents made by Executive or coming into his possession concerning any Confidential Information. Executive agrees that the rights and obligations set forth in this Section 6(b) shall extend beyond the Term of Employment. (c) Injunctive Relief. Without intending to limit the remedies ----------------- available to the Company, Executive acknowledges that a breach of any of the covenants contained in this Section 6 may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order or a preliminary or permanent injunction restraining Executive from engaging in activities prohibited by this Section 6. 7. Assignability. ------------- (a) By Executive. Neither this Agreement nor any right, duty, ------------ obligation or interest hereunder shall be assignable by Executive without the prior express written consent of the Company. (b) By the Company. This Agreement and all of the Company's rights and -------------- obligations hereunder may be assigned or transferred by it to any entity which at any time by sale, merger, consolidation or other transaction acquires all or substantially all of the assets of the Company or to which the Company transfers all or substantially all of its assets, provided that any such assignee agrees in writing to assume all of the obligations of the Company hereunder. Upon such assignment or transfer, and upon such assumption, any such entity shall be deemed to be substituted for all purposes as the Company hereunder. 8. Severability. If the final determination of a court of competent ------------ jurisdiction declares, after the expiration of the time within which judicial review (if permitted) of such determination may be perfected, that any term hereof is invalid or unenforceable, (a) the remaining terms hereof shall be unimpaired and (b) the invalid or unenforceable term shall be deemed replaced by a term that is valid and enforceable and that comes closest to implementing the intention of the invalid or unenforceable term. 9. Amendment; Waiver. This Agreement may not be modified, amended or ----------------- waived in any manner except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of any provision of this Agreement. -7- 10. Withholding. The Company shall be entitled to deduct and withhold all ----------- applicable Federal, state and local taxes which the Company is required to deduct or withhold from any payments to or on behalf of Executive under this Agreement. 11. Beneficiaries. Executive shall be entitled to select a beneficiary or ------------- beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such selection, in either case by giving the Company written notice thereof. 12. Governing Law. All matters affecting this Agreement, including the ------------- validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of Delaware. 13. Notices. Any notice hereunder by either party to the other shall be ------- given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address specified in the Company's personnel records or such other address as may be specified in a notice of change of address given by Executive to the Company, or if addressed to the Company, the notice shall be delivered or mailed to: MetaTools, Inc. 6303 Carpenteria Avenue Santa Barbara, California 93013 Attn: Chief Executive officer or to such other address as may be specified in a notice of change of address given by the Company to Executive. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt. 14. Merger. This Agreement supersedes all prior or contemporaneous ------ negotiations, commitments and agreements between the Company and Executive with respect to the subject matter hereof, and such other negotiations, commitments and agreements will have no further force or effect. 15. Counterparts. This Agreement may be executed by either of the parties ------------ hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 16. Headings. The headings of paragraphs herein are included solely for -------- convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 17. Effectiveness of Agreement. This Agreement shall not be effective unless -------------------------- the transaction contemplated by the Stock Purchase Agreement, dated as of December 20, 1996 -8- (the "Stock Purchase Agreement") is consummated and the Stock Purchase Agreement is signed by the Company and RTG (the "Purchase"). In the event the Purchase is terminated pursuant to Section 8.1 of the Stock Purchase Agreement, this Agreement shall be null and void. 18. Arbitration. ------------ (a) Except as provided in Section 6(c), Executive agrees, that any dispute or controversy arising out of, relating to or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be finally settled by binding arbitration to be held in Santa Barbara County, California under the National Rules for the Resolution of Employment Disputes supplemented by the Supplemental Procedures for Large Complex Disputes, of the American Arbitration Association as then in effect (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. (b) The arbitrator(s) shall apply Delaware law to the merits of any dispute or claim, without reference to rules of conflicts of law. The arbitrations proceedings shall be governed by federal arbitration law and by the Rules, without reference to state arbitration law. (c) Except as is otherwise provided in Section 21 below, the Company and the Executive shall each pay half of the costs and expenses of such arbitration. (d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION 18, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, ANY ASPECT OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP. 19. No Mitigation; No Offset. In the event of any termination of employment ------------------------ under Section 5, Executive shall be under no obligation to seek other employment and there shall be no offset against any amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain. Any amounts due under Section 5 are in the nature of severance payments, or liquidated damages, or both, and are not in the nature of a penalty. -9- 20. Legal Fees and Other Expenses. In the event that a claim for payment or ----------------------------- benefits under this Agreement is disputed, Executive shall be reimbursed for all attorney fees and expenses incurred by Executive in pursuing such claim, provided that Executive is successful as to a substantial part of the disputed claim by reason of litigation, arbitration or settlement. 21. Indemnification. The Company agrees that if Executive is made a party or --------------- is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director or officer of the Company and/or any affiliate or subsidiary or is or was serving at the request of the Company and/or any affiliate or subsidiary as a director, officer, member, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a director, officer, member, employee or agent while serving as a director, officer, member, employee or agent, he shall be indemnified and held harmless by the Company to the fullest extent authorized by Delaware law, including without limitation by the advancement of his expenses, as the same exists or may hereafter be amended, against all expenses incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if Executive has ceased to be an officer, director or agent, or is no longer employed by the Company and shall inure to the benefit of his heirs, executors and administrators. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed pursuant to the authority of its Board of Directors, and Executive has executed this Agreement, as of the day and year first written above. METATOOLS, INC. By: /s/ JOHN WILCZAK ---------------------------- Name John Wilczak -------------------------- Title: Chairman and CEO ------------------------ /s/ ALEXANDER MIGDAL ------------------------------- Alexander Migdal -10- EX-10.23 4 EMPLOYMENT AGMT FOR R.E. RICE EXHIBIT 10.23 ------------- EMPLOYMENT AGREEMENT -------------------- AGREEMENT, dated as of December 31, 1996 by and between MetaTools, Inc., a Delaware corporation (the "Company"), and Robert E. Rice ("Executive"). WHEREAS, concurrently with the execution and delivery of this Agreement, the Company is acquiring by means of a merger transaction all of the shares of capital stock to be issued and outstanding of Real Time Geometry Corp., a Delaware corporation ("RTG"), of which Executive has been an executive officer and a holder of shares of capital stock or options or other rights to acquire shares; and WHEREAS, the Company desires to employ Executive as an executive officer of the Company, and Executive desires so to serve the Company, upon the terms and conditions contained in this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. Prior Agreements. Executive hereby represents and warrants to the ---------------- Company that all agreements, understandings or arrangements between Executive and any other person or entity contain no terms that would be breached by Executive as a result of, or that would in any way preclude or prohibit Executive from, entering into this Agreement with the Company or performing any of the responsibilities provided for in this Agreement. 2. Employment and Responsibilities. -------------------------------- (a) General. Upon the terms and conditions herein set forth, the ------- Company hereby agrees to employ Executive and Executive agrees to serve as Vice President, Business Development of the Company, for the Term of Employment (as defined in Section 3 hereof). In such capacity, Executive shall be responsible for the business of RTG and the strategic business development activities of RTG and shall report solely and directly to John J. Wilczak, Chairman, President and Chief Executive Officer of the Company, or to any successor Chief Executive officer of the Company. (b) Nature of Services. Except as provided in Sections 2(c) and 2(d) ------------------ hereof, during the Term of Employment Executive shall, except as from time to time may be otherwise agreed to in writing by Mr. Wilczak, devote his full time and attention during normal business hours to carrying out his responsibilities hereunder, shall diligently serve the Company, shall in all respects conform to, comply with and execute the lawful directions and -1- instructions given to him by Mr. Wilczak, or any successor Chief Executive Officer of the Company, and shall diligently use his best efforts, skills and abilities to promote the interests of the Company. (c) Other Employment. During the Term of Employment, Executive may ---------------- render employment or consulting services to, invest in and engage in related activities for (including, without limitation, acting as a director, partner or joint venturer) Wexford Management LLC or any of its investment funds or other affiliates and shall use reasonable, good faith efforts to do so in ways which will (i) minimize any interference with the fulfillment of his responsibilities hereunder, (ii) not result in the disclosure of any Confidential Information (as defined in Section 6(a)) in violation of this Agreement, and (iii) not result in any conflict of interest between the Company and any such Wexford entity. (d) Charitable or Other Activities. Executive may (i) serve on ------------------------------ corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (iii) manage personal and immediate family investments, so long as such activities do not interfere with the fulfillment of Executive's responsibilities hereunder. (e) Place of Performance. The principal place of employment of -------------------- Executive shall be at offices maintained by the Company (or RTG) in Short Hills, New Jersey or another location within 10 miles of Short Hills, New Jersey, and the Company understands that Executive and his family shall have their permanent residence in or around Short Hills, New Jersey. Subject to the foregoing, Executive realizes that his responsibilities hereunder may require travel to and the rendering of services in Carpenteria, California, where the headquarters offices of the Company are located, and other locations. 3. Term of Employment. Subject to the provisions of Section 5 hereof, ------------------ Executive's term of employment under this Agreement shall commence on January 1, 1997 (the "Commencement Date") and shall terminate on December 31, 1999 (the "Term of Employment"). 4. Compensation and Other Benefits. The Company shall pay and provide ------------------------------- the following compensation and other benefits to Executive during the Term of Employment for the services to be provided hereunder: (a) Base Salary. The Company shall pay to Executive a base salary ----------- (the "Base Salary") at the rate of $150,000 per annum, payable in approximately equal installments in accordance with the customary payroll practices of the Company. If the rate per annum of the base salary paid to Executive is increased during the Term of Employment, such increased rate shall thereafter constitute the Base Salary for all purposes of this Agreement. (b) Annual Bonus. Executive shall be paid a cash bonus with respect ------------ to the first year of the Term of Employment of not less than $100,000 and with respect to each -2- subsequent year of the Term of Employment in amounts which are commensurate with the bonuses awarded to the senior executives of the Company (the "Annual Bonus"). The Annual Bonus shall be paid in accordance with the policies of the Company, but in no event later than two months after the end of each such year. (c) Company Stock Options. The Company shall grant to Executive --------------------- options (the "Options") to purchase 200,000 shares of Common Stock of the Company plus such additional number of shares to be determined on the date hereof (the "Common Stock"). The Options shall conform to the following terms: (i) the Options shall be granted on or before January 15, 1997; (ii) the Options shall be exercisable at a price per share equal to the fair market value per share of the Common Stock on the date of grant; (iii) the Options shall become exercisable with respect to one third of the number of shares of Common Stock subject to them each year on the anniversary of the date of grant; (iv) the Options shall become exercisable with respect to all of the shares of Common Stock subject to them upon any termination of the Term of Employment by the Company without Cause or by Executive for Good Reason pursuant to Section 5(b) hereof or upon any Change of Control (as defined below in this Section 4(c)) [Side letter to follow re: FD transaction]; (v) The Options shall be issued under the Company's 1996 Nonstatutory Stock Option Plan and except as expressly stated in this Section, in all other respects, the Options shall conform to the terms of the Company's standard option agreement; provided, however, that the Options may only be amended with ----------------- the prior consent of Executive; (vi) as soon as possible after the Closing the shares of Common Stock subject to the Options shall be registered under the Securities Act of 1933, as amended, pursuant to a Registration Statement on Form S-8 that has been declared effective as to such shares by the Securities and Exchange Commission, and such shares shall be qualified for trading on the principal markets for the Common Stock upon their issuances; and (vii) the Options shall be approved by the Board of Directors of the Company or a compensation committee thereof satisfying the conditions specified for approval by a Board of Directors or committee thereof consisting of "nonemployee directors" under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. The grant of the Options shall not preclude Executive from participating in stock option plans maintained by the Company from time to time for the benefit of its Executive Employees generally. "Change in Control" shall mean (i) the acquisition by any individual, entity or -3- group (as defined for purposes of Sections 13 and 14 of the Securities Exchange Act of 1934, as amended) of 35% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors or (ii) the approval by the shareholders of the Company of a reorganization, merger, consolidation or other transaction that upon consummation would effectively result in such an acquisition of (as described above in (i)) voting securities of the Company (or of any successor or surviving entity). (d) Employee Benefit Plans. During the Term of Employment, Executive ---------------------- shall be entitled to participate in such pension, retirement, life insurance, health and other welfare plans, programs and benefits as are maintained by the Company from time to time for the benefit of its executive employees (the "Plans"). (e) Vacation; Fringe Benefits. During the Term of Employment, ------------------------- Executive shall be entitled to four weeks of vacation per year and to any other fringe benefits and perquisites that are accorded to its executive employees generally by the Company from time to time (the "Fringe Benefits"). (f) Reimbursement of Expenses. The parties anticipate that in the ------------------------- course of fulfilling his responsibilities under this Agreement, Executive will incur reasonable travel, entertainment and other out-of-pocket business expenses for the account of the Company. Executive shall be entitled to reimbursement for all reasonable out-of-pocket business expenses so incurred, upon submission to the Company of an adequate, written accounting which complies with the Company's policies regarding reimbursement for business expenses. The travel expense policy applicable to Executive shall be that applicable to the most senior executives of the Company. (g) Company Loan. At the Closing, the Company shall loan to Employee ------------ the principal amount of $1,000,000 pursuant to a note and other instruments and agreements as shall be consistent with the terms of this Section 4(g) (the "Loan"). The Loan shall be repayable on January 15, 2000, shall be prepayable without penalty in whole or in part (including all accrued interest on the principal amount prepaid), and shall bear interest at the Applicable Federal Rate under Section 1274(d) of the Internal Revenue Code of 1986, as amended, as reported by the Internal Revenue Service, on the date the loan is made, payable at maturity or upon prepayment as aforesaid, and compounded semiannually. The Loan shall be secured by all of the shares of Common Stock underlying the fully- exercisable and vested stock options received by Executive under Section 1.2 of the Stock Purchase Agreement (as defined below) and held by Executive as of the date the Loan is made, pursuant to arrangements that permit the release of shares underlying such options in order to permit the sale or pledge thereof to raise after-tax proceeds to pay or prepay principal and accrued interest on the Loan at maturity or from time to time before maturity. Executive shall not be personally obligated to pay any principal of or interest on the Loan nor shall any of his assets secure payment of the principal of and interest on the Loan, except for such shares underlying such options, solely from which the Company shall seek to realize payment in the event of any failure of payment on the part of Executive. -4- 5. Termination of the Term of Employment. ------------------------------------- (a) Termination for Cause or Without Good Reason. -------------------------------------------- (i) The Company shall have the right to terminate the Term of Employment for Cause (as defined in Section 5(a)(ii) hereof) prior to December 31, 1999, and Executive shall have the right to terminate the Term of Employment without Good Reason (as defined in Section 5(b)(ii) hereof) prior to December 31, 1999. If the Term of Employment is so terminated, Executive shall be entitled to receive payment of the pro rata portion of the Base Salary through and including the date of such termination. Executive shall not be eligible to receive Base Salary or to participate in any of the Plans or to receive any of the Fringe Benefits with respect to any periods after the date of such termination, except for the right to receive vested or statutorily available benefits under any of the Plans in which Executive participates in accordance with the terms of such Plans. The Company shall also pay to Executive promptly (rather than when normally payable) a pro rata portion of the Annual Bonus (with respect to only the first year of the Term of Employment) corresponding to the portion of the year occurring prior to the date of such termination. (ii) "Cause" shall mean (A) the commission of an act of fraud or embezzlement which results in loss, damage or injury to the Company, whether directly or indirectly; (B) Executive's use of narcotics, liquor or illicit drugs has had a detrimental effect on the performance of his employment responsibilities, as determined by the Company's Board of Directors; (C) the arrest, indictment or filing of charges relating to a felony or misdemeanor, either in connection with the performance of the Executive's obligations to the Company or which shall adversely affect the Executive's ability to perform such obligations; (D) gross negligence, breach of fiduciary duty or material breach of the terms of this Agreement; or (E) the commission of an act which constitutes unfair competition with the Company. "Good Reason" shall mean a material breach by the Company of its obligations under this Agreement which is not remedied within 30 calendar days after receipt by the Company of written notice of such breach from Executive, including without limitation any diminution in the responsibilities of Executive hereunder, any change in the office to which Executive reports, any change in the principal place of employment of Executive or any reduction of or failure to pay when due the Base Salary or the Annual Bonus (as and to the extent provided for in Section 4(b) above). (iii) The date of termination of the Term of Employment by the Company under this Section 5(a) shall be the date specified in a written notice of termination delivered by the Company to Executive (which date shall not be earlier than the date of such written notice), unless no such date is specified in such notice, in which case the date of termination shall be the date of receipt by Executive of written notice of termination. The date of termination of the Term of Employment by Executive under this Section 5(a) shall be 60 calendar days after receipt by the Company of written notice of termination. -5- (b) Termination Without Cause or for Good Reason. -------------------------------------------- (i) The Company shall have the right to terminate the Term of Employment without Cause prior to December 31, 1999, and Executive shall have the right to terminate the Term of Employment for Good Reason prior to December 31, 1999. If the Term of Employment is so terminated, Executive shall be entitled to receive (A) payment when due under Section 4 hereof of the Base Salary and Annual Bonus through December 31, 1999, (B) such benefits and payments as may be provided in the event of termination of employment or resignation under the terms and provisions of any of the Plans in which Executive participates, (C) reimbursement in accordance with Section 4(f) hereof of all business expenses incurred through the date of termination, (D) payment of all vacation pay not previously paid, and (E) continuation of such coverage for Executive and Executive's immediate family as was in effect on the date of termination under any of the Plans, or comparable benefits, commencing on the date of such termination and ending on December 31, 1999; provided, however, that such coverage shall cease, with respect to any or all of the Plans, when Executive is covered by an employee plan or program providing substantially similar or more generous benefits. In the event of such termination of the Term of Employment, the Options shall become exercisable on the date of termination with respect to all of the shares of Common Stock subject to them. After such termination of the Term of Employment, Executive shall no longer be entitled to any of the Fringe Benefits. Any obligations of the Company pursuant to this Section are contingent on Executive signing a Release of Claims. A "Release of Claims" shall mean a waiver by Executive, in a form reasonably satisfactory to the Company, of all employment related obligations of and claims and causes of action against the Company (other than claims for any such severance payments due and payable). (ii) The amounts provided for in Section 5(b)(i) hereof are intended to be liquidated damages in lieu of any other liability or obligations of the Company in respect of termination of the Term of Employment by the Company without Cause or by Executive for Good Reason. (iii) The date of termination of the Term of Employment by the Company under this Section 5(b) shall be the date specified in a written notice of termination delivered by the Company to Executive (which date shall not be earlier than the date of such written notice), unless no such date is specified in such notice, in which case the date of termination shall be the date of receipt by Executive of written notice of termination. The date of termination of the Term of Employment by Executive under this Section 5(b) shall be 30 calendar days after receipt by the Company of written notice of termination, provided that the Good Reason specified in such notice shall not have been remedied by the Company during such 30 calendar day period. (c) Death. If Executive dies during the Term of Employment, the Term ----- of Employment shall terminate on the date of death and Executive's beneficiary or estate shall be entitled to receive (i) payment of the pro rata portion of the Base Salary through and including the date of death, (ii) payment (promptly, rather than when normally due) of a pro rata portion of the Annual Bonus corresponding to the portion of the year occurring prior to -6- the date of death, and (iii) such survivor benefits and payments for Executive's family as Executive is entitled to under any of the Plans. (d) Disability. If Executive becomes Permanently Disabled (as defined ---------- below in this Section 5(d)) during the Term of Employment, the Company shall be entitled to terminate the Term of Employment by written notice to Executive specifying the reason for and date of such termination (which date shall not be earlier than the date of such written notice). In the event of such termination, Executive shall be entitled to receive (i) payment of the pro rata portion of the Base Salary through and including the date of termination, (ii) payment (promptly, rather than when normally due) of a pro rata portion of the Annual Bonus corresponding to the portion of the year occurring prior to the date of death, and (iii) such disability and other benefits and payments as Executive is entitled to under any of the Plans. Executive shall be deemed "Permanently Disabled" when, and only when, he is, and has for a period of six consecutive months been, unable by reason of illness or accident to substantially perform his responsibilities hereunder. 6. Confidentiality; Company Property. --------------------------------- (a) Confidentiality. Executive recognizes that the services to be --------------- performed by him hereunder are special, unique and extraordinary in that, by reason of his employment hereunder and his association with the Company, he may acquire or has acquired Confidential Information concerning the Company the use or disclosure of which could cause the Company substantial loss which could not be readily calculated and for which no remedy at law would be adequate. Accordingly, Executive agrees that he will not at any time, except in fulfillment of his responsibilities hereunder or with the written consent of the Company disclose any Confidential Information that he may learn or has learned by reason of his employment or association with the Company or use any such information for his own personal benefit or gain. The term "Confidential Information" means information not previously disclosed to the public or to the trade by the Company's management with respect to the Company's products, facilities and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, price information, customer lists, financial information (including the revenues, costs or profits associated with any of the Company's activities or products), business plans, prospects, opportunities or other information. Confidential Information shall not include information which (i) is or becomes generally available to the public other than as a result of disclosure by Executive in violation of this Section 6(a) or (ii) Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law. Executive understands and agrees that the rights and obligations set forth in this Section 6(a) shall extend beyond the Term of Employment. (b) Company Property. Executive confirms that all Confidential ---------------- Information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company or any Confidential Information shall be and remain the property of the Company. Upon the -7- termination of the Term of Employment or upon the request of the Company at any time, Executive shall promptly deliver to the Company, and shall not without the prior express written consent of the Company retain, all copies of (i) any written materials not previously made available to the public, or (ii) records and documents made by Executive or coming into his possession concerning any Confidential Information. Executive agrees that the rights and obligations set forth in this Section 6(b) shall extend beyond the Term of Employment. (c) Assignment of Inventions. Executive shall sign and abide by the ------------------------ Company's standard invention assignment agreement. (d) Injunctive Relief. Without intending to limit the remedies ----------------- available to the Company, Executive acknowledges that a breach of any of the covenants contained in this Section 6 may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order or a preliminary or permanent injunction restraining Executive from engaging in activities prohibited by this Section 6. 7. Assignability. -------------- (a) By Executive. Neither this Agreement nor any right, duty, ------------ obligation or interest hereunder shall be assignable by Executive without the prior express written consent of the Company. (b) By the Company. This Agreement and all of the Company's rights -------------- and obligations hereunder may be assigned or transferred by it to any entity which at any time by sale, merger, consolidation or other transaction acquires all or substantially all of the assets of the Company or to which the Company transfers all or substantially all of its assets, provided that any such assignee agrees in writing to assume all of the obligations of the Company hereunder. Upon such assignment or transfer, and upon such assumption, any such entity shall be deemed to be substituted for all purposes as the Company hereunder. 8. Severability. If the final determination of a court of competent ------------ jurisdiction declares, after the expiration of the time within which judicial review (if permitted) of such determination may be perfected, that any term hereof is invalid or unenforceable, (a) the remaining terms hereof shall be unimpaired and (b) the invalid or unenforceable term shall be deemed replaced by a term that is valid and enforceable and that comes closest to implementing the intention of the invalid or unenforceable term. 9. Amendment; Waiver. This Agreement may not be modified, amended or ----------------- waived in any manner except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of any provision of this Agreement. -8- 10. Withholding. The Company shall be entitled to deduct and withhold all ----------- applicable Federal, state and local taxes which the Company is required to deduct or withhold from any payments to or on behalf of Executive under this Agreement. 11. Beneficiaries. Executive shall be entitled to select a beneficiary or ------------- beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such selection, in either case by giving the Company written notice thereof. 12. Governing Law. All matters affecting this Agreement, including the ------------- validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of Delaware. 13. Notices. Any notice hereunder by either party to the other shall be ------- given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address specified in the Company's personnel records or such other address as may be specified in a notice of change of address given by Executive to the Company, or if addressed to the Company, the notice shall be delivered or mailed to: MetaTools, Inc. 6303 Carpenteria Avenue Santa Barbara, California 93013 Attn: Mr. John J. Wilczak or to such other address as may be specified in a notice of change of address given by the Company to Executive. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt. 14. Merger. This Agreement supersedes all prior or contemporaneous ------ negotiations, commitments and agreements between the Company and Executive with respect to the subject matter hereof, and such other negotiations, commitments and agreements will have no further force or effect. 15. Counterparts. This Agreement may be executed by either of the parties ------------ hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 16. Headings. The headings of paragraphs herein are included solely for -------- convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 17. Effectiveness of Agreement. This Agreement shall not be effective -------------------------- unless the transaction contemplated by the Stock Purchase Agreement dated as of December 20, 1996 (the "Stock Purchase Agreement"), is consummated and the Stock Purchase Agreement is -9- signed by the Company and RTG (The "Purchase"). In the event the Purchase is terminated pursuant to Section 8.1 of the Stock Purchase Agreement, this Agreement shall be null and void. 18. Arbitration. ------------ (a) Except as provided in Section 6(d), Executive agrees, that any dispute or controversy arising out of, relating to or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be finally settled by binding arbitration to be held in Santa Barbara County, California under the National Rules for the Resolution of Employment Disputes supplemented by the Supplemental Procedures for Large Complex Disputes, of the American Arbitration Association as then in effect (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. (b) The arbitrator(s) shall apply Delaware law to the merits of any dispute or claim, without reference to rules of conflicts of law. The arbitrations proceedings shall be governed by federal arbitration law and by the Rules, without reference to state arbitration law. (c) Except as is otherwise provided in Section 21 below, the Company and the Executive shall each pay half of the costs and expenses of such arbitration. (d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION 18, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, ANY ASPECT OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP. 19. No Mitigation; No Offset. In the event of any termination of ------------------------ employment under Section 5, Executive shall be under no obligation to seek other employment and there shall be no offset against any amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain. Any amounts due under Section 5 are in the nature of severance payments, or liquidated damages, or both, and are not in the nature of a penalty. 20. Legal Fees and Other Expenses. In the event that a claim for payment ----------------------------- or benefits under this Agreement is disputed, Executive shall be reimbursed for all attorney fees and expenses incurred by Executive in pursuing such claim, provided that Executive is -10- successful as to a substantial part of the disputed claim by reason of litigation, arbitration or settlement. 21. Indemnification. The Company agrees that if Executive is made a party --------------- or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director or officer of the Company and/or any affiliate or subsidiary or is or was serving at the request of the Company and/or any affiliate or subsidiary as a director, officer, member, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a director, officer, member, employee or agent while serving as a director, officer, member, employee or agent, he shall be indemnified and held harmless by the Company to the fullest extent authorized by Delaware law, including without limitation by the advancement of his expenses, as the same exists or may hereafter be amended, against all expenses incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if Executive has ceased to be an officer, director or agent, or is no longer employed by the Company and shall inure to the benefit of his heirs, executors and administrators. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed pursuant to the authority of its Board of Directors, and Executive has executed this Agreement, as of the day and year first written above. METATOOLS, INC. By: /s/JOHN WILCZAK ---------------------------- Name John Wilczak ---------------------- Title: Chairman and CEO -------------------- /s/ROBERT E. RICE ---------------------------- Robert E. Rice -11- EX-10.24 5 NONCOMPETITION AGMT DATED 12/31/96 EXHIBIT 10.24 ------------- NONCOMPETITION AGREEMENT ------------------------ This NONCOMPETITION AGREEMENT, dated the 31st day of December, 1996 (the "Agreement") is made as of the Effective Date indicated below by and between MetaTools, Inc., a Delaware corporation (MetaTools), and Alexander Migdal (the "Founder"). BACKGROUND ---------- This Agreement is entered into in connection with and is ancillary to a Stock Purchase Agreement dated as of December 20, 1996 (the "Stock Purchase Agreement") between MetaTools and certain stockholders and option holders of Real Time Geometry Corp., a Delaware corporation ("RTG"), pursuant to which MetaTools has acquired RTG on the date hereof (the "Effective Date"). Founder is a founder, stockholder and executive of RTG and has been actively involved in the development and marketing of RTG's products. MetaTools intends to continue the business of RTG after the Effective Date and integrate such business into MetaTools's ongoing business. To preserve and protect the assets of RTG, including RTG's goodwill, customers and trade secrets of which Founder has, and will, in his role as an employee of MetaTools, have knowledge, and to preserve and protect MetaTools's goodwill and business interests going forward, and in consideration for MetaTools's entering into and performing under the Stock Purchase Agreement, Founder has agreed to enter into this Agreement. Founder and MetaTools believe the limitations as to time, geographical area and scope of activity contained in this Agreement hereof are reasonably necessary to, and no greater than that required to, protect the goodwill and business interests purchased by MetaTools. 1. Consideration. In consideration for Founder's performance pursuant to ------------- the terms and conditions of this Agreement, MetaTools shall (1) purchase all of the shares of RTG owned by Founder pursuant to the Stock Purchase Agreement and (2) pay Founder (i) $300,000 upon the execution of this Agreement and (ii) $150,000 on each of the first and second anniversary dates of this Agreement. 2. Noncompete. For three years following the Effective Date, or one year ---------- from the termination of employment of Founder by MetaTools, whichever is longer, Founder will not individually or as an employee, partner, officer, director or stockholder or in any other capacity whatsoever of or for any person, firm, partnership, company or corporation other than MetaTools or its subsidiaries: -1- (a) Own, manage, operate, sell, control or participate in the ownership, management, operation, sales or control of any business engaged, in the geographical areas referred to in Section 3 below, in the design, research, development, marketing, sale, or licensing of any product that is substantially similar to or competitive with any product created, distributed or known by Founder to be under development by MetaTools or any of its subsidiaries prior to the termination of Founder's employment with MetaTools; (b) Own, manage, operate, sell, control or participate in the ownership, operation, sales or control of any business engaged, in the geographical areas referred to in Section 3 below, in the design, research, development, marketing, sale, or licensing of any product that is substantially similar to or competitive with the products of MetaTools or any of its subsidiaries; (c) Directly or indirectly develop any product that is substantially similar to or competitive with any other products the creation or development of which he participated in during Founder's employment with RTG, MetaTools or any of its subsidiaries; or (d) Recruit, attempt to hire, solicit, assist others in recruiting or hiring, or refer to others concerning employment, in or with respect to the geographical areas referred to in Section 3 below, any person who is an employee of MetaTools or any of its subsidiaries or induce or attempt to induce any such employee to terminate his employment with MetaTools or any of its subsidiaries. 3. Geographic Area. The geographical areas in which the restrictions --------------- provided for in this Agreement apply include all cities, counties and states of the United States, and all other countries, in which MetaTools or any of its subsidiaries has engaged in licensing or sales or otherwise conducted business or selling or licensing efforts at any time during the two years prior to the Effective Date hereof or during the term of this Agreement. The agreement not to compete in each such geographic subdivision is a separate and severable agreement from all such other agreements. Founder acknowledges that the scope and period of restrictions and the geographical area to which the restrictions imposed in this Section 3 applies are fair and reasonable and are reasonably required for the protection of MetaTools and that this Agreement accurately describes the business to which the restrictions are intended to apply. 4. Injunctions. Founder acknowledges that any breach of the covenants of ----------- this Agreement will result in immediate and irreparable injury to MetaTools and, accordingly, consents to the application of injunctive relief and such other equitable remedies for the benefit of MetaTools as may be appropriate in the event such a breach occurs or is threatened. The foregoing remedies will be in addition to all other legal remedies to which MetaTools may be entitled hereunder, including, without limitation, monetary damages. -2- 5. Miscellaneous. -------------- (a) Notices. Any and all notices permitted or required to be given ------- under this Agreement must be in writing. Notices will be deemed given (i) when personally received or when sent by facsimile transmission (to the receiving party's facsimile number), (ii) on the first business day after having been sent by commercial overnight courier with written verification of receipt, or (iii) on the third business day after having been sent by registered or certified mail from a location on the United States mainland, return receipt requested, postage prepaid, whichever occurs first, at the address set forth below or at any new address, notice of which will have been given in accordance with this Section 5(a): If to MetaTools: MetaTools, Inc. 6303 Carpinteria Avenue Carpinteria, CA 93013 Attn: Chief Executive Officer With a copy to: Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto California 94304-1050 Attn: Jeffrey D. Saper, Esq. If to Founder, at Founder's address in the personnel records of MetaTools. (b) Amendments. This Agreement contains the entire agreement and supersedes ---------- and replaces all prior agreements between MetaTools and Founder or RTG and Founder concerning the subject matter hereof. This Agreement may not be changed or modified in whole or in part except by a writing signed by the party against whom enforcement of the change or modification is sought. (c) Successors and Assigns. This Agreement will not be assignable by either ---------------------- Founder or MetaTools except that the rights and obligations of MetaTools under this Agreement may be assigned to a corporation which becomes the successor to MetaTools as the result of a merger or other corporate reorganization and which continues the business of MetaTools or any other subsidiary of MetaTools, provided that, in the case of a subsidiary, MetaTools guarantees the performance by such assignee of MetaTools's obligations hereunder. (d) Governing Law. This Agreement will be governed by and interpreted ------------- according to the substantive laws of the State of California without regard to such state's conflicts law. (e) No Waiver. The failure of either party to insist on strict compliance --------- with any of the terms of this Agreement in any instance or instances will not be deemed to be -3- a waiver of any term of this Agreement or of that party's right to require strict compliance with the terms of this Agreement in any other instance. (f) Severability. Founder and MetaTools recognize that the limitations ------------ contained herein are reasonably and properly required for the adequate protection of the interests of MetaTools and therefore it is the intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible, under applicable law. If for any reason a court of competent jurisdiction or binding arbitration proceeding finds any provision of this Agreement, or the application thereof, to be unenforceable, the remaining provisions of this Agreement will be interpreted so as best to reasonably effect the intent of the parties. The parties further agree that the court or arbitrator shall replace any such invalid or unenforceable provisions with valid and enforceable provisions designed to achieve, to the extent possible, the business purposes and intent of such unenforceable provisions. (g) Counterparts. This Agreement may be executed in counterparts which when ------------ taken together will constitute one instrument. Any copy of this Agreement with the original signatures of all parties appended will constitute an original. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. METATOOLS, INC. FOUNDER /s/ALEXANDER MIGDAL ------------------- By /s/JOHN WILCZAK Alexander Migdal ----------------- Title Chairman and CEO ------------------ -4- EX-10.25 6 AMENDED/RESTATED INVESTOR'S RIGHTS AGMT EXHIBIT 10.25 METATOOLS, INC. AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this "Agreement") is dated as of the 31st day of December 1996, by and among MetaTools, Inc., a Delaware corporation (formerly known as HSC Software Corp.) ("Company"), and the entities set forth in Schedule 1 attached hereto (individually herein "Purchaser" and herein collectively referred to as "Purchasers"). Recitals -------- WHEREAS Company and the Original Stockholders (as set forth on the signature pages hereto) are parties to that certain Investors' Rights Agreement, dated January 21, 1994, as amended by an Amendment dated September 30, 1994 and an Amendment dated October 25, 1995 (the "Prior Agreement"); WHEREAS pursuant to that certain Stock Purchase Agreement dated the date hereof (the "Purchase Agreement"), Company is acquiring approximately 97% of the outstanding capital stock of Real Time Geometry Corp., a Delaware corporation ("RTG"), from certain stockholders of RTG (the "Former RTG Holders") in exchange for Common Stock of Company (the "Purchase"); WHEREAS in connection with the Purchase, Company shall grant the Option Holders (as defined in the Purchase Agreement) certain options to purchase Common Stock of Company (the "Former RTG Options"); WHEREAS in order to induce the Former RTG Holders and the Option Holders to consummate the Purchase, Company and the Original Stockholders desire that Company grant to the Former RTG Holders and the Option Holders the registration and other rights set forth herein. The parties hereby agree as follows: 1. DEFINITIONS. 1.1 "Agreement" shall mean, and the words "Herein," "Hereof," "Hereunder" and words of similar import shall refer to this instrument and any amendment hereto. 1.2 "Commission" shall refer to the Securities and Exchange Commission. -1- 1.3 "Exchange Act" shall refer to the Securities Exchange Act of 1934, as amended. 1.4 "Person" shall refer to any corporation, trust, partnership, individual, association, or other entity. 1.5 "Registrable Securities" shall refer to Company's Common Stock as set forth on Schedule 2 attached hereto ("Schedule 2") and Common Stock issuable upon exercise of the Former RTG Options as set forth on Schedule 2; provided, however, that (i) for the purposes of Section 2.1 (Demand Registration Rights) Registrable Securities shall not include any securities owned by the Former RTG Holders, as set forth on Schedule 2, or issuable upon exercise of the Former RTG Options and (ii) for purposes of Section 2.3 (Form S-3) Registrable Securities shall not include, until December 31, 1998, any securities owned by any Former RTG Holder or issuable upon exercise of any Former RTG Options other than any securities owned by Wexford Capital Partners II, LP and Wexford Overseas Partners I, LP. 1.6 "Securities Act" shall refer to the Securities Act of 1933, as amended. 1.7 "Seller" as used in Article 2 refers to a holder of the Registrable Securities selling or otherwise transferring pursuant to this Agreement such shares. 2. REGISTRATION RIGHTS 2.1 Demand Registration Rights. -------------------------- (a) Upon the written request to register Registrable Securities by the holders of at least forty percent (40%) of the Registrable Securities, Company shall within ten (10) days of receipt of such request deliver written notice of such request to all Persons owning Registrable Securities who shall have thirty (30) days to indicate in writing their desire to be included in such registration. Company will use its best efforts to expeditiously effect the registration of all Registrable Securities whose holders request participation in such registration under the Securities Act, but only to the extent provided for in the following provisions of this Article 2; provided, however, that Company shall not be required to effect registration pursuant to requests under Section 2.1 hereof more than once for the holders of the Registrable Securities as a group and unless the registration can reasonably be expected to result in an aggregate sales price to the public of at least One Million Five Hundred Thousand Dollars ($1,500,000). (b) Whenever a requested registration pursuant to 2.1(a) is for an underwritten offering, only Registrable Securities which are to be included in the underwriting may be included in the registration, and, if the managing underwriting determines in good faith that the number of Registrable Securities so included which are to be sold by the holders of the Registrable Securities is limited due to market conditions, the parties with Registrable Securities in such underwriting and registration shall share pro rata in -2- the number of such Registrable Securities being underwritten and registered for their account, such sharing to be based on the number of all Registrable Securities held by such holders, respectively. Except as permitted herein, Company may not cause any other registration of securities for sale for its own account (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Commission is applicable) to become effective less than ninety (90) days after the effective date of any registration required pursuant to Section 2.1. (c) Company shall file a registration statement covering the Registrable Securities requested to be registered pursuant to this Section 2.1 or Section 2.10 as soon as practical, but in any event within sixty (60) days after receipt of such request or requests; provided, however, that if Company shall furnish to the requesting Purchasers a certificate signed by the President of Company stating that in the good faith judgment of at least two-thirds of the members of the Board of Directors it would be seriously detrimental to Company and its shareholders for such registration statement to be filed at the date filing would be required and it is therefore essential to defer the filing of such registration statement, Company shall have an additional period of not more than one hundred twenty (120) days after the expiration of the initial sixty (60) day period within which to file such registration statement. Such right to delay a request may be exercised by Company not more than once in any two (2) year period. Nothing in this Section 2.1(c) shall preclude a holder of Registrable Securities from enjoying registration rights which it might otherwise possess under Section 2.2 hereof. 2.2 Piggyback Registration. If Company at any time proposes to register any ---------------------- of its securities under the Securities Act, either for its own account or the account of a security holder or holders, (other than a registration effected solely to implement an employee benefit plan, a transaction to which Rule 145 of the Commission is applicable or any other form or type of registration in which Registrable Securities cannot be included pursuant to Commission rule or practice), it will give written notice to all holders of outstanding Registrable Securities of its intention to do so. If such registration is proposed to be on a form which permits inclusion of the Registrable Securities, upon the written request of any holders of the Registrable Securities given within ten (10) days after transmittal by Company to the holders of such notice, Company will, subject to the limits contained in this Section 2.2, use its best efforts to cause all such Registrable Securities of said requesting holders to be registered under the Securities Act and qualified for sale under any state blue sky law, all to the extent requisite to permit such sale or other disposition by such holder of the Registrable Securities so registered; provided, that if the underwriter managing such transaction notifies the holders of Registrable Securities in writing that market or economic conditions limit the amount of securities which may reasonably be expected to be sold on behalf of selling stockholders, the number of Registrable Securities which are included in such registration shall be reduced. Any reduction will first be imposed on holders without registration rights and holders of registration rights other than the holders of the Registrable Securities and to the extent that further reduction is required, such reduction will be imposed pro rata among the holders of Registrable Securities, based on their respective ownership of Registrable Securities; provided that such underwriter may limit the Registrable Securities -3- sought to be registered by the holders of Registrable Securities on the Company's registration statement to not less than thirty percent (30%) of the total number of shares being registered. 2.3 Registration Procedures. If and whenever Company is required by the ----------------------- provisions of this Article 2 to use its best efforts to effect the registration of any of its securities under the Securities Act, Company will, as expeditiously as possible: (a) prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for a period not in excess of ninety (90) days (or at the request of a majority of the selling holders, an additional ninety (90) days); (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the seller or sellers of such securities shall desire to sell or otherwise dispose of the same, but only to the extent provided in this Article 2; (c) furnish to each seller such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as such seller may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such seller; (d) use every reasonable effort to register or qualify the securities covered by such registration statement under such other securities or state blue sky laws of such jurisdictions as each seller shall reasonably request, and do any and all other acts and things which may be necessary under such securities or blue sky laws to enable such seller to consummate the public sale or other disposition in such jurisdictions of the securities owned by such seller, except that Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified; (e) before filing the registration statement or prospectus or amendments or supplements thereto, furnish to one counsel selected by the holders of a majority of Registrable Securities included in such registration copies of such documents proposed to be filed, which shall be subject to the reasonable approval of such counsel; and (f) furnish to each prospective seller of more than fifty thousand (50,000) shares of Registrable Securities a signed counterpart, addressed to the prospective seller, of an opinion of counsel for Company, dated the effective date of the registration statement, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) as are customarily covered (at the time of such registration) in opinions of Company's counsel delivered to the underwriters in underwritten public offerings of securities. -4- 2.4 Expenses. All expenses incurred in effecting the registration provided -------- for in Section 2.1 and for all registrations provided for in Sections 2.2 and 2.10, including without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for Company and fees of one special counsel of the selling holders of Registrable Securities selected by the holders of a majority of the Registrable Securities included in the registration but reasonably acceptable by Company both as to experience and to fees, underwriting expenses (other than commissions or discounts), expenses of any audits of Company's financial statements incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdictions pursuant to Section 2.3(d) hereof (all of such expenses referred to "Registration Expenses") shall be paid by Company, provided, that if an offering pursuant to any registration commenced pursuant to Section 2.1(a) is abandoned by the sellers (other than by reason of adverse information pertaining to Company's business affairs or financial position, as opposed to stock market conditions, unknown to the sellers and Company prior to the commencement of such registration proceedings, in which event Company shall bear all Registration Expenses), such sellers shall bear any costs incurred by Company in conjunction with such registration or at their option forfeit their demand right under Section 2.1. 2.5 Indemnification. --------------- (a) Indemnification by Company. In the event of any registration of any of its securities under the Securities Act pursuant to this Article, Company shall indemnify and hold harmless each of the following parties ("Indemnified Parties"): (i) the seller of such securities; (ii) each underwriter (as defined in the Securities Act); (iii) each other Person who participates in the offering of such securities; and (iv) each other Person, if any, who controls (within the meaning of the Securities Act) such seller, underwriter or participating Person, against any losses, claims, damages or liabilities, including any legal fees or other cost or expense incurred for investigating or defending same (collectively a "Liability"), joint or several, to which such Indemnified Party may become subject under the Securities Act or any other statute or at common law, insofar as such Liability (or action in respect thereof) arises out of or is based upon: (a) any alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or -5- (b) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading. Notwithstanding the foregoing, Company shall not be liable to any Indemnified Party in any such case to the extent that any such Liability arises out of or is based upon any alleged untrue statements or alleged omission made in such registration statement, preliminary or final prospectus, or amendment or supplement thereto, in reliance upon and in conformity with information furnished to Company by such Person specifically for use therein. Moreover, Company shall not be required to indemnify any Person against any Liability arising from any untrue or misleading statement or omission contained in any preliminary prospectus if such deficiency is corrected in the final prospectus or for any liability which arises out of the failure of any such Person to deliver a prospectus as required by the Securities Act. The indemnity provided for in this Section 2.5 shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive transfer of such securities by such seller. Any legal fees or other costs and expenses incurred by an Indemnified Party in connection with any liability shall, subject to a good faith judgment of the Board of Directors of Company that there is no reasonable basis for not indemnifying the Indemnified Party pursuant to the requirements of this Agreement and the receipt of an acceptable undertaking to reimburse the Indemnifying Party in the event that the Indemnifying Party is not entitled to indemnification pursuant to the terms of this Agreement, be reimbursed as incurred by Indemnified Party. (b) Indemnification by Holders of Registrable Securities. Each holder ---------------------------------------------------- of any Registrable Securities shall, by acceptance thereof, indemnify and hold harmless each other holder of any Registrable Securities, Company, its directors and officers, each underwriter and each other Person, if any, who controls Company or such underwriter or other holder ("Indemnitee") against any liability (including fees and expenses incurred in investigating and defending same), joint or several, to which Indemnitee may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or actions in respect thereof) arises out of or is based upon: (i) the disposition by such holder of such Registrable Securities in violation of the provisions of this Article; (ii) any alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which securities were registered under the Securities Act at the request of such holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto; or (iii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading. Such indemnification in the case of (ii) and (iii) applies to the extent, but only to the extent, that such alleged untrue statement or alleged omission was made in such registration state- -6- ment, preliminary or final prospectus, amendment or supplement thereto (A) in reliance upon and in conformity with information furnished to Company by such holder specifically for use therein, and (B) not based on the authority of an expert as to which the holder had no reasonable ground to believe, and did not believe, that the statements made on the authority of such expert were untrue or that there was an omission to state a material fact. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnitee and shall survive transfer of such securities by such holder. (c) Liability Exclusion for Holders. No holder of Registrable ------------------------------- Securities shall be required to indemnify any Person against any liability arising from any untrue or misleading statement or omission contained in any preliminary prospectus if such deficiency is corrected in the final prospectus or for any liability which arises out of the failure of any such Person to deliver a prospectus as required by the Securities Act. Moreover, the liability of any holder of Registrable Securities pursuant to this Section 2.5 shall be limited to an amount equal to the total public offering price, less underwriting discounts and commissions, for the Registrable Securities sold by such holder or, in the situation described in (i) of subsection (b), limited to an amount equal to proceeds of the disposition referred to therein. (d) Contribution. If the indemnification provided for in Section ------------ 2.5(a) or 2.5(b) is unavailable or insufficient to hold harmless an Indemnified Party in respect of any Liability, then the person required under such Section 2.5(a) or (b), as the case may be (the "Indemnifying Party"), shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liability in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand, and the Indemnified Party on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities, expenses or actions as well as any other relevant equitable considerations, including the failure to give the notice required hereunder. The relative fault of the Indemnifying Party and the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the Indemnifying Party or the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Company and the holders of Registrable Securities agree that it would not be just and equitable if contributions pursuant to this Section 2.5(d) were determined by pro rata allocation or by any other method of allocation which did not take account of the equitable considerations referred to above. The amount paid or payable to an Indemnified Party as a result of the Liabilities shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the contribution provisions of this Section 2.5(d), in no event shall the amount contributed by any seller of Registrable Securities exceed the aggregate net offering proceeds received by such seller from the sale of Registrable Securities to which such contribution or indemnification claim relates. No person guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. -7- (e) Further Indemnity. Indemnification similar to that specified in ----------------- paragraphs (a) through (d) of this Section shall be given by Company and each holder of any Registrable Securities (with such modifications as may be appropriate) with respect to any required registration or other qualification of the Registrable Securities under any federal or state law or regulation of governmental authority other than the Securities Act. (f) Procedures, Rights to Separate Counsel. In the event an -------------------------------------- Indemnified Party or Indemnitee ("Claimant") receives a complaint, claim or other notice of any loss, claim or damage, liability or action giving rise to a claim for indemnification under this Section, the Claimant shall promptly notify the Indemnifying Party of such complaint, notice, claim or action, and such Indemnifying Party shall have the right to investigate and defend any such loss, claim, damage, liability or action. The Claimant shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the Indemnifying Party unless the Indemnifying Party fails to promptly defend, in which case the fees and expenses of such separate counsel shall be borne by the Indemnifying Party, provided, however, that a Claimant shall have the right to retain its own counsel, with the fees and expenses to be paid by the Indemnifying Party, if the representation of such Claimant would be inappropriate due to actual or potential differing interests between the Claimant and the other party represented by such counsel in such proceeding. In no event shall an Indemnifying Party be obligated to indemnify any Person for any settlement of any claim or action effected without the Indemnifying Party's prior written consent. 2.6 Termination of Registration. Notwithstanding the foregoing provisions --------------------------- of this Article 2, the rights to registration and the designation of Registrable Securities shall terminate as to any particular securities when such securities shall have been lawfully sold by the holder to the public thereof pursuant to a registration statement or Rule 144 and as to all Registrable Securities on the earlier of seven (7) years from the date hereof or December 12, 2000. 2.7 Compliance with Rule 144. At the request of any holder of Registrable ------------------------ Securities who proposes to sell the Registrable Securities in compliance with Rule 144 of the Commission, Company shall forthwith furnish to such holder or holders a written statement of compliance with the filing requirements of the Commission as set forth in such Rule, as such Rule may be amended from time to time and make available to the public and such holders such information as will enable the holders to make sales of Registrable Securities pursuant to Rule 144. 2.8 Consent to be Bound. Each subsequent holder of Registrable Securities ------------------- must consent in writing to be bound by the terms and conditions of this Article 2 in order to acquire the rights granted pursuant to Article 2 and shall be required to execute such customary underwriting agreements as may be proposed by the managing underwriter. 2.9 Amendments. The provisions of this Agreement may be amended, and ---------- Company may take any action herein prohibited or omit to perform any act herein required to -8- be performed by it, only if Company has obtained the written consent of the holders of at least two thirds (2/3) of the Registrable Securities. 2.10 Form S-3. As of December 20, 1996, the Company is, and it shall use -------- its best efforts to remain, qualified for registration on Form S-3. The holders of the Registrable Securities shall have the right to request unlimited registrations on Form S-3 (such requests shall be in writing and shall state the number of shares of Registrable Securities to be disposed of and the intended method of disposition of such shares by such holder or holders). Company shall not be required to effect a registration pursuant to this Section 2.10 if, in the good faith judgment of Company, such registration will hinder or interfere with a concurrent or proposed security issuance of, or acquisition by, Company or if the holder or holders requesting registration propose to dispose of shares of the Registrable Securities having an aggregate disposition price (before deduction of underwriting discounts and expenses of sale) of less than Five Hundred Thousand Dollars ($500,000). This Section shall not be interpreted to restrict Company from acquiring its own shares or to require Company to sell its own shares. Company shall give notice to all holders of the Registrable Securities of the receipt of a request for registration pursuant to this Section 2.10 and shall provide a reasonable opportunity for other holders to participate in the registration. Subject to the foregoing, Company will use its best efforts, in each case, to effect promptly the registration of all shares of the Registrable Securities on Form S-3 to the extent requested by the holder or holders thereof for purposes of disposition. 2.11 Assignability of Registration. Subject to Section 2.8 hereof, the ----------------------------- registration rights set forth in this Article 2 are assignable to each assignee of Registrable Securities conveyed in accordance herewith (i) who agrees in writing to be bound by the terms and conditions of this Agreement and (ii) who after such transfer owns at least fifty thousand (50,000) shares of Registrable Securities or is an affiliate of such transferror or is a Purchaser. 2.12 Designation of Underwriter. In the case of any registration effected -------------------------- pursuant to this Article 2, Company shall have the right to designate the managing underwriter, subject to the approval of Purchasers, which approval will not be unreasonably withheld. 2.13 Rights Which May Be Granted to Subsequent Investors. Company may not --------------------------------------------------- grant any registration rights to third parties which are senior to or on a parity with those granted to Purchasers pursuant to this Agreement without consent of two thirds (2/3) of the shares of Registrable Securities held by Purchasers. 2.14 Information by Seller. The holder or holders of Registrable --------------------- Securities included in any registration shall furnish to Company such information regarding such holder or holders, the Registrable Securities held by them and the distribution proposed by such holder or holder as Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Article. -9- 2.15 Standstill. As consideration for Company's agreeing to its ---------- obligations under this Article 2, in connection with any registration of the Common Stock of Company, each holder of Registrable Securities does hereby, upon the request of the underwriters managing any underwritten offering of Company's securities, agree not to sell or otherwise dispose of any Registrable Securities (other than those included in the registration) without the prior written consent of Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as the Company and underwriters may specify. Such agreement is conditioned upon each executive officer, director and holder of three percent (3%) or more of Company's Common Stock (on a fully diluted basis) entering into a like agreement. 2.16 Restrictions on Transfer. ------------------------ (a) Unless and until otherwise permitted by this Agreement, each certificate for the securities issued to a Purchaser (the "Securities") or to any subsequent transferee of any such certificate shall be stamped or otherwise imprinted with a legend in substantially the following form: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933. Such shares may not be sold or transferred in the absence of such registration or unless the Company receives an opinion of counsel or other evidence reasonably acceptable to it stating that such sale or transfer is exempt from the registration requirements of said act. Copies of the agreement covering the purchase of these shares and restricting their transfer may be obtained from the secretary of the Company." (b) Prior to any transfer or attempted transfer of any Securities bearing the legend set forth in paragraph (a) of this Section, the holder thereof shall give Company written notice of its intention to transfer. If, in the written opinion of counsel for the holder, accompanying such notice and in form and substance satisfactory to Company and its counsel, addressed to Company and the holder, the proposed transfer may be effected without registration of such security, the securities proposed to be transferred may be transferred in accordance with the terms of said notice and in compliance with applicable state securities laws and regulations. Company shall not be required to effect any such transfer prior to the receipt of such favorable opinion or opinions; provided that, if the proposed transfer is governed by Rule 144 promulgated by the Commission, or any successor rule, such opinion shall not be required, but Company may prevent such transfer until it receives evidence satisfactory to it and its counsel that the transfer complies with Rule 144. Each transfer shall comply with all applicable Commissioner's rules and applicable state securities laws. Each certificate evidencing securities transferred as above provided shall bear the restrictive legend set forth in paragraph (a) of this Section 2.16, unless the transfer is made pursuant to Rule 144 or the opinion of counsel referred to above is to the further effect that such legend is not required in order to establish compliance with the Securities Act. Upon the removal of -10- the restrictive legend, all obligations of a holder pursuant to this Section 2.16 shall immediately terminate. (c) The proposed transfer of such securities may not be effected without registration thereof under the Securities Act, such holder shall not consummate the proposed transfer. Company may order its transfer agents to stop the transfer of any Securities bearing the legend required by this Section until the conditions herein with respect to transfer of such securities have been satisfied. 3. COVENANTS OF COMPANY. 3.1 Financial Statements and Other Information. ------------------------------------------ Company will deliver to each holder of at least fifty thousand (50,000) shares of Registrable Securities within ten (10) days of transmission thereof, copies of all financial statements, proxy statements and reports that Company sends to its stockholders, and copies of all registration statements and all regular, special or periodic reports which it or any of its officers or directors file with the Commission or with any securities exchange on which any of its securities are then listed, and copies of all press releases and other statements made available generally by Company to the public concerning material developments in Company's business. The right to receive materials under this Section shall not be transferable unless the transferee and any affiliates after such transfer own at least fifty thousand (50,000) shares of Registrable Securities. 4. MISCELLANEOUS. 4.1 Consent to Amendments. Except as otherwise expressly provided herein --------------------- and except for amendments of this Section (which require the unanimous consent of the holders of the Registrable Securities), the provisions of this Agreement may be amended and Company may take any action herein prohibited, or omit to perform any act herein required to be performed by them, only if it has obtained the written consent of holders of at least two thirds (2/3) of the Registrable Securities. No course of dealing between Company and the holder of any security issued pursuant to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such holders. 4.2 Successors and Assigns. Except as otherwise expressly provided ------------------------ herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. 4.3 Severability. Whenever possible, each provision of this Agreement ------------ will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. -11- 4.4 Counterparts. This Agreement may be executed in two or more ------------ counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts when taken together will constitute one and the same Agreement. 4.5 Descriptive Headings. The descriptive headings of this Agreement are -------------------- inserted for convenience only and do not constitute a part of this Agreement. 4.6 Notices. Any approvals, consents or notices required or permitted to ------- be sent or given shall be delivered in writing personally or mailed, certified mail, return receipt requested, to the following addresses and shall be deemed to have been received upon such personal delivery or within five (5) days after such mailing: If to holders of Registrable Securities: To the Addresses set forth on Schedule 1 If to Company: MetaTools, Inc. 6303 Carpinteria Avenue Carpinteria, CA 93013 With a Copy to: Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, CA 94304 Attention: Jeffrey D. Saper, Esq. 4.7 Governing Law. The validity, meaning and effect of this Agreement ------------- shall be determined in accordance with the laws of California applicable to contracts made and to be performed in that state. 4.8 Schedules and Exhibits. All schedules and exhibits are an integral ---------------------- part of this Agreement. 4.9 Litigation Costs. If any legal action or any arbitration or other ---------------- proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. 4.10 Remedies. Any Person having any rights under any provision of this -------- Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement, and to exercise all other rights granted by law, which rights may be exercised cumulatively and not alternatively. Moreover, the parties -12- acknowledge that each party's obligation under this Agreement is unique. If any party should default in its obligations under this Agreement, the parties each acknowledge that it would be extremely impracticable to measure the resulting damages; accordingly, the nondefaulting party, in addition to any other available rights or remedies, may sue in equity for specific performance and the parties each expressly waive the defense that a remedy in damages will be adequate. 4.11 Final Agreement. This Agreement constitutes the final agreement of --------------- the parties concerning the matters herein, and supersedes all prior and contemporaneous agreements and understandings (including, but not limited to, the Prior Agreement, which shall be of no further force or effect). -13- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of December 31, 1996. METATOOLS, INC. By: /s/JOHN WILCZAK -------------------------- Its: Chairman and CEO ------------------------- ORIGINAL STOCKHOLDERS: LAGUNITAS PARTNERS, L.P. By: /s/J. PATTERSON MCBAINE -------------------------- J. Patterson McBaine Its: General Partner ------------------------- GT AMERICAN SPECIAL SITUATIONS FUND By: --------------------------- Its: -------------------------- -------------------------- DIOSDADO BANATAO /s/KAI KRAUSE -------------------------- KAI KRAUSE -14- SPUME & COMPANY By: --------------------------- Its: -------------------------- COWEN & COMPANY By: --------------------------- Its: -------------------------- JAPAN ASSOCIATED FINANCE CO., LTD. By: -------------------------- Masaki Yoshida Its: President JAFCO G-3 INVESTMENT ENTERPRISE PARTNERSHIP By: /s/ MASAKI YOSHIDA -------------------------- Masaki Yoshida Its: President Marina Capital II Japan Associated Finance Co., Ltd. Its: Executive Partner JAFCO G-4 INVESTMENT ENTERPRISE PARTNERSHIP By: /s/MASAKI YOSHIDA -------------------------- Masaki Yoshida Its: President Japan Associated Finance Co., Ltd. Its: Executive Partner -15- JAFCO G-5 INVESTMENT ENTERPRISE PARTNERSHIP By: /s/ MASAKI YOSHIDA -------------------------- Masaki Yoshida Its: President Japan Associated Finance Co., Ltd. Its: Executive Partner JANNEY MONTGOMERY SCOTT INC. CUSTODIAN FBO: BARRY ODLEN (IRA) A/C #6325-3945 By: /s/ BARRY OLDEN -------------------------- Its: Custodian FBO IRA ------------------------- MARINA CAPITAL II By: /s/ THOMAS MACINO -------------------------- Thomas Mancino Its: Managing General Partner ------------------------- JOSEPH AND SHARON LALLY, TRUSTEES FBO JOSEPH AND SHARON LALLY LIVING TRUST UTD 6/8/92 /s/ JOSEPH LALLY ------------------------------ Joseph Lally /s/ SHARON LALLY ------------------------------ Sharon Lally ----------------------------- KEVIN WENCK ----------------------------- NANCY WENCK -16- ----------------------------- JERROLD B. NEWMAN /s/ NICHOLAS STIASSNI ------------------------------ NICHOLAS STIASSNI /s/ SAMUEL H. JONES, JR. ------------------------------ SAMUEL H. JONES, JR. /s/ HOWARD MORGAN ------------------------------ HOWARD MORGAN /s/ JOHN J. WILCZAK ------------------------------ JOHN J. WILCZAK RISA, INC. By: -------------------------- Peter Weiner UNITED STATES TRUST COMPANY OF NEW YORK, AS TRUSTEE U/D WILLIAM A. KAYNOR DATED 7/20/88, ACCOUNT #24297300 By: --------------------------- Its: -------------------------- ------------------------------ RONALD YARA VULCAN VENTURES INC. By: /s/ WILLIAM SAVOY -------------------------- William Savoy -17- FORMER RTG HOLDERS: /s/ SASHA MIGDAL ------------------------------ SASHA MIGDAL /s/ ALEXEI LEBEDEV ------------------------------ ALEXEI LEBEDEV /s/ MICHAEL PETROV ------------------------------ MICHAEL PETROV /s/ BORIS LIPOVSKY ------------------------------ BORIS LIPOVSKY WEXFORD MANAGEMENT I, L.P. By: Wexford Management LLC Its: Investment Manager By: /s/ ROBERT HOLTZ -------------------------- Title: Sr. Vice President ----------------------- WEXFORD MANAGEMENT II, L.P. By: Wexford Management LLC Its: Investment Manager By: /s/ ROBERT HOLTZ -------------------------- Title: Sr. Vice President ----------------------- RTG OPTION HOLDERS: /s/ ROBERT E. RICE ------------------------------ ROBERT E. RICE /s/ DMITRY PAPERNY ------------------------------ DMITRY PAPERNY -18- SCHEDULE 1 ---------- To The Investors' Rights Agreement ----------------------------------
NAME AND ADDRESS NAME AND ADDRESS Lagunitas Partners Cowen & Company Attn: J. Patterson McBaine 345 California Street Gruber & McBaine Suite 2600 50 Osgood Place San Francisco, CA 94104 San Francisco, CA 94133 Vulcan Ventures Incorporated Japan Associated Finance Co., Ltd. 110 110th Avenue NE, Suite JAFCO G-3 Investment Enterprise Partnership 550 JAFCO G-4 Investment Enterprise Partnership Attn: William Savoy JAFCO G-5 Investment Enterprise Partnership Bellevue, WA 98004-5840 Attn: H.C. Thor International Operations Department GT American Special 10th Floor Toshiba Building Situation Fund 1-1-1 Shibaura Minato-Ku Attn: Peter Duarino Tokyo, Japan 105 GT Capital 50 California St., 27th Floor San Francisco, CA 94111 Kevin Wenck Joseph and Sharon Lally, Trustees FBO Joseph and 28 Tappan Lane Sharon Lally Living Trust UTD 6/8/92 Orinda, CA 94563-1332 1436 Warnall Avenue Los Angeles, CA 90024-5333 Nancy Wenck Kai Krause 28 Tappan Lane 601 Cowles Road Orinda, Ca 94563-1332 Montecito, CA 93108-1801 Marina Capital II Attn: Thomas E. Mancino 2190 Washington Street #901 San Francisco, CA 94109 Jerrold Newman Nicholas Stiassni Cowen & Company PaineWebber, Inc. Financial Square 725 S. Figueroa St., 40th Floor New York, NY 10005 Los Angeles, CA 90017 Howard Morgan Samuel H. Jones, Jr. The ARCA Group, Inc. U.S. Route 40, P.O. Box 169 764 Mt. Moro Road Woodstown, NJ 08098-0169 Villanova, PA 19085
NAME AND ADDRESS NAME AND ADDRESS Diosdado Banatao United States Trust Company of New York, as S/3/ Incorporated Trustee 2880 San Tomas Expressway U/D William A. Kaynor dated 7/20/88, Account Santa Clara, CA 95051-0981 #24297300 1001 Fifth Avenue New York, NY 10028 Janney Montgomery Scott Inc. John J. Wilczak Custodian FBO: Barry Odlen 1029 Alston Road (IRA) A/C #6325-3945 Montecito, CA 93108 1801 Market Street Philadelphia, PA 19103 RISA Incorporated Ronald Yara Attn: Peter Weiner S/3/ Incorporated [get new address] 2880 San Tomas Expressway Malibu, CA 90265 Santa Clara, CA 95051-0981 Spume & Co. Alexander Migdal Attn: Kevin Wenck Real Time Geometry Corp. 50 California Street 51 John F. Kennedy Parkway 27th Street Suite 303 San Francisco, CA 94111 Short Hills, NJ 07078 Robert E. Rice Alexei Lebedev Real Time Geometry Corp. Real Time Geometry Corp. 51 John F. Kennedy Parkway 51 John F. Kennedy Parkway Suite 303 Suite 303 Short Hills, NJ 07078 Short Hills, NJ 07078 Dmitry Paperny Michael Petrov Real Time Geometry Corp. Real Time Geometry Corp. 51 John F. Kennedy Parkway 51 John F. Kennedy Parkway Suite 303 Suite 303 Short Hills, NJ 07078 Short Hills, NJ 07078 Boris Lipovsky Wexford Overseas Partners I, L.P. Real Time Geometry Corp. Wexford Capital Partners II, L.P. 51 John F. Kennedy Parkway c/o Wexford Management LLC Suite 303 Attn: Robert Holtz Short Hills, NJ 07078 411 West Putnam Avenue Greenwich, CT 06830
-2- SCHEDULE 2 ---------- To the Investors' Rights Agreement ----------------------------------
CURRENT METATOOLS NUMBER OF SHAREHOLDERS HOLDING SHARES OF REGISTRATION RIGHTS COMMON STOCK - ---------------------------------------------------------- Diosdado Banatao 20,000 Cowen & Company 110,000 GT American Special Situations Fund 24,000 Spume and Co. (U.S. Small Companies Fund) 136,000 JAFCO G-3 Investment Enterprise Partnership 109,863 JAFCO G-4 Investment Enterprise Partnership 82,398 JAFCO G-5 Investment Enterprise Partnership 95,738 Japan Associated Finance Co. Ltd. 72,001 Janney Montgomery (Odlen IRA Account) 6,000 Samuel H. Jones, Jr. 608,000 Samuel H. Jones, Jr. (warrants) 260,055 William Kaynor (Trust) 180,000 William Kaynor (Trust) (warrant) 5,100 Kai Krause (warrant) 94,445 Lagunitas Partners 100,000 Mr. & Mrs. Joseph Lally 1,000 Marina Capital II 40,000 Howard L. Morgan 108,500 Jerrold Newman 8,000 RISA Inc. (Peter Weiner) (warrant) 600 Nicolas Stiassni 2,000 Vulcan Ventures Incorporated 2,000,000 Kevin Wenck 4,100 Nancy Wenck 400 John J. Wilczak 10,000 John J. Wilczak (warrants) 28,333 Ronald Yara 20,000 --------- TOTAL 4,126,533 =========
SCHEDULE 2 ---------- To the Investors' Rights Agreement ---------------------------------- - ---------------------------------------------------------------------- SHARE AND OPTION EXCHANGE IN ACQUISITION - ----------------------------------------------------------------------
NUMBER OF NUMBER OF RTG SHARES OF SHARES CLASS METATOOLS CURRENTLY OF COMMON STOCK STOCKHOLDERS HELD STOCK TO BE ISSUED - ---------------------------------------------------------------------- Alexander Migdal 700 Common 815,469 Alexei Lebedev 75 Common 91,283 Michael Petrov 25 Common 30,427 Boris Lipovsky 25 Common 30,427 Wexford Overseas 38 Preferred 69,207 Partners I, L.P. Wexford Capital 162 Preferred 295,043 Partners II, L.P. NUMBER OF OPTIONS TO PURCHASE NUMBER OF EXERCISE RTG RTG SHARES METATOOLS PRICE OPTION CURRENTLY OPTIONS TO PER HOLDERS HELD BE ISSUED SHARE - ---------------------------------------------------------------------- Robert E. Rice 75 90,165 $ 5.03 Dmitry Paperny 5 6,011 $ 0.08
EX-99.1 7 PRESS RELEASE FOR IMMEDIATE RELEASE Contact: Sallie Olmsted/Jason Ysais Moira Conlon/Steve Seidler MetaTools, Inc. Financial Relations Board 805-566-6263/6333 310-442-0599 salliemeta@aol.com/ jysais@metatools.com METATOOLS, INC. ACQUIRES REAL TIME GEOMETRY CORPORATION -Real Time 3D Enabling Technologies Increase MetaTools Reach into Computer Graphics Markets- Carpinteria, Calif., December 23, 1996 -- MetaTools, Inc. (Nasdaq: MTLS), the visual computing software company, announced today a definitive agreement to acquire Real Time Geometry Corporation ("RTG"), a privately held company based in Princeton, New Jersey, specializing in real time 3D graphics and visualization technologies. The acquisition of RTG expands MetaTools ability to participate in the rapid expansion of broad application areas that will utilize 3D technology. The RTG technologies are being developed for applications on Windows, Macintosh, SGI, Sun, Nintendo, Sega and Sony PlayStation platforms. TRANSACTION DETAILS - ------------------- MetaTools plans to issue 1,360,000 shares of MetaTools common stock in exchange for all the outstanding shares of RTG. MetaTools will also issue approximately 800,000 Nonqualified stock options to purchase MetaTools common stock to current RTG employees. The majority of the options to be issued in the transaction will have an exercise price equal to the fair market value of the MetaTools common stock on the issuance date and will vest over three to four years. The remaining options for approximately 100,000 shares of MetaTools common stock will have an average exercise price of $4.69 per share. The acquisition, which is expected to close by December 31, 1996, will be accounted for by the purchase method of accounting by MetaTools. If the common stock of MetaTools on the closing date is $14.50 per share (the closing price on December 20, 1996) then MetaTools would expect to charge approximately $17 million against earnings during the fourth quarter ended December 31, 1996 related to the write-off of research and development in-process at RTG and other costs related to the transaction. 3D ENABLING AND APPLICATION TECHNOLOGY - -------------------------------------- The addition of RTG's core innovations and development capabilities in real time 3D graphics accelerate MetaTools strategic expansion in the rapidly emerging consumer, prosumer and professional markets for 3D tools, applications and titles. Key innovations of RTG's real time 3D technology include: 1) decreasing the time required to create, render and display 3D images and environments; 2) enabling the creation of dynamic, real time resolution changes to 3D models; 3) improving the visual resolution and navigation of 3D graphics. RTG's 3D graphics innovations, combined with MetaTools design and application development expertise, will allow the RTG technology to be incorporated into MetaTools existing and planned professional tools and consumer creative entertainment software products. The company also anticipates strategic licensing agreements with third party hardware and software companies, including developers of 3D acceleration chips, still and motion imaging, animation and video graphics products, computer and console games, architectural and engineering design products, financial visualization and medical applications software. INCORPORATION OF RTG'S ENGINEERING TEAM WITH METATOOLS R&D - ---------------------------------------------------------- Real Time Geometry's existing operations of 23 people, including 20 research employees, will remain in Princeton, New Jersey as the MetaTools' Real Time Geometry research and development lab. Alexander "Sasha" Migdal and Robert Rice will continue to lead the development of Real Time Geometry's 3D imaging technologies. Through the acquisition of RTG, Sasha Migdal will assume the role of vice president & chief scientist and Robert Rice will become vice president of business development. -1- "We are extremely pleased to be joining forces with MetaTools, a recognized innovator in user interface design and real time computer graphics," said Sasha Migdal, vice president & senior scientist. "Real Time Geometry brings to MetaTools significant advances in basic 3D technology with a wide range of applications. Sasha Migdal has assembled an extraordinary research and development team utilizing applied mathematics and theoretical physics to meet the challenges facing computer visualization technologies," commented John Wilczak, MetaTools co-founder and CEO. - ------------------------ MetaTools, the visual computing software company, designs, develops, publishes, markets and supports software tools and enabling technologies for creating, editing, and manipulating computer graphic images, digital art and Internet/online content for Windows, Macintosh and other digital computing and editing systems. Working with distributors in North America, Europe and Asia, MetaTools' professional and consumer software is available in more than fifty countries. The company is located in Santa Barbara County at 6303 Carpinteria Ave., Carpinteria, CA 93013; Tel: 805-566-6200; Fax: 805-566-6385. MetaTools' International Operations Center is located at Europa House, Harcourt Street, 4th Floor, Dublin 2, Ireland. Tel: 353(1)475-1721; Fax: 353(1)475-1728; World Wide Web server: http://www.metatools.com. - ------------------------ Editor's note: Biography of Sasha Migdal appears below. A conference call discussing this acquisition will take place on Monday December 23rd at 4:30PM EST/1:30PM PST. Dial in on 800-553-2506. Replay service will be available through December 27th by calling 800-696-1588, request call i.d. number 161538. - ------------------------ ALEXANDER A. MIGDAL BIOGRAPHY Award-winning and noted physicist, Alexander "Sasha" Migdal, is the chief scientist and president of Real Time Geometry Corporation, a high-tech research company specializing in 3D graphics and visualization technologies based in Princeton, New Jersey. Mr. Migdal has thirty years of experience in theoretical and computational physics and 11 years of experience in large scale scientific and applied computations and software development. He has written more than 80 scientific papers on the theory of phase transitions, high energy physics and mathematical physics and computational fluid dynamics. In addition to co-founding Real Time Geometry, Mr. Migdal was a joint professor of physics and applied and computational mathematics at Princeton University from 1989 to 1996. Immediately after leaving the USSR with his family in 1988, he spent a year as a visiting professor of physics at the University of California, San Diego (UCSD). While in the USSR, Mr. Migdal was the head of the Laboratory of Computational Physics in the Cybernetics Council of the Soviet Academy of Sciences and was a senior research fellow at the Landau Institute for Theoretical Physics. Mr. Migdal holds a doctor of science and Ph.D. from the Landau Institute for Theoretical Physics, Chernogolovka, USSR; a M.S. in Physics from Moscow Physical Technical Institute, Moscow, USSR; as well as an honorary degree of professor from the Cybernetics Council of the Soviet Academy of Sciences. -2- -----END PRIVACY-ENHANCED MESSAGE-----