METACREATIONS CORP, PRER14A, 2000-10-10

METACREATIONS CORP
PRER14A, 2000-10-10
PREPACKAGED SOFTWARE

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<PAGE> 1
SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12

MetaCreations Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

------------------------------------------------------------------------

(5) Total fee paid:

------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

------------------------------------------------------------------------

(3) Filing Party:

------------------------------------------------------------------------

(4) Date Filed:

------------------------------------------------------------------------
<PAGE> 2

[MetaCreations Logo]

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD NOVEMBER , 2000

TO THE STOCKHOLDERS OF METACREATIONS CORPORATION:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
MetaCreations Corporation, a Delaware corporation (the "Company"), will be held
on November , 2000, at 9:30 a.m., local time, at the Millennium Broadway
Conference Center, 145 West 44th Street, New York, NY 10036, for the following
purposes:

1. To elect five directors to serve for the ensuing year and until their
successors are duly elected and qualified.

2. To approve the issuance of 5,520,000 shares of common stock of the
Company to Computer Associates International, Inc., in exchange for
shares of common stock of Viewpoint Corporation (formerly Metastream
Corporation) owned by Computer Associates.

3. To amend the Company's Stock Option Plan to increase the number of
shares available for issuance under the plan.

4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants for the Company for the 2000 fiscal year.

5. To transact such other business as may properly come before the meeting
or any adjournment thereof.

The foregoing items of business are more fully described in the proxy
statement accompanying this notice.

Only stockholders of record at the close of business on September 19, 2000
are entitled to notice of and to vote at the meeting.

All stockholders are cordially invited to attend the meeting in person. To
ensure your representation at the meeting, however, you are urged to authorize
your proxy by taking one of the following steps as promptly as possible:

1. Complete, date, sign and return the enclosed proxy card (a
postage-prepaid envelope is enclosed for that purpose); or

2. Vote via the Internet (see the instructions on the enclosed proxy card);
or

3. Vote via telephone (toll-free) in the United States and Canada (see the
instructions on the enclosed proxy card).

The Internet and telephone voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to vote their shares, and to
confirm that their instructions have been properly recorded. The Company has
been advised by counsel that the procedures which have been put in place are
consistent with the requirements of applicable law. Specific instructions to be
followed by any registered stockholder interested in voting via the Internet or
telephone are set forth on the enclosed proxy card.

Any stockholder attending the meeting may vote in person even if he or she
has returned a proxy card or voted via the Internet or telephone.

FOR THE BOARD OF DIRECTORS

BRIAN J. O'DONOGHUE, Secretary

New York, New York

October , 2000

IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, OR
VOTE VIA THE INTERNET OR TELEPHONE.
<PAGE> 3

METACREATIONS CORPORATION
498 SEVENTH AVENUE
NEW YORK, NEW YORK 10018
(212) 201-0800
------------------------

PROXY STATEMENT FOR 2000
ANNUAL MEETING OF STOCKHOLDERS

INFORMATION CONCERNING SOLICITATION AND VOTING

The enclosed proxy is solicited on behalf of the Board of Directors of
MetaCreations Corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held November , 2000 at 9:30 a.m., local time, or at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the
Millennium Broadway Conference Center, 145 West 44th Street, New York, NY 10036.

These proxy solicitation materials and the Company's Annual Report to
Stockholders for the year ended December 31, 1999, including financial
statements, are being mailed on or about October , 2000 to all stockholders
entitled to vote at the meeting.

RECORD DATE AND VOTING SECURITIES

Stockholders of record at the close of business on September 19, 2000 are
entitled to notice of and to vote at the meeting. At the record date, 28,985,946
shares of common stock, $0.001 par value, of the Company were issued and
outstanding.

REVOCABILITY OF PROXIES

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use, whether the proxy was given by telephone,
via the Internet or by proxy card. The proxy may be revoked by delivering to the
Secretary of the Company a written notice of revocation or a duly executed proxy
bearing a later date, or by making an authorized Internet or telephone
communication on a later date in accordance with the instructions on the
enclosed proxy card. It may also be revoked by attendance at the meeting and
voting in person.

VOTING AND SOLICITATION

Proxies properly given and not revoked will be voted in accordance with the
specifications made. Where no specifications are given, such proxies will be
voted as the management of the Company may propose. If any matter not described
in this proxy statement is properly presented for action at the meeting, the
persons named in the enclosed form of proxy will have discretionary authority to
vote according to their best judgment.

Each stockholder is entitled to one vote for each share of common stock on
all matters presented at the meeting. Stockholders do not have the right to
cumulative voting in the election of directors.

The cost of soliciting proxies will be borne by the Company. The Company
may also reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers, and employees, without additional compensation, personally
or by telephone or telegram.

QUORUM; REQUIRED VOTES; ABSTENTIONS; BROKER NON-VOTES

The required quorum for the transactions of business being voted on at this
year's Annual Meeting is a majority of the votes eligible to be cast by holders
of shares of common stock issued and outstanding on the Record Date. Shares that
are voted "FOR," "AGAINST," "WITHHELD" or "ABSTAIN" are treated as
<PAGE> 4

being present at the meeting for purposes of establishing a quorum and are also
treated as shares entitled to vote at the Annual Meeting with respect to such
matter.

With respect to the election of directors, Delaware law requires the
affirmative vote of the holders of a plurality of the common stock present and
entitled to vote on the election of directors at the Annual Meeting. Therefore,
for purposes of the election of directors, abstentions will have no effect on
the outcome of the vote, although they will be counted toward the presence of a
quorum.

The affirmative vote of a majority of the votes cast is required to adopt
all other proposals being voted on at this year's Annual Meeting. Although there
is no definitive statutory or case law authority in Delaware as to the proper
treatment of abstentions, the Company believes that abstentions should be
counted for purposes of determining the total number of votes cast with respect
to a proposal (other than the election of directors). In the absence of
controlling precedent to the contrary, the Company intends to treat abstentions
in this manner. Accordingly, abstentions will have the same effect as a vote
against the proposal.

The Delaware Supreme Court has held that, while broker non-votes should be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, broker non-votes should not be counted for purposes of
determining the number of votes cast with respect to the particular proposal on
which the broker has expressly not voted. The Company intends to treat broker
non-votes in a manner consistent with this holding. Thus, a broker non-vote will
not affect the outcome of the voting on any of the proposals at the Annual
Meeting.

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<PAGE> 5

PROPOSAL ONE:

ELECTION OF DIRECTORS

NOMINEES

Unless otherwise specified, all proxies received will be voted in favor of
the election of the persons named below as directors of the Company. If any
nominee of the Company is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for the nominee designated by
the present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director. The term of
office of each person elected as a director will continue until the next Annual
Meeting of Stockholders or until a successor has been elected and qualified.

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
Thomas Bennett.............................................. 44 --
Bruce R. Chizen............................................. 44 --
Samuel H. Jones, Jr. ....................................... 67 1992
Lennert J. Leader........................................... 44 --
Robert E. Rice.............................................. 45 2000
</TABLE>

There is no family relationship among any directors or executive officers
of the Company.

THOMAS BENNETT

Mr. Bennett has been with Computer Associates International, Inc. since
1988 and has been serving as its Senior Vice President of Business Development
since April 1997. On February 8, 2000, he became a director of Viewpoint
Corporation. Mr. Bennett currently serves as a member of the board of directors
of I-Storm, Inc. and several private companies.

BRUCE R. CHIZEN

Mr. Chizen has been the President of Adobe Systems Incorporated since April
2000. Mr. Chizen joined Adobe in August 1994 as Vice President and General
Manager, Consumer Products Division. In December 1997, he was promoted to Senior
Vice President and General Manager, Graphic Products Division and in August
1998, Mr. Chizen was promoted to Executive Vice President, Products and
Marketing.

SAMUEL H. JONES, JR.

Mr. Jones has been a director of the Company since April 1992. He has been
President of S-J Venture Capital Company since 1991 and President of S-J
Transportation Company, an industrial waste transportation company, since 1971.
Mr. Jones is a director of Fulton Financial Corp.

LENNERT J. LEADER

Mr. Leader has been the President of AOL Investments, a division of America
Online, Inc., since February 1998. Mr. Leader served as Senior Vice President,
Chief Financial Officer, and Treasurer of AOL from September 1989 until July
1998. Prior to joining AOL, Mr. Leader was a Vice President -- Finance of LEGENT
Corporation, a computer software and services company, from March 1989 to
September 1989, and Chief Financial Officer of Morino, Inc., a computer software
and services company, from 1986 to March 1989 and Director of Finance from 1984
to 1986. Prior to joining Morino, Inc. in 1984, he was an audit manager of Price
Waterhouse. Mr. Leader serves as a director of iVillage Inc. and Multex.com,
Inc. Mr. Leader graduated with a B.S. in Accounting in 1977 from the University
of Baltimore.

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<PAGE> 6

ROBERT E. RICE

Mr. Rice has been a director of the Company since April 4, 2000. Mr. Rice
co-founded Real Time Geometry Corp. and served as its chairman until its sale to
the Company in 1996. At the Company, he served as vice president of strategic
affairs until September 1999. He has been the President and a director of
Viewpoint Corporation since its formation in June 1999 and has been President
and Chief Executive Officer of the Company since April 7, 2000. Before founding
Real Time Geometry, Mr. Rice was a partner at the law firm of Milbank, Tweed,
Hadley and McCloy LLP, where he advised on various corporate, tax, and
intellectual property issues.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE NOMINEES SET FORTH ABOVE.

BOARD MEETINGS AND COMMITTEES

The Board of Directors of the Company held nine meetings during fiscal
1999. Each director attended at least 88% of the meetings of the Board of
Directors held during such director's term of office during fiscal 1999.

The Audit Committee reviews the financial statements and the internal
financial reporting system and controls of the Company with the Company's
management and independent auditors, recommends resolutions for any disputes
between the Company's management and its auditors, and reviews other matters
relating to the relationship of the Company with the auditors, including their
engagement and discharge. The Audit Committee held four meetings during fiscal
1999. The Audit Committee currently consists of Mr. William H. Lane III, who is
not standing for re-election as a director, and Mr. Jones. Messrs. Lane and
Jones are both independent members of the Audit Committee as defined by Rule
4200(a)(15) of the NASD listing standards.

The Compensation Committee develops and monitors compensation arrangements
for the officers and directors of the Company, including preparation of proper
reports or other disclosure required by the Compensation Committee in accordance
with applicable proxy or other rules of the Securities and Exchange Commission,
administers the Company's stock option plans, and monitors stock option activity
for the Company. The Compensation Committee held five meetings during fiscal
1999. The Compensation Committee currently consists of Messrs. Lane and Jones.

COMPENSATION OF DIRECTORS

The Company reimburses each of its non-employee directors as follows: each
non-employee director is paid $2,500 at the end of each fiscal quarter in which
he or she is a director, $1,000 for each regular Board meeting he or she
attends, and $500 for each Board committee meeting he or she attends. However,
that if more than one committee meeting is held on the same day or a Board
meeting and one or more committee meetings are held on the same day, no more
than the initial $500 or $1,000, as the case may be, is paid to any director for
all such meetings attended by such director on such date. From March 1997
through February 1999, Dr. Howard Morgan, who served as a director of the
Company until December 22, 1999, received a monthly consulting fee of $4,500 for
services rendered to the Company. In addition, from February 1997 through
February 1999, Mr. Lane, who currently serves as a director of the Company,
received a monthly consulting fee of $4,000 for services rendered to the
Company. Effective March 1, 1999, each of Dr. Morgan's and Mr. Lane's consulting
fees were reduced to $2,500 per month.

Non-employee directors participate in the Company's 1995 Director Option
Plan (the "Director Plan"). Under the Director Plan, each non-employee director
who joins the Board is automatically granted a nonstatutory option to purchase
20,000 shares of Company common stock on the date upon which such person first
becomes a director. In addition, each non-employee director, including current
non-employee directors, automatically receives a nonstatutory option to purchase
5,000 shares of Company common stock on January 1 of each year, provided the
director has been a member of the Board for at least six months. The exercise
price of each option granted under the Director Plan is equal to the fair market
value of Company

4
<PAGE> 7

common stock on the date of grant. The 20,000 share grant vests at a rate of
one-eighth of the option shares upon the end of the first six-month period after
the date of grant and one-forty-eighth of the option shares per month
thereafter, provided the optionee remains a director of the Company. The 5,000
share grant vests at the rate of one-half of the option shares upon the end of
the first six-month period after the date of grant and one-twelfth of the option
shares per month thereafter, provided the optionee remains a director of the
Company. Options granted under the Director Plan have a term of ten years unless
terminated sooner, whether upon termination of the optionee's status as a
director or otherwise pursuant to the Director Plan.

In January 1999, Messrs. Bert Kolde, who served as a director of the
Company until March 2000, Lane and Jones, and Dr. Morgan were each granted an
option to purchase 5,000 shares of Company common stock under the Director Plan
at an exercise price of $6.625 per share. In December 1999, in recognition of
the substantial contribution of the Company's directors to the formation and
success of Viewpoint Corporation, Messrs. Kolde, Lane and Jones and Dr. Morgan
were each granted a fully-vested option to purchase 50,000 shares of common
stock of Viewpoint Corporation under the Viewpoint Stock Option Plan at an
exercise price of $1.00 per share. Pursuant to the Director Plan, in January
2000 Messrs. Kolde, Lane and Jones were each granted an option to purchase 5,000
shares of Company common stock under the Director Plan at an exercise price of
$9.00 per share. For their participation as directors of Viewpoint Corporation,
in January 2000, Mr. Jones and Dr. Morgan were each granted an option to
purchase 75,000 shares of common stock of Viewpoint Corporation under the
Viewpoint Stock Option Plan at an exercise price of $1.00 per share.
Additionally, for his participation as a director of Viewpoint Corporation, in
February 2000, Mr. Lane was granted an option to purchase 75,000 shares of
common stock of Viewpoint Corporation under the Viewpoint Stock Option Plan at
an exercise price of $1.00 per share. The 75,000 share grants vest one-fifth of
the option shares on the date of grant, one-fifth of the option shares at the
end of the first year and one-thirty-sixth of the option shares per month
thereafter, provided the optionee remains a director of Viewpoint.

EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to annual
compensation and long-term compensation awarded during fiscal 1997, 1998 and
1999 to each person who served as the Company's Chief Executive Officer and the
Company's four other most highly compensated executive officers during 1999
(collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------------------------------
----------------------------------- SECURITIES SECURITIES
OTHER UNDERLYING UNDERLYING
ANNUAL COMPANY VIEWPOINT ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS OPTIONS COMPENSATION
--------------------------- ---- -------- -------- ------------ --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark Zimmer(1)............ 1999 $250,000 $169,743(5) $20,739(10) -- 50,000 $ --
President and Chief 1998 239,375 15,000(8) 17,712(10) 40,000 -- --
Executive Officer 1997 223,199 42,000(9) 16,424(10) 37,657 -- --
Terance A. Kinninger(2)... 1999 186,667 81,000 17,701(10) 125,000 -- --
Senior Vice President, 1998 173,333 18,000(8) 13,088(10) 115,000 -- --
Finance and Operations 1997 160,750 28,000(9) 9,207(10) 30,000 -- --
and Chief Financial
Officer
Robert Rice............... 1999 185,000 65,000(7) 8,923(10) 25,000 750,000 --
Vice President, Strategic 1998 173,333 100,000(8) 7,481(10) 294,500 -- --
Affairs; President and 1997 154,154 100,000(9) 4,607(10) -- -- --
Chief Executive Officer
of Viewpoint Corporation
John Leddy................ 1999 177,500 50,000(6) 6,882(10) 75,000 -- --
Senior Vice President, 1998 57,028 25,000(6) 1,875(10) 130,000 -- --
Product Development
</TABLE>

5
<PAGE> 8

---------------
(1) Mr. Zimmer served as Chief Technical Officer until his promotion to
President and Chief Executive Officer on December 4, 1999. Of the $250,000
salary Mr. Zimmer received in 1999, $189,585 was paid to Mr. Zimmer for his
services as Chief Technical Officer of the Company and $10,417 was paid to
Mr. Zimmer for his services as the President and Chief Executive Officer of
the Company. Mr. Zimmer resigned as President and Chief Executive Officer
effective April 7, 2000.

(2) Mr. Kinninger resigned as Senior Vice President and Chief Financial Officer
effective December 31, 1999.

(3) Mr. Lauer resigned as President and Chief Executive Officer effective
December 14, 1999 and continued as the Chairman of the Company until his
resignation on March 31, 2000.

(4) Mr. Krause resigned as Chief Design Officer effective May 1, 1999.

(5) Includes $125,000 paid in 1999 for services to be performed in 2000.

(6) Includes $15,000 paid in 1999 for services in 1998.

(7) Represents amount paid in 2000 for services in 1999.

(8) Represents amount paid in 1999 for services in 1998.

(9) Represents amount paid in 1998 for services in 1997.

(10) Represents auto allowance and the cost of providing health, life and
disability insurance.

(11) Represents auto allowance, the cost of providing health, life and
disability insurance, loan interest discount ($55,750 in 1999 and $16,749
in 1998).

(12) Represents reimbursement for relocation expenses ($100,000) and
miscellaneous perquisites.

(13) Represents reimbursement for relocation expenses ($50,000) and
miscellaneous perquisites.

(14) Represents amount paid as a consultant.

6
<PAGE> 9

OPTION GRANTS AND EXERCISES

The following tables set forth information regarding stock options granted
to and exercised by the Named Executive Officers during fiscal year 1999, as
well as options held by such officers as of December 31, 1999, the last day of
the Company's 1999 fiscal year. In accordance with the rules of the SEC, also
shown below is the potential realizable value over the term of the option (the
period from the grant date to the expiration date) based on assumed rates of
stock appreciation from the option exercise price of 5% and 10%, compounded
annually. These amounts do not represent the Company's estimate of future stock
price. Actual gains, if any, on stock option exercises will depend on the future
performance of Company common stock.

COMPANY OPTION GRANTS IN 1999

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUES
----------------------------------------------------- AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION -------------------
NAME AND PRINCIPAL POSITION GRANTED(1) FISCAL YEAR BASE PRICE DATE 5% 10%
--------------------------- ---------- ------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Terance A. Kinninger............. 50,000 2.4% $6.34 2/24/09 $199,479 $505,519
25,000 1.2% 5.63 6/24/09 88,438 224,120
50,000 2.4% 5.63 6/24/09 176,877 448,240
Robert E. Rice................... 25,000 1.2% 5.63 6/24/09 88,438 224,120
John Leddy....................... 75,000 3.6% 5.63 6/24/09 265,315 672,360
</TABLE>

---------------
(1) Of the securities underlying the options, 25% vest on the first anniversary
of the date of grant and one forty-eighth vests each month thereafter.
Unless each outstanding option is assumed or an equivalent option is
substituted by the successor corporation in connection with any merger, or
sale of assets, all the options, including those not then vested, become
fully exercisable.

VIEWPOINT OPTION GRANTS IN 1999

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE VALUES AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO TERM
NAME AND PRINCIPAL OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION ------------------------------
POSITION GRANTED FISCAL YEAR BASE PRICE DATE 5% 10%
------------------ ---------- ------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark Zimmer.......... 50,000(1) 1.4% $1.00 12/31/02 $ 177,660 $ 448,380
Robert E. Rice....... 750,000(2) 20.5% 1.00 7/1/09 $2,664,900 $6,725,700
Gary Lauer........... 50,000(1) 1.4% 1.00 12/31/02 $ 177,660 $ 448,380
</TABLE>

---------------
(1) Options fully vested on the date of grant.

(2) Of the securities underlying the options, 20% vested on the date of grant,
an additional 20% vests on the first anniversary of the date of grant, and
an additional one thirty-sixth vests each month thereafter. Unless each
outstanding option is assumed or an equivalent option is substituted by the
successor corporation in connection with any merger, or sale of assets, all
the options, including those not then vested, are fully exercisable.

7
<PAGE> 10

The following table sets forth information with respect to options to
purchase Company common stock exercised during fiscal 1999 by the Named
Executive Officers and the value of unexercised options at December 31, 1999.

COMPANY OPTION EXERCISES IN 1999 AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Terance A. Kinninger........ 22,600 $124,300 69,900 176,250 $ 221,917 $ 471,756
Mark Zimmer................. -- -- 93,456 31,014 360,311 25,683
Robert E. Rice.............. -- -- 352,894 56,771 1,213,772 142,542
John Leddy.................. -- -- 43,333 161,667 226,155 674,990
Gary Lauer.................. -- -- 595,556 404,444 2,086,828 1,417,172
Kai Krause.................. -- -- 604,271 230,729 3,329,190 431,300
</TABLE>

---------------
(1) The value of unexercised, in-the-money options is the difference between the
exercise price of the options and the fair market value of Company common
stock at December 31, 1999 ($8.59).

The following table sets forth information with respect to options to
purchase Viewpoint common stock exercised during fiscal 1999 by the Named
Executive Officers and the value of unexercised options at December 31, 1999.

VIEWPOINT OPTION EXERCISES IN 1999 AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark Zimmer.................... -- -- 50,000 -- $232,000 --
Robert E. Rice................. -- -- 150,000 600,000 $696,000 $2,784,000
Gary Lauer..................... -- -- 50,000 -- $232,000 --
</TABLE>

---------------

(1) The value of unexercised, in-the-money options is the difference between the
exercise price of the options and the fair market value of Viewpoint's
common stock at December 31, 1999 ($5.64).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1999, the Compensation Committee of the Board of Directors
consisted of Messrs. Jones and Lane and Dr. Morgan. Since January 1, 2000, the
Committee has consisted of Messrs. Jones and Lane. None of the members of the
Compensation Committee was an officer or employee of the Company. No
interlocking relationship exists between any member of the Company's
Compensation Committee and any member of any other company's board of directors
or compensation committee.

EMPLOYMENT ARRANGEMENTS

The Company's current employment agreement with Mr. Rice provides for
employment commencing on January 1, 2000 at an annual base salary of $275,000.
The agreement expires as of December 31, 2001. If Mr. Rice's employment is
terminated by the Company without cause, or by Mr. Rice for good cause, Mr. Rice
is entitled to accelerated vesting of 100% of any then unvested Company options
or Viewpoint options and is entitled to receive severance pay equal to his base
salary and annual bonus through December 31, 2001 and continuation of coverage
of certain benefits.

8
<PAGE> 11

The Company paid Mr. Kai Krause $166,667 as a consultant for 1999. Mr.
Terrence A. Kinninger was retained as a consultant to the Company for the period
from January 1, 2000 through March 31, 2000 for a fee of $8,000 per month.

RELATED PARTY TRANSACTIONS

Mr. Rice obtained a $1,000,000 non-recourse loan from the Company in 1996
concurrently with the acquisition by the Company of Mr. Rice's interest in Real
Time Geometry Corp. The loan is collateralized by shares of Company common stock
underlying vested and exercisable options held by Mr. Rice. The loan's principal
and interest become due and payable on December 31, 2002. Mr. Rice's loan bears
an interest rate of 5.67% and is compounded semi-annually. The Company's
employment agreement with Mr. Rice provides for the forgiveness of the loan,
including all interest accrued thereon, if the Company merges with any other
entity, including Viewpoint Corporation, sells all or substantially all of its
assets to a third party, engages in a primary public offering of its capital
stock, or if a third party acquires a majority of the Company's capital stock.

Mr. James A. Abate entered into an employment agreement with the Company on
April 17, 2000 under which Mr. Abate has agreed to serve as Chief Financial
Officer. In connection with Mr. Abate's employment agreement, the Company has
extended an interest free loan of $1,500,000 to Mr. Abate. The loan is secured
by 200,000 shares of restricted Company common stock issued to Mr. Abate as well
as options to purchase 100,000 shares of Company common stock and 600,000 shares
of Viewpoint common stock and the shares of common stock underlying such
options. The loan is due on May 1, 2004. However, the loan becomes due on
written demand if Mr. Abate ceases to be an employee of the Company for any
reason other than death or permanent disability, if Mr. Abate attempts to
transfer the shares or options securing the note or an event of default occurs
under the pledge agreement.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Committee recommends, subject to the Board's approval, compensation for
executive officers and evaluates performance of management.

Compensation Philosophy

The Company operates in the competitive and rapidly changing environment of
high technology businesses. The Committee seeks to establish compensation
policies that allow the Company flexibility to respond to changes in its
business environment. The Company's compensation philosophy is based on the
belief that achievement in this environment is enhanced by the coordinated
efforts of all individuals working toward common objectives. The goals of the
Company's compensation program are to align compensation with the Company's
business objectives and performance, to foster teamwork and to enable the
Company to attract, retain and reward employees who contribute to the Company's
long-term success.

Compensation Components

The Company's executive officers are compensated with a salary, and are
eligible for bonus and stock option awards. The Committee assesses the past
performance and anticipated future contribution, and considers the total
compensation (earned or potentially available) of each executive officer in
establishing each element of compensation.

Salary. The salaries of the executive officers, including the Chief
Executive Officer, are determined annually by the Committee with reference to
several surveys received by the Company of salaries paid to executives with
similar responsibilities at comparable companies, generally in the high
technology industry. The peer group for each executive officer is composed of
executives whose responsibilities are similar in scope and content. The Company
seeks to set executive compensation levels that are competitive with the average
levels of peer group compensation.

9
<PAGE> 12

Bonus. The Company has a discretionary key employee incentive pool
pursuant to which executive officers and a limited number of key employees may
receive annual cash bonuses. Targets for sales growth and operating income
influence the amount of the pool. Individual payments are made based on the
Company's achievement of these targets and upon the individual's personal and
departmental performance.

Stock Options. Stock options awards are designed to align the interests of
executives with the long-term interests of the stockholders. The Committee
approves option grants subject to vesting periods (usually 48 months) to retain
executives and encourage sustained contributions. The exercise price of options
is not less than the closing market price on the date of grant. These options
will acquire value only to the extent that the price of Company common stock
increases relative to the market price at the date of grant.

Chief Executive Officer's Compensation

Mr. Lauer's compensation for fiscal 1999 reflects the Committee's
evaluation of his overall leadership of the Company as its Chief Executive
Officer. In determining Mr. Lauer's compensation, the Committee considered,
among other factors, the continued growth of revenues since the second quarter
of 1998 and the release of new products and versions of existing products. The
Company paid Mr. Lauer a base salary of $350,000 for 1999. Mr. Zimmer's
compensation for fiscal year 1999 also reflects the Committee's evaluation of
his overall contribution to the Company as its Chief Technical Officer for a
majority of the year and as the Company's President and Chief Executive Officer
from December 14, 1999 through year end. The Company paid Mr. Zimmer a base
salary of $250,000 for 1999. In connection with Mr. Zimmer's promotion to
President and Chief Executive Officer of the Company, the Board of Directors
agreed to pay Mr. Zimmer a bonus of $1,250,000 contingent upon the successful
divestiture of the graphics assets on or before June 2000. In December 1999, Mr.
Zimmer received an option to purchase 50,000 shares of Viewpoint Corporation
common stock at an exercise price of $1.00 per share.

The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code of 1986, and proposed regulations thereunder. The section
disallows a tax deduction for any publicly-held corporation for individual
compensation exceeding $1 million in any taxable year for any of the Named
Executive Officers, unless such compensation is performance based. The Company's
policy is to qualify, to the extent reasonable, its executive officers'
compensation for deductibility under applicable tax laws. However, the Committee
believes that its primary responsibility is to provide a compensation program
that will attract, retain and reward the executive talent necessary to the
Company's success. Consequently, the Committee recognizes that the loss of a tax
deduction could be necessary in some circumstances.

COMPENSATION COMMITTEE

William H. Lane III
Samuel H. Jones, Jr.

STOCKHOLDER RETURN COMPARISON

The graph below compares the cumulative total return on Company common
stock for the period commencing December 12, 1995 and ending December 31, 1999
compared to the CRSP Total Return Index for the Nasdaq Stock Market (U.S.
companies) and the CRSP Total Return Index for the Nasdaq Computer and Data
Processing Services Stocks. The graph assumes that $100 was invested on the date
of the Company's initial public offering, December 12, 1995, and that all
dividends are reinvested. Historic stock price performance should not be
considered indicative of future stock price performance.

10
<PAGE> 13

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG METACREATIONS CORPORATION, THE NASDAQ STOCK MARKET --
US INDEX, AND THE NASDAQ COMPUTER AND DATA PROCESSING INDEX

[LINE GRAPH]

<TABLE>
<CAPTION>
NASDAQ STOCK MARKET - NASDAQ COMPUTER AND
METACREATIONS US INDEX DATA PROCESSING INDEX
------------- --------------------- ---------------------
<S> <C> <C> <C>
12/12/95 100.00 100.00 100.00
12/31/95 96.00 99.00 98.00
12/31/96 44.00 122.00 122.00
12/31/97 41.00 150.00 150.00
12/31/98 20.00 211.00 268.00
12/31/99 32.00 391.00 581.00
</TABLE>

SECURITY OWNERSHIP

The Company. The following table sets forth certain information known to
the Company with respect to beneficial ownership of Company common stock as of
September 15, 2000 by each beneficial owner of more than 5% of Company common
stock, each director and each nominee, each Named Executive Officer and all
directors and executive officers as a group. Each person has sole voting and
investment power with respect to all shares shown as beneficially owned, subject
to community property laws where applicable.

<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------------------------
COMMON STOCK
COMMON VESTED AND PERCENTAGE
NAME OF BENEFICIAL OWNER STOCK OPTIONS(1) VESTED OPTIONS OF TOTAL(2)
------------------------ --------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
James E. Crabbe(3).......................... 3,300,000 -- 3,300,000 11.4%
Thomas Bennett.............................. -- -- -- --
Bruce Chizen................................ -- -- -- --
Samuel H. Jones, Jr......................... 980,055 33,750 1,013,805 3.5%
William H. Lane III......................... 15,000 73,750 88,750 *
Lennert Leader.............................. -- -- -- --
Robert E. Rice.............................. -- 352,894 352,894 1.2%
Terrence A. Kinninger....................... -- -- -- --
</TABLE>

11
<PAGE> 14

<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------------------------
COMMON STOCK
COMMON VESTED AND PERCENTAGE
NAME OF BENEFICIAL OWNER STOCK OPTIONS(1) VESTED OPTIONS OF TOTAL(2)
------------------------ --------- ---------- -------------- ------------
<S> <C> <C> <C> <C>
Kai Krause.................................. -- -- -- --
Gary Lauer.................................. -- -- -- --
John Leddy.................................. 3,972 19,167 23,139 *
Mark Zimmer................................. 282,406 99,072 381,478 1.3%
--------- ------- --------- ---
All directors and executive officers as a
group (11 persons)........................ 1,281,433 578,633 1,860,066 6.5%
========= ======= ========= ===
</TABLE>

---------------
* Percentage of shares beneficially owned is less than one percent of total.

(1) Represents shares issuable upon exercise of options to purchase Company
common stock that are exercisable within 60 days of September 15, 2000.

(2) Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Company common stock subject
to options or warrants held by that person that are currently exercisable or
exercisable within 60 days of September 15, 2000 are deemed outstanding.
Such shares, however, are not deemed outstanding for the purposes of
computing the percentage ownership of any other person. Percentage ownership
is based on 28,985,946 shares of Company common stock outstanding on
September 15, 2000.

(3) Represents shares held by Mr. Crabbe as trustee of the James E. Crabbe
Revocable Trust.

Viewpoint. The following table sets forth certain information known to the
Company with respect to beneficial ownership of Viewpoint common stock as of
September 15, 2000 by each beneficial owner of more than 5% of Company common
stock, each director and each nominee, each Named Executive Officer and all
directors and executive officers as a group, in each case to the extent they own
any Viewpoint common stock. Each person has sole voting and investment power
with respect to all shares shown as beneficially owned, subject to community
property laws where applicable.

<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------------------------------
COMMON STOCK
COMMON VESTED AND PERCENTAGE
NAME OF BENEFICIAL OWNER STOCK OPTIONS(1) VESTED OPTIONS OF TOTAL(2)
------------------------ -------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Thomas Bennett............................... -- -- -- --
Bruce Chizen................................. -- -- -- --
Samuel H. Jones, Jr.......................... -- 65,000 65,000 *
William H. Lane III.......................... -- 65,000 65,000 *
Lennert Leader............................... -- -- -- --
Robert E. Rice............................... -- 375,000 375,000 1.4%
Terrence A. Kinninger........................ -- -- -- --
Kai Krause................................... -- -- -- --
Gary Lauer................................... -- 50,000 50,000 *
John Leddy................................... -- -- -- --
Mark Zimmer.................................. -- 50,000 50,000 *
-------- ------- ------- --------
All directors and executive officers as a
group (11 persons)......................... -- 605,000 605,000 2.2%
======== ======= ======= ========
</TABLE>

---------------
* Percentage of shares beneficially owned is less than one percent of total.

(1) Represents shares issuable upon exercise of options to purchase Viewpoint
common stock that are exercisable within 60 days of September 15, 2000.

12
<PAGE> 15

(2) Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Viewpoint common stock
subject to options or warrants held by that person that are currently
exercisable or exercisable within 60 days of September 15, 2000 are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person.
Percentage ownership is based on 27,050,000 shares of Viewpoint common stock
outstanding on September 15, 2000.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file an initial report of
ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC and the
National Association of Securities Dealers, Inc. Executive officers, directors
and greater than ten percent stockholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that, with
respect to fiscal 1999, all filing requirements applicable to its officers,
directors and ten percent stockholders were satisfied.

13
<PAGE> 16

PROPOSAL TWO:

ISSUANCE OF COMPANY SHARES TO COMPUTER ASSOCIATES

IN EXCHANGE FOR VIEWPOINT SHARES

At the Annual Meeting, the stockholders are being requested to consider and
approve the issuance of 5,520,000 shares of the Company's common stock to
Computer Associates International, Inc. in exchange for shares of Viewpoint
Corporation owned by Computer Associates. After completing the exchange of
shares with Computer Associates, the Company will own 99.8% of the outstanding
stock of Viewpoint and will be able to merge with Viewpoint under the
"short-form" merger provisions of the Delaware General Corporation Law. The
short-form merger would not require the approval of the Company's stockholders.
The Company intends to complete the merger with Viewpoint shortly after
completing the exchange of shares with Computer Associates.

BACKGROUND OF THE TRANSACTION; REASONS FOR THE TRANSACTION

The Viewpoint Technologies

The Company's primary business has historically been the development,
marketing, and sales of prepackaged software graphics products. Since its 1996
acquisition of Real Time Geometry Corporation, however, the Company has also
been engaged in the development of technologies designed to make practical the
efficient display and deployment on the Internet of rich media, including
realistic three-dimensional models (the "Viewpoint technologies"). As the market
for using these technologies for internet applications by e-commerce merchants
grew, the Company focused its resources towards developing these technologies
and associated businesses.

Several factors have operated to diminish the attractiveness and
profitability of the Company's software graphics operations. These factors
included: the rapid growth of the Internet and the concurrent slowdown in the
growth of the desktop applications market; increased competition from many
software graphics companies; continuing reductions in average sales prices; and
the Company's lack of a dominant, "must have" software product that could form
the basis for large, consistent upgrade revenues. The Company's attempts to
alleviate these problems, through a mix of new products, more aggressive
promotion and sales efforts, and a smaller and reorganized work force, met with
some success. Nonetheless, management and the Board began looking at the
Viewpoint technologies and business as increasingly important for building a
profitable and rapidly growing business that could be continually successful in
the future.

In March 1999, Computer Associates, a leading software manufacturer,
entered into an agreement to license, among other things, certain aspects of the
Viewpoint technologies as they existed as of March 30, 1999 solely for use in
Computer Associates enterprise application software businesses. Computer
Associates paid a one-time licensing fee of $950,000 to the Company in exchange
for the licenses granted under the March agreement. In June 1999, the parties
negotiated the terms of a broader licensing and services relationship. In
connection with these broader license arrangements, the Company agreed to
dedicate additional resources to the further development of the Viewpoint
technologies towards ends mutually determined by both Computer Associates and
the Company. To demonstrate this commitment and to facilitate further investment
in the Viewpoint technologies by Computer Associates, the Company formed
Viewpoint Corporation in June 1999 (under the corporate name of Metastream.com
Corporation) and granted to Viewpoint a broad license to use and sublicense all
of the technology then owned by the Company for the purpose of operating an
internet services business and any other purpose not competitive with the then
current business of the Company. In addition, the Company agreed to transfer to
Viewpoint a number of its engineers and managers who had previously been focused
on the Viewpoint technologies and businesses. Viewpoint, in turn, granted to the
Company a license to subsequent improvements and modifications to the Viewpoint
technologies and issued 80% of its capital stock to the Company.

14
<PAGE> 17

The Board of Directors unanimously approved these arrangements and, on June
30, 1999, the Company, Viewpoint and Computer Associates entered into a
licensing and services agreement and a share subscription agreement. Under the
agreements,

- MetaCreations and Viewpoint granted licenses to Computer Associates to
use the Viewpoint technologies,

- Computer Associates paid $3,000,000 in licensing fees and additional sums
for production services to be provided by Viewpoint,

- Computer Associates subscribed for 20% of the capital stock of Viewpoint
Corporation, and

- Computer Associates agreed to promote Viewpoint and its technologies.

On September 30, 1999, the parties amended the Licensing and Services
Agreement to provide for, among other things, an increase in the licensing fee
payable by Computer Associates to $7,000,000.

Divestiture of Software Graphics

In December 1999, the Board of Directors once again considered the
long-term viability of the Company's prepackaged software business in light of
poor performance in the fourth quarter of that year and the longer term trends
described above. The Board determined that the then-existing management had
pursued all practical options in revamping the prepackaged software business but
that such measures seemed unlikely to provide the foundation for long-term
profitability for the Company. As a result, the Board approved a plan to focus
the Company's business exclusively on the Viewpoint technologies and to
correspondingly divest itself of all its prepackaged graphics software products.
The Board determined that divesting the prepackaged software graphics products
and focusing exclusively on the development of the Viewpoint technologies
presented the best opportunity for participating in the growth of the internet
and, hence, generate returns for the Company's stockholders.

During April 2000, the Company completed the sale of a substantial portion
of the Company's graphics software product lines. Specifically, Corel
Corporation acquired the MetaCreations' Painter, Kai's Power Tools, KPT Vector
Effects and Bryce product lines; egi.sys AG acquired the Poser product line; and
fractal.com Corporation acquired the Headline Studio product line for total
consideration of $11,250,000, consisting of cash and promissory notes, plus
future royalties.

Strategic Relationships with AOL and Adobe

The business model for exploiting the Viewpoint technologies involves
building relationships with strategic partners for both the creation of content
in the Viewpoint format as well as broad distribution of Viewpoint's proprietary
software which enables viewing of such content. The Company identified America
Online, Inc. and Adobe Systems Incorporated as potential entities with which to
enter into strategic partnerships for achieving these goals and began
negotiations with both companies at the beginning of this year.

On March 28, 2000, Viewpoint and AOL entered into a licensing and
distribution agreement under which AOL has been granted the right to distribute
Viewpoint's viewing software and to deploy the software throughout AOL's
online-services network. On July 18, 2000, Viewpoint and Adobe entered into an
extensive licensing and distribution agreement pursuant to which Adobe has
agreed, among other things, to integrate the Viewpoint format for creating
content and graphics into Adobe's products. Because virtually all significant
graphics designers use Adobe's products, the integration of the Viewpoint format
into those products has the potential for proliferating the creation of content
in the Viewpoint format. In addition, the integration of Viewpoint's viewing
software into Adobe's products will lead to a wider distribution of the
Viewpoint viewing software. Adobe has also agreed to produce at least one of its
upcoming major internet products exclusively in the Viewpoint format.

In addition to these licensing and distribution arrangements, AOL and Adobe
subscribed for shares of Viewpoint preferred stock in accordance with terms more
fully described under the caption "AOL and Adobe Investments; Short-Form
Merger."

15
<PAGE> 18

Reasons for the Transaction

As a result of the divestitures of its software graphics assets, the
Company has become in effect a holding company for Viewpoint with no significant
assets other than cash and liquid securities and a 71% interest in Viewpoint.
Upon completion of the exchange of shares with Computer Associates as described
below, the Company intends to merge with Viewpoint. The Company believes that
the goals of further development of the Viewpoint technologies and the
implementation of the Viewpoint business model can be better achieved through a
singular entity.

The Board of the Company has been of the view since the December meeting
that the Company's liquid assets and other resources should be used exclusively
in the development of the Viewpoint technologies and businesses. The proposed
merger would achieve this goal in the simplest possible way.

The proposed merger will alleviate the need for officers to serve both
companies and for separate boards of directors. The Board of the Company
believes that the current structure unnecessarily complicates the Company's
business transactions as partners take pains to identify the entity with which
they are doing business and to protect themselves in the documentation of
transactions. Similarly, the Company is vulnerable to the perception of
conflicts of interest as, for example, the Company makes determinations with
respect to expending resources to develop the Viewpoint technologies. Taking
steps to avoid such potential conflicts are likely to cause cumbersome decision
making procedures and additional expense.

The Board of Directors further believes that the holding company structure
creates ambiguity in the investment community regarding the Company's focus. The
combination of Viewpoint and the Company provides investors and potential
business partners alike with a large measure of certainty as to their
relationship with the Company. The merger of the Company and Viewpoint will
demonstrate the Company's commitment to the Viewpoint business model and make it
easier for investors to understand and identify their investment.

Exchange Agreement with Computer Associates

On June 13, 2000, Mr. Rice and James Abate, CFO of the Company and Senior
Vice President of Viewpoint, met with Messrs. Bennett, Senior Vice President,
Business Development of Computer Associates and Jay Diamond, Vice President,
Legal of Computer Associates, to discuss the Company's and Viewpoint's plans for
merging the Company and Viewpoint. The parties agreed to enter into an exchange
agreement between the Company and Computer Associates pursuant to which the
Company would issue to Computer Associates 1.15 shares of the Company in
exchange for each share of common stock of Viewpoint held by Computer
Associates.

The parties executed the Exchange Agreement on August 10, 2000. A copy of
the Exchange Agreement is attached hereto as Annex A. Consummation of the share
exchange is subject to the approval of a majority of the shares present (either
in person or by proxy) at the Annual Meeting. Under the Exchange Agreement, the
Company has agreed to nominate to the Board of Directors a designee of Computer
Associates. Mr. Bennett has agreed to accept the nomination as described in
Proposal 1.

PRINCIPAL TERMS OF THE EXCHANGE AGREEMENT WITH COMPUTER ASSOCIATES

Exchange of Shares

Under the Exchange Agreement, each share of Viewpoint common stock owned by
Computer Associates will be exchanged for 1.15 shares of Company common stock.
On consummation of the share exchange, Computer Associates will exchange its
4,800,000 shares of Viewpoint common stock for 5,520,000 newly issued shares of
Company common stock.

Representations and Warranties

In the Exchange Agreement, the Company has made customary representations
and warranties regarding its organization, its power and authority to enter into
the Exchange Agreement, its capitalization, its financial

16
<PAGE> 19

statements, the absence of conflicts and required governmental consents.
Similarly, Computer Associates has made representations and warranties regarding
its power and authority to enter into the Exchange Agreement, its access to the
Company's data, its opportunity to conduct an investigation of the Company and
the acquisition of shares of Company common stock for its own account for
investment purposes. Except for the Company's representations regarding its
corporate power and authority and its capitalization, the representations and
warranties of the parties survive for a period of eighteen months from the date
of the consummation of the share exchange.

Conditions

The exchange of shares is subject to certain conditions which include:

- the representations and warranties must be true and correct in all
material respects, taken as a whole, at the time of the share
exchange; and

- the stockholders of the Company must approve the issuance of shares of
Company common stock.

In addition, the Hart-Scott-Rodino Antitrust Improvements Act of 1976
provides that certain transactions, including the share exchange, may not be
consummated until specified information has been submitted to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and a
required waiting period has elapsed. The share exchange is conditioned on being
granted this early termination.

Restriction on Transfer; Right of First Refusal

Computer Associates has agreed that until August 10, 2001, it may not,
directly or indirectly, assign, sell, pledge, or otherwise transfer or dispose
of any shares of capital stock of the Company, except in a disposition to an
affiliate that agrees to be bound by certain provisions of the Exchange
Agreement or in a business combination approved and recommended by the Company's
Board of Directors.

Computer Associates has also granted the right of first refusal to the
Company with respect to any sales from the period commencing on August 10, 2001
of the Exchange Agreement and ending on August 10, 2003. The Exchange Agreement
provides that if Computer Associates wishes to sell, assign or otherwise
transfer any shares of Company common stock to any person who is not an
affiliate of Computer Associates, Computer Associates must first offer to sell
such shares to the Company on the same terms and condition as the proposed sale
to the third party.

Preemptive Right

The Company has granted Computer Associates a preemptive right with respect
to future private sales or issuances of additional shares of Company common
stock to third parties (other than in an underwritten transaction or to
strategic partners or employees pursuant to a stock option plan). If the Company
agrees to sell shares in such a transaction, Computer Associates may purchase
the number of additional shares of Company common stock necessary to allow
Computer Associates to maintain its percentage equity interest in the Company at
the same price and on the same terms and conditions as the proposed sale to the
third party.

Designation of Board Seat

The Company has agreed to nominate a Computer Associates designee to the
Company's Board of Directors for so long as Computer Associates holds 10% or
more of the outstanding Company common stock. Computer Associates will be the
largest stockholder of the Company upon closing, owning 16.6% of the outstanding
shares of Company common stock.

17
<PAGE> 20

Voting

Until Computer Associates owns less than 10% of all the outstanding shares
of Company common stock, Computer Associates has agreed to vote for all Company
nominees to the Board of Directors and any business combination approved by the
Board of Directors of the Company.

Registration Rights Agreement

The Company has entered into a Registration Rights Agreement with Computer
Associates pursuant to which Computer Associates has the right to cause the
Company to register its shares of Company common stock for resale. Under the
agreement, the Company has granted Computer Associates "demand" and "piggyback"
registration rights that become exercisable beginning six months following the
date of the Exchange Agreement. Computer Associates may effect unlimited
registrations under its "demand" registration right but in no event will the
Company be required to effect more than one such registration in any
twelve-month period. In connection with a registration under the agreement, the
Company has agreed to indemnify Computer Associates and each underwriter
participating in the offering of the shares being registered (and all directors,
officers and partners of Computer Associates and each such underwriter) against
all claims, losses, damages, costs, expenses and liabilities whatsoever arising
out of or based on any untrue statement or any omission in the registration
statement or any other violation by the Company of any securities laws.

Amendment of Rights Plan

Because the Company's Rights Plan provides for the distribution to
stockholders of rights to purchase preferred stock of the Company upon the
acquisition by a shareholder of 15% or more of the outstanding shares of Company
common stock, the Board of Directors of the Company intends to exercise its
right to amend the Rights Plan to provide for an exception to the effectiveness
of the plan for the shares to be issued to Computer Associates.

AOL AND ADOBE INVESTMENTS; SHORT-FORM MERGER

In addition to the AOL and Adobe licensing and distribution arrangements
described in "Background of the Transaction; Reasons for the
Transaction -- Strategic Relationships with AOL and Adobe" above, each of AOL
and Adobe purchased 1,500,000 shares of preferred stock of Viewpoint for
$10,000,000. Each share of Viewpoint preferred stock is convertible, at the
option of the holder, into one share of Viewpoint common stock. The terms
governing the Viewpoint preferred stock issued to AOL and Adobe are virtually
identical, except that the Viewpoint preferred stock issued to Adobe grants to
Adobe the right to elect a member to the board of directors of Viewpoint.

Under the terms of exchange agreements with AOL and Adobe, each share of
Viewpoint preferred stock is exchangeable at the holder's option for a number of
shares of Company common stock equal to 6.67 divided by 87% of the lesser of (a)
6.67 and (b) the average closing price of Company common stock over the 15-day
period prior to the date that the holder submits notice of its exercise of the
exchange right.

Conversely, if the Company enters into arrangements for the combination of
the Company and Viewpoint, each share of Viewpoint preferred stock is
exchangeable, at the Company's option, for a number of shares of Company common
stock equal to 6.67 divided by 87% of the lesser of (a) 6.67 and (b) the average
closing price of Company common stock over the 15-day period prior to the date
that the Company and Viewpoint enter into such arrangements. However, if the
combination is not completed within 45 days following the date that the Company
and Viewpoint enter into arrangements for the combination of the Company and
Viewpoint, the holders have the right to re-exchange the shares of Company
common stock received in the exchange for the shares of Viewpoint preferred
stock relinquished in the exchange. Viewpoint and the Company have agreed to
indemnify the holders for tax consequences and other costs they may incur in the
event a holder exercises its right to re-exchange the shares.

The formula used to calculate the exchange rates was derived as the result
of arms' length negotiations between the Company and AOL and between the Company
and Adobe. The parties agreed to the formula on

18
<PAGE> 21

the basis that (a) the trading price of Company common stock on the date the
parties agreed to the principal terms of the exchange was approximately $6.67
and (b) given the historical trading volume of the Company common stock, the
parties believed that a 13% discount appropriately reflected the potential
reduction in the trading price of the Company's common stock which could result
from the block sale by AOL or Adobe of the Company common stock to be issued to
them in the exchange.

There is no minimum average closing price below which the exchange rate
cannot go. Accordingly, as reflected in the table set forth below, the number of
Company common shares to be issued in the exchange will increase to the extent
that the average 15-day closing price is less than $6.67. However, if the number
of shares issuable by the Company in the exchange would trigger stockholder
approval requirements pursuant to SEC or NASDAQ rules or regulations, the
Company would not be obligated to exchange Company common stock for the
Viewpoint preferred stock until stockholder approval is obtained. Under NASDAQ
regulations, the Company would be required to obtain stockholder approval of the
exchange transaction if the number of shares to be issued in the exchange would
exceed twenty percent (20%) of the number of shares of Company common stock
outstanding immediately prior to the exchange transaction. Based on the number
of shares outstanding on the record date (28,985,946), the Company would only be
required to obtain stockholder approval of an exchange transaction with either
AOL or Adobe if the number of shares to be issued in the transaction exceeded
5,797,189, which would be the case if the average 15-day closing price of
Company common stock was $2.00 or lower.

The Company currently intends to exercise its right to exchange
newly-issued shares of the Company common stock for the shares of Viewpoint
preferred stock held by AOL and Adobe shortly after mailing this proxy
statement. Given the historical trading price of Company common stock, the
Company expects $6.67 to exceed the average 15-day closing price of Company
common stock. Therefore, the Company expects that each share of Viewpoint
preferred stock held by AOL and Adobe will be exchangeable for 1.15 shares of
Company common stock.

Set forth below is a table indicating (i) the number of shares of Company
common stock which would be issued to AOL and Adobe in the exchange transaction
and (ii) the percentage of the outstanding Company common stock which would be
owned by AOL and Adobe assuming the average 15-day closing price of Company
common stock is $9.25 (the closing price on October 9, 2000), $6.94 (reflecting
a reduction of 25% in the October 9 closing price), $4.63 (reflecting a
reduction of 50% in the October 9 closing price), and $2.31 (reflecting a
reduction of 75% in the October 9 closing price).

<TABLE>
<CAPTION>
AVERAGE CLOSING PRICE OF
COMPANY COMMON STOCK OVER
15 DAY PERIOD PRIOR TO NUMBER OF SHARES TO BE PERCENTAGE
EXCHANGE EXCHANGE RATIO ISSUED TO AOL AND ADOBE OWNERSHIP(1)
------------------------- -------------- ----------------------- ------------
<S> <C> <C> <C>
$9.25 1.15 1,725,000 4.5%
$6.94 1.15 1,725,000 4.5%
$4.63 1.65 2,482,630 6.7%
$2.31 3.32 4,977,612 12.6%
</TABLE>

---------------

(1) Percentage ownership is based on the number of shares outstanding on the
record date 28,985,946 plus the shares of Company common stock to be issued
to Computer Associates in the exchange transaction (5,520,000) plus 57,500
shares of Company common stock that will be issued in the short-form merger
to Mr. Bert Kolde (a former director of the Company who was issued and
subsequently exercised an option to purchase 50,000 shares of Viewpoint
common stock).

During the course of negotiations with AOL and Adobe, the parties
determined that Viewpoint and the Company would benefit from the services of Mr.
Leader of AOL and Mr. Chizen of Adobe as members of the Board of Directors of
the Company. Messrs. Leader and Chizen are nominees for election to the Board of
Directors at the Annual Meeting as described in Proposal 1.

19
<PAGE> 22

The Company intends to merge with Viewpoint as soon as practicable after
the completion of the share exchange with Computer Associates. This merger will
be effected under Section 253 of the Delaware General Corporation Law which
provides that where at least 90% of each class of stock of a corporation is
owned by another corporation, a merger may be effected without the approval of
stockholders of either corporation. On completion of the share exchange with
Computer Associates, the Company will own 99.8% of the outstanding capital stock
of Viewpoint.

At the time of the merger, each issued and outstanding share of Viewpoint
common stock will be cancelled and exchanged for 1.15 shares of Company common
stock. Each outstanding option to purchase shares of Viewpoint common stock will
be converted into an option to acquire a number of the shares of Company common
stock, rounded to the nearest whole number, equal to the product of the number
of shares of Viewpoint common stock issuable upon the exercise of the option and
1.15. The option exercise price will be the amount, rounded to the nearest cent,
equal to the exercise price of the option divided by 1.15.

ACQUISITION OF VIEWPOINT DIGITAL, INC.; CHANGE IN CORPORATE NAME

On September 8, 2000, the Company purchased all of the outstanding capital
stock of Viewpoint Digital, Inc., a wholly-owned subsidiary of Computer
Associates International Inc. The audited financial statements of Viewpoint
Digital for each of the fiscal years ended December 31, 1999 and 1998 and the
unaudited financial statements for the six-month periods ended June 30, 2000 and
1999 are set forth on pages F-1 through F-15.

As consideration for the shares of Viewpoint Digital, the Company paid $10
million and issued 715,000 shares of Company common stock to Computer Associates
and is obligated to make additional payments in amounts contingent upon the
attainment of specified Viewpoint Digital revenue and employee retention goals.
These additional payment obligations are in the form of two promissory notes,
one of which is due on June 8, 2001 and the other of which is due on March 8,
2002. The maximum amount payable under each promissory note is $15 million.

Viewpoint Digital publishes what the Company believes to be the world's
largest library of 3D digital content and provides creative 3D services for
entertainment, advertising, visual stimulation, computer-based training and
corporate communications applications. Viewpoint Digital also facilitates the
widespread use of 3D graphics technology for businesses and consumers through
Web-based and e-commerce solutions.

The Company currently intends to change its name to Viewpoint Corporation
on completion of the proposed short-form merger.

PRO FORMA COMBINED SECURITY OWNERSHIP

The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company common stock as of September
15, 2000 by each beneficial owner of more than 5% of the Company common stock,
each director and each nominee, each Named Executive Officer and all directors
and executive officers as a group, assuming consummation of the share exchange
with Computer Associates and the subsequent short-form merger. Except as
otherwise indicated, each person has sole voting and investment power with
respect to all shares shown as beneficially owned, subject to community property
laws where applicable.

<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------------------- COMMON STOCK
COMMON COMMON VESTED VESTED AND PERCENTAGE
NAME OF BENEFICIAL OWNER STOCK(1) STOCK(2) OPTIONS(3) OPTIONS(4) VESTED OPTIONS OF TOTAL(5)
------------------------ --------- --------- ---------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Computer Associates International,
Inc.(6)............................ -- 6,235,000 -- -- 6,235,000 16.4%
James E. Crabbe(7)................... 3,300,000 -- -- -- 3,300,000 8.7%
Adobe Systems International, Inc..... -- 1,725,000 -- -- 1,725,000 4.5%
America Online, Inc.................. -- 1,725,000 -- -- 1,725,000 4.5%
Thomas Bennett....................... -- -- -- -- -- --
Bruce Chizen......................... -- -- -- -- -- --
Samuel H. Jones, Jr.................. 980,055 -- 33,750 74,750 1,088,555 2.9%
</TABLE>

20
<PAGE> 23

<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------------------- COMMON STOCK
COMMON COMMON VESTED VESTED AND PERCENTAGE
NAME OF BENEFICIAL OWNER STOCK(1) STOCK(2) OPTIONS(3) OPTIONS(4) VESTED OPTIONS OF TOTAL(5)
------------------------ --------- --------- ---------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
William H. Lane III.................. 15,000 -- 73,750 74,750 163,500 *
Lennert Leader....................... -- -- -- -- -- --
Robert Rice.......................... -- -- 352,894 431,250 784,144 2.0%
Gary Lauer........................... -- -- -- 57,500 57,500 *
John Leddy........................... 3,972 -- 19,167 -- 23,139 *
Mark Zimmer.......................... 282,406 -- 99,072 57,500 438,978 1.2%
--------- --------- ------- ------- --------- ----
All directors and executive officers
as a group......................... 1,281,433 -- 578,633 710,750 2,555,816 6.3%
========= ========= ======= ======= ========= ====
</TABLE>

---------------
* Percentage of shares beneficially owned is less than one percent of total.

(1) Represents shares of Company common stock currently held.

(2) Represents shares of Company common stock issued in exchange for Viewpoint
common stock.

(3) Represents shares issuable on exercise of options to purchase Company common
stock exercisable within 60 days of September 15, 2000.

(4) Represents shares issuable upon exercise of options to purchase Company
common stock issued in exchange for options to purchase Viewpoint common
stock (at the exchange ratio of 1.15 to 1.00 as described in Proposal Three)
that are exercisable within 60 days of September 15, 2000.

(5) Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to
options or warrants held by that person that are currently exercisable or
exercisable within 60 days of September 15, 2000 are deemed outstanding.
Such shares, however, are not deemed outstanding for the purposes of
computing the percentage ownership of any other person. Except as indicated
in the footnotes to this table and pursuant to applicable community property
laws, each stockholder named in the table has sole voting and investment
power with respect to the shares set forth opposite such stockholder's name.
Percentage ownership is based on 38,013,446 shares of Company common stock
outstanding on September 15, 2000, i.e., the number of shares outstanding on
the record date plus the number of shares that will be issued in the
exchange transaction with Computer Associates, the shares that will be
issued to America Online, Inc. and Adobe Systems Incorporated (as described
in this proxy statement), and 57,500 shares of Company common stock that
will be issued in the merger to Mr. Kolde (a former director of the Company
who was issued and subsequently exercised an option to purchase 50,000
shares of Viewpoint common stock).

(6) Represents shares to be issued to Computer Associates pursuant to the
exchange agreement (5,520,000 shares) and shares issued to Computer
Associates pursuant to the acquisition of Viewpoint Digital, Inc. (715,000
shares).

(7) Represents shares held by Mr. Crabbe as trustee of the James E. Crabbe
Revocable Trust.

RECOMMENDATION OF BOARD OF DIRECTORS

The Board of Directors has reviewed and considered the terms and conditions
of the transaction and believes that it is fair to, and is advisable and in the
best interests of the Company and it stockholders and has unanimously approved
the transaction and unanimously recommends that the stockholders vote "for" the
issuance of shares of Company common stock to Computer Associates for shares of
Viewpoint common stock owned by Computer Associates. The Board of Directors, in
recommending stockholder approval of this transaction, considered a number of
factors, including (a) the reasons described under the caption "Background of
the Transaction, Reasons for the Transaction" and (b) the written opinion of
Houlihan Lokey stating that the transaction is fair from a financial point of
view.

21
<PAGE> 24

FAIRNESS OF THE TRANSACTION

Houlihan Lokey was retained by the Company to render an opinion as to the
fairness, from a financial point of view, of the exchange of shares with
Computer Associates and the proposed short-form merger of MetaCreations and
Viewpoint (the "Transaction"). At the August 17, 2000 meeting of the Company's
Board, Houlihan Lokey presented its analysis as hereinafter described and, on
August 21, 2000, delivered its written opinion that, as of such date and based
on the matters described therein, the Transaction is fair to the Company from a
financial point of view.

The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The
following is a brief summary and general description of the valuation
methodologies used by Houlihan Lokey. The summary does not purport to be a
complete statement of the analyses and procedures applied, the judgments made or
the conclusion reached by Houlihan Lokey or a complete description of its
presentation. Houlihan Lokey believes, and so advised the Board of Directors of
the Company, that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all factors and analyses, could create an incomplete view of the
process underlying its analyses and opinions.

THE COMPLETE TEXT OF HOULIHAN LOKEY'S OPINION IS ATTACHED HERETO AS ANNEX
B. THE SUMMARY OF THE OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH OPINION. METACREATIONS' STOCKHOLDERS ARE URGED TO READ SUCH
OPINION CAREFULLY IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED,
THE FACTORS CONSIDERED AND THE ASSUMPTIONS MADE BY HOULIHAN LOKEY.

Houlihan Lokey's opinion to the Board addresses only the fairness from a
financial point of view of the Transaction, and does not constitute a
recommendation to the stockholders as to how such stockholders should vote at
the Annual Meeting. Houlihan Lokey's opinion does not address the Company's
underlying business decision to effect the Transaction. Furthermore, Houlihan
Lokey did not advise the Company with respect to alternatives to the
Transaction.

In connection with the preparation of its opinion, Houlihan Lokey made such
reviews, analyses and inquiries as they deemed necessary and appropriate under
the circumstances. Among other things, Houlihan Lokey:

1. reviewed the Company's annual reports to shareholders and on Form 10-K
for the fiscal years ended December 31, 1998 and 1999 (as amended), and
quarterly reports on Form 10-Q for the quarters ended March 31, 2000 (as
amended) and June 30, 2000, which the Company's management has
identified as being the most current financial statements available;

2. reviewed copies of the following agreements:

(i) Subscription Agreement among Viewpoint, the Company and Computer
Associates International, Inc. dated June 30, 1999;

(ii) Shareholders' Agreement among Viewpoint, the Company and Computer
Associates International, Inc. dated June 30, 1999;

(iii) Registration Rights Agreement between Viewpoint and Computer
Associates International, Inc. dated June 30, 1999;

(iv) License and Services Agreement between America Online, Inc. and
Viewpoint;

(v) Amended and Restated Series A Preferred Stock Purchase Agreement
among the Company, Viewpoint and America Online, Inc. dated as of
June 12, 2000;

(vi) Exchange Agreement among the Company, Viewpoint and America Online,
Inc. dated as of June 12, 2000;

(vii) Registration Rights Agreement among the Company, Viewpoint and
America Online, Inc. dated as of June 12, 2000;

22
<PAGE> 25

(viii) Series B Preferred Stock Purchase Agreement among the Company,
Viewpoint and Adobe Systems Incorporated, dated July 18, 2000,
with Exhibits; and

(ix) Amended and Restated Certificate of Incorporation of Viewpoint;

3. met with certain members of the senior management of the Company to
discuss the operations, financial condition, future prospects and
projected operations and performance of the Company and Viewpoint;

4. reviewed forecasts and projections prepared by the Company's management
with respect to Viewpoint for the years ending December 31, 2000 and
2001;

5. reviewed the historical market prices and trading volumes for the
Company's publicly traded securities;

6. reviewed certain other publicly available financial data for certain
companies that Houlihan Lokey deemed comparable to Viewpoint and certain
transactions Houlihan Lokey deemed comparable to the transaction; and

7. conducted such other studies, analyses and inquiries as Houlihan Lokey
deemed appropriate.

In assessing the financial fairness of the Transaction to the Company,
Houlihan Lokey (i) analyzed the reasonableness of the trading value of the
Company's publicly traded equity securities, (ii) independently valued the
equity of the Company and Viewpoint using widely accepted valuation
methodologies, (iii) analyzed the reasonableness of the exchange offer, and (iv)
reviewed the valuation implications to the Company of completing the
transaction.

Valuation of MetaCreations and Viewpoint

Assessment of the Company's Public Stock Price. As part of its analysis,
Houlihan Lokey analyzed the trading value and volume of the common stock of the
Company. Houlihan Lokey calculated the ratio of average daily trading volume
(over the most recent 90 days) to float and total shares outstanding for Company
common stock. Houlihan Lokey then compared the Company's ratios to similar
ratios of comparable publicly traded companies. Houlihan Lokey considered the
trading volume and float ratios of 3Dshopping.com, 3D Systems Corporation,
Engage Technologies, Inc., Internet Pictures Corporation, Macromedia, Inc.,
Micrografx, Inc., Net Perceptions, Inc., RealNetworks, Inc., and Vignette
Corporation.

Based on these analyses, it was Houlihan Lokey's opinion that the Company
common stock (i) trades as actively as the comparable public companies and (ii)
has a similar float to the comparable public companies (as a percent of shares
outstanding).

Determination of the Company's and Viewpoint's Freely Traded Stock
Price. Because of the recent significant changes in the operations of the
Company, and the lack of any trading market for shares of Viewpoint, Houlihan
Lokey completed an independent valuation of the Company and Viewpoint. In
valuing the Company, the assets of the Company were grouped into two categories,
ownership interest in Viewpoint, and net non-operating assets. The net
non-operating assets were valued based upon book value. The value of Viewpoint
was based primarily on a market multiple approach. This approach involved the
multiplication of various revenue, earnings and cash flow measures by
appropriate risk-adjusted multiples. Multiples were determined through an
analysis of certain publicly traded companies, selected on the basis of
operational and economic similarity with the principal business operations of
Viewpoint. Revenue, earnings and cash flow multiples were calculated for the
comparable companies based upon daily trading prices. A comparative risk
analysis between Viewpoint and the public companies formed the basis for the
selection of appropriate risk adjusted multiples for Viewpoint. The risk
analysis incorporates both quantitative and qualitative risk factors, which
relate to, among other things, the nature of the industry in which Viewpoint and
the comparable companies are engaged.

For purposes of this analysis, Houlihan Lokey selected nine publicly traded
digital content three-dimensional software companies. The companies included
3Dshopping.com, 3D Systems Corporation, Engage

23
<PAGE> 26

Technologies, Inc., Internet Pictures Corporation, Macromedia, Inc., Micrografx,
Inc., Net Perceptions, Inc., RealNetworks, Inc., and Vignette Corporation.

Houlihan Lokey's market multiple approach produced indications of value for
the aggregate equity of Viewpoint including its cash balance at June 30, 2000 in
the range of $340 million to $370 million, on a fully distributed, publicly
traded basis. Applying the Company's ownership interest to the concluded equity
value of Viewpoint and adding the book value of the net non-operating assets
produced an indication of the aggregate value of equity of the Company of $267
million to $288 million.

Fairness of Exchange Ratio

Houlihan Lokey analyzed the exchange ratio for certain transaction that it
considered comparable to the transaction.

Acquisition of Minority Interest Analysis. Houlihan Lokey analyzed the
consideration paid in transactions in which a majority shareholder offered to
purchase the shares held by the minority shareholders, where the consideration
consisted of stock of the majority shareholder. Houlihan Lokey analyzed the
amount of consideration relative to the freely traded stock price of the shares
prior to the announcement of the buyout offer. Houlihan Lokey noted that the one
month premium to unaffected stock price ranged from a low of 8.9 percent to a
high of 70.6 percent with a median of 20.5 percent. Houlihan Lokey noted that
the discount implied by the exchange ratio for the capital stock of Viewpoint
was 10.0 percent based on the thirty day average closing price of the Company as
of August 16, 2000 and the average of Houlihan Lokey's range of fully
distributed stock price for Viewpoint of $12.57. Based on this analysis,
Houlihan Lokey also noted that it was their conclusion that the exchange ratio
was fair to the Company.

Assessment of the Transaction

In evaluating the fairness of the transaction, from a financial point of
view, Houlihan Lokey considered the expected value to the Company of completing
the transaction.

Houlihan Lokey relied upon and assumed, without independent verification,
that the financial forecasts and projections provided to them, and as adjusted
based on their discussions with management, were reasonably prepared and
reflected the best currently available estimates of the future financial results
and condition of the Company and Viewpoint, and that there had been no material
change in the assets, financial condition, business or prospects of the Company
or Viewpoint since the date of the most recent financial statements made
available to them.

Houlihan Lokey did not independently verify the accuracy and completeness
of the information supplied to them with respect to the Company or Viewpoint and
do not assume any responsibility with respect to it. Houlihan Lokey has not made
any independent appraisal of any of the properties or assets of the Company or
Viewpoint. Houlihan Lokey's opinion was necessarily based on business, economic,
market and other conditions as they existed and could be evaluated by them at
the date of their letter.

Houlihan Lokey is a nationally recognized investment banking firm with
special expertise in, among other things, valuing businesses and securities and
rendering fairness opinions. Houlihan Lokey is continually engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, private placements of debt and equity,
corporate reorganizations, employee stock ownership plans, corporate and other
purposes. The Company selected Houlihan Lokey because of its experience and
expertise in performing valuation and fairness analysis. Houlihan Lokey does not
beneficially own nor has it ever beneficially owned any interest in the Company
or Viewpoint.

Fees and Expenses

Pursuant to an agreement dated July 7, 2000, Houlihan Lokey was retained by
the Company to analyze the fairness of the transaction from a financial point of
view. The Company has agreed to pay Houlihan Lokey a fee of $250,000 plus its
reasonable out-of-pocket expenses incurred in connection with the rendering of a

24
<PAGE> 27

fairness opinion. The Company has further agreed to indemnify Houlihan Lokey
against certain liabilities and expenses in connection with the rendering of its
services.

CERTAIN EFFECTS OF THE TRANSACTION

Dilution of Company shares; market overhang

As described above under the caption "AOL and Adobe Investments; Short-Form
Merger", the Company currently intends to enter into arrangements for the
combination of the Company and Viewpoint (which will be subject to approval by
the stockholders of Proposal Two) and to exercise its right to exchange Company
common stock for the Viewpoint preferred stock held by AOL and Adobe shortly
after mailing this proxy statement to stockholders. Under the exchange
agreements with AOL and Adobe, there is an inverse relationship between the
average trading price of Company common stock and the amount of shares of
Company common stock issuable in exchange for shares of Viewpoint preferred
stock. As a result the Company would be required to issue additional shares to
AOL and Adobe if the average closing price of Company common stock over the
15-day period prior to the date of exchange decreases below $6.67. Any such
decrease could result in significant dilution of the per share value of Company
common stock held by current investors. The perceived risk of dilution may cause
AOL and Adobe as well as other stockholders to sell their shares of Company
common stock, which would likely contribute to a downward movement in the market
price of the stock. Significant downward pressure on the trading price of
Company common stock resulting from such sales could encourage AOL, Adobe, and
other Company stockholders to engage in short sales, which would further
contribute to a decline in the market price of the stock. There can be no
assurance that the closing price of Company common stock will not decrease
substantially between the date of mailing this proxy statement and the date upon
which the Company exercises its right to exchange Company common stock for the
shares of Viewpoint preferred stock held by AOL and Adobe.

The shares of Company common stock to be issued to Computer Associates,
AOL, and Adobe are subject to registration rights. In addition, on completion of
the exchange transaction and subsequent merger of the Company and Viewpoint, an
additional 3,159,510 shares of Company common stock will be issuable on exercise
of the employee stock options. The total number of shares of Company common
stock issued or issuable will equal 41.8% of the total number of shares of
Company common stock now outstanding. The issuance or sale of a significant
number of shares of the Company's capital stock, whether in connection with this
transaction or the exercise of a significant number of outstanding options,
could dilute the interest of the Company's other stockholders now or in the
future, and resale of these shares could materially adversely affect the market
price of Company common stock.

Creation of Major Stockholder; New Directors

On completion of this transaction, Computer Associates will become the
beneficial owner of approximately 16.4% of the outstanding shares of Company
common stock, making it the largest holder. The Company has granted Computer
Associates a preemptive right under the Exchange Agreement whereby Computer
Associates may purchase the number of additional shares of Company common stock
necessary to allow Computer Associates to maintain its current equity interest
in the Company at the same price and on the same terms and conditions as any
proposed sale to any third party other than to strategic partners or employees
pursuant to a stock option plan. Computer Associates is also being granted the
right to designate one member of the Board of Directors. Accordingly, Computer
Associates will have a significant influence with respect to any corporate
transaction or other matter submitted to the Board of Directors or to
stockholders for approval, including mergers, consolidations and the sale of all
or substantially all of the Company's assets. Third parties may be discouraged
from making a bid or tender offer to acquire the Company because of this
concentration of ownership.

25
<PAGE> 28

Subjection of Company Assets to Viewpoint Creditors

At present, Viewpoint creditors have claims only against Viewpoint's
assets. On consummation of the merger, the Company will become directly subject
to all the liabilities of Viewpoint. As a result, Viewpoint creditors will gain
access to the assets of the Company as well.

INTERESTS OF OFFICERS AND DIRECTORS

Some of the Company's officers and directors may be deemed to have
interests in this transaction that are in addition to or potentially different
from the interests of stockholders of the Company generally. The Company's Board
of Directors was aware of these interests and considered them in approving this
transaction. In considering the recommendation of the Company's Board of
Directors to approve the transaction, the Company stockholders should be aware
that these interests may present actual or potential conflicts of interest.

Exchange of Options

Certain executive officers and directors of the Company currently have
options to purchase shares of Viewpoint common stock. As of September 15, 2000,
1,580,000 shares of Viewpoint common stock were issuable on exercise of these
options. On consummation of the merger, outstanding Viewpoint options will be
converted into options to acquire a number of shares of Company common stock
equal to the product of the number of shares of Viewpoint common stock issuable
upon the exercise of the option and 1.15. This is the same exchange ratio that
was negotiated with Computer Associates, America Online and Adobe. For more
information on the Viewpoint options held by certain insiders of the Company
please see "Proposal Three" below.

Loan Forgiveness

Under the terms of the Company's initial employment agreement with Mr.
Rice, the President and Chief Executive Officer of Viewpoint, the Company
extended a non-recourse loan to Mr. Rice in the principal amount of $1,000,000
secured solely by shares of Company common stock underlying options held by Mr.
Rice. The employment agreement entered into between Mr. Rice and the Company
effective January 1, 2000 provides for the forgiveness of the loan in certain
situations including the merger of the Company with any other entity, including
Viewpoint. Accordingly, Mr. Rice's loan will be forgiven on consummation of the
merger and the Company will record compensation expense.

ACCOUNTING

The Company intends to account for the exchange of shares with Computer
Associates using the purchase method of accounting. Under purchase accounting,
the total purchase price will be allocated to the tangible and intangible assets
and liabilities of the Company based upon their respective fair values as of the
closing date. The issuance of Company common stock will have an immediate
dilutive effect to existing shareholders.

26
<PAGE> 29

PROPOSAL THREE

AMENDMENT TO THE 1995 STOCK PLAN

The Company's 1995 Stock Plan (the "Plan") was approved by the Board of
Directors in October 1995 and was approved by the Company's stockholders in
November 1995. The Plan initially reserved 500,000 shares of Company common
stock for issuance thereunder subject to stockholder approval. Amendments to the
Plan approved by shareholders in each of May 1998 and May 1999 increased the
number of shares reserved for issuance thereunder by 1,500,000. A further
amendment to the Plan approved by shareholders in May 1999 increased the shares
reserved for issuance thereunder by an additional 1,000,000. As of August 21,
2000, the Plan has a total of 4,500,000 shares of Company common stock reserved
for options or rights to purchase stock; of the total, 816,764 shares are
reserved for options or rights to purchase stock that have been granted pursuant
to the Plan and approximately 2,036,988 shares are remaining.

AMENDMENT TO THE 1995 PLAN

At the Annual Meeting, the stockholders are being requested to consider and
approve the proposed amendment to the Plan to increase the number of shares of
Company common stock reserved for issuance thereunder by 7,250,000 shares,
increasing the number of shares available for grants under the Plan to
9,286,988.

The increase in the number of shares of Company common stock reserved for
issuance under the Plan is proposed for the following purposes:

- to establish enough shares to exchange options granted to officers,
directors and employees of Viewpoint and the Company under the Viewpoint
1999 Stock Plan for Company options under the Plan in connection with the
merger of Viewpoint with the Company,

- to allow for issuance of shares to the current employees of Viewpoint
Digital, Inc., which was acquired by the Company on September 8, 2000,
and

- to allow for future grants of options to be made to current and new
employees.

The Company believes the ability to grant options is essential to
attracting, retaining and rewarding employees who contribute to the Company's
long-term success.

The following table sets forth the number and dollar value of additional
shares under the Plan that will be received after the short-form merger and
simultaneous conversion of options to purchase Viewpoint common stock into
options to purchase Company common stock by (i) the Named Executive Officers,
(ii) all current executive officers as a group, (iii) all current directors who
are not executive officers as a group and (iv) all employees, including all
current officers who are not executive officers, as a group.

<TABLE>
<CAPTION>
COMPANY
VIEWPOINT COMMON STOCK
OPTIONS SUBJECT TO
GRANTED OPTIONS VALUE
---------- ------------ -----------
<S> <C> <C> <C>
Robert E. Rice(1)..................................... 1,000,000 1,150,000 $ 6,578,800
Mark Zimmer........................................... 50,000 57,500 $ 246,675
John Leddy............................................ -- -- --
Gary Lauer............................................ 50,000 57,500 $ 246,675
Kai Krause............................................ -- -- --
Current executive officers(1)(2)(3)................... 3,150,000 3,622,500 $22,998,960
Current directors(4).................................. 190,000 218,500 $ 1,277,430
All employees......................................... 4,002,000 4,602,300 $30,554,069
</TABLE>

---------------

(1) Includes option to purchase 750,000 shares of Viewpoint common stock at an
exercise price of $1.00 per share (effective July 1, 1999) and option to
purchase 250,000 shares of Viewpoint common stock at an exercise price of
$3.00 per share issued in connection with Mr. Rice's employment agreement
effective January 1, 2000.

27
<PAGE> 30

(2) Includes (a) option to purchase 900,000 shares of Viewpoint common stock at
an exercise price of $5.00 per share issued to Mr. Anders Vinberg in
connection with his retention as Chief Technology Officer of the Company and
Viewpoint, (b) option to purchase 600,000 shares of Viewpoint common stock
at an exercise price of $5.00 issued to Mr. Abate in connection with his
retention as Chief Financial Officer of the Company and Viewpoint, (c)
option to purchase 400,000 shares of Viewpoint common stock at an exercise
price of $3.00 per share issued to Mr. Paul J. Kadin in connection with his
retention as Chief Marketing Officer of Viewpoint on February 28, 2000, and
(d) options to purchase (i) 150,000 shares of Viewpoint common stock at an
exercise price of $1.00 per share and (ii) 100,000 shares of Viewpoint
common stock at an exercise price of $6.50 per share issued to Mr.
Christopher Gentile in connection with his retention as Vice President of
Production Services.

(3) Typically, 20% of shares subject to an option granted under the terms of the
Viewpoint plan vests on the date of grant, an additional 20% vests on the
first anniversary of the date of grant and one thirty-sixth vests each month
thereafter.

(4) Includes (a) fully vested options to purchase 50,000 shares of Viewpoint
common stock at an exercise price of $1.00 per share issued to Messrs. Lane
and Jones in recognition of their substantial contribution to the formation
and success of Viewpoint and (b) options to purchase 75,000 shares of
Viewpoint common stock at an exercise price of $1.00 per share granted to
Messrs. Jones and Lane in January 2000 and February 2000, respectively.
These options vest as described in footnote 3.

SUMMARY OF THE 1995 PLAN

The purpose of the Plan is to attract and retain the best available
personnel for positions of substantial responsibility with the Company, to
provide additional incentive to the employees, directors and consultants of the
Company and to promote the success of the Company's business. Options and stock
purchase rights may be granted under the Plan. Options granted under the Plan
may be either "incentive stock options," as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock
options.

Administration. The Plan may generally be administered by the Board or a
committee appointed by the Board (as applicable, the "Administrator").

Eligibility; Limitations. Nonstatutory stock options and stock purchase
rights may be granted under the Plan to employees, directors and consultants of
the Company and any parent or subsidiary of the Company. Incentive stock options
may be granted only to employees. The Administrator, in its discretion, selects
the employees, directors and consultants to whom options and stock purchase
rights may be granted, the time or times at which such options and stock
purchase rights shall be granted, and the number of shares subject to each such
grant.

Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options and stock purchase rights granted to such
persons, the Plan provides that no employee may be granted, in any fiscal year
of the Company, options and stock purchase rights to purchase more than 300,000
shares of Company common stock. Notwithstanding this limit, however, in
connection with such individual's initial employment with the Company, he or she
may be granted options and stock purchase rights to purchase up to an additional
150,000 shares of Company common stock.

Terms and Conditions of Options. Each option is evidenced by a stock
option agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:

Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value
of Company common stock on the date such option is granted; provided,
however, the exercise price of an incentive stock option granted to a 10%
stockholder may not be less than 110% of the fair market value of Company
common stock on the date such option is granted. The fair market value of
Company common stock is generally determined with reference to the closing
sale price for Company

28
<PAGE> 31

common stock (or the closing bid if no sales were reported) on the last
market trading day prior to the date the option is granted.

Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable, and may in its discretion
accelerate the vesting of any outstanding option. The means of payment for
shares issued upon exercise of an option is specified in each option
agreement. The Plan permits payment to be made by cash, check, promissory
note, other shares of Company common stock of the Company (with some
restrictions), cashless exercises, a reduction in the amount of any Company
liability to the optionee, any other form of consideration permitted by
applicable law, or any combination thereof.

Term of Option. The term of an option is specified in each option
agreement. The term of an incentive stock option may be no more than ten
years from the date of grant; however in the case of an incentive stock
option granted to a 10% stockholder, the term of the option may be no more
than five years from the date of grant. No option may be exercised after
the expiration of its term.

Termination of Employment. If an optionee's employment, director or
consulting relationship terminates for any reason (other than death or
disability), all options held by the optionee under the Plan expire on the
earlier of (i) the date set forth in his or her notice of grant or (ii) the
expiration date of such option. To the extent the option is exercisable at
the time the optionee's service relationship with the Company terminates,
the optionee may exercise all or part of his or her option at any time
before the option expires.

Death or Disability. If an optionee's employment, director or
consulting relationship terminates as a result of death or disability, then
all options held by such optionee under the Plan expire on the earlier of
(i) 12 months from the date of such termination or (ii) the expiration date
of such option. The optionee (or the optionee's estate or the person who
acquires the right to exercise the option by bequest or inheritance), may
exercise all or part of the option at any time before such expiration to
the extent that the option was exercisable at the time of such termination.

Nontransferability of Options and Stock Purchase Rights. Unless
otherwise specified by the Administrator, options and stock purchase rights
granted under the Plan are not transferable other than by will or the laws
of descent and distribution, and may be exercised during the optionee's
lifetime only by the optionee.

Other Provisions. The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.

Stock Purchase Rights ("SPRs"). In the case of SPRs, unless the
Administrator determines otherwise, the Restricted Stock Purchase Agreement must
grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased under the Restricted Stock Purchase Agreement will be the original
price paid by the purchaser and may be paid by cancellation of any indebtedness
of the purchaser to the Company. The repurchase option will lapse at a rate
determined by the Administrator.

Adjustments upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments will be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the Plan, and the exercise
price of any such outstanding option or stock purchase right.

In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may in its discretion
provide that each optionee shall have the right to exercise all of the
optionee's options and stock purchase rights, including those not otherwise
exercisable, until a date fixed by the Board before the consummation of the
liquidation or dissolution.

29
<PAGE> 32

In connection with any merger or sale of assets, each outstanding option or
stock purchase right must be assumed or an equivalent option or right
substituted by the successor corporation. If the successor corporation refuses
to assume the options and stock purchase rights or to substitute substantially
equivalent options and stock purchase rights, the optionee will have the right
to exercise the option or stock purchase right as to all the optioned stock,
including shares not otherwise exercisable.

Amendment and Termination of the Plan. The Board may amend, alter, suspend
or terminate the Plan at any time and for any reason. However, the Company must
obtain stockholder approval for any amendment to the Plan to the extent
necessary to comply with Section 422 of the Code, or any other applicable law,
rule or regulation. No such action by the Board or stockholders may alter or
impair any option or stock purchase right previously granted under the Plan
without the written consent of the optionee. Unless terminated earlier, the Plan
will terminate ten years from the date of its original approval by the
stockholders or the Board of the Company, whichever is earlier.

FEDERAL INCOME TAX CONSEQUENCES

Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. The maximum federal tax rate
possible for net capital gains on shares held for more than 12 months is 20%.
Capital losses are allowed in full against capital gains and up to $3,000
against other income. If these holding periods are not satisfied, the optionee
recognizes ordinary income at the time of disposition equal to the difference
between the exercise price and the lower of (i) the fair market value of the
shares at the date of the option exercise or (ii) the sale price of the shares.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, director or 10% stockholder of the Company.
The Company is entitled to a deduction in the same amount as the ordinary income
recognized by the optionee.

Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period. The maximum
federal tax rate possible for net capital gains on shares held for more than 12
months is 20%. Capital losses are allowed in full against capital gains and up
to $3,000 against other income.

Stock Purchase Rights. SPRs will generally be taxed in the same manner as
nonstatutory stock options. However, on the exercise of an SPR the holder
generally receives restricted stock. At the time of purchase, restricted stock
is subject to a "substantial risk of forfeiture" within the meaning of Section
83 of the Code. As a result, the purchaser will not recognize ordinary income at
the time of purchase. Instead, the purchaser will recognize ordinary income on
the dates when stock ceases to be subject to a substantial risk of forfeiture.
The stock will generally cease to be subject to a substantial risk of forfeiture
when it is no longer subject to the Company's right to repurchase the stock upon
the purchaser's termination of employment with the Company. At such times, the
purchaser will recognize ordinary income measured as the difference between the
purchase price and the fair market value of the stock on the date the stock is
no longer subject to a substantial risk of forfeiture.

The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of

30
<PAGE> 33

the Code. In such event, the ordinary income recognized, if any, is measured as
the difference between the purchase price and the fair market value of the stock
on the date of purchase, and the capital gain holding period commences on such
date. The ordinary income recognized by a purchaser who is an employee will be
subject to tax withholding by the Company. Different rules may apply if the
purchaser is also an officer, director or 10% stockholder of the Company.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS AND THE COMPANY WITH RESPECT TO
THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE PLAN. IT
DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF
THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT
MAY RESIDE.

RECOMMENDATION OF BOARD OF DIRECTORS

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE AMENDMENT TO THE PLAN.

31
<PAGE> 34

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The Unaudited Pro Forma Consolidated and Combined Balance Sheet as of June
30, 2000, gives effect to the Exchange Agreement with Computer Associates, the
Preferred/Common Stock and Options Exchange, and the Acquisition of Viewpoint
Digital, Inc., as if these transactions had occurred on that date. The Unaudited
Pro Forma Consolidated and Combined Statement of Operations for the six months
ended June 30, 2000 and for the year ended December 31, 1999, gives effect to
the Exchange Agreement with Computer Associates, the Preferred/Common Stock and
Options Exchange, and the Acquisition of Viewpoint Digital, Inc., as if these
transactions had occurred on January 1, 1999.

The Unaudited Pro Forma Consolidated and Combined Financial Statements have
been derived from, and should be read in conjunction with, (a) the historical
financial statements, including the notes thereto, of MetaCreations Corporation,
whose financial statements are included in the Company's Quarterly Reports on
Form 10-Q/A and 10-Q for the quarters ended March 31, 2000 and June 30, 2000,
respectively, and its Annual Report on Form 10-K/A for the year ended December
31, 1999, which are incorporated in this proxy statement by reference and (b)
the historical financial statements of Viewpoint Digital, Inc., whose
consolidated financial statements are contained on pages F-1 through F-15 of
this proxy statement.

The Pro Forma Consolidated and Combined Financial Statements are presented
for informational purposes only and are not necessarily indicative of the
financial position or results of operations that would have occurred had the
exchanges and acquisitions been consummated as of the dates indicated or of the
future financial position or future results of operations of the Company.

METASTREAM HISTORICAL RESULTS OF OPERATIONS

The Company has excluded from this Proxy the historical financial
statements of Metastream as all relevant historical information relating to
Metastream's results of operations and financial position is included in or can
be derived from the Company's Quarterly Reports on Form 10-Q/A and 10-Q for the
quarters ended March 31, 2000 and June 30, 2000 respectively and its Annual
Report on Form 10-K/A for the year ended December 31, 1999.

At June 30, 2000, all of the Company's assets and liabilities included in
its Consolidated Balance Sheet primarily consist of Viewpoint's assets and
liabilities, except for cash and cash equivalents of $10,915,000, short-term
investments of $18,073,000 and the assets of $10,485,000 and liabilities of
$1,178,000 related to discontinued operations.

Revenue and expenses included in the Company's Consolidated Statement of
Operations for the year ended December 31, 1999 and for the six month period
ended June 30, 2000 primarily consist of Viewpoint's results of operations,
except for minority interest and discontinued operations.

EXCHANGE AGREEMENT WITH COMPUTER ASSOCIATES

On August 10, 2000, the Company entered into an Exchange Agreement with
Computer Associates pursuant to which the Company would issue to Computer
Associates 1.15 shares of the Company's common stock in exchange for each share
of common stock of Viewpoint Corporation (formerly known as Metastream
Corporation) held by Computer Associates. On consummation of the share exchange,
Computer Associates will exchange its 4,800,000 shares of Viewpoint common stock
for 5,520,000 newly issued shares of Company common stock.

The consideration to be paid by the Company in connection with the exchange
approximates $56,930,000 consisting of the following:

- The issuance of 5,520,000 shares of Company common stock valued at $10.25
per common share, which is the average market price of the Company's
common stock for the two trading days before and after August 10, 2000,
for equity consideration of $56,580,000; and

- Estimated transaction costs of $350,000.

32
<PAGE> 35

The exchange of shares will be accounted for as an acquisition of minority
interest under the purchase method of accounting. Accordingly, the purchase
price will be allocated to goodwill and other intangibles, net of the carrying
value of Computer Associates' minority interest. The goodwill and other
intangibles recorded will be amortized over an estimated life of five years.

PREFERRED/COMMON STOCK AND OPTIONS EXCHANGE

The Company intends to exchange each share of Viewpoint mandatorily
redeemable convertible preferred stock held by America Online, Inc. for a number
of shares of Company common stock equal to 6.67 divided by 87% of the lesser of
(a) 6.67 and (b) the average closing price of Company common stock over the
15-day period prior to the date that the Company and Viewpoint enter into such
an arrangement.

On completion of the share exchange with Computer Associates and the
preferred stock exchange, the Company will own 99.8% of the outstanding capital
stock of Viewpoint. The only other shareholder will be Mr. Bert Kolde, a former
director of the Company who was issued and subsequently exercised an option to
purchase 50,000 shares of Viewpoint common stock, whose shares will also be
exchanged.

The Company also intends to merge with Viewpoint as soon as practicable
after the completion of the share exchange with Computer Associates. At the time
of the merger, each issued and outstanding share of Viewpoint common stock will
be cancelled and exchanged for 1.15 shares of Company common stock. Each
outstanding option to purchase shares of Viewpoint common stock will be
converted into an option to acquire a number of shares of Company common stock,
rounded to the nearest whole number, equal to the product of the number of
shares of Viewpoint common stock issuable upon the exercise of the option and
1.15. The option exercise price will be the amount, rounded to the nearest cent,
equal to the exercise price of the option divided by 1.15.

Pro Forma adjustments for these exchanges include:

- The issuance of 1,725,000 shares of Company common stock in exchange for
America Online, Inc.'s 1,500,000 shares of Viewpoint mandatorily
redeemable convertible preferred stock;

- The issuance of options to purchase 7,320,900 shares of Company common
stock in exchange for all of the outstanding options to purchase
6,366,000 shares of Viewpoint common stock; and

- The issuance of 57,500 shares of Company common stock valued at $12 per
common share (market value of the Company's Common Stock on June 30,
2000) in exchange for Mr. Bert Kolde's 50,000 shares of Viewpoint common
stock.

In July 2000, Viewpoint issued 1,500,000 shares of Series B Mandatorily
Redeemable Convertible Preferred Stock to Adobe Systems Incorporated for cash
consideration totaling $10,000,000. In connection with the issuance of the
preferred shares to Adobe, the Company recorded a one-time non-cash sales and
marketing charge of $14,258,000 related to the difference between the fair
market value of the Company's common shares into which Adobe could have
converted the Viewpoint preferred shares on the date of issuance and the
$10,000,000 cash consideration paid by Adobe. This transaction was not reflected
in the accompanying Pro Forma Consolidated and Combined Financial Statements.

ACQUISITION OF VIEWPOINT DIGITAL, INC.

On September 8, 2000 the Company purchased all of the outstanding capital
stock of Viewpoint Digital, Inc., a wholly-owned subsidiary of Computer
Associates.

The consideration to be paid by the Company in connection with the
acquisition approximates $19,138,000 consisting of the following:

- The issuance of 715,000 shares of Company common stock valued at $12.50
per common share, which is the average market price of the Company's
common stock for the two trading days before and after the July 24, 2000
announcement date of the acquisition, for equity consideration of
$8,938,000;

- Cash consideration of $10,000,000; and
33
<PAGE> 36

- Estimated transaction costs of $200,000.

The Viewpoint Digital acquisition will be accounted for using the purchase
method of accounting and, accordingly, the purchase price will be allocated to
the tangible and identifiable intangible assets acquired and liabilities assumed
on the basis of their fair values on date of acquisition. The Company is in the
process of performing an independent valuation of the assets acquired and
liabilities assumed of Viewpoint Digital. The preliminary allocation of purchase
price may be subject to change depending upon the final outcome of the
valuation. For pro forma purposes, the Company has assumed that the historical
carrying amounts of such assets and liabilities approximated their fair values.
The excess of the purchase price over the fair value of the net tangible assets
acquired and liabilities assumed, of $16,935,000 has preliminarily been
allocated to goodwill and other intangibles and will be amortized over an
estimated life of five years.

The stock purchase agreement entered into for Viewpoint Digital requires
the payment of additional consideration contingent upon the achievement of
certain levels of future operating results (excluding amortization of goodwill
and other intangible assets) and employee retention, through 2002. The
contingent consideration consists of two promissory notes each in the amount of
$15,000,000. Payments under the promissory notes, if any, will increase goodwill
and other intangibles. The pro forma analysis for this acquisition excludes the
impact of the $30,000,000 of contingent consideration.

34
<PAGE> 37

METACREATIONS CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED BALANCE SHEET

AS OF JUNE 30, 2000

(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS FOR ADJUSTMENTS FOR
EXCHANGE AGREEMENT PREFERRED/COMMON VIEWPOINT
METACREATIONS WITH COMPUTER PRO FORMA STOCK AND OPTIONS PRO FORMA DIGITAL, INC.
HISTORICAL ASSOCIATES ADJUSTED EXCHANGE ADJUSTED HISTORICAL
------------- ------------------ --------- ----------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.... $ 20,510 $ -- $ 20,510 $ -- $ 20,510 $ 65
Short-term investments....... 18,073 -- 18,073 -- 18,073 --
Accounts receivable, net..... 7 -- 7 -- 7 1,375
Prepaid expenses............. 266 -- 266 -- 266 --
Current assets of
discontinued operations.... 10,328 -- 10,328 -- 10,328 --
--------- -------- --------- -------- --------- --------
Total current assets....... 49,184 -- 49,184 -- 49,184 1,440
--------- -------- --------- -------- --------- --------
Goodwill and other
intangibles.................. 75 46,638A 46,713 19,962B 67,258 29,495
583C
Property and equipment, net... 2,433 -- 2,433 -- 2,433 1,577
Other assets.................. 173 -- 173 -- 173 --
Non-current assets of
discontinued operations...... 157 -- 157 -- 157 --
--------- -------- --------- -------- --------- --------
Total assets............... $ 52,022 $ 46,638 $ 98,660 $ 20,545 $119,205 $ 32,512
========= ======== ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable............. $ 1,722 $ -- $ 1,722 $ -- $ 1,722 $ 814
Accrued expenses............. 1,584 350A 1,934 -- 1,934 --
Current liabilities of
discontinued operations.... 968 -- 968 -- 968 --
Provision for loss on
disposal of discontinued
operations................. 211 -- 211 -- 211 --
--------- -------- --------- -------- --------- --------
Total current
liabilities.............. 4,485 350 4,835 -- 4,835 814
Other liabilities............. -- -- -- -- -- 4,094
Deferred tax liabilities...... -- -- -- -- -- 1,049
Mandatorily redeemable
convertible preferred stock
of subsidiary................ 15,574 -- 15,574 (15,574)D -- --
Minority interest............. 10,399 (10,292)A 107 (107)C -- --
Stockholders' equity:
Preferred stock.............. -- -- -- -- -- --
Common stock................. 28 6A 34 2D 36 --
Paid-in capital.............. 133,232 56,574A 189,806 19,962B 281,953 42,865
690C
15,572D
55,923E
Notes receivable from related
parties.................... (4,967) -- (4,967) -- (4,967) --
Deferred compensation........ (1,540) -- (1,540) (55,923)E (57,463) --
Accumulated deficit.......... (105,189) -- (105,189) -- (105,189) (16,310)
--------- -------- --------- -------- --------- --------
Total stockholders'
equity................... 21,564 56,580 78,144 36,226 114,370 26,555
--------- -------- --------- -------- --------- --------
Total liabilities and
stockholders' equity..... $ 52,022 $ 46,638 $ 98,660 $ 20,545 $119,205 $ 32,512
========= ======== ========= ======== ========= ========

<CAPTION>
PRO FORMA
ADJUSTMENTS FOR
ACQUISITION OF METACREATIONS
VIEWPOINT PRO FORMA
DIGITAL, INC. COMBINED
--------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.... $(10,000)F $ 10,575
Short-term investments....... -- 18,073
Accounts receivable, net..... -- 1,382
Prepaid expenses............. -- 266
Current assets of
discontinued operations.... -- 10,328
-------- ---------
Total current assets....... (10,000) 40,624
-------- ---------
Goodwill and other
intangibles.................. 16,935F 84,193
(29,495)G
Property and equipment, net... -- 4,010
Other assets.................. -- 173
Non-current assets of
discontinued operations...... -- 157
-------- ---------
Total assets............... $(22,560) $ 129,157
======== =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable............. $ -- $ 2,536
Accrued expenses............. 200F 2,134
Current liabilities of
discontinued operations.... -- 968
Provision for loss on
disposal of discontinued
operations................. -- 211
-------- ---------
Total current
liabilities.............. 200 5,849
Other liabilities............. (4,094)H --
Deferred tax liabilities...... (1,049)I --
Mandatorily redeemable
convertible preferred stock
of subsidiary................ -- --
Minority interest............. -- --
Stockholders' equity:
Preferred stock.............. -- --
Common stock................. 1F 37
Paid-in capital.............. 8,937F 290,890
(42,865)J
Notes receivable from related
parties.................... -- (4,967)
Deferred compensation........ -- (57,463)
Accumulated deficit.......... 16,310J (105,189)
-------- ---------
Total stockholders'
equity................... (17,617) 123,308
-------- ---------
Total liabilities and
stockholders' equity..... $(22,560) $ 129,157
======== =========
</TABLE>

35
<PAGE> 38

METACREATIONS CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED

STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS FOR ADJUSTMENTS FOR
EXCHANGE AGREEMENT PREFERRED/COMMON VIEWPOINT
METACREATIONS WITH COMPUTER PRO FORMA STOCK AND OPTIONS PRO FORMA DIGITAL, INC.
HISTORICAL ASSOCIATES ADJUSTED EXCHANGE ADJUSTED HISTORICAL
-------------- ------------------ --------- ----------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............. $ 317 $ -- $ 317 $ -- $ 317 $ 3,623
Cost of revenues......... -- -- -- -- -- 1,509
-------- -------- -------- ------- -------- -------
Gross profit.......... 317 -- 317 -- 317 2,114
Operating expenses:
Sales and marketing..... 10,114 -- 10,114 -- 10,114 1,642
Research and
development........... 2,027 -- 2,027 -- 2,027 575
General and
administrative........ 2,008 -- 2,008 -- 2,008 997
Amortization of goodwill
and other
intangibles........... 75 4,664K 4,739 1,996M 6,793 3,239
58N
Stock-based
compensation.......... 7,003 -- 7,003 -- 7,003 --
-------- -------- -------- ------- -------- -------
Total operating
expenses.......... 21,227 4,664 25,891 2,054 27,945 6,453
-------- -------- -------- ------- -------- -------
Loss from operations..... (20,910) (4,664) (25,574) (2,054) (27,628) (4,339)
Other income............. 987 -- 987 -- 987 --
-------- -------- -------- ------- -------- -------
Loss before benefit for
income taxes............ (19,923) (4,664) (24,587) (2,054) (26,641) (4,339)
Benefit for income
taxes................... -- -- -- -- -- (791)
-------- -------- -------- ------- -------- -------
Loss before minority
interest................ (19,923) (4,664) (24,587) (2,054) (26,641) (3,548)
Minority interest in loss
of subsidiary........... 3,327 (3,293)L 34 (34)O -- --
-------- -------- -------- ------- -------- -------
Net loss from continuing
operations.............. $(16,596) $ (7,957) $(24,553) $(2,088) $(26,641) $(3,548)
======== ======== ======== ======= ======== =======
Net loss per common share
from continuing
operations -- basic and
diluted................. $ (0.61) $ (0.75) $ (0.77)
======== ======== ========
Weighted average number
of shares outstanding -- 58C
basic and diluted....... 27,216 5,520A 32,736 1,725D 34,519
======== ======== ======== ======= ========

<CAPTION>
PRO FORMA
ADJUSTMENTS FOR
ACQUISITION OF METACREATIONS
VIEWPOINT PRO FORMA
DIGITAL, INC. COMBINED
--------------- -------------
<S> <C> <C>
Net revenues............. $ -- $ 3,940
Cost of revenues......... -- 1,509
------- --------
Gross profit.......... -- 2,431
Operating expenses:
Sales and marketing..... -- 11,756
Research and
development........... -- 2,602
General and
administrative........ -- 3,005
Amortization of goodwill
and other
intangibles........... 1,693P 8,486
(3,239)Q
Stock-based
compensation.......... -- 7,003
------- --------
Total operating
expenses.......... (1,546) 32,852
------- --------
Loss from operations..... 1,546 (30,421)
Other income............. -- 987
------- --------
Loss before benefit for
income taxes............ 1,546 (29,434)
Benefit for income
taxes................... 791R --
------- --------
Loss before minority
interest................ 755 (29,434)
Minority interest in loss
of subsidiary........... -- --
------- --------
Net loss from continuing
operations.............. $ 755 $(29,434)
======= ========
Net loss per common share
from continuing
operations -- basic and
diluted................. $ (0.84)
========
Weighted average number
of shares outstanding --
basic and diluted....... 715F 35,234
======= ========
</TABLE>

36
<PAGE> 39

METACREATIONS CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED

STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS FOR ADJUSTMENTS FOR
EXCHANGE AGREEMENT PREFERRED/COMMON VIEWPOINT
METACREATIONS WITH COMPUTER PRO FORMA STOCK AND OPTIONS PRO FORMA DIGITAL, INC.
HISTORICAL ASSOCIATES ADJUSTED EXCHANGE ADJUSTED HISTORICAL
-------------- ------------------ --------- ----------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............. $ 3,093 $ -- $ 3,093 $ -- $ 3,093 $ 8,284
Cost of revenues......... -- -- -- -- -- 3,187
-------- -------- -------- ------- -------- -------
Gross profit.......... 3,093 -- 3,093 -- 3,093 5,097
Operating expenses:
Sales and marketing..... 2,567 -- 2,567 -- 2,567 3,230
Research and
development........... 2,816 -- 2,816 -- 2,816 1,250
General and
administrative........ 3,913 -- 3,913 -- 3,913 2,832
Amortization of goodwill
and other
intangibles........... 152 9,328K 9,480 3,992M 13,589 6,478
117N
Stock-based
compensation.......... 6,081 -- 6,081 -- 6,081 --
-------- -------- -------- ------- -------- -------
Total operating
expenses............ 15,529 9,328 24,857 4,109 28,966 13,790
-------- -------- -------- ------- -------- -------
Loss from operations..... (12,436) (9,328) (21,764) (4,109) (25,873) (8,693)
Other income............. 2,286 -- 2,286 -- 2,286 --
-------- -------- -------- ------- -------- -------
Loss before provision
(benefit) for income
taxes................... (10,150) (9,328) (19,478) (4,109) (23,587) (8,693)
Provision (benefit) for
income taxes............ 5,481 -- 5,481 -- 5,481 (2,121)
-------- -------- -------- ------- -------- -------
Loss before minority
interest................ (15,631) (9,328) (24,959) (4,109) (29,068) (6,572)
Minority interest in loss
of subsidiary........... 1,048 (1,048)L -- -- -- --
-------- -------- -------- ------- -------- -------
Net loss from continuing
operations.............. $(14,583) $(10,376) $(24,959) $(4,109) $(29,068) $(6,572)
======== ======== ======== ======= ======== =======
Net loss per common share
from continuing
operations -- basic and
diluted................. $ (0.59) $ (0.83) $ (0.91)
======== ======== ========
Weighted average number
of shares outstanding --
basic 58C
and diluted............. 24,581 5,520A 30,101 1,725D 31,884
======== ======== ======== ======= ========

<CAPTION>
PRO FORMA
ADJUSTMENTS FOR
ACQUISITION OF METACREATIONS
VIEWPOINT PRO FORMA
DIGITAL, INC. COMBINED
--------------- -------------
<S> <C> <C>
Net revenues............. $ -- $ 11,377
Cost of revenues......... -- 3,187
------- --------
Gross profit.......... -- 8,190
Operating expenses:
Sales and marketing..... -- 5,797
Research and
development........... -- 4,066
General and
administrative........ -- 6,745
Amortization of goodwill
and other
intangibles........... 3,387P 16,976
(6,478)Q
Stock-based
compensation.......... -- 6,081
------- --------
Total operating
expenses............ (3,091) 39,665
------- --------
Loss from operations..... 3,091 (31,475)
Other income............. -- 2,286
------- --------
Loss before provision
(benefit) for income
taxes................... 3,091 (29,189)
Provision (benefit) for
income taxes............ 2,121R 5,481
------- --------
Loss before minority
interest................ 970 (34,670)
Minority interest in loss
of subsidiary........... -- --
------- --------
Net loss from continuing
operations.............. $ 970 $(34,670)
======= ========
Net loss per common share
from continuing
operations -- basic and
diluted................. $ (1.06)
========
Weighted average number
of shares outstanding --
basic
and diluted............. 715F 32,599
======= ========
</TABLE>

37
<PAGE> 40

METACREATIONS CORPORATION

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Pro Forma Adjustments and Assumptions

A. Represents the consideration to be paid for the acquisition of Computer
Associates' minority interest in Viewpoint Corporation inclusive of
transaction costs of $350,000. The purchase price will be allocated to
goodwill and other intangibles, net of the carrying value of Computer
Associates' minority interest. The goodwill and other intangibles recorded
will be amortized over an estimated life of five years.

B. Represents the estimated fair value of vested options to purchase 1,777,440
shares of the Company's common stock to be issued in exchange for vested
options held by employees and non-employees to purchase 1,545,600 shares of
Viewpoint common stock as of June 30, 2000. The estimated fair value of
vested options to purchase the Company's common stock was based on a
weighted-average estimated fair value of $11.23 per share. The estimated
fair value of the options was determined using the Black-Scholes
option-pricing model and was based on the following weighted-average
assumptions: expected volatility - 100%; expected lives - 4.53; a risk-free
interest rate - 6%; and expected dividend yield - 0%. The estimated fair
value of the vested options will be treated as goodwill and other
intangibles and will be amortized over an estimated life of five years.

C. Represents the issuance of 57,500 shares of the Company's common stock in
exchange for Mr. Bert Kolde's 50,000 shares of Viewpoint common stock. The
exchange of shares will be accounted for as an acquisition of minority
interest under the purchase method of accounting. Accordingly, the purchase
price will be allocated to goodwill and other intangibles, net of the
carrying value of Bert Kolde's minority interest. The goodwill and other
intangibles recorded will be amortized over an estimated life of five years.

D. Represents the exchange of America Online, Inc.'s 1,500,000 shares of
Viewpoint mandatorily redeemable convertible preferred stock for 1,725,000
shares of the Company's common stock. The exchange will be recorded pursuant
to the terms of AOL's exchange agreement.

E. Represents the intrinsic value of unvested options to purchase 5,543,460
shares of the Company's common stock to be issued in exchange for options
held by employees and non-employees to purchase 4,820,400 shares of
Viewpoint common stock as of June 30, 2000. The intrinsic value will be
recorded as deferred compensation and will be recognized as stock-based
compensation over the remaining four year vesting period.

F. Represents the acquisition of all of the issued and outstanding stock of
Viewpoint Digital, Inc. for consideration consisting of $10,000,000 in cash
and the issuance of 715,000 shares of the Company's common stock for total
consideration of $19,138,000, inclusive of transaction costs of $200,000.
The excess of the purchase price over the fair value of net tangible assets
acquired and liabilities assumed, of $16,935,000, has been allocated to
goodwill and other intangibles and will be amortized over an estimated life
of five years.

G. Represents the elimination of Viewpoint Digital's historical goodwill and
other intangibles.

H. Represents the elimination of Viewpoint Digital's historical other
liabilities, which consist of an amount due to Computer Associates.

I. Represents the elimination of Viewpoint Digital's historical net deferred
tax liabilities, as such liabilities will not be payable by the Company.

J. Represents the elimination of Viewpoint Digital's historical stockholder's
equity.

K. To increase amortization expense due to $46,638,000 of goodwill and other
intangibles to be generated from the Computer Associates minority interest
acquisition, assuming a five-year amortization period.

L. To reverse minority interest income due to the acquisition of Computer
Associates' minority interest.

38
<PAGE> 41

M. To increase amortization expense due to $19,962,000 of goodwill and other
intangibles to be generated from the vested options exchange, assuming a
five-year amortization period.

N. To increase amortization expense due to $583,000 of goodwill and other
intangibles to be generated from Bert Kolde's minority interest acquisition,
assuming a five-year amortization period.

O. To reverse minority interest income due to the acquisition of Bert Kolde's
minority interest.

P. To increase amortization expense due to $16,935,000 of goodwill and other
intangibles generated from the Viewpoint Digital acquisition, assuming a
five-year amortization period.

Q. Represents the elimination of Viewpoint Digital's historical amortization of
goodwill and other intangibles.

R. Represents the elimination of Viewpoint Digital's historical tax benefits.
The benefits would not have been realized on a pro forma basis due to
MetaCreations' operating losses.

39
<PAGE> 42

PROPOSAL FOUR:

RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors has selected PriceWaterhouseCoopers LLP, independent
accountants, to audit the financial statements of the Company for the 2000
fiscal year. This appointment is being presented to the stockholders for
ratification at the Annual Meeting. If the stockholders reject the appointment,
the Board will reconsider its selection. PriceWaterhouseCoopers LLP has audited
the Company's financial statements since the Company's inception. A
representative of PriceWaterhouseCoopers LLP is expected to be present at the
meeting, will have the opportunity to make a statement and is expected to be
available to respond to appropriate questions.

RECOMMENDATION OF BOARD OF DIRECTORS

THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S ACCOUNTANTS FOR FISCAL 2000 AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.

40
<PAGE> 43

OTHER MATTERS

The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors of the Company may recommend.

FINANCIAL STATEMENTS

The Company's 1999 Annual Report on Form 10-K/A is incorporated herein by
reference and is being mailed with this proxy statement to stockholders entitled
to notice of the Annual Meeting. In addition, the Company's Quarterly Reports on
SEC Form 10-Q/A and 10-Q for the periods ending March 31, 2000 and June 30,
2000, respectively, are incorporated herein by reference and are available for
inspection with the SEC or upon request at the executive offices of the Company.

PROPOSALS BY STOCKHOLDERS

Proposals of stockholders of the Company which are intended to be presented
at the Company's 2001 Annual Meeting must be received by the Company no later
than , 2001 to be considered for inclusion in the proxy statement
and form of proxy relating to that meeting. Any such proposal must be in
accordance with the rules and regulations of the Securities and Exchange
Commission. With respect to proposals submitted by a stockholder other than for
inclusion in the Company's 2001 Proxy Statement and related form of proxy,
timely notice of the proposal must be received by the Company no later than
, 2001. Proxies solicited by the Board of Directors for the 2001
Annual Meeting may confer discretionary authority to vote on any proposals
notice of which is not received by that date.

41
<PAGE> 44

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1999

(WITH INDEPENDENT AUDITORS' REPORT THEREON)

F-1
<PAGE> 45

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholder
Viewpoint Digital, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Viewpoint
Digital, Inc. and subsidiaries (Successor) as of December 31, 1998 and 1999, and
the related consolidated statements of operations, stockholder's equity and cash
flows for the period from October 21, 1998 to December 31, 1998 and for the year
ended December 31, 1999 (Successor period). We have also audited the
accompanying consolidated statements of operations, stockholders' equity and
comprehensive loss and cash flows of Viewpoint DataLabs International, Inc. and
subsidiaries (Predecessor) for the year ended December 31, 1997 and the period
from January 1, 1998 to October 20, 1998 (Predecessor period). These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the aforementioned Successor consolidated financial
statements present fairly, in all material respects, the financial position of
Viewpoint Digital, Inc. and subsidiaries as of December 31, 1998 and 1999, and
the results of their operations and their cash flows for the Successor period,
in conformity with accounting principles generally accepted in the United States
of America. Further, in our opinion, the aforementioned Predecessor consolidated
financial statements present fairly, in all material respects, the results of
Viewpoint DataLabs International, Inc. and subsidiaries' operations and cash
flows for the Predecessor period, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in note 1 to the consolidated financial statements, effective
October 20, 1998, Computer Associates International, Inc. acquired all of the
outstanding stock of Viewpoint DataLabs International, Inc. in a business
combination accounted for as a purchase. As a result of the acquisition, the
financial information for the periods after the acquisition is presented on a
different cost basis than that for the periods before the acquisition and,
therefore, is not comparable.

KPMG LLP

September 22, 2000
Salt Lake City, Utah

F-2
<PAGE> 46

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SUCCESSOR
-----------------------------------------
DECEMBER 31,
-------------------------- JUNE 30,
1998 1999 2000
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 92,964 179,694 64,919
Accounts receivable, less allowance for doubtful
accounts of $231,532 in 1998, $200,167 in 1999,
and $210,518 at June 30, 2000.................. 1,562,546 1,386,494 1,374,900
----------- ----------- -----------
Total current assets........................... 1,655,510 1,566,188 1,439,819
----------- ----------- -----------
Property and equipment, net of accumulated
depreciation of $186,823 in 1998, $1,187,813 in
1999, and $1,324,626 at June 30, 2000............. 977,756 146,415 1,577,174
Goodwill and other intangible assets, net of
accumulated amortization of $1,080,000 in 1998,
$7,558,000 in 1999, and $10,797,000 at June 30,
2000.............................................. 39,510,000 32,733,700 29,494,700
----------- ----------- -----------
Total assets................................... $42,143,266 34,446,303 32,511,693
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities -- accounts payable and accrued
expenses.......................................... $ 329,000 465,226 813,903
Due to parent....................................... 884,518 2,043,107 4,093,834
Deferred tax liability.............................. -- 1,344,725 1,048,919
Stockholder's equity:
Common stock, $0.01 par value. Authorized 1,000
shares; 100 shares issued and outstanding...... 1 1 1
Additional paid-in capital........................ 42,865,434 42,865,434 42,865,434
Accumulated deficit............................... (1,935,687) (12,272,190) (16,310,398)
----------- ----------- -----------
Total stockholder's equity..................... 40,929,748 30,593,245 26,555,037
Commitments and contingencies
----------- ----------- -----------
Total liabilities and stockholder's equity..... $42,143,266 34,446,303 32,511,693
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 47

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements.
F-4
<PAGE> 48

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
COMMON
SERIES B SERIES C SERIES D SERIES A STOCK ADDITIONAL
PREFERRED PREFERRED PREFERRED PREFERRED COMMON SUBSCRIPTION PAID-IN
PREDECESSOR STOCK STOCK STOCK STOCK STOCK RECEIVABLE CAPITAL
----------- --------- --------- --------- --------- ------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996........ $23,426 45,545 -- 35,582 11,050 (60,000) 8,116,240
Issuance of 107,823 shares of Series
C preferred stock and 334,521
shares of common stock to acquire
ThinkFish.......................... -- 1,078 -- -- 3,345 -- 263,059
Issuance of 783,831 shares of common
stock for cash..................... -- -- -- -- 7,838 -- 71,401
Repurchase and retirement of 286,457
shares of common stock............. -- -- -- -- (2,864) -- (25,782)
Comprehensive loss:
Foreign currency translation
adjustments...................... -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------- ----------
Total comprehensive loss............. -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------- ----------
Balances at December 31, 1997........ 23,426 46,623 -- 35,582 19,369 (60,000) 8,424,918
Issuance of 2,474,039 shares of
Series D preferred stock for
cash............................... -- -- 24,740 -- -- -- 3,746,568
Repayment of stock subscription
receivable......................... -- -- -- -- -- 60,000 --
Comprehensive loss:
Foreign currency translation
adjustments...................... -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------- ----------
Total comprehensive loss............. -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------- ----------
Balances at October 20, 1998......... $23,426 46,623 24,740 35,582 19,369 -- 12,171,486
======= ====== ====== ====== ====== ======= ==========

<CAPTION>
TOTAL
ACCUMULATED STOCK-
ACCUMULATED COMPREHEN- HOLDERS'
PREDECESSOR DEFICIT SIVE LOSS EQUITY
----------- ----------- ----------- ----------
<S> <C> <C> <C>
Balances at December 31, 1996........ (5,108,034) (9,972) 3,053,837
Issuance of 107,823 shares of Series
C preferred stock and 334,521
shares of common stock to acquire
ThinkFish.......................... 267,482
Issuance of 783,831 shares of common
stock for cash..................... -- -- 79,239
Repurchase and retirement of 286,457
shares of common stock............. -- -- (28,646)
Comprehensive loss:
Foreign currency translation
adjustments...................... -- (19,210) (19,210)
Net loss........................... (3,068,004) -- (3,068,004)
----------- ------- ----------
Total comprehensive loss............. -- -- (3,087,214)
----------- ------- ----------
Balances at December 31, 1997........ (8,176,038) (29,182) 284,698
Issuance of 2,474,039 shares of
Series D preferred stock for
cash............................... -- -- 3,771,308
Repayment of stock subscription
receivable......................... -- -- 60,000
Comprehensive loss:
Foreign currency translation
adjustments...................... -- 29,182 29,182
Net loss........................... (3,059,833) -- (3,059,833)
----------- ------- ----------
Total comprehensive loss............. -- -- (3,030,651)
----------- ------- ----------
Balances at October 20, 1998......... (11,235,871) -- 1,085,355
=========== ======= ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 49

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
SUCCESSOR STOCK CAPITAL DEFICIT EQUITY
--------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Acquisition of Viewpoint by Computer
Associates................................ $1 41,580,434 -- 41,580,435
Contribution of 3Name3D..................... -- 1,285,000 -- 1,285,000
Net loss for the period October 21, 1998
through December 31, 1998................. -- -- (1,935,687) (1,935,687)
-- ---------- ----------- ----------
Balances at December 31, 1998............... 1 42,865,434 (1,935,687) 40,929,748
Net loss.................................... -- -- (6,572,223) (6,572,223)
Dividends................................... -- -- (3,764,280) (3,764,280)
-- ---------- ----------- ----------
Balances at December 31, 1999............... 1 42,865,434 (12,272,190) 30,593,245
Net loss (unaudited)........................ -- -- (3,548,388) (3,548,388)
Dividends (unaudited)....................... -- -- (489,820) (489,820)
-- ---------- ----------- ----------
Balances at June 30, 2000 (unaudited)....... $1 42,865,434 (16,310,398) 26,555,037
== ========== =========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 50

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
-------------------------- -----------------------------------------------------
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FOR THE JANUARY 1, OCTOBER 21, FOR THE FOR THE SIX-MONTH
YEAR ENDED THROUGH THROUGH YEAR ENDED PERIODS ENDED JUNE 30,
DECEMBER 31, OCTOBER 20, DECEMBER 31, DECEMBER 31, -----------------------
1997 1998 1998 1999 1999 2000
------------ ----------- ------------ ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................ $(3,068,004) (3,059,833) (1,935,687) (6,572,223) (3,638,576) (3,548,388)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization......... 689,045 502,897 1,266,823 7,478,990 3,739,495 3,375,813
Deferred tax benefit.................. -- -- -- (2,121,255) (1,060,628) (785,626)
Write-off of in-process research and
development costs................... 546,314 -- -- -- -- --
Loss on sale of fixed assets.......... 847 -- -- -- -- --
Changes in operating assets and
liabilities:
Receivables......................... (46,819) (675,340) (84,422) 176,052 399,241 11,594
Inventories......................... (31,486) (66,481) -- -- -- --
Prepaid expenses.................... (72,531) (240,218) -- -- -- --
Other assets........................ (46,274) 118,192 751,594 -- -- --
Accounts payable and accrued
liabilities....................... 83,104 115,880 (896,218) 136,226 4,170 348,677
Deferred revenue.................... (143,517) 78,074 -- -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Net cash used in operating
activities...................... (2,089,321) (3,226,829) (897,910) (902,210) (556,298) (597,930)
----------- ---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition of business................. (200,000) -- -- -- -- --
Purchase of fixed assets................ (507,683) (384,025) (138,613) (169,649) (84,749) (1,567,572)
Proceeds from sale of fixed assets...... 2,050 -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities...................... (705,633) (384,025) (138,613) (169,649) (84,749) (1,567,572)
----------- ---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Changes in due to/from parent........... -- -- 884,518 1,158,589 594,655 2,050,727
Net borrowings (payments) on line of
credit................................ 483,024 (483,024) -- -- -- --
Net borrowings (payments) on equipment
loans................................. (4,925) 7,934 -- -- -- --
Repurchase and retirement of stock...... (28,646) -- -- -- -- --
Proceeds from issuance of common and
preferred stock....................... 79,239 3,771,308 -- -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Net cash provided by financing
activities...................... 528,692 3,296,218 884,518 1,158,589 594,655 2,050,727
----------- ---------- ---------- ---------- ---------- ----------
Effect of foreign exchange rate changes on
cash.................................... (19,210) 29,182 -- -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Net (decrease) increase in cash........... (2,285,472) (285,454) (152,005) 86,730 (46,392) (114,775)
Cash at beginning of period............... 2,815,895 530,423 244,969 92,964 92,964 179,694
----------- ---------- ---------- ---------- ---------- ----------
Cash at end of period..................... $ 530,423 244,969 92,964 179,694 46,572 64,919
=========== ========== ========== ========== ========== ==========
Supplemental disclosure of cash flow
information -- cash paid during the year
for interest............................ $ 92,885 -- -- -- -- --
Supplemental disclosure of significant
noncash transactions:
Dividend to parent for deferred tax
assets utilized by parent............. $ -- -- -- 3,764,280 1,882,140 489,820
Contribution of 3Name3D................. -- -- 1,285,000 -- -- --
Common and preferred stock issued to
acquire ThinkFish..................... $ 267,482 -- -- -- -- --
</TABLE>

See accompanying notes to consolidated financial statements.
F-7
<PAGE> 51

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1999 AND JUNE 30, 2000 (UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Business and Basis of Presentation

Viewpoint Digital, Inc. and subsidiaries, formerly Viewpoint Datalabs
International, Inc. and subsidiaries (collectively, Viewpoint or the Company)
develops and markets three-dimensional computer graphic models (3D images).
Sales consist of 3D images from the Company's published catalog and customized
3D images designed based on customer specifications. The Company's sales are
primarily to domestic animators, as well as animators in the Far East and
Europe.

On October 20, 1998, 100 percent of the then outstanding preferred and
common stock plus certain outstanding stock options of Viewpoint DataLabs
International, Inc. were acquired by Computer Associates International, Inc.
(the Parent) for total consideration of $41.6 million consisting of $40.8
million in cash and $800,000 in assumed debt. The Company prior to and including
October 20, 1998 is referred to as the "Predecessor." The Company after October
20, 1998 is referred to as the "Successor."

Concurrent with the acquisition, all outstanding debt of the Company was
retired. The total purchase price and final allocation among the tangible and
identifiable intangible assets and liabilities acquired, and goodwill is
summarized as follows:

<TABLE>
<S> <C>
Working capital............................................. $ 1,249,000
Fixed assets................................................ 1,026,000
Intangible assets:
Core technology........................................... 8,515,000
Workforce-in-place........................................ 1,798,000
Goodwill.................................................. 28,992,000
-----------
Total purchase price...................................... $41,580,000
===========
</TABLE>

As a result of the change in ownership and control, the accompanying
consolidated financial statements are presented on a "push-down accounting"
basis for the Successor periods. Accordingly, the purchase price has been
allocated to the Company's tangible net assets, identifiable intangible assets
and goodwill based upon their estimated fair values at the date of acquisition.

Subsequent to the acquisition, the Company changed its name from Viewpoint
DataLabs International, Inc. to Viewpoint Digital, Inc.

On October 20, 1998, the Parent also completed its acquisition of 100
percent of the outstanding common stock of Yglesias, Wallock, Divekar, Inc. dba
3Name3D. 3Name3D developed and sold graphical objects software for use in a
variety of software products. The Parent had previously acquired partial
ownership interests of 3Name3D in March 1997 and again in September 1998. The
total consideration paid by the Parent to acquire 100 percent of the common
stock of 3Name3D was approximately $1.3 million. Of the total purchase price,
$300,000 was allocated to tangible assets acquired and liabilities assumed and
the remainder was allocated to goodwill. Immediately subsequent to the
acquisition of 3Name3D, the net assets and operations of 3Name3D were merged
with and into Viewpoint and 3Name3D was dissolved. The acquisition of 3Name3D
has been recorded as a contribution of capital in the accompanying consolidated
statements of stockholder's equity.

The consolidated financial statements for the Successor and Predecessor
periods include the financial statements of Viewpoint and its wholly-owned
subsidiaries Viewpoint Digital Limited and ThinkFish Acquisition Company. All
significant intercompany balances and transactions have been eliminated in
consolidation.

F-8
<PAGE> 52

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(b) Unaudited Interim Periods

The interim financial statements as of June 30, 2000 and for the six months
ended June 30, 1999 and 2000 are unaudited. These interim consolidated financial
statements have been prepared on the same basis as the financial statements
included herewith. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary to fairly present the interim
consolidated financial statements, have been included. The results of the
consolidated operations for the interim periods are not necessarily indicative
of the results for the entire fiscal year.

Revenues from the sale of 3D images from the Company's published catalog
are recognized upon product delivery. Revenues from the sale of 3D images
customized by the Company to customer specifications are recognized using the
percentage-of-completion method based on costs incurred relative to total
estimated costs.

(d) Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation.
Depreciation of equipment and leasehold improvements is calculated using the
straight-line method over the assets' estimated useful lives, which ranges from
two to seven years.

(e) Software Development Costs

Certain software development costs may be capitalized once technological
feasibility is established, which is defined by the Company as the completion of
a working model of the software. However, no costs have been capitalized to date
as the time period between technological feasibility and the availability of the
product for sale to customers is so short that the impact on the consolidated
financial statements for all periods presented is not material.

(f) Goodwill and Other Intangible Assets

Goodwill and other intangible assets consist primarily of goodwill and
other identifiable intangible assets recorded in connection with the acquisition
of the Company by the Parent on October 20, 1998. Core technology,
workforce-in-place, and goodwill are being amortized on a straight-line basis
over the periods of expected benefit of five years, four years, and seven years,
respectively.

The carrying value of goodwill and other intangible assets is reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the goodwill or other intangible assets may not be
recoverable. The Company assesses the recoverability of goodwill and other
intangible assets by determining whether the amortization of goodwill and other
intangible assets over their remaining lives can be recovered through
undiscounted future operating cash flows of the business. The amount of
impairment, if any, is measured based on projected discounted operating cash
flows compared to the carrying value of the intangible assets. No impairment has
been recorded by the Company related to goodwill and other intangible assets.

(g) Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following at December
31, 1998 and 1999:

<TABLE>
<CAPTION>
1998 1999
-------- -------
<S> <C> <C>
Accrued commissions......................................... $ 51,000 91,000
Royalties payable........................................... 60,000 87,000
</TABLE>

F-9
<PAGE> 53

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

<TABLE>
<CAPTION>
1998 1999
-------- -------
<S> <C> <C>
Accrued compensation........................................ 57,000 51,000
Accrued legal............................................... 20,000 22,000
Accrued vacation............................................ 30,000 28,000
Accrued technology costs.................................... 67,000 34,000
Other....................................................... 44,000 152,226
-------- -------
$329,000 465,226
======== =======
</TABLE>

(h) Income Taxes

Subsequent to the acquisition of the Company on October 20, 1998, the
Company has been included in the consolidated federal tax return of the Parent.
For financial reporting purposes during the Successor period, the Company has
recognized income tax benefits and provided required disclosures as if it were
filing a separate return. The tax assets utilized by the Parent on the
consolidated income tax return will not be reimbursed by the Parent to the
Company and, accordingly, the Company has recorded these amounts as dividends.

The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred tax assets and deferred tax
liabilities are recognized for the future tax consequences attributable to
differences between the financial statements carrying amounts of existing assets
and liabilities, and their respective tax bases, operating losses, and tax
credit carryforwards. Deferred tax assets and deferred tax liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and deferred tax liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

(i) Fair Values of Financial Instruments

The fair values of the Company's accounts receivable and accounts payable
and accrued expenses approximated their carrying values for all periods
presented.

(j) Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues, expenses and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.

(k) Stock Option Plan

The Company has adopted the footnote disclosure provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock Based Compensation
(SFAS 123). SFAS 123 encourages entities to adopt a fair-value based method of
accounting for and measuring compensation expense related to stock options.
However, SFAS 123 allows entities to continue to measure compensation expense
for stock-based plans using the intrinsic-value based method prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25). The Company has elected to continue to account for
stock-based compensation plans using the provisions of APB 25. Pro forma
footnote disclosure of net loss has been made as if the fair-value based method
of accounting defined in the statement had been applied.

F-10
<PAGE> 54

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(l) Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS 133), that establishes new accounting
and reporting standards for companies to report information about derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
For a derivative not designated as a hedging instrument, changes in the fair
value of the derivative are recognized in earnings in the period of change. The
Company will adopt SFAS 133 on January 1, 2001. Management does not believe the
adoption of SFAS 133 will have a material effect on the Company's consolidated
results of operations, financial position or liquidity.

In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, Revenue Recognition, (SAB 101) to provide
guidance on the recognition, presentation and disclosure of revenue in financial
statements; however, SAB 101 does not change existing literature on revenue
recognition. The Company will adopt SAB 101 during the quarter ended December
31, 2000. The Company believes that its current revenue recognition policy is in
compliance with this guidance; however, the Company continues to evaluate the
impact, if any, of SAB 101 and any possible, subsequent interpretations of SAB
101 on the Company's policies and procedures.

The FASB issued Interpretation No. 44, Accounting for Certain Transactions
Involving Stock Compensation -- an Interpretation of APB Opinion No. 25 (FIN 44)
in March 2000. The interpretation clarifies the application of APB 25 for only
certain issues such as the following: (a) the definition of employee for
purposes of applying APB 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. The Company will adopt FIN 44 on July 1, 2000. Management does not
believe that the interpretation will have a material effect on the Company's
consolidated results of operations, financial position or liquidity.

(m) Comprehensive Loss

For the period from October 21, 1998 through December 31, 1998 and the year
ended December 31, 1999, comprehensive loss was equivalent to net loss as
reported on the accompanying consolidated statements of operations.

(n) Operating Segments

The Company operates in one line of business, the development and sale of
3D images. As such, the Company has only one reportable operating segment as
defined by Statement of Financial Accounting Standards No. 131, Disclosures
About Segments of an Enterprise and Related Information.

(2) BUSINESS ACQUISITION

On June 11, 1997, the Company acquired ThinkFish, Inc. (ThinkFish) for
$200,000 cash, 334,521 shares of common stock and 107,823 shares of Series C
preferred stock. The common stock and Series C preferred stock issued in
connection with the acquisition were valued at $100,356 and $167,126,
respectively. ThinkFish develops and markets graphics software.

The Company accounted for the ThinkFish acquisition using the purchase
method of accounting. Accordingly, the purchase price was allocated, based on
estimated fair value, to the net tangible assets and identifiable intangible
assets which included in-process research and development projects that had not
reached technological feasibility. The excess of the purchase price over the
fair value of the acquired net

F-11
<PAGE> 55

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

tangible and identifiable intangible assets was recorded as goodwill and is
being amortized over five years. The amount allocated to in-process research and
development projects was expensed in 1997.

The allocation of the purchase price is summarized as follows:

<TABLE>
<S> <C>
Assets acquired............................................. $ 20,858
Liabilities assumed......................................... (306,256)
Goodwill and other intangibles.............................. 206,566
Expensed in-process research and development................ 546,314
---------
Total purchase price (estimated market value of stock issued
as consideration, and cash consideration)................. $ 467,482
=========
</TABLE>

The results of operations of ThinkFish since June 11, 1997 have been
included in the accompanying consolidated statements of operations. Assuming the
acquisition of ThinkFish had occurred at January 1, 1997, the Company's
unaudited pro forma condensed consolidated revenues and net loss, exclusive of
nonrecurring charges including in-process research and development projects, for
the year ended December 31, 1997 would have been approximately $7,582,360 and
$(3,368,457), respectively.

(3) INCOME TAXES

Income tax benefit attributable to income from continuing operations for
the periods ended December 31, 1997, October 20, 1998, and December 31, 1998 was
zero. For the year ending December 31, 1999 income tax benefit consists of the
following:

<TABLE>
<CAPTION>
ALLOCATION TO
CURRENT DEFERRED GOODWILL TOTAL
-------- --------- ------------- ---------
<S> <C> <C> <C> <C>
US federal and state................. $841,700 1,577,855 (298,300) 2,121,255
======== ========= ======== =========
</TABLE>

The deferred tax assets were reduced for net operating losses utilized by
the Parent in the amount of $2,922,580. Additionally, the Parent utilized
$841,700 of tax benefit for net operating losses generated during 1999. All net
operating losses utilized by the Parent were recorded by the Company as a
dividend.

Income tax benefit attributable to losses from continuing operations
differed from the amounts computed by applying the U.S. federal tax rate of 35
percent to pretax loss from operations as a result of the following:

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
-------------------------- ---------------------------
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FOR THE JANUARY 1, OCTOBER 21, FOR THE
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, OCTOBER 20, DECEMBER 31, DECEMBER 31,
1997 1998 1998 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Computed "expected" tax benefit........ $1,074,000 1,071,000 677,000 3,043,000
Nondeductible goodwill amortization.... -- -- (242,000) (1,449,000)
Change in valuation allowance.......... (1,074,000) (1,071,000) (462,000) 462,000
Other.................................. -- -- 27,000 65,255
---------- ---------- -------- ----------
$ -- -- -- 2,121,255
========== ========== ======== ==========
</TABLE>

F-12
<PAGE> 56

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1999 are as follows:

<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $4,542,580 1,620,000
Less: valuation allowance................................. (759,905) --
---------- ----------
Net deferred tax assets................................ 3,782,675 1,620,000
Deferred tax liabilities -- identifiable intangible
assets.................................................... (3,782,675) (2,964,725)
---------- ----------
Net deferred tax liability............................. $ -- (1,344,725)
========== ==========
</TABLE>

For the year ended December 31, 1999, the Parent utilized $9,906,000 of the
Company's net operating loss carryforwards to offset taxable income at the
consolidated Parent level. At December 31, 1999, the Company has net operating
loss carryforwards for federal income tax purposes of $4,263,000 which are
available to offset future taxable income, if any, through 2019.

Under the rules of the Tax Reform Act of 1986, the Company has undergone
changes of ownership and, consequently, the availability of the Company's net
operating loss carryforwards in any one year is limited. The maximum amount of
carryforwards available in a given year is limited to the product of the
Company's value on the date of ownership change and the federal long-term
tax-exempt rate, plus any limited carryforward not utilized in prior years.
Management believes that these limitations will not prevent these net operating
losses from being utilized.

(4) RELATED PARTY TRANSACTIONS

Since its acquisition on October 20, 1998, most of the Company's
administrative functions have been provided for and administered by the Parent.
Costs such as payroll, employee benefits, rent and other general and
administrative expenditures are paid on the Company's behalf by the Parent and
recorded as an increase to the due to parent account. The due to parent account
is reduced by cash remitted to the Parent on collections of the Company's sales.

Included in the accompanying consolidated statement of operations for the
year ended December 31, 1999, are sales and gross profit to the Parent of
approximately $863,000 and $345,000, respectively. No significant sales were
made to the Parent in 1997 or 1998.

(5) CAPITAL STOCK

Prior to October 20, 1998, the Company had authorized capital of 13,680,000
shares of preferred stock and 18,003,000 shares of common stock, all with a par
value of $0.01 per share. The preferred stock was designated as follows:
3,970,000 shares of Series A preferred stock, 2,360,000 shares of Series B
preferred stock, 4,750,000 shares of Series C preferred stock, and 2,600,000
shares of Series D preferred stock. All issued and outstanding preferred and
common stock was acquired by the Parent on October 28, 1998.

The preferred stock was convertible, at the option of the stockholder, into
common stock based on a conversion rate equal to the original issue price
divided by the conversion price. Holders of preferred stock were entitled to the
same voting rights as the common stock into which the shares were convertible.
Dividends were payable only when declared by the Board of Directors.

F-13
<PAGE> 57

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(6) STOCK-BASED COMPENSATION PLAN

In 1996, the Company adopted a stock option plan (the Plan) pursuant to
which the Company's Board of Directors could grant stock options to officers and
key employees. An aggregate of 3,300,000 shares of common stock were authorized
for issuance under this Plan. Stock options were granted with an exercise price
equal to the stock's fair market value at the date of grant. The number of
shares, terms, and exercise and vesting period were determined by the Board of
Directors on an option-by-option basis.

The Plan contained an early exercise provision which allowed employees the
ability to exercise their options prior to vesting. Shares issued under this
provision were considered restricted shares until vested. Stock options
generally vest 25 percent one year from the date of grant and 1/48 per month
thereafter. If employees leave prior to shares vesting, the Company would buy
back the unvested shares at the exercise price paid by the employee.
Accordingly, all of the common shares issued under these exercises were
considered restricted shares. In connection with the acquisition on October 20,
1998, the Parent acquired all issued and outstanding restricted shares of common
stock.

In connection with the acquisition on October 20, 1998, the Parent acquired
all stock options granted prior to June 30, 1997 and all vested options granted
subsequent to June 30, 1997. Unvested options were converted into a phantom
stock option program (Phantom Program). Under the Phantom Program, unvested
options vest and are exercisable 50 percent on the first anniversary of the
acquisition and 50 percent on the second anniversary of the acquisition. The
unvested options retained the same exercise price and will be settled through a
payment of cash. Employees who leave the Company forfeit any remaining unvested
options. The Company paid $339,000 during the year ended December 31, 1999,
relating to the first anniversary payment under the Phantom Program, which was
recorded as compensation expense ratably over the period of service. The Company
expects to pay approximately $300,000 in October 2000 related to the second
anniversary payment.

A summary of stock option activity for the year ended December 31, 1997 and
the period from January 1, through October 20, 1998 is as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE YEAR ENDED JANUARY 1, THROUGH
DECEMBER 31, 1997 OCTOBER 20, 1998
----------------------------- -----------------------------
NUMBER OF WEIGHTED-AVERAGE NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Options outstanding at
beginning of year........... 935,500 $0.10 860,527 $0.18
Granted....................... 847,628 0.18 646,000 0.30
Exercised..................... (783,831) 0.10 (74,106) 0.20
Forfeited..................... (138,770) 0.11 (61,421) 0.30
-------- ---------
Options outstanding at end of
period...................... 860,527 $0.18 1,371,000 $0.23
======== ===== ========= =====
</TABLE>

Of the 1,371,000 options outstanding at October 20, 1998, approximately
591,000 options were acquired by the Parent at a price equivalent to $1.81, less
the respective exercise price for the option. The cost of acquiring these
options has been included in the purchase price. The remaining 780,000 options
were converted to the Phantom Program as discussed above.

The per share weighted-average fair value of options granted during 1997
and 1998 was $0.01 and $0.08, respectively. At December 31, 1997 and October 20,
1998, the weighted-average remaining contractual life of outstanding options was
9.3 and 9.0 years, respectively.

F-14
<PAGE> 58

VIEWPOINT DIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The Company accounted for this Plan under APB 25 under which no
compensation cost had been recognized. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
123, the Company's net loss in 1997 and for the period from January 1, through
October 20, 1998 would have been increased to the pro forma amount indicated
below:

<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM
FOR THE YEAR JANUARY 1,
ENDED THROUGH
DECEMBER 31, OCTOBER 20,
1997 1998
------------ -----------
<S> <C> <C>
Net loss
As reported................................................. $3,068,004 3,059,833
Pro forma................................................... 3,084,215 3,083,218
</TABLE>

The fair value of each option grant was estimated on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions: expected dividend yield of zero percent; expected volatility of
zero percent; risk-free interest rate of 6.32 percent in 1997 and 6.50 percent
in 1998, and an expected life of five years. Stock option information for the
Successor periods is not shown as all outstanding stock options were acquired or
converted to the Phantom Program on the date of acquisition, as discussed above.

(7) GEOGRAPHIC INFORMATION

The following geographic net sales information reflects the country of
origin from which customer orders are received:

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
--------------------------- ----------------------------
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FOR THE JANUARY 1, OCTOBER 21, FOR THE
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, OCTOBER 20, DECEMBER 31, DECEMBER 31,
1997 1998 1998 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
United States..................... $5,925,839 4,120,277 692,469 5,790,199
Europe............................ 698,311 961,871 192,374 1,373,105
Asia.............................. 388,512 471,248 94,250 619,280
Other............................. 420,526 415,242 83,267 501,315
---------- --------- --------- ---------
$7,433,188 5,968,638 1,062,360 8,283,899
========== ========= ========= =========
</TABLE>

All of the Company's long-lived assets are located in the United States.

(8) SUBSEQUENT EVENT

In September 2000, the Parent entered into an agreement to sell all of the
issued and outstanding common stock of the Company to MetaCreations Corporation
for consideration consisting of $10.0 million in cash, two notes payable in the
amounts of $15.0 million each, and 715,000 common shares of MetaCreations
Corporation. One of the notes payable matures in June 2001 and the other matures
in March 2002. Both notes may be reduced if the Company does not achieve certain
sales, income (excluding amortization of goodwill and other intangible assets)
and employee retention results.

F-15
<PAGE> 59

ANNEX A

EXCHANGE AGREEMENT

EXCHANGE AGREEMENT, dated as of August 10, 2000 (this "Agreement"), by and
between METACREATIONS CORPORATION, a Delaware corporation (the "Company") and
COMPUTER ASSOCIATES INTERNATIONAL, INC., a Delaware corporation ("Computer
Associates"), with reference to the following:

A. Computer Associates owns 4,800,000 shares (the "Metastream Shares") of
common stock, par value $0.00001 per share, of Metastream Corporation, a
Delaware corporation ("Metastream").

B. The Company, currently the holder of 19,200,000 shares of common stock,
par value $0.00001 per share, of Metastream, desires to acquire the
Metastream Shares in exchange for 5,520,000 newly-issued shares (the
"Company Shares") of common stock, par value $0.001 per share of the
Company ("Common Stock"), and Computer Associates desires to acquire the
Company Shares in exchange for the Metastream Shares.

NOW, THEREFORE, in consideration of the obligations and agreements
contained herein, the parties hereto agree as follows:

SECTION 1

CLOSING DATES; DELIVERIES

1.1 Closing. The closing (the "Closing") of the exchange of the
Metastream Shares for the Company Shares pursuant to this Agreement shall take
place at the offices of MetaCreations, at 10:00 a.m. local time, as soon as
reasonably practicable after the satisfaction of the conditions described in
Sections 6 and 7 hereof (the "Closing Date").

1.2 Deliveries. At the Closing, the parties shall make the following
deliveries:

(a) Share Certificates. The Company shall deliver to Computer
Associates a certificate representing the Company Shares, which shall be
delivered and accepted against delivery by Computer Associates to the
Company of a certificate or certificates representing the Metastream
Shares.

(b) Registration Rights Agreement. The Company and Computer
Associates shall execute and deliver the Registration Rights Agreement in
substantially the form of Exhibit A hereto (the "Registration Rights
Agreement").

(c) Secretary's Certificate. The Company shall deliver to Computer
Associates a certificate executed by its Secretary, certifying, as
appropriate, to (i) resolutions adopted by the Board of Directors of the
Company authorizing the transactions contemplated by this Agreement and the
Registration Rights Agreement and (ii) such other proceedings relating to
the authorization, execution and delivery of this Agreement and the
Registration Rights Agreement as may be reasonably requested by Computer
Associates.

(d) Disclosure Schedule. The Company shall deliver to Computer Associates
a Disclosure Schedule setting forth exceptions and certain other information
with respect to the representations and warranties of the Company made in
Section 2 hereof (the "Disclosure Schedule").

(e) Consents and Approvals. The Company shall deliver to Computer
Associates copies of all consents, permits and waivers, if any, necessary or
appropriate to effect the transactions contemplated hereby.

A-1
<PAGE> 60

SECTION 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Computer Associates that,
except as will be set forth on the Disclosure Schedule:

2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease and
operate its assets, properties and business and to carry on its business as it
is now being conducted or proposed to be conducted. The Company is duly
qualified as a foreign corporation to transact business, and is in good
standing, in each jurisdiction where it owns or leases real property or
maintains employees or where the nature of its activities make such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, assets, condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole (a "Material
Adverse Effect").

2.2 Corporate Power. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the Registration Rights
Agreement and to carry out and perform its obligations under the terms of this
Agreement and the Registration Rights Agreement.

2.3 Capitalization. The authorized capital stock of the Company consists
of 80,000,000 shares, of which 75,000,000 are designated as Common Stock and of
which 5,000,000 are designated as preferred stock, $0.001 par value per share.
As of July 26, 2000, 27,865,636 of the authorized shares of Common Stock have
been issued and are outstanding and approximately 6,000,000 of the authorized
shares of Common Stock have been reserved for issuance to employees, officers,
directors and consultants of the Company upon the exercise of options pursuant
to the Company's stock option plans. Upon issuance to Computer Associates in
accordance with the terms and conditions of this Agreement, the Company Shares
will be duly and validly issued and outstanding, will be fully paid and
nonassessable with no personal liability attaching to the ownership thereof,
will not be subject to preemptive or similar rights of stockholders of the
Company or others, will be free of any liens, claims or encumbrances of the
Company and free of restrictions on transfer other than as set forth in this
Agreement or the Registration Rights Agreement or under applicable state and
federal securities laws.

2.4 Authorization. The Company has full corporate power and authority to
enter into this Agreement and the Registration Rights Agreement, subject to
obtaining the Company Stockholders' Approval (as defined in Section 4.1), to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of the Company, the Board of Directors of the Company has recommended
adoption of this Agreement by the stockholders of the Company and directed that
this Agreement be submitted to the stockholders of the Company for their
consideration, and no other corporate proceedings on the part of the Company or
its stockholders are necessary to authorize the execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby, other than obtaining the Company
Stockholders' Approval. This Agreement has been duly and validly executed and
delivered by the Company and, subject to the obtaining of the Company
Stockholders' Approval, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

2.5 Financial Information. Copies of the Company's audited balance sheet,
dated December 31, 1999 (the "Balance Sheet"), and the related statements of
operations and cash flows for the period from January 1, 1999 through December
31, 1999 (collectively, the "Financial Statements") have been delivered to
Computer Associates and, (i) present fairly in all material respects the
financial position, results of operations and cash flow of the Company as of
such date and for such period, (ii) have been compiled from the books and
records

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of the Company and its Subsidiaries, and (iii) have been prepared in accordance
with generally accepted accounting principles, consistently applied.

2.6 Absence of Conflicts. The execution, delivery, and performance of,
and compliance with this Agreement and the Registration Rights Agreement, the
issuance and exchange of the Company Shares, and the consummation of the
transactions contemplated hereby and thereby, have not and will not: (i)
violate, conflict with or result in a breach of any provision of or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in the creation of any lien upon any of the
material assets, properties or business of the Company under, any of the terms,
conditions or provisions of (x) the Certificate of Incorporation or the Bylaws
of the Company, or (y) any material indenture, loan agreement or other contract
of the Company; or (ii) violate any judgment, ruling, order, writ, injunction,
award, decree, or any law or rule of any federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority which is applicable to the Company or any of its assets, properties or
businesses; or (iii) result in the suspension, revocation, impairment,
forfeiture, or non-renewal of any Permit that is material to the Company, which
individually or in the aggregate as to the items set forth in clauses (i), (ii)
or (iii) above would have a Material Adverse Effect.

2.7 Governmental Consent. No consent, approval, authorization,
declaration, notification, or filing with any governmental authority on the part
of the Company is required in connection with the execution, delivery and
performance of this Agreement or the Registration Rights Agreement or the
issuance and exchange of the Company Shares or the consummation of any other
transaction contemplated hereby or by the Registration Rights Agreement, except
for filing and qualification (or the taking of such action as may be necessary
to secure an exemption from qualification, if available) of the offer and sale
of the Company Shares under applicable federal and state securities laws, which
filings and qualifications, if required, will be accomplished in a timely
manner; provided, however, that solely with respect to federal and state
securities laws, the representations and warranties provided in this Section 2.7
shall be subject to the accuracy of the representations of Computer Associates
set forth in Section 3 hereof.

2.8 Offering. Subject to the truth and accuracy of Computer Associates's
representations and warranties set forth in this Agreement, the offer of the
Company Shares as contemplated by this Agreement is exempt from the registration
requirements of the Securities Act and any applicable state securities laws.

2.9 Disclosure. No representation or warranty of the Company contained in
this Agreement, the Disclosure Schedule, the Registration Rights Agreement, or
any certificate furnished or to be furnished to Computer Associates at the
Closing contains an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which they were made.

2.10 SEC Reports. The Company will deliver to Computer Associates, prior
to the Closing Date, a true and complete copy of each form, report (including
but not limited to the Annual Report of the Company on SEC Form 10-K for the
period ending December 31, 1999), schedule, registration statement, definitive
proxy statement and other document (together with all amendments thereof and
supplements thereto) filed by the Company or any of its Subsidiaries with the
SEC during the period from January 1, 2000 through and including the day
immediately prior to the Closing Date (as such documents have since the time of
their filing been amended or supplemented, the "Company SEC Reports"), which are
all the documents (other than preliminary material) that the Company and its
Subsidiaries were required to file with the SEC since January 1, 2000. As of
their respective dates, the Company SEC Reports (i) complied as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

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2.11 Brokers or Finders. Computer Associates has not incurred and will
not incur, directly or indirectly, through the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.

SECTION 3

REPRESENTATIONS AND WARRANTIES OF COMPUTER ASSOCIATES

Computer Associates hereby represents and warrants to the Company as
follows:

3.1 Investment. Computer Associates is, and will be, acquiring the
Company Shares for investment for its own account, not as a nominee or agent,
and not with the view to, or for resale in connection with, any distribution
thereof. Computer Associates understands that the Company Shares have not been,
and will not be, registered under the Securities Act or the securities laws of
any state by reason of exemptions from the registration provisions of the
Securities Act and such laws which depend upon, among other things, the bona
fide nature of the investment intent and the accuracy of Computer Associates'
representations as expressed herein.

3.2 Access to Data. Computer Associates has had an opportunity to discuss
the Company's business, management, and financial affairs with the Company's
management and has had the opportunity to review the Company's respective
facilities and business plans. Computer Associates has also had an opportunity
to ask questions of officers of the Company, which questions were answered to
Computer Associates's satisfaction. Computer Associates acknowledges that it has
had an opportunity to conduct its own independent due diligence investigation of
the Company.

3.3 Authorization. All corporate action on the part of Computer
Associates and its stockholders necessary for the authorization, execution,
delivery, and performance of this Agreement and the Registration Rights
Agreement by Computer Associates, the exchange and delivery of the Viewpoint
Shares and the performance of all of Computer Associates' obligations hereunder
and under the Registration Rights Agreement have been taken. Each of this
Agreement and the Registration Rights Agreement, when executed and delivered by
Computer Associates, will constitute a valid and legally binding obligation of
Computer Associates, enforceable against Computer Associates in accordance with
its terms, except to the extent limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally and by general equity principles regardless of whether such
enforceability is considered in a proceeding in equity or at law.

3.4 Brokers or Finders. The Company has incurred and will not incur,
directly or indirectly, through Computer Associates, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.

SECTION 4

COVENANTS OF THE COMPANY

The Company covenants and agrees with Computer Associates that, at all
times from and after the date hereof until the Closing the Company will comply
with all covenants and provisions of this Section 4, except to the extent
Computer Associates may otherwise consent in writing.

4.1 Company Stockholders' Approval. The Company shall, through its Board
of Directors, duly call, give notice of, convene and hold a meeting of its
stockholders for the purpose of voting on the adoption of this Agreement (the
"Company Stockholders' Approval") as soon as reasonably practicable after the
date hereof.

4.2 Other Approvals. The Company will, and will cause its Subsidiaries
to, as promptly as practicable take all commercially reasonable steps necessary
or desirable to obtain all consents, approvals or actions of, make all filings
with and give all notices to governmental or regulatory authorities or any other
person required of the Company or any Subsidiary to consummate the transactions
contemplated hereby and by the Registration Rights Agreement, including but not
limited approval under the Hart-Scott-Rodino Antitrust
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Improvements Act of 1977 (the "HSR Act"). The Company will provide prompt
notification to Computer Associates when any such consent, approval, action,
filing or notice referred to above is obtained, taken, made or given, as
applicable, and will advise Computer Associates of any communications (and,
unless precluded by law, provide copies of any such communications that are in
writing) with any governmental or regulatory authority or other Person regarding
any of the transactions contemplated by this Agreement or the Registration
Rights Agreement.

4.3 Conduct of Business. The Company will, and will cause its
subsidiaries to conduct business only in the ordinary course. Without limiting
the generality of the foregoing, the Company will, and will cause its
Subsidiaries to use commercially reasonable efforts, to the extent the officers
of the Company believe such action to be in bests interests of the Company and
the Subsidiaries, to (a) preserve intact the present business organization and
reputation of the Company and the Subsidiaries in all material respects, (b)
keep available (subject to dismissals and retirements in the ordinary course of
business) the services of the key officers and employees of the Company and the
Subsidiaries, (c) maintain the assets and properties of the Company and the
Subsidiaries in good working order and condition, ordinary wear and tear
excepted, and (d) maintain the good will of key customers, suppliers and lenders
and other Persons with whom the Company or any Subsidiary otherwise has
significant business relationships.

4.4 Fulfillment of Conditions. The Company will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of Computer Associates contained in
this Agreement and will not, and will not permit the Company or any Subsidiary
to, take or fail to take any action that could reasonably be expected to result
in the nonfulfillment of any such condition.

SECTION 5

COVENANTS OF COMPUTER ASSOCIATES

Computer Associates covenants and agrees with the Company that, at all
times from and after the date hereof until the Closing, Computer Associates will
comply with all covenants and provisions of this Section 5, except to the extent
the Company may otherwise consent in writing.

5.1 Approvals. Computer Associates will as promptly as practicable (a)
take all commercially reasonable steps necessary or desirable to obtain all
consents, approvals or actions of, make all filings with and give all notices to
governmental or regulatory authorities or any other Person required of Computer
Associates to consummate the transactions contemplated hereby and by the
Registration Rights Agreements, including but not limited to approval under the
HSR Act. Computer Associates will provide prompt notification to the Company
when any such consent, approval, action, filing or notice referred to above is
obtained, taken, made or given, as applicable, and will advise the Company of
any communications (and, unless precluded by law, provide copies of any such
communications that are in writing) with any governmental or regulatory
authority or other Person regarding any of the transactions contemplated by this
Agreement or the Registration Rights Agreement.

5.2 Fulfillment of Conditions. Computer Associates will take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the obligations of the Company
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.

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SECTION 6

CONDITIONS TO OBLIGATIONS OF COMPUTER ASSOCIATES

The obligations of Computer Associates hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by the Company in its sole
discretion):

6.1 Company Stockholders' Approval. This Agreement and the issuance of
Company Shares in accordance herewith shall have been adopted and the issuance
of Company Shares in accordance herewith shall have been approved by the
requisite vote of the stockholders of the Company under applicable law and under
the applicable regulations of The Nasdaq Stock Market, Inc.

6.2 Representations and Warranties. The representations and warranties
made by the Company in this Agreement, taken as a whole, shall be true and
correct, in all respects material to the validity and enforceability of this
Agreement and the Registration Rights Agreement and to the business or condition
of the Company, on and as of the Closing Date as though made on and as of the
Closing Date or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date.

6.3 Performance. The Company shall have performed and complied with, in
all material respects, the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by the Company at or before
the Closing.

6.4 Orders and Laws. There shall not be in effect on the Closing Date any
order or law restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
the Registration Rights Agreement.

6.5 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any governmental or regulatory authority
necessary to permit Computer Associates and the Company to perform their
obligations under this Agreement and the Registration Rights Agreement and to
consummate the transactions contemplated hereby shall have been duly obtained,
made or given and shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any governmental or regulatory
authority necessary for the consummation of the transactions contemplated by
this Agreement and the Registration Rights Agreements, including under the HSR
Act, shall have occurred.

6.6 Third Party Consents. The consents (or in lieu thereof waivers)
listed in Section 6.6 of the Disclosure Schedule shall have been obtained and
shall be in full force and effect.

SECTION 7

CONDITIONS TO OBLIGATIONS OF THE COMPANY

The obligations of the Company hereunder to issue and exchange the Company
Shares are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
the Company in its sole discretion):

7.1 Company Stockholders' Approval. This Agreement and the issuance of
Company Shares in accordance herewith shall have been adopted and the issuance
of Company Shares in accordance herewith shall have been approved by the
requisite vote of the stockholders of the Company under applicable law and under
the applicable regulations of The Nasdaq Stock Market, Inc.

7.2 Representations and Warranties. The representations and warranties
made by Computer Associates in this Agreement, taken as a whole, shall be true
and correct in all respects material to the validity and enforceability of this
Agreement and the Registration Rights Agreement and to the business or condition
of the Company, on and as of the Closing Date as though made on and as of the
Closing Date or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date.

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7.3 Performance. Computer Associates shall have performed and complied
with, in all material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with by Computer
Associates at or before the Closing.

7.4 Orders and Laws. There shall not be in effect on the Closing Date any
order or law restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
the Registration Rights Agreement.

7.5 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the Company and Computer Associates to perform their
obligations under this Agreement and the Registration Rights Agreement and to
consummate the transactions contemplated hereby shall have been duly obtained,
made or given and shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any governmental or regulatory
authority necessary for the consummation of the transactions contemplated by
this Agreement and the Registration Rights Agreement, including under the HSR
Act, shall have occurred.

7.6 Third Party Consents. The consents (or in lieu thereof waivers)
listed in Section 7.6 of the Disclosure Schedule shall have been obtained and
shall be in full force and effect.

SECTION 8

ADDITIONAL AGREEMENTS

8.1 Preemptive Right. If the Company shall enter into an agreement
providing for the private sale or issuance of Additional Stock (as hereinafter
defined) to a third party, Computer Associates shall have a right to subscribe
for and purchase the number of shares of Common Stock as will permit Computer
Associates to maintain its then current equity interest in the Company at the
same price and on the same terms and conditions as the proposed sale to such
third party (the "Preemptive Right"); provided, however, that the Preemptive
Right shall expire and be of no further force and effect on the date after which
the market capitalization of the Company is equal to or greater than
$600,000,000 for a consecutive thirty (30) trading day period. As used herein,
the term "Additional Stock" means any shares of Common Stock issued by the
Company from and after the date hereof, other than: (a) Common Stock issued
pursuant to a stock split or other similar transaction, (b) Common Stock or
options, warrants or other rights to acquire Common Stock or securities
convertible into or exchangeable for Common Stock ("Common Stock Equivalents")
issued or issuable to suppliers, customers or strategic partners in connection
with their entering into or maintaining a business relationship with the Company
or issued or issuable as all or a portion of the purchase price of any
acquisition by the Company of another business entity, in each case so long as
such issuance is approved by the Board of Directors of the Company, (c) up to
that number of shares of Common Stock or Common Stock Equivalents as shall equal
20% of the outstanding capital stock of the Company, issued or issuable to
employees, consultants, officers or directors of the Company pursuant to an
employee stock option plan, incentive stock plan or other similar arrangement
approved by the Board of Directors of the Company, and (d) Common Stock issued
or issuable upon conversion of Preferred Stock.

8.2 Board Seat Nomination. For so long as Computer Associates is the
beneficial owner of 10% or more (the "Minimum Percentage") of the outstanding
capital stock of the Company, the Board of Directors shall, at each meeting of
stockholders of the Company at which the term of any director designated by
Computer Associates expires, nominate for election as a director of the Company
in accordance with the Company's procedures for nomination of directors as
provided for in its Bylaws, a designee of Computer Associates to stand for
election for a succeeding term, and shall vote all management proxies in favor
of such nominee, except for such proxies that specifically indicate to the
contrary. Until such time as Computer Associates beneficially owns less than the
Minimum Percentage, if any director designated by it in accordance with this
Section 8.2 shall decline or be unable to serve for any other reason, the Board
of Directors shall promptly upon the request of Computer Associates nominate or
elect, as the case may be, a qualified person recommended by Computer Associates
to replace such designee; provided that Computer Associates shall have such
right only if and to the extent consistent with the foregoing provision of this
Section 8.2. Computer

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Associates shall promptly provide to the Company, as the Company may from time
to time reasonably request, information regarding any of its designees for the
Board of Directors, for inclusion in any form, report, schedule, registration
statement, definitive proxy statement or other documents required to be filed by
the Company with the Securities and Exchange Commission. At such time as
Computer Associates no longer has the right to designate a director in
accordance with this Section 8.2, it will cause the director designated by it to
resign from the Board Directors.

8.3 Voting. Until such time as Computer Associates beneficially owns less
than the Minimum Percentage, at each meeting of stockholders of the Company,
Computer Associates hereby agrees to vote all shares of capital stock of the
company held by it (a) for the nominees recommended by the Board of Directors
(provided such nominees include the nominee referred to in Section 8.2 above)
and (b) on any proposal of the Board of Directors with respect to a Business
Combination Transaction. A "Business Combination Transaction" means any merger,
consolidation or other business combination including the Company or any of its
Subsidiaries, or any acquisition or similar transaction (including, without
limitation, a tender or exchange offer), involving the purchase of (i) all or
any significant portion of the assets of the Company or any of its Subsidiaries
or (ii) 20% or more of the outstanding shares of Common Stock of the Company.

8.4 Transfers. Computer Associates hereby agrees that prior to August 10,
2001, it shall not, directly or indirectly, assign, sell, pledge, or otherwise
transfer or dispose of (a "Disposition") any shares of capital stock of the
Company owned (beneficially or otherwise) by it, except (i) a Disposition to an
affiliate who simultaneously with such Disposition agrees in a written
instrument in form and substance satisfactory to the Company to be bound by
Sections 8.4 and 8.5 of this Agreement as though an original signatory hereto or
(ii) pursuant to a Business Combination Transaction approved and recommended by
the Board of Directors.

8.5 Right of First Refusal. (a) Private Sales. If, at any time between
the period commencing August 10, 2001 and ending on August 10, 2003, Computer
Associates desires to sell, assign or otherwise transfer Company Shares to any
Person (other than in accordance with Section 8.5(b) hereof or other than to an
affiliate of Computer Associates who agrees in a written instrument in form and
substance satisfactory to the Company to be bound by this Section 8.5 of this
Agreement), Computer Associates shall first offer to sell such Company Shares to
the Company. Computer Associates shall deliver a notice (the "Sale Notice") to
the Company of its intention to sell, assign or otherwise transfer such Company
Shares, identifying the proposed purchaser, assignee or other transferee and
indicating the price per Company Share (which must be cash), and other
significant terms and conditions of the proposed sale, assignment or other
transfer. For a period of 60 business days following delivery of the Sale
Notice, the Company shall have the option to purchase such Company Shares upon
the terms specified in the Sale Notice. If the Company does not exercise its
option to purchase the Company Shares within such 60-day period, Computer
Associates shall be free to sell, assign or otherwise transfer the Company
Shares to the purchaser, assignee or other transferee identified in the Sale
Notice at the price and on the terms and conditions therein specified for a
period of 45 days. If the transfer to such purchaser, assignee or other
transferee is not effected within such 45-day period, then Computer Associates
must again follow the procedures set forth in this Section 8.5 in order to sell,
assign or otherwise transfer such Company Shares. Any sale of Company Shares by
Computer Associates to the Company in accordance with this Section 8.5(a) shall
take place within ten business days following the date the option is exercised
at the offices of the Company at 10:00 A.M. local time, or at such other place
and time as agreed to by Computer Associates and the Company.

(b) Public Sales. If, at any time between the period commencing August 10,
2001 and ending on August 10, 2003, Computer Associates desires to sell Company
Shares on The Nasdaq Stock Market or, if Common Stock is not then trading on The
Nasdaq Stock Market, on any other public stock market for Common Stock (the
"Public Market"), Computer Associates shall first offer to sell such Company
Shares to the Company. Computer Associates shall deliver a notice (the "Public
Sale Notice") to the Company of its intention to sell Company Shares in the
Public Market. For a period of seven calendar days following delivery of the
Public Sale Notice, the Company shall have the option to purchase all or a
portion of such Company Shares for a price per share equal to the average per
share sales price of Common Stock as quoted in the National Association of
Securities Dealers Automated Quotation System (or as reported in the
Consolidated Last Sale Reporting System if Common Stock is not then trading on
The Nasdaq Stock Market) on the day
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during such seven-day period that the Company delivers notice to Computer
Associates of the Company's agreement to purchase such Company Shares in
accordance with this Section 8.5(b). If the Company does not exercise its option
to purchase such Company Shares on the terms specified in this Section 8.5(b),
Computer Associates shall be free to sell the Company Shares identified in the
Public Sale Notice on the Public Market for a period of 45 days. If the public
sale is not effected within such 45-day period, then Computer Associates must
again follow the procedures set forth in this Section 8.5(b) in order to sell
such Company Shares. Any sale of Company Shares by Computer Associates to the
Company in accordance with this Section 8.5(b) shall take place within ten
business days following the date the option is exercised at the offices of the
Company at 10:00 A.M. local time, or at such other place and time as agreed to
by Computer Associates and the Company.

SECTION 9

TERMINATION

9.1. Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:

(a) at any time before the Closing, by mutual written agreement of the
Company and Computer Associates;

(b) at any time before the Closing, by the Company or Computer
Associates, in the event that any order or law becomes effective
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement,
upon notification of the non-terminating party by the terminating party;

(c) at any time after January 31, 2001 by the Company or Computer
Associates upon notification of the non-terminating party by the
terminating party if the Closing shall not have occurred on or before such
date and such failure to consummate is not caused by a breach of this
Agreement by the terminating party.

9.2. Effect of Termination. If this Agreement is validly terminated
pursuant to Section 9.1, this Agreement will forthwith become null and void, and
there will be no liability or obligation on the part of the Company or Computer
Associates (or any of their respective officers, directors, employees, agents or
other representatives or affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to confidentiality in
Section 10.13 and expenses in Section 10.14 will continue to apply following any
such termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 9.1(b) or (c),
the Company and Computer Associates shall remain liable to each other for any
willful breach of their respective obligations under Sections 4.4 and 6.2
existing at the time of such termination, and the Company and Computer
Associates may seek such remedies, including damages and fees of attorneys,
against the other with respect to any such breach as are provided in this
Agreement or as are otherwise available at law or in equity.

SECTION 10

GENERAL PROVISIONS

10.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
conflicts of laws principles thereof (other than New York General Obligations
Law Section 5-1401).

10.2 Successors and Assigns; Third Party Beneficiaries. Except as
otherwise expressly limited herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors and assigns of the parties
hereto. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party other than the parties hereto and their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement.

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10.3 Entire Agreement; Amendment and Waiver. This Agreement, the
Disclosure Schedule and the Registration Rights Agreement constitute the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof and thereof and supersede all prior agreements among the
parties, if any. Any term of this Agreement may be amended, and the observance
of any term hereof may be waived (either generally or in a particular instance)
only with the written consent of each of Computer Associates and the Company.
Any amendment or waiver effected in accordance with this Section 10.3 shall be
binding upon each of the parties hereto.

10.4 Survival. The representations and warranties made herein shall
survive the Closing for a period of eighteen (18) months, except that the
representations and warranties in Sections 2.2, 2.3 and 2.4 shall survive
indefinitely.

10.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be (i) by facsimile, (ii)
mailed by registered or certified mail, postage prepaid, (iii) delivered by
reliable overnight courier service, or (iv) otherwise delivered by hand or by
messenger, addressed (A) if to Computer Associates, to Computer Associates
International, Inc., One Computer Associates Plaza, Islandia, New York 11788,
Attention: Tommy Bennett (Fax No.: 516-342-4866), with a copy to Computer
Associates International, Inc., One Computer Associates Plaza, Islandia, New
York 11788, Attention: General Counsel (Fax No.: 516-342-4866) or at such other
address as Computer Associates shall have furnished to the Company in writing,
(B) if to the Company, to MetaCreations Corporation, 498 Seventh Avenue, Suite
1810, New York, N.Y. 10018, Attention: Chief Executive Officer (Fax No.:
646-485-9101) with a copy to MetaCreations Corporation, 498 Seventh Avenue,
Suite 1810, New York, N.Y. 10018, Attention: General Counsel (Fax No.:
646-485-9211) or at such other address as the Company shall have furnished to
Computer Associates in writing. All such notices and communications shall be
effective (x) on the date of transmission if delivered by facsimile with
transmission confirmed by telecopier-generated receipt and followed by mail
delivery in accordance with clause (ii) above, (y) on the day of delivery if
delivered by hand or by registered or certified mail, and (z) on the day
following deposit thereof with a reliable overnight courier service if delivered
thereby.

10.6 Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any party upon any breach or default under this
Agreement shall be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing.

10.7 References. Unless the context otherwise requires, any reference to
a "Section" refers to a section of this Agreement.

10.8 Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.

10.9 Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the Person
or Persons may require.

10.10 Counterparts; Facsimile Execution. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original and
enforceable against the parties actually executing such counterpart, and all of
which, when taken together, shall constitute one instrument. Facsimile execution
and delivery of this Agreement shall be legal, valid and binding execution and
delivery for all purposes.

A-10
<PAGE> 69

10.11 Certain Definitions. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise required:

(a) "Person" means any individual, corporation, general or limited
partnership, limited liability company, limited liability partnership,
firm, joint venture, association, enterprise, joint stock company, trust,
business trust, unincorporated organization or other entity.

(b) "Subsidiary" means any Person as to which the Company directly or
indirectly, owns or has the power to vote, or to exercise a controlling
influence with respect to, fifty percent (50%) or more of the securities of
any class of such Person, holders of which class are entitled to vote for
the election of directors (or persons performing similar functions) of such
Person.

10.12 Restrictive Legends. (a) Each certificate representing (i) Company
Shares and (ii) any other securities issued or issuable, directly or indirectly,
in respect of any of the Company Shares or any shares issued upon conversion or
exchange of the Company Shares, upon any stock split, stock dividend,
recapitalization, merger, consolidation, share exchange or similar event, shall
(unless otherwise permitted by the provisions of this Section 10.12) be stamped
or otherwise imprinted with a legend in substantially the following form to the
extent applicable (in addition to any legend(s) required under applicable state
securities laws):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
THE TRANSFER OF SUCH SECURITIES IS ALSO RESTRICTED PURSUANT TO THE
EXCHANGE AGREEMENT DATED AS OF AUGUST 3, 2000, AS AMENDED FROM TIME TO
TIME, INCLUDING SECTIONS 8.4 AND 8.5 THEREOF.

Computer Associates and any subsequent holder of the Company Shares
consents to the Company making a notation on its records and giving instructions
to any transfer agent of the Shares in order to implement the restrictions on
transfer described in this Section 10.12.

(b) The Company shall reissue promptly certificates without the foregoing
legend at the request of Computer Associates if Computer Associates shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend or, as to the second sentence thereof, the applicable
provisions of this Agreement have terminated and no longer require such legend.
Any legend endorsed on an instrument pursuant to applicable state securities
laws and the stop-transfer instructions with respect to such securities shall be
removed upon receipt by the Company of an order of the appropriate blue sky
authority authorizing such removal or an opinion of counsel reasonably
satisfactory to the Company to the effect that any such applicable state
securities legends or stop-transfer instructions are not required and may be
removed.

10.13 Confidentiality. Computer Associates agrees to keep confidential
any confidential or proprietary information provided to it by the Company
pursuant to this Agreement or the Registration Rights Agreement, in the
Disclosure Schedule or otherwise, and further agrees that it will use such
information solely for purposes related to its investment in the Company;
provided, however, that (i) any of such information may be disclosed to Computer
Associates' partners, directors, officers, employees, investment advisor,
attorneys, accountants, consultants and other professionals who need to know
such information (it being understood that such partners, directors, officers,
employees, investment advisor, attorneys, accountants, consultants and other
professionals shall be informed by Computer Associates of the confidential
nature of such information and shall be directed to treat such information
confidentially), (ii) any of such information may be disclosed, to any
prospective holder of the Company Shares as long as such prospective Computer
Associates agrees in writing to be bound by the confidentiality provisions of
this Section, (iii) any such information may be disclosed following prior notice
if (A) required by subpoena, applicable law, regulation, regulatory body,

A-11
<PAGE> 70

administrative order, stock exchange rules or any listing or trading agreement,
and (iv) disclosure of such information may be made with respect to which the
Company consents in writing. The provisions of this Section 10.13 shall not
apply to information which (x) is already known to Computer Associates, (y) is
or becomes generally available to the public other than as a result of
disclosure by the partners, directors, officers, employees, agents or advisors
of Computer Associates, or (z) becomes available to Computer Associates on a
non-confidential basis from a source other than the Company, provided that such
source is not known by Computer Associates to be bound by an obligation of
confidentiality or secrecy to the Company.

10.14 Legal Fees and Expenses. Each party hereto shall bear its own
expenses and legal fees incurred on its behalf with respect to the negotiation
of this Agreement and the transactions contemplated hereby.

[signature page follows]

A-12
<PAGE> 71

IN WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement
to be executed by their duly authorized officers as of the date first set forth
above.

METACREATIONS CORPORATION

By: /s/ JAMES A. ABATE
------------------------------------
Name: James A. Abate
Title: Chief Financial Officer

COMPUTER ASSOCIATES INTERNATIONAL,
INC.

By: /s/ STEVEN M. WOGHIN
------------------------------------
Name: Steven M. Woghin
Title: Senior Vice President

A-13
<PAGE> 72

ANNEX B

August 21, 2000

To The Board of Directors
MetaCreations Corporation

Ladies and Gentlemen:

We understand that MetaCreations Corporation ("MetaCreations" or the
"Company" hereinafter) is considering entering into a series of transactions in
which it will (i) exchange (the "CA Exchange") 1.15 shares of its common stock
for each share of Metastream Corporation ("Metastream") owned by Computer
Associates International, Inc. (ii) exercise certain exchange rights resulting
in the exchange (the "Preferred Exchange") of Metastream Preferred Stock for
shares of MetaCreations common stock at a to be determined exchange ratio
subject to a minimum of 1.15 shares of MetaCreations common stock per share of
Metastream preferred stock, and (iii) merge (the "Merger") Metastream into
MetaCreations with MetaCreations being the surviving entity and in which
shareholders of Metastream will receive 1.15 shares of MetaCreations common
stock. The CA Exchange and the Preferred Exchange are referred to collectively
as the Exchange. The Exchange, the Merger and the other related transactions
disclosed to Houlihan Lokey are referred to collectively herein as the
"Transaction."

You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. Furthermore, at your request, we have not negotiated
the Transaction or advised you with respect to alternatives to it.

In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:

1. reviewed the Company's annual reports to shareholders and on Form
10-K for the fiscal years ended December 31, 1998 and 1999 (as amended),
and quarterly reports on Form 10-Q for the quarters ended March 31, 2000
(as amended) and June 30, 2000, which the Company's management has
identified as being the most current financial statements available;

2. reviewed copies of the following agreements:

(i) Subscription Agreement among Metastream Corporation, the
Company and Computer Associates International, Inc. dated June 30, 1999;

(ii) Shareholders' Agreement among Metastream, the Company and
Computer Associates International, Inc. dated June 30, 1999;

(iii) Registration Rights Agreement between MetaStream Corporation
and Computer Associates International, Inc. dated June 30, 1999;

(iv) License and Services Agreement between America Online, Inc.
and MetaStream Corporation;

(v) Amended and Restated Series A Preferred Stock Purchase
Agreement among the Company, Metastream and America Online, Inc. dated
as of June 12, 2000;

(vi) Exchange Agreement among the Company, Metastream and America
Online, Inc. dated as of June 12, 2000;

(vii) Registration Rights Agreement among the Company, Metastream
and America Online, Inc. dated as of June 12, 2000;

(viii) Series B Preferred Stock Purchase Agreement among the
Company, Metastream and Adobe Systems Incorporated, dated July 18, 2000,
with Exhibits, and;

(ix) Amended and Restated Certificate of Incorporation of
Metastream;

B-1
<PAGE> 73
To The Board of Directors
MetaCreations Corporation
August 21, 2000

3. met with certain members of the senior management of the Company to
discuss the operations, financial condition, future prospects and projected
operations and performance of the Company and Metastream;

4. reviewed forecasts and projections prepared by the Company's
management with respect to Metastream for the years ended December 31, 2000
through 2001;

5. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;

6. reviewed certain other publicly available financial data for
certain companies that we deem comparable to Metastream and certain
transactions we deem comparable to the Transaction; and

7. conducted such other studies, analyses and inquiries as we have
deemed appropriate.

We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company and Metastream, and that there has been no
material change in the assets, financial condition, business or prospects of the
Company and Metastream since the date of the most recent financial statements
made available to us.

We have not been requested to, and did not consider the effect of the
pending acquisition of Viewpoint Digital, Inc. in our analysis.

We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and Metastream and do not
assume any responsibility with respect to it. We have not made any physical
inspection or independent appraisal of any of the properties or assets of the
Company or Metastream. Our opinion is necessarily based on business, economic,
market and other conditions as they exist and can be evaluated by us at the date
of this letter.

Based upon the foregoing, and in reliance thereon, it is our opinion that
the Transaction is fair to the Company from a financial point of view.

HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.

B-2
<PAGE> 74

DETACH HERE

PROXY

METACREATIONS CORPORATION

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER , 2000

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of MetaCreations Corporation, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders dated October , 2000, and hereby appoints and
, and each of them, proxies and attorneys-in-fact, with
full power to each of substitution, on behalf of the undersigned, to represent
the undersigned at the Annual Meeting of Stockholders of MetaCreations
Corporation to be held at the Millennium Broadway Conference Center, 145 West
44th Street, New York, NY 10036 at 9:30 a.m., local time, and at any adjournment
or adjournments thereof, and to vote all shares of MetaCreations common stock
that the undersigned would be entitled to vote if then and there personally
present, on all matters set forth on the reverse side hereof.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREIN. IF NO SPECIFICATION IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE PERSONS AND THE
PROPOSALS ON THE REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING AS THE PROXY HOLDERS DEEM ADVISABLE.

SEE REVERSE SEE REVERSE
SIDE SIDE

CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 75

<TABLE>
<CAPTION>
<S> <C>
----------------- ----------------
VOTE BY TELEPHONE VOTE BY INTERNET
----------------- ----------------

It's fast, convenient and immediate It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted
1-877-PRX-VOTE (1-877-779-8683)

FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:

1. READ THE ACCOMPANYING PROXY 1. READ THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND PROXY CARD STATEMENT/PROSPECTUS AND PROXY CARD

2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8683) FOR HTTP://WWW.EPROXYVOTE.COM/MCRE
STOCKHOLDERS RESIDING OUTSIDE THE UNITED
STATES CALL COLLECT ON A TOUCH-TONE PHONE 3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
1-201-538-8073 LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME

3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER LOCATED 4. FOLLOW THE INSTRUCTIONS PROVIDED
ON YOUR PROXY CARD ABOVE YOUR NAME

4. FOLLOW THE RECORDED INSTRUCTIONS

YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime Go to http://www.eproxyvote.com/mcre anytime

DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET

-----------------------------------------------------------------------------------------------------------------------------------
DETACH HERE

[X] Please mark
Votes as in
this example.

1. Election of Directors
FOR AGAINST ABSTAIN
NOMINEES: (01) Thomas Bennett, (02) Bruce R. Chizen, 2 To approve the issuance to Computer
(03) Lennert J. Leader, (04) Samuel H. Jones, Jr. and Associates of shares of [ ] [ ] [ ]
(05) Robert E. Rice common stock of MetaCreations
in exchange for shares of common
stock of Metastream Corporation

3 To amend the 1995 Stock Plan to add [ ] [ ] [ ]
an additional 7,250,000 shares
thereto

MARK HERE
FOR all nominees listed above [except FOR ADDRESS [ ] 4 To ratify the appointment of [ ] [ ] [ ]
as marked to the contrary below). CHANGE AND PricewaterhouseCoopers LLP as
[ ] NOTE BELOW independent accountants for
MetaCreations for the 2000
WITHHOLD AUTHORITY to vote for all fiscal year
nominees listed above.
[ ]
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
(Instructions: To withhold authority to MEETING DATED OCTOBER , 2000.
vote for any individual nominee, write
that nominee's name in the space PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
provided below). THE ENCLOSED ENVELOPE.

NOTE: Please sign exactly as name appears on your stock
certificate. If the stock is registered in the names of
two or more persons, each should sign. Executors, administrators,
trustees, guardians, attorneys and corporate officers should
insert their titles.

Signature:__________________________________ Date:_______________ Signature:__________________________________ Date:_______________
</TABLE>