<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1994
REGISTRATION NO. 33-53215
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NOVELL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 87-0393339
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR
ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
122 EAST 1700 SOUTH
PROVO, UTAH 84606
TELEPHONE: (801) 429-7000
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID R. BRADFORD, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY
NOVELL, INC.
122 EAST 1700 SOUTH
PROVO, UTAH 84606
TELEPHONE: (801) 429-7000
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------
Copies to:
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<S> <C> <C>
LARRY W. SONSINI, ESQ. JOSHUA L. GREEN, ESQ. R. DUFF THOMPSON, ESQ.
TOR R. BRAHAM, ESQ. STEVEN J. TONSFELDT, ESQ. EXECUTIVE VICE PRESIDENT
AARON J. ALTER, ESQ. BROBECK, PHLEGER & HARRISON AND GENERAL COUNSEL
WILSON, SONSINI, GOODRICH & ROSATI TWO EMBARCADERO PLACE WORDPERFECT CORPORATION
PROFESSIONAL CORPORATION 2200 GENG ROAD 1555 NORTH TECHNOLOGY WAY
TWO PALO ALTO SQUARE PALO ALTO, CALIFORNIA 94303 OREM, UTAH 84057
PALO ALTO, CALIFORNIA 94306
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As promptly as practicable after this Registration Statement becomes
effective and the effective time of the proposed merger of a subsidiary of the
Registrant with and into WordPerfect Corporation, as described in the Agreement
and Plan of Reorganization, dated as of March 21, 1994, attached as Appendix A
to the Prospectus/Proxy Statement forming a part of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding Company and there is compliance with
General Instruction G, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
NOVELL, INC.
------------------------
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 REGISTRATION STATEMENT ITEM AND
HEADING LOCATION IN PROSPECTUS
--------------------------------------------- ------------------------------------------
<C> <S> <C>
(Information about the Transaction)
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front and Outside Back Cover Pages
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................ Summary; Risk Factors; Selected Unaudited
Historical Consolidated Financial Data;
The Merger and Related Transactions; Terms
of the Merger; Information Concerning
Novell; Information Concerning
WordPerfect; WordPerfect Management's
Discussion and Analysis of Financial
Condition and Results of Operations
4. Terms of the Transaction..................... Summary; Introduction; The Merger and
Related Transactions; Terms of the Merger;
Description of Novell Capital Stock;
Comparison of Rights of Holders of Novell
Common Stock and Holders of Common Stock
of WordPerfect
5. Pro Forma Financial Information.............. Unaudited Pro Forma Condensed Combined
Financial Statements
6. Material Contacts with the Company Being
Acquired..................................... The Merger and Related Transactions
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters.............................. *
8. Interests of Named Experts and Counsel....... Experts; Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. *
(Information about the Registrant)
10. Information with Respect to S-3
Registrants.................................. Summary; Risk Factors; Introduction; The
Merger and Related Transactions; Terms of
the Merger; Information Concerning Novell;
Description of Novell Capital Stock;
Comparison of Rights of Novell Common
Stock and Holders of Common Stock of
WordPerfect
11. Incorporation of Certain Information
by Reference................................. *
12. Information with Respect to S-2 or S-3
Registrants.................................. *
13. Incorporation of Certain Information by
Reference.................................... Incorporation of Certain Information by
Reference
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM S-4 REGISTRATION STATEMENT ITEM AND
HEADING LOCATION IN PROSPECTUS
--------------------------------------------- ------------------------------------------
<C> <S> <C>
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants.................. *
(Information about the Company being Acquired)
15. Information with Respect to S-3 Companies.... *
16. Information with Respect to S-2 or S-3
Companies.................................... *
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies.................... Summary; Risk Factors; Introduction;
Voting and Proxies; The Merger and Related
Transactions; Terms of the Merger;
Information Concerning WordPerfect;
WordPerfect Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Management of
WordPerfect; Certain Transactions of
WordPerfect; Principal Shareholders of
WordPerfect; Comparison of Rights of
Holders of Novell Common Stock and Holders
of Common Stock of WordPerfect; Index to
WordPerfect Financial Statements
(Voting and Management Information)
18. Information if Proxies, Consents
Authorizations are to be Solicited........... Summary; Introduction; Voting and Proxies;
Information Concerning Novell; Information
Concerning WordPerfect
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in
an Exchange Offer............................ *
</TABLE>
- ---------------
* Not Applicable.
<PAGE> 4
WORDPERFECT CORPORATION
1555 NORTH TECHNOLOGY WAY
OREM, UTAH 84057
, 1994
Dear Shareholder:
A Special Meeting of Shareholders of WordPerfect Corporation
("WordPerfect") will be held on , June , 1994, at 9:00 a.m., local
time, at the principal executive offices of WordPerfect located at 1555 North
Technology Way, Orem, Utah 84057. Accompanying this letter is a Notice of
Special Meeting of Shareholders.
At this Special Meeting, you will be asked to consider and vote upon the
approval and adoption of the Agreement and Plan of Reorganization dated as of
March 21, 1994 (the "Merger Agreement"), providing for the merger (the "Merger")
of WordPerfect with a wholly owned subsidiary of Novell, Inc. ("Novell"), as
described in the preliminary Prospectus/Proxy Statement previously delivered to
you on April 29, 1994.
Pursuant to the Merger, WordPerfect will become a wholly owned subsidiary
of Novell, and each share of WordPerfect Common Stock outstanding immediately
prior to the time of the closing of the Merger (other than dissenters' shares)
will be converted into and exchanged for one share of Novell Common Stock. Each
outstanding option to acquire shares of WordPerfect Common Stock will be assumed
by Novell and will become exercisable for an equivalent number of shares of
Novell Common Stock. The vesting of such options will accelerate immediately
upon consummation of the Merger, based on existing contractual commitments to
holders of such options. The Merger is expected to be consummated promptly after
approval thereof by the WordPerfect shareholders. For more information regarding
the consideration to be received by WordPerfect shareholders in the Merger,
please refer to the preliminary Prospectus/Proxy Statement under "Terms of the
Merger -- Manner and Basis of Converting Shares" and "-- Employee Benefit
Plans."
The WordPerfect Board of Directors has unanimously approved the Merger
Agreement described in the attached materials and the transactions contemplated
thereby and has determined that the Merger is in the best interests of
WordPerfect and its shareholders. After careful consideration, the WordPerfect
Board of Directors unanimously recommends that the shareholders of WordPerfect
vote in favor of the Merger. Holders of approximately 89% of the outstanding
shares of WordPerfect Common Stock have signed an agreement pursuant to which
they have agreed to vote all shares held by them in favor of approval of the
Merger Agreement. Therefore, approval of the Merger Agreement and the
transactions contemplated thereby is assured.
All shareholders are cordially invited to attend the Special Meeting in
person. However, whether or not you plan to attend the Special Meeting, please
complete, sign and return the proxy which is expected to be provided to you,
along with the final Prospectus/Proxy Statement, within the next few weeks. If
you attend the Special Meeting, you may vote in person if you wish, even though
you have previously returned your proxy. It is important that your shares be
represented and voted at the Special Meeting.
Sincerely,
ADRIAAN RIETVELD
President and Chief Executive Officer
<PAGE> 5
WORDPERFECT CORPORATION
1555 NORTH TECHNOLOGY WAY
OREM, UTAH 84057
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE , 1994
TO THE SHAREHOLDERS OF WORDPERFECT CORPORATION:
A Special Meeting of Shareholders of WordPerfect Corporation, a Utah
corporation ("WordPerfect"), will be held on , June , 1994, at 9:00
a.m., local time, at the principal executive offices of WordPerfect located at
1555 North Technology Way, Orem, Utah 84057, to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Reorganization dated as
of March 21, 1994 (the "Merger Agreement"), entered into by and among Novell,
Inc., a Delaware corporation ("Novell"), Novell Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Novell ("Sub"), WordPerfect, Alan
C. Ashton, Bruce W. Bastian and Melanie L. Bastian. The Merger Agreement
provides that (i) Sub will be merged with and into WordPerfect, with WordPerfect
remaining as the surviving corporation and becoming a wholly owned subsidiary of
Novell (the "Merger"); (ii) each outstanding share of WordPerfect Common Stock
(other than shares dissenting from the Merger) will be converted into and
exchanged for one share of Novell Common Stock; and (iii) each outstanding
option to acquire shares of WordPerfect Common Stock will be assumed by Novell
and following the Merger will become exercisable for an equivalent number of
shares of Novell Common Stock. The Merger is more fully described in the Merger
Agreement attached as Appendix A to the preliminary Prospectus/Proxy Statement
delivered to you on April 29, 1994.
Only shareholders of record at the close of business on May 20, 1994 are
entitled to notice of, and to vote at, the Special Meeting, or at any
continuance(s) or adjournment(s) thereof. APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF HOLDERS OF AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES OF WORDPERFECT'S COMMON STOCK.
By Order of the Board of Directors,
ADRIAAN RIETVELD
President and Chief Executive Officer
Orem, Utah
May , 1994
<PAGE> 6
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JUNE 13, 1994
[NOVELL LOGO] [WORDPERFECT LOGO]
WORDPERFECT CORPORATION
PROXY STATEMENT
------------------------
NOVELL, INC.
PROSPECTUS
------------------------
Novell, Inc., a Delaware corporation ("Novell"), has filed a Registration
Statement on Form S-4 with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act of 1933, as amended, covering an aggregate of
51,380,100 shares of its Common Stock, $.10 par value, to be issued in
connection with the proposed merger (the "Merger") of WordPerfect Corporation, a
Utah corporation ("WordPerfect"), with and into Novell. Originally, the
combination of Novell and WordPerfect was to be effected by the merger of Novell
Acquisition Corp., a wholly owned subsidiary of Novell ("Sub"), with and into
WordPerfect, with WordPerfect becoming a wholly owned subsidiary of Novell,
pursuant to the terms of the Agreement and Plan of Reorganization, dated as of
March 21, 1994 (the "Merger Agreement"), entered into by and among Novell, Sub,
WordPerfect, Alan C. Ashton, Bruce W. Bastian and Melanie L. Bastian. As of May
31, 1994, the Merger Agreement was amended by the parties thereto to provide for
the merger of WordPerfect directly into Novell. All references herein to the
Merger Agreement are to the Merger Agreement as amended.
Pursuant to the Merger Agreement, upon consummation of the Merger, Novell
will be the surviving corporation and holders of the issued and outstanding
shares of WordPerfect Common Stock will receive an aggregate of 51,380,100
shares of Novell Common Stock, less such number of shares as are otherwise
issuable to persons exercising dissenters' rights. Each shareholder of
WordPerfect will receive one share of Novell Common Stock for each share of
WordPerfect Common Stock owned by such shareholder. Each outstanding option to
acquire shares of WordPerfect Common Stock will be assumed by Novell and will
become exercisable for an equivalent number of shares of Novell Common Stock.
The vesting of such options will accelerate immediately upon consummation of the
Merger, based on existing contractual commitments to holders of such options.
See "The Merger and Related Transactions" and "Terms of the Merger."
This Prospectus/Proxy Statement constitutes (a) the Proxy Statement of
WordPerfect relating to the solicitation of proxies by WordPerfect for use at
the Special Meeting of Shareholders of WordPerfect scheduled to be held on June
, 1994 and (b) the Prospectus of Novell filed as part of the Registration
Statement on Form S-4. All information herein with respect to WordPerfect has
been furnished by WordPerfect, and all information herein with respect to Novell
and Sub has been furnished by Novell.
See "Risk Factors" for a discussion of certain factors which should be
considered by WordPerfect shareholders before voting on the Merger Agreement.
This Prospectus/Proxy Statement and the accompanying form of proxy are
first being mailed to shareholders of WordPerfect on or about June , 1994.
THE SHARES OF NOVELL COMMON STOCK TO BE ISSUED IN THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus/Proxy Statement is June , 1994.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. 1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE..................................... 1
TRADEMARKS............................................................................ 2
SUMMARY............................................................................... 3
The Companies....................................................................... 3
Special Meeting of Shareholders of WordPerfect Corporation.......................... 4
The Merger.......................................................................... 4
</TABLE>
<TABLE>
<S> <C>
SELECTED UNAUDITED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA............... 9
RISK FACTORS.......................................................................... 14
INTRODUCTION.......................................................................... 18
VOTING AND PROXIES.................................................................... 19
Date, Time, Place and Purpose of Special Meeting.................................... 19
Record Date and Outstanding Shares.................................................. 19
Voting of Proxies................................................................... 19
Vote Required....................................................................... 19
Expenses; Solicitation of Proxies................................................... 19
Dissenters' Rights.................................................................. 20
THE MERGER AND RELATED TRANSACTIONS................................................... 21
Joint Reasons for the Merger........................................................ 21
Additional Reasons for the Merger -- Novell......................................... 22
Additional Reasons for the Merger -- WordPerfect.................................... 22
WordPerfect Board Recommendation of the Merger...................................... 23
Material Contacts................................................................... 23
TERMS OF THE MERGER................................................................... 26
Effective Time of the Merger........................................................ 26
Manner and Basis of Converting Shares............................................... 26
Employee Benefit Plans.............................................................. 27
Conduct of Business of WordPerfect and Novell Prior to the Merger................... 27
Conduct of Business of the Combined Company Following the Merger.................... 29
Conditions to the Merger............................................................ 29
Termination or Amendment of Merger Agreement........................................ 30
Indemnification..................................................................... 31
Certain Federal Income Tax Considerations........................................... 31
Affiliates Agreements............................................................... 33
Shareholder Agreements.............................................................. 33
Tax Matters Agreement............................................................... 33
Governmental and Regulatory Approvals............................................... 34
Accounting Treatment................................................................ 34
Dissenters' Rights.................................................................. 34
Acquisition of Quattro Pro Product Line............................................. 36
License to Borland's Paradox Relational Database Products........................... 37
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS........................... 38
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS.................. 40
</TABLE>
i
<PAGE> 8
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION CONCERNING NOVELL......................................................... 42
The Company......................................................................... 42
Business Strategy................................................................... 43
Products............................................................................ 45
Product Development................................................................. 51
Sales and Marketing................................................................. 51
Service, Support and Education...................................................... 52
Manufacturing Suppliers............................................................. 52
Backlog............................................................................. 52
Competition......................................................................... 53
Licenses, Patents and Trademarks.................................................... 53
Employees........................................................................... 54
Factors Affecting Earnings and Stock Price.......................................... 54
INFORMATION CONCERNING WORDPERFECT.................................................... 56
Introduction........................................................................ 56
Industry Background................................................................. 56
The WordPerfect Strategy............................................................ 57
Products............................................................................ 59
Customer Support.................................................................... 64
Sales and Distribution.............................................................. 65
Marketing........................................................................... 66
Product Development................................................................. 66
Competition......................................................................... 67
Intellectual Property; Proprietary Rights........................................... 68
Production.......................................................................... 69
Employees........................................................................... 69
Facilities.......................................................................... 69
WORDPERFECT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 70
Overview............................................................................ 70
Results of Operations............................................................... 71
Liquidity and Capital Resources..................................................... 75
MANAGEMENT OF WORDPERFECT............................................................. 77
Executive Officers, Senior Management and Directors................................. 77
Summary of Cash and Other Compensation.............................................. 77
Option Grants....................................................................... 78
Option Exercises and Holdings....................................................... 78
Employment Contracts, Termination of Employment and Change in Control
Arrangements..................................................................... 79
CERTAIN TRANSACTIONS OF WORDPERFECT................................................... 80
PRINCIPAL SHAREHOLDERS OF WORDPERFECT................................................. 82
DESCRIPTION OF NOVELL CAPITAL STOCK................................................... 83
Novell Common Stock................................................................. 83
Shareholder Rights Plan and Preferred Stock......................................... 83
</TABLE>
ii
<PAGE> 9
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMPARISON OF RIGHTS OF HOLDERS OF NOVELL COMMON STOCK AND HOLDERS OF COMMON STOCK OF
WORDPERFECT......................................................................... 83
Preemptive Rights................................................................... 84
Dividends and Other Distributions................................................... 84
Amendment of Certificate or Articles of Incorporation; Amendment of Bylaws.......... 84
Action by Written Consent........................................................... 85
Special Meetings of Shareholders.................................................... 85
Voting in the Election of Directors................................................. 85
Number and Qualification of Directors............................................... 86
Classification of Board............................................................. 86
Removal of Directors................................................................ 86
Filling Vacancies on the Board of Directors......................................... 87
Transactions Involving Officers or Directors........................................ 87
Indemnification and Limitation of Liability......................................... 87
Mergers and Sales of Substantially All Corporate Assets............................. 88
Creation of Indebtedness............................................................ 89
Appraisal Rights.................................................................... 89
Shareholder Approval of Certain Business Combinations............................... 89
Inspection of Shareholder List, Books and Records................................... 91
Shareholder Derivative Suits........................................................ 91
Duration of Proxies................................................................. 92
Dissolution......................................................................... 92
EXPERTS............................................................................... 92
LEGAL MATTERS......................................................................... 92
WORDPERFECT FINANCIAL STATEMENTS...................................................... F-1
</TABLE>
<TABLE>
<S> <C>
APPENDIX A: Agreement and Plan of Reorganization
APPENDIX B: Utah Revised Business Corporation Act Part 13 -- Dissenters' Rights
</TABLE>
iii
<PAGE> 10
AVAILABLE INFORMATION
Novell is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the SEC. Such reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained by
mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
Novell has filed with the SEC a registration statement on Form S-4 (herein,
together with all amendments and exhibits, referred to as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus/Proxy Statement does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the SEC pursuant to the Exchange Act are
incorporated herein by reference:
1. Novell's Annual Report on Form 10-K for the fiscal year ended October
30, 1993, filed with the SEC on January 27, 1994;
2. Novell's Quarterly Report on Form 10-Q for the fiscal quarter ended
January 29, 1994, filed with the SEC on March 14, 1994;
3. Novell's Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1994, filed with the SEC on June 10, 1994;
4. The description of Novell's Common Stock contained in the Registration
Statement on Form 8-A filed with the SEC on April 3, 1985;
5. The description of Novell's Preferred Shares Rights Plan and the Series
A Junior Participating Preferred Shares issuable thereunder contained in the
Registration Statement on Form 8-A filed with the SEC on December 7, 1988; and
6. Novell's Proxy Statement for the Annual Meeting of Shareholders held on
March 9, 1994, filed with the SEC on January 21, 1994.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purpose of this Prospectus/Proxy Statement to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus/Proxy Statement, except as so modified or
superseded.
This Prospectus/Proxy Statement incorporates documents by reference which
are not presented herein or delivered herewith. These documents (not including
exhibits thereto) are available upon request from David R. Bradford, Esq.,
Corporate Secretary, Novell, Inc., 122 East 1700 South, Provo, Utah 84606; (801)
429-7000. In order to ensure timely delivery of the documents, such requests
should be made by June , 1994.
No person has been authorized to give any information or to make any
representation other than as contained herein in connection with these matters,
and, if given or made, such information or representation must not be relied
upon as having been authorized by Novell or WordPerfect. Neither the delivery
hereof nor any distribution of securities made hereunder shall, under any
circumstances, create an implication that there has been no change in the facts
herein set forth since the date hereof. This Prospectus/Proxy Statement does not
constitute an offer to sell or a solicitation of an offer to buy the securities
offered by this Prospectus/Proxy Statement or a solicitation of a proxy in any
jurisdiction where, or to any person to whom, it is unlawful to make such an
offer or solicitation.
<PAGE> 11
TRADEMARKS
The following trademarks, service marks and collective marks are mentioned
in this Prospectus/Proxy Statement:
Novell, NetWare, DR DOS, FlexOS are registered trademarks and AppWare,
AppWare Bus, AppWare Foundation, AppWare Loadable Module, ALM, NetWare 3,
NetWare 4, NetWare Directory Services, NDS, NetWare Distributed Management
Services, NDMS, NetWare FLeX/IP, NetWare Loadable Module, NLM, NetWare MHS,
NetWare SNA Links, Novell DOS, Novell Labs and Visual AppBuilder are trademarks
of Novell. Certified NetWare Engineer, CNE, Independent Manufacturer Support
Program and IMSP are service marks of Novell. Novell Authorized Education
Center, NAEC, Technical Support Alliance and TSA are collective marks of Novell.
Tuxedo and UNIX are registered trademarks and System V, UnixWare, UnixWare
Application Server, UnixWare Online Data Manager are trademarks of Unix System
Laboratories, Inc., a wholly owned subsidiary of Novell.
WordPerfect, WPCorp, DataPerfect, LetterPerfect, DrawPerfect, PlanPerfect,
ConvertPerfect, and Grammatik are registered trademarks of WordPerfect in the
United States and certain foreign countries, and WordPerfect Works, WordPerfect
Office, WordPerfect InForms, WordPerfect Presentations, WordPerfect Intellitag,
InfoCentral, ExpressDocs, Quickfinder, WordPerfect Clip Art, ExpressFax, Button
Bar, Kap'n Karaoke, WordPerfect Gateways, SpeedSearch, WordPerfect Envoy,
SoftSolutions, Main Street, iConnect, WordPerfect Language Modules, Coaches, and
the WordPerfect logo are trademarks of WordPerfect.
This Prospectus/Proxy Statement also contains trademarks and registered
trademarks of persons other than Novell and WordPerfect.
2
<PAGE> 12
SUMMARY
The following contains a brief summary of certain information contained
elsewhere in this Prospectus/ Proxy Statement. This summary contains a
description of the material features of the proposal to be voted on but is
qualified in its entirety by the more detailed information appearing elsewhere
in this Prospectus/Proxy Statement and in the information and documents
incorporated by reference herein. Unless otherwise defined herein, capitalized
terms used in this Summary have the respective meanings assigned to them
elsewhere in this Prospectus/Proxy Statement. As used in this Proxy
Statement/Prospectus, the terms "Novell" and "WordPerfect" refer to Novell, Inc.
and WordPerfect Corporation, respectively, and where the context so requires, to
their respective subsidiaries. Unless otherwise stated, all references to the
"Combined Company" mean Novell after consummation of the Merger and include
WordPerfect and the Combined Company's other directly or indirectly owned
subsidiaries after such time. Shareholders are urged to read carefully the
entire Prospectus/Proxy Statement, including the information and documents
incorporated by reference herein.
THE COMPANIES
Novell, Inc.
Novell, Inc., a Delaware corporation ("Novell"), is the leading provider of
network server operating system software that integrates desktop computers,
servers, and mini-computer and mainframe hosts for business-wide information
sharing. Novell's NetWare network computing products manage and control the
sharing of data, applications and services among personal computer work groups
and departmental networks, and across business-wide information systems.
Novell's products support standards to integrate DOS, IBM's OS/2, Microsoft
Windows, Apple/Macintosh and UNIX System desktop computers with each other and
with IBM, Digital Equipment Corporation ("DEC"), Hewlett-Packard Company ("HP")
and UNIX System hosts, among others.
The Company was incorporated in Delaware in 1983. Novell's executive
offices are located at 122 East 1700 South, Provo, Utah 84606. Its telephone
number at that address is (801) 429-7000.
WordPerfect Corporation
WordPerfect Corporation, a Utah corporation ("WordPerfect"), is a leading
provider of software applications that enable users to create and process
complex documents. WordPerfect also produces a broad range of software in the
areas of workgroup automation, general business, electronic publishing and
consumer products. WordPerfect's products provide individuals, small businesses
and large, global organizations with information processing solutions that
operate across complex networked computing environments. WordPerfect was one of
the original developers of word processing applications for personal computers,
and its flagship product, WordPerfect, is one of the best-selling PC software
applications ever introduced, having been sold to over 15 million users
worldwide. WordPerfect is now available in 23 languages and on all of the most
widely used computing platforms and operating systems, including DOS, MS
Windows, UNIX, Apple/Macintosh and DEC's VAX/VMS. In 1993, WordPerfect
introduced new workgroup automation products designed to capitalize on
WordPerfect's expertise in developing multi-platform, multi-lingual
applications. WordPerfect Office 4.0 and WordPerfect InForms 1.0 are designed to
meet an organization's needs for effectively sharing information in a complex,
networked computing environment. These products, which provide such features as
electronic mail, calendaring, scheduling and electronic forms filing and
routing, improve users' productivity by automating the communication process
within workgroups. In April 1994, WordPerfect announced its Main Street line of
consumer products that offer low-cost, easy-to-use products designed for
personal productivity, entertainment and home education.
WordPerfect was incorporated as Satellite Software International in Utah in
1979. Satellite Software International changed its name to WordPerfect
Corporation in 1986. WordPerfect's principal executive offices are located at
1555 North Technology Way, Orem, Utah 84057. Its telephone number at that
address is (801) 225-5000.
3
<PAGE> 13
SPECIAL MEETING OF SHAREHOLDERS OF WORDPERFECT CORPORATION
Time, Date, Place and Purpose. A Special Meeting of Shareholders of
WordPerfect will be held at the principal executive offices of WordPerfect
located at 1555 North Technology Way, Orem, Utah 84057 on , June ,
1994, at 9:00 a.m. local time (the "Special Meeting"). The purpose of the
Special Meeting is to vote upon a proposal to approve and adopt the Merger
Agreement providing for the merger of WordPerfect with and into Novell.
Record Date and Vote Required. Only WordPerfect shareholders of record at
the close of business on Friday, May 20, 1994 (the "Record Date"), are entitled
to notice of, and to vote at, the Special Meeting. Under the Utah Revised
Business Corporation Act (the "URBCA"), approval and adoption of the Merger
Agreement require the affirmative vote of the holders of a majority of the
outstanding shares of WordPerfect's Common Stock. The presence, either in person
or by properly executed proxy, of the holders of a majority of the outstanding
shares of WordPerfect Common Stock is necessary to constitute a quorum at the
Special Meeting. Because the Merger Agreement must be approved by at least a
majority of the outstanding shares entitled to vote on such matter, abstentions
will have the effect of a negative vote.
Shares Held by Directors, Executive Officers and Affiliates. As of the
Record Date, the directors, officers and affiliates of WordPerfect, together
with persons and entities related to or affiliated with them, held an aggregate
of 51,380,100 shares of WordPerfect Common Stock, representing 100% of the
outstanding WordPerfect Common Stock. Shareholders of WordPerfect, who, directly
or indirectly, collectively own approximately 89% of the outstanding capital
stock of WordPerfect have agreed to vote in favor of approval of the Merger
Agreement and have granted the Novell Board of Directors proxies to vote their
shares in favor of approval of the Merger Agreement and any matter that could
reasonably be expected to facilitate the Merger. Therefore, assuming that the
proxies granted to Novell by such shareholders are voted in favor of the Merger
Agreement, the Merger Agreement and the transactions contemplated thereby will
be approved at the Special Meeting.
THE MERGER
Terms of the Merger. At the effective time of the Merger, WordPerfect will
merge with and into Novell and each outstanding share of WordPerfect Common
Stock (other than shares, if any, held by WordPerfect shareholders who have
exercised dissenters' rights under Part 13 of the URBCA) will be converted into
one share of Novell Common Stock. Based upon the number of shares of WordPerfect
Common Stock outstanding as of May 27, 1994, 362,229,164 shares of Novell Common
Stock will be outstanding immediately after the effective time of the Merger, of
which approximately 14.18% will be held by the former holders of WordPerfect
Common Stock. On June 8, 1994, the last sale price of Novell Common Stock as
reported on the Nasdaq National Market was $17 1/4 per share.
Acquisition of Borland's Quattro Pro Spreadsheet Product Line. On March
20, 1994, Novell entered into a Purchase and License Agreement (the "Borland
Agreement") with Borland International, Inc. ("Borland"), pursuant to which
Novell, subject to regulatory approval and other conditions to closing, will
acquire Borland's Quattro Pro spreadsheet product line for approximately $110
million of cash. Novell will also acquire, for approximately $35 million, a
three-year license to reproduce and distribute up to one million copies of
current and future versions of Borland's Paradox relational database products as
part of a suite of products including WordPerfect and any Quattro Pro product.
See "Terms of the Merger -- Acquisition of Quattro Pro Product Line" and
"-- License to Borland's Paradox Relational Database Products."
WordPerfect Options. Pursuant to the Merger Agreement, all outstanding
options to acquire WordPerfect Common Stock ("WordPerfect Options") will be
assumed by Novell at the effective time of the Merger and converted into options
to acquire an equivalent number of shares of Novell Common Stock. As of March
31, 1994, WordPerfect Options to acquire an aggregate of 7,820,000 shares of
WordPerfect Common Stock were issued and outstanding at exercise prices ranging
from $8.50 to $13.50. Notice to holders of WordPerfect Options as to the terms
of such assumption and conversion will be sent by Novell upon consummation of
the Merger. Each WordPerfect Option so assumed by Novell will continue to have,
and be subject to, the same terms and conditions set forth in the original
WordPerfect Option prior to the Merger,
4
<PAGE> 14
including the existing provisions that provide that the vesting of such options
will automatically accelerate immediately upon consummation of the Merger. See
"Terms of the Merger -- Employee Benefit Plans -- WordPerfect Options."
Market Price Data. The Common Stock of Novell has been traded in the
over-the-counter market under the Nasdaq National Market symbol "NOVL" since
Novell's Common Stock began public trading in January 1985. The following table
sets forth the range of high and low trading prices for Novell Common Stock as
reported by the Nasdaq National Market for the periods indicated and gives
retroactive effect to the two-for-one stock split effective August 1992.
<TABLE>
<CAPTION>
OCTOBER 31
FISCAL YEAR(1)
-------------------
HIGH LOW
----- -------
<S> <C> <C>
Fiscal 1992
First quarter........................................... 32 1/2 21 3/8
Second quarter.......................................... 32 23 7/8
Third quarter........................................... 28 1/2 24 5/16
Fourth quarter.......................................... 32 1/8 22 1/2
Fiscal 1993
First quarter........................................... 33 1/2 25 3/4
Second quarter.......................................... 35 1/4 25 3/4
Third quarter........................................... 33 1/2 17 5/8
Fourth quarter.......................................... 23 1/4 17
Fiscal 1994
First quarter........................................... 25 3/8 19 1/4
Second quarter.......................................... 26 1/4 15
Third quarter (through June 8, 1992).................... 19 3/8 16 7/8
</TABLE>
- ---------------
(1) Novell reports its annual financial results on a 52-week/53-week basis with
the last day of the fiscal year being on the last Saturday of October.
On March 18, 1994, the last trading day prior to the signing of the Merger
Agreement, the closing price of Novell Common Stock as reported on the Nasdaq
National Market was $24.00 per share. Following the Merger, Novell Common Stock
will continue to be traded on the Nasdaq National Market under the symbol
"NOVL."
No established public trading market exists for WordPerfect Common Stock.
WordPerfect most recently issued options to acquire shares of its Common Stock
in January 1994 at an exercise price of $13.50 per share. WordPerfect has in the
past granted options at exercise prices ranging from $8.50 to $13.50 per share.
Novell has never paid cash dividends on its shares of Common Stock.
WordPerfect, which from 1985 until September 30, 1993, was treated for U.S.
federal and state income tax purposes as an S corporation under Subchapter S of
the Internal Revenue Code of 1986, as amended (the "Code"), has previously made
distributions to its shareholders to fund the payment of their individual tax
liabilities attributable to their allocation of WordPerfect's income and as a
return of capital. Such distributions totaled $20.3 million in 1993, $178.2
million in 1992 and $121.9 million in 1991. The distribution amount for 1993
excludes amounts attributable to the transfer to WordPerfect Corporation of
certain shareholders' interests in a limited liability company which owns the
land and buildings used by WordPerfect for its operating activities in North
America. For financial statement purposes, the transfer of the limited liability
company has been treated as a distribution to such shareholders during 1993 and
resulted in a concurrent reduction in shareholders' equity of $79.3 million.
Separate Operating Unit. Upon consummation of the Merger, Novell will
establish and maintain WordPerfect as a separate operating unit constituting the
Novell Applications Product Group. The Quattro Pro spreadsheet product line to
be acquired from Borland will be placed under the control of the Novell
Applications Product Group. Mr. Adriaan Rietveld, the current President and
Chief Executive Officer of WordPerfect, will be appointed President of the
Novell Applications Product Group and will report directly to
5
<PAGE> 15
the President and Chief Executive Officer of Novell. The remaining executive
officers of the Novell Applications Product Group will report directly to the
Applications Product Group President. The Novell Applications Product Group will
be operated in accordance with a plan to be developed by the Applications
Product Group and approved by Novell.
Reasons for the Merger. In the discussions which led to the signing of the
Merger Agreement, the respective managements of Novell and WordPerfect
identified a number of potential joint benefits resulting from the Merger,
including expanded marketing and distribution opportunities and capabilities,
strengthened and diversified research and development capabilities, a more
diversified intellectual property base, and a broadened pool of experienced
management. In addition, the WordPerfect Board of Directors believes that the
Merger will provide a significant increase in financial, marketing, distribution
and development resources for WordPerfect. The WordPerfect Board believes that
given the established trading market for Novell Common Stock, the Merger will
provide WordPerfect shareholders with increased liquidity. See "The Merger and
Related Transactions -- Joint Reasons for the Merger."
Recommendation of the WordPerfect Board of Directors. The Board of
Directors of WordPerfect has unanimously approved the Merger Agreement and
believes that the Merger is fair and in the best interests of WordPerfect and
its shareholders. The WordPerfect Board of Directors recommends that the
shareholders vote FOR the approval and adoption of the Merger Agreement and the
transactions contemplated thereby. See "The Merger and Related
Transactions -- Joint Reasons for the Merger" and "-- WordPerfect Board
Recommendation of the Merger."
Effective Time of Merger. The Merger will become effective upon the filing
of the Articles of Merger contemplated by the Merger Agreement with the Utah
Division of Corporations and Commercial Code (the date and time of such filing
being referred to herein respectively as the "Effective Date" and the "Effective
Time"). Assuming all conditions to the Merger are met or waived prior thereto,
it is anticipated that the Effective Time will occur on the date of the Special
Meeting. See "Terms of the Merger -- Effective Time of the Merger."
Exchange of WordPerfect Stock Certificates. As soon as practicable after
the Effective Time, an exchange agent appointed by Novell (the "Exchange Agent")
will mail a letter of transmittal with instructions to all holders of record of
WordPerfect Common Stock for use in exchanging their certificates representing
shares of Common Stock of WordPerfect for certificates representing shares of
Novell Common Stock. CERTIFICATES SHOULD NOT BE SURRENDERED BY THE HOLDERS OF
WORDPERFECT COMMON STOCK UNTIL SUCH HOLDERS RECEIVE THE LETTER OF TRANSMITTAL
FROM THE EXCHANGE AGENT. See "Terms of the Merger -- Manner and Basis of
Converting Shares."
Conditions to the Merger; Termination and Amendment. Consummation of the
Merger is subject to the satisfaction of various conditions which, if not
fulfilled or waived, permit termination of the Merger Agreement. The Merger
Agreement may also be terminated under certain other circumstances, including
termination by mutual consent of Novell and WordPerfect and termination by
either Novell or WordPerfect if the Merger is not consummated on or before July
31, 1994. See "Terms of the Merger -- Conditions to the Merger."
The Merger Agreement may be amended by the parties thereto, provided such
amendment is in writing, at any time before or after the approval and adoption
of the Merger Agreement by the WordPerfect shareholders; but, after any such
shareholder approval has been obtained, no amendment of any of the agreements
executed in connection with the Merger may be made which by law requires the
further approval of the WordPerfect shareholders, without obtaining such further
approval. Under applicable law, any amendment subsequent to the adoption of the
Merger Agreement by the WordPerfect shareholders that alters any contractual
rights of the WordPerfect shareholders in connection with the Merger, such as a
change in the amount or kind of securities to be received in exchange for
WordPerfect Common Stock in the Merger, or that otherwise adversely affects the
WordPerfect shareholders would require the further approval of the WordPerfect
shareholders. See "Terms of the Merger -- Termination or Amendment of Merger
Agreement."
6
<PAGE> 16
Representation on Novell's Board of Directors. The Merger Agreement
provides that it will be a condition to WordPerfect's obligation to consummate
the Merger that Dr. Ashton and Mr. Bastian (or designees of each of them) be
elected to the Novell Board of Directors. It is anticipated that this condition
will be waived by WordPerfect in return for Novell's agreement that following
the Merger, the Novell Board of Directors will, promptly following the request
of Dr. Ashton and Mr. Bastian, cause the number of directors comprising the full
Board of Directors of Novell to be increased by two persons, from seven to nine,
and at such time cause Dr. Ashton and Mr. Bastian (or their designees) to be
elected to the Novell Board of Directors. Dr. Ashton and Mr. Bastian are
expected to make a request to join the Novell Board of Directors in the latter
part of 1994. In addition to the foregoing, the Novell Board of Directors has
agreed to take all necessary action to cause Dr. Ashton and Mr. Bastian (or
their designees) to be nominated for election at the Novell annual meeting of
stockholders for fiscal 1995.
Shareholder Agreements. Pursuant to Shareholder Agreements entered into
between Novell and shareholders of WordPerfect holding in aggregate
approximately 89% of the outstanding WordPerfect Common Stock, such shareholders
of WordPerfect have agreed to vote in favor of the Merger Agreement and have
granted the Novell Board of Directors proxies to vote their shares of capital
stock of WordPerfect in favor of the Merger Agreement. See "Terms of the
Merger -- Shareholder Agreements."
Resale of Novell Common Stock; Affiliates Agreements. Certain "affiliates"
(as that term is defined for purposes of Rule 145 of the Securities Act) of
WordPerfect have entered or will enter into agreements restricting the sale or
disposition of their shares of WordPerfect Common Stock prior to the Merger and
the resale or other disposition of shares of Novell Common Stock received by
them in the Merger (including shares of Novell Common Stock issued upon the
exercise of Options) so as to comply with the requirements of securities laws,
tax laws and pooling of interests accounting. See "Terms of the
Merger -- Conditions to the Merger" and "-- Affiliates Agreements."
Certain Federal Income Tax Considerations. The Merger is intended to
qualify as a reorganization (a "Reorganization") under Section 368 of the Code,
in which case no gain or loss would generally be recognized by the shareholders
of WordPerfect on the exchange of their shares of WordPerfect Common Stock for
shares of Novell Common Stock. If the Merger were not to qualify, the exchange
of shares would be taxable. It is a condition to the obligation of each of
Novell and WordPerfect to consummate the Merger that they receive an opinion of
their respective counsel to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. ALL WORDPERFECT
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS. See "Terms of the
Merger -- Certain Federal Income Tax Considerations."
Tax Matters Agreement. Certain WordPerfect shareholders will enter into a
Tax Matters Agreement that will provide that such shareholders, subject to
certain limitations, will severally and not jointly indemnify WordPerfect and
Novell with respect to U.S. federal and Utah and New Mexico state income tax
liability (including interest and penalties) arising out of a failure of
WordPerfect or its affiliates to have been S corporations (as defined in Section
1361 of the Code) during any taxable year (or that portion of any taxable year)
for which such corporations reported for federal and Utah state income tax
purposes that they were S corporations. See "Terms of the Merger -- Tax Matters
Agreement."
Accounting Treatment. The Merger is to be treated as a pooling of
interests for financial reporting purposes. Consummation of the Merger is
conditioned upon (i) receipt by Novell of a letter from its independent auditors
indicating their opinion that such accounting treatment is appropriate and (ii)
receipt by WordPerfect of a letter from its independent accountants that such
independent accountants are not aware of any condition that would preclude
WordPerfect from participating in a merger transaction to be accounted for as a
pooling of interests. See "Terms of the Merger -- Conditions to the Merger" and
"-- Accounting Treatment."
Governmental and Regulatory Approvals. The notification and waiting period
imposed upon Novell and WordPerfect under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") expired on May 4, 1994. See
"Terms of the Merger -- Governmental and Regulatory Approvals."
7
<PAGE> 17
Novell and WordPerfect are aware of no other governmental or regulatory
approvals required for consummation of the Merger, other than compliance with
applicable "blue sky" laws of the various states.
Dissenters' Rights. Shareholders of WordPerfect who do not vote in favor
of the Merger may, under certain circumstances and by following procedures
prescribed by Part 13 of the URBCA, exercise dissenters' rights and receive cash
for their shares of WordPerfect Common Stock. The failure of a dissenting
shareholder of WordPerfect to follow the appropriate procedures may result in
the termination or waiver of such rights. A copy of Part 13 of the URBCA is
attached to this Prospectus/Proxy Statement as Appendix B. Shareholders of
WordPerfect are urged to read Part 13 of the URBCA carefully. See "Terms of the
Merger -- Dissenters' Rights."
8
<PAGE> 18
SELECTED UNAUDITED HISTORICAL AND
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected unaudited historical and pro forma consolidated
financial data of Novell and WordPerfect have been derived from their respective
historical consolidated financial statements and should be read in conjunction
with such consolidated financial statements and notes thereto, certain of which
are incorporated by reference or included elsewhere in this Prospectus/Proxy
Statement. In the opinion of management of Novell and WordPerfect, respectively,
the interim data presented include all adjustments necessary for a fair
statement of the results of operations for such periods. Novell's Common Stock
was split two-for-one in August 1992, August 1991 and July 1990. All stock
splits have been reflected retroactively herein.
NOVELL, INC.
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED(1)
--------------------- -------------------------------------------------------------------
APRIL 30, MAY 1, OCTOBER 30, OCTOBER 31, OCTOBER 26, OCTOBER 27, OCTOBER 28,
1994(2) 1993 1993(3) 1992 1991 1990 1989
--------- -------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales............................ $717,975 $540,894 $1,122,896 $ 933,370 $ 640,079 $ 497,512 $ 421,877
Income from operations............... 248,790 215,144 74,225 356,862 226,138 134,220 71,541
Income before taxes.................. 267,257 229,300 104,048 377,318 248,074 145,106 77,058
Net income (loss).................... 177,726 151,338 (35,160 ) 249,030 162,488 94,319 48,547
Net income (loss) per share.......... .57 .49 (.11 ) .81 .55 .34 .18
Weighted average shares
outstanding........................ 314,154 311,399 314,409 308,104 295,968 276,468 266,872
</TABLE>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 30, OCTOBER 31, OCTOBER 26, OCTOBER 27, OCTOBER 28,
1994 1993 1992 1991 1990 1989
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash and short-term investments.............. $ 929,554 $ 664,070 $ 545,260 $ 346,765 $ 254,776 $ 129,803
Working capital.............................. 1,052,139 821,771 716,033 434,854 308,342 216,400
Total assets................................. 1,579,229 1,343,855 1,096,696 726,250 494,438 346,620
Long-term debt............................... -- -- -- 1,208 2,366 56,972
Shareholders' equity......................... 1,314,087 996,499 937,806 598,585 398,283 235,808
</TABLE>
- ---------------
(1) Novell reports its annual financial results on a 52-week/53-week basis with
the last day of the fiscal year being the last Saturday of October.
(2) The first six months of fiscal 1994 includes a Sun Microsystems purchase of
a one time fully paid license for UNIX technology for $80.5 million and
associated expenses of $35 million. Net of income taxes, net income was
increased by $30.3 million or $.10 per share.
(3) During fiscal 1993, Novell wrote off $311.5 million of non-tax deductible
purchased research and development in connection with acquisitions. An
additional $9.0 million tax deductible charge was incurred related to
restructuring of operations. Net of income taxes, net income was reduced by
$317.5 million or $1.01 per share.
9
<PAGE> 19
WORDPERFECT CORPORATION
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------- YEAR ENDED DECEMBER 31,
APRIL 30, JUNE 30, ----------------------------------------------------
1994(1)(2) 1993 1993(3) 1992(4) 1991 1990 1989
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED STATEMENT OF INCOME DATA:
Net sales.................................... $ 305,233 $346,428 $707,515 $579,118 $621,994 $505,932 $316,386
Income from operations....................... 4,543 47,653 33,873 71,284 202,535 196,989 101,715
Income before taxes.......................... $ 3,998 $ 48,850 $ 34,109 $ 84,489 $213,138 $206,734 $106,631
Provision (benefit) for income taxes(5)...... (9,100) 4,830 (41,771) 11,541 12,310 8,085 4,844
----------- -------- -------- -------- -------- -------- --------
Net income................................... $ 13,098 $ 44,020 $ 75,880 $ 72,948 $200,828 $198,649 $101,787
=========== ======== ======== ======== ======== ======== ========
Net income per share(6)...................... $ .24 $ .83 $ 1.42 $ 1.42 $ 4.02 $ 3.97 $ 2.04
Shares used in per share calculations(6)..... 54,125 52,795 53,491 51,380 50,000 50,000 50,000
UNAUDITED PRO FORMA DATA(7):
Income before taxes.......................... $ 3,998 $ 48,850 $ 34,109 $ 84,489 $213,138 $206,734 $106,631
Pro forma income taxes....................... 6,448 15,632 11,918 32,252 75,080 73,512 37,172
----------- -------- -------- -------- -------- -------- --------
Pro forma net income......................... $ (2,450) $ 33,218 $ 22,191 $ 52,237 $138,058 $133,222 $ 69,459
=========== ======== ======== ======== ======== ======== ========
Pro forma net income per share(6)............ $ (.05) $ .63 $ .41 $ 1.02 $ 2.76 $ 2.66 $ 1.39
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
APRIL 30, ----------------------------------------------------
1994 1993 1992 1991 1990 1989
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA:
Cash and short-term investments............................ $ 51,194 $ 55,127 $ 86,569 $166,348 $107,333 $ 53,408
Working capital............................................ 27,105 37,537 11,035 126,799 88,824 30,164
Total assets............................................... 390,164 401,482 333,779 407,250 294,630 154,553
Long-term debt............................................. 91,763 84,289 12,256 1,263 8,450 580
Shareholders' equity....................................... 124,688 149,527 177,241 285,697 205,155 91,287
</TABLE>
- ---------------
(1) The historical consolidated statement of income data and unaudited pro forma
data for the six months ended April 30, 1994 include two months (November
and December 1993) which are also included in the historical consolidated
statement of income data and unaudited pro forma data for the year ended
December 31, 1993. Results of operations for the two months ended December
31, 1993 consist of net sales of $136.6 million and net income of $39.9
million.
(2) The six months ended April 30, 1994 includes a $15.0 million write-off of
non-tax deductible purchased research and development in connection with an
acquisition. Net income was reduced accordingly by $15.0 million, or $.28
per share.
(3) During 1993, WordPerfect wrote off $3.0 million of non-tax deductible
purchased research and development in connection with an acquisition. A
$33.0 million tax deductible restructuring charge was also incurred. Net of
income taxes, pro forma net income was reduced by $24.5 million, or $.46 per
share.
(4) During 1992, WordPerfect wrote off $20.4 million of non-tax deductible
purchased research and development in connection with an acquisition. Net
income was reduced accordingly by $20.4 million, or $.40 per share.
(5) WordPerfect and most of its subsidiaries have historically been exempt from
the payment of U.S. federal and certain state income taxes as a result of
being taxed as either S corporations or partnerships. The actual provision
for income taxes, for 1989 through 1992, reflects a provision for income
taxes in foreign countries. On September 30, 1993, WordPerfect Corporation
terminated its S corporation election, resulting in the recognition of an
income tax benefit of $44.5 million. On December 31, 1993, WordPerfect's
other entities terminated their S corporation elections and were reorganized
as a single, consolidated entity, resulting in the recognition of an income
tax benefit of $14.1 million.
(6) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing net income per share.
(7) The unaudited pro forma data are based upon historical income before taxes,
adjusted to reflect a provision for income taxes as if WordPerfect and its S
corporation subsidiaries had never been S corporations. See "WordPerfect
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Pro Forma Provision for Income
Taxes," "Certain Transactions of WordPerfect" and Notes 2 and 16 of Notes to
Consolidated Financial Statements.
10
<PAGE> 20
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The unaudited pro forma combined financial data are calculated after giving
effect to the Merger at the exchange ratio of one share of Novell Common Stock
for each share of WordPerfect Common Stock using the pooling of interests method
of accounting. The unaudited pro forma combined financial data are not
necessarily indicative of future operations or the actual results that would
have occurred had the Merger been consummated at the beginning of the periods
presented. The selected unaudited pro forma combined financial data of Novell
and WordPerfect are derived from the unaudited pro forma condensed combined
financial statements and should be read in conjunction with such unaudited pro
forma condensed combined financial statements and notes thereto, certain of
which are incorporated by reference or included elsewhere in this
Prospectus/Proxy Statement. For a description of the various periods combined
for pro forma purposes and for other information regarding the pro forma data,
see "Unaudited Pro Forma Condensed Combined Financial Statements."
NOVELL AND WORDPERFECT COMBINED
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED PRO FORMA STATEMENT OF INCOME DATA:
<TABLE>
<CAPTION>
SIX MONTHS ENDED(1) FISCAL YEAR ENDED(2)
------------------------ -------------------------------------------------------------------
APRIL 30, MAY 1, OCTOBER 30, OCTOBER 31, OCTOBER 26, OCTOBER 27, OCTOBER 28,
1994(3) 1993 1993(4) 1992(5) 1991 1990 1989
---------- -------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................. $1,023,208 $887,322 $1,830,411 $1,512,488 $1,262,073 $1,003,444 $ 738,263
Income from operations..... 253,333 262,797 108,098 428,146 428,673 331,209 173,256
Income before taxes........ 271,255 278,150 138,157 461,807 461,212 351,840 183,689
Net income................. 190,824 195,358 40,720 321,978 363,316 292,968 150,334
Net income per share....... .52 .54 .11 .90 1.05 .90 .47
Weighted average shares
outstanding.............. 368,279 364,194 367,900 359,484 345,968 326,468 316,872
ADDITIONAL UNAUDITED PRO FORMA DATA(6):
Income before taxes........ $ 271,255 $278,150 $ 138,157 $ 461,807 $ 461,212 $ 351,840 $ 183,689
Pro forma income taxes..... 95,979 93,594 151,126 160,540 160,666 124,299 65,683
---------- -------- ----------- ----------- ----------- ----------- -----------
Pro forma net income
(loss)................... $ 175,276 $184,556 $ (12,969 ) $ 301,267 $ 300,546 $227,541... $ 118,006
========= ======== =========== =========== =========== =========== ===========
Pro forma net income (loss)
per share................ $ .48 $ .51 $ (.04 ) $ .84 $ .87 $ .70 $ .37
</TABLE>
UNAUDITED PRO FORMA BALANCE SHEET DATA(7):
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 30, OCTOBER 31, OCTOBER 26, OCTOBER 27, OCTOBER 28,
1994 1993 1992 1991 1990 1989
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash and short-term
investments............................. $ 980,748 $ 719,197 $ 631,829 $ 513,113 $ 362,109 $ 183,211
Working capital........................... 1,079,244 859,308 727,068 561,653 397,166 246,564
Total assets.............................. 1,969,393 1,745,337 1,430,475 1,133,500 789,068 501,173
Long-term debt............................ 91,763 84,289 12,256 2,471 10,816 57,552
Shareholders' equity...................... 1,438,775 1,146,026 1,115,047 884,282 603,438 327,095
</TABLE>
- ---------------
(1) WordPerfect has a calendar year end and, accordingly, the WordPerfect
statement of income for the year ended December 31, 1993 has been combined
with the Novell statement of operations for the fiscal year ended October
30, 1993. Furthermore, the unaudited pro forma combined financial data for
the six months ended April 30, 1994 include two months (November and
December 1993) for WordPerfect, which are also included in the unaudited pro
forma combined statement of income for the fiscal year ended October 30,
1993. Results of operations of WordPerfect for the two months ended December
31, 1993 consist of net sales of $136.6 million and net income of $39.9
million. The unaudited pro forma condensed combined financial data for the
six months ended May 1, 1993 combines Novell's unaudited historical and pro
forma consolidated financial data for the six months ended May 1, 1993 with
11
<PAGE> 21
WordPerfect's unaudited historical and pro forma consolidated financial data
for the six months ended June 30, 1993.
(2) Novell reports its annual financial results on a 52-week/53-week basis with
the last day of the fiscal year being the last Saturday of October.
(3) Nonrecurring items resulted in an increase in pro forma net income of $15.3
million, or $.04 per share. See footnote 2 on page 9 and footnote 2 on page
10.
(4) Nonrecurring items resulted in a decrease in pro forma net income of $342.0
million, or $.93 per share. See footnote 3 on page 9 and footnote 3 on page
10.
(5) Nonrecurring items resulted in a decrease in pro forma net income of $20.4
million, or $.06 per share. See footnote 4 on page 10.
(6) The additional unaudited pro forma condensed combined financial data are
based upon historical combined income before taxes, adjusted to reflect a
provision for income taxes as if WordPerfect and its S corporation
subsidiaries had never been S corporations. See "WordPerfect Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Pro Forma Provision for Income
Taxes," "Certain Transactions of WordPerfect" and Notes 2 and 16 of Notes to
WordPerfect Consolidated Financial Statements. See Note 2 of Notes to
WordPerfect Consolidated Financial Statements for an explanation of the
determination of shares used in computing net income per share.
(7) Excludes the impact of accelerating the repayment of $76.9 million of
long-term notes payable to shareholders, including accrued interest at April
30, 1994, within 30 days after the closing of the Merger.
12
<PAGE> 22
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth (1) the historical net income (loss) per
common share and the historical book value per share data of Novell Common
Stock; (2) the pro forma net income per common share and the historical book
value per share data of WordPerfect Common Stock; (3) the pro forma net income
per share of common stock and the pro forma book value per share data after
giving effect to the proposed Merger on a pooling of interests basis; and (4)
the pro forma net income per share of common stock and the unaudited pro forma
book value per share, assuming solely for the purpose of this calculation an
exchange ratio of one share of Novell Common Stock for each share of WordPerfect
Common Stock. The information presented in the table should be read in
conjunction with the separate historical consolidated financial statements, the
unaudited pro forma condensed combined financial statements of Novell and
WordPerfect, and the interim unaudited consolidated condensed financial
statements of Novell and WordPerfect and the notes thereto incorporated herein
by reference or included elsewhere in this Prospectus/Proxy Statement. All stock
splits have been reflected retroactively herein.
<TABLE>
<CAPTION>
PRO FORMA
EQUIVALENT
FOR ONE
HISTORICAL PRO FORMA PRO FORMA WORDPERFECT
NOVELL WORDPERFECT COMBINED SHARE
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Net income (loss) per share:
First six months of fiscal 1994..... $ .57 $ (.05) $ .48 $ .48
Fiscal 1993......................... (.11) .41 (.04) (.04)
Fiscal 1992......................... .81 1.02 .84 .84
Fiscal 1991......................... .55 2.76 .87 .87
Book value per share:
End of first six months of fiscal
1994............................. 4.23 2.43 3.97 3.97
Fiscal year end 1993................ 3.23 2.91 3.19 3.19
</TABLE>
13
<PAGE> 23
RISK FACTORS
UNCERTAINTIES RELATED TO THE MERGER AND THE QUATTRO PRO ACQUISITION. While
Novell has acquired a number of companies in recent years, the acquisition of
WordPerfect and the Quattro Pro spreadsheet product line from Borland is the
largest acquisition ever undertaken by Novell. The successful combination of
companies and product lines in the high technology industry may be more
difficult and require a greater period of time to accomplish than in other
industries. Novell has historically not had any presence in the software
applications market and accordingly may lack the management and marketing
experience that will be necessary to successfully operate the WordPerfect
business following the Merger. The successful expansion of the Combined
Company's software applications business will require communication and
cooperation in product development and marketing among the senior executives and
key technical personnel of Novell, WordPerfect and Borland. Given the inherent
difficulties involved in completing a major business combination, there can be
no assurance that such cooperation will occur or that the integration of the
respective businesses will be successful and will not result in disruptions in
one or more sectors of the Combined Company's business. In addition, there can
be no assurance that the Combined Company will retain its key technical and
management personnel, that the market will favorably view Novell's proposed
entry into the software applications field or that Novell will realize any of
the other anticipated benefits of the Merger and the Quattro Pro acquisition.
Novell has historically been viewed as an independent provider of operating
system software and one that treated all software application vendors in a
neutral fashion. The proposed Merger with WordPerfect may be perceived by the
market as a deviation from this operating strategy and as a result may lead to a
certain amount of confusion in the market.
COMPETITION IN MARKETS FOR OPERATING SYSTEM SOFTWARE. The market for
operating systems software, including network operating systems and client
operating systems, has become increasingly problematic due to Microsoft's
growing dominance in all sectors of the software business. The Combined Company
will not have the product breadth and market power of Microsoft. Microsoft's
dominant position provides it with enormous competitive advantages, including
the ability to unilaterally determine the direction of future operating systems
and to leverage its strength in one or more product areas to achieve a dominant
position in new markets. This position may enable Microsoft to increase its
market position even if the Combined Company succeeds in introducing products
with performance and features superior to those offered by Microsoft.
Microsoft's ability to offer networking functionality in future versions of
MS Windows and MS Windows NT and in any other Microsoft operating systems, or to
provide incentives to customers to purchase certain products in order to obtain
favorable sales terms or necessary compatibility or information with respect to
other products, may significantly inhibit the Combined Company's ability to
maintain its business. Moreover, Microsoft's ability to offer products on a
bundled basis can be expected to impair the Combined Company's competitive
position with respect to particular products. In addition, as Microsoft creates
new operating systems and applications, there can be no assurance that Novell
will be able to ensure that its products will be compatible with those of
Microsoft.
Both Novell and WordPerfect are aware of several new operating systems
currently under development and scheduled for introduction within the next year
and beyond. If any of these operating systems achieves market acceptance for use
with the types of applications sold by WordPerfect and WordPerfect does not
introduce application programs for them in a timely manner, WordPerfect's
business and results of operations could be materially adversely affected.
COMPETITION IN MARKETS FOR APPLICATIONS. In the market for MS Windows word
processing applications, WordPerfect for MS Windows competes with, among others,
Microsoft's Word and Lotus Development Corporation's ("Lotus") Ami Pro. Novell
believes that the Combined Company's share of the Windows word processing market
will be a critical factor in its future success. Although WordPerfect has
significantly increased its share of this market during the past year, it
remains second to Microsoft. The market for MS Windows applications is currently
characterized by severe competitive pressure, and attempts by major participants
to maintain or increase market share may lead to rapid reductions in product
prices. In addition, some software vendors are combining a number of application
programs in a "bundle" or "suite" for sale as one unit or arranging with
hardware manufacturers to preload application programs on new computers. The
14
<PAGE> 24
price for a bundle or suite is typically significantly less than the price for
separately purchased applications, and many end users are likely to prefer the
bundle or suite over a more expensive combination of other individually
purchased applications, even if the latter applications offer superior
performance or features. Microsoft and Lotus offer bundles or suites of their
respective products at prices significantly discounted from the prices of stand
alone products. To the extent that bundling, suites and preloading arrangements
by competitors are more successful than those of the Combined Company, the
Combined Company's business and results of operations could be materially
adversely affected.
SALES OF QUATTRO PRO SPREADSHEET. In August 1993, a federal district court
in Boston, Massachusetts, issued an injunction with respect to Borland's sale of
versions of the Quattro Pro spreadsheet incorporating certain functions which
were found to infringe copyrights held by Lotus. These functions enabled users
of Quattro Pro to use macros developed for the Lotus 1-2-3 spreadsheets, as well
as other features designed to enable a level of compatibility between Quattro
Pro and Lotus 1-2-3. The issuance of the injunction, the procedures implemented
by Borland to comply with the injunction, as well as publicity and marketing
efforts by Lotus following the issuance of the injunction, have disrupted sales
of the Quattro Pro products in a variety of different ways, and may continue to
do so. Although Novell will not assume any direct liability for this lawsuit,
should the decision of the district court be upheld on appeal, the continued
existence of the injunction could have a significant continuing adverse affect
on Novell's ability to sustain or increase sales of the Quattro Pro spreadsheet,
either on a stand alone basis or in conjunction with other application products.
Moreover, the market for spreadsheet applications products is maturing and
becoming increasingly competitive, particularly on the basis of price. To
maintain or increase its share of the spreadsheet software market, Borland has
significantly discounted the price of its Quattro Pro product, thereby
substantially decreasing any profits that could potentially be earned on the
sale of the products. Moreover, Novell believes that disruptions associated with
the Merger and the acquisition of Quattro Pro have resulted in a decline in
sales of Quattro Pro in recent periods. Due to these factors, there can be no
assurance that the level of sales of Quattro Pro will be maintained or increased
or that the Combined Company will derive significant profits from its existing
or future Quattro Pro products.
LICENSES, PATENTS AND TRADEMARKS. The Combined Company will rely on
copyright, patent, trade secret and trademark law, as well as provisions in its
license, distribution and other agreements in order to protect its intellectual
property rights. Additionally, Novell and WordPerfect have numerous patents
pending in foreign countries. No assurance can be given that such patents
pending will be issued or, if issued, will provide protection for the Combined
Company's competitive position. Although Novell intends to protect its patent
rights vigorously, there can be no assurance that these measures will be
successful. Additionally, no assurance can be given that the claims on any
patents held by the Combined Company will be sufficiently broad to protect the
Combined Company's technology. In addition, no assurance can be given that any
patents issued to the Combined Company will not be challenged, invalidated or
circumvented or that the rights granted thereunder will provide competitive
advantages to the Combined Company. The loss of patent protection on the
Combined Company's technology or the circumvention of its patent protection by
competitors could have a material adverse effect on the Combined Company's
ability to compete successfully in its products business.
The software industry is characterized by frequent litigation regarding
copyright, patent and other intellectual property rights. Both Novell and
WordPerfect have from time to time had infringement claims asserted by third
parties against them and their respective products. There can be no assurance
that such third party claims will be resolved in a satisfactory manner, that
third parties will not assert other claims against the Combined Company with
respect to existing or future products or that licenses will be available on
reasonable terms, or at all, with respect to any third-party technology. In the
event of litigation to determine the validity of any third-party claims, such
litigation could result in significant expense to the Combined Company and
divert the efforts of the Combined Company's technical and management personnel,
whether or not such litigation is determined in favor of the Combined Company.
In the event of an adverse result in any such litigation, the Combined
Company could be required to expend significant resources to develop
non-infringing technology or to obtain licenses to the technology which is the
subject of the litigation. There can be no assurance that the Combined Company
would be successful in such development or that any such licenses would be
available. In addition, the laws of certain countries in
15
<PAGE> 25
which Novell's or WordPerfect's products are or may be developed, manufactured
or sold may not protect the Combined Company's products and intellectual
property rights to the same extent as the laws of the United States.
ATTRACTION AND RETENTION OF KEY EMPLOYEES. The ability of the Combined
Company to maintain its competitive technological position will depend, in large
part, on its ability to attract and retain highly qualified development and
managerial personnel. Competition for such personnel is intense. While the
Merger and the agreement to acquire the Quattro Pro product line from Borland
will increase the Combined Company's human resources in these areas, there is a
risk of departure of key employees due to the combination process. The
announcement of the proposed Merger and Quattro Pro product line acquisition may
impede the Combined Company's ability to attract and retain personnel prior to
and after these transactions. The loss of a significant group of key personnel
would adversely affect the Combined Company's product development efforts.
WORDPERFECT PRODUCT CONCENTRATION. Approximately 80% and 86% of
WordPerfect's revenues during 1993 and 1992, respectively, were derived from
sales of various versions of WordPerfect's flagship document processing product,
WordPerfect. Although additional products are currently being sold or developed,
Novell believes that WordPerfect in its various forms will continue to be the
Combined Company's primary application product for the foreseeable future. See
"WordPerfect Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Information Concerning WordPerfect -- Products."
POSSIBLE NEW PRODUCT DELAYS. As is common in the computer software
industry, both Novell and WordPerfect have experienced delays in their product
development and "debugging" efforts, and the Combined Company may experience
similar delays from time to time in the future. Significant delays in
developing, completing or shipping new or enhanced products would adversely
affect the Combined Company. There can be no assurance that the Combined Company
will be able to respond effectively to technological changes or new product
announcements by others, or that the Combined Company's research and development
efforts will be successful. For example, in the spring of 1993, Novell
introduced its NetWare 4.x operating system family of products. Initial shipment
of the 4.0 version of NetWare occurred in May 1993, and Novell has new product
releases scheduled for the second half of fiscal 1994 and the first quarter of
fiscal 1995. However, given the complexity of network operating system software,
there can be no assurance that these releases or any future product releases
will not be delayed beyond their anticipated release dates. In the past, Novell
has experienced delays in the introduction of new products, due to the
complexity of network operating systems, the need for extensive testing of such
software to ensure compatibility of new releases with a wide variety of
application software and hardware devices and the need to "debug" products prior
to extensive distribution. Moreover, the Company may experience delays in market
acceptance of new releases of the Netware operating system as the Company
engages in marketing and education of the user base regarding the advantages and
system requirements for the new products and as customers evaluate the
advantages and disadvantages of upgrading. The Company has encountered these
issues on each major new release of its operating system software, and expects
that it will encounter such issues in the future. Novell's ability to achieve
desired levels of sales growth depends at least in part on the successful
completion, introduction and sale of new versions of its NetWare 4.x operating
system. Should Novell experience material delays or sales shortfalls with
respect to these product releases, the Combined Company's sales and net income
could be adversely affected.
MARKET ACCEPTANCE OF EXPANDED BUSINESS STRATEGY. A fundamental goal of the
Combined Company will be the delivery of workgroup application solutions
combining the networking services of Novell and the workgroup applications of
WordPerfect. The future success of this strategy will depend in part on the
Combined Company's ability to develop and market new competitive products for
the workgroup productivity and information processing areas. Development of
these products, which include Novell's AppWare, WordPerfect Office, WordPerfect
InForms and SoftSolutions, has already required and will continue to require a
substantial investment in research and development, particularly as a result of
WordPerfect's decision to offer products across multiple operating environments.
Although Novell's existing network of distributors should assist in this
transition, marketing and distribution of these products may also require
developing new marketing and sales strategies and will entail significant
expense. WordPerfect has had only limited experience
16
<PAGE> 26
in the market for these products, and there can be no assurance that the
Combined Company will be successful in developing and marketing these new
products. See "Information Concerning WordPerfect -- The WordPerfect Strategy,"
"-- Products" and "-- Product Development."
FLUCTUATIONS IN QUARTERLY RESULTS; VOLATILITY OF STOCK PRICE. The Combined
Company's future earnings and stock price could be subject to significant
volatility, particularly on a quarterly basis. The Combined Company's revenues
and earnings may be unpredictable due to its anticipated shipment patterns. As
is typical in the software industry, a high percentage of the Combined Company's
revenues are expected to be earned in the third month of each fiscal quarter and
will tend to be concentrated in the latter half of that month. Accordingly,
quarterly financial results will be difficult to predict and quarterly financial
results may fall short of anticipated levels. Because the Combined Company's
backlog early in a quarter will not generally be large enough to assure that it
will meet its revenue targets for any particular quarter, quarterly results may
be difficult to predict until the end of the quarter. A shortfall in shipments
at the end of any particular quarter may cause the results of that quarter to
fall significantly short of anticipated levels. Due to analysts' expectations of
continued growth and the historically high price/earnings ratio at which
Novell's Common Stock trades, any such shortfall in earnings could have an
immediate and very significant adverse effect on the trading price of Novell's
Common Stock in any given period. WordPerfect's past pattern of new product
introductions has caused WordPerfect's sales revenues to fluctuate, sometimes
significantly, on a quarter-by-quarter basis, with sales being relatively higher
in quarters in which new versions are introduced. Such revenue fluctuations may
contribute to the volatility of the trading price of Novell Common Stock in any
given period following the Merger.
In addition, the market prices for securities of software companies have
generally been volatile in recent years. The market price of Novell Common
Stock, in particular, has been subject to wide fluctuations in the past. As a
result of the foregoing factors and other factors that may arise in the future,
the market price of Novell's Common Stock may be subject to significant
fluctuations over a short period of time. These fluctuations may be due to
factors specific to the Combined Company, to changes in analysts' earnings
estimates, or to factors affecting the computer industry or the securities
markets in general.
The Merger will result in greater involvement by Novell in the market for
applications software. To compete successfully in the applications market,
Novell anticipates incurring significantly higher expenditures in sales,
marketing and customer support as a percent of net sales than is typically
incurred in the sale of network operating systems. Accordingly, the Combined
Company can be expected to incur greater operating expenses, both in aggregate
dollars and as a percentage of total net sales, than Novell has incurred in the
past. Although the Combined Company will seek to offset such higher operating
costs through the higher sales levels derived from a broader product offering
and continued cost control, there can be no assurance that the Combined Company
will successful in such efforts.
17
<PAGE> 27
INTRODUCTION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by WordPerfect Corporation, a Utah corporation ("WordPerfect"), of
proxies to be voted at the special meeting of its shareholders (the "Special
Meeting"), which will be held on June , 1994, at 9:00 a.m., local time, at the
principal executive offices of WordPerfect located at 1555 North Technology Way,
Orem, Utah.
The purpose of the Special Meeting is to approve and adopt the Merger
Agreement (as defined below), as amended, providing for the merger of
WordPerfect with and into Novell, Inc., a Delaware corporation ("Novell").
Originally, the combination of Novell and WordPerfect was to be effected by the
merger of Novell Acquisition Corp., a wholly owned subsidiary of Novell ("Sub"),
with and into WordPerfect, with WordPerfect becoming a wholly owned subsidiary
of Novell, pursuant to the terms of the Agreement and Plan of Reorganization,
dated as of March 21, 1994 (the "Merger Agreement"), entered into by and among
Novell, Sub, WordPerfect, Alan C. Ashton, Bruce W. Bastian and Melanie L.
Bastian. As of May 31, 1994, the Merger Agreement was amended by the parties
thereto to provide for the merger of WordPerfect directly into Novell. All
references herein to the Merger Agreement are to the Merger Agreement as
amended.
The Merger will become effective upon the filing of the Articles of Merger
contemplated by the Merger Agreement with the Utah Division of Corporations and
Commercial Code (the date and time of such filing being referred to herein
respectively as the "Effective Date" and the "Effective Time"). At the Effective
Time, WordPerfect will merge with and into Novell and each share of WordPerfect
Common Stock (other than shares, if any, held by shareholders who have exercised
dissenters' rights under Part 13 of the Utah Revised Business Corporation Act
("URBCA")) will be converted into and exchanged for one share of Novell Common
Stock.
The Board of Directors of WordPerfect has unanimously approved the Merger
Agreement and determined that the Merger is in the best interests of WordPerfect
and its shareholders and recommends that the shareholders of WordPerfect vote in
favor of the Merger Agreement.
The information set forth herein concerning Novell has been furnished by
Novell, and the information set forth herein concerning WordPerfect has been
furnished by WordPerfect.
This Prospectus/Proxy Statement contains certain information set forth more
fully in the Merger Agreement attached hereto as Appendix A and is qualified in
its entirety by reference to the Merger Agreement, which is hereby incorporated
herein by reference. In formulating his or her voting decision with respect to
the proposed Merger, each WordPerfect shareholder should carefully read the
Merger Agreement.
18
<PAGE> 28
VOTING AND PROXIES
DATE, TIME, PLACE AND PURPOSE OF SPECIAL MEETING
The Special Meeting of Shareholders of WordPerfect will be held at the
principal executive offices of WordPerfect located at 1555 North Technology Way,
Orem, Utah on June , 1994, at 9:00 a.m., local time. The purpose of the
Special Meeting is to vote upon a proposal to approve and adopt the Merger
Agreement, providing for the merger of WordPerfect with and into Novell.
RECORD DATE AND OUTSTANDING SHARES
Only WordPerfect shareholders at the close of business on May 20, 1994 (the
"Record Date"), are entitled to notice of, and to vote at, the Special Meeting.
On the Record Date, there were 19 holders of Common Stock with 51,380,100 shares
of Common Stock of WordPerfect issued and outstanding. Except for the
shareholders identified herein under "Principal Shareholders of WordPerfect," on
the Record Date there were no other persons known to the management of
WordPerfect to be the beneficial owners of more than 5% of the outstanding
capital stock of WordPerfect.
VOTING OF PROXIES
All properly executed proxies that are not revoked will be voted at the
Special Meeting in accordance with the instructions contained therein. Proxies
returned and containing no instructions regarding the Merger proposal will be
voted "for" approval of the Merger Agreement in accordance with the
recommendation of the WordPerfect Board of Directors. A shareholder who has
executed and returned a proxy may revoke it at any time before it is voted at
the Special Meeting by executing and returning a proxy bearing a later date, by
filing written notice of such revocation with the Secretary of WordPerfect
stating that the proxy is revoked or by attending the Special Meeting and voting
in person.
VOTE REQUIRED
Under the URBCA, approval and adoption of the Merger Agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of
WordPerfect's Common Stock. Because the Merger Agreement must be approved by at
least a majority of outstanding shares entitled to vote on such matter,
abstentions will have the effect of a negative vote.
As of the Record Date, the directors, officers and affiliates of
WordPerfect, together with persons and entities related to or affiliated with
them, held an aggregate of 51,380,100 shares of WordPerfect Common Stock,
representing 100% of the outstanding WordPerfect Common Stock. Shareholders of
WordPerfect holding approximately 89% of the outstanding WordPerfect Common
Stock have agreed to vote in favor of the Merger Agreement and have granted the
Novell Board of Directors proxies to vote their shares in favor of approval of
the Merger, the Merger Agreement and any matter that could reasonably be
expected to facilitate the Merger. Therefore, assuming that the proxies granted
to Novell by such shareholders are voted in favor of the Merger Agreement,
approval of the Merger Agreement is assured.
EXPENSES; SOLICITATION OF PROXIES
Each party to the Merger Agreement will pay its own costs and expenses
incurred incident to the Merger Agreement and incurred in preparation therefor
and in carrying out the transactions contemplated thereby, except that if the
Merger is not consummated, expenses incurred in connection with printing this
Prospectus/ Proxy Statement will be shared equally by Novell and WordPerfect. No
proxy solicitation expenses are expected to be incurred in connection with the
approval of the Merger.
19
<PAGE> 29
DISSENTERS' RIGHTS
Holders of WordPerfect capital stock who do not vote in favor of the Merger
may, under certain circumstances and by following procedures prescribed by the
URBCA, exercise dissenters' rights and receive cash for their shares of stock of
WordPerfect. The failure of a dissenting WordPerfect shareholder to follow the
appropriate procedures may result in the termination or waiver of such rights.
See "Terms of the Merger -- Dissenters' Rights."
20
<PAGE> 30
THE MERGER AND RELATED TRANSACTIONS
JOINT REASONS FOR THE MERGER
Novell and WordPerfect have identified several potential mutual benefits of
the Merger that they believe will contribute to the success of the Combined
Company. These reasons are outlined below.
- - Changing Nature of Network Computing. Novell and WordPerfect believe the era
of stand alone computing is rapidly transitioning to the era of network
computing, and the network is becoming the natural platform for applications
within companies of all sizes. The combination of Novell and WordPerfect will
provide the infrastructure, networking services, tools and applications to
pioneer a new era of network applications, as well as the marketing expertise
to be an effective participant in this emerging market. The term "network
applications" refers to desktop applications which are specifically designed
to take advantage of network operating system services. Additionally,
offerings such as AppWare by Novell and OpenDoc, an industry standard being
developed by WordPerfect and other software vendors, will enable software
developers to substantially increase user productivity and ease of use in
networked environments. In the future, Novell and WordPerfect expect that
these applications will increasingly rely upon more advanced network operating
system services such as support for multimedia and document imaging, as well
as traditional existing services such as directories, network management
services and security functions. WordPerfect's expertise in workgroup
automation is expected to provide the Combined Company with a significant
opportunity in developing and offering network applications.
- - Emerging Market For Groupware Products. An emerging and rapidly growing
segment of the PC software market is the area of electronic mail and groupware
products which allow PC users to communicate and collaborate over networks.
Novell believes that this market will expand to include enhanced networking
services and that leadership in networking software will be critical in
providing an infrastructure and environment conducive to the development of
new application software. Currently, Novell provides the tools which many
software developers use to effectively integrate products and services with
the NetWare environment. Novell believes that, to compete most effectively in
the future, a software company must become more than simply a vendor of a
narrow range of networking software or application software products. The
strategy of the Combined Company will be to complement existing standards and
continue Novell's longstanding commitment to support openness with other
software vendors.
- - Increased Customer Base and Channels of Distribution. The Combined Company
will benefit from a larger customer base, which will present greater
opportunities for marketing the products of the Combined Company. In addition,
Novell and WordPerfect each bring major distributors and reseller
organizations to the Combined Company.
- - Cost Efficiencies and Synergies. With a broader, complementary product line,
the Combined Company should be better positioned to achieve efficiencies in
sales, administrative functions, development, support, marketing and
distribution, enabling it to compete more effectively.
- - Deliver New Products and Services to Exploit the "Information
Highway." Together, WordPerfect and Novell will provide the interface, the
infrastructure and the tools to help customers exploit the information
highway. As the networks within organizations are tied into national and
international networks, the Combined Company will be well-positioned to
provide solutions to electronically connect its customers worldwide. This
global networking capability will also provide an important new electronic
channel for software purchasing, distribution and maintenance.
21
<PAGE> 31
ADDITIONAL REASONS FOR THE MERGER -- NOVELL
The Board of Directors of Novell believes that the following are additional
benefits of the Merger and the related purchase of Borland's Quattro Pro product
line:
- - Acquisition of a Worldwide Application Software Franchise. WordPerfect's
brand name provides strong name recognition to buyers of personal computer
("PC") applications products. Combining Novell's and WordPerfect's
capabilities and resources will:
-- Give Novell greater visibility to the end-user customer through association
with WordPerfect's strong presence and brand awareness in the market for
software applications.
-- Increase Novell's ability to compete more effectively in the software and
networking market by having a broader product line including applications
software and groupware software solutions.
- - Provide Broad Array of Technological Solutions to Customers. Novell will also
be able to offer a suite of productivity applications, including word
processing, spreadsheet and presentations graphics products, which should
enhance Novell's network applications strategy.
- - Build on WordPerfect Marketing Expertise. Novell will be able to take
advantage of WordPerfect's strong distribution channels for application
software products, and its extensive sales and marketing infrastructure
worldwide.
- - An Expanded Base of Experienced Management and Employees. The acquisition of
WordPerfect will provide Novell with experienced development personnel who
have extensive expertise in the development of multi-platform, multi-language
application software products. Furthermore, Novell will have access to
WordPerfect management's expertise in marketing application software which
will enhance Novell's ability to compete in the emerging network application
software market.
ADDITIONAL REASONS FOR THE MERGER -- WORDPERFECT
The Board of Directors of WordPerfect believes that the following are
additional benefits of the Merger and the related purchase of Borland's Quattro
Pro product line:
- - Access to Novell's Established Customer Base. The Merger will permit
WordPerfect to access the installed base of more than 40 million users of
Novell's products. WordPerfect believes that this access is increasingly
critical in the competitive marketplace for applications software.
- - Availability of Novell's Distribution Network. As WordPerfect continues to
place increased importance on its workgroup application products, it needs to
develop different distribution channels and selling methods. Novell's existing
distribution and certification capabilities are highly complementary to those
which are being developed by WordPerfect. These channels are especially
important for such products as WordPerfect Office and WordPerfect InForms
which are designed to operate in a network environment. WordPerfect believes
that the Merger will provide a significant advantage in more rapidly
developing these capabilities.
- - Increased Resources to Compete in Applications Market. WordPerfect believes
that the market for application software is becoming increasingly competitive,
and expects such competition to increase in the future. As a result,
WordPerfect believes that its alliance with the leading company in the field
of networking software will significantly assist WordPerfect in this
environment.
- - Positioning for Broader Product Solutions. WordPerfect believes that the
software market is rapidly moving from stand alone applications to suite
offerings and that the purchase of the Quattro Pro product line by Novell will
complete WordPerfect's suite offering by including a strong spreadsheet
application. In addition, as WordPerfect's workgroup products become
increasingly important to its overall strategy, the opportunity to be part of
Novell, the leading networking company, will provide an excellent platform to
realize the potential of these products.
- - Integration of a Comprehensive Suite of Software Products. WordPerfect
believes that a suite offering which combines important applications, such as
a word processor and spreadsheet, is essential to be
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competitive in today's marketplace. Therefore, as a condition precedent to the
Merger, Novell will acquire Borland's Quattro Pro product line, one of the
most popular spreadsheet programs on the market today. This purchase will
allow the Combined Company to compete more effectively in one of the most
rapidly growing areas of PC application software -- suites -- by fully
combining and integrating WordPerfect's products, Novell's network operating
systems and application development tools and the Quattro Pro spreadsheet
product.
- - Provide Liquidity to WordPerfect Shareholders. The Merger will be a means by
which WordPerfect shareholders and optionholders will be able to obtain
liquidity for their equity interests. The Merger was considered in view of
available alternatives, and the Board of Directors of WordPerfect concluded
that no other company had the strategic fit or could offer the benefits
available from Novell. In addition, the Merger is expected to be accomplished
as a tax-free exchange of WordPerfect shares for Novell shares under Section
368(a) of the Internal Revenue Code.
WORDPERFECT BOARD RECOMMENDATION OF THE MERGER
WordPerfect's Board of Directors (the "WordPerfect Board") believes that
the Merger is fair to and in the best interests of WordPerfect and its
shareholders and therefore unanimously recommends that WordPerfect shareholders
vote in favor of the Merger.
The WordPerfect Board believes that the shares of Novell Common Stock to be
received by the shareholders of WordPerfect in the Merger will enable
WordPerfect shareholders to realize an attractive return on their investment.
The WordPerfect Board also views the Merger as a method by which the
shareholders of WordPerfect would be permitted to participate in any post-Merger
appreciation in the price of Novell Common Stock, if any. In this regard, the
WordPerfect Board recognized that no assurance can be given that the value of
the Novell Common Stock will be maintained before or after the Merger at any
particular level, and may be subject to significant fluctuations over short
periods of time.
In evaluating the proposed Merger, the WordPerfect Board discussed and
considered a wide variety of factors in order to make a determination of what is
in the best interests of WordPerfect and its shareholders. Specifically, the
WordPerfect Board reviewed the history of merger discussions with Novell (see
"-- Material Contacts" below), and also considered the advantages and
disadvantages that the Merger would present to WordPerfect's ability to achieve
its strategic objectives (see "-- Joint Reasons for the Merger" and "--
Additional Reasons for the Merger -- WordPerfect"). In addition, the WordPerfect
Board reviewed the status of the preliminary discussions that were taking place
at that time with Lotus Development Corporation ("Lotus"), a company that had
expressed an interest in acquiring WordPerfect. As part of this review, the
WordPerfect Board, together with legal counsel, engaged in a discussion
regarding possible antitrust concerns that might arise in connection with a
business combination with Lotus and the steps that the two companies might be
required to take to reduce these concerns. At the conclusion of this
consideration, it was determined that WordPerfect should terminate its
discussions with Lotus and engage in a transaction with Novell.
After considering the foregoing factors, the WordPerfect Board unanimously
adopted and approved the Merger Agreement and the transactions contemplated
thereby and recommended that the shareholders of WordPerfect vote to approve the
Merger.
MATERIAL CONTACTS
In early 1993, Novell and WordPerfect entered into a broad-based cross
licensing agreement under which each party was granted rights to utilize a
number of the other company's products on an internal basis. Several meetings
were held in 1993, the intent of which was to strengthen the strategic alliances
between the companies. In late 1993, Novell began consideration of a possible
acquisition of WordPerfect. At the time, the Novell Board of Directors was
considering a variety of strategic actions and did not actively pursue merger
discussions with WordPerfect. On or about January 21, 1994, Mr. Alan C. Ashton,
Co-Founder and Co-Chairman of the WordPerfect Board, contacted Mr. Raymond J.
Noorda, Chairman of the Board and then Chief Executive Officer of Novell, to
discuss whether Novell would consider an acquisition of WordPerfect.
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There was a general discussion between Mr. Noorda and Mr. Ashton related to
possible price and strategic synergies, but Novell did not at the time pursue a
transaction.
In March 1994, Novell decided to revisit the prospect of an acquisition of
WordPerfect. On Friday, March 4, 1994, legal, financial, and operational due
diligence teams from Novell met with their counterparts at WordPerfect. An
extensive review of WordPerfect's business operations was conducted. The
meetings continued on Monday, March 7, 1994, and into Tuesday, March 8, 1994. On
March 7, 1994, Mr. Larry W. Sonsini, a member of the Novell Board of Directors
and a partner in the law firm of Wilson, Sonsini, Goodrich & Rosati, legal
counsel to Novell, tendered his resignation from the WordPerfect Board to
WordPerfect. On Tuesday evening, March 8, 1994, Mr. Noorda convened a meeting of
Novell's Board of Directors. A discussion ensued regarding the advantages and
disadvantages associated with pursuing a merger or a corporate combination with
WordPerfect.
On Wednesday, March 9, 1994, another meeting of the Novell Board of
Directors was held. This meeting included members of the Novell Office of the
President together with Mr. David R. Bradford, Senior Vice President and General
Counsel. An extensive discussion was held, following which the Board of
Directors directed Novell senior management to explore Novell's acquisition of
WordPerfect.
Later that same day, Mr. Noorda, Ty Mattingly of Novell and Mr. Bradford
met at the offices of WordPerfect with Mr. Ashton, Mr. Adriaan Rietveld,
President and Chief Executive Officer of WordPerfect, Mr. R. Duff Thompson,
Executive Vice President and General Counsel of WordPerfect. Mr. Bruce Bastian,
a senior executive and Co-Founder and Co-Chairman of the WordPerfect Board, took
part in the meeting from Australia via telephone. A number of issues were
discussed regarding a possible combination of Novell and WordPerfect. Following
the meeting, Mr. Thompson and Mr. Bradford met at the offices of Novell where
they drafted a preliminary Letter of Intent regarding a possible combination of
the companies. Copies of the draft Letter of Intent were circulated to the
Novell Board of Directors and to its financial and legal advisors.
On Thursday March 10, 1994, the Novell Board of Directors again met. They
reviewed the terms contained in the draft Letter of Intent and the strategic
reasons for the transaction and authorized management of Novell to continue to
explore a possible merger of the companies.
During the course of the March 9, 1994 meeting, WordPerfect articulated its
position that any transaction with Novell would have to include the acquisition
of a strong spreadsheet product for the MS Windows and DOS markets. The parties
agreed to mutually explore the acquisition of the Quattro Pro spreadsheet
business from Borland. To do so, the parties met at the offices of Borland on
Friday March 11, 1994. Present at that meeting were Mr. Bradford, Mr. Mattingly,
and Mr. Noorda from Novell and Mr. Rietveld and Mr. Thompson of WordPerfect.
Also present were Mr. Philippe Kahn, Chief Executive Officer of Borland, Mr.
Peter Astiz of the law firm of Baker & McKenzie, legal counsel to Borland, and
Michael Price of Lazard Freres, financial advisor to Borland. The parties
discussed a possible purchase of the Quattro Pro spreadsheet business during the
course of that meeting.
In order to determine the feasibility of a potential transaction with
Borland, representatives of WordPerfect and Borland met on both Saturday and
Sunday, March 12 and 13, 1994, in Palo Alto, California to discuss potential
terms of an acquisition of the Quattro Pro product line.
A meeting between representatives of Novell and WordPerfect was then held
on Wednesday, March 16, 1994 at Mr. Ashton's home in Utah. Novell was given the
opportunity to present to WordPerfect's management team Novell's view of a
Novell-WordPerfect combination. Present at that meeting representing Novell were
Mr. Bradford, Mr. Noorda, Mr. John Edwards, Novell's Executive Vice President,
AppWare Systems Group, Mr. Mattingly, Mr. James Tolonen, Office of the President
and Chief Financial Officer of Novell, Mr. Darcy Mott, Corporate Treasurer of
Novell, Mr. Steve Wise, Senior Vice President of Finance of Novell and Mr.
Clifford Simpson, Director of Tax at Novell. Representing WordPerfect were Mr.
David Moon, Senior Vice President and Chief Technical Officer of WordPerfect,
Mr. Thompson, Mr. Ashton, Mr. Bastian, Mr. Rietveld, Mr. John Lewis, Executive
Vice President of WordPerfect, and Mr. Daniel Campbell, Senior Vice President
and Chief Financial Officer of WordPerfect. Acting in the interests of Novell
from the investment banking firm of Morgan Stanley & Co. Inc. were Mr. Frank
Quattrone and Mr. George
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Boutros. Present from Wilson, Sonsini, Goodrich & Rosati were Mr. Sonsini and
Mr. Tor R. Braham. Mr. Joshua L. Green and Mr. Steven J. Tonsfeldt from Brobeck,
Phleger & Harrison, legal counsel to WordPerfect, were also present at the
meeting.
At the meeting, the parties discussed the potential of network-based
applications, the strength of AppWare and WordPerfect Office, and the importance
of a comprehensive software suite incorporating both networking and application
products. Mr. Sonsini outlined a series of key points which comprised a plan for
the combination of Novell and WordPerfect, including Novell's purchase of the
Quattro Pro spreadsheet product from Borland. It was stated that Novell would
form an Applications Division comprised of the WordPerfect business and new
management of WordPerfect that would manage the software applications business.
Mr. Sonsini also summarized the proposed financial terms of the transaction,
including the exchange ratio.
The Novell representatives then left the meeting and the WordPerfect
shareholders, executive officers and legal counsel reviewed the Novell proposal.
Novell was told by WordPerfect that it would be making a decision whether or not
to pursue the Novell proposal that evening.
Later that night, representatives of WordPerfect contacted Novell and
informed Novell that the WordPerfect Board, including the major shareholders of
WordPerfect, had determined to proceed along the lines proposed by Novell,
subject to the preparation of a mutually satisfactory definitive agreement and
subject also to the execution by Novell of an agreement to acquire the Quattro
Pro spreadsheet business from Borland.
A meeting of the Board of Directors of Novell was held on Thursday March
17, 1994. An extensive discussion was held following which the Novell Board of
Directors resolved to authorize the officers of Novell to proceed and negotiate
a definitive agreement for both the WordPerfect and Quattro Pro transactions,
subject to final review by the Board of Directors of Novell.
Beginning on Friday, March 18, 1994, and continuing through Sunday, March
20, meetings, discussions, and negotiations were held at the law offices of
Wilson, Sonsini, Goodrich & Rosati among representatives of Novell, WordPerfect
and Borland.
On Sunday evening, March 20, 1994 commencing at 5:00 p.m. Pacific time,
another Novell Board of Directors' meeting was held. A WordPerfect Board meeting
was convened at the same time to consider the transaction.
The Board of Directors of Novell authorized the execution of the Merger
Agreement as well as a Purchase and License Agreement with Borland relating to
the acquisition of the QuattroPro spreadsheet business. At its meeting, the
WordPerfect Board authorized the execution of the Merger Agreement and certain
related matters. Thereafter, the definitive agreements for both transactions
were executed.
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TERMS OF THE MERGER
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that the separate existence of WordPerfect
shall cease and WordPerfect shall be merged with and into Novell, with Novell as
the surviving corporation. The Merger will become effective upon the filing of
the Articles of Merger contemplated by the Merger Agreement with the Division of
Corporations and Commercial Code of the State of Utah in accordance with the
URBCA. See "Terms of the Merger -- Conditions to the Merger." It is anticipated
that if the Merger is approved and adopted at the Special Meeting and all other
conditions of the Merger have been fulfilled or waived, the Effective Date will
be the date of the Special Meeting, or as soon as practicable thereafter. The
Merger Agreement also provides that (i) the Articles of Incorporation of Novell
shall be the Articles of Incorporation of the surviving corporation, (ii) the
Bylaws of Novell shall be the Bylaws of the surviving corporation, (iii) the
directors of Novell shall be the directors of the surviving corporation, (iv)
the officers of Novell shall be the officers of the surviving corporation; and
(v) the Merger shall, from and after the Effective Time, have all the effects
provided by applicable law, the Merger Agreement and the Articles of Merger.
MANNER AND BASIS OF CONVERTING SHARES
Terms of the Merger. Each issued and outstanding share of WordPerfect
Common Stock (other than shares held by WordPerfect, Novell or their respective
subsidiaries and shares, if any, held by persons exercising dissenters' rights
in accordance with the URBCA ("Dissenting Shares")), including shares issuable
upon the exercise of any WordPerfect Option (as defined below) prior to the
Effective Time, that are issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares) shall automatically be canceled
and extinguished and converted, without any action on the part of the holder
thereof, into the right to receive one share of Novell Common Stock. On June 8,
1994, the last sale price of Novell Common Stock as reported on the Nasdaq
National Market was $17 1/4 per share.
Based upon the number of shares of Novell Common Stock outstanding as of
May 27, 1994, 362,229,164 shares of Novell Common Stock will be outstanding
immediately after the Effective Time, of which approximately 14.18% will be held
by the former holders of WordPerfect Common Stock.
Exchange of Certificates. As soon as practicable after the Effective Time,
an exchange agent appointed by Novell (the "Exchange Agent") will mail to each
holder of record of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of capital stock of WordPerfect
(the "Certificates") whose shares are being converted into Novell Common Stock
pursuant to the Merger Agreement, a letter of transmittal with instructions for
use in effecting the surrender of the Certificates in exchange for Novell Common
Stock. After the Effective Time, there will be no further registration of
transfers on the stock transfer books of WordPerfect, as the surviving
corporation, of shares of WordPerfect Common Stock that were outstanding
immediately prior to the Effective Time. CERTIFICATES SHOULD NOT BE SURRENDERED
BY THE HOLDERS OF WORDPERFECT COMMON STOCK UNTIL SUCH HOLDERS RECEIVE THE LETTER
OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Upon the surrender of a Certificate representing shares of WordPerfect
Common Stock to the Exchange Agent together with a duly executed letter of
transmittal, the holder of such certificate will be entitled to receive in
exchange therefor the number of shares of Novell Common Stock equal to the
number of shares of WordPerfect Common Stock held by such holder. In the event
of a transfer of ownership of shares of WordPerfect Common Stock which is not
registered on the transfer records of WordPerfect, the appropriate number of
shares of Novell Common Stock may be delivered to a transferee if the
Certificate representing such shares of WordPerfect Common Stock is presented to
the Exchange Agent, together with the related letter of transmittal, and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
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Until a Certificate representing shares of WordPerfect Common Stock has
been surrendered to the Exchange Agent, each such Certificate will be deemed at
any time after the Effective Time to represent the right to receive upon such
surrender the number of shares of Novell Common Stock to which the shareholder
is entitled under the Merger Agreement.
EMPLOYEE BENEFIT PLANS
Representatives of Novell's and WordPerfect's respective human resources
departments have met and will continue to meet to coordinate the manner of
transition of the insurance and other benefit plans of WordPerfect after the
Merger. Novell and WordPerfect intend that the continuing employees of
WordPerfect will be entitled to receive employee benefits from Novell that will
be at least comparable to those being received by the employees of Novell, taken
as a whole, who occupy comparable positions and have comparable
responsibilities.
WordPerfect Options. Pursuant to the Merger Agreement, all stock options
to acquire shares of WordPerfect Common Stock outstanding immediately prior to
the Effective Time ("WordPerfect Options") will be assumed by Novell and
converted into options to acquire an equivalent number of shares of Novell
Common Stock. As of March 31, 1994, WordPerfect Options to acquire an aggregate
of 7,820,000 shares of WordPerfect Common Stock were issued and outstanding.
Notice to the holders of WordPerfect Options as to the terms of such assumption
and conversion will be sent by Novell upon consummation of the Merger. Each
WordPerfect Option so assumed by Novell shall continue to have, and be subject
to, the same terms and conditions set forth in the option agreement relating to
such WordPerfect Option, including the existing provisions that provide that the
vesting of such options will automatically accelerate immediately upon
consummation of the Merger.
Novell will take all corporate and other actions necessary to reserve and
make available sufficient shares of Novell Common Stock for issuance upon
exercise of the WordPerfect Options assumed by Novell and to prepare and file
with the SEC a registration statement on Form S-8 (or any successor form) with
respect to the underlying shares of Novell Common Stock issuable upon exercise
of such WordPerfect Options. Novell will use its reasonable efforts to have such
registration statement declared effective as soon as practicable following the
Effective Time and to maintain the effectiveness of such registration statement.
Section 401(k) Plan. WordPerfect has established a tax-deferred savings
plan (the "WordPerfect Plan") qualified under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Under the WordPerfect Plan,
eligible employees may authorize voluntary payroll deductions of up to 10% of
their base salaries to be invested in certain independently managed,
employee-elected investment funds. WordPerfect also makes contributions which
match up to 100% for the first 2% of salary contributions by the employee, 75%
for the next 2% and 50% for the next 2%. There is no matching for employee
contributions over 6%. Following the Merger, WordPerfect employees will be
eligible to participate in the Novell 401(k) Plan (the "Novell Plan") by making
new contributions to the Novell Plan. It is presently intended that WordPerfect
will file for authorization to terminate the WordPerfect Plan with the
appropriate governmental authorities, and the assets of the WordPerfect Plan
will be transferred to the Novell Plan.
CONDUCT OF BUSINESS OF WORDPERFECT AND NOVELL PRIOR TO THE MERGER
Under the Merger Agreement, WordPerfect has agreed that until the Effective
Time or the earlier termination of the Merger Agreement pursuant to the terms
thereof, WordPerfect and its majority-owned subsidiaries will conduct their
respective businesses in the ordinary and usual course consistent with past
practice and will use reasonable efforts to maintain and preserve intact their
business organizations, keep available the services of their officers and
employees and maintain satisfactory relations with licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relationships with them. Among other limitations relating to the conduct of its
business, WordPerfect has agreed that it will not, without Novell's prior
written consent, prior to the Effective Time, (a) declare, set aside or pay any
dividends on or make any other distribution (whether in cash, stock or property)
in respect of any of its capital stock; (b) split, combine or reclassify any of
its capital stock, or issue any other securities in respect of, in lieu of or in
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substitution for shares of its capital stock, or repurchase, redeem or otherwise
acquire any shares of its capital stock; (c) issue, deliver, or sell any shares
of its capital stock, or any other securities convertible into, or exchangeable
or exercisable therefor; (d) except pursuant to mandatory terms under
outstanding options, accelerate, amend or change the exercise period of options
granted under the WordPerfect Stock Option Plan or any other options, warrants
or other convertible securities; (e) authorize cash payments in exchange for any
options granted under the WordPerfect Stock Option Plan or any other options;
(f) authorize any change in its equity capitalization; (g) cause or permit any
amendments to its Articles of Incorporation or Bylaws or other charter
documents; (h) acquire or agree to acquire any business or any corporation,
partnership, association or other business organization or division thereof, or
assets which are material to the business condition of WordPerfect and its
majority-owned subsidiaries, taken as a whole; (i) sell, lease, pledge, license
or otherwise dispose of or encumber any of its assets or properties, except in
the ordinary course of business consistent with past practice (including,
without limitation, any indebtedness owed to it or any claims held by it); (j)
transfer the stock of any majority-owned subsidiary to any other majority-owned
subsidiary or any assets or liabilities to any new or, except in the ordinary
course of business consistent with past practice, existing majority-owned
subsidiary; (k) incur any indebtedness for borrowed money or guarantee any such
indebtedness, or guarantee the obligations of others, or make loans or advances;
(l) pay, discharge or satisfy any claims, liabilities or obligations, other than
the payment, discharge or satisfaction of liabilities in the ordinary course of
business consistent with past practice; (m) adopt or amend any employee benefit
plan, or enter into or amend any employment, severance, special pay arrangement
with respect to termination of employment or other similar arrangements or
agreements with any of its directors, officers or employees or increase the
salaries or wage rates of its employees other than pursuant to scheduled
employee reviews, consistent with past practices; (n) except in the ordinary
course of business consistent with past practices, transfer to any person or
entity any rights to WordPerfect intellectual property rights; (o) enter into or
amend any agreements pursuant to which any other party is granted exclusive
marketing or other rights of any type or scope with respect to any products of
WordPerfect or any of its majority-owned subsidiaries; (p) except in the
ordinary course of business with prior notice to Novell, violate, amend or
otherwise modify the terms of any material WordPerfect contracts; (q) commence a
lawsuit other than for the routine collection of bills; (r) change the
accounting methods or practices followed by WordPerfect or any of its
majority-owned subsidiaries, except as may be required by changes in generally
accepted accounting principles, make or change any material tax election, file
any material tax return or any amendment to a material tax return, enter into
any material closing agreement, settle any material tax claim or assessment, or
consent to any extension or waiver of the limitation period applicable to any
material tax claim or assessment, without the prior consent of Novell, which
consent will not be unreasonably withheld; (s) take any action that would result
in any of the representations and warranties of WordPerfect set forth in the
Merger Agreement becoming untrue or in any of the conditions to the Merger set
forth in the Merger Agreement not being satisfied; (t) enter into any capital
commitment or long term obligation equal to or in excess of $500,000; or (u)
authorize or propose any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
WordPerfect has also agreed, under the Merger Agreement, not, directly or
indirectly, to solicit, initiate, entertain, encourage or negotiate any
proposals or offers from any third party relating to the merger or acquisition
of WordPerfect or a material portion of its assets or capital stock of
WordPerfect, nor will WordPerfect, during the term of the Merger Agreement,
participate in any negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any person to do or seek any such
transaction.
Under the Merger Agreement, Novell has also agreed that until the Effective
Time or the earlier termination of the Merger Agreement pursuant to the terms
thereof, it will not, without the prior written consent of WordPerfect, (a)
amend its Certificate of Incorporation in any manner which would adversely
affect the rights of holders of Novell Common Stock, or (b) issue, deliver, or
sell or authorize or propose the issuance, delivery or sale of, or purchase or
propose the purchase of, any shares of its capital stock or any class or
securities convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of a character obligating it or any
of its majority-owned subsidiaries to issue any such shares or other convertible
securities, except for the issuance or proposed issuance of its capital stock or
options to purchase shares of its capital stock (i) in connection with a
proposed business combination, (ii) in connection
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with privately negotiated sales of stock pursuant to corporate partnering
arrangements or (iii) pursuant to stock option grants or exercises or other
employee stock benefit plans.
Each of WordPerfect and Novell have further agreed to (a) promptly apply
for and use all reasonable efforts to obtain all consents and approvals required
with respect to the consummation of the Merger and (b) use all reasonable
efforts to effectuate the transactions contemplated by the Merger Agreement and
to fulfill the conditions to close the Merger.
CONDUCT OF BUSINESS OF THE COMBINED COMPANY FOLLOWING THE MERGER
Upon the consummation of the Merger, Novell will establish and maintain
WordPerfect as a separate operating unit constituting the Novell Applications
Product Group. The Quattro Pro spreadsheet product line to be acquired from
Borland will be placed under the control of the Novell Applications Product
Group. Adriaan Rietveld, the current President and Chief Executive Officer of
WordPerfect, will be appointed President of the Novell Applications Product
Group, to serve until his successor is duly appointed, and will report directly
to the President and Chief Executive Officer of Novell. The remaining executive
officers of WordPerfect will report to the Novell Applications Product Group
President. The Novell Applications Product Group will be operated in accordance
with a plan to be developed by the Novell Applications Product Group and
approved by Novell.
CONDITIONS TO THE MERGER
Each party's respective obligation to effect the Merger is subject to the
satisfaction prior to the closing date of the Merger (the "Closing Date") of the
following conditions: (a) the Merger Agreement and the Articles of Merger shall
have been approved and adopted by the affirmative vote or consent of the holders
of at least a majority of the issued and outstanding shares of WordPerfect
Common Stock present, in person or by proxy, at the Special Meeting; (b) the
Registration Statement shall have become effective under the Securities Act and
shall not be subject to any stop order, and this Prospectus/Proxy Statement
shall not be subject to any proceedings commenced or threatened by the SEC; (c)
the applicable waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated; (d) all material
authorizations, consents, orders or approvals of, or declarations or filings
with, or expiration of waiting periods imposed by, any governmental entity
necessary for the consummation of the transactions contemplated by this
Agreement and the Articles of Merger shall have been filed, expired or been
obtained; (e) Novell and WordPerfect shall each have received favorable written
opinions from their respective counsel, to the effect that the Merger will
constitute a tax-free reorganization; and (f) the absence of any legal action
preventing the consummation of the Merger or rendering Novell or WordPerfect
unable to consummate the Merger.
The obligations of Novell to effect the Merger are subject to, among other
things, the satisfaction of the following conditions, unless waived by Novell:
(a) the representations and warranties of WordPerfect in the Merger Agreement
shall be true and correct in all material respects (except for such
representations and warranties which are qualified by their terms by a reference
to materiality, which representations and warranties as so qualified shall be
true in all respects) (i) as of the date of the Merger Agreement and (ii) as of
the Closing Date, as though made on and as of the Closing Date (except for
representations and warranties that speak of a specific date) unless any
failures to be true and correct, individually or in the aggregate, do not have
and could not reasonably be expected to have a material adverse effect on
WordPerfect; (b) WordPerfect shall have performed in all material respects all
obligations and covenants required to be performed by it under the Merger
Agreement and the Articles of Merger prior to or as of the Closing Date; (c)
Novell shall have received an opinion of Brobeck, Phleger & Harrison, counsel to
WordPerfect, dated the Closing Date, in form and substance reasonably
satisfactory to Novell and WordPerfect; (d) (i) Novell shall have received a
letter from Ernst & Young to the effect that the Merger will be accounted for as
a pooling of interests and (ii) WordPerfect shall have received a letter from
Price Waterhouse to the effect that Price Waterhouse is not aware of any
condition that would preclude WordPerfect from participating in a merger
transaction to be accounted for as a pooling of interests; (e) Novell shall have
received duly executed copies of all material third-party consents and approvals
in form and substance reasonably satisfactory to Novell;
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(f) certain "affiliates" (as defined below) of WordPerfect shall have executed
and delivered to Novell an Affiliates Agreement (as described below); (g)
certain shareholders of WordPerfect shall not have breached the Shareholder
Agreements (as described below); (h) there shall have been no material adverse
effect on WordPerfect or any of its majority-owned subsidiaries on or before the
closing date of the Merger; and (i) certain WordPerfect shareholders shall have
executed and delivered to Novell and WordPerfect a Tax Matters Agreement (as
described below).
The obligation of WordPerfect to effect the Merger is subject to, among
other things, the satisfaction of the following conditions, unless waived by
WordPerfect: (a) the representations and warranties of Novell in the Merger
Agreement shall be true and correct in all material respects (except for such
representations and warranties which are qualified by their terms by a reference
to materiality, which representations and warranties as so qualified shall be
true in all respects) (i) as of the date of the Merger Agreement and (ii) as of
the Closing Date, as though made on and as of the Closing Date (except for
representations and warranties that speak of a specific date), unless any
failures to be true and correct, individually or in the aggregate, do not have
and could not reasonably be expected to have a material adverse effect on
Novell; (b) Novell shall have performed in all material respects all obligations
and covenants required to be performed by them under the Merger Agreement and
the Articles of Merger prior to or as of the Closing Date; (c) WordPerfect shall
have received an opinion dated the Closing Date of Wilson, Sonsini, Goodrich &
Rosati, counsel for Novell, in form and substance reasonably satisfactory to
WordPerfect and Novell; (d) there shall have been no material adverse effect on
Novell on or before the Closing Date; (e) the Board of Directors of Novell shall
have taken appropriate action to cause the number of directors comprising the
full Board of Directors of Novell to be increased by two persons, from seven to
nine, and Alan C. Ashton and Bruce W. Bastian (or a designee of either of such
persons, which designee or designees shall be acceptable to the Board of
Directors of Novell) shall have been elected to the Board of Directors of Novell
and (f) either Novell or WordPerfect shall have acquired the rights to sell a
spreadsheet program mutually acceptable to the parties hereto (which acquisition
will close prior to or simultaneously with the consummation of the Merger).
The condition to WordPerfect's obligation to consummate the Merger
described in clause (e) in the preceding paragraph concerning the appointment of
Dr. Ashton and Mr. Bastian (or their designees) to the Novell Board of Directors
has been waived by WordPerfect in return for Novell's agreement that following
the Merger the Novell Board of Directors will, promptly following the receipt of
a request from Dr. Ashton and Mr. Bastian, increase the size of the Board of
Directors from seven to nine and at such time cause Dr. Ashton and Mr. Bastian
(or their designees) to be elected to the Novell Board of Directors. Dr. Ashton
and Mr. Bastian are expected to make such a request in the latter part of 1994.
The Novell Board of Directors has agreed to take all necessary action to cause
Dr. Ashton and Mr. Bastian (or their designees) to be nominated for election at
the Novell annual meeting of stockholders for fiscal year 1995.
TERMINATION OR AMENDMENT OF MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Merger by the shareholders of
WordPerfect: (a) by mutual written agreement of Novell and WordPerfect; (b) by
Novell, if there has been a breach by WordPerfect of any representation,
warranty, covenant or agreement set forth in the Merger Agreement on the part of
WordPerfect or if any representation or warranty of WordPerfect shall have
become untrue, but only if such breach(es) or untrue representations or
warranties, individually or in the aggregate, have or could reasonably be
expected to have a material adverse effect on WordPerfect and which breach or
inaccuracy WordPerfect fails to cure within seven days after notice thereof is
given by Novell (except that no cure period shall be provided for a breach by
WordPerfect or inaccuracy which by its nature cannot be cured); (c) by
WordPerfect, if there has been a breach by Novell of any representation,
warranty, covenant or agreement set forth in this Agreement on the part of
Novell or if any representation or warranty of Novell shall have become untrue,
but only if such breach(es) or untrue representations or warranties,
individually or in the aggregate, have or could reasonably be expected to have a
material adverse effect on Novell and which breach or inaccuracy Novell fails to
cure within seven days after notice thereof is given by WordPerfect (except that
no cure period shall be provided for a breach by Novell which by its nature
cannot be cured); (d) by Novell or WordPerfect, if the Merger shall not have
been
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consummated on or before July 31, 1994 (other than delays attributable to
concluding the HSR Act waiting period or receiving an order of effectiveness
from the SEC with respect to the Registration Statement, but in no event later
than September 30, 1994); (e) by Novell or WordPerfect if the required approval
of the shareholders of WordPerfect or, if required, the stockholders of Novell,
contemplated by the Merger Agreement shall not have been obtained by reason of
the failure to obtain the required vote upon a vote taken at the Shareholders'
Meeting; or (f) by Novell or WordPerfect if any permanent injunction or other
order of a court or other competent authority preventing the Merger shall have
become final and nonappealable.
The Merger Agreement may be amended by the parties, by action taken by
their respective Board of Directors, at any time before or after approval of the
Merger by the shareholders of WordPerfect; provided that following approval of
the Merger by the shareholders of WordPerfect, no amendment shall be made which
by law requires the further approval of such shareholders without obtaining such
further approval. Under applicable law, any amendment subsequent to the adoption
of the Merger Agreement by the WordPerfect shareholders that alters any
contractual rights of the WordPerfect shareholders in connection with the
Merger, such as a change in the amount or kind of securities to be received in
exchange for WordPerfect Common Stock in the Merger, or that otherwise adversely
affects the WordPerfect shareholders would require the further approval of the
WordPerfect shareholders.
INDEMNIFICATION
From and after the Effective Time, Novell shall (to the fullest extent
permitted by applicable law) indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof or who becomes prior to
the Effective Time, an officer or director of WordPerfect or any of its
majority-owned subsidiaries against any and all losses, damages, costs,
expenses, liabilities or judgments, or amounts that are paid in settlement of,
or in connection with, any claim, action, suit, proceeding or investigation
based on or arising out of the fact that such person is or was a director or
officer of WordPerfect or any majority-owned subsidiary of WordPerfect, whether
pertaining to any matter existing or occurring at or prior to the Effective
Time.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations relevant to the exchange of shares of WordPerfect Common Stock
for Novell Common Stock pursuant to the Merger. In particular, this discussion
addresses the tax consequences of the Merger generally applicable to holders of
WordPerfect Common Stock. It does not deal with all federal income tax
considerations that may be relevant to particular WordPerfect shareholders in
light of their particular circumstances, such as shareholders who do not hold
their WordPerfect Common Stock as capital assets or persons who acquired their
shares in compensatory transactions. In addition, the following discussion does
not address the tax consequences of transactions effectuated prior or subsequent
to, or concurrently with, the Merger (whether or not any such transactions are
undertaken in connection with the Merger) including, without limitation, any
transaction in which shares of WordPerfect Common Stock are acquired or any
shares of Novell Common Stock are disposed of. Furthermore, no foreign, state or
local tax considerations are addressed herein. ACCORDINGLY, WORDPERFECT
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.
The Merger is intended to constitute a "reorganization" within the meaning
of Section 368(a) of the Code (a "Reorganization"), in which case, subject to
the limitations and qualifications referred to herein, the Merger will generally
result in the following federal income tax consequences:
(a) No gain or loss will be recognized by holders of WordPerfect
Common Stock solely upon their receipt in the Merger of Novell Common Stock
in exchange therefor.
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(b) The aggregate tax basis of the Novell Common Stock received in the
Merger will be the same as the aggregate tax basis of WordPerfect Common
Stock surrendered in exchange therefor.
(c) The holding period of the Novell Common Stock received in the
Merger will include the period for which the WordPerfect Common Stock
surrendered in exchange therefor was held, provided that the WordPerfect
Common Stock is held as a capital asset at the time of the Merger.
(d) Neither Novell nor WordPerfect will recognize material amounts of
gain solely as a result of the Merger.
(e) A shareholder who exercises dissenters' rights with respect to a
share of WordPerfect Common Stock and receives payment for such share in
cash will generally recognize gain or loss for federal income tax purposes,
measured by the difference between the holder's basis in such share and the
amount of cash received, provided that the payment is neither essentially
equivalent to a dividend within the meaning of Section 302 of the Code nor
has the effect of a distribution of a dividend within the meaning of
Section 356(a)(2) of the Code (collectively "a Dividend Equivalent
Transaction"). A sale of WordPerfect Common Stock pursuant to an exercise
of dissenters' rights will generally not be a Dividend Equivalent
Transaction if, as a result of such exercise, the dissenter owns no shares
of Novell Common Stock (either actually or constructively within the
meaning of Section 318 of the Code such as through the attributing of stock
ownership through family members). If, however, a shareholder's sale for
cash of WordPerfect Common Stock is a Dividend Equivalent Transaction, then
such Shareholder will generally recognize income for federal income tax
purposes in an amount equal to the entire amount of the cash so received.
Even if the Merger qualifies as a Reorganization, a recipient of shares of
Novell Common Stock could recognize gain to the extent that such shares were
considered by the Internal Revenue Service (the "IRS") to be received in
exchange for consideration (other than WordPerfect Common Stock). All or a
portion of such gain may be taxable as ordinary income. Gain could also have to
be recognized to the extent that a WordPerfect shareholder was treated by the
IRS as receiving (directly or indirectly) consideration other than Novell Common
Stock in exchange for his or her WordPerfect Common Stock.
The parties are not requesting and will not request a ruling from the IRS
in connection with the Merger. Novell and WordPerfect, however, have each
received an opinion from their respective counsel to the effect that the Merger
will constitute a Reorganization (the "Tax Opinions"). WordPerfect shareholders
should be aware that the Tax Opinions do not bind the IRS and the IRS is
therefore not precluded from successfully asserting a contrary opinion. The Tax
Opinions are subject to certain assumptions, including but not limited to the
truth and accuracy of certain representations made by Novell, WordPerfect and
certain shareholders of WordPerfect. Of particular importance are certain
representations relating to the Code's "continuity of interest requirement."
To satisfy the continuity of interest requirement, WordPerfect shareholders
must not, pursuant to a plan or intent existing at or prior to the Merger,
dispose of or transfer so much of either (i) their WordPerfect Common Stock in
anticipation of the Merger or (ii) the Novell Common Stock to be received in the
Merger (collectively, "Planned Dispositions"), such that WordPerfect
shareholders, as a group, would no longer have a significant equity interest in
the WordPerfect business being conducted by Novell after the Merger. WordPerfect
shareholders will generally be regarded as having a significant equity interest
as long as the number of shares of Novell Common Stock received in the Merger
less the number of shares subject to Planned Dispositions (if any) represents,
in the aggregate, a substantial portion of the entire consideration received by
the WordPerfect shareholders in the Merger.
A successful IRS challenge to the Reorganization status of the Merger (as a
result of a failure of the continuity of interest or otherwise) would result in
WordPerfect shareholders recognizing taxable gain or loss with respect to each
share of WordPerfect Common Stock surrendered equal to the difference between
the shareholder's basis in such share and the fair market value, as of the
Effective Time, of the Novell Common Stock received in exchange therefor. In
such event, a shareholder's aggregate basis in the Novell Common
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Stock so received would equal its fair market value and the holding period for
such stock would begin the day after the Merger.
AFFILIATES AGREEMENTS
The shares of Novell Common Stock to be issued in the Merger have been
registered under the Securities Act by a Registration Statement on Form S-4,
thereby allowing such securities to be traded without restriction by all former
holders of WordPerfect Common Stock not deemed to be "affiliates" (as such term
is defined for purposes of Rule 145 under the Securities Act) of WordPerfect at
the time the transaction is submitted for a vote to the WordPerfect
shareholders. WordPerfect shareholders who may be deemed to be affiliates of
WordPerfect will be so advised prior to the Effective Time.
Pursuant to the terms of the Merger Agreement, each affiliate of
WordPerfect has executed or will execute an Affiliates Agreement in the form of
Exhibit 5.12 to the Merger Agreement. Pursuant to the Affiliates Agreement, each
WordPerfect affiliate has agreed not to make any sale of Novell Common Stock
received upon consummation of the Merger in violation of the Securities Act or
the rules and regulations promulgated thereunder. Generally this will require
that such sales be made in accordance with Rule 145(d) under the Securities Act
promulgated by the SEC, which in turn requires that, for specified periods, such
sales be made in compliance with the volume limitations, manner of sale
provisions and current information requirements of Rule 144 under the Securities
Act also promulgated by the SEC. The volume limitations should not impose any
material limitations on any WordPerfect shareholder who owns less than one
percent of Novell's outstanding Common Stock after the Merger unless, pursuant
to Rule 144, such shareholder's shares are required to be aggregated with those
of another shareholder.
The Affiliates Agreements provide, among other things, that each affiliate
of WordPerfect has agreed (i) not to sell, exchange, transfer, pledge, dispose
of or otherwise reduce his risk relative to shares of WordPerfect Common Stock
owned by such affiliate for 30 days prior to the Effective Time; (ii) not to
transfer, sell, exchange, pledge, dispose of or otherwise reduce his risk
relative to Novell Common Stock (except limited transfers to members of such
affiliate's immediate family, with such transferee to be bound by the terms of
the Affiliates Agreement) until such time as financial results covering at least
30 days of combined operations of Novell and WordPerfect after the Effective
Time have been filed with the SEC or published by Novell; (iii) that the
affiliate has no present plan or intent to engage in a sale, exchange, transfer,
pledge, disposition or any other transaction which results in a reduction in the
risk of ownership with respect to more than 50% of the shares of Novell Common
Stock to be received by him or her in the Merger; and (iv) not to offer, sell,
exchange, transfer, pledge or otherwise dispose of any Novell Common Stock
except as permitted by Rule 145 promulgated under the Securities Act by the SEC
or pursuant to a registration statement under, or an exemption from, the
Securities Act.
SHAREHOLDER AGREEMENTS
Pursuant to the terms of the Merger Agreement, certain shareholders of
WordPerfect, holding in the aggregate approximately 89% of the outstanding
Common Stock of WordPerfect, executed Shareholder Agreements in the form of
Exhibit 5.6 to the Merger Agreement. Under these Shareholder Agreements, each of
such WordPerfect shareholders has agreed to vote in favor of the Merger
Agreement and has executed a proxy in favor of the Board of Directors of Novell
to vote their shares of WordPerfect Common Stock in favor of the Merger.
TAX MATTERS AGREEMENT
As a condition to the Merger, certain WordPerfect shareholders will enter
into a Tax Matters Agreement that will provide that such shareholders will
severally and not jointly indemnify WordPerfect and Novell with respect to U.S.
federal and Utah and New Mexico state income tax liability (including interest
and penalties) arising out of a failure of WordPerfect or its affiliates to have
been S corporations (as defined in Section 1361 of the Code) during any taxable
year (or that portion of any taxable year) for which such corporations reported
for federal and Utah and New Mexico state income tax purposes that they were S
corporations. Each
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such WordPerfect shareholder's liability for purposes of such indemnification
will be limited in certain respects pursuant to the terms of the Tax Matters
Agreement.
GOVERNMENTAL AND REGULATORY APPROVALS
Transactions such as the Merger are reviewed by the Department of Justice
and the Federal Trade Commission (the "FTC") to determine whether they comply
with applicable antitrust laws. Under the provisions of the HSR Act, the Merger
may not be consummated until such time as certain information has been furnished
to the Department of Justice and the FTC and the specified waiting period
requirements of the HSR Act have been satisfied. Premerger Notification and
Report Forms were filed with the Department of Justice and the FTC under the HSR
Act by each of Novell, Bruce W. Bastian, and Melanie L. Bastian, the ultimate
parent entities of WordPerfect, on April 4, 1994. The notification and waiting
period imposed under the HSR Act expired on May 4, 1994.
At any time before or after the Effective Time, the Department of Justice,
the FTC, state attorneys general or a private person or entity could challenge
the Merger under the antitrust laws and seek among other things, to enjoin the
Merger or to cause Novell to divest itself, in whole or in part, of WordPerfect
or Novell. Based on information available to them, Novell and WordPerfect
believe that the Merger will not violate federal or state antitrust laws.
However, there can be no assurance that a challenge to the Merger on antitrust
grounds will not be made or that, if such a challenge is made, Novell and
WordPerfect will prevail or would not be required to accept certain conditions,
possibly including certain divestures or hold-separate agreements, in order to
consummate the Merger.
Novell and WordPerfect each conduct operations in a number of foreign
countries where regulatory filings may be required as a result of the Merger.
Novell and WordPerfect will make such filings as they determine are necessary or
appropriate.
Novell and WordPerfect are aware of no other governmental or regulatory
approvals required for consummation of the Merger, other than compliance with
applicable securities and "blue sky" laws of the various states.
ACCOUNTING TREATMENT
The Merger is to be treated as a pooling of interests for financial
reporting purposes. Novell expects to receive a letter from its independent
auditors, Ernst & Young, indicating their opinion that such accounting method is
appropriate. The delivery of the letter of Ernst & Young to Novell is a
condition to the closing of the Merger. The delivery of a letter to WordPerfect
from WordPerfect's independent public accountants, Price Waterhouse, stating
that Price Waterhouse is not aware of any condition that would preclude
WordPerfect from participating in a merger to be accounted for as a pooling of
interests, is also a condition to the closing of the Merger. See "-- Conditions
to the Merger."
Under the pooling of interests method of accounting, Novell's prior period
financial statements will be restated on a combined basis with those of
WordPerfect, with all significant intercompany accounts being eliminated and all
expenses relating to the combination being deducted from combined income for the
period when such expenses were incurred.
DISSENTERS' RIGHTS
Pursuant to the terms of the Merger Agreement, if holders of capital stock
of WordPerfect have exercised dissenters' rights in connection with the Merger
in accordance with the provisions of Sections 1301-1331 of Part 13 of the URBCA
("Part 13"), any Dissenting Shares (as defined below) will not be converted into
Novell Common Stock but will be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the laws of the State of Utah.
The following summary of the provisions of Part 13 is not intended to be a
complete statement of such provisions and is qualified in its entirety by
reference to the full text of Part 13, a copy of which is attached to this
Prospectus/Proxy Statement as Appendix B and is incorporated herein by
reference.
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If the Merger is approved by the required vote of WordPerfect's
shareholders and is not abandoned or terminated, each holder of shares of
WordPerfect Common Stock who does not vote in favor of the Merger and who
follows the procedures set forth in Part 13 will be entitled to have his shares
of WordPerfect Common Stock purchased by WordPerfect for cash at their Fair
Value (as defined below). The "Fair Value" of shares of WordPerfect Common Stock
will be determined as of the day before the first announcement of the terms of
the proposed Merger, excluding any appreciation or depreciation in anticipation
of the proposed Merger. The shares of WordPerfect Common Stock with respect to
which holders have perfected their purchase demand in accordance with Part 13
and have not effectively withdrawn or lost such rights are referred to in this
Prospectus/Proxy Statement as the "Dissenting Shares."
Prior to the vote taken to approve the proposed Merger at the Special
Meeting, a shareholder who wishes to assert dissenters' rights must (a) deliver
written notice to WordPerfect of his intent to demand payment for shares if the
proposed Merger is approved and (b) may not vote any of his shares in favor of
the proposed Merger. Within ten days after approval of the Merger by WordPerfect
shareholders, WordPerfect must mail a notice of such approval (the "Approval
Notice") to all shareholders who are entitled to demand payment for their shares
under Part 13, together with a statement of the price determined by WordPerfect
to represent the Fair Value of the applicable Dissenting Shares (determined in
accordance with the immediately preceding paragraph), a brief description of the
procedures to be followed in order for the shareholder to pursue his dissenters'
rights, a copy of Part 13, and a form for demanding payment. The statement of
price by WordPerfect constitutes an offer by WordPerfect to purchase all
Dissenting Shares at the stated amount. Only a holder of record of shares of
WordPerfect Common Stock as of May 20, 1994 (or his duly appointed
representative) is entitled to assert a purchase demand for the shares
registered in that holder's name.
A shareholder of WordPerfect electing to exercise dissenters' rights must,
within 30 days after the date on which the Approval Notice is mailed to such
shareholder, demand in writing from WordPerfect the purchase of his shares of
WordPerfect capital stock and payment to the shareholder of their fair market
value and must submit a certificate representing the Dissenting Shares to
WordPerfect in accordance with the terms of the Approval Notice. A shareholder
who does not demand payment and deposit share certificates as required, by the
date set in the Approval Notice, is not entitled to payment for shares under
Part 13. A holder who elects to exercise dissenter's rights should mail or
deliver his written demand for payment to WordPerfect at 1555 North Technology
Way, Orem, Utah 84057, directed to the attention of R. Duff Thompson, Esq. The
demand should specify the holder's name and mailing address, the number of
shares of WordPerfect Common Stock owned by such shareholder and state that such
holder is demanding purchase of his shares in payment of their Fair Value. Upon
the later of the Effective Time and receipt by WordPerfect of each payment
demand made pursuant to Part 13, WordPerfect shall pay the amount WordPerfect
estimates to be the Fair Value of the Dissenting Shares, plus interest at the
legal rate of interest to each dissenter who has complied with the requirements
of Part 13 and who has not yet received payment.
Any holder of Dissenting Shares who has not accepted an offer made by
WordPerfect may, within 30 days after WordPerfect first offered payment for his
shares, notify WordPerfect in writing of his own estimate of the Fair Value of
his shares and demand payment of the estimated amount, plus interest, less any
payment made under Part 13, if (i) the holder of Dissenting Shares believes that
the amount offered or paid by WordPerfect under Part 13 is less than the Fair
Value of the shares, (ii) WordPerfect fails to make payment within 60 days after
the date set by WordPerfect as the date by which it must receive the payment
demand, or (iii) WordPerfect, having failed to consummate the proposed Merger,
does not return share certificates deposited by a holder as required by Part 13.
If WordPerfect denies that the shares are Dissenting Shares, or if WordPerfect
and the shareholder fail to agree upon the fair market value of the shares, then
within 60 days after receiving the payment demand WordPerfect must petition the
District Court of Utah County (the "Court") to determine whether the shares are
Dissenting Shares or to determine the Fair Value of such holder's shares of
WordPerfect capital stock, or both. If WordPerfect does not commence the
proceeding within the 60-day period, it shall pay each holder of Dissenting
Shares whose demand remains unresolved the amount demanded. WordPerfect shall
make all holders of Dissenting Shares whose demands remain unresolved parties to
the proceeding as an action against their shares. The Court may appoint one or
more persons as appraisers to receive evidence and recommend a decision on the
question of Fair Value. Each
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holder of Dissenting Shares made a party to the proceeding is entitled to
judgment for the amount, if any, by which the Court finds that the Fair Value of
his shares, plus interest, exceeds the amount paid by WordPerfect.
If any holder of shares of WordPerfect Common Stock who demands the
purchase of his shares under Part 13 fails to perfect, or effectively withdraws
or loses his right to, such purchase, the shares of such holder will be
converted into the right to receive the number of shares of Novell Common Stock
equal to the number of shares of WordPerfect Common Stock held by such person,
in accordance with the Merger Agreement. Dissenting Shares lose their status as
Dissenting Shares if (a) the Merger is abandoned; (b) the shares are transferred
prior to their submission for the required endorsement; (c) the shareholder
fails to make a written demand for purchase; (d) the shareholder votes to
approve and adopt the Merger Agreement; (e) the shareholder and WordPerfect do
not agree on the status of the shares as Dissenting Shares or do not agree on
the purchase price, but neither WordPerfect nor the shareholder files a
complaint within 60 days after the mailing of the Approval Notice; or (f) with
WordPerfect's consent, the shareholder delivers to WordPerfect a written
withdrawal of such shareholder's demand for purchase of his shares.
ACQUISITION OF QUATTRO PRO PRODUCT LINE
On March 20, 1994, Novell entered into a Purchase and License Agreement
with Borland (the "Borland Agreement"), pursuant to which Novell, subject to
regulatory approval and other conditions to closing, will acquire Borland's
Quattro Pro spreadsheet product line for approximately $110 million in cash.
Under the terms and conditions of the Borland Agreement, Novell will acquire all
right, title and interest in or to (i) all versions of the Quattro Pro computer
software programs (other than versions as to which a transfer thereof would
violate the existing injunction issued by the federal district court in the
Lotus Development Corp. v. Borland International copyright litigation), (ii) all
related user, technical support and marketing documentation, (iii) the "Quattro
Pro" and "Quattro" trademarks, (iv) Borland's inventory of Quattro Pro 5.0 and
Quattro Pro 5.0 for Windows and (v) various equipment and other fixed assets
used by Borland to develop, test and maintain the Quattro Pro product line. In
addition, Novell will acquire a nonexclusive, paid-up license to certain Borland
software products and source code, development tools and related technology, as
well as Borland's software patents. Prior to entering into the Borland Agreement
with Novell, Borland had entered into a number of agreements with WordPerfect
relating to (i) a bundling arrangement for WordPerfect, Quattro Pro and Paradox
(dated April 5, 1993) and (ii) the purchase, for $9 million, of the right to
sell up to 1,000,000 licenses of Quattro Pro (dated August 30, 1993, and amended
December 31, 1993).
The acquisition of the Quattro Pro product line provides several important
advantages for Novell. First, the acquisition enables Novell to further develop,
market and sell a leading spreadsheet application package. According to some
independent industry product reviews, Quattro Pro performs favorably as compared
to other full-featured spreadsheet products in terms of product features and
functionality. In particular, the Quattro Pro for Work Groups product has been
favorably reviewed as an applications product designed specifically for use by
groups of networked users. For example, in a detailed product review reported in
the April 1994 edition of Windows Magazine, Quattro Pro 5.0 Workgroup Edition
received the highest score in four of five categories of product features, equal
to that of MicroSoft Excel. In this product review, this version of Quattro Pro
receives the most favorable review for workgroup features in a spreadsheet
product. In addition the December 1993 edition of PC Computing awarded the
Quattro pro 5.0 Workgroup Edition the MVP award among spreadsheet products.
Novell seeks to increase the sales and market presence of the Quattro Pro
products, both as stand alone products and as a part of integrated applications
and networked software products.
In particular, Novell may develop and introduce integrated applications
products which incorporate spreadsheet functionality with other software
applications functions, including word processing functions. Moreover, Novell's
access to a leading spreadsheet package is important to its participation in the
growing market for software suites, which are becoming a growing segment of the
software applications market. In the future, Novell also believes that a demand
will emerge for spreadsheet applications products which are tightly coordinated
with network functions. Novell believes that the Quattro Pro products will
provide an important part of Novell's network applications product offerings.
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Pursuant to the Borland Agreement, Novell will also assume certain
liabilities of Borland with respect to the contracts related to the purchased
assets, including obligations relating to such contracts occurring prior to the
closing. Specifically, Novell will assume certain obligations relating to
product support, warranty and distributors in certain geographic areas. Novell
will also be obligated to reimburse distributors for costs, not to exceed $10
million, for inventory of the Quattro Pro products in the distribution channel
sold by Borland which is returned to the Combined Company or Borland unsold
after the closing.
In connection with its acquisition of the Quattro Pro product line, Novell
will offer employment to approximately 100 Borland employees who are responsible
for research and development, quality assurance, testing, maintenance or
marketing of the Quattro Pro product line. In addition, Novell has agreed that
in the event of the termination of the Merger Agreement as a result of (i) the
failure of the HSR Act waiting period to expire without the commencement of any
governmental action with respect to the HSR filing made in connection with the
Merger or (ii) the failure of the Registration Statement on Form S-4 covering
the Merger to be declared effective as contemplated by the Merger Agreement,
Novell will make a loan to Borland in the amount of $50 million. Such loan will
be a full recourse obligation of Borland, will be secured by a first deed of
trust on Borland's Scotts Valley, California corporate campus and will be
subject to market terms and conditions in all respects. The maturity date of
such loan will be 42 months following the advance of funds.
If the Quattro Pro acquisition does not close due to the termination of the
Merger Agreement as a result of a failure of a condition precedent in the Merger
Agreement (other than those described in the preceding paragraph), Novell will
pay as a breakup fee of $10 million in cash to Borland within ten days after
such termination of the Merger Agreement.
In August 1993, as part of ongoing litigation between Borland and Lotus, a
federal district court in Boston, Massachusetts, issued a permanent injunction
with respect to Borland's sale of versions of the Quattro Pro spreadsheet
incorporating certain functions which were found to infringe copyrights held by
Lotus. These functions enabled users of Quattro Pro to use user-designed
routines or "macros" developed by users for the Lotus 1-2-3 spreadsheets, and
enable a moderate level of compatibility between Quattro Pro and Lotus 1-2-3.
The issuance of the injunction, the products implemented by Borland to comply
with the injunction, and publicity and marketing efforts undertaken by Lotus
following the issuance of the injunction, have disrupted sales of the Quattro
Pro products in a variety of different ways, and may continue to do so. Should
the decision of the federal district court be upheld on appeal, the continued
existence of the injunction could have a significant continuing adverse affect
on Novell's ability to sustain or increase sales of the Quattro Pro spreadsheet,
either on a stand alone basis or in conjunction with other application products.
Moreover, the market for spreadsheet applications products is maturing and
becoming increasingly competitive, particularly on the basis of price. There can
be no assurance that sales of Quattro Pro will be maintained or increased or
that the Combined Company will derive significant operating income from its
existing or future Quattro Pro products. Pursuant to the terms of the Borland
Agreement, all liabilities associated with the Lotus litigation will be retained
by Borland. No claims have been brought or asserted by Lotus with respect to
current versions of the Quattro Pro spreadsheet
LICENSE TO BORLAND'S PARADOX RELATIONAL DATABASE PRODUCTS
To enable Novell to offer a leading database product in current and future
software suites, Novell will also acquire, for approximately $35 million, a
three-year worldwide, fully paid, nonexclusive license to reproduce and
distribute up to one million copies of current and future versions of Borland's
Paradox relational database products as part of a suite of products including
WordPerfect and Quattro Pro.
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<PAGE> 47
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
assume a business combination between Novell and WordPerfect accounted for as a
pooling of interests. The unaudited pro forma condensed combined financial
statements are based upon the respective historical financial statements and the
notes thereto, certain of which are incorporated by reference or included
elsewhere in this Prospectus/Proxy Statement. The unaudited pro forma condensed
combined statements of income combine Novell's historical condensed consolidated
statements of operations for the three fiscal years ended October 30, 1993,
October 31, 1992, and October 26, 1991, and the unaudited condensed consolidated
statements of operations for the six months ended April 30, 1994 and May 1, 1993
with the corresponding WordPerfect historical condensed consolidated statements
of income for the three years ended December 31, 1993, 1992 and 1991, and the
unaudited condensed consolidated statements of income for the six months ended
April 30, 1994 and June 30, 1993, respectively. The unaudited pro forma
condensed combined balance sheets combine Novell's historical condensed
consolidated balance sheets as of April 30, 1994, October 30, 1993 and October
31, 1992 with WordPerfect's historical condensed consolidated balance sheets as
of April 30, 1994, December 31, 1993 and December 31, 1992, respectively.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger had been consummated as presented in the
accompanying unaudited pro forma condensed combined financial statements, nor is
it necessarily indicative of future operating results.
These unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical consolidated financial statements and
the related notes thereto of Novell and WordPerfect incorporated by reference or
included elsewhere herein.
NOVELL AND WORDPERFECT
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FISCAL YEAR ENDED
--------------------- ---------------------------------------
APRIL 30, MAY 1, OCTOBER 30, OCTOBER 31, OCTOBER 26,
1994 1993 1993 1992 1991
---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales....................................... $1,023,208 $887,322 $ 1,830,411 $ 1,512,488 $ 1,262,073
Cost of sales................................... 249,174 183,381 402,602 326,707 267,242
---------- -------- ----------- ----------- -----------
Gross profit........................... 774,034 703,941 1,427,809 1,185,781 994,831
Operating expenses:
Sales and marketing........................... 252,881 226,855 509,722 380,079 287,680
Product development........................... 166,460 134,064 290,239 226,809 161,205
General and administrative.................... 86,391 80,225 163,249 130,380 117,273
Nonrecurring charges.......................... 14,969 -- 356,501 20,367 --
---------- -------- ----------- ----------- -----------
520,701 441,144 1,319,711 757,635 566,158
---------- -------- ----------- ----------- -----------
Income from operations.......................... 253,333 262,797 108,098 428,146 428,673
Other income, net............................... 17,922 15,353 30,059 33,661 32,539
---------- -------- ----------- ----------- -----------
Income before taxes............................. 271,255 278,150 138,157 461,807 461,212
Income taxes.................................... 80,431 82,792 97,437 139,829 97,896
---------- -------- ----------- ----------- -----------
Net income...................................... $ 190,824 $195,358 $ 40,720 $ 321,978 363,316
========== ========= ========== ========== ==========
ADDITIONAL UNAUDITED PRO FORMA DATA(C):
Income before taxes............................. $ 271,255 $278,150 $ 138,157 $ 461,807 $ 461,212
Pro forma income taxes.......................... 95,979 93,594 151,126 160,540 160,666
---------- -------- ----------- ----------- -----------
Pro forma net income (loss)..................... $ 175,276 $184,556 $ (12,969) $ 301,267 $ 300,546
========== ========= ========== ========== ==========
Pro forma net income (loss)
per share..................................... $ .48 $ .51 $ (.04) $ .84 $ .87
========== ========= ========== ========== ==========
Weighted average shares outstanding............. 368,279 364,194 367,900 359,484 345,968
========== ========= ========== ========== ==========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
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<PAGE> 48
NOVELL AND WORDPERFECT
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 30, OCTOBER 31,
1994 1993 1992
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 478,590 $ 383,596 $ 346,502
Short-term investments............................... 502,158 335,601 285,327
Receivables, net..................................... 346,855 395,334 304,590
Other................................................ 166,026 142,878 84,883
---------- ----------- -----------
Total current assets......................... 1,493,629 1,257,409 1,021,302
Property, plant, and equipment, net.................... 406,043 403,752 356,922
Other assets........................................... 69,721 84,176 52,251
---------- ----------- -----------
Total assets................................. $1,969,393 $ 1,745,337 $ 1,430,475
========= ========= =========
</TABLE>
<TABLE>
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt...................................... $ 28,771 $ 9,436 $ 1,979
Accounts payable..................................... 55,651 75,470 70,646
Accrued salaries and wages........................... 62,976 69,061 47,711
Accrued marketing liabilities........................ 53,476 51,553 49,474
Other accrued liabilities............................ 89,938 103,204 57,023
Income taxes payable................................. 74,383 55,589 34,648
Deferred revenue..................................... 49,190 33,788 32,753
---------- ----------- -----------
Total current liabilities.................... 414,385 398,101 294,234
Deferred income taxes.................................. 11,711 -- --
Long-term debt......................................... 91,763 84,289 12,256
Minority interests..................................... 12,759 10,205 8,938
Put warrants........................................... -- 106,716 --
Shareholders' equity:
Common stock......................................... 36,198 35,943 35,202
Additional paid-in capital........................... 620,152 485,253 380,609
Retained earnings.................................... 786,454 635,551 698,134
Unearned stock compensation.......................... (7,007) (9,814) --
Cumulative translation adjustment.................... 2,978 (907) 1,102
---------- ----------- -----------
Total shareholders' equity................... 1,438,775 1,146,026 1,115,047
---------- ----------- -----------
Total liabilities and shareholders' equity... $1,969,393 $ 1,745,337 $ 1,430,475
========= ========= =========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
39
<PAGE> 49
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE A. The unaudited pro forma condensed combined financial statements of
Novell and WordPerfect give retroactive effect to the Merger which is being
accounted for as a pooling of interests and, as a result, the unaudited pro
forma condensed combined balance sheets and statements of income are presented
as if the combining companies had been combined for all periods presented. The
unaudited pro forma condensed combined financial statements will become the
historical financial statements of Novell upon issuance of financial statements
for a period that includes the date of the acquisition. The unaudited pro forma
condensed combined financial statements, including the notes thereto, should be
read in conjunction with the historical consolidated financial statements of
Novell and WordPerfect incorporated by reference or included elsewhere in this
Prospectus/Proxy Statement.
The pro forma combined net income per share is based on the combined
weighted average number of common shares of Novell Common Stock and WordPerfect
Common Stock for each period, based on the exchange ratio of one share of Novell
Common Stock for each share of WordPerfect Common Stock. The pro forma condensed
combined balance sheets reflect the issuance of 51,380,100 shares of Novell
Common Stock in exchange for all shares of WordPerfect Common Stock outstanding
at each balance sheet date, based on such exchange ratio. The table below sets
forth the composition of the unaudited pro forma combined net sales and net
income for each of the periods shown, had the Merger taken place at the
beginning of the periods shown:
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
--------------------- ---------------------------------------
APRIL 30, MAY 1, OCTOBER 30, OCTOBER 31, OCTOBER 26,
1994 1993 1993 1992 1991
---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales:
Novell.......................... $ 717,975 $540,894 $1,122,896 $ 933,370 $ 640,079
WordPerfect..................... 305,233 346,428 707,515 579,118 621,994
---------- -------- ----------- ----------- -----------
Combined companies........... $1,023,208 $887,322 $1,830,411 $1,512,488 $1,262,073
========= ======== =========== =========== ===========
Net income:
Novell.......................... $ 177,726 $151,338 $ (35,160 ) $ 249,030 $ 162,488
WordPerfect..................... 13,098 44,020 75,880 72,948 200,828
---------- -------- ----------- ----------- -----------
Combined companies........... $ 190,824 $195,358 $ 40,720 $ 321,978 $ 363,316
========= ======== =========== =========== ===========
</TABLE>
NOTE B. WordPerfect has a calendar year end and, accordingly, the
WordPerfect statements of income for the years ended December 31, 1993, 1992 and
1991 have been combined with the Novell statements of operations for the fiscal
years ended October 30, 1993, October 31, 1992 and October 26, 1991,
respectively. In order to conform WordPerfect's year end to Novell's fiscal year
end, the unaudited pro forma condensed combined statement of income for the six
months ended April 30, 1994 includes two months (November and December 1993) for
WordPerfect which are also included in the unaudited pro forma condensed
combined statement of income for the year ended October 30, 1993. Accordingly,
an adjustment has been made in the six months ended April 30, 1994 to retained
earnings for the duplication of net income of $39.9 million for such two month
period. Other results of operations for such two-month period of WordPerfect
include net sales of $136.6 million, income before taxes of $34.6 million, and
income tax benefits of $5.2 million. The unaudited pro forma condensed combined
financial data for the six months ended May 1, 1993 combines Novell's financial
statements for the six months ended May 1, 1993 with WordPerfect's financial
statements for the six months ended June 30, 1993.
NOTE C. The additional unaudited pro forma condensed combined financial
data are based upon historical combined income before taxes, adjusted to reflect
a provision for income taxes as if WordPerfect and its S corporation
subsidiaries had never been S corporations. See "WordPerfect Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Pro Forma Provision for Income Taxes,"
"Certain Transactions of WordPerfect" and Notes 2 and 16 of Notes to WordPerfect
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<PAGE> 50
Consolidated Financial Statements. See Note 2 of Notes to WordPerfect
Consolidated Financial Statements for an explanation of the determination of
shares used in computing net income per share.
NOTE D. Certain reclassifications, none of which are material, have been
made to the WordPerfect financial statements in the unaudited pro forma
condensed combined financial statements to conform to Novell classifications.
There are no other material adjustments required to the historical financial
statements of Novell and WordPerfect to arrive at the unaudited pro forma
condensed combined balance sheets and statements of income.
NOTE E. Total costs to be incurred by Novell and WordPerfect in connection
with the Merger are estimated to be approximately $5.5 million. These costs,
relating to legal, printing, accounting, financial advisory services and other
related expenses will be charged against income in the periods subsequent to the
pro forma condensed combined financial statements. Accordingly, the effects of
these costs have not been reflected in these pro forma condensed combined
financial statements.
41
<PAGE> 51
INFORMATION CONCERNING NOVELL
THE COMPANY
Novell, Inc. ("Novell" or the "Company") is an information system software
company, that develops, markets and services specialized and general purpose
operating system products and application programming tools. Novell's
NetWare(R), UnixWareTM and AppWareTM families of products provide matched
software components for distributing information resources within local,
wide-area and internetworked information systems.
The Company was incorporated in Delaware on January 25, 1983. Novell's
executive offices are located at 122 East 1700 South, Provo, Utah 84606. Its
telephone number at that address is (801) 429-7000.
The Company sells its products domestically and internationally through 33
U.S. sales offices and 31 foreign offices. The Company sells its products
primarily through distributors and national retail chains, which in turn sell
the Company's products to retail dealers. The Company also sells its products
through OEMs, system integrators, and value added resellers ("VARs").
The Company conducts product development activities in Cupertino, Monterey,
San Jose, Sunnyvale, and Walnut Creek, California; Boulder, Colorado; Natick,
Massachusetts; Summit, New Jersey; Austin, Texas; Provo, Salt Lake City, and
Sandy, Utah; Toronto, Canada; and Hungerford, U.K. It also contracts out some
product development activities to third-party developers.
In December 1990, the Company announced that Canon, Fujitsu, NEC, Sony, and
Toshiba, five major Japanese computer companies, joined SOFTBANK Corporation and
Novell as investment partners in Novell Japan, Ltd., a Tokyo-based joint venture
inaugurated in April 1990. Novell has a 54% ownership interest, and accordingly,
the financial statements of Novell Japan, Ltd. are consolidated in the financial
statements of the Company, with the minority interest in profit or loss offset
within other income and expense.
In April 1991, the Company invested $15.0 million in UNIX System
Laboratories, Inc. ("USL"), a subsidiary of AT&T that develops and licenses the
UNIX(R) operating system and other standards-based software to customers
worldwide. In December 1991, the Company announced the formation of Univel, a
joint venture with USL, formed to accelerate the expanded use of the UNIX
operating system in the personal computer and network computing marketplace.
Novell and USL contributed cash and technology rights to Univel. Then in June
1993, the Company acquired the remaining portion of USL by issuing approximately
11.1 million shares of Novell Common Stock valued at $321.8 million in exchange
for all of the outstanding stock of USL not previously owned by Novell and
assumed additional liabilities of $9.4 million. The transaction was accounted
for as a purchase and, on this basis, resulted in a one-time write-off of $268.7
million for purchased research and development in the third quarter of fiscal
1993.
On October 28, 1991, the Company completed a merger with Digital Research
Inc. ("DRI"), a producer of personal computer operating software, whereby DRI
became a wholly owned subsidiary of Novell. There were 6.0 million shares of
Novell Common Stock exchanged for all of the outstanding stock of DRI. This
transaction was accounted for as a pooling of interests; however, prior year
financial statements have not been restated due to immateriality.
In April 1992, the Company purchased all of the outstanding stock of
International Business Software, Ltd. ("IBS"), a developer of distributed
computing technology for Apple Macintosh computers, for $5.2 million cash,
whereby IBS became a wholly owned subsidiary of Novell.
In June 1992, the Company purchased all of the outstanding stock of
American International Communications Corporation, doing business as Annatek
Systems, Inc. ("Annatek"), a developer of software distribution products, for
$10.0 million cash, whereby Annatek became a wholly owned subsidiary of Novell.
In June 1993, the Company purchased all of the outstanding stock not
previously owned by Novell of Serius Corporation ("Serius"), a developer of
object-based application tools, for $17.0 million cash and assumed liabilities
of $5.0 million, whereby Serius became a wholly owned subsidiary of Novell.
Novell previously had invested cash of $1.1 million in Serius. This transaction
was accounted for as a purchase and,
42
<PAGE> 52
on this basis, resulted in a one-time write-off of $22.1 million for purchased
research and development in the third quarter of fiscal 1993.
In June 1993, the Company acquired all of the outstanding stock of Software
Transformation, Inc. ("STI"), a developer of software development tools, by
issuing approximately 800,000 shares of Novell Common Stock in exchange for all
of the outstanding stock of STI. The transaction was accounted for as a pooling
of interests; however, prior periods were not restated due to immateriality.
In July 1993, the Company acquired all of the outstanding stock of Fluent,
Inc. ("Fluent"), a developer of multimedia software for personal computers, for
$18.5 million cash and assumed liabilities of $3.0 million, whereby Fluent
became a wholly owned subsidiary of Novell. The transaction was accounted for as
a purchase and, on this basis, resulted in a one-time write-off of $20.7 million
for purchased research and development in the third quarter of fiscal 1993.
The Company will continue to look for similar acquisitions, investments or
strategic alliances that it believes complement its overall business strategy.
BUSINESS STRATEGY
Novell's business strategy is to be a leading supplier of software products
for the network computing industry. Over the past several years the Company has
issued Common Stock or paid cash to acquire technology companies, invested cash
in other technology companies, and formed strategic alliances with still other
technology companies. Novell undertook all of these transactions to promote the
growth of the network computing industry, and in many cases to also broaden the
Company's business as a system software supplier.
Novell believes that companies implement technologies to meet business
needs. People use technology to help them to be more productive in their jobs.
As a result of these motivations, customers have made the NetWare operating
system the most popular network solution in the industry. This is a direct
result of Novell's delivery of a networking environment that contributes to the
success of individuals and companies.
To meet the needs of its customers, over the past year Novell has embarked
on a strategy to combine the industry's most proven network operating system
with the industry's most proven application platform, UNIX. This "matched pair"
combines the best network services with the best application services to deliver
to customers the best computing platform on which to run their businesses. These
strong operating systems combine with Novell's innovative client/server
application platform to deliver a total system software solution.
Novell's mission is to accelerate the growth of the network computing
industry through responsible leadership. The Company accomplishes this by
delivering an overall networking environment that includes industry leading
product technology, programs and partnerships. The key elements of the Company's
overall business strategy are:
Technological Leadership
Integration Platform. Novell's NetWare network operating system
provides a platform for the integration of multiple technologies. This
includes the seamless integration of multiple desktop systems and host
environments. Novell believes that the customer environments are inherently
heterogeneous and therefore require an information system that integrates
dissimilar technologies. The goal of Novell's strategy of integrating
various desktop systems is to allow IBM and IBM-compatible, Apple
Macintosh, and UNIX-based PCs and workstations to access and share
simultaneously a common set of network resources and information. This
gives customers the freedom to choose the desktop and application server
systems that best fit their application requirements. In addition to the
integration of desktops, host environments from vendors such as IBM, HP,
DEC and Olivetti are integrated into the NetWare network so that users can
access host-based resources and information from their desktops across the
network. Novell continues to extend this hardware and infrastructure
integration to other communication devices such as PBXs and imbedded
systems such as cash registers and process control devices. The overall
objective is to seamlessly connect users by shielding them from the
underlying network technology used to share resources and information
across heterogenous systems.
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<PAGE> 53
Network Services. Novell delivers advanced network services on top of
the integration platform. These services enhance the functionality
available to users on the network. In the first release of the NetWare
operating system, those services were file and print only. While Novell has
continued to enhance NetWare file and print services, the services provided
by Novell and third parties have expanded significantly to include
communications, network and systems management, messaging, directory,
software licensing and distribution, imaging and document management and
telephony services. Novell continues to add network services through
internal development efforts, partnerships and acquisitions.
Application Framework; AppWare. In addition to the programming
interfaces that Novell provides for application developers, Novell has
begun delivering AppWare, a set of development tools that significantly
eases the development of true client/server applications. AppWare allows
application developers and internal IS development teams to deliver
distributed applications that integrate and take advantage of all of the
network services available in NetWare and UnixWare.
Directory Services. With the introduction of NetWare 4 in March 1993,
Novell began to deliver an industry-leading distributed naming service,
NetWare Directory ServicesTM ("NDSTM"). NDS allows administrators and users
to view the information and resources on the network in a simple and
integrated way. It provides for one common view of the network rather than
having to track resources by knowing on which server the resource resides.
NDS allows the user to log in once to the network and access information
and resources independent of physical location. While this simplifies both
the administration and use of the network, NDS also improves the security
of network information with the use of encryption technology. NDS will
continue to become the centerpiece of network services and client/server
applications for the next several years.
Programs
Certified NetWare EngineerSM Program. Through the Certified NetWare
Engineer ("CNESM") program, Novell is strengthening the networking
industry's Level I support self-sufficiency. CNEs are individuals who
receive high-level training, information and advanced technical telephone
support (Level II) from Novell. CNEs may be employed by resellers,
independent support organizations or Novell Support Organizations ("NSOs").
The NSO program pools the capabilities of the industry's best support
providers. NSOs have contractual agreements with Novell that are designed
to ensure quality service on a national or global level.
National Authorized Education CentersCLM. Novell offers education to
end users through more than 1,200 established Novell Authorized Education
Centers ("NAECsCLM") worldwide, which use Novell-developed courses to
instruct more than 30,000 students per month in the use and maintenance of
Novell products. Novell also offers self-paced training products.
Novell LabsTM. Through its Independent Manufacturer Support ProgramSM
("IMSPSM"), Novell works with third-party manufacturers to test and certify
hardware components designed to interoperate with the NetWare operating
system. Novell distributes these tests results to inform NetWare customers
about products that have formally demonstrated NetWare compatibility. In
effect, IMSP certification programs help vendors to market their products
through Novell's distribution channels. The primary goal of IMSP is to
foster working relationships between Novell and strategic third-party
hardware manufacturers. Secondary goals include promoting certified
hardware to industry resellers, anticipating industry hardware directions
through co-marketing efforts and working with vendors to co-develop
critical network hardware components.
Technical Support AllianceCLM. In May 1991 Novell announced the
formation of the Technical Support Alliance ("TSACLM"), with 37 current
members including Apple, Compaq, HP, Intel, IBM, Lotus, Microsoft, Oracle
and WordPerfect. The TSA was organized to provide one-stop multivendor
support.
Client-Server NetWare Loadable ModuleTM Testing Program. Novell is
committed to ensuring the highest quality customer solutions by raising the
level of importance that quality assurance and testing
44
<PAGE> 54
hold in the software development cycle. The NetWare Loadable Module
("NLM(TM)") testing program is a result of that commitment; it allows
developers to submit client-server NLM applications for testing and
certification.
Partnerships
Development Partners. When customers request a new network service be
added to the NetWare operating system, Novell investigates the most
effective way to deliver that functionality to the user. Very often the
best way is for Novell to partner with a company that has expertise in that
specific area. By partnering, the combination of Novell's expertise in
networks and the partner's expertise in the given product area combine to
deliver a better solution faster than if Novell would have attempted to
develop it alone.
Systems Partners. Novell partners with companies who have
complementary software and hardware. The resulting solution is a powerful
combination of products that deliver enterprise-wide connectivity
solutions. These partners include system suppliers like IBM, HP and DEC, as
well as system integration experts like Memorex Telex, Andersen Consulting,
EDS, etc.
Application Partners. Novell works very closely with application
developers to provide integrated software support for end users.
Multiple Channel Distribution Network. The Company markets a broad
line of the NetWare operating system and the UnixWare operating system
through distributors, dealers, value added resellers, systems integrators
and OEMs, as well as to major end users.
Worldwide Service and Support. The Company is committed to providing
service and support on a worldwide basis to its resellers and to their
end-user customers. The Company has established agreements with third-party
service vendors to expand and complement the service provided directly by
the Company's service personnel and the Company's resellers.
PRODUCTS
The Company's products fall within three operating groups: NetWare Systems
Group ("NSG"), UNIX Systems Group ("USG"), and AppWare Systems Group ("ASG").
NETWARE SYSTEMS GROUP. NSG develops operating systems products to
meet customer demands that include the following features:
Open Architecture. Novell maintains an open architecture in all of
its networking products. Application interfaces to all of the NetWare
services have been developed to allow developers to take advantage of
NetWare functionality. NetWare applications interfaces provide access to
all NetWare services, including file and print, database,
communications, and messaging services.
NDS is the foundation for network services and client/server
applications for the next several years. Besides enhanced NetWare file
and print services, the services provided by Novell and third parties
will also include communications, network and systems management,
messaging, directory, software licensing and distribution, imaging and
document management and telephony services.
Ease of Use. NetWare 4 reduces administrative costs by allowing
network supervisors to manage and administer their networks easily. A
new graphical utility called the NetWare Administrator consolidates all
network administration tools into a single console, giving intuitive
control of the entire network.
Reliability. NetWare contains a wide variety of features that
ensure system reliability and data integrity. These features protect
everything from the storage medium to critical application files,
allowing Novell to provide the highest levels of network reliability in
the industry.
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<PAGE> 55
Novell pioneered system fault tolerance in PC-based networks and
continues to lead the industry in this area. Novell's introduction of
mirrored server technology in 1992 provides the highest level of fault
tolerance for PC-based networks.
Manageability. Through NetWare Distributed Management Services
("NDMSTM"), Novell delivers industry leading products that provide network
and systems management capabilities. NetWare manages all of a customer's
critical assets -- information, infrastructure, hardware and software --
through delivery of storage management, device and software licensing and
distribution services.
Security. Throughout its history, the NetWare product line has
provided the tightest security features in the industry. Novell introduced
the concept of user names, passwords and user profiles to the network
market in NetWare as early as 1983. These user profiles list the resources
to which a user has access and the rights he or she has while using that
resource. With version 2.15 of the NetWare operating system, network
managers have been able to specify the date, time and location from which a
user can log in to the network. Intruder detection and lockout features
notify supervisors of any unauthorized access attempt. NetWare 3TM
incorporates additional security features including encrypted passwords
over the wire. NetWare 4 adds new security auditing capabilities required
in many security conscious network environments.
Workstation Independence. NetWare currently supports DOS, MS Windows,
OS/2, Macintosh and UNIX workstations. By providing a network operating
system that can integrate all the standard workstation operating systems,
Novell gives users the freedom to choose their workstation environment
while ensuring them full network participation.
Hardware Independence. NetWare is hardware-independent and the
Company has close working relationships with more than 350 strategic
third-party hardware manufacturers. This independence and these
relationships provide the Company with a broad market for its networking
software and the ability to support new hardware as it is developed.
High Performance. When Novell introduced the Advanced NetWare network
operating system to the market in 1985, it represented a major improvement
in network operating system performance, and NetWare network operating
systems still lead the market in performance today. The NetWare 3 network
operating system extends Novell's performance leadership by providing end
users the potential for up to three times the performance of the NetWare 2
network computing products. The NetWare 4 network operating system allows
users and applications to gain access to network-wide information and
services transparently through technologies such as NDS, new security
capabilities, wide-area networking improvements and enhanced administration
and management tools.
NETWARE OPERATING SYSTEMS PRODUCT LINE. The NetWare family of network
operating systems provides solutions to a wide variety of needs ranging from
small, simple networks to enterprise-wide networks and include the following
products.
NetWare 4. In March 1993, Novell introduced the NetWare 4 operating
system. An elaborate demonstration showed the ability of how one network
server can support 1,000 clients or how one client can access 1,000
servers.
Novell sees itself and NetWare at the center of the converging market
forces reshaping business computing on to downsized, or rightsized
information systems. Cohesively managed computer networks are taking on
computing responsibilities held by mainframe computers over the last three
decades.
NetWare has increasingly defined a system services environment that
supports this worldwide shift away from mainframe and mid-range computing
solutions to computer networks.
Novell's NetWare 4 operating system is designed to deliver the power
and technology to meet downsizing requirements.
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All Encompassing Environment. Delivering a manageable, global
directory framework that provides connectivity to other computing
platforms enables users to access applications and system services
regardless of their physical location on the network.
System Fault Tolerance. Providing robust business-critical
reliability to a network using the concept of server mirroring allows
the workflow of the business to be uninterrupted even in the event of a
hardware failure.
Large Scale Configurations. NetWare 4 supports single-server
configurations of up to 1,000 concurrent users, or clients, on each
server.
NetWare 3. NetWare 3 is a proven, sophisticated connectivity tool for
businesses, departments and workgroups of various sizes. NetWare 3 is a
full-featured, 32-bit network operating system that supports all key
desktop operating systems -- DOS, MS Windows, OS/2, UNIX, and
Macintosh -- as well as the IBM SNA environment. NetWare 3 provides a
high-performance integration platform for businesses requiring a
sophisticated network computing solution in a multivendor environment.
NetWare 3 offers centralized network management and is available in 5-,10-,
20-, 50-, 100-and 250-user versions, allowing organizations to standardize
on a high-performance networking solution regardless of their size.
NetWare Clients. As new desktop operating systems have become
available, Novell has continued its Open Desktop Strategy. It has offered
NetWare clients and redirectors for connection into the NetWare operating
system through fulfillment and 1-800 numbers. This allows existing users of
NetWare to update client network components while maintaining their
investment in NetWare servers. In 1992 Novell released Workstation kits for
MS DOS, DR DOS(R), MS Windows 3.1 and OS/2 2.0. These kits provide users
and administrators with the ability to get the latest desktop client
support available and allows Novell the flexibility to enhance the desktop
support independently of NetWare Operating System releases.
Messaging Services. Messaging technology provides communications
capabilities that allow messages to be sent between people, between
processes, or between a person and a process without using real-time links.
Novell also provides products with these capabilities.
NetWare MHSTM is a "store-and-forward" message handling service for
the Novell distributed computing platform. NetWare MHS platform supports a
wide range of services including electronic mail ("e-mail"), workflow
automation, calendar and scheduling, and fax services.
Applications from more than 900 developers (including more than 150
commercial applications) operate on this foundation and support the NetWare
MHS platform.
For example, Indisy provides connectivity between mainframe,
minicomputer and PC-based network users. In addition to electronic mail,
Indisy also provides software for the exchange of single mail parcels
containing spreadsheets, graphics and text, batch report distribution,
remote job submission, document translation, and other functions.
NetWare for Macintosh. When used in conjunction with a NetWare
environment, NetWare for Macintosh brings the comprehensive networking
features of NetWare, such as enhanced security, resource accounting and
fault tolerance, to the Apple Macintosh environment. NetWare for Macintosh
allows Macintosh, DOS, and OS/2 workstations to share data and resources in
a high-performance, secure network environment. This product is of special
interest to large-and medium-sized companies that have heterogeneous
computing environments.
NetWare for Macintosh comes in two versions: NetWare for Macintosh
4.01 and NetWare for Macintosh 3.12.
NetWare for Macintosh 4.01 is the premier solution for integrating
Macintosh computers into the NetWare environment. It provides file
services, print services, administrative utilities and AppleTalk routing
for Macintosh users on a NetWare 4 network. NetWare for Macintosh 4.01 also
allows fast and secure CD-ROM access and DOS-to-Macintosh application
mapping.
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NetWare for Macintosh 3.12 provides NetWare file, print, routing, and
administrative utilities to Macintosh users and integrates them into the
NetWare 3 environment.
Personal NetWare. As the networking industry continues to grow, new
users are interested in simple and inexpensive entry-level networking
solutions to connect small groups of users together in workgroups. In
September 1991 Novell introduced a new peer-to-peer desktop networking
product aimed at this market called NetWare Lite 1.0. In July 1992 Novell
released an updated NetWare Lite 1.1 that improved the performance of
NetWare Lite 1.0 by adding a full network caching and also improved the
reliability and Windows support.
Novell continued to enhance its desktop networking solutions with the
release of Personal NetWare in 1993. Personal NetWare is the ideal solution
for small businesses and for workgroups in larger businesses and
enterprise-wide NetWare networks. Personal NetWare allows users to connect
as many as 50 PCs running DOS or MS Windows so they can share hard disks,
printers, CD-ROM drives and other resources. In addition to tighter
integration with NetWare, Personal NetWare will include support for mobile
users and network management at the desktop.
Other features of Personal NetWare include a single-network view,
single login, full compatibility with other versions of the NetWare network
operating system, easy management and administration, security,
autoreconnect and a flexible configuration to maximize memory use.
Novell DOSTM . In September 1991, the Company introduced DR DOS 6.0,
a major upgrade of its advanced DR DOS operating system. DR DOS 6.0
represents a significant advance over DR DOS 5.0 and other competing
products with respect to features such as memory management, disk caching
and task-switching. The latest addition to Novell's desktop operating
system products is Novell DOS 7.
Novell DOS 7 is the first DOS that fully integrates advanced DOS
technology with networking. Novell DOS 7 advances the DOS standard by
providing state-of-the-art network and client management utilities,
workstation security, disk compression and NetWare with all inherent
peer-to-peer networking capabilities. Fully integrated networking makes
Novell DOS 7 the best DOS client operating system for the NetWare network
operating system. It is also fully compatible with the installed base of
DOS and MS Windows applications.
COMMUNICATIONS AND CONNECTIVITY PRODUCTS. As the leader in local area
network technology, the Company has made a significant commitment to
implementing communications and connectivity services within the NetWare
environment.
Remote PC Access to Networks. The company provides two types of
dial-in services for remote PCs:
NetWare for SAA. NetWare for SAA 1.3B, which runs on both NetWare
3 and NetWare 4 platforms, integrates the NetWare network operating
system with traditional IBM SNA mainframe and AS/400 environments. With
NetWare for SAA, NetWare clients can access host data and applications
while simultaneously accessing files and data on NetWare servers. Built
as a set of NLMs, NetWare for SAA capitalizes on the high performance,
security, name services and administration features on the NetWare
operating system.
NetWare SNA LinksTM . NetWare SNA Links 2.0 is an NLM that works
with NetWare for SAA to provide LAN-to-LAN communications over existing
SNA networks. With NetWare SNA Links, users in geographically dispersed
branch offices can access remote LAN and host resources over SDLC and
Token-Ring backbones without requiring specialized software on the host.
Network supervisors can administer branch office servers from a central
location using standard NetWare utilities and management products.
When installed on a NetWare 3 server or a NetWare MultiProtocol
Router 2.0, NetWare SNA Links can route IPX, IP, AppleTalk, and OSI over
leased lines using the Point-to-Point Protocol or using x.25 private or
public data networks.
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INTERNETWORKING PRODUCTS. Novell's internetworking products connect
NetWare services at headquarters with services at branch offices, providing
access to information and NetWare resources.
NetWare MultiProtocol Router. The NetWare MultiProtocol Router v2.11
and NetWare MultiProtocol Router Plus v2.11 are software-based
bridge/routers that run on 80386, 80486, and Pentium PCs. These
bridge/routers enable users to connect to remote offices using familiar
NetWare and PC technology. NetWare MultiProtocol Router is ideal for
connecting local area networks by routing the IPX, IP, AppleTalk, and OSI
protocols over a wide range of LAN types, and source-route bridging over
Token-Ring. NetWare MultiProtocol Router Plus provides remote routing and
source-bridge routing over leased lines, Frame Relay, and x.25.
UNIX SYSTEMS GROUP. USG provides a full suite of UNIX operating system and
UNIX connectivity products. Key products include:
Operating System Products. Novell's UnixWare operating system
provides a powerful application server and client for today's distributed
computing environments. The current product offerings are the UnixWare
Application ServerTM 1.1 and the UnixWare Personal Edition 1.1. UnixWare
uses the network services available from Novell's NetWare operating system
and the cross-platform development tools available from AppWare to make
applications available throughout the entire enterprise. UnixWare is easy
to use, enabling users to be productive right away. Its fully graphical
user interface gives users access to all the enterprise-wide information
and services available in the corporate computing environment with simple
point-and-click mouse functions. UnixWare also supports a variety of
international languages.
Optional products for the Application Server systems include: UnixWare
Server Merge for Windows, which provides UnixWare users with multiuser DOS
access and limited multiuser MS Windows access; UnixWare Online Data
ManagerTM 1.1, a UNIX System VTM, industry-standard, robust file system
designed to maximize system and data availability and improve I/O
performance; and OracleWare System-UnixWare Edition, a powerful
applications data server platform which integrates the UnixWare Application
Server 1.1 operating system with Oracle 7 cooperative database server on a
single CD-ROM disk.
Optional add-on products for UnixWare Personal Edition include
UnixWare NFS, which enables resource-sharing with other UNIX systems;
UnixWare C2 Auditing, which records security-related events to help detect
attempts to breach security; and UnixWare Encryption Utilities, which
provide support for DES encryption and decryption.
Novell also supplies the UNIX operating system source code to other
UNIX system vendors. The latest version, UNIX System V Release 4.2
("SVR4.2"), unifies several earlier versions and offers greatly enhanced
ease of use and ease of administration features.
UNIX Connectivity Products. Novell provides several product families
designed to integrate NetWare into the UNIX and TCP/IP environments.
NetWare NFS provides UNIX workstations with transparent access to the
NetWare 3 and NetWare 4 file systems. Once NetWare NFS is installed,
workstations with NFS client services can share files with other NetWare
clients-such as DOS, Macintosh and OS/2 workstations. NetWare NFS enables
UNIX and NetWare clients to share all network printing devices. It also
provides an X Window System application that enables UNIX network
supervisors to remotely manage NetWare servers. NetWare FLeX/IPTM provides
all the services delivered in the NetWare NFS product except the
transparent access to the NFS distributed file system.
The NetWare NFS Gateway enables DOS and MS Windows users on NetWare to
transparently access files on NFS servers. It extends the users' reach into
the UNIX world yet preserves the familiar NetWare look and feel. The
NetWare NFS Gateway provides easy-to-use, server-based installation,
administration and management.
Novell's popular LAN WorkPlace family of products provides users with
fast, direct access to enterprise-wide TCP/IP resources, including the
Internet, from a variety of desktop workstations. LAN
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WorkPlace for DOS offers unsurpassed flexibility by including both DOS
and MS Windows TCP/IP applications, as well as new native language
versions in French, German, Spanish, Portuguese and Japanese. LAN
WorkGroup provides the same versatile connectivity to DOS and MS
Windows users of large NetWare networks; its server-based installation,
maintenance and management greatly reduce administration time and
costs. LAN WorkPlace products are also available for such users of
Macintosh and OS/2 systems. Mobile WorkPlace is the newest member of
the family, enabling users to access TCP/IP resources when they're on
the road just as if they were in the office.
NetWare/IP is another way for customers to tightly integrate NetWare
services into their TCP/IP environments. By installing NetWare/IP on
existing NetWare 3 and NetWare 4 servers, customers can create an
environment that supports both the TCP/IP and IPX transport protocols, or
one that uses TCP/IP only.
Novell also offers a solution for integrating Open Systems
Interconnection ("OSI") with NetWare. NetWare FTAM from Firefox is a fully
FOSIP-compliant FTAM server that enables a variety of FTAM clients to
access the NetWare 3 file system. This standard protocol-based product
provides a key to enabling multivendor interoperability with NetWare
systems.
APPWARE SYSTEMS GROUP. ASG provides tools and technologies for the
development of network-aware applications. Four key elements are the focus of
ASG's product line: (1) object-based tools and systems for use by corporate and
consulting developers for rapid network application development; (2) libraries
for use by commercial software vendors for writing portable source code,
covering dominant desktop and network system services; (3) transaction
processing monitor technology for the creation and management of
mission-critical corporate transaction applications; and (4) operating systems
and network access technologies for office, commercial, and industrial devices
to connect into local area networks.
AppWare BusTM and AppWare Loadable ModulesTM . The AppWare Bus and
AppWare Loadable Modules ("ALMTM") provide a model for software components
from separate vendors to work together in custom applications. The AppWare
Bus is a sophisticated engine for managing the interactions between the ALM
components. Novell and many third parties provide high-level, easy-to-use
ALMs covering network, DBMS, communications, multimedia, and other
application fields. When accessed by a development tool such as Novell's
Visual AppBuilderTM , the AppWare Bus allows all ALMs to be used rapidly in
any combination to create powerful applications. The AppWare Bus and ALMs
are usually bundled with other Novell products, and several OEM agreements
are in place for building within other vendors' development tools.
Visual AppBuilder. Visual AppBuilder is Novell's rapid development
tool for corporate and consulting developers. It provides an intuitive,
visual interface to application construction, empowering developers who
need not necessarily be fluent with traditional languages such as C and
C++. Visual AppBuilder accesses the AppWare Bus and ALMs to provide the
component engine and component set for developers to visually assemble into
custom applications. Visual AppBuilder, when combined with network ALMs, is
one of the most effective tools for building network-aware applications.
Visual AppBuilder is targeted for sale through a variety of distribution
channels, and will be bundled with several other Novell products.
ALM SDK. The ALM SDK is a tool for C and C++ programmers to use to
create new ALMs. The interface to the AppWare Bus is provided, allowing any
third party programmer or vendor to create ALMs that interoperate with
Novell's ALMs. The ALM SDK is bundled with Visual AppBuilder.
AppWare FoundationTM . AppWare Foundation is a set of libraries that
provide an application programming interface ("API") for C and C++
developers to write portable source code. The problem of portability that
is addressed by the AppWare Foundation is perhaps one of the most important
issues facing software vendors today. Using the AppWare Foundation, a
programmer may write code once for a new application or software component,
and simply recompile the code to run on any of the dominant desktop
computing systems, including MS Windows, MacIntosh, UnixWare and other
versions of UNIX, and soon OS/2 and MS Windows NT. The Foundation offers
such portable APIs covering graphical
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interfaces, operating systems, network systems, and network services.
AppWare Foundation is targeted for sale through a variety of
distribution channels, and several OEM relationships have been formed
to distribute the Foundation libraries as a part of third-party
development tools.
Tuxedo(R). Derived from Novell's 1993 acquisition of USL, Tuxedo is a
sophisticated transaction processing manager for mission-critical
transaction-oriented applications. Tuxedo provides both client and server
software for connecting client applications and server services together
with a highly reliable, high-performance, secure, managed transaction
connection. In use today for mission-critical applications, Tuxedo is well
recognized as a leading offering in its field. Its integration with
NetWare, via NLMs, and AppWare, via ALMs, provides those key Novell
products with effective transaction processing facilities. Tuxedo is sold
largely through OEM agreements with major system software vendors, and
directly to large corporate customers.
PRODUCT DEVELOPMENT
Due to the rapid pace of technological change in its industry, the Company
believes that its future success will depend, in part, on its ability to enhance
and develop its network, communications and system software products to
satisfactorily meet specific market needs.
The Company's current product development activities include the
enhancement of existing products and the development of products that will
support (1) further integration of NetWare and UNIX environments and the
establishment of UnixWare as an industry-leading UNIX platform; (2) network
management services; (3) global naming services; (4) international networking
standards; (5) integrated peer services in NetWare clients; (6) integration of
current and future desktop operating systems into the overall networking
environment; (7) host-based versions of NetWare, such as NetWare for UNIX and
NetWare for OS/2; (8) processor-independent versions of NetWare; (9) additional
network services; (10) technologies for distributed applications development and
operation; (11) AppWare ALMs for a broad range of Novell and UNIX services; and
(12) multiplatform and multivendor APIs for major network services.
During fiscal 1993, 1992 and 1991, product development expenses were
approximately $164.9 million, $120.8 million, and $77.9 million, respectively.
The Company's product development effort consists primarily of work performed by
employees; however, the Company also utilizes third-party technology partners to
assist with product development.
SALES AND MARKETING
Novell markets its NetWare family of network products and the UnixWare
operating system through distributors, dealers, vertical market resellers,
systems integrators and OEMs who meet the Company's criteria, as well as to
major end users. In addition, the Company provides technical support, training,
and field service to its customers from its field offices and corporate
headquarters. The Company also conducts sales and marketing activities from its
offices in Cupertino, Monterey, San Jose, and Sunnyvale, California; Summit, New
Jersey; Austin, Texas; Provo and Sandy, Utah; and from its 33 U.S. domestic and
31 foreign field offices.
Distributors. Novell has established a network of independent
distributors, which resell the Company's products to dealers, smaller VARs, and
computer retail outlets. As of December 31, 1993, there were approximately 21
domestic distributors and approximately 113 foreign distributors.
Dealers. The Company also markets its products to large-volume dealers and
regional and national computer retail chains.
VARs and Systems Integrators. Novell also sells directly to VARs and
systems integrators who market data processing systems to vertical markets, and
whose volume of purchases warrants buying directly from the Company.
OEMs. The Company licenses its network software to domestic and
international OEMs for integration with their products. With the acquisitions of
USL and DRI, the number of OEM agreements the Company
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has increased significantly as USL and DRI have marketed their products quite
extensively through OEMs, both domestically and internationally.
End Users. Generally, the Company refers prospective end-user customers to
its resellers. However, the Company has the internal resources to work directly
with major end users and has developed master license agreements with
approximately 150 of them to date. Additionally, some upgrade products are sold
directly to end users.
Export Sales. In fiscal 1993, 1992, and 1991, approximately 48%, 47%, and
44%, respectively, of the Company's net sales were to customers outside the
U.S., primarily distributors. To date, substantially all international sales
except Japanese sales have been invoiced by the Company in U.S. dollars, and in
fiscal 1994 the Company anticipates that substantially all foreign revenues
except Japanese sales, will continue to be invoiced in U.S. dollars. Except for
Germany, which accounted for 11% of revenue in fiscal 1993, 13% of revenue in
fiscal 1992 and 10% of revenue in fiscal 1991, no one foreign country accounted
for more than 10% of net sales in any period. Except for Ingram Micro, Inc., a
multi-national distributor that accounted for 12% of revenue in fiscal 1993, no
customer accounted for more than 10% of revenue in any period.
Marketing. The Company's marketing activities include distribution of
sales literature and press releases, advertising, periodic product
announcements, support of NetWare user groups, publication of technical and
other articles in the trade press and participation in industry seminars,
conferences and trade shows. The marketing departments of the Company employ
many technical laboratories of networked computer equipment and individual
device testing and evaluation. The knowledge derived from these laboratories is
the basis for the technical publications published by the Company. These
activities are designed to educate the market about local area networks in
general, as well as to promote the Company's products. Through the Professional
Developers Program, the Company strongly supports independent software and
hardware vendors in developing products that work on NetWare networks. Thousands
of multiuser application software packages are now compatible with the NetWare
operating system. In March 1994, the tenth annual BrainShare Conference
(formerly Developers' Conference) was held to inform and educate developers
about NetWare product strategy, NetWare open architecture programming interfaces
and NetWare third-party product certification programs.
SERVICE, SUPPORT AND EDUCATION
The purpose of any service program is to help users get the most out of the
products they buy. Novell offers a variety of support alternatives and
encourages users to select the services that meet their own needs. These include
the worldwide service and support organization, the TSA, the CNE program, NAECs,
IMSP and the ClientServer NLM Testing Program.
MANUFACTURING SUPPLIERS
The Company's products, which consist primarily of software diskettes and
manuals, are duplicated by outside vendors. This allows the Company to minimize
the need for expensive capital equipment in an industry in which multiple
high-volume manufacturers are available. The Company believes that there are
multiple sources of the materials necessary to produce its products and that
such materials are widely available. Furthermore, the Company has not, to date,
experienced any material shortages in materials necessary to manufacture and
distribute its products.
BACKLOG
Lead times for the Company's products are typically short. Consequently,
the Company does not believe that backlog is a reliable indicator of future
sales or earnings. The absence of significant backlog may contribute to
unpredictability in the Company's net income and to fluctuations in the
Company's stock price. See "Factors Affecting Earnings and Stock Price." The
Company's backlog of orders at January 21, 1994, was approximately $35.3
million, compared with $35.7 million at January 22, 1993. All such orders are
expected to be filled within the current fiscal year.
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COMPETITION
Novell competes in the highly competitive market for computer software,
including in particular, network operating systems, desktop operating systems
and related systems software. In the market for network operating systems,
Novell believes that the principal competitive factors are hardware independence
and compatibility, availability of application software, marketing strength in
desktop operating systems, system/ performance, customer service and support,
reliability, ease of use, price/performance, and connectivity with minicomputer
and mainframe hosts.
The market for operating systems software, including network operating
systems and client operating systems, has become increasingly problematic due to
Microsoft's growing dominance in all sectors of the software business. The
Company does not have the product breadth and market power of Microsoft.
Microsoft's dominant position provides it with enormous competitive advantages,
including the ability to unilaterally determine the direction of future
operating systems and to leverage its strength in one or more product areas to
achieve a dominant position in new markets. This position may enable Microsoft
to increase its dominance even if the Company succeeds in continuing to
introduce products with superior performance and features to those offered by
Microsoft.
Microsoft's ability to offer networking functionality in future versions of
MS Windows, MS Windows NT and other system software, or to provide incentives to
customers to purchase certain products in order to obtain favorable sales terms
or necessary compatibility or information with respect to other products, may
significantly inhibit the Company's ability to maintain its business. Moreover,
Microsoft's ability to offer products on a bundled basis can be expected to
impair the Company's competitive position with respect to particular products.
Novell may be unable to maintain compatibility with Microsoft's key products,
although Novell will continue to seek to do so.
The Company has not succeeded in establishing significant sales from Novell
DOS. The Company believes that it will continue to be at a substantial
competitive disadvantage in selling its client operating systems (including both
Novell DOS and UnixWare) due in part to Microsoft's dominance and certain of
Microsoft's pricing and licensing practices. Such competitive position and
practices may prevent the Company from successfully offering products to a broad
variety of customers or from maintaining demand for these products.
The application software development tools market in which Novell now
operates is also highly competitive. There can be no assurance that Novell will
be successful in competing in this market or any other market in the future.
LICENSES, PATENTS AND TRADEMARKS
The Company currently relies on copyright, patent, trade secret and
trademark law, as well as provisions in its license, distribution and other
agreements in order to protect its intellectual property rights. The Company
currently holds a number of United States patents and has numerous United States
patents pending. All such Company patents expire in excess of ten years from the
date hereof. Additionally, the Company has a number of patents pending in
foreign jurisdictions. No assurance can be given that such patents pending will
be issued or, if issued, will provide protection for the Company's competitive
position. Although the company intends to protect its patent rights vigorously,
there can be no assurance that these measures will be successful. Additionally,
no assurance can be given that the claims on any patents held by the Company
will be sufficiently broad to protect the Company's technology. In addition, no
assurance can be given that any patents issued to the Company will not be
challenged, invalidated or circumvented or that the rights granted thereunder
will provide competitive advantages to the Company. The loss of patent
protection on the Company's technology or the circumvention of its patent
protection by competitors could have a material adverse effect on the Company's
ability to compete successfully in its products business.
The software industry is characterized by frequent litigation regarding
copyright, patent and other intellectual property rights. There can be no
assurance that third parties will not assert claims against the Company with
respect to existing or future products or that licenses will be available on
reasonable terms, or
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at all, with respect to any third party technology. In the event of litigation
to determine the validity of any third party claims, such litigation could
result in significant expense to the Company and divert the efforts of the
Company's technical and management personnel, whether or not such litigation is
determined in favor of the Company.
In the event of an adverse result in any such litigation, the Company could
be required to expend significant resources to develop non-infringing technology
or to obtain licenses to the technology which is the subject of the litigation.
There can be no assurance that the Company would be successful in such
development or that any such licenses would be available. In addition, the laws
of certain countries in which the Company's products are or may be developed,
manufactured or sold may not protect the Company's products and intellectual
property rights to the same extent as the laws of the United States.
EMPLOYEES
As of December 31, 1993, the Company had 4,335 employees. The functional
distribution of its employees was: sales and marketing -- 939; product
development and marketing -- 1,817; general and administrative -- 487; service,
support and education -- 807; operations -- 146; and joint ventures -- 139. Of
these, 349 employees are located in U.S. field offices, and 755 employees are in
offices outside the U.S. All other Company personnel are based at the Company's
facilities in Utah, California, Colorado, Massachusetts, New Jersey or Texas.
None of the employees is represented by a labor union, and the Company considers
its employee relations to be excellent.
Competition for qualified personnel in the computer industry is intense. To
make a long-term relationship with the Company rewarding, Novell endeavors to
give its employees and consultants challenging work, educational opportunities,
competitive wages, and, through sales commission plans, bonuses and stock option
and purchase plans, opportunities to participate financially in the Company.
FACTORS AFFECTING EARNINGS AND STOCK PRICE
In addition to factors described above under "Competition" which may
adversely affect the Company's earnings and stock price, other factors may also
adversely affect the Company's earnings and stock price. The successful
combination of companies in the high technology industry may be more difficult
to accomplish than in other industries. There can be no assurance that Novell
will be successful in integrating acquired businesses into its own, that it will
retain their key technical and management personnel or that Novell will realize
any of the other anticipated benefits of the acquisitions.
The computer software industry has experienced delays in its product
development and "debugging" efforts, and the Company could experience such
delays in the future. Significant delays in developing, completing or shipping
new or enhanced products would adversely affect the Company. Furthermore, it can
be expected that as products become more complex, development cycles will become
longer and more expensive. There can be no assurance that Novell will be able to
respond effectively to technological changes or new product announcements by
others, or that Novell's research and development efforts will be successful.
The Company's industry is characterized by rapid technological change,
resulting in continuing pressure for price/performance improvements in response
to advances in computer software and hardware technology. The Company believes
that its future success will depend on its ability to continue to enhance its
current products and to develop and introduce new products that maintain its
technological leadership and achieve market acceptance.
In particular, the Company introduced the NetWare 4 operating system in
1993. This new version of the NetWare operating system provides increased
functionality as compared to prior releases of the NetWare product, including
the ability to support a substantial increase in the number of clients connected
on a single network. As with the introduction of any major new product or
upgrade, the introduction of the product may cause a deferral in orders or
reduction in demand for prior versions of the NetWare operating system, as
customers and value-added resellers evaluate the functionality of the new
product. Moreover, because the new product addresses new market segments and is
offered at a higher price than prior NetWare product releases,
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the Company is unable to predict the level of demand for the NetWare 4 operating
system which will actually occur. Should orders and sales for either the NetWare
4 operating system or prior versions of the NetWare product fall short of the
Company's objectives, the Company could experience excess inventories and
unexpected costs. As a result, the Company's future sales and earnings may be
subject to substantial fluctuations, particularly in the near term.
The introduction of new products also involves material marketing risks due
to the possibility of errors or shortfalls in product performance. Should any
new product experience a high rate of bugs or performance difficulties, the
Company could experience product returns, unexpected warranty expenses and lower
than expected sales. No assurance can be given as to the Company's financial
results during such periods. In the past, the Company has not experienced higher
than expected product returns or warranty costs associated with product errors
or difficulties. However, as is common in the software industry, initial
releases of new software products and major product upgrades have experienced
product errors or "bugs." Such bugs have been present in both new releases in
the Netware 3. operating system and the new Netware 4. operating system. See
"Risk Factors -- Possible New Product Delays."
The Company's future earnings and stock price could be subject to
significant volatility, particularly on a quarterly basis. The Company's
revenues and earnings may be unpredictable due to the Company's shipment
patterns. As is typical in the software industry, a high percentage of Novell's
revenues are earned in the third month of each fiscal quarter and tend to be
concentrated in the latter half of that month. Accordingly, quarterly financial
results are difficult to predict and quarterly financial results may fall short
of anticipated levels. Because the Company's backlog early in a quarter is not
generally large enough to assure that it will meet its revenue targets for any
particular quarter, quarterly results may be difficult to predict until the end
of the quarter. A shortfall in shipments at the end of any particular quarter
may cause the results of that quarter to fall significantly short of anticipated
levels. Due to analysts' expectations of continued growth and the high
price/earnings ratio at which the Company's common stock trades, any such
shortfall in earnings could have an immediate and very significant adverse
effect on the trading price of the Company's common stock in any given period.
As a result of the foregoing factors and other factors that may arise in
the future, the market price of the Company's common stock may be subject to
significant fluctuations over a short period of time. These fluctuations may be
due to factors specific to the Company, to changes in analysts' earnings
estimates, or to factors affecting the computer industry or the securities
markets in general.
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INFORMATION CONCERNING WORDPERFECT
INTRODUCTION
WordPerfect is a leading provider of software applications which enable
users to create and process documents. In addition to providing document
processing software, WordPerfect also produces a broad range of workgroup
automation, general business, electronic publishing and consumer products.
WordPerfect's products are easy to use, offer superior functionality and provide
individuals, small businesses and large, global organizations with software
solutions that operate across complex, networked computing environments.
WordPerfect's strategy is to be the leading provider of productivity
applications for individuals and organizations by focusing on innovations in
usability, performance, reliability and functionality.
WordPerfect was one of the original developers of word processing
applications for personal computers, and WordPerfect's flagship product,
WordPerfect, is one of the best-selling personal computer ("PC") software
applications ever introduced, having been sold to over 15 million users
worldwide. WordPerfect is now available in 23 languages and on all of the most
widely used computing platforms and operating systems, including MS Windows,
DOS, UNIX, Apple/Macintosh, and DEC's VAX/VMS. WordPerfect released WordPerfect
6.0 for DOS in June 1993 and WordPerfect 6.0 for MS Windows in October 1993. In
1993 and early 1994, WordPerfect also introduced new workgroup automation
products which capitalize on WordPerfect's expertise in developing
multi-platform, multi-lingual applications. WordPerfect Office 4.0, WordPerfect
InForms 1.0 and SoftSolutions 4.0 are designed to meet an organization's needs
for effectively sharing information in a complex, networked computing
environment. WordPerfect's Main Street line of consumer products was announced
in April 1994 and offers low-cost, easy-to-use products designed for personal
productivity, entertainment and home education.
After completion of the Merger, WordPerfect and the Quattro Pro business
unit from Borland will become the Novell Applications Product Group. See "The
Merger and Related Transactions."
INDUSTRY BACKGROUND
Communication -- the processing, sharing and presentation of
information -- is crucial to the productivity of individuals and organizations.
Documents are a primary method of communication, ranging from simple messages,
forms, letters and memoranda to complex multimedia presentations that
incorporate spreadsheets, database reports, graphics, video and sound. Once a
document is created, a significant challenge for the user is to easily share and
collaborate on the information with others. Within a home or small business, a
document may simply be printed and distributed, while the multinational
corporation needs methods to share this information electronically. Regardless
of the complexity of the document or method of distribution, there is increasing
demand for more efficient means to process, share and present documents and the
information contained within them.
Document Processing
Data processing has evolved from centralized mainframe systems, to more
distributed minicomputers, and now to workstations and PCs. Document processing
has followed a similar evolution. Documents were historically created on
typewriters, and the integration of any media other than text required manual
cutting and pasting. The automation of document creation began in the late 1970s
with the introduction of simple text-editing systems on mainframe computers,
minicomputers and dedicated word processing systems. These systems were
typically used only by specialized information processing professionals. The
proliferation of workstations and personal computers in the 1980s and 1990s has
provided users with more affordable and accessible general purpose computing
power and has enabled users to create and manipulate documents more easily using
word processing software. Well-designed word processing software has
significantly improved user productivity and become the standard tool for
document processing and the most popular software application category on
personal computers.
The most successful word processing software applications offer features
which specifically address the particular needs of individuals. In the early
1980s, word processing software programs provided only simple
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character manipulation and were difficult to use. In subsequent years,
innovative features were developed including easy on-screen editing, the
capability to merge data files into a document, macro functions that allowed
non-technical users to create simple programs and the ability to support a wide
variety of printers and other peripheral devices. In recent years, features such
as graphical user interfaces, context-sensitive tools, "fast key" access and
"drag and drop" editing have been developed to allow more rapid and efficient
composition of complex documents. Thus, current word processing applications
provide a comprehensive, enterprise-wide solution to any organization's document
needs.
Workgroup Automation
Although the proliferation of workstations and PCs enabled the emergence of
desktop document processing, these systems were typically isolated and could not
communicate with other computing resources within an organization. This
isolation limited the productivity benefits derived from desktop computing to
the individual PC or workstation user. Information systems professionals sought
to integrate these desktop systems into their enterprise computing environments
in order to provide the same productivity benefits to workgroups across the
organization and to improve communication throughout the enterprise. As a
solution, computer networking technology, including the requisite network
operating system software, evolved from allowing small workgroups to share
peripherals, such as printers and data storage devices, to enabling the
interconnection of computer users and their information throughout a global
enterprise. These local and wide area networking technologies allowed the
creation of complex, computing environments which may consist of mainframe
computers, minicomputers, workstations, PCs and emerging portable computing
devices. Until recently, however, relatively few applications were available to
take advantage of the network operating system to improve workgroup
productivity.
Increasingly, workgroups within organizations are demanding applications
which enable them to take advantage of the productivity made possible by the
network infrastructure. These applications range from word processors and
spreadsheets which include features designed specifically for a networked
environment, to applications which are specifically developed to automate more
complicated workgroup tasks extending across the enterprise, such as
calendaring, scheduling and enterprise-wide document management. The workgroup
automation needs common to most organizations include "e-mail," the creation and
routing of electronic forms, scheduling of meetings, document storage and
retrieval systems, and the staging, sequencing, routing and tracking of work
throughout a multi-platform, multi-language enterprise. Unfortunately, early
workgroup applications failed to provide comprehensive solutions for the
processing, sharing and presentation of information and were also difficult for
information systems professionals to administer. These products were either
designed to accomplish discrete tasks, such as e-mail or scheduling, or were
dependent upon proprietary database architectures, messaging technologies,
hardware platforms or operating systems.
THE WORDPERFECT STRATEGY
WordPerfect was founded in 1979 to automate document processing by offering
high quality, easy-to-use word processing software and comprehensive customer
support. WordPerfect's first product, WordPerfect, was introduced in 1980 and
became the word processing market share leader by providing superior
functionality when compared to earlier word processing products. WordPerfect
continues its focus on providing innovative document processing applications
that meet the needs of its customers. In December 1993, WordPerfect began
offering its newest version of an integrated product suite for MS Windows that
includes Borland's award-winning Quattro Pro spreadsheet and Paradox database
products. WordPerfect is leveraging its leadership position in providing
document processing solutions in multi-platform, multi-lingual computing
environments by offering workgroup automation solutions which address the more
complex computing environments found in many organizations today. In addition,
WordPerfect is beginning to offer products in the emerging product categories of
electronic publishing and consumer products. WordPerfect also plans to utilize
its traditionally strong customer support capabilities to service this
increasingly diverse customer base.
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Document Processing Solutions
WordPerfect believes that the document and document processing software
will continue to be central to the way people communicate. WordPerfect is a
leader in the continuing evolution of word processing from simple text
manipulation to complex document processing that offers support for such
features as graphics, sound, tables with spreadsheet functionality, equations,
spreadsheet and database access, integrated writing tools such as spelling and
grammar checkers, contextual help and numerous other desktop publishing
features. WordPerfect's objective is to maintain its leadership position in
document processing by focusing on advances in usability, performance,
reliability and functionality across all strategic platforms. WordPerfect's
current products include such advanced features as cross-platform file
compatibility, specialized features for vertical markets such as legal and
accounting, a powerful document indexing and retrieval system, extensive
language support, customizable tool bars and powerful table functionality.
Desktop Application Suite
WordPerfect believes that today's customers are interested in purchasing
desktop application suites that provide not only a purchase-price advantage, but
also a set of best-of-class applications that demonstrate increasing levels of
integration between the products themselves and the data generated within them.
To date, WordPerfect has cooperated with Borland to produce Borland Office 2.0
for MS Windows, a product suite which includes the WordPerfect word processor
and Borland's Quattro Pro spreadsheet and Paradox database programs. The product
achieves a high level of product integration by using PerfectFit technology to
provide a single installation, common icons, button bars and cross-application
macros, as well as shared resources like spell-checking. The customizable
Desktop Application Director provides easy access to common applications and
common tasks from a single location. Borland Office 2.0 for MS Windows is
workgroup-enabled and allows for the convenient sharing of information among
individual users' suite components and between workgroup participants. With
Novell's acquisition of Borland's Quattro Pro spreadsheet business unit,
WordPerfect will take control of developing, marketing, selling and supporting
future versions of the suite.
Workgroup Automation Solutions
WordPerfect believes that one of the most significant needs of any
organization is the ability to share and coordinate information effectively
within workgroups. With the advent of networks, network software and
applications that run on a network, organizations are increasingly utilizing
these technologies to automate the communication process and to become more
productive in operations and administrative processes. The multi-platform,
multi-lingual approach which has been central to WordPerfect's document
processing strategy since its inception has provided valuable technological
expertise for the development of powerful workgroup automation applications.
WordPerfect Office 4.0 integrates workgroup communication tools such as e-mail,
personal calendar, group scheduler and task management into a cohesive,
easy-to-use application for networked computing environments. Its growth has
been impressive, with over 2 million licenses sold to date. In addition to its
rich client functionality, WordPerfect Office 4.0 offers extensive systems
administration capabilities that make it easier to manage users across diverse
networking and hardware platforms. WordPerfect InForms is a comprehensive
package providing tools for users to create electronic forms, access multiple
databases and automate their business workflow processes. With the acquisition
of SoftSolutions Technology Corporation in January 1994, WordPerfect's workgroup
solutions are further enhanced by the immediate, enterprise-wide information
access provided by SoftSolutions -- a market leader in LAN-based document
management software. SoftSolutions includes advanced network automation
capabilities such as automated enterprise document sharing, archiving and
deletion, version control, cost recovery, activity tracking and integrated image
management. WordPerfect believes that the growing success of WordPerfect Office
and its innovative distributed messaging architecture, the introduction of
WordPerfect InForms in the emerging electronic form and workflow categories and
the established presence of SoftSolution's powerful document management
functionality has already added to WordPerfect's presence as a significant force
in this critical application category.
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Emerging Product Opportunities
Consistent with its strategy to help the world communicate, WordPerfect
believes there are significant market opportunities in the areas of electronic
publishing and consumer products. By providing electronic publishing content and
tools, WordPerfect promotes a natural extension to workgroup automation by
allowing users to mark-up, exchange, distribute and consume information
electronically. By pursuing partnerships with publishers worldwide, WordPerfect
will bring into electronic form the reference content that people traditionally
access while using a computer. WordPerfect's Main Street consumer product line
focuses on offering personal productivity, entertainment and home education
products that may eventually provide important access points to the information
highway from the home or small office. In April 1994, WordPerfect announced 19
Main Street products including a personal organizer, reference guides and
education and entertainment products. The consumer products market is estimated
to be a $1.5 billion market by 1996, up from $430 million in 1991.
World-Class Customer Support
WordPerfect is recognized as a world leader in the computer industry in
providing post-sales customer support. WordPerfect plans to continue to invest
significant resources in its customer support offerings, believing that the
software user's productivity may depend on the availability of high quality
technical assistance. As support demands change with changing customer needs and
product lines, WordPerfect plans to implement offerings and programs which
efficiently meet the customers' needs. In addition to its standard support
policies, WordPerfect recently announced the introduction of Silver, Gold and
Platinum support offerings, which are fee-based programs designed to meet the
ongoing support needs of small to large businesses. WordPerfect believes that
its expertise in providing support to individual end users will better enable it
to service and support the information systems professionals that are
increasingly responsible for purchasing and supporting software applications
within an organization.
PRODUCTS
WordPerfect has always focused on developing products which address the
needs of individual users. During the early 1980s, WordPerfect established
itself as the leading provider of word processing software on multiple platforms
and in multiple languages in a largely stand alone environment. As the needs of
users began to center more on network operating systems, WordPerfect's software
took on additional functionality to meet those evolving needs. At the same time,
WordPerfect began work on specific workgroup automation applications that
allowed users to share and coordinate information effectively within workgroups.
In a continued drive for electronic sharing of information across broad
networks, WordPerfect has begun to offer electronic publishing solutions which
provide online content and tools for viewing, manipulating, annotating and
printing information. Users are also increasingly demanding low-priced,
easy-to-use products appropriate for home and small office use, and WordPerfect
intends to meet these needs with its Main Street line of consumer products.
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The table below lists WordPerfect's major products that are currently being
sold or will be commercially available during 1994.
<TABLE>
<CAPTION>
CURRENT CURRENT VERSION NUMBER OF
PRODUCT OPERATING ENVIRONMENT VERSION RELEASE DATE+ LANGUAGES
- ------------------------------------------- -------------------------- ------- --------------- ---------
<S> <C> <C> <C> <C>
DOCUMENT PROCESSING
WordPerfect MS Windows 6.0a 4/94 14
DOS 6.0b 2/94 13
DOS 5.1+ 4/94 13
UNIX 6.0 6/94 11
Macintosh 3.0 10/93 10
Macintosh for PowerPC 3.0 3/94 9
VAX/VMS 5.1 6/91 10
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
RELATED BUSINESS APPLICATIONS
Borland Office MS Windows 2.0 12/93 4
WordPerfect Presentations DOS 2.0 11/92 11
MS Windows 2.0 7/93 12
WORKGROUP AUTOMATION
WordPerfect Office DOS 4.0a 10/93 13
MS Windows 4.0a 10/93 13
Macintosh 4.0a 10/93 6
UNIX 4.0a 12/93 8
VAX/VMS 3.1 4/92 4
WordPerfect InForms MS Windows 1.0b 4/94 12
(Designer/Filler)
DOS (Filler-only) 1.0b 6/94 3
SoftSolutions DOS 4.0 1/94 7
MS Windows 4.0 1/94 7
UNIX 4.0 1/94 7
Macintosh 4.0 10/94 * 7
WordPerfect Gateways Multiple 4.0 8/93 NA
ELECTRONIC PUBLISHING
WordPerfect Envoy MS Windows 1.0 6/94 1
Macintosh 1.0 6/94 1
WordPerfect Intellitag DOS 1.2 4/94 1
UNIX 1.2 4/94 1
SELECTED MAIN STREET
CONSUMER PRODUCTS
WordPerfect Works MS Windows 1.0 10/94 * 1
DOS 1.0 3/92 5
Macintosh 1.2.1 12/92 1
InfoCentral MS Windows 1.0 3/94 1
LetterPerfect DOS 1.0 7/90 10
Macintosh 2.1 7/92 4
Language Modules DOS 6.0b 4/94 19
MS Windows 6.0a 5/94 19
Macintosh 3.0 3/94 15
Grammatik MS Windows 6.0 5/94 2
DOS 5.1 12/93 2
Macintosh 1.1 7/93 1
</TABLE>
- ---------------
+ All dates are for the U.S. English version of the product. In certain cases,
other language versions are planned for release shortly after the release of
the U.S. English version.
* Dates reflect WordPerfect's current estimates for commercial shipment of
these products.
Document Processing
WordPerfect. WordPerfect is one of the best-selling PC application
software products ever introduced. Since its introduction in 1980, this powerful
word processing program has been purchased by over 15 million customers
worldwide and is now available in 23 languages. Versions of WordPerfect are
currently available for the following platforms: MS Windows, DOS, Macintosh,
UNIX and VAX/VMS. WordPerfect continues to
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set the standard for word processing applications and has won numerous awards.
WordPerfect for MS Windows, introduced in 1991, received the 1992 Reader's
Choice Award from BYTE, the Most Valuable Product ("MVP") award from
PC/Computing in both 1992 and 1993 and the 1994 Win 100 Award from Windows
Magazine. PC World has honored WordPerfect for DOS with its World Class Award
for eight years in a row. In 1993, sales of WordPerfect for DOS accounted for
82% of worldwide sales of all DOS word processing applications. All versions of
WordPerfect include spell-checking and thesaurus capabilities, multi-column
formatting, merge and macro support, tables, outline mode, automatic
hyphenation, extensive character sets, footnotes, end notes, styles and on-line
help. The DOS and MS Windows versions of WordPerfect accounted for 75% of
WordPerfect's net sales during 1993. The PC-based versions of WordPerfect
currently carry a suggested retail list price of $495.
WordPerfect for MS Windows. WordPerfect 6.0 for MS Windows is the world's
first document processor integrating text, data and graphics in one
easy-to-use program. It provides powerful text editing features, drawing
and charting capabilities, advanced spreadsheet functionality, direct
import of database and spreadsheet data and the QuickFinder indexing and
text retrieval tools. This version is mail-enabled, providing the ability
to send mail messages from within WordPerfect and includes Coaches that
walk the user step by step through common tasks, more than 70 ExpressDocs
templates for creating professional-looking documents and the Grammatik 5
grammar checker. Version 6.0a is a significant interim release that was
released in May 1994.
WordPerfect for DOS. WordPerfect 6.0 for DOS was released in June 1993,
with such features as a WYSIWYG ("what you see is what you get") graphical
user interface ("GUI"), customizable button bars, "drag and drop" editing,
full mouse support, integrated spreadsheet capability, extensive font
capability (including Adobe ATM, TrueType and Bitstream Speedo support),
context-sensitive help, direct fax transmission, Grammatik 5 grammar
checker, rapid text indexing and retrieval, color printing, sound,
simultaneous display and editing of up to nine documents, new macro
capabilities and an interface to WordPerfect's e-mail products. WordPerfect
5.1+ was released in April 1994, permitting those still using WordPerfect
5.1 to be able to open and use WordPerfect 6.0 level files. It comes
bundled with Stairway Software's ScreenExtender and FaceLift from Bitstream
Corporation. In addition, WordPerfect 5.1 offers direct fax transmission,
e-mail enabling and enhanced file management, and is tailored to the user
who is limited by lower capacity and performance hardware, such as
286-based PCs.
WordPerfect for UNIX. WordPerfect 6.0 for UNIX integrates text, data and
graphics in one easy-to-use program that offers a true WYSIWYG environment
and provides the only GUI and character-based solution for UNIX. It gives
the user the ability to create appealing documents with powerful
text-editing features, drawing and charting capabilities, advanced
spreadsheet functionality and direct import of spreadsheet data.
WordPerfect 6.0 for UNIX includes more than 70 ExpressDocs pre-formatted
document templates for fax forms, memos, letters, invoices and more. It
also includes a user-customizable interface with features such as pull-down
menus and mouse support, a ruler bar, a power bar, status bars, button
bars, zoom editing and support for X-Windows.
WordPerfect for Macintosh. WordPerfect 3.0 for Macintosh and Power
Macintosh is a powerful and easy-to-use word processor with an innovative,
Mac-savvy interface. Its features include tables, an equation editor, a
built-in graphics editor with comprehensive drawing tools, integrated
grammar checker, styles, columns, macros, and "drag and drop" editing.
WordPerfect 3.0 was also the first word processor to support Apple
Computer's System 7 Pro which combines PowerTalk, AppleScript, WorldScript
and QuickTime.
Related Business Applications
Borland Office. Borland Office 2.0 for MS Windows is an integrated office
suite which includes WordPerfect 6.0 plus Borland's Quattro Pro spreadsheet and
Paradox database programs, each a winner of the 1993 MVP Award from
PC/Computing. The product achieves a high level of product integration by using
PerfectFit technology to provide a single installation, common icons, button
bars and cross-application macros, as well as shared resources like
spell-checking. The customizable Desktop Application Director
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provides easy access to common applications and common tasks from a single
location. Borland Office 2.0 is workgroup-enabled via The Workgroup Desktop,
which allows for the sharing of information from any application among worldwide
workgroup participants. The suggested retail list price for Borland Office 2.0
is $595.
WordPerfect Presentations. WordPerfect Presentations 2.0 is a presentation
graphics package that is currently available for the MS Windows and DOS
platforms. This product offers a powerful GUI and provides users with the
ability to create professional-looking presentations in a variety of formats,
including handouts, transparencies, 35mm slides and electronic slide shows.
Features include a master gallery and ready-made slide templates, an outliner
that creates slides from outline format, speaker notes and handouts, drawing,
editing, clip art, support for 16 million colors, slide sorter, two-and
three-dimensional charts, paint tools, automatic bitmap tracing, customizable
button bars and multimedia capability. WordPerfect Presentations 2.0 for MS
Windows was runner-up for the 1993 PC/Computing MVP award for Presentation
Graphics. The suggested retail list price for WordPerfect Presentations 2.0 is
$495.
Workgroup Automation
WordPerfect believes that workgroup computing is best accomplished by
providing users with the basic tools and front-end applications for
communication. These essential "building blocks" each provide a specific,
well-defined function and can be combined to build additional services and
functions. For example, WordPerfect recently introduced WordPerfect InForms,
which is used to create and fill electronic forms and capitalizes on the
workflow capabilities within WordPerfect Office to route forms among members of
an organization. WordPerfect Office is built on a powerful distributed messaging
architecture, enabling rich functionality in its workgroup-computing
applications across multiple languages and multiple computing environments. This
messaging system was designed to support multiple message types, including
e-mail messages, meeting requests, task assignments and electronic forms.
WordPerfect Office offers extensive systems-administration capabilities that
make it easy to manage users across diverse networks and platforms. The
SoftSolutions document management system allows workgroups to manage documents
created by any widely used application, in all popular operating environments
and on all types of network operating systems. Both WordPerfect Office and
SoftSolutions were honored with LAN Times' Readers Choice Award in 1994, one for
GroupWare and Scheduling and the other for Document Management.
WordPerfect Office. WordPerfect Office 4.0 was released for MS Windows,
Macintosh and DOS operating system clients in June 1993. An additional version
for the UNIX operating system client was introduced in October 1993. This
powerful workgroup application combines e-mail, calendaring, group scheduling
and task management software in a single application. WordPerfect Office 4.0
includes rules-based message management, workflow automation, ordered
distribution, task management, global calendaring, directory synchronization,
central and distributed administration, custom mail views, voice messaging,
mouse support and windowing capabilities. Administration tools for the product
provide a full naming system, diagnostic and management information and software
maintenance for single-location installation for the entire enterprise.
WordPerfect also offers interfaces and tool kits that allow third parties to
develop message-enabled applications and information sharing services that work
with WordPerfect Office 4.0. WordPerfect Office 4.0 is sold as two
components -- a Client/Admin pack which contains the software and documentation
for network users and administrators, and a Message Server pack which contains
the tools to connect multiple electronic post offices in a WordPerfect Office
system. For a five-user license, the WordPerfect Office 4.0 Client/Admin pack
has a suggested retail list price of $495. A WordPerfect Office 4.0 Message
Server pack has a suggested retail list price of $295.
WordPerfect InForms. WordPerfect InForms 1.0 is available as two separate
packages: a Designer package for those involved in the creation of forms, and a
Filler package for those that need to fill in forms created with the Designer.
The Designer package provides a tool palette to simplify the creation of
professional-looking forms. WordPerfect InForms provides electronic distribution
capabilities, electronic fill-in, routing, security, tracking and approval. Its
features also include an object library for form objects, an easy-to-use query
tool and direct access to a number of popular desktop and SQL databases.
WordPerfect InForms also permits users to customize forms or "views" to help
them process, present and share information. The
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WordPerfect InForms Designer and Filler packages were released for MS Windows in
July 1993. Filler packages for DOS and Macintosh are scheduled for release later
in 1994. WordPerfect InForms for MS Windows is available in a Designer/Filler
package for a suggested retail list price of $495 and in a five-license,
Filler-only package for a suggested retail list price of $475.
SoftSolutions. SoftSolutions 4.0 is a document management system ("DMS")
which allows users to quickly locate files and objects, to assist in network
maintenance and to provide tight integration among applications and platforms.
It has a fast, powerful searching engine called SpeedSearch at its core, making
it the most streamlined and efficient DMS design available. It includes advanced
features like wide area network searching, intelligent search, portable mode,
image management, OLE functionality and client/server architecture for profile
access, full-text access and document access. The price is $295 per workstation
for the basic product and $395 for a "suite" which includes the Document Desktop
interface and an integrated image management module.
WordPerfect's workgroup products are capable of operating in multiple
platform client/server environments. In these environments, powerful file or
application servers are networked with workstations or PCs that act as clients.
For example, a Macintosh client using WordPerfect Office or WordPerfect InForms
can communicate with an MS Windows client using WordPerfect Office through a
DOS, MS Windows or Macintosh server. A number of WordPerfect Gateways are
available to provide communication bridges among multiple networking
environments. With SoftSolutions, users of both DOS and MS Windows can
simultaneously retrieve and manage documents generated from any application on
any network platform.
Electronic Publishing
WordPerfect Envoy. WordPerfect Envoy is the code name for a new product
scheduled for release in June 1994 that will allow MS Windows and Macintosh
users to electronically exchange, distribute and consume portable compound
documents across different computers and different operating systems. This
solution is a second-generation product that provides new and innovative methods
of viewing, manipulating, annotating and printing documents. WordPerfect Envoy
is fast, provides an impressive set of options for file creation, offers
exceptional compression of both text and graphics and contains a rich feature
set, including live thumbnails, four types of annotation, zoom, page navigation,
searching, text/graphics selection and export, page-level editing, data export
and OLE capability. WordPerfect Envoy is expected to have a suggested retail
list price of $189.
WordPerfect Intellitag. WordPerfect Intellitag 1.2 is available for DOS
and UNIX platforms. It is a simple, affordable way to convert documents into
Standard Generalized Mark-up Language ("SGML") format. WordPerfect Intellitag
provides a unique two-way direction in converting WordPerfect documents to SGML
and back again. ConvertPerfect is included with the product so that
non-WordPerfect documents may be converted to a format WordPerfect Intellitag
can accept. It supports any standard or user-defined Document Type Definition,
provides special tagging features (including pre-tagging and auto-table
tagging), text editing features, special validation features and the ability to
save documents in both WordPerfect 5.1 and SGML format. The suggested retail
list price for WordPerfect Intellitag is $495.
Main Street Consumer Products
WordPerfect's Main Street line of consumer products was launched in April
1994 and offers low-cost, easy-to-use products designed for personal
productivity, entertainment and home education. The Main Street product line
includes the following products:
WordPerfect Works. WordPerfect Works is an integrated software
package that includes a word processor, a spreadsheet application, a
flat-file database, separate draw and paint modules and communication
support. In addition, an MS Windows version of WordPerfect Works is under
development and is expected to be released later in 1994. The suggested
retail list price for WordPerfect Works for MS Windows, DOS and Macintosh
is $109.
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InfoCentral. InfoCentral 1.0 for MS Windows is a new personal
information manager that takes a different approach to organizing
information by putting intelligence into the connections between
information. This intelligence comes in the form of iConnect technology, an
associative database engine that gives the product a unique way to find,
organize, and process information by treating each piece of information in
the database as an object. InfoCentral comes with four pre-built
information bases. The suggested retail list price is $139.
LetterPerfect. LetterPerfect is an entry-level word processor which
provides upward file compatibility with WordPerfect and is available on the
DOS and Macintosh platforms. Its features include a speller, an on-screen
thesaurus, on-line help, pull-down menus, "fast key" access to features,
graphics and merge capabilities. The suggested retail list price for
LetterPerfect for DOS and Macintosh is $49.95.
WordPerfect Language Modules. WordPerfect Language Modules for MS
Windows, DOS and Macintosh allow users of WordPerfect to access
language-specific speller, thesaurus, hyphenation and keyboard files for
foreign languages that appear in text. The suggested retail list price for
most language modules is $99.
Grammatik 5. Grammatik 5 proofreads documents for errors in grammar,
style, usage, punctuation and spelling, explains errors and suggests
alternatives. The suggested retail list price for Grammatik 5 for MS
Windows, DOS and Macintosh is $49.95.
In addition to the offerings described above, WordPerfect Main Street
includes a number of other products such as WordPerfect Clip Art, ExpressFax
Plus fax and data communications software, Random House Webster's electronic
dictionary and thesaurus, electronic medical and legal dictionaries, Wallobee
Jack interactive cartoon adventures and Kap'n Karaoke sing-along tunes for kids.
CUSTOMER SUPPORT
WordPerfect is recognized as a world leader in the computer industry in
providing post-sales customer support. In each of the last four years,
WordPerfect has received the "World Class" award from PC World for its end-user
support. WordPerfect believes that its willingness to listen and respond to
customer needs distinguishes it from other application software companies.
WordPerfect has committed substantial resources to providing personalized
customer support in all of its worldwide offices. More than 1,250 of
WordPerfect's employees are dedicated to customer support, including more than
900 technicians in Utah and more than 350 technicians in various other locations
around the world, responding to users' questions about WordPerfect's software,
including all aspects of installing and using its products. WordPerfect believes
that this commitment to support has resulted in a high degree of loyalty among
its customers. WordPerfect also believes that its expertise in providing support
to individual end users will better enable it to service and support the
information systems professionals that are increasingly responsible for
purchasing and supporting software applications within an organization.
WordPerfect's worldwide direct telephone support representatives handle
approximately 16,000 customer calls each business day, plus additional calls at
night and on weekends. A typical call includes listening to the customer's
problem, duplicating the problem on the representative's computer, and guiding
the customer to a solution. If a representative cannot answer the question
within a reasonable amount of time, he or she will research the problem and call
the customer back with a solution, usually within the same day. WordPerfect was
the first to introduce live "hold jockeys" who administer the flow of incoming
calls, inform customers of their estimated waiting time, discuss other product
offerings and upgrades and play music in the interim.
The direct sale of software products as part of customer support is a new
service WordPerfect has recently made available. Many customers are pleased that
they can now order software products directly from WordPerfect through its
technicians. In addition to greater convenience, the customers are assured that
the products they are ordering will fit their needs and their systems.
In May 1993, WordPerfect established an Account Management Team to provide
vertically aligned account management and on-site diagnostics for key accounts.
Each account is assigned an account
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coordinator. These coordinators are experienced technicians and have access to
all corporate resources. Their focus is on managing all service and support
needs of a few accounts within the same vertical market. WordPerfect believes
this program helps to further solidify its leadership position in offering
appropriate forms of support to the marketplace.
WordPerfect has also established other methods of providing support,
including written response letters, e-mail, electronic bulletin boards,
Compuserve, America On-line and Spaceworks forums, automated fax response
systems and on-site assistance through Strategic WordPerfect Assistance Teams.
WordPerfect also provides its customer support database on CDs, floppy disks and
via commercial publishers (e.g., Ziff-Davis Publishing Co.). WordPerfect
believes that its investment in customer support generates improved customer
satisfaction and that customer satisfaction leads to favorable recommendations
of WordPerfect's products to others.
WordPerfect also integrates its customer support operations with its
product development efforts. Customer support generates high-quality input from
existing customers which is used to identify areas of improvement in existing
programs and to assist in developing new and enhanced products. Each customer
support operator has access to a number of online databases that are used to
assemble the product data collected through customer contacts, including bug
files, enhancement requests and software trouble reports. WordPerfect believes
that its ability to collect and assimilate customer feedback and suggestions
contributes significantly to the quality and usability of its products as well
as to the effectiveness of its marketing efforts.
SALES AND DISTRIBUTION
WordPerfect's products are used by a broad base of customers, from
individual and small business users to large organizations installing
enterprise-wide workgroup solutions. WordPerfect has structured its sales and
distribution strategy to meet the varying needs of this diverse customer base.
WordPerfect sells its products primarily to distributors, including Ingram
Micro, Inc. and Merisel, Inc., large volume resellers, and directly to certain
large accounts. The distributors resell WordPerfect's products to retail
software outlets, computer superstores and general mass merchandisers.
WordPerfect's large volume resellers, such as Egghead, Inc., often operate their
own software specialty stores. Ingram Micro, Inc. and Merisel, Inc. accounted
for approximately 18% and 19%, respectively, of net sales of WordPerfect in
1993.
WordPerfect pursues direct arrangements with selected large customers.
These customers often require flexible pricing, licensing and maintenance
arrangements. Through WordPerfect's Customer Advantage Program, qualified
customers receive: tiered pricing discounts, which encourage volume purchases of
WordPerfect's products; multiple licensing options, providing for
enterprise-wide, multi-platform and multi-lingual licenses; and enhanced
maintenance and support services. WordPerfect believes that its direct
relationships with these large organizations are key to the successful adoption
of WordPerfect's software applications throughout the enterprise.
WordPerfect's sales organization consists of approximately 165 area
managers located throughout the United States and Canada, and approximately 165
area managers outside North America. These employees meet with large companies,
government agencies, educational institutions and numerous user groups to
promote use of WordPerfect's products. Internationally, WordPerfect maintains 24
branch offices and is represented in 33 other locations by distributors and
resellers.
Although WordPerfect's software products are sold primarily as individual
applications, WordPerfect has participated in creating bundled product offerings
with other hardware and software manufacturers. For example, WordPerfect and
Borland offer the Borland Office suite for MS Windows, which includes
WordPerfect and Borland's Quattro Pro spreadsheet and Paradox database products.
As part of WordPerfect's existing arrangement with Borland, WordPerfect also has
the right to include Borland's Paradox and Quattro Pro products in its own suite
offering. Typical arrangements with hardware manufacturers permit the inclusion
of copies of WordPerfect's software products preinstalled on their personal
computers. For example, Compaq Computer Corporation offers copies of WordPerfect
for Windows preinstalled on several of its personal computer offerings. The
prices charged by WordPerfect for products included in bundles are typically
significantly lower than the prices charged for the individual products.
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MARKETING
WordPerfect has embarked upon aggressive new marketing campaigns to
substantially raise consumer awareness of its products. In the past year,
WordPerfect implemented the following new initiatives: expanded print
advertising, which is now appearing in general publications as well as
technology periodicals; television commercials, which first appeared on major
networks in early 1993; international sports team sponsorships, which
WordPerfect believes will increase its brand name recognition in markets outside
North America; direct mail programs, which are expected to increase direct sales
to WordPerfect's installed user base; and publicized competitive comparisons,
which highlight the relative strengths of WordPerfect's products.
WordPerfect's product marketing efforts are organized by specific products
and computer platforms and are closely tied to WordPerfect's development
efforts. Product marketing managers frequently consult with developers about
features and customer preferences and facilitate communications between
WordPerfect's programmers and its customers. In addition, WordPerfect's large
support staff records and evaluates end user requests for improved or new
products which it then communicates to WordPerfect's product marketing and
development teams. This focus on customer feedback is a fundamental part of
WordPerfect's product development strategy.
In order to directly communicate WordPerfect's strategic vision and product
directions to customers, WordPerfect operates an Executive Briefing Center in
Orem, Utah. Customers are invited to attend presentations which not only allow
WordPerfect to demonstrate its products, but also allow the customer to offer
valuable input on WordPerfect's products. In addition, WordPerfect has invited
representatives from selected corporate, government and educational accounts to
participate on an advisory board, whose purpose is to offer WordPerfect
suggestions on product directions.
PRODUCT DEVELOPMENT
WordPerfect's product development objective is to create software
applications that appeal to a broad range of users, run on a wide range of
operating systems and hardware platforms and are focused on helping the user
communicate more effectively. WordPerfect developers begin each project with
discussions about the new product's look, functionality and performance.
Customer input and product marketing group feedback are carefully considered,
and emerging technologies are reviewed in order to design software that can
incorporate new hardware and related software features. WordPerfect's list of
frequently requested products and features are reviewed and planned into new
projects. Solicitation and tracking of customer feedback, both prior to and
during the release of a new product, is an ongoing process. Cross-platform and
multi-lingual issues are also considered early in the development process.
Efforts to ensure ease of use include specific user interface designers trained
in human factors research and development techniques, extensive testing of
products in a state-of-the-art usability lab and continued solicitation of
customer feedback, both prior to and during the release of a new product.
Another set of developers is assigned to focus on increasing performance and
optimizing the program code for the intended operating system. When developers
have finished the preliminary work on a new project, testers begin using the
product and experimenting with its features. This intensive testing process is
continuously performed by WordPerfect employees, groups of novice, intermediate
and advanced users, and at external beta testing sites.
Over 625 developers and over 280 testers work in WordPerfect's Orem, Utah
facilities and at other facilities worldwide. WordPerfect believes that its team
of developers is one of the most stable in the industry and that the relatively
low turnover rate experienced by WordPerfect assists in creating stable product
designs and efficient use of programming expertise. Most of WordPerfect's
products have been developed by its internal development teams, although
WordPerfect also uses outside consultants for certain projects. In some cases,
WordPerfect will acquire or license key technology from third-party developers
to complement its product offerings, as was the case with the acquisition of
SoftSolutions Technology Corporation in January 1994.
WordPerfect's expenditures on research and development (excluding purchased
in-process research and development) during 1993, 1992 and 1991 were $125.4
million, $106.0 million and $83.3 million, respectively. WordPerfect expects
that aggregate research and development expenses will increase in the future,
and that
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such expenses could increase as a percentage of net sales. Software research and
development expenses have been expensed as incurred.
COMPETITION
The markets for WordPerfect's products are intensely competitive and are
characterized by constant pressures to reduce prices, increase promotional
activity, incorporate new features, adapt to new or enhanced operating systems
and accelerate the release of new products and new versions of existing
products. Several companies currently offer products that compete directly with
WordPerfect's products, and certain of these competitors have significantly
greater financial, technical and marketing resources and broader product lines
than WordPerfect. In particular, Microsoft is increasingly dominant in many
sectors of the software industry, and may be able to define or influence the
direction of operating systems software. Microsoft may therefore enjoy
competitive advantages with respect to the development and sale of application
programs under such operating systems as a result of its access to information
not documented or shared with independent software vendors or developers in a
timely manner, if at all. In view of Microsoft's increasing dominance within the
software industry, even if WordPerfect introduces applications with superior
performance, features and capabilities, it is possible that Microsoft will be
able to maintain or increase the market position of its application products
competitive with those of WordPerfect.
For several years, WordPerfect has had the largest market share for DOS
word processing programs, and through 1992 WordPerfect for DOS represented the
largest percentage of WordPerfect's revenues. Although DOS is currently used on
more personal computers than any other operating system, the overall market for
DOS applications is declining, and WordPerfect believes it will decline further
in the future, primarily as a result of the increased market acceptance of
Windows. By introducing products such as WordPerfect 6.0 and 5.1+ for DOS,
WordPerfect's objective is to extend the life of the market for its DOS
applications.
In the market for MS Windows word processing applications, WordPerfect for
MS Windows competes with Microsoft's Word and Lotus' Ami Pro, among others.
WordPerfect believes that its share of the MS Windows word processing market
will be a critical factor in its future success. Although WordPerfect has
significantly increased its share of this market during the past year, it
remains second to Microsoft. The MS Windows market is currently characterized by
severe competitive pressure, and attempts by major participants to maintain or
increase market share may lead to rapid reductions in product prices. In
addition, some software vendors are combining a number of application programs
in a "bundle" or "suite" for sale as one unit or arranging with hardware
manufacturers to preload application programs on new computers. The price for a
bundle or suite is typically significantly less than the price for separately
purchased applications, and many end users are likely to prefer the bundle or
suite over a more expensive combination of individually purchased applications,
even if the latter applications have superior performance or features. Microsoft
and Lotus offer bundles or suites of their respective products at prices
significantly discounted from the prices of stand alone products. WordPerfect
and Borland have participated in an agreement under which the WordPerfect for MS
Windows product and Borland's Quattro Pro spreadsheet and Paradox database
programs may be sold in bundles or suites. As part of the merger, Novell has
agreed to purchase Quattro Pro and license Paradox. In addition, while
WordPerfect has a number of preloading arrangements with hardware manufacturers,
Microsoft may have a significant competitive advantage in preloading products
because of its broad range of software programs and its control of the DOS and
MS Windows operating environments. Microsoft's extensive relationships with
hardware manufacturers result in preloading of its software on many new
computers, which may discourage end users from considering buying competitive
applications from other vendors. To the extent that bundling, suites and
preloading arrangements by competitors are successful, WordPerfect's business
and results of operations could be materially adversely affected.
A fundamental goal of the Combined Company will be the delivery of
workgroup application solutions combining the networking services of Novell and
the workgroup applications of WordPerfect. The future success of this strategy
will depend in part on the Combined Company's ability to develop and market new
competitive products for the workgroup productivity and information processing
areas. Development of these products, which include Novell's AppWare,
WordPerfect Office, WordPerfect InForms and SoftSolutions, has already required
and will continue to require a substantial investment in research and
development,
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particularly as a result of WordPerfect's decision to offer products across
multiple operating environments. Although Novell's existing network of
distributors should assist in this transition, marketing and distribution of
these products may also require developing new marketing and sales strategies
and will entail significant expense. WordPerfect has had only limited experience
in the market for these products, and there can be no assurance that the
Combined Company will be successful in developing and marketing these new
products.
Current competitive products in the workgroup computing market include
Lotus' Notes program and Microsoft's Mail and Windows for Workgroups programs.
Lotus Notes, in particular, has received considerable market interest. Although
WordPerfect believes that this market has the potential to expand in the future,
the market is currently relatively small, and no product has been successful in
significantly expanding the market to date. WordPerfect also believes that the
ability to sell effectively in this market will require it to develop new sales
channels because the complexity and functionality of the products require
greater support and assistance from resellers and WordPerfect. There can be no
assurance that this market will expand in accordance with WordPerfect's
expectations, that WordPerfect will be successful in developing the necessary
sales channels in conjunction with Novell or that WordPerfect's product in this
market will be successful.
To date, WordPerfect has competed against Microsoft, Lotus and other
competitors on the basis of product quality, product functionality, customer
support and price. WordPerfect expects competition from these competitors to
increase, and that such increased competition could result in price reductions
and loss of market share for WordPerfect. Accordingly, there can be no assurance
that WordPerfect will not be required to lower prices in the future, which could
materially adversely affect WordPerfect's operating results and financial
condition. WordPerfect also competes with a variety of third parties that offer
supplies and services compatible with WordPerfect's software products. A variety
of potential actions by any of WordPerfect's competitors, including lower
prices, increased promotion and accelerated introduction of new or enhanced
products, could have a material adverse effect on WordPerfect's competitive
position.
INTELLECTUAL PROPERTY; PROPRIETARY RIGHTS
WordPerfect generally has only "shrink-wrap" license agreements with the
end users of its products and does not copy-protect its software. Shrink-wrap
licenses are not signed by the end user and may not be enforceable in all cases.
WordPerfect relies primarily on copyright laws and contract license provisions
to prevent unauthorized use, duplication and distribution of its software. These
laws and provisions afford only limited protection, and despite WordPerfect's
active efforts, policing unauthorized use of WordPerfect's products is
difficult, and software piracy is expected to be a persistent problem. Further,
the laws of certain countries in which WordPerfect's products are or may be
distributed do not protect WordPerfect's products and intellectual property
rights to the same extent as the laws of the United States. In its efforts to
combat the unauthorized use of it products and technology, WordPerfect continues
to be actively involved as a member of the Business Software Alliance and other
software industry associations and coalitions which are working to improve the
legal environment for the sale and protection of software products, not only in
the United States, but in other regions of the world.
WordPerfect also relies on a combination of trade secret, patent and
trademark laws and nondisclosure agreements to protect its proprietary rights.
WordPerfect has registered trademarks in the United States and in other
countries, as noted on the inside front cover of this Prospectus/Proxy
Statement, and has pending trademark applications for additional product names.
To date, three of WordPerfect's patent applications have been allowed, and
WordPerfect has a number of other patent applications pending with respect to
certain innovative elements of its technology. Nevertheless, it may be possible
for unauthorized third parties to duplicate WordPerfect's products or to reverse
engineer or otherwise obtain and use information that WordPerfect regards as
proprietary. While WordPerfect intends to police and protect its intellectual
property rights, there can be no assurance that WordPerfect can prevent the
unauthorized use of its intellectual property, including preventing competitors
from independently developing products that are substantially similar to
WordPerfect's products.
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While WordPerfect's competitive position may be affected by its ability to
protect its proprietary rights, WordPerfect believes that, because of the rapid
pace of technological change in the computer software industry, factors such as
the technical expertise, innovative skills and experience of WordPerfect's
employees, frequent product enhancements, its name recognition and the
timeliness and quality of its support services may be more significant in
maintaining WordPerfect's competitive position.
As the number of software products in the industry increases and the
functionality of these products further overlap, WordPerfect believes that
software increasingly will become the subject of claims of infringement upon the
rights of others. From time to time, WordPerfect has received communications
from third parties asserting that features or content of certain of
WordPerfect's products infringe intellectual property rights of such parties.
While WordPerfect has been a party to trademark and copyright litigation in
order to protect its marks and copyrighted works, the expenses and settlement
costs of such litigation have not been material, and WordPerfect currently is
not a defendant in any patent or copyright litigation. Nevertheless, there can
be no assurance that WordPerfect will be able to resolve any further claims, if
at all, without costly litigation or licensing of technology on terms that may
be unfavorable to WordPerfect. In addition, there can be no assurance that
licenses will be available on reasonable terms, if at all.
PRODUCTION
After development has been completed and products are ready for commercial
distribution, WordPerfect prepares master software diskettes and artwork for the
associated printed materials, which are then delivered to the manufacturing
division for in-house production or outsourcing of production. If a given
product is produced in-house, WordPerfect's manufacturing division duplicates
diskettes and arranges for the outside production of all printed portions of the
package, then assembles and ships the final products. Extensive quality
assurance methods are employed to protect the software from any file corruption
or virus infection during the duplication process. WordPerfect purchases raw
materials and component parts from a number of qualified vendors. WordPerfect
has entered into agreements with a few third parties to provide the fulfillment
services and quality control for outsourced products. To date, WordPerfect has
not experienced any material difficulties or delays in manufacturing its
products, or material returns due to product defects. However, there can be no
assurance that WordPerfect will not experience such difficulties or delays in
the future.
EMPLOYEES
As of March 31, 1994, WordPerfect employed 5,128 employees, of which 3,932
were based in the United States and 1,196 were based internationally. Of this
total, 1,366 of such employees were engaged in sales and marketing, 1,250 in
customer support, 1,372 in product development, 400 in production and 740 in
administration. WordPerfect believes that it currently maintains competitive
compensation, benefits, equity incentive and work environment policies to assist
in attracting and retaining qualified personnel. The employees of WordPerfect
are not parties to any collective bargaining agreement, and WordPerfect believes
that its relations with employees are good. WordPerfect also believes that the
future success of its business will depend in large part on its ability to
attract and retain qualified personnel. Competition for such personnel is
intense, and there can be no assurance that WordPerfect will be successful in
attracting and retaining such personnel.
FACILITIES
The Company's corporate headquarters are located in Orem, Utah, where it
owns approximately 1,000,000 square feet of office space and 359,000 square feet
of manufacturing and fulfillment facilities located on approximately 110 acres.
WordPerfect also owns approximately 12,000 square feet of office space and
78,000 square feet of warehouse and manufacturing space in Rotterdam, The
Netherlands. WordPerfect has entered into a letter of intent with R.R. Donnelley
and Sons Documentation Services to sell the Rotterdam facility for $3.5 million.
This transaction is expected to close on or about June 1, 1994. WordPerfect
leases additional office space in Orem and in major metropolitan areas of
Australia, Austria, Belgium, Brazil, Chile, Denmark, Finland, France, Germany,
Hong Kong, Italy, Japan, Mexico, Norway, Portugal, Singapore, South Africa,
Spain, Sweden, Switzerland, the United Arab Emirates and the United Kingdom.
International offices are leased for terms of from one to three years at
commercially reasonable rates. WordPerfect expects that it will be able to renew
its leases on satisfactory terms. WordPerfect also believes that its existing
facilities are adequate to meet current needs, and that suitable additional
space will be available or built by WordPerfect as needed to accommodate any
further physical expansion of corporate operations and for additional sales and
support offices.
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WORDPERFECT MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
WordPerfect was founded in 1979 to develop, market and support word
processing software and sold its first product in 1980. Through most of its
history, WordPerfect has focused its efforts on developing word processing
software for personal computers and, specifically, applications that operate in
the DOS operating environment. Sales of the WordPerfect word processing program
for all supported operating environments generated a substantial amount of
WordPerfect's net sales in 1993 and 1992.
WordPerfect's results of operations in 1993 and 1992 were adversely
affected by the general shift in the PC market from the DOS operating
environment to the MS Windows operating environment and by the more competitive
nature of the MS Windows market. In response, WordPerfect began to implement
changes in its strategic direction. These changes included: an increase in the
scope and aggressiveness of WordPerfect's selling and marketing activities; an
increase in investment in research and development to broaden WordPerfect's
product line; an increase in support for additional operating environments;
development and implementation of improved financial control systems;
reorganization of WordPerfect's management structure; and restructuring of
WordPerfect's compensation program to industry-appropriate salaries with
performance and profit-based bonuses. As part of the management reorganization
and restructured compensation program, WordPerfect made severance and
non-recurring payments to certain former employees and current employees
aggregating $29.0 million. These payments were charged to 1992 operations and
are reflected as severance and non-recurring compensation expense in the
consolidated statement of income. During 1993, WordPerfect announced plans to
restructure and streamline its operations. As a result, WordPerfect recorded a
$33.0 million non-recurring restructuring expense in the third quarter of 1993
in order to provide for costs related to the restructuring plan. The expense
includes provisions for employee severance costs, writedown of certain assets to
estimated realizable values, outside professional fees and other costs
associated with the plan.
Product life cycles in the application software industry are relatively
short, with significantly upgraded or new products replacing older products
frequently. Once a new product has been released, WordPerfect has generally
experienced significant increases in net sales attributable to such products.
Nevertheless, the success of a particular product over the long term depends on
a wide variety of factors, and WordPerfect is unable to predict whether any
particular product will achieve sustained market acceptance. To the extent a new
product is a new version of an existing product, revenues from the new version
may include substantial sales of upgrade packages to the existing product's
installed base. Upgrade package sales generally have lower average selling
prices and gross margins than sales of full retail packages to new users. As a
product advances in its life cycle, competitive pressures may lead to a decline
in its average selling price. In addition, the release or announcement of new
products or upgrades by WordPerfect's competitors may have the effect of
substantially shortening the life cycle of, and significantly reducing
WordPerfect's revenues from, a particular product. Further, the announcement of
new products or upgrades by WordPerfect itself can have a negative effect on
sales of WordPerfect's existing products and can cause WordPerfect to further
reduce average selling prices, establish reserves for estimated future returns
or offer upgrades to the new product. WordPerfect expects these factors to
continue to affect its business in the future, especially in 1994, during which
period WordPerfect expects to release a number of new products and product
upgrades. The pattern was exhibited with WordPerfect's May 1994 release of
WordPerfect 6.0a for MS Windows. WordPerfect experienced a significant decrease
in sales during April 1994 as compared to prior months as the distribution
channel was prepared for the upgraded version of the product. In May,
WordPerfect sales rebounded substantially in response to the marketing efforts
associated with the roll-out of the upgraded product.
In general, for a significant period of time prior to the release of a new
product or upgrade, WordPerfect will incur substantial research and development
expenses, followed by substantial sales and marketing expenses in anticipation
of the release. WordPerfect will incur these expenses before any revenues are
received from the new product and even before the market acceptance of the
product can be determined. In particular, WordPerfect expended substantial
research and development and sales and marketing efforts during 1993 and 1992 in
anticipation of the release of new or upgraded document processing products for
the MS Windows, DOS and Macintosh platforms, workgroup products for the MS
Windows, DOS, Macintosh and UNIX platforms, and a presentations graphics product
for the MS Windows platform. Despite these investments of significant resources,
there can be no assurance as to the market acceptance of, or the revenues which
may result from these products in the remainder of 1994 or in future years.
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RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales represented by
certain items on WordPerfect's consolidated statement of income for the periods
indicated. All pro forma information gives effect to the pro forma adjustments
described in Note 9 of Notes to WordPerfect Consolidated Financial Statements.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
YEAR ENDED DECEMBER 31,
-------------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Net sales........................................................... 100.0% 100.0% 100.0%
Cost of sales....................................................... 25.2 24.6 23.1
----- ----- -----
Gross margin........................................................ 74.8 75.4 76.9
----- ----- -----
Expenses:
Selling and marketing............................................. 35.5 25.6 17.7
Research and development.......................................... 17.7 17.3 13.4
General and administrative........................................ 11.7 11.7 13.2
Purchased in-process research and development..................... 0.4 3.5 --
Restructuring..................................................... 4.7 -- --
Severance and non-recurring compensation.......................... -- 5.0 --
----- ----- -----
Total expenses...................................................... 70.0 63.1 44.3
----- ----- -----
Income from operations.............................................. 4.8 12.3 32.6
Other income, net................................................... -- 2.3 1.7
----- ----- -----
Income before provision (benefit) for income taxes.................. 4.8 14.6 34.3
Provision (benefit) for income taxes................................ (5.9) 2.0 2.0
----- ----- -----
Net income.......................................................... 10.7% 12.6% 32.3%
===== ===== =====
UNAUDITED PRO FORMA DATA:
Income before provision for income taxes.......................... 4.8% 14.6% 34.3%
Provision for income taxes........................................ 1.7 5.6 12.1
----- ----- -----
Net income........................................................ 3.1% 9.0% 22.2%
===== ===== =====
</TABLE>
Net Sales
Net sales include revenues from software product sales less promotional
discounts, deferrals and reserves for product returns. Revenue is generally
recognized at the time of shipment. Historically, substantially all of
WordPerfect's net sales have been derived from sales of word processing
software -- specifically WordPerfect for DOS and, commencing in the fourth
quarter of 1991, WordPerfect for MS Windows.
WordPerfect's net sales were $139.4 million in the first quarter of 1994,
as compared with $200.0 million in the fourth quarter of 1993 and $172.2 million
in the first quarter of 1993. The 19.0% decrease from the first quarter of 1993
to the first quarter of 1994 was due primarily to decreased sales of WordPerfect
for DOS consistent with the overall trend in the DOS applications market, and to
the release of WordPerfect 5.2 for MS Windows in the first quarter of 1993. The
30.3% decrease in net sales from the fourth quarter of 1993 to the first quarter
of 1994 resulted primarily from the initial release of WordPerfect 6.0 for MS
Windows in the fourth quarter of 1993, and from decreased sales of WordPerfect
6.0 for MS Windows in the first quarter of 1994 as management prepared the
channel for the release of the 6.0a upgrade version of this product. WordPerfect
6.0a for MS Windows was subsequently released in May of 1994. North American net
sales of $85.0 million in the first quarter of 1994 declined from $140.7 million
in the fourth quarter of 1993 and $112.7 million in the first quarter of 1993,
comparative decreases of 39.6% and 24.6%, respectively. International net sales
of $54.4 million in the first quarter of 1994 declined from $59.3 million in the
fourth quarter of 1993 and $59.5 million in the first quarter of 1993,
comparative decreases of 8.3% and 8.6%, respectively.
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WordPerfect's net sales increased from $579.1 million in 1992 to $707.5
million in 1993, an increase of 22.2%. The increase in net sales, all of which
was in North America, resulted primarily from the release of WordPerfect 5.2 for
MS Windows in late 1992, the release of WordPerfect 6.0 for DOS in June 1993 and
the release of WordPerfect 6.0 for MS Windows in September 1993. This increase
in net sales was partially offset by further declines in sales of WordPerfect
5.1 for DOS internationally. The increase in net sales reflected growth in North
American net sales from $352.1 million in 1992 to $500.2 million in 1993, an
increase of 42.1%, which was offset in part by a decrease in international net
sales from $227.0 million in 1992 to $207.3 million, a decrease of 8.7%.
Net sales decreased from $622.0 million in 1991 to $579.1 million in 1992,
a decrease of 6.9%. This decrease was substantially the result of a decline in
revenues from sales of WordPerfect for DOS as a result of the general shift in
the PC market from the DOS platform to the MS Windows platform, especially
internationally. The decrease in net sales also reflects the effects of the
overstocking by distributors which WordPerfect believes may have occurred in the
fourth quarter of 1991, when WordPerfect announced an increase in its prices
beginning in 1992. In addition, WordPerfect had no new product releases during
1992 until the fourth quarter, when it released WordPerfect Presentations for
DOS and WordPerfect 5.2 for MS Windows. The decrease in net sales was also
partially offset by a significant increase in revenues from sales of WordPerfect
5.1 for MS Windows, reflecting the availability of this product in North America
for the full twelve months of 1992, as compared to two months in 1991, and the
international release of this product in the first quarter of 1992. Net sales in
North America declined from $416.3 million in 1991 to $352.1 million in 1992, a
decrease of 15.4%. International net sales increased from $205.7 million to
$227.0 million, an increase of 10.4%, reflecting increased sales of WordPerfect
for MS Windows.
Gross Margin
Gross margin is the difference between net sales and cost of sales.
WordPerfect includes in cost of sales all costs of manuals, diskettes and
duplication, packaging materials, assembly costs, paper goods, manufacturing
related shipping, appropriate manufacturing labor and overhead, royalty payments
and customer support. Customer support costs include the costs of personnel,
equipment and telephone charges. Customer support costs were $65.9 million in
1993, $54.9 million in 1992, and $48.1 million in 1991. A significant portion of
these costs are marketing related. The portion of the support costs that are
non-marketing are insignificant vendor obligations. Gross margins are
significantly affected by changes in average selling prices. Generally, average
selling prices of existing products decline as a result of competitive pressures
and product life cycles, which may cause WordPerfect to lower prices or offer
other terms to increase or maintain market share. Average selling prices may
also decline following WordPerfect's release of new versions of existing
products, a substantial portion of which are sold as upgrade packages with lower
average selling prices and lower margins than full retail packages. In addition,
to the extent WordPerfect offers its products in bundles, suites or pursuant to
preloading arrangements with hardware manufacturers, average selling prices may
also be negatively affected.
WordPerfect's gross margin percentage decreased from 76.3% in the first
quarter of 1993 to 73.4% in the first quarter of 1994. This decrease was a
result of a general decline in the average selling prices of WordPerfect's
products and was partially offset by improvements in manufacturing efficiencies.
WordPerfect's gross margin percentage decreased from 75.4% in 1992 to 74.8%
in 1993. This decrease primarily related to continuing declines in average
selling prices, as upgrade packages of WordPerfect 5.2 and 6.0 for MS Windows
and WordPerfect 6.0 for DOS accounted for an increasing percentage of total
sales.
WordPerfect's gross margin percentage decreased from 76.9% in 1991 to 75.4%
in 1992. This decrease resulted from an increase in customer support expense and
a general decline of average selling prices for WordPerfect's products, although
this decline was partially offset by increased manufacturing efficiencies.
Selling and Marketing Expenses
Selling and marketing expenses include personnel and equipment costs,
advertising, trade show-related expenses and promotional items. Selling and
marketing expenses were $53.8 million, or 31.3% of net sales, in
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the first quarter of 1993 and $48.1 million, or 34.5% of net sales, in the first
quarter of 1994. This decrease resulted from fewer advertising and promotional
activities in the first quarter of 1994 and from the effects of the January 1994
reduction-in-force.
Selling and marketing expenses increased from $148.2 million, or 25.6% of
net sales in 1992 to $251.1 million, or 35.5% of net sales, in 1993. This
increase was the result of the continuation of WordPerfect's increased focus on
selling and marketing activities. During 1993, WordPerfect increased North
American personnel, although the costs of this increase were partially offset by
reduced compensation expense for certain employees due to the 1992 change in
WordPerfect's compensation program. During 1993, WordPerfect also incurred
expenses from sponsorship of international sports teams, from its television
advertising campaign and from marketing efforts related to the release of
WordPerfect 6.0 for DOS and WordPerfect 6.0 for MS Windows.
Selling and marketing expenses increased from $110.0 million, or 17.7% of
net sales in 1991, to $148.2 million, or 25.6% of net sales, in 1992. The
increase in selling and marketing expenses is also the result of WordPerfect's
greatly increased focus on selling and marketing activities. During 1992,
WordPerfect increased its sales and marketing staff, advertising efforts, trade
show activities and customer support expenditures.
Research and Development Expenses
Research and development expenses consist primarily of personnel and
equipment costs required to conduct WordPerfect's development efforts. These
costs include internal software development costs, software testing costs,
documentation costs and third-party software development costs. WordPerfect
believes that significant investments in research and development for
multi-operating environment products is required to remain competitive. As a
result, WordPerfect has increased its expenditures on research and development
each year since 1988.
WordPerfect's research and development expenses were $29.9 million, or
17.4% of net sales, in the first quarter of 1993 and $29.5 million, or 21.1% of
net sales, in the first quarter of 1994. This decrease was primarily the result
of the January 1994 reduction-in-force.
Research and development expenses increased from $100.2 million, or 17.3%
of net sales, in 1992 to $125.4 million, or 17.7% of net sales, in 1993. The
increase was due primarily to an increase in compensation-related expenses
resulting from a larger number of employees in 1993 and the implementation of an
incentive bonus program based on completion dates for certain products under
development. The increase was partially offset by the reduced compensation
expenses for certain employees as a result of the restructured compensation
program.
Research and development expenses were $100.2 million, or 17.3% of net
sales, in 1992 and $83.3 million, or 13.4% of net sales, in 1991. The increase
from 1991 to 1992 was the result of increased research and development personnel
and third-party development costs in support of WordPerfect's continued
expansion of its product offerings, both in terms of application software
products and the operating environments in which such applications operate. A
substantial portion of such costs in 1992 and 1991 were directly related to
products which have been or are expected to be released in 1993 and 1994.
General and Administrative Expenses
General and administrative expenses are composed primarily of the costs of
WordPerfect's finance, legal, facilities, human resources, information systems
and other administrative functions. General and administrative expenses
increased from $18.4 million, or 10.7% of net sales, in the first quarter of
1993 to $19.1 million, or 13.7% of net sales, in the first quarter of 1994. This
increase was primarily the result of increased fees for outside professional
services.
General and administrative expenses were $83.1 million, or 11.7% of net
sales, in 1993, $67.6 million, or 11.7% of net sales, in 1992 and $82.2 million,
or 13.2% of net sales, in 1991. The increase in general and
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administrative expenses from 1992 to 1993 resulted primarily from an increase in
administrative personnel. The decrease in general and administrative expenses
from 1991 to 1992 resulted primarily from a decrease in compensation related
expenses. During 1991, WordPerfect paid certain employees large bonuses related
to WordPerfect's 1991 performance.
Purchased In-Process Research and Development Expenses
Purchased in-process research and development expenses during the first
quarter of 1994 and during 1993 and 1992 were principally the result of the
acquisition of SoftSolutions Technology Corporation in the first quarter of
1994, the purchase of the InfoCentral technology in the third quarter of 1993,
and the acquisition of Reference Software International in the fourth quarter of
1992. A significant portion of the purchase prices for both SoftSolutions
Technology Corporation and Reference Software International, as well as all of
the purchase price of the InfoCentral technology, were attributable to purchased
in-process research and development for future products. The technological
feasibility of these products had not been achieved at the time of the
acquisitions, and, as a result, the portion of each purchase price attributable
to purchased in-process research and development was expensed during the quarter
in which it was purchased. See Note 3 of Notes to Consolidated Financial
Statements.
Severance and Non-Recurring Compensation Expense and Restructuring Expense
During 1992, in a series of transactions, WordPerfect reorganized its
management and adjusted compensation levels to market-based salaries with
performance and profit based bonuses. These transactions resulted in severance
expense of $12.5 million and non-recurring compensation expense of $16.5
million. The severance payments related to former members of management and were
expensed when the employees left WordPerfect and the severance arrangements were
determined. The non-recurring compensation payments related to one-time payments
made to certain employees when they were informed of reduced future compensation
levels at industry-appropriate levels. The non-recurring compensation expense
was recorded when the amount of the one-time payments were determined and the
employees were informed of the restructured compensation levels.
In September 1993, WordPerfect management adopted plans to restructure and
streamline WordPerfect's operations and, as a result, recorded a non-recurring
restructuring expense of $33.0 million in the third quarter of 1993. The plan
was announced during the fourth quarter of 1993, and its implementation has
continued throughout the first and second quarters of 1994. As a result of the
plan, WordPerfect's work force has been reduced by approximately 1,100 employees
to date in all areas of operations. The $33.0 million restructuring expense
included $16.4 million for employee severance and relocation costs, $9.7 million
for the disposition of a manufacturing facility in Rotterdam, $3.4 million for
costs associated with the discontinuation of DataPerfect and WordPerfect for
OS/2, $2.5 million for the revaluation of equipment to estimated realizable
value and $1.0 million for outside professional services and other costs
associated with the plan. Of the restructuring costs, approximately $11.5
million were non-cash expenditures. Management believes that the plan has
enabled WordPerfect to significantly improve its operational efficiencies and
estimates that these efficiencies will save WordPerfect approximately $30.0
million in annual operating costs. WordPerfect management does not believe that
the restructuring plan will have a material adverse effect on future revenues.
Other Income
Other income consists primarily of interest income on cash and short-term
investment balances and net gains on foreign currency transactions. Other income
decreased from $1.2 million in the first quarter of 1993 to a loss of $500,000
in the first quarter of 1994. This change resulted from foreign currency
fluctuations and increased interest expense associated with the notes payable to
shareholders. Interest income decreased from 1992 to 1993 as a result of reduced
cash and short-term investment balances primarily due to a large distribution to
the shareholders in December 1992. Interest income increased from 1991 to 1992
principally because of higher cash and investment balances, offset in part by
declining interest rates.
WordPerfect had a small loss from foreign currency transactions in 1993 and
gains from foreign currency transactions in 1991 and 1992. WordPerfect expects
gains or losses from foreign currency transactions to
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fluctuate significantly from period to period, primarily as a result of
fluctuating values of the U.S. dollar and the recent instability in European
currency markets. WordPerfect recently initiated a program to evaluate purchases
of forward foreign exchange contracts to hedge its outstanding accounts
receivable exposure in certain countries, and anticipates purchasing such hedge
contracts to cover a substantial portion of the outstanding exposure when
appropriate. Nonetheless, a decrease in the value of foreign currencies relative
to the U.S. dollar could result in future losses from foreign currency
transactions.
Pro Forma Provision for Income Taxes
From January 1, 1985 through September 30, 1993, WordPerfect had elected to
be taxed as an S corporation such that the income tax effects of WordPerfect's
activities have accrued directly to its shareholders. Most of WordPerfect's
subsidiaries had also made S corporation elections at their inceptions. Such
elections were terminated on September 30, 1993 for WordPerfect and December 31,
1993 for WordPerfect's subsidiaries. The Consolidated Financial Statements
contained herein include a pro forma amount for the income tax provision that
would have been incurred had WordPerfect never been an S corporation, calculated
under Financial Accounting Standard No. 109, "Accounting for Income Taxes."
The provision for income taxes and the pro forma provision for income taxes
were approximately $1.8 million and $10.3 million for the first quarters of 1994
and 1993, respectively. These amounts represent effective tax rates of 37.0%
(excluding the one-time expense for purchased in-process research and
development) in the first quarter of 1994 and 34.0% in the first quarter of
1993. The pro forma provisions for income taxes were approximately $11.9
million, $32.3 million and $75.1 million in 1993, 1992 and 1991, respectively,
with effective tax rates of 34.9%, 38.2% and 35.2% for the same periods. The
effective rate is determined based upon applicable federal, state and foreign
statutory rates, less the pro forma effect of any research and development
credits. The increase in the effective tax rate for 1992 reflects the purchased
in-process research and development acquired from Reference Software
International, which has been expensed for financial accounting purposes but has
not been expensed for income tax purposes.
During the period of WordPerfect's S corporation status, its shareholders
have been required, under applicable tax laws, to recognize and pay tax on a
greater amount of income than has been accrued pursuant to applicable accounting
rules. The amount of taxes paid by the shareholders in excess of the tax
provisions on WordPerfect's financial statements has been recorded as an asset
and an income tax benefit on September 30, 1993 and December 31, 1993. As a
result, WordPerfect recognized approximately $49.9 million as income tax benefit
in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, WordPerfect has financed its activities almost
exclusively from cash generated from operations. At March 31, 1994, WordPerfect
had approximately $40.5 million of cash and cash equivalents, compared to $55.1
million at December 31, 1993. WordPerfect has a line of credit to finance
short-term needs under which it can borrow up to $40 million of either the
bank's prime lending rate or 1.125 percent over LIBOR. See Note 7 of Notes to
Consolidated Financial Statements.
Prior to September 30, 1993, WordPerfect's shareholders had been liable for
federal and state income taxes on Company earnings as a consequence of
WordPerfect's S corporation status. WordPerfect has made periodic distributions
to shareholders in amounts sufficient to pay such taxes and as a return of
capital. The aggregate amount of such distributions to all shareholders was
$20.3 million in 1993, $178.2 million in 1992 and $121.9 million in 1991,
excluding the transfer of certain shareholders' interests in a limited liability
company which owns the land and buildings used by WordPerfect for its operating
activities in North America. For financial statement purposes, the transfer of
the limited liability company has been treated as a distribution to such
shareholders during 1993 and resulted in a concurrent reduction in shareholders'
equity of $79.3 million.
WordPerfect has historically used cash generated from operations to fund
its working capital requirements and to acquire capital equipment. WordPerfect's
operating activities utilized net cash of $8.7 million in the first quarter of
1994 and provided net cash of $39.9 million, $155.2 million and $246.1 million
in the years
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ended December 31, 1993, 1992 and 1991, respectively. WordPerfect's capital
expenditures aggregated $3.1 million in the first quarter of 1994, and $42.7
million, $47.3 million and $55.9 million for the years ended December 31, 1993,
1992 and 1991, respectively. These expenditures have historically consisted of
purchases of computer equipment, furniture and fixture, and costs of new
building construction. In the future, WordPerfect's available cash may decrease
as a result of changes in the terms of sale to its distributors, which may
extend the period that accounts receivable are outstanding. At December 31,
1993, WordPerfect had no material commitments for capital expenditures.
From time to time, WordPerfect evaluates potential acquisitions of
businesses, products or technologies that complement WordPerfect's business. In
January 1994, WordPerfect purchased the outstanding common stock of
SoftSolutions Technology Corporation ("SoftSolutions"), a developer of network
document management software, in exchange for $5.8 million in cash and $9.2
million in notes payable to SoftSolutions stockholders. The notes accrue
interest at 6% per annum and are payable in two annual installments beginning in
January 1995. WordPerfect has no present understandings, commitments or
agreements with respect to any material acquisitions of other businesses,
products or technologies.
WordPerfect believes that the cash generated from operations and amounts
available under its line of credit, will satisfy WordPerfect's projected working
capital and capital expenditure requirements for at least the next 12 months.
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MANAGEMENT OF WORDPERFECT
EXECUTIVE OFFICERS, SENIOR MANAGEMENT AND DIRECTORS
The WordPerfect executive officers and senior management who will serve or
are entitled to serve as executives or as members of the Board of Directors of
Novell following the Merger are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH NOVELL
- ----------------------------------- --- -------------------------------------
<S> <C> <C>
Alan C. Ashton, Ph.D............... 51 Director
Bruce W. Bastian................... 46 Director
Adriaan Rietveld................... 39 President, Applications Product
Group
</TABLE>
Dr. Ashton co-founded WordPerfect and has served as Co-Chairman of the
WordPerfect Board of Directors since January 1994. He has served as an executive
officer and/or a director of WordPerfect and certain of its subsidiaries since
its inception. Prior to founding WordPerfect, Dr. Ashton was a professor at
Brigham Young University ("BYU"), where he taught computer science for 14 years.
Dr. Ashton received a B.S. degree in mathematics and a Ph.D. degree in computer
science from the University of Utah.
Mr. Bastian co-founded WordPerfect and has served as Co-Chairman of the
WordPerfect Board of Directors since January 1994. He has served as an executive
officer and/or a director of WordPerfect and certain of its subsidiaries since
its inception. Mr. Bastian received a B.A. degree in music from BYU and an M.S.
degree in computer science from BYU.
Mr. Rietveld joined WordPerfect in 1988 and was promoted to President and
Chief Executive Officer in January 1994. He previously served as Senior Vice
President, Sales and Marketing from November 1992 to December 1993. He has also
served in various positions with WordPerfect's subsidiaries and affiliates.
Prior to joining WordPerfect, Mr. Rietveld served as General Manager for
DELTAware B.V., a software distribution company he co-founded. Mr. Rietveld
studied mathematics and communication at Groen van Prinsterer College. See
"WordPerfect Certain Transactions."
The Merger Agreement provides that it will be a condition to WordPerfect's
obligation to consummate the Merger that Dr. Ashton and Mr. Bastian (or
designees of each of them) be elected to the Novell Board of Directors. This
condition has been waived by WordPerfect in return for Novell's agreement that
following the Merger the Novell Board of Directors will, promptly following the
request of Dr. Ashton and Mr. Bastian, cause the number of directors comprising
the full Board of Directors of Novell to be increased by two persons, from seven
to nine, and at such time cause Dr. Ashton and Mr. Bastian (or their designees)
to be elected to the Novell Board of Directors. Dr. Aston and Mr. Bastian are
expected to make a request to join the Novell Board of Directors in the latter
part of 1994. In recognition of the foregoing, the disclosures concerning Dr.
Aston and Mr. Bastian in the "Management of WordPerfect" Section, while not
required by the rules and regulations of the SEC, are being presented on a
voluntary basis.
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth the compensation earned for services
rendered to WordPerfect in all capacities during the fiscal year ended December
31, 1993 by each person who will serve or is entitled to serve as an executive
officer or director of Novell (together, the "Named Officers").
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1) COMPENSATION($)(2)
- ----------------------------------------------- ----- ------------ ----------- ------------------
<S> <C> <C> <C> <C>
Adriaan Rietveld -- President and Chief
Executive Officer(3)......................... 1993 $313,882 $ 87,500 $ 330
Alan C. Ashton, Ph.D. -- Co-Chairman of the
Board(4)..................................... 1993 $492,446 $ 200,001 $ 10,434
Bruce W. Bastian -- Co-Chairman of the
Board(5)..................................... 1993 $475,000 $ 190,000 $ 9,828
</TABLE>
- ---------------
(1) WordPerfect granted bonuses to the Named Officers based on predefined
individual performance criteria for 1993. Such performance criteria
included, but were not limited to, productivity, work quality,
creativity/innovation, communication and supervisory skills, and knowledge
and analytical skills.
(2) For each Named Officer, "All Other Compensation" includes (i) contributions
by WordPerfect to WordPerfect's 401(k) Plan which match contributions made
by such individuals to the Plan and (ii) premiums for life insurance
policies on behalf of such Named Officer as follows:
<TABLE>
<CAPTION>
PLAN INSURANCE
NAME CONTRIBUTION PREMIUM
-------------------------------------------------------- ------------ ---------
<S> <C> <C>
Adriaan Rietveld........................................ -- $ 330
Alan C. Ashton.......................................... $8,994 $ 1,140
Bruce W. Bastian........................................ $8,994 $ 834
</TABLE>
(3) Mr. Rietveld served as the Senior Vice President, Sales and Marketing of
WordPerfect during fiscal year 1993 and became the President and Chief
Executive Officer of WordPerfect on January 1, 1994. Mr. Rietveld will serve
as President of the Novell Applications Product Group upon consummation of
the Merger.
(4) Dr. Ashton served as the President and Chief Executive Officer of
WordPerfect during fiscal year 1993 and is currently Co-Chairman of
WordPerfect's Board of Directors effective January 1, 1994 and has a right
to become a member of the Board of Directors of Novell after the
consummation of the Merger.
(5) Mr. Bastian served as Chairman of WordPerfect's Board of Directors during
fiscal year 1993 and is currently Co-Chairman of WordPerfect's Board
effective January 1, 1994 and has a right to become a member of the Board of
Directors of Novell after the consummation of the Merger.
OPTION GRANTS
No options or stock appreciation rights were granted to any Named Officers
during 1993.
OPTION EXERCISES AND HOLDINGS
The following table sets forth for each of the Named Officers certain
information concerning the number of shares subject to both exercisable and
unexercisable stock options as of December 31, 1993. Also reported are values
for "in-the-money" options that represent the positive spread between the
respective exercise prices of outstanding stock options and the fair market
value of WordPerfect's Common Stock as of December 31, 1993, as determined by
WordPerfect's Board of Directors. No options or stock appreciation rights were
exercised during 1993, and no stock appreciation rights were outstanding as of
December 31, 1993.
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AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
----------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(2)
------------------------------ ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Adriaan Rietveld.............. -- 225,000 -- $1,125,000
Alan C. Ashton................ -- -- -- --
Bruce W. Bastian.............. -- -- -- --
</TABLE>
- ---------------
(1) Based upon the $13.50 per share value of the Company's Common Stock, as
determined by WordPerfect's Board of Directors on December 31, 1993.
(2) Pursuant to the Merger Agreement, all WordPerfect Options that are
outstanding as of the Effective Date will be assumed by Novell, and all such
options will accelerate and become immediately exercisable at that time.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
WordPerfect entered into an employment agreement with Mr. Rietveld on
January 22, 1993 pursuant to which WordPerfect has agreed to employ Mr. Rietveld
until March 12, 1996. The agreement was amended on January 1, 1994 (the
"Addendum") in connection with Mr. Rietveld's promotion to President and Chief
Executive Officer of WordPerfect. Pursuant to the Addendum, Mr. Rietveld was
granted an option to purchase 25,000 shares of WordPerfect's Common Stock on
January 8, 1994 at an exercise price of $13.50 per share. In the event of Mr.
Rietveld's involuntary termination without cause (including any termination as a
result of death or permanent disability and any termination in connection with a
change in control of WordPerfect), he will be entitled to a severance payment
for five years as follows: 100% of base salary for the two years following
termination, 75% of base salary for the third year, 50% of base salary for the
fourth year and 25% of base salary for the fifth year. In addition, all options
to purchase shares of WordPerfect Common Stock held by Mr. Rietveld at the time
of such involuntary termination without cause will be accelerated so that all
such options will become immediately exercisable for 50% of all unvested shares
and the remaining 50% will become exercisable one year after the date of
involuntary termination without cause. Further, all outstanding options will
remain exercisable for a period of three years following the involuntary
termination without cause. In the event that Mr. Rietveld voluntarily terminates
his employment with WordPerfect, he will receive a severance payment equal to
his base salary for a period of 180 days. As previously described, all
WordPerfect stock options held by Mr. Rietveld at the Effective Date will
automatically accelerate in full and become immediately exercisable at such
time. See "Terms of the Merger -- Employee Benefit Plans -- WordPerfect
Options."
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CERTAIN TRANSACTIONS OF WORDPERFECT
Prior to September 30, 1993, WordPerfect was operated as a series of
related entities that were owned or controlled by the shareholders who control
WordPerfect (the "Related Entities"). On September 30, 1993 and December 31,
1993, certain Related Entities became wholly owned subsidiaries of WordPerfect
(the "Consolidated Entities"). For purposes of the Consolidated Financial
Statements included in this Prospectus/Proxy Statement, transactions among these
entities have been treated as intracompany transactions of WordPerfect which are
eliminated in the consolidation process. See Note 1 of Notes to Consolidated
Financial Statements. The Consolidated Entities consist of the following Related
Entities: WordPerfect International, WP Leasing, Inc., ABP Development Company,
WordPerfect Publishing Corporation, Reference Software International, Nihon
WordPerfect, WP Software GmbH, WordPerfect Danmark, WordPerfect Switzerland,
WordPerfect Pacific, WordPerfect America Latina Corporation, WordPerfect Asia,
SoftCopy Europe, WordPerfect Brasil Tecnologia Ltda., and WP Properties, L.C.
For purposes of this "Certain Transactions of WordPerfect" section,
references to Dr. Ashton and Mr. Bastian shall refer to Alan C. Ashton and Bruce
W. Bastian respectively, and may also include their respective spouses,
children, and trusts. Each of Dr. Ashton and Mr. Bastian are Co-Chairmen of the
Board of Directors of WordPerfect.
During 1988, Dr. Ashton and Mr. Bastian extended a line of credit for
working capital to ComputerShow, a corporation substantially owned by Dr. Ashton
and Mr. Bastian and included as a consolidated entity of WordPerfect through
September 30, 1993. The line of credit bore interest at 9% and had a maximum
outstanding balance of $307,000 during 1991. The line of credit was repaid in
full during 1992. Total interest paid was $4,000 during 1992 and $22,000 during
1991.
ABP Development Company provided construction and building maintenance
services to and received payment from Dr. Ashton of approximately $41,000 and
$69,000 in 1993 and 1992, respectively, from Mr. Bastian of approximately
$35,000 in 1993, and from BAT Investments, L.C., a limited liability company
substantially owned by Dr. Ashton and Mr. Bastian of approximately $108,000 in
1993. In January 1994, the activities of ABP Development Company were
discontinued. Assets related to ABP Development Company, with net book value of
approximately $64,000, were distributed to Dr. Ashton and Mr. Bastian.
WordPerfect entered into agreements with Mr. Lewis Bastian, a brother of
Mr. Bastian, and Bastian Enterprises, Inc., a company owned and controlled by
Mr. Lewis Bastian ("BEI"), in connection with the development and sale of
DataPerfect, a general purpose database software program, and TOOL, an object-
oriented language used for software development. Pursuant to these agreements,
WordPerfect paid Mr. Lewis Bastian and BEI aggregate consulting fees and royalty
payments of $718,000, $474,000 and $479,000 during 1993, 1992 and 1991,
respectively. In February 1994, WordPerfect agreed to pay BEI $2.75 million over
three years in exchange for a termination of these agreements and to pay BEI
fees of $125,000 per year, for up to two years, for consulting services that BEI
provides to WordPerfect.
Pursuant to agreements with Dr. Ashton and Mr. Bastian for the development
and sale of WordPerfect Executive and WordPerfect Library, WordPerfect, during
1992 and 1991, made royalty payments to Dr. Ashton of $79,000 and $125,000,
respectively, and to Mr. Bastian of $79,000 and $125,000, respectively. Such
agreements were terminated as of August 1993.
During 1992 and 1991, WordPerfect International, formerly WordPerfect
Europe, made payments pursuant to management agreements to MeRi, a Dutch company
controlled by Adriaan Rietveld, who was then serving as an officer of
WordPerfect Europe and SoftCopy Europe, of approximately $6.8 million and $2.0
million, respectively. The $6.8 million payment in 1992 included a negotiated
termination of these management agreements for a lump sum payment to MeRi. Mr.
Rietveld is currently the President and Chief Executive Officer of WordPerfect.
See "Management of WordPerfect -- Employment Contracts, Termination of
Employment and Change in Control Arrangements."
Prior to the Merger, Novell, Sub, WordPerfect and the shareholders of
WordPerfect will enter into a Tax Matters Agreement which will provide, among
other things, that certain WordPerfect shareholders will severally and not
jointly indemnify WordPerfect and Novell with respect to any U.S. federal and
Utah and New Mexico state income tax liability (including interest and
penalties) arising out of a failure of
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WordPerfect or its affiliates to have been S corporations during any taxable
year (or that portion of any taxable year) for which such corporations reported
for federal and Utah and New Mexico state income tax purposes that they were S
corporations. Each such WordPerfect shareholder's liability for purposes of such
indemnification will be limited in certain respects pursuant to the terms of the
Tax Matters Agreement. See "Terms of the Merger -- Tax Matters Agreement."
Effective September 30, 1993, all the interests of WP Properties, L.C., a
limited liability company owned by Dr. Ashton (50%) and Mr. Bastian (50%), were
transferred to WordPerfect in exchange for $5 million in cash and a promissory
note in the principal amount of $74.3 million payable to Dr. Ashton and Mr.
Bastian. Such note accrues interest at a rate of 6% per annum. Such note, by its
terms, shall become due and payable within 30 days after a merger or change in
control of WordPerfect.
In December 1992, ABP Investments, L.C., a limited partnership owned by Dr.
Ashton (47.5%), Mr. Bastian (47.5%) and another individual (5%) transferred
certain real property directly related to WordPerfect's business to WP
Properties, L.C., a Consolidated Entity, initially owned by Dr. Ashton (50%) and
Mr. Bastian (50%). The remaining assets, which consisted of certain parcels of
real property not directly related to WordPerfect's business, were transferred
to BAT Investments, L.C., a limited liability company owned by Dr. Ashton
(44.8%), Mr. Bastian (44.8%) and another individual (10.4%). Aggregate lease
payments of WordPerfect to BAT Investments, L.C. and its predecessor with
respect to such properties were $216,000, $169,000, and $135,000 for 1993, 1992
and 1991, respectively.
In February 1992, WordPerfect acquired by merger the stock of a company
engaged in the duplication, assembly and shipping of software products which was
owned by Dr. Ashton (40%), Mr. Bastian (40%) and another individual (20%). In
connection with this merger, all of the outstanding stock of the old company was
cancelled and 483,150, 483,150 and 413,800 shares of WordPerfect Common Stock
were issued to Dr. Ashton, Mr. Bastian and another individual, respectively. In
1992, certain assets that were not directly related to the business activities
of WordPerfect, having an aggregate book value of $9.1 million, were distributed
to a newly formed corporation ("SoftCopy") owned by Dr. Ashton (49.5%), Mr.
Bastian (49.5%) and another individual (1.0%), respectively. For the years ended
December 31, 1993 and 1992, the Consolidated Entities made payments to SoftCopy
for diskette and duplication services of approximately $906,000 and $1.2
million, respectively.
During March 1992, WP Leasing, Inc. loaned SoftCopy $100,000 for working
capital. In May and June 1992, WP Leasing, Inc. loaned $100,000 to BA Ltd., a
limited liability company owned by Mr. Ashton (50%) and Mr. Bastian (50%). Such
loans were repaid in 1993.
UPA Associates, a limited liability company substantially owned by Dr.
Ashton and Mr. Bastian provides property maintenance services to WordPerfect.
Since its inception in January 1994, aggregate payments from WordPerfect to UPA
Associates through April 1, 1994 have been approximately $134,000.
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PRINCIPAL SHAREHOLDERS OF WORDPERFECT
The following table sets forth, as of March 31, 1994, certain information
with respect to the beneficial ownership of WordPerfect's Common Stock for: (i)
each person known by WordPerfect to beneficially own more than 5% of the
outstanding shares of WordPerfect Common Stock, (ii) each of WordPerfect's
directors, (iii) each of WordPerfect's senior executive officers and (iv) all
WordPerfect directors and officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY OWNED(1)
----------------------------------------------
PERCENTAGE PERCENTAGE
DIRECTORS, EXECUTIVE OFFICERS AND OWNERSHIP OWNERSHIP
FIVE PERCENT SHAREHOLDERS NUMBER PRE-MERGER POST-MERGER(2)
- ------------------------------------------------ ---------- ----------- ---------------
<S> <C> <C> <C>
Alan C. and Karen J. Ashton(3).................. 25,345,670 49.33% 7.03%
c/o WordPerfect Corporation
1555 North Technology Way
Orem, Utah 84057
Bruce W. Bastian(4)............................. 20,178,255 39.27% 5.60%
c/o WordPerfect Corporation
1555 North Technology Way
Orem, Utah 84057
Melanie L. Bastian(5)........................... 5,906,655 11.50% 1.64%
c/o WordPerfect Corporation
1555 North Technology Way
Orem, Utah 84057
Adriaan Rietveld(6)............................. 250,000 * *
David C. Moon(6)................................ 275,000 * *
R. Duff Thompson(6)(7).......................... 275,000 * *
John C. Lewis(6)................................ 275,000 * *
Daniel W. Campbell(6)........................... 225,000 * *
Linda Wertheimer Hart(6)........................ 20,000 * *
All officers and directors as a group (8
persons)(8)................................... 46,843,925 88.89% 13.00%
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options currently exercisable, or exercisable within 60 days of the
completion of the Merger, are deemed outstanding for computing the
percentage of the person holding such option, but are not outstanding for
computing the percentage of any other person. Except as indicated in the
footnotes to this table and pursuant to applicable community property laws,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned.
(2) Calculated on the basis that each share of WordPerfect Common Stock will be
exchanged for one share of Novell Common Stock upon completion of the
Merger. Assumes that a total of 360,401,397 shares of Novell Common Stock
will be outstanding upon consummation of the Merger.
(3) Includes 413,256 shares held by a third party as a custodian for Alan and
Karen Ashton's children who are under 18 years of age, as to which shares
Alan and Karen Ashton disclaim beneficial ownership. Does not include
344,380 shares held by Alan and Karen Ashton's children who are over 18
years of age.
(4) Includes 394,860 shares held by a third party as a custodian for Bruce
Bastian's children who are under 18 years of age, as to which shares Bruce
Bastian disclaims beneficial ownership. Excludes 5,511,795 shares held by
Bruce Bastian's wife, Melanie L. Bastian.
(5) Includes 394,860 shares held by a third party as a custodian for Melanie
Bastian's children who are under 18 years of age, as to which shares Melanie
Bastian disclaims beneficial ownership. Excludes 19,783,395 shares held by
Melanie Bastian's husband, Bruce W. Bastian.
(6) All such shares are subject to an option exercisable within 60 days after
the completion of the Merger.
(7) Excludes 808,116 shares which Mr. Thompson holds as custodian for the
children of the Ashton family and Bastian family who are under 18 years of
age.
(8) Includes 1,320,000 shares subject to options held by directors and officers
that are exercisable within 60 days of the completion of the Merger.
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DESCRIPTION OF NOVELL CAPITAL STOCK
A brief general description of Novell's capital stock and Shareholder
Rights Plan (the "Plan") is set forth below. A more complete description of
Novell's capital stock and the Plan is set forth in the Company's Registration
Statements on Form 8-A filed with the Securities and Exchange Commission on
April 3, 1985 and December 7, 1988, respectively, which are incorporated herein
by reference.
The authorized capital stock of Novell consists of 400,000,000 shares of
Novell Common Stock, $.10 par value, and 500,000 shares of Preferred Stock, $.10
par value (the "Novell Preferred Stock"), all of which have been designated
Series A Junior Participating Preferred Shares (the "Series A Preferred"). As of
March 26, 1994, there were 309,946,279 shares of Novell Common Stock
outstanding, 27,978,621 shares of Novell Common Stock issuable upon the exercise
of outstanding stock options, and no shares of Novell Preferred Stock
outstanding.
NOVELL COMMON STOCK
Holders of shares of Novell Common Stock are entitled to one vote per share
on all matters to be voted upon by the shareholders and are not entitled to
cumulate votes for the election of directors. Holders of shares of Novell Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Novell Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
Novell, the holders of shares of Novell Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of Novell Preferred Stock, if any, then outstanding. Shares
of Novell Common Stock have no preemptive, conversion or other subscription
rights and there are no redemption or sinking fund provisions applicable to the
Novell Common Stock.
SHAREHOLDER RIGHTS PLAN AND PREFERRED STOCK
Novell's Series A Preferred was created in connection with a Shareholder
Rights Plan adopted by the Board of Directors in December 1988. The plan
provides for a dividend of rights (the "Rights") which can be exercised to
purchase fractional shares of Series A Preferred or, in certain circumstances,
Common Stock, at half of the then fair market value of such shares. If Novell
were to be acquired under certain circumstances, the Rights could instead allow
holders of Novell's Common Stock to buy shares of the acquiring corporation at
half the then fair market value of such shares. Each shareholder of record
receives one Right for each share of Common Stock that he owns. The Plan was
adopted to ensure that all shareholders of Novell receive fair value for their
Common Stock in the event of any proposed takeover of the Company and to guard
against coercive tactics to gain control of the Company without offering fair
value to the Company's shareholders. The Plan may have the effect of delaying or
preventing a change in control of Novell. Each share of Novell Common Stock to
be received by the WordPerfect shareholders in the Merger will automatically be
accompanied by one Right, without the requirement of any action on the part of
the WordPerfect shareholder.
COMPARISON OF RIGHTS OF HOLDERS OF NOVELL COMMON STOCK
AND HOLDERS OF COMMON STOCK OF WORDPERFECT
Upon consummation of the Merger, the former shareholders of WordPerfect, a
Utah corporation, will become stockholders of Novell, a Delaware corporation.
The rights of such stockholders will be governed by applicable Delaware law
("Delaware Law"), including the Delaware General Corporation Law (the "DGCL"),
and by the Restated Certificate of Incorporation and Bylaws of Novell (the
"Novell Certificate" and "Novell Bylaws," respectively). The following is a
summary of the material differences between Delaware law and applicable Utah law
("Utah Law"), including the URBCA, and between the Novell Certificate and Novell
Bylaws, on the one hand, and the Articles of Incorporation and Bylaws of
WordPerfect (the "WordPerfect Articles" and "WordPerfect Bylaws," respectively),
on the other, that may affect the rights of WordPerfect shareholders who become
stockholders of Novell.
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PREEMPTIVE RIGHTS
Under both Delaware Law and Utah Law, security holders of a corporation
have only such preemptive rights as may be provided in the corporation's
certificate or articles of incorporation. Neither the Novell Certificate nor the
WordPerfect Articles grant any preemptive rights to security holders.
DIVIDENDS AND OTHER DISTRIBUTIONS
Under Utah Law, a corporation may make distributions to shareholders so
long as such action would not (a) make the corporation unable to pay its debts
as they become due in the usual course of business or (b) cause the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed to satisfy preferential rights of shareholders senior to those receiving
the distribution. A Utah corporation may acquire its own shares, and such shares
are either returned to the status of "authorized but unissued" or removed from
the authorized number of shares, whichever is specified in the articles of
incorporation. Limitations on payment of dividends also apply to redemptions of
stock.
Delaware Law permits a corporation to declare and pay dividends out of
surplus (defined as net assets minus capital) or, if there is no surplus, out of
net profits for the fiscal year in which the dividend is declared and/or for the
preceding fiscal year as long as the amount of capital of the corporation
following the declaration and payment of the dividend is not less than the
aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets. In addition,
Delaware Law generally provides that a corporation may redeem or repurchase its
shares only if such redemption or repurchase would not impair the capital of the
corporation.
Neither the Novell Certificate nor the WordPerfect Articles contain any
restrictions on the payment of dividends or the repurchase of shares.
AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION; AMENDMENT OF BYLAWS
Under Utah Law, a corporation's articles of incorporation may be amended by
resolution of the board of directors and approval by the holders of a majority
of the outstanding stock entitled to vote thereon. If any particular class of
stock has a right to vote on any amendment to the articles of incorporation, a
majority of such shares must be voted in favor of the amendment. The holders of
outstanding shares of a class of stock are entitled to vote as a class upon a
proposed amendment if it would have certain specified effects, such as changing
the preferential rights of such shares, altering rights regarding redemption of
such shares, altering preemptive rights of such shares, altering voting rights
on such shares or reducing such shares to fractional shares that may be redeemed
for cash. In addition, approval of all affected shareholders is required for any
amendment that would impose personal liability on such shareholders for the
debts of a corporation. Supermajority voting requirements may be imposed and
maintained by the articles of incorporation.
Under Utah Law, the bylaws of a corporation may be amended at any time by
the corporation's board of directors, except to the extent that the articles of
incorporation reserve this power exclusively to the shareholders, in whole or in
part. However, the board of directors (without shareholder approval) may not
change a bylaw regarding quorum or voting requirements applicable to approvals
by shareholders once such a bylaw is adopted by shareholders, and may not change
a bylaw regarding quorum or voting requirements applicable to approvals by
directors if such a bylaw was adopted by shareholders or the prior action of the
board of directors imposes a requirement of shareholder approval. Conferring
power to amend the bylaws upon the directors does not divest shareholders of the
power to amend the bylaws.
Under Delaware Law, an amendment to a corporation's certificate of
incorporation requires the approval of the board of directors and the approval
of a majority of the outstanding stock entitled to vote thereon and a majority
of the outstanding stock of each class entitled to vote thereon. Under Delaware
Law, the holders of the outstanding shares of a class are entitled to vote as a
separate class on a proposed amendment that would increase or decrease the
aggregate number of authorized shares of such class, increase or decrease the
par value of the shares of such class or alter or change the powers, preferences
or special rights of the shares of
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such class so as to affect them adversely. If any proposed amendment would alter
or change the powers, preferences or special rights of one or more series of any
class so as to affect them adversely, but would not so affect the entire class,
then only the shares of the series so affected by the amendment will be
considered a separate class for purposes of voting by classes. Under Delaware
Law, a provision in a corporation's certificate of incorporation requiring a
super-majority vote of the board of directors or stockholders may be amended
only by such super-majority vote.
Under Delaware Law, an amendment to a corporation's bylaws requires the
approval of the stockholders, unless the certificate of incorporation confers
the power to amend the bylaws upon the board of directors.
The Novell Bylaws grant the board of directors the authority to make, alter
or repeal the Novell Bylaws. The WordPerfect Bylaws permit the board of
directors to make, amend, alter or repeal bylaws, except that no bylaw adopted
or amended by the shareholders may be altered or repealed by the board of
directors and no bylaw may be adopted by the board requiring more than a
majority of the voting shares for a quorum at a meeting of shareholders, or more
than a majority of the votes cast to constitute action by the shareholders,
except where higher percentages are required by law or by the WordPerfect
Articles.
ACTION BY WRITTEN CONSENT
Under both Utah Law and Delaware Law, unless otherwise provided in a
corporation's articles of incorporation or certificate of incorporation, any
action that may be taken at any annual or special meeting of shareholders may be
taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. However, Utah Law prohibits the election of
directors by written consent of the shareholders unless the consent is
unanimous.
Neither the Novell Certificate nor the WordPerfect Articles restricts the
ability of the shareholders of the corporation to take action by written
consent. The Novell Bylaws contain a provision concerning stockholder actions by
written consent consistent with the provisions of Delaware Law. The WordPerfect
Bylaws contain a provision concerning shareholder actions by written consent
consistent with the provisions of Utah Law, except that all actions by written
consent must be unanimously approved by the WordPerfect shareholders.
SPECIAL MEETINGS OF SHAREHOLDERS
Utah Law provides that a special meeting of shareholders may be called by
the board of directors, the holders of shares entitled to cast at least 10% of
the votes at such meeting or such other persons as are authorized by the bylaws.
Under Delaware Law, a special meeting of stockholders may be called by the board
of directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws.
The WordPerfect Bylaws contain provisions concerning special meetings
consistent with the provisions of Utah Law described above, authorizing the
chairman of the board and the president, in addition to the board of directors,
to call a special meeting. The Novell Bylaws contain provisions concerning
special meetings consistent with the provisions of Delaware Law described above,
and also empower the chairman of the board, the president, or holders of a
majority of the outstanding capital stock of Novell to call a special meeting.
VOTING IN THE ELECTION OF DIRECTORS
In an election of directors under cumulative voting, each share of stock
normally having one vote is entitled to a number of votes equal to the number of
directors to be elected. A shareholder may then cast all such votes for a single
candidate or may allocate them among as many candidates as the shareholder may
choose. Without cumulative voting, the holders of a majority of the shares
voting in the election of directors would have the power to elect all the
directors to be elected, and no person could be elected without the support of
holders of a majority of the shares.
Under Utah Law, unless otherwise provided in the articles of incorporation,
every shareholder entitled to vote at the election of directors has the right to
cast, in person or by proxy, all of the votes to which the
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shareholder's shares are entitled for as many persons as there are directors to
be elected and for whose election the shareholder has the right to vote.
Directors are elected by a plurality of votes cast by the shares entitled to
vote in the election at a meeting of shareholders at which a quorum is present.
Shareholders do not have the right to cumulate their votes for the election of
directors unless the articles of incorporation so provide.
Under Delaware Law, cumulative voting is not mandatory, and cumulative
voting rights must be provided in a corporation's certificate of incorporation
if stockholders are to be entitled to cumulative voting rights. Delaware Law
requires that elections of directors be by written ballot, unless otherwise
provided in a corporation's certificate of incorporation.
Neither the WordPerfect Articles nor the Novell Certificate provides for
cumulative voting.
NUMBER AND QUALIFICATION OF DIRECTORS
Utah Law permits the board of directors to change the authorized number of
directors by amendment to the bylaws unless the number of directors is fixed
(and not allowed to be changed) by the articles of incorporation, in which case
a change in the number of directors may be made only by amendment to the
articles of incorporation. The minimum number of individuals on a board of
directors is three unless there are only one or two shareholders. No decrease in
the number of directors is permitted to shorten the term of any incumbent
director.
Under Delaware Law, the minimum number of directors is one. Delaware Law
permits the board of directors alone to change the authorized number, or the
range, of directors by amendment to the bylaws, unless the directors are not
authorized in the certificate of incorporation to amend the bylaws or the number
of directors is fixed in the certificate of incorporation, in which cases a
change in the number of directors may be made only upon approval of such change
by the stockholders.
The Novell Bylaws provide for a variable number of directors between three
and nine, with the exact number currently fixed at six. The WordPerfect Bylaws
provide for a board of three members.
None of Utah Law, Delaware Law, the WordPerfect Articles or the WordPerfect
Bylaws or the Novell Certificate or the Novell Bylaws sets forth specific
qualification requirements for directors.
CLASSIFICATION OF BOARD
A classified board is one in which a certain number, but not all, of the
directors are elected on a rotating basis each year. This method of electing
directors makes changes in the composition of the board of directors, and thus a
potential change in control of a corporation, a lengthier and more difficult
process.
Both Utah Law and Delaware Law permit, but do not require, a classified
board of directors, with staggered terms under which one-half or one-third of
the directors are elected for terms of two or three years, respectively.
None of the WordPerfect Articles or the WordPerfect Bylaws or the Novell
Certificate or the Novell Bylaws provides for a classified board of directors.
REMOVAL OF DIRECTORS
Under Utah Law, directors may generally be removed, with or without cause,
by holders of a majority of the shares entitled to vote at an election of
directors, unless the articles of incorporation provide otherwise. However, in
the case of a corporation having cumulative voting, a director may not be
removed if the number of votes sufficient to elect the director under cumulative
voting is voted against removal.
Under Delaware Law, a director of a corporation, such as Novell, that does
not have a classified board of directors or cumulative voting may be removed,
with or without cause, with the approval of a majority of the outstanding shares
entitled to vote at an election of directors. In the case of a corporation
having cumulative voting, if less than the entire board is to be removed, a
director may not be removed without cause unless the number of shares voted
against such removal would not be sufficient to elect the director under
cumulative
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voting. A director of a corporation with a classified board of directors may be
removed only for cause, unless the certificate of incorporation otherwise
provides. Neither the WordPerfect Articles nor the Novell Certificate alters the
statutory means by which directors may be removed by shareholders.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under Utah Law, vacancies or new positions in the board of directors of a
corporation may be filled by vote of the shareholders or an affirmative vote of
a majority of the remaining directors (even though less than a quorum of the
board of directors). Unless the articles of incorporation provide otherwise, if
one or more directors are elected by a particular class of shareholders, only
such shareholders or the directors elected by such shareholders may fill the
vacancy. The WordPerfect Articles do not provide otherwise.
Under Delaware Law, vacancies and newly created directorships may be filled
by a majority of the directors then in office, although less than a quorum,
unless otherwise provided in the certificate of incorporation or bylaws. The
Novell Certificate and the Novell Bylaws do not provide otherwise. However, if
the certificate of incorporation directs that a particular class is to elect
such director, such vacancy may be filled only by the other directors elected by
such class. If, at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least ten
percent of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
TRANSACTIONS INVOLVING OFFICERS OR DIRECTORS
Under Utah Law, a transaction between a corporation and a party related to
a director in some way may not be enjoined, set aside or create a cause of
action unless the director's relationship to such party would constitute a
statutory "conflicting interest transaction." "Conflicting interest
transactions" have to do with beneficial financial interests of a director or
persons or entities associated with the director so as to influence the
director's decisions. A director's conflicting interest transaction may be
protected against future challenge if approved by a majority of the
disinterested directors, even if not otherwise a quorum, or if approved by
disinterested shareholders holding a majority of the shares entitled to vote
upon the matter, in each case after full disclosure.
Under Delaware Law, no contract or transaction between a corporation and
one or more of its directors or officers, or between a corporation and any other
entity in which one or more of its directors or officers are directors or
officers, or have a financial interest, is void or voidable if (i) the material
facts as to the director's or officer's relationship or interest and as to the
contract or transaction are disclosed or known to the board of directors or
committee which authorizes the contract or transaction by the affirmative vote
of a majority of the disinterested directors; (ii) the material facts as to the
director's or officer's relationship or interest and as to the contract or
transaction are disclosed or known to the stockholders entitled to vote thereon,
and the contract or transaction is specifically approved by the stockholders; or
(iii) the contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified by the board of directors, a committee
thereof, or the stockholders. A corporation may make loans to, guarantee the
obligations of or otherwise assist its officers or other employees and those of
its subsidiaries, including directors who are also officers or employees, when
such action, in the judgment of the directors, may reasonably be expected to
benefit the corporation.
INDEMNIFICATION AND LIMITATION OF LIABILITY
Utah Law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by a disinterested
committee of the board of directors consisting of at least two directors, by
special legal counsel or by a majority vote of a quorum of the shareholders that
the person seeking indemnification acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation. However, a director may not be indemnified in a derivative suit or
in connection with any other proceeding in
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which the director is found liable on a charge that he derived an improper
personal benefit. Unless otherwise provided in the articles of incorporation,
indemnification is mandatory to a director who is successful in defending an
action on the merits or otherwise.
Utah Law permits a corporation to adopt a provision in its charter
documents eliminating or limiting the personal liability of a director to the
corporation or its shareholders for monetary damages for acts or failures to act
in the director's capacity as a director, except liability for financial
benefits to which the director was not entitled, intentional infliction of harm
to the corporation or shareholders, unlawful distributions or intentional
violation of criminal laws.
Under Delaware Law, a corporation has the power to indemnify any agent
against expenses, judgments, fines and settlements incurred in a proceeding,
other than an action by or in the right of the corporation, if the person acted
in good faith and in a manner that the person reasonably believed to be in the
best interests of the corporation or not opposed to the best interests of the
corporation and, in the case of a criminal proceeding, had no reason to believe
that their conduct was unlawful. In the case of an action by or in the right of
the corporation, the corporation has the power to indemnify any agent against
expenses incurred in defending or settling the action if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation; provided, however, that no
indemnification may be made when a person is adjudged liable to the corporation,
unless a court determines such person is entitled to indemnity for expenses, and
then such indemnification may be made only to the extent that such court shall
determine. Delaware Law requires that to the extent an officer, director,
employee or agent of a corporation is successful on the merits or otherwise in
defense of any third-party or derivative proceeding, or in defense of any claim,
issue or matter therein, the corporation must indemnify such person against
expenses incurred in connection therewith.
Under Delaware Law, a corporation may adopt a provision in its certificate
of incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit director monetary liability for (i) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or (iv) transactions in which the director received an improper
personal benefit.
The Novell Certificate eliminates the liability of directors for monetary
damages to the corporation for breach of fiduciary duty to the fullest extent
permitted under Delaware Law and the Novell Bylaws contain indemnification
provisions consistent with the Novell Certificate and Delaware Law. Novell has
also entered into indemnification agreements with certain of its officers and
directors that require Novell to indemnify such persons to the fullest extent
permitted under Delaware Law.
The WordPerfect Bylaws contain provisions permitting indemnification of
expenses incurred in the defense or settlement of derivative or third-party
actions to the fullest extent allowed under Utah law. WordPerfect has also
entered into indemnification agreements with certain of its officers and
directors that require WordPerfect to indemnify such persons to the fullest
extent permitted under Utah Law.
MERGERS AND SALES OF SUBSTANTIALLY ALL CORPORATE ASSETS
Utah Law generally requires that a majority of the shareholders of both the
acquiring and the target corporation approve statutory mergers. However, Utah
Law does not require a shareholder vote of the surviving corporation in a merger
if (a) the merger occurs between a parent and its subsidiary, if the parent owns
at least 90% of the total outstanding stock of the subsidiary and certain other
provisions of Utah Law are met, (b) the articles of incorporation of the
surviving corporation are not amended, (c) each shareholder of the surviving
corporation holds the same number of identical shares immediately after the
merger and (d) the number of shares issued by the surviving corporation in the
merger does not represent an increase by more than 20% of (i) the voting shares
of the corporation or (ii) the shares that would participate without limitation
in distributions. The board of directors may sell, lease, exchange or otherwise
dispose of all, or substantially all, of the corporation's assets without
consent or approval of the shareholders when done in the regular course of
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its business and may mortgage or pledge such property whether or not in the
regular course of its business. When not done in the regular course of the
corporation's business, the disposition of all or substantially all of the
corporation's assets requires the approval of a majority of the outstanding
shares of each class.
Under Delaware Law, the principal terms of a merger generally require the
approval of the stockholders of each of the merging corporations, but do not
require the approval of the stockholders of any parent corporation, even when
the parent corporation's securities are to be used as consideration for the
merger. Unless otherwise required in a corporation's certificate of
incorporation, Delaware Law does not require a stockholder vote of the surviving
corporation in a merger if (i) the merger agreement does not amend the existing
certificate of incorporation, (ii) each share of the surviving corporation
outstanding before the merger is an identical outstanding or treasury share
after the merger and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or the
number of shares to be issued by the surviving corporation in the merger does
not exceed 20% of the shares outstanding immediately prior to the merger. A
disposition of substantially all of a corporation's assets requires the approval
of the outstanding shares of the corporation.
None of the WordPerfect Articles, WordPerfect Bylaws, Novell Certificate or
Novell Bylaws contain any additional provisions relating to mergers or sales of
substantially all corporate assets.
CREATION OF INDEBTEDNESS
The WordPerfect Articles provide that no long-term indebtedness may be
created by the corporation without the prior consent of a majority of the
shareholders. No comparable provision is found in the Novell Certificate.
APPRAISAL RIGHTS
For a description of appraisal rights provided by Utah Law, see "Terms of
the Merger -- Dissenters' Rights" and Part 13 of the URBCA, which is set forth
in Appendix B hereto.
Under Delaware Law, the right to receive the fair market value of
dissenting shares is made available to stockholders of a constituent corporation
in a merger or consolidation effected under the Delaware Code. Dissenters'
rights of appraisal are not available (i) with respect to the sale, lease or
exchange of all or substantially all of the assets of a corporation, (ii) with
respect to a merger or consolidation by a corporation the shares of which are
either listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or are held of record by more than 2,000
holders if such stockholders receive only shares of the surviving corporation or
shares of any other corporation which are either listed on a national securities
exchange or held of record by more than 2,000 holders, plus cash in lieu of
fractional shares or (iii) to stockholders of a parent corporation that is not
itself a constituent corporation in a merger transaction.
None of the WordPerfect Articles, WordPerfect Bylaws, Novell Certificate or
Novell Bylaws contain any additional provisions relating to dissenters' rights
of appraisal.
SHAREHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS
Under the Utah Control Shares Acquisitions Act (the "CSAA"), acquisition
(on a cumulative basis) of 20% or more of the voting power of certain publicly
held corporations located in Utah in a "control shares acquisition" prohibits
such shares, known as "control shares," from being voted on any matter unless
and until a resolution allowing such shares to be voted is approved by a
majority of the outstanding shares of each class of stock, excluding "interested
shares." "Interested shares" are those held by the acquiror subject to the CSAA
and all officers and employee-directors of the company. A corporation may "opt
out" of the CSAA in its charter documents at any time prior to a control share
acquisition.
The CSAA defines "control shares" as shares of a publicly traded company
that, when combined with all other shares of that company owned or controlled by
one shareholder or group of shareholders acting in concert, represents 20% or
more of the voting power of the company in an election of directors. The
definition
89
<PAGE> 99
of "control shares acquisition" contains some important exceptions to the list
of transactions that would trigger application of the CSAA, including (a)
transactions entered into or agreed upon in writing before the CSAA's 1987
adoption, (b) pursuant to laws of descent and distribution, (c) pursuant to a
pledge arrangement made in good faith and not intended to circumvent the CSAA,
(d) pursuant to a merger or share exchange approved by shareholders under Utah
Law and (e) in certain cases, if the shares are acquired from a shareholder that
had received approval under the CSAA or whose shares would have been outside of
the definition of control share acquisition under one of the exemptions
mentioned.
The CSAA applies only to shares of a corporation formed under the laws of
the State of Utah that has (a) 100 or more shareholders, (b) its principal
office or place of business, or substantial assets, located in Utah and (c) one
or more of (i) more than 10% of its shareholders resident in Utah, (ii) more
than 10% of its shares owned by Utah residents or (iii) 10,000 shareholders that
are Utah residents. Shares held by banks, depositories (except as trustees),
brokers or nominees are disregarded for purposes of calculations. The CSAA does
not state that the corporation's shares must be traded on a stock exchange or
national trading system in order to be considered an "issuing public
corporation."
Upon an acquiror obtaining a majority interest in a corporation subject to
the CSAA, other shareholders obtain dissenter's rights to appraisal and cash
payment in return for their shares, if desired, and such amount must not be less
than the amount paid for the shares acquired in the control shares acquisition.
The CSAA also contains provisions allowing the corporation to provide in its
charter documents for the ability to redeem the acquiror's shares at fair market
value under certain conditions for up to 60 days after the control share
acquisition; however, the corporation may not redeem the shares if the acquiror
files a notice with the corporation unless the shareholders refuse to grant full
voting rights.
The CSAA is relatively new and no information about its application under
case law is available. It appears that the CSAA is similar to control share
acquisition statutes that have been adopted by other states. In practical
effect, the CSAA causes an entity intent on an acquisition of a controlling
position in a widely held, Utah-based corporation to obtain shareholder approval
for such an acquisition.
Section 203 of the Delaware Code ("Section 203") prohibits a Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for three years following the date that such person becomes an
interested stockholder. With certain exceptions, an interested stockholder is a
person or group who or which owns 15% or more of the corporation's outstanding
voting stock (including any rights to acquire stock pursuant to an option,
warrant, agreement, arrangement or understanding, or upon the exercise of
conversion or exchange rights, and stock with respect to which the person has
voting rights only), or is an affiliate or associate of the corporation and was
the owner of 15% or more of such voting stock at any time within the previous
three years.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder; sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a
subsidiary equal to ten percent or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock; the issuance or
transfer by the corporation or a subsidiary of stock of the corporation or such
subsidiary to the interested stockholder (except for transfers in a conversion
or exchange or a pro rata distribution or certain other transactions, none of
which increase the interested stockholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if (i) prior to the date on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder; (ii) the interested stockholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
an interested stockholder (excluding from the 85% calculation shares owned by
directors who are also officers of the target corporation and shares held by
employee stock plans which do not permit employees to decide confidentially
whether to accept a tender or exchange offer); or (iii) on or
90
<PAGE> 100
after the date such person becomes an interested stockholder, the board approves
the business combination and it is also approved at a stockholder meeting by
66.67% of the voting stock not owned by the interested stockholder.
Section 203 only applies to Delaware corporations which have a class of
voting stock that is listed on a national securities exchange, are quoted on an
interdealer quotation system such as NASDAQ or are held of record by more than
2,000 stockholders. However, a Delaware corporation may elect not to be governed
by Section 203 by a provision in its original certificate of incorporation or an
amendment thereto or to the bylaws, which amendment must be approved by majority
stockholder vote and may not be further amended by the board of directors.
Section 203 is currently under challenge in lawsuits arising out of ongoing
takeover disputes, and it is not yet clear whether and to what extent its
constitutionality will be upheld by the courts. Although the United States
District Court for the District of Delaware has consistently upheld the
constitutionality of Section 203, the Delaware Supreme Court has not yet
considered the issue. So long as the constitutionality of Section 203 is upheld,
Section 203 will encourage any potential acquiror to negotiate with the
Company's board of directors. Section 203 also has the effect of limiting the
ability of a potential acquiror to make a two-tiered bid for a Delaware
corporation in which all stockholders would not be treated equally. Stockholders
should note that the application of Section 203 to the Company will confer upon
the Board the power to reject a proposed business combination, even though a
potential acquiror may be offering a substantial premium for the Company's stock
over the then current market price (assuming the stock is then publicly traded).
Section 203 should also discourage certain potential acquirors unwilling to
comply with its provisions.
None of the WordPerfect Articles, WordPerfect Bylaws, Novell Certificate or
Novell Bylaws contain any additional provisions relating to transactions with
interested shareholders or other takeover situations.
INSPECTION OF SHAREHOLDER LIST, BOOKS AND RECORDS
Both Utah Law and Delaware Law allow any shareholder to inspect and copy a
corporation's shareholder list for a purpose reasonably related to such person's
interest as a shareholder.
Utah Law allows any director or shareholder to inspect the corporation's
charter documents; minutes of shareholder meetings, actions and written
communications; list of officers; annual report; and financial statements for
the past three years for any purpose. In addition, any director or shareholder
may inspect minutes of board meetings and actions, accounting records and
shareholder lists upon demand made in good faith for a purpose reasonably
related to the demanding shareholder's or director's interest as a shareholder
or director. Such information may not be used for other purposes.
Delaware Law allows any stockholder to inspect the stockholders' list and
other books and records of the corporation for a purpose reasonably related to
such person's interest as a stockholder. Directors, whether or not stockholders,
have a similar right.
The WordPerfect Bylaws and the Novell Bylaws contain provisions consistent
with the provisions of Utah Law and Delaware Law, respectively, regarding the
inspection of the shareholder list.
SHAREHOLDER DERIVATIVE SUITS
Under Utah Law, a shareholder may only bring a derivative action on behalf
of the corporation if the shareholder was a shareholder when the transaction
complained of occurred or he became a shareholder through transfer by operation
of law from someone who was a shareholder at that time. The suing shareholder
must explain what request, if any, was made to the board of directors and that
the request was refused or ignored or why the shareholder did not make such a
demand. Dismissal of such a proceeding requires court approval.
Under Delaware Law, a stockholder may only bring a derivative action on
behalf of the corporation if the stockholder was a stockholder of the
corporation at the time of the matter in question or the stockholder's
91
<PAGE> 101
stock thereafter devolved upon the stockholder by operation of law. Dismissal of
such a proceeding generally requires court approval.
None of the WordPerfect Articles, WordPerfect Bylaws, Novell Certificate or
Novell Bylaws contain any additional provisions relating to shareholder
derivative suits.
DURATION OF PROXIES
Under Utah Law, unless otherwise provided in the articles of incorporation,
a proxy appointment is ordinarily valid only for 11 months. Proxies may be given
by facsimile or other electronic transmission.
Delaware Law allows proxies to have a duration of three years. Proxies may
be given by facsimile or other electronic transmission.
The Novell Bylaws and the WordPerfect Bylaws contain provisions consistent
with the provisions of Delaware Law and Utah Law, respectively, regarding the
duration of proxies.
DISSOLUTION
Under Utah Law, a majority of all votes entitled to be cast are needed to
authorize a corporation's dissolution, with or without the approval of the
corporation's board of directors.
Under Delaware Law, unless the board of directors approves a proposal to
dissolve a corporation, the dissolution must be approved by stockholders holding
100% of the total voting power of the corporation. If the dissolution is
initiated by the board of directors, it need only be approved by a majority of
the corporation's stockholders.
EXPERTS
The consolidated financial statements and schedules of Novell appearing or
incorporated by reference in Novell's Annual Report on Form 10-K for the fiscal
year ended October 30, 1993, have been audited by Ernst & Young, independent
auditors, as set forth in their reports thereon appearing or incorporated by
reference therein and incorporated by reference herein. Such consolidated
financial statements are incorporated by reference herein in reliance upon such
reports given upon authority of such firm as experts in accounting and auditing.
The consolidated financial statements of WordPerfect as of December 31,
1993 and 1992 and for each of the three years in the period ended December 31,
1993, included in this Prospectus/Proxy Statement have been so included in
reliance on the report of Price Waterhouse, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the Novell Common Stock issuable pursuant to the Merger and
certain other legal matters relating to the Merger and the transactions
contemplated thereby will be passed upon for Novell by Wilson, Sonsini, Goodrich
& Rosati, Professional Corporation, Palo Alto, California. Larry W. Sonsini, a
member of Wilson, Sonsini, Goodrich & Rosati, is a director of Novell. In fiscal
1993, 1992 and 1991, legal fees of approximately $2,000,000, $716,000 and
$510,000, respectively, were paid to Wilson, Sonsini, Goodrich & Rosati by
Novell.
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<PAGE> 102
INDEX TO WORDPERFECT FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants................................................... F-2
Consolidated Balance Sheet.......................................................... F-3
Consolidated Statement of Income.................................................... F-4
Consolidated Statement of Shareholders' Equity...................................... F-5
Consolidated Statement of Cash Flows................................................ F-6
Notes to Consolidated Financial Statements.......................................... F-7
Consolidated Condensed Balance Sheet................................................ F-19
Consolidated Condensed Statement of Income.......................................... F-20
Consolidated Condensed Statement of Cash Flows...................................... F-21
Notes to Consolidated Condensed Financial Statements................................ F-22
</TABLE>
F-1
<PAGE> 103
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of WordPerfect Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of WordPerfect
Corporation and its subsidiaries at December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE
Salt Lake City, Utah
March 22, 1994
F-2
<PAGE> 104
WORDPERFECT CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 55,127 $ 86,569
Accounts receivable less allowance for doubtful accounts
of $5,936 and $5,098.............................................. 63,672 39,670
Inventories.......................................................... 23,467 16,412
Deferred income taxes................................................ 43,587 --
Prepaid expenses and other assets.................................... 19,350 12,666
-------- --------
Total current assets......................................... 205,203 155,317
Property, plant and equipment, net..................................... 186,903 175,157
Deferred income taxes.................................................. 6,310 --
Other assets........................................................... 3,066 3,305
-------- --------
Total assets................................................. $401,482 $333,779
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 37,472 $ 37,448
Accrued expenses..................................................... 98,604 77,233
Deferred revenue..................................................... 17,949 23,230
Income taxes payable................................................. 5,001 6,371
Notes payable........................................................ 8,640 --
-------- --------
Total current liabilities.................................... 167,666 144,282
Notes payable to shareholders.......................................... 75,369 --
Long-term debt and other liabilities................................... 8,920 12,256
-------- --------
Total liabilities............................................ 251,955 156,538
-------- --------
Shareholders' equity:
Common stock, no par value, 200,000,000 shares authorized, 51,380,100
shares issued and outstanding..................................... 79,327
Retained earnings.................................................... 73,313 176,383
Cumulative translation adjustment.................................... (3,113) 858
-------- --------
Total shareholders' equity................................... 149,527 177,241
-------- --------
Total liabilities and shareholders' equity................... $401,482 $333,779
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 105
WORDPERFECT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................................... $ 707,515 $ 579,118 $ 621,994
Cost of sales........................................... 178,071 142,531 143,948
----------- ----------- -----------
Gross margin............................................ 529,444 436,587 478,046
Expenses:
Selling and marketing................................. 251,064 148,209 110,023
Research and development.............................. 125,379 100,168 83,281
General and administrative............................ 83,127 67,602 82,207
Non-recurring compensation expense.................... -- 28,957 --
Purchased in-process research and development......... 3,001 20,367 --
Restructuring......................................... 33,000 -- --
----------- ----------- -----------
Total expenses.......................................... 495,571 365,303 275,511
Income from operations.................................. 33,873 71,284 202,535
Other income, net....................................... 236 13,205 10,603
----------- ----------- -----------
Income before provision for income taxes................ 34,109 84,489 213,138
Provision (benefit) for income taxes(Note 9)............ (41,771) 11,541 12,310
----------- ----------- -----------
Net income.............................................. $ 75,880 $ 72,948 $ 200,828
========== ========== ==========
Unaudited pro forma data (Note 16):
Income before provision for income taxes.............. $ 34,109 $ 84,489 $ 213,138
Provision for income taxes............................ 11,918 32,252 75,080
----------- ----------- -----------
Net income............................................ $ 22,191 $ 52,237 $ 138,058
========== ========== ==========
Net income per share.................................. $ 0.41 $ 1.02 $ 2.76
========== ========== ==========
Weighted average number of common shares(Note 2)...... 53,490,673 51,380,100 50,000,000
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 106
WORDPERFECT CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON RETAINED TRANSLATION
STOCK EARNINGS ADJUSTMENT TOTAL
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1990.................... $ -- $ 202,759 $ 2,396 $ 205,155
Distributions to shareholders................... -- (121,947) -- (121,947)
Foreign currency translation.................... -- -- 1,661 1,661
Net income...................................... -- 200,828 -- 200,828
------- --------- ------- ---------
Balance at December 31, 1991.................... -- 281,640 4,057 285,697
Distributions to shareholders................... -- (178,205) -- (178,205)
Foreign currency translation.................... -- -- (3,199) (3,199)
Net income...................................... -- 72,948 -- 72,948
------- --------- ------- ---------
Balance at December 31, 1992.................... -- 176,383 858 177,241
Distributions to shareholders................... -- (99,623) -- (99,623)
Termination of S corporation status (Note 8).... 79,327 (79,327) -- --
Foreign currency translation.................... -- -- (3,971) (3,971)
Net income...................................... -- 75,880 -- 75,880
------- --------- ------- ---------
Balance at December 31, 1993.................... $79,327 $ 73,313 $(3,113) $ 149,527
======= ========= ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 107
WORDPERFECT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 75,880 $ 72,948 $ 200,828
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 33,692 26,849 21,169
Provision for restructuring costs...................... 33,000 -- --
Charge for purchased in-process research and
development......................................... 3,001 20,367 --
Changes in assets and liabilities:
Accounts receivable................................. (29,579) 4,062 (2,947)
Inventories......................................... (12,488) 5,601 (3,266)
Deferred income taxes............................... (49,897) -- --
Prepaid expenses and other assets................... (8,350) 4,022 (5,251)
Accounts payable.................................... 735 4,229 9,160
Accrued expenses.................................... (1,967) 6,126 20,158
Income taxes payable................................ 1,074 (2,567) 4,938
Deferred revenue.................................... (5,154) 13,525 1,333
-------- --------- ---------
Net cash provided by operating activities.............. 39,947 155,162 246,122
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of short-term investments................ -- (8,265) (44,144)
Purchases of property, plant and equipment............. (42,748) (47,322) (55,868)
Proceeds from sale of equipment........................ 2,959 1,003 276
Purchases of other assets.............................. (237) (1,088) (957)
Payment for acquisitions, net of cash acquired......... -- (7,760) --
Change in other liabilities............................ (931) 105 (28)
-------- --------- ---------
Net cash used in investment activities................. (40,957) (63,327) (100,721)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt............................ (76) (1,746) (8,876)
Repayment of short term debt........................... (5,820) -- --
Distributions to shareholders.......................... (23,889) (80,871) (121,947)
-------- --------- ---------
Net cash used in financing activities.................. (29,785) (82,617) (130,823)
-------- --------- ---------
Effect of exchange rate changes on cash.................. (647) 72 293
-------- --------- ---------
Net (decrease)/increase in cash and cash equivalents..... (31,442) 9,290 14,871
Cash and cash equivalents at beginning of period......... 86,569 77,279 62,408
-------- --------- ---------
Cash and cash equivalents at end of period............... $ 55,127 $ 86,569 $ 77,279
======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 108
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY
WordPerfect Corporation ("WordPerfect" or the "Company") is engaged in the
development, marketing, distribution and customer support of software products
throughout the world. All references to the Company in these consolidated
financial statements refer to the Company and the entities that were merged into
or purchased by the Company, as described below.
On February 1, 1992, SoftCopy, Inc. ("SoftCopy"), a corporation affiliated
with the Company through common ownership, was merged into WordPerfect. In
connection with the merger, WordPerfect issued 1,380,100 shares of common stock
for all of SoftCopy's outstanding common stock. SoftCopy provided duplication,
assembly and shipping services for the Company and other third-party software
developers. Immediately subsequent to the merger, certain assets of SoftCopy
were distributed to a newly-formed corporation ("New SoftCopy") which was
organized to provide duplication and assembly service to third-party developers;
results of operations of New SoftCopy are not included in the consolidated
financial statements for any period presented.
Prior to September 30, 1993, the Company had been organized as numerous
legal entities under common control. These entities, including WordPerfect, WP
Leasing, Inc. ("Leasing"), ABP Development ("Development"), WordPerfect
Publishing Corporation ("Publishing"), ComputerShow, WP Properties
("Properties"), WordPerfect International ("International") and Reference
Software International ("RSI"), owned the assets and conducted the operations of
the Company. On September 30, 1993, the common stock of RSI owned by the
shareholders was contributed to WordPerfect. Also, the owner's interest in
Properties was transferred to WordPerfect in exchange for $5.0 million cash and
notes of $74.3 million payable to the existing shareholders of the Company,
which represented Properties' net book value at the date of the transfer (see
Note 11). On the same date, the common stock of ComputerShow was distributed to
the shareholders of the Company at ComputerShow's net book value of $1.4
million. The common stock of the remaining entities were contributed to
WordPerfect on December 31, 1993.
Because the above transactions were among entities under common control,
the Company has accounted for them in a manner similar to a pooling of interests
and, accordingly, the Company's consolidated financial statements include the
historical results of SoftCopy (excluding New SoftCopy), Leasing, Development,
Publishing, Properties and International for all periods presented (see Note
11). Results of operations of RSI are included from date of acquisition (see
Note 3); results of operations of ComputerShow are included to the date of
distribution of the common stock to the shareholders.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements comprise those of the Company and its
wholly owned domestic and foreign subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Cash Equivalents
Cash and cash equivalents include all highly liquid investments with a
maturity of three months or less at the date of purchase.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the weighted average method. Inventories include materials, direct labor
and overhead.
F-7
<PAGE> 109
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Property, plant and equipment
Property, plant and equipment is stated at cost and depreciated using the
straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings....................................................... 30 years
Equipment and office furniture.................................. 7 years
Computer and communications equipment........................... 5 years
Vehicles........................................................ 3 years
Leasehold improvements.......................................... Lease term
</TABLE>
Maintenance and repairs are expensed as incurred. The cost of assets and
related accumulated depreciation are removed from the accounts upon retirement
or other disposition; any resulting gain or loss is reported as other income or
expense.
Revenue Recognition
Revenue from sales to distributors, other resellers and directly to users
is recognized when products are shipped. Revenues are reduced for anticipated
sales returns and allowances. Advance payments are recorded as deferred revenue
and recognized as revenue when products are shipped. Subscription, maintenance
and service revenues are billed directly to the customer. Revenue is recognized
ratably over the term of the related sales contract or as services are
performed. The Company is in compliance for all periods presented with the
requirements set forth in the Statement of Position 91-1, "Software Revenue
Recognition," issued by the American Institute of Certified Public Accountants.
Software Development Costs
Software development costs are capitalized from the date technological
feasibility is obtained, if material. Such deferrable costs have not been
material during the periods presented.
Noncontractual Customer Support Obligations
Provision is made at the time of sale for estimated costs of customer
support for which the Company is not contractually obligated but has
historically provided.
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. Under SFAS
109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on the
differences between financial reporting and the tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Prior to September 30, 1993, the Company elected to be taxed as an S
corporation whereby the income tax effects of the Company's activities accrue
directly to its shareholders; therefore, adoption of SFAS 109 required no
establishment of deferred income taxes since no material differences between
financial reporting and the tax basis of assets and liabilities existed. On
September 30, 1993, WordPerfect terminated its S corporation elections. On
December 31, 1993, the Company's other entities terminated their S corporation
elections. As a result, deferred income taxes under the provisions of SFAS 109
were established on the dates the S corporation elections were terminated.
F-8
<PAGE> 110
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Pro forma Net Income Per Common Share
Pro forma net income per common share is computed using the weighted
average number of common shares and common equivalent shares outstanding.
Foreign Currency Translation
The assets and liabilities denominated in foreign currency are translated
into U.S. dollars at exchange rates existing at the balance sheet date.
Revenues, costs and expenses are translated at the average exchange rates during
the year. Resulting translation adjustments are reported as a separate component
of shareholders' equity. Gains and (losses) resulting from foreign currency
transactions of ($598,000), $2.9 million and $1.9 million for the years ended
December 31, 1993, 1992 and 1991, respectively, are included in other income in
the consolidated financial statements.
Major Customers and Concentration of Credit Risk
The Company sells its products primarily to distributors and resellers on
cash or credit terms. Net sales to a distributor were 18%, 17% and 18% of total
net revenue for the years ended December 31, 1993, 1992 and 1991, respectively.
Net sales to a second distributor were 19%, 21% and 13% of total net revenue for
the years ended December 31, 1993, 1992 and 1991, respectively. The Company's
receivables are from distributors and resellers of software products throughout
the world; the Company performs ongoing credit evaluations of its customers'
financial condition and provides reserves to reflect its receivables at
realizable values.
NOTE 3 -- ACQUISITIONS
In July 1993, the Company acquired technology which will be used for the
development of a personal information manager software product. The purchase
price representing purchased in-process research and development of $3.0 million
was charged against operations in 1993.
In December 1992, the Company acquired 75 percent of the outstanding shares
of RSI. Substantially all of the remaining 25 percent of the outstanding shares
were acquired by February 1993. The total acquisition price of $20.0 million
consisted of $5.0 million cash and deferred payments of $15.0 million bearing
interest at five percent. That portion of the purchase price representing
purchased in-process research and development of $16.0 million was charged
against operations in 1992.
In October 1992, the Company acquired the assets of Beagle Bros., Inc.,
developers of software technology, for $2.5 million in cash. The portion of the
purchase price representing purchased in-process research and development of
$2.0 million was charged against operations in 1992.
In August 1992, the Company acquired the assets of MagicSoft, Inc.,
developers of communications software technology, for $1.3 million in cash and
$1.3 million of deferred payments. The portion of the purchase price
representing purchased in-process research and development of $2.3 million was
charged against operations in 1992.
Pro forma statements of operations as though the companies had been
combined from the beginning of the year would not differ significantly from
reported results.
In January 1994, the Company acquired the outstanding common stock of
SoftSolutions Technology Corporation ("SoftSolutions"), a developer of network
document management software, in exchange for a $5.8 million down payment and
notes payable of $9.2 million. The notes accrue interest at 6% per annum and
F-9
<PAGE> 111
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- ACQUISITIONS -- (CONTINUED)
are payable in two annual installments beginning in January 1995. Results of
operations of SoftSolutions were not material.
NOTE 4 -- INVENTORIES
Inventories are comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
-------- --------
<S> <C> <C>
Finished goods........................................... $ 7,129 $ 3,969
Raw materials............................................ 16,338 12,443
-------- --------
$ 23,467 $ 16,412
======= =======
</TABLE>
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
--------- ---------
<S> <C> <C>
Land and improvements.................................. $ 12,592 $ 12,379
Buildings and improvements............................. 100,167 99,488
Computer and communications equipment.................. 112,991 86,105
Equipment and office furniture......................... 52,272 44,767
Vehicles............................................... 5,916 5,553
Leasehold improvements................................. 3,945 3,427
--------- ---------
287,883 251,719
Less accumulated depreciation and amortization......... 100,980 76,562
--------- ---------
$ 186,903 $ 175,157
======== ========
</TABLE>
NOTE 6 -- ACCRUED EXPENSES
Accrued expenses is comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
-------- --------
<S> <C> <C>
Reserve for returns and exchanges........................ $ 12,502 $ 18,415
Noncontractual customer support obligations.............. 15,147 15,495
Compensation and related liabilities..................... 15,382 13,884
Marketing and advertising................................ 10,935 5,807
Property, sales and other taxes.......................... 6,545 5,653
Restructuring costs...................................... 28,500 --
Other.................................................... 9,593 17,979
-------- --------
$ 98,604 $ 77,233
======= =======
</TABLE>
NOTE 7 -- BANK LINE OF CREDIT
During May 1993, the Company entered into a bank line of credit of $40.0
million which expires May 26, 1994. Interest on borrowings is at the bank's
prime rate or at 1.125 percent over the Base LIBOR Rate, at the
F-10
<PAGE> 112
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- BANK LINE OF CREDIT -- (CONTINUED)
Company's option. The agreement contains covenants that require the Company to
maintain certain financial ratios and also prohibit the payment of cash
dividends, the purchase or redemption of Company capital stock or the
distribution of assets to the shareholders subsequent to termination of the
Company's S corporation election.
NOTE 8 -- EQUITY TRANSACTIONS
Common Stock
On December 29, 1992, the Company amended its articles of incorporation to
increase the number of authorized shares from 1,250,000 to 200,000,000. In
addition, the Company's Board of Directors and shareholders approved a 50-for-1
split of its common stock effective December 29, 1992.
Retained Earnings and Common Stock
As a result of the Company's termination of its S corporation status (see
Notes 1 and 9), the undistributed retained earnings of the S corporations at the
respective dates of termination were reclassified to common stock.
Retained earnings at December 31, 1993 consists of the tax benefit from the
recognition of the deferred tax assets resulting from the change in tax status
included in 1993 results of operations and net income for WordPerfect and
Properties for the period October 1, 1993 through December 31, 1993.
Stock Options
In December 1992, the Company adopted the WordPerfect Corporation 1992
Long-Term Incentive Plan (the "Plan"), which authorized the granting of
incentive and nonstatutory stock options, stock purchase rights, stock
appreciation rights and long-term performance awards to certain employees and
consultants. The Company has reserved a total of 12,000,000 shares of common
stock for issuance under the Plan. Incentive stock options must be granted with
exercise prices at least equal to the fair market value of the common stock on
the grant date, as determined by the Board of Directors. The options vest and
become exercisable in full on the fifth anniversary of the date of the grant.
However, in the event of a registration statement covering an initial public
offering of the Company's common stock, the options become vested at a rate of
20 percent immediately prior to the closing of the offering and 20 percent for
each of the four years following the closing date until fully vested. The
options expire ten years from date of grant. In the event of a change in
control, all options become fully vested.
During December 1992, the Company granted 6,364,000 options at $8.50 per
share. During 1993, the Company granted 1,162,500 options, 60,000 options and
41,000 options at $8.50 per share, $10.50 per share and $13.50 per share,
respectively. At December 31, 1993, no options have been exercised or have
expired; however, 134,500 options have been cancelled. At December 31, 1993,
options for 4,507,000 shares were available for future grants.
In May 1993, the Company adopted the 1993 Director Option Plan (the
"Director Plan"), which authorized the granting of nonstatutory stock options to
nonemployee directors of the Company. The Company has reserved a total of
250,000 shares of common stock for issuance under the Director Plan. During June
1993, the Company granted 40,000 options at an exercise price of $13.50 per
share. No options have been exercised, canceled or have expired.
F-11
<PAGE> 113
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- EQUITY TRANSACTIONS -- (CONTINUED)
Employee Stock Purchase Plan
During May 1993, the Company adopted the 1993 Employee Stock Purchase Plan
(the "Purchase Plan"). The Purchase Plan is intended to qualify under Section
423 of the Internal Revenue Code. The Company has reserved 3,000,000 shares of
common stock for issuance under the Purchase Plan. An eligible employee may
purchase shares of common stock from the Company through payroll deductions of
up to ten percent of their compensation at a price per share equal to 85 percent
of the fair market value of the common stock at the beginning of each offering
period. Offering periods will commence on or after July 1 and January 1. No
shares have been sold under the Purchase Plan.
NOTE 9 -- INCOME TAXES
Consolidated pretax income for the year ended December 31, 1993 consists of
the following (in thousands):
<TABLE>
<S> <C>
U.S. Operations.................................................... $ 34,032
International Operations........................................... 77
--------
$ 34,109
=======
</TABLE>
The provision/(benefit) for current and deferred income taxes for the year
ended December 31, 1993 consists of the following (in thousands):
<TABLE>
<S> <C>
Current
Federal....................................................... $ 902
State......................................................... 174
Foreign....................................................... 7,050
--------
8,126
--------
Deferred
Federal....................................................... 7,139
State......................................................... 1,557
Foreign....................................................... --
Change in tax status.......................................... (58,593)
--------
Benefit for income taxes................................... $(41,771)
========
</TABLE>
As a result of the Company's reorganization as described in Note 1, the
Company will no longer be treated as an S corporation. Accordingly, the benefit
for income taxes for the year ended December 31, 1993 consists of the cumulative
income tax effect from recognition of the deferred tax assets at the respective
dates of S corporation termination, the provision for income taxes for the
period October 1, 1993 through December 31, 1993 for WordPerfect and Properties
and the income taxes paid in foreign countries for all entities during the year.
The provision for income taxes for 1992 and 1991 primarily represents
income taxes paid in foreign countries not recognizing an S corporation status.
F-12
<PAGE> 114
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- INCOME TAXES -- (CONTINUED)
Significant components of the Company's deferred tax assets as of December
31, 1993, were as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Restructuring reserve.................... $12,837
Non-contractual customer support
reserve............................... 5,603
Reserve for sales returns................ 5,134
Capitalized documentation costs.......... 4,841
Unearned revenue......................... 5,388
Inventory reserve........................ 2,617
Allowance for doubtful accounts
receivable............................ 2,309
Other................................. 11,168
-------
Total deferred tax assets........... $49,897
=======
</TABLE>
The Company has determined that a valuation allowance for the deferred tax
assets is not necessary.
The reconciliation of the 1993 effective income tax rate excluding the
effect of the change in tax status is as follows:
<TABLE>
<S> <C>
Federal statutory tax rate................... 35.0%
State income taxes, net of federal benefit... 3.3
Research and development credit.............. (2.8)
Foreign taxes................................ 20.7
S corporation earnings prior to change in tax
status..................................... (7.0)
Other........................................ 0.1
-----
49.3%
=====
</TABLE>
The Company adopted SFAS 109, effective January 1, 1993. SFAS 109 requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been recognized in the financial statements or
tax returns. Deferred tax liabilities and assets are determined based upon
temporary differences between the financial statement carrying amounts and the
tax basis of assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse. Differences between
financial reporting and tax basis arise most frequently from differences in
timing of income and expense recognition.
Since the Company was treated as an S corporation for income tax purposes
at January 1, 1993, adoption required no establishment of deferred income taxes.
However, as a result of the Company's change in tax status as described in Note
1, the Company under the provisions of SFAS 109 established deferred tax assets
which represent the cumulative difference in recognition of income and expenses
for financial and income tax reporting purposes for depreciation, allowance for
doubtful accounts, various accrued expenses and other items at the respective
dates of change in tax status.
NOTE 10 -- SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid for the years ended December 31, 1993, 1992 and 1991
amounted to $10.4 million, $15.0 million and $7.8 million, respectively.
During 1992, the Company distributed $97.3 million of short-term
investments to the shareholders of the Company.
F-13
<PAGE> 115
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- SUPPLEMENTAL CASH FLOW INFORMATION -- (CONTINUED)
During 1992, the Company acquired MagicSoft, Inc. and Reference Software
International. The acquisition price included deferred payments of $16.4 million
of which $10.9 million representing the long-term portion and $5.5 million
representing the current portion are included in other long-term liabilities and
accrued expenses, respectively, in the financial statements.
During 1993, the Company included in distributions to shareholders $79.3
million for the transfer of Properties and $1.4 million for the distribution of
ComputerShow (see Note 1).
NOTE 11 -- RELATED PARTY TRANSACTIONS
Effective September 30, 1993, the owner's interests in Properties was
transferred to the Company by existing shareholders in exchange for $5.0 million
cash and notes payable of $74.3 million. The notes accrue interest at 6% per
annum.
The Company provided construction and building maintenance services for the
shareholders and a company owned by these shareholders and an executive officer
of the Company and received payments for the services rendered of $184,000,
$162,000 and $1.2 million in 1993, 1992 and 1991, respectively.
WordPerfect entered into agreements with Mr. Lewis Bastian, a brother of
Mr. Bastian, in connection with the development and sale of DataPerfect, a
general purpose database software program, and TOOL, an object-oriented language
used for software development. Pursuant to these agreements, WordPerfect paid
Mr. Lewis Bastian consulting fees and royalty payments of $718,000, $474,000 and
$479,000 during 1993, 1992 and 1991, respectively. In February 1994, WordPerfect
agreed to pay Mr. Lewis Bastian $3.0 million over four years in exchange for a
termination of these agreements.
Pursuant to agreements with Dr. Ashton and Mr. Bastian for the development
and sale of WordPerfect Executive and WordPerfect Library, WordPerfect, during
1992 and 1991, made royalty payments to Dr. Ashton of $79,000 and $125,000,
respectively, and to Mr. Bastian of $79,000 and $125,000, respectively.
Effective with the merger of Softcopy into the Company as described in Note
1, a 20 percent shareholder in SoftCopy (which interest represented 51 percent
of the voting shares of SoftCopy) exchanged such shares for shares of the
Company, thereby increasing his ownership of the Company from 0.2 percent to one
percent. The one percent interest in the Company was acquired on December 24,
1992 by its controlling shareholders for $4.5 million.
Effective March 31, 1992, the controlling owners of the Company and ABP
Investments ("Investments"), predecessor to Properties, acquired the nine
percent interest in Investments held by another member of the ownership group
for $3.9 million. Subsequent thereto, assets held by Investments were split into
Properties (owner and lessor of real property utilized by the Company) and
another corporation (investments in non-Company related real properties); the
latter corporation is not a member of the consolidated group presented herein
(see Note 1).
On March 31, 1992, Development, Leasing, International and Publishing
purchased and retired the common stock held by a shareholder of each of these
companies at an aggregate cost of $600,000. In addition, on March 31, 1993,
Publishing acquired the remaining shares not held by the controlling
shareholders of the Company for $1.3 million.
The Company entered into management agreements with a distribution company
controlled by an existing officer of the Company. Payments of approximately $6.8
million and $2.0 million were made pursuant to these management agreements for
the years 1992 and 1991, respectively. The payments of $6.8 million in 1992
included a negotiated termination of these management agreements.
F-14
<PAGE> 116
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- RELATED PARTY TRANSACTIONS -- (CONTINUED)
The accompanying consolidated financial statements include the operating
results of each of the entities involved in the related party transactions
outlined above (exclusive of operations attributable to the corporation holding
investments in non-Company related real properties) for all periods presented
either as a result of (a) the transactions being between companies under common
control or (b) the transactions being at amounts which approximate book value.
Further, the results of operations attributable to the ownership interests
acquired were not significant in any period in relation to the consolidated
operating results of the Company. Shares issued in connection with the SoftCopy
transaction are included in the consolidated financial statements for all
periods presented.
NOTE 12 -- SAVINGS PLAN
The Company has a defined contribution savings plan which qualifies under
Section 401(k) of the Internal Revenue Code for employees meeting certain
service requirements. Participants may contribute certain amounts of their gross
wages each calendar year. The plan provides for discretionary matching
contributions by the Company which amounted to $4.8 million, $4.2 million and
$3.7 million for the years ended December 31, 1993, 1992 and 1991, respectively.
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
Minimum annual rental payments for existing operating leases at December
31, 1993 are as follows (in thousands):
<TABLE>
<S> <C>
1994............................................... $ 5,460
1995............................................... 4,254
1996............................................... 2,561
1997............................................... 1,964
1998............................................... 1,587
-------
$15,826
=======
</TABLE>
Rent expense under operating leases was $4.9 million, $3.7 million, and
$3.2 million for the years ended December 31, 1993, 1992 and 1991, respectively.
The Company has entered into a commitment to sponsor certain sporting
teams. The Company's remaining commitment aggregates to $5.8 million per year
for 1994 and 1995.
At December 31, 1993, the Company had irrevocable standby letters of credit
of approximately $12.7 million outstanding which guarantee the deferred payments
due to the former shareholders of RSI relating to the purchase of their stock.
The Company pays a commitment fee of 0.5 percent on the outstanding portion of
the letters of credit.
Effective January 1, 1994, the Company entered into employment agreements
with certain of its key executives in connection with changes in the executive
management structure of the Company announced in November 1993. Under such
agreements, severance payments and benefits would become payable in the event of
specified terminations of employment.
The Company is involved in certain claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
financial position or results of operations of the Company.
F-15
<PAGE> 117
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- SEGMENT INFORMATION
The Company operates exclusively within the software industry. The
following summarizes the Company's operations by geographic segment (in
thousands):
<TABLE>
<CAPTION>
NORTH OTHER
AMERICAN EUROPEAN INTERNATIONAL
OPERATIONS OPERATIONS OPERATIONS ELIMINATIONS CONSOLIDATED
---------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1993
Net revenues:
Customers..................... $ 500,192 $ 158,896 $48,427 $ -- $707,515
Intercompany.................. 76,577 28,075 -- (104,652) --
---------- ---------- ------------- ------------ ------------
Total...................... $ 576,769 $ 186,971 $48,427 $ (104,652) $707,515
======== ======== ========= ========= =========
Operating income................ $ 52,758 $ (12,671) $(6,214) $ -- $ 33,873
======== ======== ========= ========= =========
Identifiable assets............. $ 359,826 $ 101,840 $15,307 $ (75,491) $401,482
======== ======== ========= ========= =========
1992
Net revenues:
Customers..................... $ 352,092 $ 184,460 $42,566 $ -- $579,118
Intercompany.................. 98,150 22,022 2,931 (123,103) --
---------- ---------- ------------- ------------ ------------
Total...................... $ 450,242 $ 206,482 $45,497 $ (123,103) $579,118
======== ======== ========= ========= =========
Operating income................ $ 35,599 $ 25,409 $10,276 $ -- $ 71,284
======== ======== ========= ========= =========
Identifiable assets............. $ 351,304 $ 102,452 $11,216 $ (131,193) $333,779
======== ======== ========= ========= =========
1991
Net revenues:
Customers..................... $ 416,262 $ 170,149 $35,583 $ -- $621,994
Intercompany.................. 90,937 9,555 738 (101,230) --
---------- ---------- ------------- ------------ ------------
Total...................... $ 507,199 $ 179,704 $36,321 $ (101,230) $621,994
======== ======== ========= ========= =========
Operating income................ $ 133,181 $ 57,109 $12,245 $ -- $202,535
======== ======== ========= ========= =========
Identifiable assets............. $ 342,251 $ 113,581 $ 8,868 $ (57,450) $407,250
======== ======== ========= ========= =========
</TABLE>
Intercompany sales between geographic areas are accounted for at cost.
"Other International Operations" primarily include affiliates in Australia,
Japan, Singapore, South Africa, Brazil and Chile. The majority of U.S. export
revenues of $36.1 million, $32.5 million and $40.3 million for the years ended
December 31, 1993, 1992 and 1991, respectively, result from sales to Canada.
NOTE 15 -- RESTRUCTURING AND NON-RECURRING COMPENSATION EXPENSES
In the third quarter of 1993, the Company recorded a $33.0 million
non-recurring charge to restructure and streamline its operations. The provision
includes employee severance costs, the write-down of assets to estimated
realizable values, outside professional fees and other expenses associated with
the restructuring plan.
As part of the management reorganization compensation program, the Company
incurred non-recurring compensation expenses and made payments in 1992 to
certain employees aggregating $29.0 million.
F-16
<PAGE> 118
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 -- UNAUDITED PRO FORMA DATA
Pro Forma Provision for Income Taxes
Consolidated pretax income consists of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
------- ------- --------
<S> <C> <C> <C>
U.S. Operations.............................. $34,032 $59,118 $177,413
International Operations..................... 77 25,371 35,725
------- ------- --------
$34,109 $84,489 $213,138
======= ======= ========
</TABLE>
The consolidated income statement includes a pro forma presentation for
income taxes which would have been recorded if the Company had not been an S
corporation based upon the tax laws in effect during those periods utilizing
accounting standards required by SFAS 109. The unaudited pro forma income tax
provisions are as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Current:
Federal.................................... $ 6,263 $21,271 $57,215
State...................................... 3,383 6,874 13,178
Foreign.................................... 7,050 11,593 14,626
Deferred................................... (4,778) (7,486) (9,939)
------- ------- -------
$11,918 $32,252 $75,080
======= ======= =======
</TABLE>
The differences between pro forma income taxes at the statutory federal
income tax rate of 34 and 35 percent and pro forma income taxes reported in the
consolidated statement of income are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER
31,
----------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate.................... 35.0% 34.0% 34.0%
State income taxes, net of federal benefit.... 4.8 4.0 3.6
Purchased in-process research and
development................................. 2.7 5.6 --
Research and development credit............... (9.3) (2.8) (2.0)
Other......................................... 1.7 (2.6) (0.4)
---- ---- ----
34.9% 38.2% 35.2%
==== ==== ====
</TABLE>
F-17
<PAGE> 119
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 -- UNAUDITED PRO FORMA DATA -- (CONTINUED)
Supplemental Pro Forma Data:
As discussed in Notes 1 and 11, on September 30, 1993, the owners' interest
in Properties was transferred to the Company in exchange for 6% notes payable
aggregating $74.3 million and cash of $5.0 million; results of operations of
Properties are included in the accompanying financial statements for all periods
presented. The following supplemental pro forma data presents the results of
operations after adjustment to reflect additional interest expense assuming such
notes payable had been issued on January 1, 1993.
<TABLE>
<S> <C>
Income before income taxes............................... $34,109
Interest expense......................................... 3,341
--------
Income before provision for income taxes................. 30,768
Provision for income taxes............................... 9,992
--------
Net income............................................... $20,776
--------
--------
Net income per share..................................... $0.39
-----
-----
Weighted-average number of shares........................ 53,490,673
----------
----------
</TABLE>
NOTE 17 -- SUBSEQUENT EVENT
On March 21, 1994, the Company signed a definitive agreement to merge with
Novell, Inc. ("Novell"). Novell is a leading provider of network server
operating system software that integrates desktop computers, servers, and
mini-computer and mainframe hosts for business-wide information sharing. Its
sales for the fiscal year ended October 30, 1993 were approximately $1.1
billion. The transaction, which will be accounted for as a pooling of interests,
will be effected through the exchange of 51,380,100 shares of Novell's common
stock for all of the issued and outstanding shares of the Company's common
stock. The Company will become a wholly-owned subsidiary of Novell. The
transaction is subject to certain conditions including approval from the United
States Justice Department and the effective filing of a registration statement
with the Securities and Exchange Commission. Completion of the transaction is
expected in June 1994.
F-18
<PAGE> 120
WORDPERFECT CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 40,484 $ 55,127
Accounts receivable less allowance for doubtful accounts of $6,539
and $5,936........................................................ 60,679 63,672
Inventories.......................................................... 20,926 23,467
Deferred income taxes................................................ 44,310 43,587
Prepaid expenses and other assets.................................... 20,067 19,350
--------- ------------
Total Current Assets......................................... 186,466 205,203
Property, plant and equipment, net................................... 182,861 186,903
Deferred income taxes................................................ 6,310 6,310
Other assets......................................................... 3,163 3,066
--------- ------------
$ 378,800 $401,482
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 21,329 $ 37,472
Accrued expenses..................................................... 84,909 98,604
Deferred revenue..................................................... 20,870 17,949
Income taxes payable................................................. 6,939 5,001
Notes payable........................................................ 13,489 8,640
--------- ------------
Total Current Liabilities.................................... 147,536 167,666
Notes payable to shareholders........................................ 76,506 75,369
Long term debt and other liabilities................................. 15,409 8,920
--------- ------------
239,451 251,955
--------- ------------
Shareholders' equity:
Common stock, no par, 200,000,000 shares authorized, 51,380,100
shares issued and outstanding..................................... 79,327 79,327
Retained earnings.................................................... 61,739 73,313
Cumulative translation adjustment.................................... (1,717) (3,113)
--------- ------------
139,349 149,527
--------- ------------
$ 378,800 $401,482
======== ==========
</TABLE>
See notes to consolidated condensed financial statements.
F-19
<PAGE> 121
WORDPERFECT CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1994 1993
---------- ----------
<S> <C> <C>
Net sales........................................................... $ 139,436 $ 172,150
Cost of sales....................................................... 37,070 40,877
---------- ----------
Gross margin........................................................ 102,366 131,273
Expenses:
Selling and marketing............................................. 48,060 53,839
Research and development.......................................... 29,479 29,912
General and administrative........................................ 19,115 18,351
Purchased in process research and development..................... 14,969 --
---------- ----------
Total expenses...................................................... 111,623 102,102
---------- ----------
Income/(loss) from operations....................................... (9,257) 29,171
Other income, net................................................. (470) 1,198
---------- ----------
Income/(loss) before provision for income taxes................... (9,727) 30,369
Provision for income taxes.......................................... 1,782 3,831
---------- ----------
Net income/(loss)................................................. $ (11,509) $ 26,538
========= =========
Net income/(loss) per share....................................... $ (.22)
=========
Weighted average number of common shares............................ 51,380,100
=========
Unaudited pro forma data:
Income before provision for income taxes.......................... $ 30,369
Provision for income taxes........................................ 10,325
----------
Net income/(loss)................................................. $ 20,044
=========
Net income/(loss) per share....................................... $ .39
=========
Weighted average number of common shares............................ 52,035,582
=========
</TABLE>
See notes to consolidated condensed financial statements.
F-20
<PAGE> 122
WORDPERFECT CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss).................................................... $(11,509) $ 26,538
Adjustments to reconcile net income/(loss) to net cash
provided/(used) by operating activities:
Depreciation and amortization..................................... 7,871 8,584
Charge for purchased in-process research and development.......... 14,969 --
Changes in assets and liabilities:
Accounts receivable............................................. 3,819 (10,917)
Inventories..................................................... 3,034 (3,345)
Prepaid expenses and other assets............................... (459) (656)
Accounts payable................................................ (16,334) (746)
Accrued expenses................................................ (14,202) 14,152
Income taxes payable............................................ 1,956 (147)
Deferred taxes.................................................. (723) --
Deferred revenue................................................ 2,825 (790)
-------- --------
Net cash provided/(used) by operating activities..................... (8,753) 32,673
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment........................... (3,125) (10,975)
Change in other liabilities.......................................... (34) 257
Purchases of other assets............................................ (97) (177)
Payment for acquisitions, net of cash acquired....................... (5,665) --
Proceeds from sale of equipment...................................... 53 --
-------- --------
Net cash used in investment activities............................... (8,868) (10,895)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) long-term debt.......................... 3,100 (5,938)
Distributions to shareholders........................................ -- (1,821)
-------- --------
Net cash provided/(used) by financing activities..................... 3,100 (7,759)
-------- --------
Effect of exchange rate changes on cash................................ (122) (9)
-------- --------
Net increase/(decrease) in cash and cash equivalents................... (14,643) 14,010
Cash and cash equivalents at beginning of period....................... 55,127 86,569
-------- --------
Cash and cash equivalents at end of period............................. $ 40,484 $100,579
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
F-21
<PAGE> 123
WORDPERFECT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions to Form-10Q and do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
The consolidated condensed financial statements include the accounts of
WordPerfect Corporation and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
In the opinion of management all adjustments, consisting of normal
recurring adjustments, which are necessary for a fair presentation of the
results for the interim periods have been made. The interim financial statements
should be read in conjunction with the Company's consolidated financial
statements and notes thereto for the year ended December 31, 1993 appearing
elsewhere herein.
NOTE 2 -- MERGER WITH NOVELL, INC.
On March 21, 1994, the Company signed a definitive agreement to merge with
Novell, Inc. ("Novell"). Novell is a leading provider of network server
operating system software that integrates desktop computers, servers, and
mini-computer mainframe hosts for business-wide information sharing. Its sales
for the fiscal year ended October 31, 1993 were approximately $1.1 billion. The
transaction, which will be accounted for as a pooling of interests, will be
effected through the exchange of 51,380,100 shares of Novell's common stock for
all of the issued and outstanding shares of the Company's common stock. The
Company will become a wholly-owned subsidiary of Novell. The transaction is
subject to certain conditions including approval from the United States Justice
Department and the effective filing of a registration statement with the
Securities and Exchange Commission. Completion of the transaction is expected in
June 1994.
NOTE 3 -- UNAUDITED PRO FORMA DATA
For the three months ended March 31, 1993, the consolidated statement of
income includes a pro forma presentation for income taxes which would have been
recorded if the Company had not been an S corporation based upon the tax laws in
effect during that period utilizing accounting standards required by SFAS 109.
Pro forma net income per share is computed using the weighted average number of
common shares and common equivalent shares outstanding.
NOTE 4 -- INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the weighted average method. Inventories include materials, direct labor
and overhead and consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
--------- ------------
<S> <C> <C>
Finished goods....................................................... $ 8,620 $ 7,129
Raw materials........................................................ 12,306 16,338
--------- ------------
Total...................................................... $20,926 $ 23,467
======== ==========
</TABLE>
NOTE 5 -- ACQUISITION
In January 1994, the Company acquired the outstanding common stock of
SoftSolutions Technology Corporation ("SoftSolutions"), a developer of network
document management software, in exchange for cash of $5.8 million and notes
payable of $9.2 million. The notes accrue interest at 6% per annum and are
payable in two annual installments beginning in January 1995. That portion of
the purchase price representing purchased in-process research and development of
$14.4 million was charged against operations during the quarter.
F-22
<PAGE> 124
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors in certain circumstances. As permitted by amendments
to the Delaware General Corporation Law effective in July 1986, the Registrant
has included a provision in its Restated Certificate of Incorporation that,
subject to certain limitations, eliminates the ability of the Registrant and its
stockholders to recover monetary damages from a director of the Registrant for
breach of fiduciary duty as a director. Article VII, Sections 7.01 and 7.02, of
the Registrant's Bylaws, a copy of which is filed as Exhibit 3.2 hereto provides
for indemnification of the Registrants directors and officers in certain
circumstances. The Registrant has a directors' and officers' liability insurance
policy which affords directors and officers insurance coverage for losses
arising from claims based on breaches of duty, negligence, error and other
wrongful acts. Additionally, the Registrant has entered into indemnification
agreements with its directors and executive officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<S> <C>
2.1 Agreement and Plan of Reorganization (the "Merger Agreement") among the Registrant,
Sub, WordPerfect, Alan C. Ashton, Bruce W. Bastian and Melanie L. Bastian, dated as
of March 21, 1994, is included as Appendix A filed with this Registration Statement.
Certain Disclosure Schedules of WordPerfect and the Registrant setting forth various
exceptions to the representations and warranties made by WordPerfect and the
Registrant pursuant to the Merger Agreement have been omitted. The Registrant agrees
to furnish supplementally copies of these documents to the SEC upon request.
2.2 Form of Articles of Merger among the Registrant and WordPerfect to be executed upon
approval of the Merger by the shareholders of WordPerfect is included as Exhibit 1.1
of Appendix A filed with this Registration Statement.
2.3 Form of Shareholder Agreement among the Registrant, Sub, WordPerfect and certain
shareholders of WordPerfect and Irrevocable Proxy to Vote WordPerfect Corporation
Stock to be executed in connection with the Merger Agreement is included as Exhibit
5.6 of Appendix A filed with this Registration Statement.
2.4 Form of WordPerfect Affiliates Agreement to be executed in connection with the
Merger Agreement is included as Exhibit 5.2 of Appendix A filed with this
Registration Statement.
2.5 Form of Tax Matters Agreement among the Registrant, Sub, WordPerfect and certain
shareholders of WordPerfect to be executed in connection with the Merger Agreement
is included as Exhibit 6.2(j) of Appendix A filed with this Registration Statement.
2.6 Amendment to the Merger Agreement dated May 31, 1994.
*3.1 Registrant's Restated Certificate of Incorporation, as amended.(1)
*3.2 Registrant's Bylaws, as amended.(2)
*4.1 Preferred Shares Rights Agreement dated as of December 7, 1988 between the
Registrant and Mellon Bank N.A.(3)
*5.1 Legal opinion of Wilson, Sonsini, Goodrich & Rosati, counsel to the Registrant.
8.1 Tax opinion of Wilson, Sonsini, Goodrich & Rosati, counsel to the Registrant.
</TABLE>
<TABLE>
<S> <C>
8.2 Tax opinion of Brobeck, Phleger & Harrison, counsel to WordPerfect.
*10.1 Purchase and License Agreement dated as of March 20, 1994 by and between Borland and
the Registrant.
</TABLE>
II-1
<PAGE> 125
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<S> <C>
*13.1 Registrant's Quarterly Report on Form 10-Q for the quarter ended January 29,
1993.(4)
*13.2 Registrant's 1993 Annual Report on Form 10-K for the fiscal year ended October 30,
1993.(5)
23.1 Consent of Ernst & Young, independent auditors.
23.2 Consent of Price Waterhouse, independent auditors.
*23.3 Consent of Counsel (included in Exhibit 5.1 hereto).
*24.1 Power of Attorney (included on page II-4).
99.1 Form of proxy card.
</TABLE>
- ---------------
* Previously filed.
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-4 filed August 15, 1991, and all amendments thereto.
(2) Incorporated by reference from the Registrant's Registration Statement on
Form S-1 filed November 30, 1984, and all amendments thereto (File No.
2-94613).
(3) Incorporated by reference from the exhibit filed with the Registrant's
Registration Statement on Form 8-A dated December 12, 1988.
(4) Previously filed with the Commission on March 14, 1994.
(5) Previously filed with the Commission on January 27, 1994.
(B) FINANCIAL STATEMENT SCHEDULES
Not applicable.
ITEM 22. UNDERTAKINGS
(1) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended (the "Securities Act"),
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) The Registrant hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the Registrant
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(3) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(4) The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the Prospectus/Proxy Statement pursuant
to Items 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
II-2
<PAGE> 126
(5) The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
(6) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 127
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, NOVELL, INC.
HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF PROVO, STATE OF UTAH, ON THE 9TH DAY
OF JUNE, 1994.
NOVELL, INC.
By: /s/ DAVID R. BRADFORD
David R. Bradford,
Senior Vice President, General
Counsel and
Corporate Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------------
<C> <S> <C>
RAYMOND J. NOORDA* Chairman of the Board June 9, 1994
(Raymond J. Noorda)
ROBERT J. FRANKENBERG* President and Chief Executive June 9, 1994
(Robert J. Frankenberg) Officer (Principal Executive
Officer)
JAMES R. TOLONEN* Chief Financial Officer June 9, 1994
(James R. Tolonen) (Principal Financial and
Accounting Officer)
ELAINE R. BOND* Director June 9, 1994
(Elaine R. Bond)
JACK L. MESSMAN* Director June 9, 1994
(Jack L. Messman)
KANWAL S. REKHI* Executive Vice President, June 9, 1994
(Kanwal S. Rekhi) Corporate Technology and
Director
LARRY W. SONSINI* Director June 9, 1994
(Larry W. Sonsini)
IAN R. Director June 9, 1994
WILSON*
(Ian R. Wilson)
*By: /s/ DAVID R. BRADFORD June 9, 1994
(David R. Bradford, Attorney-in-Fact)
</TABLE>
II-4
<PAGE> 128
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
NOVELL, INC.
NOVELL ACQUISITION CORP.
WORDPERFECT CORPORATION
ALAN C. ASHTON
BRUCE W. BASTIAN
AND
MELANIE L. BASTIAN
MARCH 21, 1994
<PAGE> 129
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I -- THE MERGER.............................................................. A-1
1.1 Merger; Effective Time................................................... A-1
1.2 Closing.................................................................. A-1
1.3 Effects of the Merger.................................................... A-1
1.4 Tax-Free Reorganization; Pooling of Interests............................ A-1
ARTICLE II -- EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES................................. A-2
2.1 Effect on Capital Stock.................................................. A-2
2.2 Exchange of Certificates................................................. A-3
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF WORDPERFECT......................... A-4
3.1 Organization, Standing and Power......................................... A-4
3.2 Capital Structure........................................................ A-4
3.3 Authority................................................................ A-4
3.4 Financial Statements..................................................... A-5
3.5 Compliance with Law...................................................... A-6
3.6 No Defaults.............................................................. A-6
3.7 Litigation............................................................... A-6
3.8 No Material Adverse Effect............................................... A-6
3.9 Absence of Undisclosed Liabilities....................................... A-7
3.10 Information Supplied..................................................... A-7
3.11 Certain Agreements....................................................... A-8
3.12 ERISA.................................................................... A-8
3.13 Major Contracts.......................................................... A-8
3.14 Taxes.................................................................... A-9
3.15 Interests of Officers and Directors...................................... A-10
3.16 Intellectual Property.................................................... A-10
3.17 Restrictions on Business Activities...................................... A-11
3.18 Title to Properties; Absence of Liens and Encumbrances; Condition of A-12
Equipment................................................................
3.19 Governmental Authorizations and Licenses................................. A-12
3.20 Environmental Matters.................................................... A-12
3.21 Insurance................................................................ A-12
3.22 Board Approval........................................................... A-13
3.23 Labor Matters............................................................ A-13
3.24 Questionable Payments.................................................... A-13
3.25 Accounting Matters....................................................... A-13
3.26 Brokers.................................................................. A-13
3.27 Disclosure............................................................... A-13
</TABLE>
(i)
<PAGE> 130
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF NOVELL AND SUB....................... A-14
4.1 Organization; Standing and Power......................................... A-14
4.2 Capital Structure........................................................ A-14
4.3 Authority................................................................ A-14
4.4 SEC Documents; Novell Financial Statements............................... A-15
4.5 Information Supplied..................................................... A-15
4.6 Litigation............................................................... A-15
4.7 No Defaults.............................................................. A-16
4.8 Opinion of Financial Advisor............................................. A-16
4.9 Accounting Matters....................................................... A-16
4.10 Brokers.................................................................. A-16
4.11 Disclosure............................................................... A-16
ARTICLE V -- CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL
AGREEMENTS.............................................................. A-16
5.1 Information and Access................................................... A-16
5.2 Conduct of Business of the Parties....................................... A-17
5.3 Negotiation With Others.................................................. A-19
5.4 Preparation of S-4 and the Proxy Statement; Other Filings................ A-19
5.5 Advice of Changes........................................................ A-20
5.6 Shareholder Approval..................................................... A-20
5.7 Agreements to Cooperate.................................................. A-20
5.8 State Statutes........................................................... A-21
5.9 Consents................................................................. A-21
5.10 Nasdaq National Market Listing........................................... A-21
5.11 Public Announcements..................................................... A-21
5.12 Affiliates............................................................... A-21
5.13 WordPerfect Options...................................................... A-22
5.14 Indemnification.......................................................... A-22
5.15 Notification of Certain Matters.......................................... A-23
5.16 Pooling Accounting....................................................... A-23
5.17 FIRPTA................................................................... A-23
5.18 Subsequent Amendments of Disclosure Schedules............................ A-23
5.19 Establishment of Applications Group...................................... A-23
5.20 Satisfaction of WordPerfect Obligations.................................. A-23
5.21 Continued Nomination of Directors........................................ A-23
5.22 Other Transactions....................................................... A-24
ARTICLE VI -- CONDITIONS PRECEDENT................................................... A-24
6.1 Conditions to Each Party's Obligation to Effect the Merger............... A-24
6.2 Conditions of Obligations of Novell and Sub.............................. A-24
6.3 Conditions of Obligation of WordPerfect.................................. A-25
</TABLE>
(ii)
<PAGE> 131
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VII -- TERMINATION........................................................... A-26
7.1 Termination.............................................................. A-26
7.2 Effect of Termination.................................................... A-27
ARTICLE VIII -- GENERAL PROVISIONS................................................... A-27
8.1 Nonsurvival of Representations, Warranties and Agreements................ A-27
8.2 Amendment................................................................ A-27
8.3 Expenses................................................................. A-27
8.4 Extension; Waiver........................................................ A-28
8.5 Notices.................................................................. A-28
8.6 Interpretation........................................................... A-28
8.7 Counterparts............................................................. A-29
8.8 Entire Agreement......................................................... A-29
8.9 No Transfer.............................................................. A-29
8.10 Severability............................................................. A-29
8.11 Other Remedies........................................................... A-29
8.12 Further Assurances....................................................... A-29
8.13 Absence of Third Party Beneficiary Rights................................ A-29
8.14 Mutual Drafting.......................................................... A-29
8.15 Governing Law............................................................ A-29
</TABLE>
<TABLE>
<S> <C> <C>
Exhibit 1.1 Articles of Merger
Exhibit 5.6 Form of Shareholder Agreement
Exhibit 5.12 Form of Affiliates Agreement
Exhibit 6.2(j) Form of Tax Matters Agreement
</TABLE>
(iii)
<PAGE> 132
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
March 21, 1994, is entered into by and among NOVELL, INC., a Delaware
corporation ("Novell"), NOVELL ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Novell ("Sub"), and WORDPERFECT CORPORATION., a Utah
corporation ("WordPerfect"). Alan C. Ashton ("Ashton"), Bruce W. Bastian ("Mr.
Bastian"), and Melanie L. Bastian ("Ms. Bastian") shareholders of WordPerfect,
are parties to this Agreement only for purposes of Section 5.3. Novell and
WordPerfect are sometimes referred to as a "Company" or the "Companies."
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and
mutual covenants and agreements contained herein, Novell, Sub and WordPerfect
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 Merger; Effective Time. Subject to the terms and conditions of this
Agreement and of the Articles of Merger attached as Exhibit 1.1 (the "Articles
of Merger"), Sub will be merged into WordPerfect (the "Merger") in accordance
with the Utah Revised Business Corporation Act (the "URBCA"). The Articles of
Merger provide, among other things, the mode of effecting the Merger and the
manner and basis of converting each issued and outstanding share of capital
stock of WordPerfect into shares of Common Stock of Novell ("Novell Common
Stock").
Subject to the provisions of this Agreement and the Articles of Merger, the
Articles of Merger, together with required officers' certificates, shall be
filed in accordance with the URBCA on the Closing Date (as defined in Section
1.2). The Merger shall become effective upon confirmation of such filing of the
Articles of Merger and such officers' certificates (the date of confirmation of
such filing is referred to as the "Effective Date" and the time of confirmation
of such filing is referred to as the "Effective Time").
1.2 Closing. The closing of the Merger (the "Closing") will take place as
soon as practicable on the later of (x) the date of the Shareholders' Meeting
referred to in Section 5.6 or (y) the first business day after satisfaction or
waiver of the latest to occur of the conditions set forth in Article VI (the
"Closing Date"), at the offices of Wilson, Sonsini, Goodrich & Rosati, Two Palo
Alto Square, Palo Alto, California 94306, unless a different date or place is
agreed to in writing by the parties hereto.
1.3 Effects of the Merger. At the Effective Time, (i) the separate
existence of Sub shall cease and Sub shall be merged with and into WordPerfect
(Sub and WordPerfect are sometimes referred to as the "Constituent Corporations"
and WordPerfect after the Merger is sometimes referred to as the "Surviving
Corporation"), (ii) the Articles of Incorporation of WordPerfect shall be the
Articles of Incorporation of the Surviving Corporation, except that such
Articles of Incorporation shall be amended to provide that the authorized
capital stock of the Surviving Corporation shall be 1,000,000 shares of Common
Stock, (iii) the Bylaws of WordPerfect shall be the Bylaws of the Surviving
Corporation, (iv) the directors of Sub shall be the directors of the Surviving
Corporation, (v) the officers of WordPerfect shall be the officers of the
Surviving Corporation; and (vi) the Merger shall, from and after the Effective
Time, have all the effects provided by applicable law, this Agreement and the
Articles of Merger.
1.4 Tax-Free Reorganization; Pooling of Interests. The Merger is intended
to be a reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to be accounted for as a pooling of
interests pursuant to Opinion No. 16 of the Accounting Principles Board.
<PAGE> 133
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of capital
stock of WordPerfect:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall continue to be issued and outstanding and shall be
converted into one share of validly issued, fully paid and non-assessable
Common Stock of the Surviving Corporation. Each stock certificate of Sub
evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of
WordPerfect. All shares of capital stock of WordPerfect that are owned
directly or indirectly by WordPerfect or by any Subsidiary (as defined
below) of WordPerfect and any shares of capital stock of WordPerfect owned
by Novell, Sub or any other Subsidiary of Novell shall be cancelled and no
stock of Novell or other consideration shall be delivered in exchange
therefor. In this Agreement, a "Subsidiary" means a corporation or other
entity whose voting securities are owned or are otherwise controlled
directly or indirectly by a parent corporation or other intermediary entity
in an amount sufficient to elect at least a majority of the Board of
Directors or other managers of such corporation or other entity.
(c) Conversion of Capital Stock of WordPerfect. Each issued and
outstanding share of WordPerfect Common Stock (other than shares to be
canceled pursuant to Section 2.1(b) and shares, if any, held by persons
exercising dissenters' rights in accordance with the URBCA ("Dissenting
Shares")), including shares issuable upon the exercise of any WordPerfect
Option (as defined in Section 3.2 below) prior to the Effective Time, that
are issued and outstanding immediately prior to the Effective Time (other
than Dissenting Shares) shall automatically be canceled and extinguished
and converted, without any action on the part of the holder thereof, into
the right to receive one share of Novell Common Stock. The ratio pursuant
to which each share of capital stock of WordPerfect will be exchanged for
one share of Novell Common Stock, determined in accordance with the
foregoing provisions, is referred to as the "Exchange Ratio."
(d) Adjustment of Exchange Ratio. If, between the date of this
Agreement and the Effective Time, the outstanding shares of Novell Common
Stock shall have been changed into a different number of shares or a
different class by reason of any reclassification, split-up, stock
dividend, stock combination, then the Exchange Ratio shall be
correspondingly adjusted.
(e) Dissenters' Rights. If holders of capital stock of WordPerfect are
entitled to dissenters' rights in connection with the Merger under Part 13
of the URBCA, any Dissenting Shares shall not be converted into Novell
Common Stock but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to the law of the State of Utah. WordPerfect
shall give Novell prompt notice of any demand received by WordPerfect to
require WordPerfect to purchase shares of capital stock of WordPerfect, and
Novell shall have the right to participate in all negotiations and
proceedings with respect to such demand. WordPerfect agrees that, except
with the prior written consent of Novell, or as required under the URBCA,
it will not voluntarily make any payment with respect to, or settle or
offer to settle, any such purchase demand. Each holder of Dissenting Shares
("Dissenting Shareholder") who, pursuant to the provisions of the URBCA,
becomes entitled to payment of the value of shares of capital stock of
WordPerfect shall receive payment therefor (but only after the value
therefor shall have been agreed upon or finally determined pursuant to such
provisions). In the event of legal obligation, after the Effective Time, to
deliver shares of Novell Common Stock to any holder of shares of capital
stock of WordPerfect who shall have failed to make an effective purchase
demand or shall have lost its status as a Dissenting Shareholder, Novell
shall issue and deliver, upon surrender by such Dissenting Shareholder of
such holder's certificate or certificates representing
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shares of capital stock of WordPerfect, the shares of Novell Common
Stock to which such Dissenting Shareholder is then entitled under this
Section 2.1 and the Articles of Merger.
(f) Fractional Shares. No fractional shares of Novell Common Stock
shall be issued, but in lieu thereof each holder of shares of capital stock
of WordPerfect who would otherwise be entitled to receive a fraction of a
share of Novell Common Stock shall receive from Novell an amount of cash
equal to the per share market value of Novell Common Stock (based on the
last sales price of Novell Common Stock as reported on the National Market
System of the National Association of Securities Dealers' Automated
Quotation System on the Effective Date of the Merger) multiplied by the
fraction of a share of Novell Common Stock to which such holder would
otherwise be entitled. The fractional share interests of each WordPerfect
shareholder shall be aggregated, so that no WordPerfect shareholder shall
receive cash in an amount greater than the value of one full share of
Novell Common Stock.
2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Novell shall appoint Mellon
Bank, N.A. to act as exchange agent (the "Exchange Agent") in the Merger.
(b) Novell to Provide Common Stock. Promptly after the Effective Time,
Novell shall make available for exchange in accordance with this Article II and
the Articles of Merger, through such reasonable procedures as Novell may adopt,
the shares of Novell Common Stock issuable pursuant to Section 2.1 and the
Articles of Merger in exchange for outstanding shares of capital stock of
WordPerfect.
(c) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of capital stock of WordPerfect (the "Certificates") whose
shares are being converted into Novell Common Stock pursuant to Section 2.1 and
the Articles of Merger, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Novell may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for Novell Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Novell, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the number of shares of Novell Common Stock to which the holder of capital stock
of WordPerfect is entitled pursuant to Section 2.1 hereof. The Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of capital stock of WordPerfect which is not registered on the transfer records
of WordPerfect, the appropriate number of shares of Novell Common Stock may be
delivered to a transferee if the Certificate representing such capital stock of
WordPerfect is presented to the Exchange Agent and accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent the right to receive upon such surrender
the number of shares of Novell Common Stock as provided by this Article II and
the provisions of the URBCA.
(d) No Further Ownership Rights in Capital Stock of WordPerfect. All Novell
Common Stock delivered upon the surrender for exchange of shares of capital
stock of WordPerfect in accordance with the terms hereof shall be deemed to have
been delivered in full satisfaction of all rights pertaining to such shares of
capital stock of WordPerfect. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of capital stock of WordPerfect which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be cancelled and exchanged as
provided in this Article II.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WORDPERFECT
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which identifies the section
and subsection to which such disclosure relates and which is delivered by
WordPerfect to Novell prior to the execution of this Agreement (the "WordPerfect
Disclosure Schedule"), WordPerfect represents and warrants to Novell and Sub as
set forth below:
3.1 Organization, Standing and Power. Each of WordPerfect and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, and has all requisite
power and authority to own, operate and lease its properties and to carry on its
business as now being conducted. A true and complete list of such Subsidiaries
is set out in Schedule 3.1 hereto together with the jurisdiction of
incorporation of each Subsidiary. Each of WordPerfect and its Subsidiaries is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect (as defined below). WordPerfect has no direct or indirect equity interest
in or loans to any partnership, corporation, joint venture, business association
or other entity other than WordPerfect's Subsidiaries and loans to entities
affiliated with employees of WordPerfect which in the aggregate do not exceed
$1,000,000. WordPerfect has delivered to Novell, or will deliver to Novell
within twenty one (21) days of the date hereof, complete and correct copies of
the Articles of Incorporation and Bylaws (or other organizational or charter
document) of WordPerfect and each of WordPerfect's Subsidiaries, in each case as
amended to the date hereof.
As used in this Agreement, the term "Material Adverse Effect" used in
connection with a party or any of such party's subsidiaries means any event,
change or effect that is materially adverse to the condition (financial or
otherwise), properties, assets, liabilities, businesses, operations, results of
operations or prospects of such party and its subsidiaries taken as a whole;
provided, however, that a change or deterioration in the financial condition,
assets, liabilities or results of operations of WordPerfect and its Subsidiaries
which is reflected in the financial projections delivered by WordPerfect to
Novell on March 17, 1994 (the "WordPerfect Financial Projections") will not be
deemed to constitute a Material Adverse Effect with respect to WordPerfect for
any purpose under this Agreement.
3.2 Capital Structure. The authorized capital stock of WordPerfect
consists of 200,000,000 shares of Common Stock, no par value ("WordPerfect
Common Stock"). At the close of business on March 18, 1994, there were
51,380,100 shares of WordPerfect Common Stock outstanding and 7,857,500 shares
of WordPerfect Common Stock were reserved for issuance upon the exercise of
outstanding employee stock options("WordPerfect Options"), pursuant to the
WordPerfect Corporation 1992 Long-Term Incentive Plan ("WordPerfect Option
Plan"). All outstanding shares of WordPerfect Common Stock are, and any shares
of WordPerfect Common Stock issued upon exercise of any WordPerfect Option will
be, validly issued, fully paid and nonassessable and not subject to preemptive
rights created by statute, WordPerfect's Articles of Incorporation or Bylaws or
any agreement to which WordPerfect or any of its Subsidiaries is a party or by
which WordPerfect or any of its Subsidiaries may be bound. Except for the shares
listed above issuable pursuant to WordPerfect Options, there are no options,
warrants, calls, conversion rights, commitments or agreements of any character
to which WordPerfect or any Subsidiary of WordPerfect is a party or by which any
of them may be bound that do or may obligate WordPerfect or any Subsidiary of
WordPerfect to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of WordPerfect or of any Subsidiary of
WordPerfect or that do or may obligate WordPerfect or any Subsidiary of
WordPerfect to grant, extend or enter into any such option, warrant, call,
conversion right, commitment or agreement. WordPerfect is, or will be prior to
the Closing, the owner of all outstanding shares of capital stock of each of its
Subsidiaries and all such shares are duly authorized, validly issued, fully paid
and nonassessable. WordPerfect is not under any obligation to register under the
Securities Act of 1993, as amended (the "Securities Act") any of its presently
outstanding securities or any securities that may subsequently be issued.
3.3 Authority. WordPerfect has all requisite corporate power and authority
to enter into this Agreement and the Articles of Merger and, subject to approval
of this Agreement and the Articles of Merger by the shareholders of WordPerfect,
to perform its obligations hereunder, and to consummate the transactions
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contemplated hereby. The execution and delivery of this Agreement and the
Articles of Merger, the performance by WordPerfect of its obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of WordPerfect, and have been unanimously approved by the Board of
Directors of WordPerfect. No other corporate proceeding on the part of
WordPerfect is necessary to authorize this Agreement or the Articles of Merger
or the performance of WordPerfect's obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, other than the
approval of the Merger by WordPerfect's shareholders. This Agreement and the
Articles of Merger have been duly executed and delivered by WordPerfect and
constitute legal, valid and binding obligations of WordPerfect enforceable
against WordPerfect in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought. Subject to satisfaction of
the conditions set forth in Article VI, the execution and delivery of this
Agreement and the Articles of Merger do not, and the consummation of the
transactions contemplated hereby and thereby will not conflict with or result in
any violation of any material statute, law, rule, regulation, judgment, order,
decree, or ordinance applicable to WordPerfect or any Subsidiary of WordPerfect
or their respective properties or assets, or conflict with or result in any
breach or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
a material lien or encumbrance on any of the properties or assets of WordPerfect
or any of its Subsidiaries pursuant to (i) any provision of the Articles of
Incorporation or Bylaws of WordPerfect or any Subsidiary of WordPerfect or (ii)
any material agreement, contract, note, mortgage, indenture, lease, instrument,
permit, concession, franchise or license to which WordPerfect or any of its
Subsidiaries is a party or by which WordPerfect or any of its Subsidiaries or
any of their properties or assets may be bound or affected. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency, commission, regulatory authority or
other governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required by or with respect to WordPerfect or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
or the Articles of Merger by WordPerfect or the consummation by WordPerfect of
the transactions contemplated hereby or thereby, except for (i) the filing of a
premerger notification report by WordPerfect under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
distribution of a proxy statement relating to the Shareholders' Meeting (the
"Proxy Statement") and the obtaining of the approval of the Merger by
WordPerfect's shareholders, (iii) the filing of the Articles of Merger with the
Utah Division of Corporations and Commercial Code and the Secretary of the State
of the State of Delaware and appropriate documents with the relevant authorities
of other states in which WordPerfect is qualified to do business, (iv) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the laws of any foreign country, which if not
obtained or made would not have a Material Adverse Effect on WordPerfect and (v)
such other consents, authorizations, filings, approvals and registrations which
if not obtained or made would not have a Material Adverse Effect on WordPerfect.
3.4 Financial Statements. WordPerfect has furnished Novell with its
financial statements for each of the fiscal years ended December 31, 1991, 1992
and 1993, including a consolidated balance sheet of WordPerfect and its
consolidated Subsidiaries as at each of the fiscal years ended December 31,
1991, 1992 and 1993 (collectively, the "WordPerfect Financial Statements"). The
WordPerfect Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and fairly present the consolidated financial position of
WordPerfect and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended. WordPerfect will provide in a timely manner audited
WordPerfect Financial Statements and any interim financial statements required
in connection with the filing of any registration statement relating to the
transactions contemplated hereby. All reserves established by WordPerfect with
respect to assets of WordPerfect are adequate. There has been no change in
WordPerfect's accounting policies, except as described in the notes to the
WordPerfect Financial Statements.
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3.5 Compliance with Law. Each of WordPerfect and its Subsidiaries is in
compliance and has conducted its business so as to comply with all laws, rules
and regulations, judgments, decrees or orders of any Governmental Entity
applicable to its operations or with respect to which compliance is a condition
of engaging in the business thereof, except to the extent that failure to comply
would, individually or in the aggregate, not have had and is reasonably expected
not to have a Material Adverse Effect on WordPerfect. There are no material
judgments or orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against
WordPerfect or any Subsidiary of WordPerfect or against any of their respective
properties or businesses.
3.6 No Defaults. Neither WordPerfect nor any Subsidiary of WordPerfect is,
or has received notice that it would be with the passage of time, (i) in
violation of any provision of the Articles of Incorporation or Bylaws (or other
organizational or charter document) of WordPerfect or any Subsidiary of
WordPerfect or (ii) in default or violation of any term, condition or provision
of (A) any material judgment, decree, order, injunction or stipulation
applicable to WordPerfect or any Subsidiary of WordPerfect or (B) any material
agreement, note, mortgage, indenture, contract, lease or instrument, permit,
concession, franchise or license to which WordPerfect or any Subsidiary of
WordPerfect is a party or by which WordPerfect or any of its Subsidiaries or
their properties or assets may be bound.
3.7 Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the best knowledge of WordPerfect, threatened,
against WordPerfect or any of its Subsidiaries which could, individually or in
the aggregate, have a Material Adverse Effect or which in any manner challenges
or seeks to prevent, enjoin, alter or delay any of the transactions contemplated
hereby. The WordPerfect Disclosure Schedule sets forth with respect to each
pending action, suit, proceeding, claim or investigation to which WordPerfect or
any of its Subsidiaries is a party to the extent that the aggregate damages
claimed for all such complaints exceed $10,000,000, the forum, the parties
thereto, a brief description of the subject matter thereof and the amount of
damages claimed. WordPerfect has delivered to, or will deliver within twenty one
(21) days of the date hereof to Novell correct and complete copies of all
correspondence prepared by its counsel for WordPerfect's independent public
accountants in connection with the last three completed audits of WordPerfect's
financial statements and any such correspondence since the date of the last such
audit.
3.8 No Material Adverse Effect. Since December 31, 1993, WordPerfect and
its Subsidiaries have conducted their respective businesses in the ordinary
course and there has not occurred:
(a) Any Material Adverse Effect with respect to WordPerfect;
(b) Any amendments or changes in the Articles of Incorporation or
Bylaws of WordPerfect or any of its Subsidiaries other than in connection
with a consolidation of its business units prior to the date of this
Agreement in the manner previously disclosed to Novell;
(c) Any damage, destruction or loss, whether covered by insurance or
not, that could reasonably constitute a Material Adverse Effect;
(d) Any redemption, repurchase or other acquisition of shares of
capital stock of WordPerfect or its Subsidiaries by WordPerfect or its
Subsidiaries (other than pursuant to arrangements with terminated employees
or consultants), or any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to the capital stock of WordPerfect or its Subsidiaries;
(e) Any increase in or modification of the compensation or benefits
payable or to become payable by WordPerfect or any Subsidiary to any of
their directors or employees, except in the ordinary course of business
consistent with past practice;
(f) Any increase in or modification of any bonus, pension, insurance
or other employee benefit plan, payment or arrangement (including, but not
limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of its employees, except in
the ordinary course of business consistent with WordPerfect's past
practice;
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(g) Any acquisition or sale of a material amount of property or assets
of WordPerfect or any of its Subsidiaries;
(h) Any alteration in any term of any outstanding security of
WordPerfect or any of its Subsidiaries;
(i) Any (A) incurrence, assumption or guarantee by WordPerfect or any
of its Subsidiaries of any debt for borrowed money; (B) issuance or sale of
any securities convertible into or exchangeable for debt securities of
WordPerfect or any of its Subsidiaries; or (C) issuance or sale of options
or other rights to acquire from WordPerfect or any of its Subsidiaries,
directly or indirectly, debt securities of WordPerfect or any of its
Subsidiaries or any securities convertible into or exchangeable for any
such debt securities;
(j) Any creation or assumption by WordPerfect or any of its
Subsidiaries of any mortgage, pledge, security interest or lien or other
encumbrance on any asset (other than liens arising under existing lease
financing arrangements or liens arising in the ordinary course of
WordPerfect's business which in the aggregate are not material and liens
for taxes not yet due and payable);
(k) Any making of any loan, advance or capital contribution to or
investment in any person other than (A) loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries of
WordPerfect, (B) travel loans or advances made in the ordinary course of
business of WordPerfect and its Subsidiaries and (C) loans to entities
affiliated with its employees prior to the date of this Agreement which do
not exceed $1,000,000 in the aggregate;
(l) Any entry into, amendment of, relinquishment, termination or
non-renewal by WordPerfect or any of its Subsidiaries of any contract,
lease transaction, commitment or other right or obligation requiring
aggregate payments by WordPerfect in excess of $10,000,000 other than in
the ordinary course of business;
(m) Any transfer or grant of a right under the WordPerfect
Intellectual Property Rights (as defined in Section 3.16), other than those
transferred or granted in the ordinary course of business consistent with
past practice;
(n) Any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of WordPerfect or any of its Subsidiaries; or
(o) Any agreement or arrangement made by WordPerfect or any of its
Subsidiaries to take any action which, if taken prior to the date hereof,
would have made any representation or warranty set forth in this Section
3.8 untrue or incorrect as of the date when made.
3.9 Absence of Undisclosed Liabilities. WordPerfect and its Subsidiaries
have no liabilities or obligations (whether absolute, accrued or contingent, and
whether or not determined or determinable), of a character which, under
generally accepted accounting principles, should be accrued, shown or disclosed
on a balance sheet of WordPerfect (including the footnotes thereto) except
liabilities (i) adequately provided for in the WordPerfect Balance Sheet, (ii)
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected on the WordPerfect Balance Sheet
or (iii) incurred since the date of the WordPerfect Balance Sheet which are not,
individually or in the aggregate, material.
3.10 Information Supplied. None of the information supplied or to be
supplied by WordPerfect for inclusion in the Registration Statement on Form S-4
to be filed with the Securities and Exchange Commission (the "SEC") by Novell in
connection with the issuance of the Novell Common Stock in or as a result of the
Merger (the "S-4"), including the Proxy Statement included therein, at the date
such information is supplied and at the time of the Shareholders' Meeting,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading or will, in the case of the S-4 at the time
the S-4 becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
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3.11 Certain Agreements. Neither the execution and delivery of this
Agreement or the Articles of Merger nor the consummation of the transactions
contemplated hereby or thereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director or employee of WordPerfect or
its Subsidiaries from WordPerfect or its Subsidiaries, under any Plan (as
defined in Section 3.12) or otherwise, (ii) materially increase any benefits
otherwise payable under any Plan, or (iii) result in the acceleration of the
time of payment or vesting of any such benefits, other than the acceleration of
the WordPerfect Options.
3.12 ERISA. All material employee benefit plans, programs, policies or
arrangements covering any active, former or retired employee of WordPerfect or
its Subsidiaries are listed in the WordPerfect Disclosure Schedule (the
"Plans"). To the extent applicable, the Plans comply with the requirements of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
the Code, and any Plan intended to be qualified under Section 401(a) of the Code
has either obtained a favorable determination letter as to its qualified status
from the Internal Revenue Service or still has a remaining period of time under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination. To the extent any Plan with an
existing determination letter from the Internal Revenue Service must be amended
to comply with the applicable requirements of the Tax Reform Act of 1986 and
subsequent legislation, the time period for effecting such amendments will not
expire prior to the Merger. WordPerfect has furnished or will furnish within
twenty one (21) days of the date hereof, Novell with copies of the most recent
Internal Revenue Service letters and Forms 5500 with respect to any such Plan.
No Plan is covered by Title IV of ERISA or Section 412 of the Code. Neither
WordPerfect, its Subsidiaries nor any officer or director of WordPerfect or any
of its Subsidiaries has incurred any liability or penalty under Sections 4975
through 4980 of the Code or Title I of ERISA. Each Plan has been maintained and
administered in all material respects in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable to such
Plans. No suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Plan activities) has been brought, or to the
best knowledge of WordPerfect is threatened, against or with respect to any such
Plan. All material contributions, reserves or premium payments required to be
made or accrued as of the date hereof to the Plans have been made or accrued.
3.13 Major Contracts. Neither WordPerfect nor any of its Subsidiaries is a
party to or subject to:
(a) Any union contract or any employment contract or arrangement
providing for future compensation, written or oral, with any officer,
consultant, director or employee which is not terminable by it or its
Subsidiary on 30 days' notice or less without penalty or obligation to make
payments related to such termination, other than (A) (in the case of
employees other than executive officers) such agreements as are not
materially different from standard arrangements offered to employees
generally in the ordinary course of business consistent with WordPerfect's
past practices, copies of which have been provided, or will be provided
within twenty one (21) days of the date hereof to Novell and (B) such
agreements as may be imposed or implied by law;
(b) Any plans, contracts or arrangements which collectively require
aggregate payments by WordPerfect in excess of $500,000, written or oral,
providing for bonuses, pensions, deferred compensation, severance pay or
benefits, retirement payments, profit-sharing, or the like;
(c) Any joint venture contract or arrangement or any other agreement
which has involved or is expected to involve a sharing of profits with
other persons;
(d) Any existing OEM agreement, distribution agreement, volume
purchase agreement, or other similar agreement in which the annual amount
involved in 1993 exceeded or is expected to exceed in fiscal 1994
$10,000,000 in aggregate amount or pursuant to which WordPerfect has
granted or received exclusive marketing rights related to any product,
group of products or territory;
(e) Any lease for real or personal property in which the amount of
payments which WordPerfect is required to make on an annual basis exceeds
$1,000,000.
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(f) Any material agreement, contract, mortgage, indenture, lease,
instrument, license, franchise, permit, concession, arrangement, commitment
or authorization which may be, by its terms, terminated or breached by
reason of the execution of this Agreement, the Articles of Merger, the
closing of the Merger, or the transactions contemplated hereby or thereby;
(g) Except for trade indebtedness incurred in the ordinary course of
business, any instrument evidencing or related in any way to indebtedness
in excess of $10,000,000 incurred in the acquisition of companies or other
entities or indebtedness in excess of $10,000,000 for borrowed money by way
of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, or otherwise;
(h) Any material license agreement, either as licensor or licensee
(excluding nonexclusive software licenses granted to customers or end-users
in the ordinary course of business) involving the payment of at least
$1,000,000;
(i) Any contract containing covenants purporting to limit
WordPerfect's freedom or that of any of its Subsidiaries to compete in any
line of business in any geographic area; or
(j) Any other agreement, contract or commitment which is material to
WordPerfect and its Subsidiaries taken as a whole.
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license and commitment listed in the
WordPerfect Disclosure Schedule pursuant to this Section 3.13 is valid and
binding on WordPerfect or its Subsidiaries, as applicable, and is in full force
and effect, and neither WordPerfect nor any of its Subsidiaries, nor to the
knowledge of WordPerfect, any other party thereto, has breached any material
provision of, or is in material default under the terms of, any such agreement,
contract, mortgage, indenture, plan, lease, instrument, permit, concession,
franchise, arrangement, license or commitment.
3.14 Taxes.
(a) All Tax (as defined below) returns, statements, reports and forms
(including estimated Tax returns and reports and information returns and
reports) required to be filed with any Taxing Authority (as defined below) with
respect to any Taxable period ending on or before the Effective Time, by or on
behalf of WordPerfect or any of its Subsidiaries (collectively, the "WordPerfect
Returns"), have been or will be filed when due in accordance with all applicable
laws (including any extensions of such due date), and all amounts shown due
thereon have been paid or have been fully accrued on the WordPerfect Financial
Statements in accordance with generally accepted accounting principles. Except
to the extent provided for or disclosed in the WordPerfect Financial Statements
(including notes thereto), the WordPerfect Returns correctly reflect in all
material respects (and, as to any WordPerfect Returns not filed as of the date
hereof but filed prior to the Merger, will correctly reflect in all material
respects) the Tax liability and status of WordPerfect and its Subsidiaries
(including each such corporation's status as an S corporation within the meaning
of Section 1361 of the Code or any comparable provision under state law).
WordPerfect and its Subsidiaries have withheld and paid to the applicable
financial institution or Taxing Authority all amounts required to be withheld.
All WordPerfect Returns pertaining to federal income tax filed with respect to
Taxable years of WordPerfect and its Subsidiaries through the Taxable year ended
December 31, 1990 in the case of the United States, have been examined and
closed or are WordPerfect Returns with respect to which the applicable period
for assessment under applicable law, after giving effect to extensions or
waivers, has expired. Neither WordPerfect nor any of its Subsidiaries (or any
member of any affiliated or combined group of which WordPerfect or any of its
Subsidiaries has been a member) has granted any extension or waiver of the
limitation period applicable to any WordPerfect Returns. There is no claim,
audit, action, suit, proceeding, or investigation now pending or (to the best
knowledge of WordPerfect or any of its Subsidiaries) threatened against or with
respect to WordPerfect or any of its Subsidiaries in respect of any Tax or
assessment. No notice of deficiency or similar document of any Tax Authority has
been received by WordPerfect or any of its Subsidiaries, and there are no
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to the issues that have
been raised (and are currently pending) by any Tax Authority that could, if
determined adversely to WordPerfect or any of its Subsidiaries, materially
affect the liability of
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WordPerfect or any of its Subsidiaries for Taxes in other Taxable (as defined
below) periods. Neither WordPerfect nor any of its Subsidiaries, nor any other
person on behalf of WordPerfect or any of its Subsidiaries, has entered into nor
will it enter into any agreement or consent pursuant to Section 341(f) of the
Code. There are no liens for Taxes upon the assets of WordPerfect or any of its
Subsidiaries except liens for current Taxes not yet due. Neither WordPerfect nor
any of its Subsidiaries has been or will be required to include any material
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing. There is no contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of WordPerfect or any of its
Subsidiaries that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to Section 162 (as
unreasonable compensation) or pursuant to Section 280G of the Code. WordPerfect
and its Subsidiaries have provided or made available to Novell or its designated
representative true and correct copies of all material Tax Returns, and, as
reasonably requested by Novell prior to or following the date hereof,
information statements, reports, work papers, Tax opinions and memoranda and
other Tax data and documents. WordPerfect has not been within the five year
period preceding the date hereof a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code. Neither
WordPerfect nor any of its Subsidiaries is a party to (or obligated under) any
Tax allocation, Tax distribution, tax sharing, tax indemnity or similar
agreement or arrangement with respect to any tax (including without limitation
any such agreement or arrangement imposed by operation of law).
(b) For purposes of this Agreement, the following terms have the following
meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (A)
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "Taxing Authority") responsible for the imposition of any
such tax (domestic or foreign), (B) any liability for the payment of any amounts
of the type described in (A) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period and (C) any
liability for the payment of any amounts of the type described in (A) or (B) as
a result of any express or implied obligation to indemnify any other person.
3.15 Interests of Officers and Directors. Except as disclosed in a
supplemental schedule to be delivered to Novell within 21 days following the
date of this Agreement, no officer or director of WordPerfect or any "affiliate"
or "associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of any such person has had, either directly or indirectly, a
material interest in: (i) any person or entity which purchases from or sells,
licenses or furnishes to WordPerfect or any of its Subsidiaries any goods,
property, technology or intellectual or other property rights or services; (ii)
any any contract or agreement to which WordPerfect or any of its Subsidiaries is
a party or by which it may be bound or affected; or (iii) any property, real or
personal, tangible or intangible, used in or pertaining to its business or that
of its Subsidiaries, including any interest in the WordPerfect Intellectual
Property Rights, except for rights as a shareholder, and except for rights under
any Plan.
3.16 Intellectual Property.
(a) WordPerfect owns, or is licensed or otherwise entitled to exercise,
without restriction, all rights to, all patents, trademarks, trade names,
service marks, copyrights, mask work rights, trade secret rights and other
intellectual property rights, and any applications or registrations therefor,
and all mask works, net lists, schematics, technology, source code, know-how,
computer software programs and all other tangible and intangible information or
material, that are used or currently proposed to be used in the business of
WordPerfect and its Subsidiaries as currently conducted or as currently proposed
to be conducted (collectively, the "WordPerfect Intellectual Property Rights").
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(b) The WordPerfect Disclosure Schedule lists all patents, registered and
unregistered copyrights, trade names, trademarks, service marks and other
company, product or service identifiers and mask work rights, and any
applications or registrations therefor, included in the WordPerfect Intellectual
Property Rights, together with a list of all of WordPerfect's currently marketed
products and an indication as to which, if any, of such products have been
registered for copyright protection with the United States Copyright Office and
any foreign offices.
(c) Neither WordPerfect nor any of its Subsidiaries is, or as a result of
the execution and delivery of this Agreement or the performance of WordPerfect's
obligations hereunder will be, in violation of, or lose any rights pursuant to
any license, sublicense or agreement described in the WordPerfect Disclosure
Schedule.
(d) WordPerfect or one of its Subsidiaries is the owner or licensee of,
with all necessary right, title and interest in and to (free and clear of any
liens, encumbrances or security interests), the WordPerfect Intellectual
Property Rights and has rights (and except as set forth in the WordPerfect
Disclosure Schedule is not contractually obligated to pay any compensation to
any third party in respect thereof) in an amount in excess of $1,000,000 to the
use thereof or the material covered thereby in connection with the services or
products in respect of which the WordPerfect Intellectual Property Rights are
being used.
(e) No claims with respect to the WordPerfect Intellectual Property Rights
have been asserted or, to the best knowledge of WordPerfect, after reasonable
investigation, are threatened by any person, and WordPerfect knows of no claims
(i) to the effect that the manufacture, sale or use of any product as now used
or offered or proposed for use or sale by WordPerfect or any Subsidiary of
WordPerfect infringes any copyright, patent, trade secret, or other intellectual
property right, (ii) against the use by WordPerfect or Subsidiary of WordPerfect
of any WordPerfect Intellectual Property Rights, or (iii) challenging the
ownership, validity or effectiveness of any of the WordPerfect Intellectual
Property Rights.
(f) All patents and registered trademarks, service marks, and other
company, product or service identifiers and registered copyrights held by
WordPerfect are valid and subsisting.
(g) To the best knowledge of WordPerfect, there has not been and there is
not now any material unauthorized use, infringement or misappropriation of any
of the WordPerfect Intellectual Property Rights by any third party, including
without limitation any employee or former employee of WordPerfect or any of its
Subsidiaries; neither WordPerfect nor any of its Subsidiaries has been sued or
charged in writing as a defendant in any claim, suit, action or proceeding which
involves a claim of infringement of any patents, trademarks, service marks,
copyrights or other intellectual property rights and which has not been finally
terminated prior to the date hereof; there are no such charges or claims
outstanding; and to the best knowledge of WordPerfect neither WordPerfect nor
any of its Subsidiaries has any infringement liability with respect to any
patent, trademark, service mark, copyright or other intellectual property right
of another.
(h) No WordPerfect Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting in any
manner the licensing thereof by WordPerfect or any of its Subsidiaries. Neither
WordPerfect nor any of its Subsidiaries has entered into any agreement to
indemnify any other person against any charge of infringement of any WordPerfect
Intellectual Property Right. Neither WordPerfect nor any of its Subsidiaries has
entered into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce rights with
respect to, any WordPerfect Intellectual Property Right. WordPerfect and its
Subsidiaries have the exclusive right to file, prosecute and maintain all
applications and registrations with respect to the WordPerfect Intellectual
Property Rights.
3.17 Restrictions on Business Activities. There is no material agreement,
judgment, injunction, order or decree binding upon WordPerfect or any of its
Subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of WordPerfect or any
of its Subsidiaries, any acquisition of property by WordPerfect or any of its
Subsidiaries or the conduct of business by WordPerfect or any of its
Subsidiaries as currently conducted or as currently proposed to be conducted by
WordPerfect.
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3.18 Title to Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) WordPerfect and its Subsidiaries have good and valid title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
their tangible properties and assets, real, personal and mixed, used in their
business, free and clear of any liens, charges, pledges, security interests or
other encumbrances, except as reflected in the WordPerfect Financial Statements
or except for such imperfections of title and encumbrances, if any, which are
not substantial in character, amount or extent, and which do not materially
detract from the value, or interfere with the present use, of the property
subject thereto or affected thereby.
(b) The equipment owned or leased by WordPerfect or its Subsidiaries is,
taken as a whole, (A) adequate for the conduct of the business of WordPerfect
and its Subsidiaries consistent with their past practice, (B) suitable for the
uses to which it is currently employed, (C) in good operating condition, (D)
regularly and properly maintained, (E) not obsolete, dangerous or in need of
renewal or replacement, except for renewal or replacement in the ordinary course
of business, and (F) free from any defects, except, with respect to clauses (B)
through (E) above, as would not have a Material Adverse Effect.
3.19 Governmental Authorizations and Licenses. Each of WordPerfect and its
Subsidiaries is the holder of all licenses, authorizations, permits,
concessions, certificates and other franchises of any Governmental Entity
required to operate its business (collectively, the "Licenses"). The Licenses
are in full force and effect. There is not now pending, or to the best knowledge
of WordPerfect is there threatened, any action, suit, investigation or
proceeding against WordPerfect or any of its Subsidiaries before any
Governmental Entity with respect to the Licenses, nor is there any issued or
outstanding notice, order or complaint with respect to the violation by
WordPerfect or any of its Subsidiaries of the terms of any License or any rule
or regulation applicable thereto.
3.20 Environmental Matters.
(a) No substance that is regulated by any Governmental Entity or that has
been designated by any Governmental Entity to be radioactive, toxic, hazardous
or otherwise a danger to health or the environment (a "Hazardous Material") is
present in, on or under any property that WordPerfect or any of its Subsidiaries
has at any time owned, operated, occupied or leased.
(b) Neither WordPerfect nor any of its Subsidiaries has transported,
stored, used, manufactured, released or exposed its employees or any other
person to any Hazardous Material in violation of any applicable statute, rule,
regulation, order or law.
(c) WordPerfect and its Subsidiaries have obtained all permits, licenses
and other authorizations ("Environmental Permits") required to be obtained by
any of them under the laws of any Governmental Entity relating to pollution or
protection of the environment (collectively, "Environmental Laws"). All
Environmental Permits are in full force and effect. WordPerfect and its
Subsidiaries (A) are in compliance with all terms and conditions of the
Environmental Permits and (B) are in compliance in all material respects with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code, plan, order, decree,
judgment, notice or demand letter issued, entered, promulgated or approved
thereunder. Neither WordPerfect nor any of its Subsidiaries has received any
notice or is aware of any past or present condition or practice of the
businesses conducted by WordPerfect or its present or former Subsidiaries which
forms or could form the basis of any claim, action, suit, proceeding, hearing or
investigation against WordPerfect or any of its Subsidiaries, arising out of the
manufacture, processing, distribution, use, treatment, storage, spill, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any Hazardous Material.
3.21 Insurance. WordPerfect maintains insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of WordPerfect and its Subsidiaries
(collectively, the "Insurance Policies") which are of the type and in amounts
customarily carried by persons conducting businesses similar to those of
WordPerfect and its Subsidiaries. There is no material claim by WordPerfect or
any of its Subsidiaries pending under any of the material Insurance Policies as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All
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premiums payable under all such material Insurance Policies have been paid and
WordPerfect and its Subsidiaries are otherwise in full compliance with the terms
of such policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). WordPerfect does not know of any threatened
termination of, or material premium increase with respect to, any of its
material Insurance Policies.
3.22 Board Approval. The Board of Directors of WordPerfect has, as of the
date hereof, unanimously (i) approved this Agreement and the Articles of Merger
and the transactions contemplated hereby and thereby, (ii) determined that the
Merger is in the best interests of the shareholders of WordPerfect and is on
terms that are fair to such shareholders and (iii) recommended that the
shareholders of WordPerfect approve this Agreement, the Articles of Merger and
the Merger.
3.23 Labor Matters. WordPerfect and its Subsidiaries are in compliance in
all material respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment and wages and hours and occupational safety and health and employment
practices, and are not engaged in any unfair labor practice. Neither WordPerfect
nor any of its Subsidiaries has received any notice from any Governmental
Entity, and there has not been asserted before any Governmental Entity, any
claim, action or proceeding to which WordPerfect or any of its Subsidiaries is a
party or involving WordPerfect or any of its Subsidiaries, and there is neither
pending nor, to WordPerfect's best knowledge, threatened any investigation or
hearing concerning WordPerfect or any of its Subsidiaries arising out of or
based upon any such laws, regulations or practices.
3.24 Questionable Payments. Neither WordPerfect nor any of its
Subsidiaries nor to its best knowledge any director, officer or other employee
of WordPerfect or any of its Subsidiaries has: (i) made any payments or provided
services or other favors in the United States of America or in any foreign
country in order to obtain preferential treatment or consideration by any
Governmental Entity with respect to any aspect of the business of WordPerfect or
any of its Subsidiaries; or (ii) made any political contributions which would
not be lawful under the laws of the United States and the foreign country in
which such payments were made. Neither WordPerfect nor any of its Subsidiaries
nor to its best knowledge any director, officer or other employee of WordPerfect
or any of its Subsidiaries nor, to the best knowledge of WordPerfect, any
customer or supplier of any of them has been the subject of any inquiry or
investigation by any Governmental Entity in connection with payments or benefits
or other favors to or for the benefit of any governmental or armed services
official, agent, representative or employee with respect to any aspect of the
business of WordPerfect or its Subsidiaries or with respect to any political
contribution.
3.25 Accounting Matters. Neither WordPerfect nor any of its Subsidiaries
nor, to WordPerfect's best knowledge after reasonable inquiry, any of its
Affiliates (as defined in Section 5.12), has taken or agreed to take any action
that would adversely affect the ability of Novell to account for the business
combination to be effected by the Merger as a pooling of interests.
3.26 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement. In the event that the preceding
sentence is in any way inaccurate, WordPerfect agrees to indemnify and hold
harmless Novell from any liability for any commission or compensation in the
nature of a finder's fee (and the costs and expenses of defending against such
liability or asserted liability) for which Novell or any of its officers,
partners, employees or representatives is responsible.
3.27 Disclosure. No representation or warranty made by WordPerfect in this
Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished or to be
prepared and furnished by WordPerfect or its representatives pursuant hereto or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. To the best knowledge of WordPerfect after reasonable inquiry, there
is no event, fact or condition that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect that has not been set forth in
this Agreement or in the WordPerfect Disclosure Schedule. The WordPerfect
Financial Projections constitute WordPerfect's best estimate of the information
purported to be shown therein and WordPerfect reasonably
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believes that there is a reasonable basis for such projections and is not aware
of any fact or information that would lead it to believe that such projections
are incorrect or misleading in any material respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NOVELL AND SUB
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which identifies the section
and subsection to which such disclosure relates and which is delivered by Novell
to WordPerfect prior to the execution of this Agreement (the "Novell Disclosure
Schedule"), Novell and Sub represent and warrant to, and agree with, WordPerfect
as follows:
4.1 Organization; Standing and Power. Each of Novell and Sub is a
corporation validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as now being
conducted. Novell has delivered to WordPerfect complete and correct copies of
the Certificate of Incorporation and Bylaws of Novell and the Articles of
Incorporation and Bylaws of Sub as amended to the date hereof.
4.2 Capital Structure. As of the date hereof the authorized capital stock
of Novell consists of 400,000,000 shares of Novell Common Stock, $.10 par value
and 500,000 shares of Novell Preferred Stock, $.10 par value. At the close of
business on January 29, 1994, 309,021,297 shares of Novell Common Stock were
outstanding, 27,978,621 shares of Novell Common Stock were reserved for issuance
upon the exercise of outstanding stock options ("Novell Options"), no shares of
Novell Common Stock were held by Novell in its treasury, and no shares of Novell
Preferred Stock were outstanding. All the outstanding shares of Novell Common
Stock are validly issued, fully paid, nonassessable and free of preemptive
rights except pursuant to rights issued under Novell's Stockholder Rights Plan.
The shares of Novell Common Stock issuable in connection with the Merger are
duly authorized and reserved for issuance and, when issued in accordance with
the terms of this Agreement and the Articles of Merger, will be validly issued,
fully paid, nonassessable and free of preemptive rights (other than any rights
which may be issued pursuant to Novell's Stockholder Rights Plan). As of the
date hereof, the authorized capital stock of Sub consists of 1,000,000 shares of
Common Stock, $0.01 par value, all of which are validly issued, fully paid and
nonassessable and owned by Novell. Except for the shares listed above issuable
pursuant to Novell Options, there are not any options, warrants, calls,
conversion rights, commitments or agreements of any character to which Novell or
any Subsidiary of Novell is a party or by which any of them may be bound
obligating Novell or any Subsidiary of Novell to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock of
Novell or of any Subsidiary of Novell or obligating Novell or any Subsidiary of
Novell to grant, extend or enter into any such option, warrant, call, conversion
right, commitment or agreement.
4.3 Authority. Novell and Sub have all requisite corporate power and
authority to enter into this Agreement and, subject to any required stockholder
approval, to consummate the transactions contemplated hereby and by the Articles
of Merger. Sub has all requisite corporate power and authority to enter into the
Articles of Merger. The execution and delivery by Novell of this Agreement, and
by Sub of this Agreement and the Articles of Merger, and the consummation of the
transactions contemplated by this Agreement and the Articles of Merger have been
duly authorized by all necessary corporate action on the part of Novell and Sub.
This Agreement has been duly executed and delivered by Novell and Sub and
constitutes a valid and binding obligation of Novell and Sub enforceable in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies is subject to
the discretion of the court before which any proceeding therefor may be brought.
The Articles of Merger have been duly executed and delivered by Sub and
constitutes a valid and binding obligation of Sub enforceable in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency, or
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought. Subject to
satisfaction of the conditions set forth in Article VI, the execution and
delivery of this Agreement and the Articles of Merger and the consummation of
the transactions contemplated hereby and thereby will not conflict with or
result in any
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violation of any material statute, law, rule, regulation, judgment, order,
decree or ordinance applicable to Novell or any Subsidiary of Novell or their
respective properties or assets, or conflict with or result in any breach or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit, under (i) any provision of the Certificate of
Incorporation or Bylaws of Novell or any of its Subsidiaries or (ii) any
material agreement, contract, note, mortgage, indenture, lease, instrument,
permit, concession, franchise or license to which Novell or any of its
Subsidiaries is a party or by which Novell or any of its Subsidiaries or their
respective properties or assets may be bound or affected. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Novell or Sub in
connection with the execution and delivery of this Agreement and the Articles of
Merger or the consummation by Novell and Sub of the transactions contemplated
hereby or thereby, except for (i) the filing of a premerger notification report
by Novell and Sub under the HSR Act, (ii) the filing of the S-4 and such other
documents with, and the obtaining of such orders from, the SEC and various state
securities or "blue sky" authorities, and the making of such reports under the
Exchange Act, as are required in connection with the transactions contemplated
by this Agreement, (iii) the filing of the Articles of Merger with the Utah
Division of Corporations and Commercial Code and the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which Novell is qualified to do business, (iv) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under the laws of any foreign country which if not obtained or
made would not have a Material Adverse Effect and (v) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not have a Material Adverse Effect.
4.4 SEC Documents; Novell Financial Statements. Novell has furnished
WordPerfect with or made available to WordPerfect a true and complete copy of
each statement, annual, quarterly and other report, registration statement
(without exhibits) and definitive proxy statement filed by Novell with the SEC
since October 31, 1992 (the "Novell SEC Documents"). As of their respective
filing dates, the Novell SEC Documents complied in all material respects with
the requirements of the Exchange Act or the Securities Act, as the case may be,
and none of the Novell SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
subsequently filed Novell SEC Document. The financial statements of Novell
included in the Novell SEC Documents (the "Novell Financial Statements") comply
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present the consolidated financial position of Novell and its consolidated
Subsidiaries at the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring audit
adjustments, provided that the notes and accounts receivable are collectible in
the amounts shown thereon and inventories are not subject to write-down, except
in either case in an amount not material or for which Novell has provided
adequate reserves). There has been no change in Novell's accounting policies or
estimates except as described in the notes to the Novell Financial Statements.
4.5 Information Supplied. None of the information supplied by Novell or
Sub for inclusion in the Proxy Statement or the S-4, at the time such
information is supplied and at the time of the Shareholders' Meeting, contains
or will contain any untrue statement of a material fact or omits or will omit to
state any 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, or will, in the case of the S-4, at the time the S-4
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
4.6 Litigation. There is no action, suit, proceeding, investigation or
claim pending or, to the best knowledge of Novell, threatened against Novell or
any of its Subsidiaries which could, individually or in the
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aggregate, have a Material Adverse Effect or which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby.
4.7 No Defaults. Neither Novell nor any Subsidiary of Novell is, or has
received notice that it would be with the passage of time, (i) in violation of
any provision of the Certificate of Incorporation or Bylaws of Novell or any
Subsidiary of Novell; or (ii) in default or violation of any material term,
condition or provision of (A) any material judgment, decree, order, injunction
or stipulation applicable to Novell or any Subsidiary of Novell or (B) any
material agreement, note, mortgage, indenture, contract, lease or instrument,
permit, concession, franchise or license to which Novell or any Subsidiary of
Novell is a party or by which Novell or any of its Subsidiaries or their
properties or assets may be bound.
4.8 Opinion of Financial Advisor. Novell has been advised in writing by
its financial advisor, Morgan Stanley & Co., that in its opinion as of the date
hereof, the Exchange Ratio, when considered together with the transactions
contemplated hereby, is fair to Novell from a financial point of view.
4.9 Accounting Matters. Neither Novell nor any of its Subsidiaries nor, to
Novell's best knowledge after reasonable inquiry, any of its Affiliates (as
defined in (Section 5.12), has taken or agreed to take any action that would
adversely affect the ability of Novell to account for the business combination
to be effected by the Merger as a pooling of interests.
4.10 Brokers. No broker, finder or investment banker (other than Morgan
Stanley & Co.) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement. Novell
agrees to indemnify and hold harmless WordPerfect from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
Novell or any of its officers, partners, employees or representatives is
responsible.
4.11 Disclosure. No representation or warranty made by Novell in this
Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit prepared and furnished or to be
prepared and furnished by Novell or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. To the best knowledge of Novell after reasonable inquiry, there is no
event, fact or condition that has resulted in, or could reasonably be expected
to result in, a Material Adverse Effect that has not been set forth in this
Agreement or in the Novell Disclosure Schedule.
ARTICLE V
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; ADDITIONAL AGREEMENTS
5.1 Information and Access. Subject to and in accordance with the terms
and conditions of that certain letter agreement dated March 7, 1994, between
Novell and WordPerfect (the "Confidentiality Agreement"), from the date of this
Agreement and continuing until the Effective Time, each party shall afford and,
with respect to clause (b) below, such party shall cause its independent
auditors to afford, (a) to the officers, independent auditors, counsel and other
representatives of the other party reasonable access to the properties, books,
records (including Tax returns filed and those in preparation) and personnel of
such party and its Subsidiaries in order that the other party may have a full
opportunity to make such investigation as it reasonably desires to make of such
party and its Subsidiaries and (b) to the independent auditors of the other
Company, reasonable access to the audit work papers and other records of the
independent auditors of such party and its Subsidiaries. Additionally, subject
to and in accordance with the Confidentiality Agreement, each party and its
Subsidiaries will permit the other party to make such reasonable inspections of
such party and its Subsidiaries and their respective operations during normal
business hours as the other party may reasonably require and each party and its
Subsidiaries will cause its officers and the officers of its Subsidiaries to
furnish the other party with such financial and operating data and other
information with respect to the
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business and properties of such party and its Subsidiaries as the other party
may from time to time reasonably request. WordPerfect further agrees to provide
Novell with the following information as soon as practicable following the date
of this Agreement:
(a) The jurisdictions in which each WordPerfect Intellectual Property
Right has been issued or registered or in which an application for such
issuance or registration has been filed, including the respective
registration or application numbers;
(b) all licenses, sublicenses and other agreements as to which
WordPerfect or any of its Subsidiaries is a party and pursuant to which
WordPerfect or any of its Subsidiaries or any other person is authorized to
use any WordPerfect Intellectual Property Right, including the identity of
all parties thereto, a description of the nature and subject matter
thereof, all material rights, restrictions, conditions, or other terms
pertaining to each WordPerfect Intellectual Property Right, the applicable
royalty or other consideration and the term thereof, and including the
extent to which rights with respect to WordPerfect Intellectual Property
Rights survive termination or expiration thereof (copies of all licenses,
sublicenses, and other agreements identified pursuant to this clause (b)
have previously been delivered by WordPerfect to Novell);
(c) all parties to whom WordPerfect has delivered copies of
WordPerfect source code, whether pursuant to an escrow arrangement or
otherwise, or parties who have the right to receive such source code;
(d) a true and complete list of all real property owned or leased by
WordPerfect or any of its Subsidiaries and the aggregate annual rental or
other fee payable under any such lease; and
(e) a true and complete list of all Environmental Permits.
No investigation pursuant to this Section 5.1 shall affect or otherwise obviate
or diminish any representations and warranties of any party or conditions to the
obligations of any party.
5.2 Conduct of Business of the Parties. During the period from the date of
this Agreement and continuing until the Effective Time or until the termination
of this Agreement pursuant to Section 7.1, the parties agree that (except to the
extent that the other parties have given their prior written consent):
(a) WordPerfect Conduct. WordPerfect and its Subsidiaries shall
conduct their respective businesses in the ordinary and usual course
consistent with past practice and shall use reasonable efforts to maintain
and preserve intact their business organizations, keep available the
services of their officers and employees and to maintain satisfactory
relations with licensors, licensees, suppliers, contractors, distributors,
customers and others having business relationships with them. Without
limiting the generality of the foregoing and except as expressly
contemplated by this Agreement, prior to the Effective Time, neither
WordPerfect nor any of its Subsidiaries shall, without the prior written
consent of Novell:
(i) declare, set aside or pay any dividends on or make any other
distribution (whether in cash, stock or property) in respect of any of
its capital stock except as permitted by subsection (iii) below;
(ii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or repurchase, redeem or otherwise acquire any shares
of its capital stock;
(iii) issue, deliver, pledge, encumber or sell, or authorize or
propose the issuance, delivery, pledge, encumbrance or sale of, or
purchase or propose the purchase of, any shares of its capital stock or
securities convertible into, or rights, warrants or options to acquire,
any such shares of capital stock or other convertible securities (other
than the issuance of such capital stock upon the exercise or conversion
of WordPerfect Options, outstanding on the date of this Agreement in
accordance with their present terms); or except pursuant to mandatory
terms under options outstanding on the date hereof, accelerate, amend or
change the period of exercisability of options granted under the
WordPerfect Stock Option Plan or any other options, warrants or other
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convertible securities or authorize cash payments in exchange for any
options granted under any of the WordPerfect Stock Option Plan or
authorize or propose any change in its equity capitalization;
(iv) cause or permit any amendments to its Articles of
Incorporation or Bylaws or other charter documents;
(v) acquire or agree to acquire by merging or consolidating with,
or by purchasing any material portion of the capital stock or assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business condition of
WordPerfect and its Subsidiaries, taken as a whole;
(vi) sell, lease, pledge, license or otherwise dispose of or
encumber any of its assets or properties, except in the ordinary course
of business consistent with past practice (including, without
limitation, any indebtedness owed to it or any claims held by it);
(vii) except as contemplated by Section 5.20, transfer the stock of
any Subsidiary to any other Subsidiary or any assets or liabilities to
any new or, except in the ordinary course of business consistent with
past practice, existing Subsidiary;
(viii) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any of its debt securities or
guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of others, or make loans or advances;
(ix) pay, discharge or satisfy any claims, liabilities or
obligations (whether absolute, accrued, contingent or otherwise), other
than the payment, discharge or satisfaction of liabilities in the
ordinary course of business consistent with past practice of liabilities
reflected or reserved against in the consolidated financial statements
(or the notes thereto) of WordPerfect and its consolidated Subsidiaries;
(x) adopt or amend any Plan, or enter into or amend any employment,
severance, special pay arrangement with respect to termination of
employment or other similar arrangements or agreements with any of its
directors, officers or employees or increase the salaries or wage rates
of its employees other than pursuant to scheduled employee reviews under
WordPerfect's or any of its Subsidiaries' normal employee review cycle,
as the case may be, consistent with WordPerfect's past practices;
(xi) except in the ordinary course of business consistent with past
practices and other than transfers between or among WordPerfect and any
of its wholly-owned Subsidiaries, transfer to any person or entity any
rights to the WordPerfect Intellectual Property Rights;
(xii) enter into or amend any agreements pursuant to which any
other party is granted exclusive marketing or other rights of any type
or scope with respect to any products of WordPerfect or any of its
Subsidiaries;
(xiii) except in the ordinary course of business with prior notice
to Novell, violate, amend or otherwise modify the terms of any of the
contracts set forth on the WordPerfect Disclosure Schedule;
(xiv) commence a lawsuit other than for the routine collection of
bills;
(xv) change the accounting methods or practices followed by
WordPerfect or any of its Subsidiaries, including any change in any
assumption underlying, or method of calculating, any bad debt,
contingency or other reserve, except as may be required by changes in
generally accepted accounting principles make or change any material Tax
election, adopt or change any Tax accounting method, file any material
Tax return or any amendment to a material Tax return, enter into any
material closing agreement, settle any material Tax claim or assessment,
or consent to any extension or waiver of the limitation period
applicable to any material Tax claim or assessment, without the prior
consent of Novell, which consent will not be unreasonably withheld (for
purposes
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of this covenant a "material" Tax Return, closing agreement, Tax
claim or assessment shall mean a Tax liability with respect to each
such item in excess of $500,000);
(xvi) take any action that would result in any of the
representations and warranties of WordPerfect set forth in this
Agreement becoming untrue or in any of the conditions to the Merger set
forth in Article VI not being satisfied;
(xvii) enter into any capital commitment or long term obligation
equal to or in excess of $500,000;
(xviii) authorize or propose any of the foregoing, or enter into
any contract, agreement, commitment or arrangement to do any of the
foregoing.
(b) Novell Conduct. Except in connection with transactions
contemplated by this Agreement, Novell shall not without the prior consent
of WordPerfect (i) amend the Certificate of Incorporation in any manner
which would adversely affect the rights of holders of Novell Common Stock,
or (ii) issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of
its capital stock of any class or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it or any of its Subsidiaries to
issue any such shares or other convertible securities, except for the
issuance or proposed issuance of its capital stock or options to purchase
shares of its capital stock (A) in connection with a proposed business
combination, (B) in connection with privately negotiated sales of stock
pursuant to corporate partnering arrangements or (C) pursuant to stock
option grants or exercises or other employee stock benefit plans.
5.3 Negotiation With Others. WordPerfect will not, nor will Ashton, Mr.
Bastian or Ms. Bastian, directly or indirectly, through any officer, director,
other shareholder, affiliate or agent of WordPerfect or otherwise, solicit,
initiate, entertain, encourage or negotiate any proposals or offers from any
third party relating to the merger or acquisition of WordPerfect or a material
portion of its assets or capital stock of WordPerfect, including acquisition of
WordPerfect Common Stock (or voting agreements or proxies with respect thereto)
owned beneficially by Ashton, Mr. Bastian or Ms. Bastian, nor will WordPerfect,
Ashton, Mr. Bastian or Ms. Bastian, during this period participate in any
negotiations regarding, or furnish to any person any information with respect
to, or otherwise cooperate with, facilitate or encourage any effort or attempt
by any person to do or seek any such transaction. WordPerfect shall immediately
cease and cause to be terminated all such negotiations with the third parties
(other than Novell) which have occurred prior to the date of this Agreement.
5.4 Preparation of S-4 and the Proxy Statement; Other Filings. As promptly
as practicable after the date of this Agreement, WordPerfect shall provide to
Novell and its counsel for inclusion in the Prospectus/Proxy Statement on the
S-4 in form and substance satisfactory to Novell and its counsel, such
information concerning WordPerfect, its operations, capitalization, technology,
share ownership and other material as Novell or its counsel may reasonably
request. As promptly as practicable after the date of this Agreement, Novell
shall prepare and file with the SEC the S-4, in which the Proxy Statement will
be included as a prospectus. Each of Novell and WordPerfect shall use its
reasonable efforts to respond to any comments of the SEC, to have the S-4
declared effective under the Securities Act as promptly as practicable after
such filing and to cause the Proxy Statement to be mailed to WordPerfect's
shareholders at the earliest practicable time. As promptly as practicable after
the date of this Agreement, Novell and WordPerfect shall prepare and file any
other filings required under the Exchange Act, the Securities Act or any other
Federal or state securities or "blue sky" laws relating to the Merger and the
transactions contemplated by this Agreement and the Articles of Merger,
including, without limitation, under the HSR Act and State Takeover Laws (the
"Other Filings"). Each Company will notify the other Company promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff or any other government officials for amendments or supplements to
the S-4, the Proxy Statement or any Other Filing or for additional information
and will supply the other Company with copies of all correspondence between such
Company or any of its representatives, on the one hand, and the SEC, or its
staff or any other government officials, on the other hand, with respect to the
S-4, the Proxy Statement, the Merger or any Other Filing. The Proxy Statement,
the S-4 and the Other
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Filings shall comply in all material respects with all applicable requirements
of law. Whenever any event occurs which should be set forth in an amendment or
supplement to the Proxy Statement, the S-4 or any Other Filing, Novell or
WordPerfect, as the case may be, shall promptly inform the other Company of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to shareholders of Novell and WordPerfect,
such amendment or supplement. The Proxy Statement shall include the unanimous
recommendation of the Board of Directors of WordPerfect that the shareholders of
WordPerfect approve the Merger.
5.5 Advice of Changes. Each Company shall confer on a regular and frequent
basis with the other Company, report on operational matters and promptly advise
the other orally and in writing of any change or event having, or which, insofar
as can reasonably be foreseen, could result in, a Material Adverse Effect with
respect to such Company. Each Company shall promptly provide the other Company
(or its counsel) copies of all filings made by such Company with any
Governmental Entity in connection with this Agreement, the Articles of Merger
and the transactions contemplated hereby and thereby.
5.6 Shareholder Approval. WordPerfect will call a meeting of its
shareholders (the "Shareholders' Meeting") to be held as promptly as practicable
for the purpose of obtaining the shareholder approval required in connection
with the transactions contemplated hereby and by the Articles of Merger and
shall use all reasonable efforts to obtain such approval. WordPerfect shall
coordinate and cooperate with Novell with respect to the timing of the
Shareholders Meeting. WordPerfect shall not change the date of the Shareholders
Meeting without the prior written consent of Novell, nor shall WordPerfect
adjourn the Shareholders Meeting without the prior written consent of Novell,
unless such adjournment is due to the lack of a quorum, in which case the
Chairman of the Shareholders Meeting shall announce at such meeting the time and
place of the adjourned meeting. Concurrently with the execution of this
Agreement, Ashton, Mr. Bastian and Ms. Bastian (collectively, the "WordPerfect
Principal Shareholders") shall have executed Shareholder Agreements in the form
of Exhibit 5.6 (the "Shareholder Agreements").
5.7 Agreements to Cooperate.
(a) WordPerfect shall take, and shall cause its Subsidiaries to take, all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on WordPerfect or its Subsidiaries with respect to the
Merger (including furnishing all information required under the HSR Act) and
shall take all reasonable actions necessary to cooperate promptly with and
furnish information to Novell in connection with any such requirements imposed
upon Novell or Sub or any Subsidiary of Novell or Sub in connection with the
Merger. WordPerfect shall take, and shall cause its Subsidiaries to take, all
reasonable actions necessary (i) to obtain (and will take all reasonable actions
necessary to promptly cooperate with Novell or Sub and their Subsidiaries in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity, or other third party, required to be obtained or
made by WordPerfect or any of its Subsidiaries (or by Novell or Sub or any of
their Subsidiaries) in connection with the Merger or the taking of any action
contemplated by this Agreement; (ii) to lift, rescind or mitigate the effect of
any injunction or restraining order or other order adversely affecting the
ability of WordPerfect to consummate the transactions contemplated hereby; (iii)
to fulfill all conditions applicable to WordPerfect pursuant to this Agreement;
and (iv) to prevent, with respect to a threatened or pending temporary,
preliminary or permanent injunction or other order, decree or ruling or statute,
rule, regulation or executive order, the entry, enactment or promulgation
thereof, as the case may be; provided, however, that WordPerfect shall not be
obligated to, nor shall WordPerfect be obligated to cause its Subsidiaries to,
dispose of or hold separate all or a material portion of the business or assets
of WordPerfect and its Subsidiaries, taken as a whole.
(b) Novell and Sub shall take, and shall cause their Subsidiaries to take,
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on them or their Subsidiaries with respect to the Merger
(including furnishing all information required under the HSR Act) and shall take
all reasonable actions necessary to cooperate promptly with and furnish
information to WordPerfect in connection with any such requirements imposed upon
WordPerfect or any Subsidiary of WordPerfect in connection with the Merger.
Novell and Sub shall take, and shall cause their Subsidiaries to take, all
reasonable actions necessary (i) to obtain (and will take all reasonable actions
necessary to promptly cooperate with
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WordPerfect and its Subsidiaries in obtaining) any consent, authorization, order
or approval of, or any exemption by, any Governmental Entity, or other third
party, required to be obtained or made by Novell or Sub or any of their
Subsidiaries (or by WordPerfect or any of its Subsidiaries) in connection with
the Merger or the taking of any action contemplated by this Agreement; (ii) to
lift, rescind or mitigate the effect of any injunction or restraining order or
other order adversely affecting the ability of Novell or Sub to consummate the
transactions contemplated hereby; (iii) to fulfill all conditions applicable to
Novell or Sub pursuant to this Agreement; and (iv) to prevent, with respect to a
threatened or pending temporary, preliminary or permanent injunction or other
order, decree or ruling or statute, rule, regulation or executive order, the
entry, enactment or promulgation thereof, as the case may be; provided, however,
that Novell shall not be obligated to, nor shall Novell be obligated to cause
its Subsidiaries to, dispose of or hold separate or otherwise relinquish all or
a material portion of the business or assets either of WordPerfect or of Novell
and its Subsidiaries, taken as a whole, or to change its business in any
material way.
(c) Subject to the terms and conditions of this Agreement, each of the
parties shall use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
subject to the appropriate approval of the shareholders of Novell and
WordPerfect. The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to the HSR Act or any other federal or state
antitrust or fair trade law.
5.8 State Statutes. If any State Takeover Law shall become applicable to
the transactions contemplated by this Agreement, Novell and its Board of
Directors or WordPerfect and its Board of Directors, as the case may be, shall
use their reasonable efforts to grant such approvals and take such actions as
are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effects of such State Takeover Law on
the transactions contemplated by this Agreement.
5.9 Consents. Novell, Sub and WordPerfect shall each use all reasonable
efforts to obtain the consent and approval of, or effect the notification of or
filing with, each person or authority whose consent or approval is required in
order to permit the consummation of the Merger and the transactions contemplated
by this Agreement and to enable the Surviving Corporation to conduct and operate
the business of WordPerfect and its Subsidiaries substantially as presently
conducted and as contemplated to be conducted.
5.10 Nasdaq National Market Listing. Novell shall use its reasonable
efforts to cause the shares of Novell Common Stock issuable to the shareholders
of WordPerfect in the Merger to be authorized for listing on the Nasdaq National
Market, upon official notice of issuance.
5.11 Public Announcements. Novell and WordPerfect shall cooperate with
each other prior to releasing information concerning this Agreement and the
transactions contemplated hereby, shall furnish to the other drafts of all press
releases or other public announcements prior to publication and shall obtain the
consent of the other prior to the issuance of press releases or the release of
other public announcements; provided that any party hereto shall have the right
(i) to furnish any information to any Governmental Entity or (ii) to issue any
other release, in each case when in the reasonable opinion of its counsel it is
legally required to do so.
5.12 Affiliates.
(a) The WordPerfect Disclosure Schedule sets forth those persons who are,
in WordPerfect's reasonable judgment, "affiliates" of WordPerfect within the
meaning of Rule 145 (each such person, together with the persons identified
below, an "Affiliate") promulgated under the Securities Act ("Rule 145"),
including without limitation Mr. Bastian, Ms. Bastian and Ashton. WordPerfect
shall provide Novell such information and documents as Novell shall reasonably
request for purposes of reviewing such list. WordPerfect shall use its best
efforts to deliver or cause to be delivered to Novell, concurrently with the
execution of this Agreement from each of the Affiliates of WordPerfect
identified in the foregoing list Affiliates Agreements in the form
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attached as Exhibit 5.12. Novell and Sub shall be entitled to place appropriate
legends on the certificates evidencing any Novell Common Stock to be received by
such Affiliates pursuant to the terms of this Agreement and the Articles of
Merger, and to issue appropriate stop transfer instructions to the transfer
agent for Novell Common Stock, consistent with the terms of such Affiliates
Agreements.
(b) Novell shall use its reasonable efforts to obtain prior to the
Effective Date the execution of agreements with respect to the sale of Novell
Common Stock with each person who is an Affiliate of Novell regarding compliance
with pooling restrictions.
5.13 WordPerfect Options.
(a) At the Effective Time, each outstanding option (each, a "WordPerfect
Option") to purchase shares of WordPerfect Common Stock issued pursuant to the
WordPerfect Option Plan, whether vested or unvested, shall be assumed by Novell.
Accordingly, each WordPerfect Option shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such
WordPerfect Option, the number, rounded down to the nearest whole integer, of
full shares of Novell Common Stock the holder of such WordPerfect Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such Option in full, including as to unvested shares, immediately prior to the
Effective Time, at a price per share equal to (y) the aggregate exercise price
for the shares of WordPerfect Common Stock otherwise purchasable pursuant to
such WordPerfect Option divided by (z) the number of full shares of Novell
Common Stock deemed purchasable pursuant to such WordPerfect Option with such
exercise price per share rounded up to the nearest whole cent. The vesting of
the WordPerfect Options shall accelerate upon consummation of the Merger, based
on existing contractual commitments to holders of such WordPerfect Options.
(b) As soon as practicable after the Effective Time, Novell shall deliver
to each holder of a WordPerfect Option a document evidencing the foregoing
assumption of such WordPerfect Option by Novell.
(c) As soon as practicable after the Effective Time, Novell shall file a
registration statement on Form S-8 (or any successor or other appropriate form),
or another appropriate form with respect to the shares of Novell Common Stock
subject to such WordPerfect Options and shall use its reasonable efforts to
maintain the effectiveness of such registration statement (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such WordPerfect Options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, where applicable, Novell
shall administer the WordPerfect Option Plan assumed pursuant to this Section
5.13 in a manner that complies with Rule 16b-3 promulgated by the SEC under the
Exchange Act to the extent the applicable WordPerfect Option Plan complied with
such rule prior to the Merger.
5.14 Indemnification. From and after the Effective Time, Novell and the
Surviving Corporation shall (to the fullest extent permitted by applicable law)
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Effective Time, an
officer or director of WordPerfect or any of its Subsidiaries (the "Indemnified
Parties") against any and all losses, damages, costs, expenses, liabilities or
judgments, or amounts that are paid in settlement of, or in connection with, any
claim, action, suit, proceeding or investigation based on or arising out of the
fact that such person is or was a director or officer of WordPerfect or any
Subsidiary of WordPerfect, whether pertaining to any matter existing or
occurring at or prior to the Effective Time ("Indemnified Liabilities"). Without
limiting the foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether arising before
or after the Effective Time), (i) any counsel retained by the Indemnified
Parties for any period after the Effective Time shall be reasonably satisfactory
to Novell (ii) after the Effective Time, Novell shall pay all reasonable fees
and expenses of counsel for the Indemnified Parties promptly as statements
therefor are received; and (iii) after the Effective Time, Novell shall use all
reasonable efforts to assist in the defense of any such matter, provided that
Novell shall not be liable for any settlement of any claim effected without its
written consent, which consent, however, shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify Novell (but the failure so to notify Novell shall not relieve
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it from any liability which it or the Surviving Corporation may have under this
Section except to the extent such failure materially prejudices Novell or the
Surviving Corporation). The Indemnified Parties as a group may retain only one
law firm to represent them with respect to each such matter unless there is,
under applicable standards of professional conduct, a potential conflict on any
issue between the positions of any two or more Indemnified Parties.
5.15 Notification of Certain Matters. WordPerfect shall give prompt notice
to Novell, and Novell and Sub shall give prompt notice to WordPerfect, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be likely to cause (a) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Effective Time, or (b) any material
failure of WordPerfect or Novell and Sub, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement.
5.16 Pooling Accounting. Each party agrees not to take any action that
would adversely affect the ability of Novell to treat the Merger as a pooling of
interests, and each party agrees to take such action as may be reasonably
required to negate the impact of any past actions which would adversely impact
the ability of Novell to treat the Merger as a pooling of interests. The
foregoing covenant shall be inapplicable, however, in the event that Novell
shall waive the condition precedent to Closing set forth in Section 6.2(c).
5.17 FIRPTA. WordPerfect shall deliver to the Internal Revenue Service a
notice regarding the statement described in Section 6.2(m) hereof, in accordance
with the requirements of Treasury Regulation Section 1.897-2(h)(2).
5.18 Subsequent Amendments of Disclosure Schedules. Novell and WordPerfect
shall each have the right after the date hereof but no later than twenty one
(21) days after the date hereof to deliver to the other written amendments to
the applicable Sections of the Novell Disclosure Schedule or the WordPerfect
Disclosure Schedule, as the case may be; provided, that any such disclosure is
as of, and may not include events or actions subsequent to, the date hereof. To
the extent that any such amendment shall not disclose any event or condition
that, individually or in the aggregate, could be reasonably likely to have a
Material Adverse Effect on Novell or WordPerfect, respectively, such amendment
shall be deemed accepted by the other party and the relevant Section of the
Disclosure Schedule shall be deemed amended accordingly thereby. Notwithstanding
the foregoing, each party hereby represents and warrants that it has used all
reasonable efforts to have completed such party's Disclosure Schedule delivered
prior to execution of this Agreement.
5.19 Establishment of Applications Group. Novell agrees that upon
consummation of the Merger, it will establish and maintain WordPerfect as a
separate operating unit constituting the Novell Applications Group. The present
President of WordPerfect shall be appointed President of the Novell Applications
Group, to serve until his successor is duly appointed, who shall report directly
to the Chief Executive Officer and President of Novell and the remaining
executive officers shall report to such Novell Applications Group President.
Novell also agrees that the Novell Applications Group shall be operated in
accordance with a plan submitted by WordPerfect and approved by Novell, as
modified from time to time.
5.20 Satisfaction of WordPerfect Obligations. Novell agrees that in the
period following the Effective Date it shall, or shall cause WordPerfect to,
satisfy and discharge the liabilities and obligations of WordPerfect in a timely
manner in accordance with the contractual terms, if any, associated with any
such liability or obligation.
5.21 Continued Nomination of Directors. The Board of Directors of Novell
shall take all necessary action to cause Ashton and Mr. Bastian (or a designee
of either of such persons which designee or designees shall be reasonably
acceptable to the Board of Directors of Novell) to be nominated as a member of
the Novell management slate of directors to stand for election to the Novell
Board of Directors to serve until such person's successor shall be duly
appointed. The Board of Directors of Novell shall also take all necessary action
to cause Ashton and Mr. Bastian (or their designees) to be nominated for
election at the Novell annual meeting of stockholders to be convened in Novell's
1995 fiscal year.
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5.22 Other Transactions. The parties acknowledge that any action taken by
either party with respect to the acquisition of rights to sell a spreadsheet
program mutually acceptable to the parties which has been approved by both
Novell and WordPerfect will not be deemed a breach of any representation,
warranty or covenant, notwithstanding the terms of any such representation,
warranty or covenant.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Effectiveness of the S-4. The S-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the S-4 shall have been issued by the SEC and no
proceedings for that purpose and no similar proceeding with respect to the
Proxy Statement shall have been initiated or threatened by the SEC.
(b) Shareholder Approval. This Agreement and the Articles of Merger
shall have been approved and adopted by the affirmative vote or consent of
the holders of at least a majority of the issued and outstanding shares of
WordPerfect Common Stock present, in person or by proxy, at the meeting of
WordPerfect's shareholders contemplated by Section 5.6. Notwithstanding
anything in this Agreement to the contrary, the issuance of shares of
Novell Common Stock, whether in the Merger or in connection with the Merger
or any transaction contemplated hereby, shall have been approved by the
stockholders of Novell if required by applicable law or by any requirement
of the National Association of Securities Dealers.
(c) HSR Act. The applicable waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(d) Governmental Entity Approvals. All material authorizations,
consents, orders or approvals of, or declarations or filings with, or
expiration of waiting periods imposed by, any Governmental Entity necessary
for the consummation of the transactions contemplated by this Agreement and
the Articles of Merger shall have been filed, expired or been obtained.
(e) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any
of the foregoing be pending; and there shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which would (i) make the consummation of the
Merger illegal or (ii) render Novell, Sub or WordPerfect unable to
consummate the Merger, except for any waiting period provisions.
(f) Tax Opinions. Novell and WordPerfect shall each have received
substantially identical written opinions from their respective counsel,
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation and Brobeck,
Phleger & Harrison, in form and substance reasonably satisfactory to them
to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinions, counsel
may rely upon (and, to the extent reasonably required, the parties and
WordPerfect's shareholders shall make) reasonable representations related
thereto.
6.2 Conditions of Obligations of Novell and Sub. The obligations of Novell
and Sub to effect the Merger are subject to the satisfaction of the following
conditions, unless waived by Novell and Sub:
(a) Representations and Warranties. The representations and warranties
of WordPerfect set forth in this Agreement shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which
representations and warranties as so qualified shall be true in all
respects) (i) as of the date of this Agreement and (ii) as of
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the Closing Date, as though made on and as of the Closing Date
(provided that in the cases of clauses (i) and (ii) any such
representation and warranty made as of a specific date shall be true
and correct in all material respects as of such specific date), unless
any failures to be true and correct, individually or in the aggregate,
do not have and could not reasonably be expected to have a Material
Adverse Effect on WordPerfect; and there shall have been no willful
breach by WordPerfect of any of its representations or warranties made
in the Agreement. Novell and Sub shall have received a certificate
signed by the chief executive officer and the chief financial officer
of WordPerfect to such effect on the Closing Date.
(b) Performance of Obligations of WordPerfect. WordPerfect shall have
performed in all material respects all obligations and covenants required
to be performed by it under this Agreement and the Articles of Merger prior
to or as of the Closing Date, and Novell and Sub shall have received a
certificate signed by the chief executive officer and the chief financial
officer of WordPerfect to such effect.
(c) Auditors Letter. (i) Novell shall have received a letter from
Ernst & Young in form and substance satisfactory to Novell to the effect
that the Merger will be accounted for as a pooling of interests and (ii)
Ernst & Young shall have received a substantially identical letter from
Price Waterhouse to such effect; provided that the letter from Price
Waterhouse may except any effect on the accounting of the Merger as a
pooling of interests based on any actions taken by Novell.
(d) Opinion of WordPerfect's Counsel. Novell shall have received an
opinion of Brobeck, Phleger & Harrison, counsel to WordPerfect dated the
Closing Date, in form and substance reasonably satisfactory to Novell and
WordPerfect.
(e) Consents. Novell and Sub shall have received duly executed copies
of all material third-party consents and approvals contemplated by this
Agreement or the WordPerfect Disclosure Schedule in form and substance
reasonably satisfactory to Novell and Sub.
(f) Affiliate Agreements. Novell shall have received the executed
WordPerfect Affiliate Agreements contemplated by Section 5.12.
(g) Shareholder Agreements. Neither Ashton, Mr. Bastian nor Ms.
Bastian shall have breached the Shareholder Agreements.
(h) No Material Adverse Effect. There shall have been no Material
Adverse Effect on WordPerfect or any of its Subsidiaries on or before the
Closing Date.
(i) Resignation of Directors. The directors of WordPerfect in office
immediately prior to the Effective Time shall have resigned as directors of
the Surviving Corporation effective as of the Effective Time.
(j) Tax Matters Agreement. The WordPerfect shareholders shall have
executed and delivered to Novell and WordPerfect a Tax Matters Agreement
substantially in the form attached to this Agreement as Exhibit 6.2(j).
(k) FIRPTA. Novell, as agent for the shareholders of WordPerfect shall
have received a properly executed FIRPTA Notification Letter, in form and
substance satisfactory to Novell, which states that shares of capital stock
of WordPerfect do not constitute "United States real property interests"
under Section 897(c) of the Code, for purposes of satisfying Novell's
obligations under Treasury Regulation Section 1.1445-2(c)(3).
6.3 Conditions of Obligation of WordPerfect. The obligation of WordPerfect
to effect the Merger is subject to the satisfaction of the following conditions,
unless waived by WordPerfect:
(a) Representations and Warranties. The representations and warranties
of Novell and Sub set forth in this Agreement shall be true and correct in
all material respects (except for such representations and warranties which
are qualified by their terms by a reference to materiality, which
representations and warranties as so qualified shall be true in all
respects) (i) as of the date of this Agreement and (ii) as of the Closing
Date, as though made on and as of the Closing Date (provided that in the
cases of clauses (i) and (ii) any such representation and warranty made as
of a specific date shall be true and correct in all
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material respects as of such specific date), unless any failures to be
true and correct, individually or in the aggregate, do not have and
could not reasonably be expected to have a Material Adverse Effect on
Novell; and there shall have been no willful breach by Novell of any of
its representations or warranties made in the Agreement. WordPerfect
shall have received a certificate signed by the chief executive officer
and the chief financial officer of Novell and the president of Sub to
such effect on the Closing Date.
(b) Performance of Obligations of Novell and Sub. Novell and Sub shall
have performed in all material respects all obligations and covenants
required to be performed by them under this Agreement and the Articles of
Merger prior to or as of the Closing Date, and WordPerfect shall have
received a certificate signed by the chief executive officer and the chief
financial officer of Novell and the president of Sub to such effect.
(c) Opinion of Novell's and Sub's Counsel. WordPerfect shall have
received an opinion dated the Closing Date of Wilson, Sonsini, Goodrich &
Rosati, counsel for Novell and Sub, in form and substance reasonably
satisfactory to WordPerfect and Novell.
(d) Consents. WordPerfect shall have received duly executed copies of
all material third-party consents and approvals contemplated by this
Agreement and the Novell Disclosure Schedule in form and substance
satisfactory to WordPerfect.
(e) No Material Adverse Effect. There shall have been no Material
Adverse Effect on Novell or any of its Subsidiaries on or before the
Closing Date.
(f) Election of Director Nominees. The Board of Directors of Novell
shall have taken appropriate action to cause the number of directors
comprising the full Board of Directors of Novell to be increased by two
persons, from seven to nine, and Ashton and Mr. Bastian (or a designee of
either of such persons which designee or designees shall be acceptable to
the Board of Directors of Novell) shall have been elected to the Board of
Directors of Novell, effective upon the Effective Time, until their
successors, if any, are duly elected or appointed.
(g) Acquisition of Rights to Sell a Spreadsheet Program. Either Novell
or WordPerfect shall have acquired the rights to sell a spreadsheet program
mutually acceptable to the parties hereto (which acquisition will close
prior to or simultaneously with the consummation of the Merger contemplated
by this Agreement).
(h) Comparability of Employee Benefits. WordPerfect shall be
reasonably satisfied that the continuing employees of WordPerfect, after
giving effect to the Merger, shall be entitled to receive at least
comparable benefits to those being received by the employees of Novell,
taken as a whole, who occupy comparable positions and have comparable
responsibilities; provided, however, that, as soon as practicable after the
date hereof and in any event prior to the Closing, Novell and WordPerfect
shall confer and agree upon a plan that has as its primary purpose the
transition of WordPerfect employees to Novell benefits in a manner that
results in minimal disruption to the continuing operations of WordPerfect
and continued employment of key individuals. The parties hereto acknowledge
that such plan may take an extended period of time to implement
successfully.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger by the
shareholders of WordPerfect:
(a) by mutual written agreement of Novell, Sub and WordPerfect;
(b) by Novell, if there has been a breach by WordPerfect of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of WordPerfect or if any representation or warranty of WordPerfect
shall have become untrue, in either case such that the condition set forth in
Sections 6.2(a) or
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6.2(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue and which breach or
inaccuracy WordPerfect fails to cure within seven days after notice thereof is
given by Novell (except that no cure period shall be provided for a breach by
WordPerfect or inaccuracy which by its nature cannot be cured);
(c) by WordPerfect, if there has been a breach by Novell or Sub of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of Novell or Sub or if any representation or warranty of Novell or Sub
shall have become untrue, in either case such that the condition set forth in
Sections 6.3(a) or 6.3(b) would not be satisfied as of the time of such breach
or as of the time such representation or warranty shall have become untrue and
which breach or inaccuracy Novell or Sub, as the case may be, fails to cure
within seven days after notice thereof is given by WordPerfect (except that no
cure period shall be provided for a breach by Novell or Sub which by its nature
cannot be cured);
(d) by Novell or WordPerfect, if the Merger shall not have been consummated
on or before July 31, 1994 (other than delays attributable to concluding the HSR
Act waiting period or receiving an order of effectiveness from the SEC with
respect to the S-4, but in no event later than September 30, 1994);
(e) by Novell or WordPerfect if the required approval of the shareholders
of WordPerfect or, if required, the stockholders of Novell, contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain the
required vote upon a vote taken at the Shareholders' Meeting or at any
adjournment thereof or at any meeting of the Novell stockholders or any
adjournment thereof, to the extent determined to be necessary subsequent to the
date hereof; or
(f) by Novell or WordPerfect if any permanent injunction or other order of
a court or other competent authority preventing the Merger shall have become
final and nonappealable.
Where action is taken to terminate this Agreement pursuant to this Section
7.1, it should be sufficient for such action to be authorized by the Board of
Directors of the party taking such action.
7.2 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 7.1, this Agreement shall forthwith become void and there
shall be no liability on the part of any party hereto except that (i) the
provisions of the Confidentiality Agreement and Section 3.26, Section 4.10 and
Article VIII of this Agreement shall survive the termination of this Agreement
and (ii) nothing herein shall relieve any party from liability for any breach of
this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be conditions
to the Merger and shall not survive the consummation of the Merger, except that
the agreements contained in Article II, Section 3.26, Section 4.10 and Article
VIII, the agreements delivered pursuant to this Agreement and the
representations made to counsel in connection with the tax opinions to be
delivered pursuant to Section 6.1(f) shall survive the consummation of the
Merger.
8.2 Amendment. The Merger Agreement may be amended by the parties hereto,
by action taken by their respective Board of Directors, at any time before or
after approval of the Merger by the shareholders of WordPerfect; provided that
following approval of the Merger by the shareholders of WordPerfect, no
amendment shall be made which by law requires the further approval of such
shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.3 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, the Articles of Merger and
the transactions contemplated hereby and thereby shall be paid by the party
incurring such expense, except that if the Merger is not consummated expenses
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incurred in connection with printing the documents distributed to shareholders
of WordPerfect and the S-4 shall be shared equally by Novell and WordPerfect.
8.4 Extension; Waiver. At any time prior to the Effective Time, each of
WordPerfect and Novell, by action taken by its Board of Directors, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other, (ii) waive any inaccuracies in the
representations and warranties made to it contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the agreements
or conditions for the benefit of it contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
8.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or sent by telecopy,
confirmation received, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified by
like notice):
(a) if to Novell or Sub, to:
Novell, Inc.
122 East 1700 South
Provo, Utah 84606
Attention: David R. Bradford, Esq.
Telecopy No. (801) 377-7619
Telephone No. (801) 429-7000
with a copy to:
Wilson, Sonsini, Goodrich & Rosati
2 Palo Alto Square
Palo Alto, California 94306
Attn: Larry W. Sonsini, Esq.
Telecopy No.: (415) 493-6811
Telephone No.: (415) 493-9300
(b) if to WordPerfect, to:
WordPerfect Corporation
1555 North Technology Way
Orem, Utah 84057
Attention: R. Duff Thompson, Esq.
Telecopy No.: (801) 222-4477
Telephone No.: (801) 222-4400
with a copy to:
Brobeck, Phleger & Harrison
2 Embarcadero Place
2200 Geng Road
Palo Alto, California 94306
Attn: Joshua Green, Esq.
Telecopy No.: (415) 496-2885
Telephone No.: (415) 424-0160
8.6 Interpretation. When a reference is made in this Agreement to Sections
or Exhibits, such reference shall be to a Section or Exhibit to this Agreement
unless otherwise indicated. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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8.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
8.8 Entire Agreement. This Agreement, the Confidentiality Agreement and
the documents and instruments and other agreements among the parties delivered
pursuant hereto constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and are not intended to confer upon any other person any
rights or remedies hereunder except as otherwise expressly provided herein.
8.9 No Transfer. This Agreement and the rights and obligations set forth
herein may not be transferred or assigned by operation of law or otherwise
without the consent of each party hereto. This Agreement is binding upon and
will inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
8.10 Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
8.11 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law or equity on
such party, and the exercise of any one remedy will not preclude the exercise of
any other.
8.12 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
8.13 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will be interpreted, to provide to create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, employee, partner or any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
8.14 Mutual Drafting. This Agreement is the joint product of Novell and
WordPerfect, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Novell and WordPerfect, and shall not
be construed for or against any party hereto.
8.15 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to its choice of law principles).
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IN WITNESS WHEREOF, Novell, Sub and WordPerfect have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
NOVELL, INC.
By: /s/ JAMES R. TOLONEN
James R. Tolonen, Office of the
President and Chief Financial Officer
WORDPERFECT CORPORATION
By: /s/ R. DUFF THOMPSON
R. Duff Thompson, Executive
Vice-President
NOVELL ACQUISITION CORP.
By: /s/ JAMES R. TOLONEN
James R. Tolonen, President
By: /s/ ALAN C. ASHTON
Alan C. Ashton*
By: /s/ BRUCE W. BASTIAN
Bruce W. Bastian*
By: /s/ MELANIE L. BASTIAN
Melanie L. Bastian*
* For purpose of Section 5.3 only.
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EXHIBIT 1.1
ARTICLES OF MERGER
These Articles of Merger, dated as of , 1994 ("Articles of
Merger"), are entered into between WordPerfect Corporation, a Utah corporation
("WordPerfect"), and Novell, Inc., a Delaware corporation ("Novell" or
"Surviving Corporation") (WordPerfect and Novell being collectively referred to
as the "Constituent Corporations").
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and
material covenants and agreements contained herein, the Constituent Corporations
hereby agree as follows:
ARTICLE I
THE MERGER PLAN
1.1 Merger of WordPerfect With and Into Novell.
(a) Agreement and Plan of Reorganization. Subject to the terms of these
Articles of Merger and an Agreement and Plan of Reorganization dated as of March
21, 1994, as amended (the "Reorganization Agreement"), WordPerfect shall be
merged with and into Novell (the "Merger").
(b) Effective Time of the Merger. The Merger shall become effective at such
time (the "Effective Time") (the date the Merger shall become effective is
sometimes referred to as the "Effective Date") as these Articles of Merger are
filed with the Division of Corporations and Commercial Code of the State of Utah
pursuant to Section 16-10a-1105 of the Revised Business Corporation Act of the
State of Utah.
(c) Surviving Corporation. At the Effective Time, WordPerfect shall be
merged with and into Novell and the separate corporate existence of WordPerfect
shall thereupon cease. Novell shall be the surviving corporation in the Merger
and the separate corporate existence of Novell shall continue after the Merger.
1.2 Effect of the Merger; Additional Actions.
(a) Effects. The Merger shall have the effects set forth in Section
16-10a-1106 of the Revised Business Corporation Act of the State of Utah.
(b) Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any such further action is necessary or desirable to carry out
the purposes of the Reorganization Agreement or these Articles of Merger and to
vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of WordPerfect, the
officers and directors of Novell and WordPerfect are fully authorized in the
name of their respective corporations or otherwise to take, and will take, all
such lawful and necessary action.
ARTICLE II
THE CONSTITUENT CORPORATIONS
2.1 Organization of WordPerfect.
(a) Incorporation. WordPerfect was incorporated under the laws of the State
of Utah in 1979.
(b) Authorized Stock. WordPerfect is authorized to issue an aggregate of
200,000,000 shares of Common Stock, $0.001 par value ("WordPerfect Common
Stock").
(c) Outstanding Stock. At the close of business on , 1994,
shares of WordPerfect Common Stock were outstanding.
2.2 WordPerfect Shareholder Approval. The Reorganization Agreement and
these Articles of Merger were duly approved and adopted by the affirmative vote
of the holders of at least a majority of the shares of
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WordPerfect Common Stock entitled to vote on the Reorganization Agreement and
these Articles of Merger at a special meeting of the shareholders held on June
, 1994, in accordance with the provisions of Section 16-10a-1103 of the Utah
Revised Business Corporation Act.
2.3 Organization of Novell.
(a) Incorporation. Novell was incorporated under the laws of the State of
Delaware on , 1983.
(b) Authorized Stock. The authorized capital stock of Novell consists of
400,000,000 shares of Common Stock, $.10 par value ("Novell Common Stock"), and
500,000 shares of preferred stock, $.10 par value ("Novell Preferred Stock").
(c) Outstanding Stock. On the date hereof, an aggregate of shares
of Novell Common Stock and no shares of Novell Preferred Stock are outstanding.
2.4 Novell Stockholder Approval. The approval of the stockholders of
Novell is not required under the Delaware General Corporation Law or the
Restated Certificate of Incorporation and Bylaws.
ARTICLE III
CERTIFICATE OF INCORPORATION, BYLAWS AND
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 Certificate of Incorporation of Surviving Corporation. The Restated
Certificate of Incorporation of Novell in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation.
3.2 Bylaws of Surviving Corporation. The Bylaws of Novell in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation unless and until amended or repealed as provided by applicable law,
the Certificate of Incorporation of the Surviving Corporation and such Bylaws.
3.3 Directors and Officers of Surviving Corporation. The directors of
Novell immediately prior to the Effective Time shall be the directors of the
Surviving Corporation at the Effective Time, each to hold office in accordance
with the Certificate of Incorporation and Bylaws of the Surviving Corporation,
and the officers of Novell immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, in each case, until their respective
successors are duly elected or appointed or qualified.
ARTICLE IV
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
4.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of
WordPerfect Common Stock:
(a) Cancellation of Certain Shares of WordPerfect Common Stock. All
shares of WordPerfect Common Stock that are owned directly or indirectly by
WordPerfect or by any Subsidiary (as defined below) of WordPerfect and any
shares of WordPerfect Common Stock owned by Novell or any Subsidiary of
Novell shall be cancelled and no stock of Novell or other consideration
shall be delivered in exchange therefor. "Subsidiary" means a corporation
or other entity whose voting securities are owned or are otherwise
controlled directly or indirectly by a parent corporation or other
intermediary entity in an amount sufficient to elect at least a majority of
the Board of Directors or other managers of such corporation or other
entity.
(b) Conversion of WordPerfect Common Stock. Each issued and
outstanding share of WordPerfect Common Stock (other than shares to be
cancelled pursuant to Section 4.1(b) hereof and shares, if any, which then
or thereafter constitute dissenter's shares within the meaning of Part 16
of the Utah Revised Business Corporation Act ("Dissenter's Shares")) shall
be canceled and extinguished and
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converted, without any action on the part of the holders thereof and
subject to Section 4(e) hereof, into one share of Novell Common Stock.
(c) Dissenters' Rights. If holders of WordPerfect Common Stock are
entitled to dissenters' rights in connection with the Merger under Part 16
of the Utah Revised Business Corporation Act, any Dissenter's Shares shall
not be converted into Novell Common Stock but shall be converted into the
right to receive such consideration as may be determined to be due with
respect to such Dissenter's Shares pursuant to the law of the State of
Utah.
(d) Fractional Shares. No fractional shares of Novell Common Stock
shall be issued, but in lieu thereof each holder of shares of WordPerfect
Common Stock who would otherwise be entitled to receive a fraction of a
share of Novell Common Stock shall receive from Novell an amount of cash
equal to the per share market value of Novell Common Stock (based on the
last sales price of Novell Common Stock as reported on the National Market
System of the National Association of Securities Dealers' Automated
Quotation System on the Effective Date of the Merger) multiplied by the
fraction of a share of Novell Common Stock to which such holder would
otherwise be entitled. The fractional share interests of each WordPerfect
shareholder shall be aggregated, so that no WordPerfect shareholder shall
receive cash in an amount greater than the value of one full share of
Novell Common Stock.
4.2 Exchange of Certificates.
(a) Exchange Agent. Mellon Bank, N.A. shall act as exchange agent (the
"Exchange Agent") in the Merger.
(b) Novell to Provide Common Stock. Promptly after the Effective Time,
Novell shall make available to the Exchange Agent for exchange in accordance
with the provisions of this Article IV and the Reorganization Agreement, through
such reasonable procedures as Novell may adopt, the shares of Novell Common
Stock issuable pursuant to Section 4.1 of these Articles of Merger and the
provisions of the Reorganization Agreement in exchange for outstanding shares of
WordPerfect Common Stock.
(c) No Further Ownership Rights in WordPerfect Common Stock. All Novell
Common Stock delivered upon the surrender for exchange of shares of WordPerfect
Common Stock in accordance with the terms of the Reorganization Agreement and
these Articles of Merger shall be deemed to have been delivered in full
satisfaction of all rights pertaining to such shares of WordPerfect Common
Stock. There shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of WordPerfect Common Stock
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article IV and
the Reorganization Agreement.
ARTICLE V
TERMINATION
5.1 Termination by Mutual Agreement. Notwithstanding the approval of these
Articles of Merger by the shareholders of WordPerfect, these Articles of Merger
may be terminated at any time prior to the Effective Time by mutual written
agreement of the Boards of Directors of Novell and WordPerfect.
5.2 Termination of Agreement and Plan of Merger. Notwithstanding the
approval of these Articles of Merger by the shareholders of WordPerfect, these
Articles of Merger shall terminate forthwith in the event that the
Reorganization Agreement shall be terminated as therein provided.
5.3 Effects of Termination. In the event of the termination of these
Articles of Merger, these Articles of Merger shall forthwith become void and
there shall be no liability on the part of either WordPerfect or Novell or their
respective officers or directors, except as otherwise provided in the
Reorganization Agreement.
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ARTICLE VI
GENERAL PROVISIONS
6.1 Amendment. These Articles of Merger may be amended by the parties
hereto any time before or after approval hereof by the shareholders of
WordPerfect but, after such approval, no amendment shall be made which by law
requires the further approval of shareholders of WordPerfect without obtaining
such approval. These Articles of Merger may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
6.2 Counterparts. These Articles of Merger may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.
6.3 Governing Law. These Articles of Merger shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Utah.
IN WITNESS WHEREOF, the parties have duly executed these Articles of Merger
as of the date first written above.
WORDPERFECT CORPORATION
1555 North Technology Way
Orem, Utah 84057
By:
Alan C. Ashton, President and
Chief
Executive Officer
NOVELL, INC.
122 East 1700 South
Provo, Utah 84606
By:
James R. Tolonen, Chief Financial
Officer
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EXHIBIT 5.6
WORDPERFECT CORPORATION
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "Agreement") is made and entered into as
of March 21, 1994, between Novell, Inc., a Delaware corporation ("Novell"),
WordPerfect Corporation, a Utah corporation ("WordPerfect") and the undersigned
shareholder ("Shareholder") of Wordperfect.
RECITALS
A. Concurrently with the execution of this Agreement, Novell, Novell
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Novell
("Sub"), and WordPerfect have entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), which contemplates that
WordPerfect and Sub will enter into the Articles of Merger, which Reorganization
Agreement and Articles of Merger (collectively, the "Merger Agreements") provide
for the merger (the "Merger") of Sub with and into WordPerfect. Pursuant to the
Merger, all outstanding capital stock of WordPerfect will be converted into
Common Stock of Novell.
B. Shareholder is the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such number
of shares of the outstanding Common Stock, no par value per share, of
WordPerfect as is indicated on the final page of this Agreement (the "Shares").
C. In consideration of the execution of the Reorganization Agreement by
Novell, Shareholder agrees not to transfer or otherwise dispose of any of the
Shares, or any other shares of capital stock of WordPerfect acquired by
Shareholder hereafter and prior to the Expiration Date (as defined in Section
1.1 below), and agrees to vote the Shares and any other such shares of capital
stock of WordPerfect so as to facilitate consummation of the Merger.
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Shareholder agrees not to transfer
(except as permitted under Section 1.3 below), sell, exchange, pledge
(except in connection with a bona fide loan transaction, provided that any
pledgee agrees not to transfer, sell, exchange, pledge or otherwise dispose
or encumber the Shares or any New Shares (as defined in Section 1.2 below)
prior to the Expiration Date and to be subject to the Proxy (as defined in
Section 3 below)) or otherwise dispose of or encumber the Shares or any New
Shares or to make any offer or agreement relating thereto, at any time
prior to the Expiration Date. As used herein, the term "Expiration Date"
shall mean the earlier to occur of (i) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the
Merger Agreements or (ii) the termination of the Reorganization Agreement
in accordance with its terms.
1.2 New Shares. Shareholder agrees that any shares of capital stock
of WordPerfect that Shareholder purchases or with respect to which
Shareholder otherwise acquires beneficial ownership after the date of this
Agreement and prior to the Expiration Date ("New Shares") shall be subject
to the terms and conditions of this Agreement to the same extent as if they
constituted Shares.
1.3 Permitted Transfers. Shareholder may transfer up to thirty
percent (30%) of the Shares or any New Shares to members of Shareholder's
immediate family if, prior to any such transfer, (i) Novell receives advice
from its counsel that such transfer will not affect the treatment of the
Merger as a pooling of interests for accounting purposes and (ii) the
transferee agrees to be bound by the provisions of this Agreement.
2. Agreement to Vote Shares. At every meeting of the shareholders of
WordPerfect called with respect to any of the following, and at every
adjournment thereof, and on every action or approval by written consent
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of the shareholders of WordPerfect with respect to any of the following,
Shareholder shall vote the Shares and any New Shares: (i) in favor of approval
of the Merger Agreements and the Merger and any matter that could reasonably be
expected to facilitate the Merger; and (ii) against approval of any proposal
made in opposition to or in competition with consummation of the Merger and the
Merger Agreements, against any merger, consolidation, sale of assets,
reorganization or recapitalization with any party and against any liquidation or
winding up of WordPerfect (each of the foregoing is referred to as an "Opposing
Proposal"). Shareholder agrees not, directly or indirectly, to solicit or
encourage any offer from any party concerning the possible disposition of all or
any substantial portion of WordPerfect's business assets or capital stock.
3. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Shareholder agrees to deliver to Novell a proxy in the form attached as Exhibit
A (the "Proxy"), which shall be irrevocable to the extent provided in Section
16-10a-722 of the Utah Revised Business Corporation Act, covering the total
number of Shares and New Shares of capital stock of WordPerfect beneficially
owned (as such term is defined in Rule 13d-3 under the Exchange Act) by
Shareholder set forth therein.
4. Affiliates Agreement. Concurrently with the execution of this
Agreement, Shareholder agrees to execute and deliver to Novell the Affiliates
Agreement in the form attached as Exhibit B.
5. Representations, Warranties and Covenants of Shareholder. Shareholder
represents, warrants and covenants to Novell as follows:
5.1 Ownership of Shares. Shareholder: (i) is the beneficial owner of
the Shares, which at the date of this Agreement and at all times up until the
Expiration Date will be free and clear of any liens, claims, options, charges or
other encumbrances; (ii) does not beneficially own any shares of capital stock
of WordPerfect other than the Shares (excluding shares as to which Shareholder
currently disclaims beneficial ownership in accordance with applicable law); and
(iii) has full power and authority to make, enter into and carry out the terms
of this Agreement and the Proxy.
5.2 No Proxy Solicitations. Shareholder will not, and will not permit
any entity under Shareholder's control, to: (i) solicit proxies or become a
"participant" in a "solicitation" (as such terms are defined in Regulation 14A
under the Exchange Act) with respect to an Opposing Proposal or otherwise
encourage or assist any party in taking or planning any action that would
compete with, restrain or otherwise serve to interfere with or inhibit the
timely consummation of the Merger in accordance with the terms of the Merger
Agreements; (ii) initiate a shareholders' vote or action by written consent of
WordPerfect shareholders with respect to an Opposing Proposal; or (iii) become a
member of a "group" (as such term is used in Section 13(d) of the Exchange Act)
with respect to any voting securities of WordPerfect with respect to an Opposing
Proposal.
6. Additional Documents. Shareholder and Novell hereby covenant and agree
to execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Novell, to carry out the purpose and intent of this
Agreement.
7. Consent and Waiver. Shareholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Merger under the terms
of any agreement to which Shareholder is a party or pursuant to any rights
Shareholder may have.
8. Termination. This Agreement and the Proxy delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted
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assigns, but, except as otherwise specifically provided herein, neither this
Agreement nor any of the rights, interests or obligations of the parties hereto
may be assigned by either of the parties without the prior written consent of
the other.
9.3 Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
9.4 Specific Performance; Injunctive Relief. The parties acknowledge
that Novell will be irreparably harmed and that there will be no adequate remedy
at law for a violation of any of the covenants or agreements of Shareholder set
forth herein. Therefore, it is agreed that, in addition to any other remedies
that may be available to Novell upon any such violation, Novell shall have the
right to enforce such covenants and agreements by specific performance,
injunctive relief or by any other means available to Novell at law or in equity.
9.5 Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationallyrecognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to Novell: Novell, Inc.
122 East, 1700 South
Provo, Utah 84606
Attn: Chief Executive Officer
Telecopy No.: (801) 429-3951
Telephone No.: (801) 429-7000
With a copy to: Wilson, Sonsini, Goodrich & Rosati
Two Palo Alto Square
Palo Alto, California 94306
Attn: Larry W. Sonsini, Esq.
Telecopy No.: (415) 493-6811
Telephone No.: (415) 493-9300
If to Shareholder: To the address for notice set forth on the last
page hereof.
With a copy to: WordPerfect Corporation
1555 North Technology Way
Orem, Utah 84057
Attn: Chief Executive Officer
Telecopy No.: (801) 228-7077
Telephone No.: (801) 222-4400
With a copy to: Brobeck, Phleger & Harrison
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94306
Attn: Joshua Green, Esq.
Telecopy No.: (415) 496-2885
Telephone No.: (415) 424-0160
9.6 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of Utah.
9.7 Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
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9.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
9.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
<TABLE>
<S> <C>
NOVELL, INC. SHAREHOLDER
By: By:
Title:
Shareholder's Address for Notice:
--------------------------------------------
WORDPERFECT CORPORATION
--------------------------------------------
By:
--------------------------------------------
Title:
Shares beneficially owned:
-------shares of WordPerfect Corporation
Common Stock
</TABLE>
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IRREVOCABLE PROXY
TO VOTE
WORDPERFECT CORPORATION STOCK
The undersigned shareholder of WordPerfect Corporation, a Utah corporation
("WordPerfect"), hereby irrevocably (to the full extent permitted by Section
16-10a-722 of the Utah Revised Business Corporation Act) appoints the directors
on the Board of Directors of Novell, Inc., a Delaware corporation ("Novell"),
and each of them, as the sole and exclusive attorneys and proxies of the
undersigned, with full power of substitution and resubstitution, to vote and
exercise all voting and related rights (to the full extent that the undersigned
is entitled to do so) with respect to all of the shares of capital stock of
WordPerfect that now are or hereafter may be beneficially owned by the
undersigned, and any and all other shares or securities of WordPerfect issued or
issuable in respect thereof on or after the date hereof (collectively, the
"Shares") in accordance with the terms of this Proxy. The Shares beneficially
owned by the undersigned shareholder of WordPerfect as of the date of this Proxy
are listed on the final page of this Proxy. Upon the undersigned's execution of
this Proxy, any and all prior proxies given by the undersigned with respect to
any Shares are hereby revoked and the undersigned agrees not to grant any
subsequent proxies with respect to the Shares until after the Expiration Date
(as defined below).
This proxy is irrevocable (to the extent provided in Section 16-10a-722 of
the Utah Revised Business Corporation Act) is granted pursuant to that certain
Shareholder Agreement dated as of March , 1994, between Novell and the
undersigned shareholder (the "Shareholder Agreement"), and is granted in
consideration of Novell entering into that certain Agreement and Plan of
Reorganization dated as of March , 1994 (the "Reorganization Agreement"),
among Novell, Novell Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Novell ("Sub"), and WordPerfect, and that certain related
Agreement of Merger between Sub and WordPerfect (such agreements are
collectively referred to as the "Merger Agreements"). The Merger Agreements
provide for the merger of Sub into WordPerfect in accordance with their terms
(the "Merger"). As used herein, the term "Expiration Date" shall mean the
earlier to occur of (i) such date and time as the Merger shall become effective
in accordance with the terms and provisions of the Merger Agreements or (ii) the
termination of the Reorganization Agreement in accordance with its terms.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to Section 16-10a-704 of the Utah Revised Business Corporation
Act) at every annual, special or adjourned meeting of the shareholders of
WordPerfect and in every written consent in lieu of such meeting: (a) in favor
of approval of the Merger and the Merger Agreements and in favor of any matter
that could reasonably be expected to facilitate the Merger, and (b) against
approval of any proposal made in opposition to or in competition with the
consummation of the Merger and the Merger Agreements, against any merger,
consolidation, sale of assets, reorganization or recapitalization or WordPerfect
with any party other than Novell and its affiliates and against any liquidation
or winding up of WordPerfect. The attorneys and proxies named above may not
exercise this Irrevocable Proxy on any other matter except as provided in
clauses (a) and (b) above. The undersigned shareholder may vote the Shares on
all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
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This proxy is irrevocable (to the full extent permitted by Section
16-10a-722 of the Utah Revised Business Corporation Act).
<TABLE>
<S> <C>
Dated: ------------------, Signature of Shareholder:
1994 ------------------------------------------
Print Name of Shareholder:
---------------------------------------
Shares beneficially owned:
---------------shares of WordPerfect Corporation Common
Stock
</TABLE>
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EXHIBIT 5.12
WORDPERFECT CORPORATION
AFFILIATES AGREEMENT
This Affiliates Agreement (this "Agreement") is made and entered into as of
March , 1994 between WordPerfect Corporation, a Utah corporation
("WordPerfect"), Novell, Inc., a Delaware corporation ("Novell") and the
undersigned affiliate ("Affiliate") of WordPerfect.
RECITALS
A. Concurrently with the execution of this Agreement, WordPerfect and
Novell have entered into an Agreement and Plan of Reorganization (the
"Reorganization Agreement"), which contemplates that WordPerfect and Novell
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Novell
("Sub"), will enter into Articles of Merger, which Reorganization Agreement and
Articles of Merger (collectively, the "Merger Agreements") provide for the
merger (the "Merger") of Sub with and into WordPerfect. Pursuant to the Merger,
all outstanding capital stock of WordPerfect will be converted into Common Stock
of Novell.
B. Affiliate is the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such number
of shares of the outstanding Common Stock, no par value per share, of
WordPerfect as is indicated on the final page of this Agreement (the "Shares").
C. Affiliate understands that, since the Merger will be accounted for
using the "pooling of interests" method and Affiliate is an "affiliate" of
WordPerfect (within the meaning of Rule 145 promulgated under the Securities Act
of 1933, as amended (the "Securities Act")), the Shares may only be disposed of
in a conformity with the limitations described herein. Affiliate has been
informed that the treatment of the Merger as a pooling of interests for
accounting purposes, and as a tax-free reorganization under applicable
provisions of the Internal Revenue Code, is dependent upon the accuracy of
certain of the representations and warranties and the compliance with certain of
the agreements set forth herein. Affiliate further understands that the
representations, warranties and agreement set forth herein will be relied upon
by Novell, WordPerfect and their respective counsel and accounting firms.
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Affiliate agrees not to transfer (except
as may be specifically required by court order or as permitted under
Section 1.3 below), sell, exchange, pledge (except in connection with a
bona fide loan transaction, provided that any pledgee agrees not to
transfer, sell, exchange, pledge or otherwise dispose or encumbrance the
Shares or any New Shares, as defined in Section 1.2 below, prior to the
Expiration Date) or otherwise dispose of or encumber the Shares or any New
Shares or to make any offer or agreement relating thereto, at any time
prior to the Expiration Date. As used herein, the term "Expiration Date"
shall mean the date Novell shall have publicly released a report including
the combined financial results of Novell and WordPerfect for a period of at
least 30 days of combined operations of Novell and WordPerfect.
1.2 New Shares. Affiliate agrees that any shares of capital stock of
WordPerfect that Affiliate purchases or with respect to which Affiliate
otherwise acquired beneficial ownership after the date of this Agreement
and prior to the Expiration Date ("New Shares") shall be subject to the
terms and conditions of this Agreement to the same extent as if they
constituted Shares.
1.3 Permitted Transfers. Affiliate may transfer up to thirty percent
(30%) of the Shares or any New Shares to members of Affiliate's immediate
family if, prior to any such transfer, (i) Novell receives advice from its
counsel that such transfer will not affect the treatment of the Merger as a
pooling of
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interests for accounting purposes and (ii) the transferee agrees to be
bound by the provisions of this Agreement.
2. Tax Treatment: Rule 145. Affiliate understands and agrees that it is
intended that the Merger will be treated as a "reorganization" for federal
income tax purposes. Affiliate further understands and agrees that Affiliate may
be deemed to be an "affiliate" of WordPerfect within the meaning of Rule 145,
although nothing contained herein should be construed as an admission of such
fact.
3. Reliance Upon Representations, Warranties and Covenants. Affiliate has
been informed that the treatment of the Merger as a reorganization for federal
income tax purposes requires that a sufficient number of former shareholders of
WordPerfect maintain a meaningful continuing equity ownership interest in Novell
after the Merger. Affiliate understands that the representations, warranties and
covenants of Affiliate set forth herein will be relied upon by Novell,
WordPerfect and their respective counsel and accounting firms.
4. Representations, Warranties and Covenants of Affiliate. Affiliate
represents, warrants and covenants as follows:
(a) Affiliate has full power and authority to execute this Agreement,
to make the representations, warranties and covenants herein contained and
to perform Affiliate's obligations hereunder.
(b) Set forth below the signatures below is the number of shares of
Common Stock of WordPerfect ("WordPerfect Stock") owned by Affiliate,
including all WordPerfect Stock as to which Affiliate has sole or shared
voting or investment power and all rights, options and warrants to acquire
WordPerfect Stock owned or held by Affiliate.
(c) Affiliate will not sell, transfer, exchange, pledge (except in
connection with a bona fide loan transaction as set forth in Section 1.1
above) or otherwise dispose of, or make any offer or agreement relating to
any of the foregoing with respect to, any shares of Common Stock of Novell
("Novell Stock") that Affiliate may acquire in connection with the Merger,
or any securities that may be paid as a dividend or otherwise distributed
thereon or with respect thereto or issued or delivered in exchange or
substitution therefor (all such shares and other securities of Novell are
sometimes collectively referred to as "Restricted Securities"), or any
option, right or other interest with respect to any Restricted Securities,
unless: (i) such transaction is permitted pursuant to Rule 145(c) and
145(d) under the Securities Act; (ii) counsel representing Affiliate, which
counsel is reasonably satisfactory to Novell, shall have advised Novell in
a written opinion letter satisfactory to Novell, shall have advised Novell
in a written opinion letter satisfactory to Novell and Novell's legal
counsel, and upon which Novell and its legal counsel may rely, that no
registration under the Securities Act would be required in connection with
the proposed sale, transfer or other disposition; (iii) a registration
statement under the Securities Act covering the Novell Stock proposed to be
sold, transferred or otherwise disposed of, describing the manner and terms
of the proposed sale, transfer or other disposition, and containing a
current prospectus, shall have been filed with the Securities and Exchange
Commission (the "SEC") and made effective under the Securities Act; or (iv)
an authorized representative of the SEC shall have rendered written advice
to Affiliate (sought by Affiliate or counsel to Affiliate, with a copy
thereof and all other related communications delivered to Novell) to the
effect that the SEC would take no action, or that the staff of the SEC
would not recommend that the SEC take any action, with respect to the
proposed disposition if consummated.
(d) Affiliate has, and as of the Effective Time will have, no present
plan or intention (a "Plan") to sell, transfer, exchange, pledge (other
than in a preexisting bona fide margin account) or otherwise dispose of,
including a distribution by a partnership to its partners, or a corporation
to its stockholders, or any other transaction which results in a reduction
in the risk of ownership (any of the foregoing, a "Sale") of more than
thirty percent (30%) of the shares of Novell Stock that Affiliate may
acquire in connection with the Merger, or any securities that may be paid
as a dividend or otherwise distributed thereon with respect thereto or
issued or delivered in exchange or substitution therefor. Affiliate is not
aware of, or participating in, any Plan on the part of WordPerfect
stockholders to engage in Sales of the shares of Novell Stock to be issued
in the Merger such that the aggregate fair market value, as of the
Effective Time of the Merger, of the shares subject to such Sales would
exceed thirty percent (30%) of
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the aggregate fair market value of all shares of outstanding
WordPerfect Stock immediately prior to the Merger. For purposes of the
preceding sentence, shares of WordPerfect Stock (i) which are exchanged
for cash in lieu of fractional shares of Novell Common Stock or (ii)
with respect to which a pre-Merger Sale occurs in a Related Transaction
(as hereinafter defined), shall be considered to be shares of
WordPerfect Common Stock that are exchanged for Novell Stock in the
Merger and then disposed of pursuant to a Plan. A Sale of Novell Stock
shall be considered to have occurred pursuant to a Plan if, among other
things, such Sale occurs in a Related Transaction. For purposes of this
Section 4(d), a "Related Transaction" shall mean a transaction that is
in contemplation of, or related or pursuant to, the Merger or the
Merger Agreements. If any of Affiliate's representations in this
Section 4(d) cease to be true at any time prior to the Effective Time,
Affiliate will deliver to each of WordPerfect and Novell, prior to the
Effective Time, a written statement to that effect, signed by
Affiliate.
5. Rules 144 and 145. From and after the Effective Time and for so long as
is necessary in order to permit Affiliate to sell the Novell Stock held by
Affiliate pursuant to Rule 145 and, to the extent applicable, Rule 144 under the
Securities Act, Novell will use its reasonable efforts to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, referred to in paragraph (c)(1) of Rule 144
under the Securities Act, in order to permit Affiliate to sell the Novell Stock
held by it pursuant to the terms and conditions of Rule 145 and the applicable
provisions of Rule 144.
6. Limited Resales. Affiliate understands that, in addition to the
restrictions imposed under Section 3 of this Agreement, the provisions of Rule
145 limit Affiliate's public resales of Restricted Securities, in the manner set
forth in subsections (a), (b) and (c) below:
(a) Unless and until the restriction "Cut-off" provisions of Rule
145(d)(2) or Rule 145(d)(3) set forth below become available, public
resales of Restricted Securities may only be made by Affiliate in
compliance with the requirements of Rule 145(d)(1). Rule 145(d)(1) permits
such resales only: (i) while Novell meets the public information
requirements of Rule 144(c); (ii) in brokers' transactions or in
transactions with a market maker; and (iii) where the aggregate number of
Restricted Securities sold at any time together with all sales of
restricted Novell Stock sold for Affiliate's account during the preceding
three-month period does not exceed the greater of (A) 1% of the Novell
Common Stock outstanding or (B) the average weekly volume of trading in
Novell Common Stock on all national securities exchanges, or reported
through the automated quotation system of a registered securities
association, during the four calendar weeks preceding the date of receipt
of the order to execute the sale.
(b) Affiliate may make unrestricted sales of Restricted Securities
pursuant to Rule 145(d)(2) if: (i) Affiliate has beneficially owned (within
the meaning of Rule 144(d) under the Securities Act) the Restricted
Securities for at least two years after the Effective Time of the Merger;
(ii) Affiliate is not an affiliate of Novell; and (iii) Novell meets the
public information requirements of Rule 144(c).
(c) Affiliate may make unrestricted sales of Restricted Securities
pursuant to Rule 145(d)(3) if Affiliate has beneficially owned (within the
meaning of Rule 144(d) under the Securities Act) the Restricted Securities
for at least three years and is not, and has not been for the last three
months, an affiliate of Novell.
(d) Novell acknowledges that the provisions of Section 4(c) of this
Agreement will be satisfied as to any sale by the undersigned of the
Restricted Securities pursuant to Rule 145(d), by a broker's letter and a
letter from the undersigned with respect to that sale stating that each of
the above-described requirements of Rule 145(d)(1) has been met or is
inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3); provided,
however, that Novell has no reasonable basis to believe that such sales
were not made in compliance with such provisions of Rule 145(d).
7. Legends. Affiliate also understands and agrees that stop transfer
instructions will be given to Novell's transfer agent with respect to
certificates evidencing the Restricted Securities and that there will be placed
on the certificates evidencing the Restricted Securities legends stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF
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<PAGE> 175
EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF
1933, AS AMENDED, AND THE OTHER CONDITIONS SPECIFIED IN THAT CERTAIN
AFFILIATES AGREEMENT DATED AS OF MARCH 21, 1994 AMONG NOVELL, INC.,
WORDPERFECT CORPORATION AND THE SHAREHOLDER, A COPY OF WHICH AFFILIATES
AGREEMENT MAY BE INSPECTED BY THE HOLDER OF THIS CERTIFICATE AT THE
OFFICES OF NOVELL INC. NOVELL INC. WILL FURNISH, WITHOUT CHARGE, A COPY
THEREOF TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST
THEREFOR."
Novell agrees to remove promptly such stop transfer instructions and legend upon
full compliance with this Agreement by the undersigned, including, without
limitation, a sale or transfer or Novell Stock permitted under Section 4(c)
above.
8. Termination. This Agreement shall be terminated and shall be of no
further force and effect upon the termination of the Reorganization Agreement
pursuant to Section 7.1 of the Reorganization Agreement.
9. Counterparts. This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument.
10. Binding Agreement. This Agreement will inure to the benefit of and be
binding upon and enforceable against the parties and their successors and
assigns, including administrators, executors, representatives, heirs, legatees
and devisees of Affiliate and any pledgee holding Restricted Securities as
collateral.
11. Waiver. No waiver by any party hereto of any condition or of any breach
of any provision of this Agreement shall be effective unless in writing and
signed by each party hereto.
12. Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware.
13. Attorneys' Fees. In the event of any legal actions or proceeding to
enforce or interpret the provisions hereof, the prevailing party shall be
entitled to reasonable attorneys' fees, whether or not the proceeding results in
a final judgment.
14. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
15. Third Party Reliance. Counsel to and accountants for the parties shall
be entitled to rely upon this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
<TABLE>
<S> <C>
WORDPERFECT CORPORATION AFFILIATE
By: By:
Title:
Affiliate's Address for Notice:
--------------------------------------------
NOVELL, INC.
--------------------------------------------
By:
--------------------------------------------
Title:
Shares beneficially owned:
-------shares of WordPerfect Common Stock
</TABLE>
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<PAGE> 177
EXHIBIT 6.2(J)
TAX MATTERS AGREEMENT
This TAX MATTERS AGREEMENT (the "Agreement") is made and entered into as of
the day of 1994 between NOVELL, INC., a Delaware corporation
("Novell"), WORDPERFECT CORPORATION, a Utah corporation ("WordPerfect") and Alan
C. Ashton, Karen J. Ashton, Emily Ann Ashton, Amy Jo Ashton, Spencer C. Ashton,
Morgan A. Ashton, Brigham M. Ashton, Allison Rae Ashton, Samuel L. Ashton, Eliza
K. Ashton, Adam C. Ashton, Stephen D. Ashton, Rebekah R. Ashton, Bruce W.
Bastian, Melanie L. Bastian, C. Richard Bastian, Darren B. Bastian, Jeffrey H.
Bastian, and Robert A. Bastian (each such person a "Stockholder" and all such
persons, collectively, the "Stockholders"). Capitalized terms not defined herein
shall have the meaning set forth in the Merger Agreement (as hereinafter
defined).
WHEREAS, WordPerfect and its Subsidiaries were S corporations as defined in
Section 1361 of the Code (as hereinafter defined) for certain taxable years (or
portions thereof) ending prior to January 1, 1994;
WHEREAS, WordPerfect owns one hundred percent (100%) of the outstanding
capital stock of each of the Subsidiaries;
WHEREAS, the Stockholders own one hundred percent (100%) of the outstanding
capital stock of WordPerfect;
WHEREAS, WordPerfect has entered into that certain Agreement and Plan of
Reorganization, dated March 21, 1994 (and subsequently amended on May , 1994)
among Novell, Novell Acquisition Corp., a Delaware corporation ("Sub"), and
WordPerfect (the "Merger Agreement") pursuant to which WordPerfect will be
merged into Novell as of the Effective Time of the Merger (the "Merger"); and
WHEREAS, as a condition of the consummation of the Merger, the Stockholders
have agreed to make representations and warranties and to provide
indemnification with respect to certain tax matters relating to the former
status of WordPerfect and its Subsidiaries as S corporations.
NOW, THEREFORE, the parties agree as follows.
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"Code" means the Internal Revenue Code of 1986, as amended, and, in the
context of a state or local tax, a reference to the Code or a section of the
Code includes any similar applicable provision of state or local law.
"Final Determination" shall have the meaning set forth in section 1313(a)
of the Code or under similar state law.
"Party" means Novell, WordPerfect or the Stockholders, and "Parties" means
Novell, WordPerfect and the Stockholders.
"Sharing Percentage" shall mean with respect to each Stockholder the
percentage shown opposite such Stockholder's name as set forth in Schedule A
attached hereto and incorporated herein by this reference.
"Stockholders' Representatives" shall mean the persons designated pursuant
to Article IV hereof.
"Taxes" means all taxes, however denominated, including any interest,
penalties or additions to tax that may become payable in respect thereof,
imposed by any federal, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income, payroll and employee
withholding, unemployment insurance, social security, sales and use, excise,
profits, value added, ad valorem, occupancy, disability, franchise, gross
receipts, environmental, occupation, real and personal property, stamp,
transfer, license, net worth, real property gains, capital, and worker's
compensation taxes.
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"Tax Returns" means all reports, estimates, information statements and
returns relating to, or required to be filed in connection with, any Taxes.
ARTICLE II
THE TERMINATION
2.1 Termination of S Status. The Stockholders, severally and not jointly,
hereby represent and warrant that the S corporation elections of WordPerfect and
each of its Subsidiaries (that elected to be treated as S corporations) were
terminated on or before January 1, 1994.
2.2 Distribution and Tax Sharing Agreements. Except with respect to (i)
this Agreement, (ii) any promissory note or other indebtedness currently
outstanding and reflected on the financial statements of WordPerfect or (iii)
those agreements shown on the disclosure schedule attached hereto as Schedule
2.2, the Stockholders, severally but not jointly, hereby represent and warrant
that they are not a party to and do not claim any rights under any Tax
indemnity, Tax sharing, Tax allocation agreement with WordPerfect and/or any of
its Subsidiaries or under any agreement obligating WordPerfect or any of its
Subsidiaries to make any distribution or payment of cash or property to the
Stockholders in respect of, or in connection with, their ownership of shares of
capital stock of WordPerfect or the Subsidiaries (collectively, "Tax Sharing
Agreements"). Except for this Tax Matters Agreement and any promissory notes or
other indebtedness currently reflected on the financial statements of
WordPerfect, to the extent any such Tax Sharing Agreements have existed or
currently exist, the Stockholders, WordPerfect and each of the Subsidiaries
hereby agree to terminate any and all such Tax Sharing Agreements effective as
of December 31, 1993 and hereby waive any rights they may have now or in the
future under such Tax Sharing Agreements.
ARTICLE III
TAX ALLOCATION AND INDEMNIFICATION
3.1 Tax Returns. WordPerfect hereby covenants and agrees on behalf of
itself and its Subsidiaries that it shall be responsible for and shall cause the
filing of all Tax Returns which it or any of its Subsidiaries is required to
file, or in which it or any of its Subsidiaries is to be included (including any
combined, unitary or consolidated returns) with respect to all taxable years (or
portions thereof) ending on or prior to December 31, 1993.
3.2 Corporate Liability for Taxes.
(a) Except as otherwise provided in Section 3.3 hereof, WordPerfect shall
pay or cause to be paid any and all Taxes required to be paid by WordPerfect or
any of its Subsidiaries for all taxable years covered by the Tax Returns
referred to in Section 3.1 as required by applicable law, and shall indemnify
and hold harmless the Stockholders from any liability for such Taxes.
(b) In the event an assessment of additional foreign income taxes by a
foreign taxing authority against WordPerfect or any of it Subsidiaries, with
respect to any taxable year ending on or prior to December 31, 1993, results in
the WordPerfect Stockholders' having a claim for additional credits or
deductions for foreign income taxes, then each WordPerfect Stockholder shall
apply for a refund to the fullest extent allowed by law in order to realize the
greatest refund available with respect to such additional credits or deductions
and shall pay to Novell the amount thereof (plus interest received under Section
6611 of the Code) immediately upon receipt of such refund without regard to any
other adjustments to such Stockholder's Tax Return for the taxable year for
which such refund was received, provided, however, the amount paid hereunder
shall be reduced by the reasonable fees and costs associated with such
Stockholder's claim for refund and any taxes paid in respect of such refund. The
liability of each Stockholder to WordPerfect hereunder shall be several and not
joint.
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3.3 Stockholder Indemnification for Certain Federal and State Corporate Tax
Liabilities.
(a) Subject to section 3.3(b) below, each Stockholder, severally, in
accordance with such Stockholder's Sharing Percentage (and not jointly), hereby
indemnifies and agrees to hold each of Novell, WordPerfect and each of its
Subsidiaries harmless from, against and in respect of any U.S. federal, Utah or
New Mexico income tax liability, if any, resulting from (i) WordPerfect or any
of its Subsidiaries failing to qualify as an S corporation under Code Section
1361(a)(1) (as enacted and in effect prior to January 1, 1993) or under
applicable Utah or New Mexico state law (A) with respect to the Subsidiaries
(other than those Subsidiaries that never purported to be taxed as S
corporations) for every taxable year (or any portion of a taxable year) ending
on or prior to December 31, 1993 for which each such Subsidiary purported to be
taxed as an S Corporation, and (B) with respect to WordPerfect, for every
taxable year (or any portion of a taxable year) commencing on or after January
1, 1985 and ending on or before October 1, 1993 or (ii) a breach of any
representation or warranty made by the Stockholders in Sections 2.1 and 2.2 of
this Tax Matters Agreement. For the purposes of subsection (i) of this section
3.3(a), "income tax liability" shall mean the amount of the income tax liability
(plus interest, penalties and additions to taxes imposed with respect thereto)
as finally determined by the relevant taxing authority, but only to the extent
such amount represents the income tax liability that would have been payable
with respect to the amount of taxable income shown on the relevant corporate tax
return as originally filed.
(b) The total liability of each Stockholder under section 3.3(a)(i) shall
not exceed the sum of (i) the product of the Stockholder's Sharing Percentage
and One Hundred Fifteen Million Dollars ($115,000,000.00) (the "Indemnity
Fund"), (ii) the sum of each year's (or that portion of a year's) Indemnity Fund
Earnings (as defined below) accrued on or after January 1, 1993; and (iii) the
amount of any refund received by such Stockholder as a result of WordPerfect or
any of its Subsidiaries failing to qualify as S corporations (a "Failed S
Election") for any taxable period (or that portion of any taxable period) during
which the relevant corporation reported its filing status as that of an S
corporation less any taxes paid in respect of such refund. For purposes of the
preceding sentence, a Stockholder shall be deemed to have received a refund on
the earlier to occur of (i) the date of the actual receipt of a refund
attributable to a Failed S Election or (ii) the date upon which a refund
attributable to a Failed S Election is applied against a tax liability of such
Stockholder, but only after a Final Determination in respect of such other tax
liability. Notwithstanding the immediately preceding sentence, if a Stockholder
does not file a claim for refund within 90 days after receipt of written notice
of a Final Determination as to a Failed S Election, the Stockholder shall be
deemed to have received a refund for purposes of this Section 3.3(b) on the date
which is 270 days after date of the receipt of such written notice. For purposes
of this Agreement, (i) "Indemnity Fund Earnings" shall mean the product of the
Indemnity Fund and 60 percent of the one year Treasury Bill rate in effect as of
January 1st of the applicable year, and (ii) for purposes of calculating the
Indemnity Fund Earnings, the Indemnity Fund shall be increased each year by the
cumulative amount of the Indemnity Fund Earnings for all prior years.
3.4 Audit and Contest Rights.
(a) The parties hereto shall cooperate fully with each other in the conduct
of any audit or other proceeding relating to Taxes of WordPerfect or its
Subsidiaries and/or relating to Taxes of the Stockholders and shall make
available to each other such Tax data and other information as may be reasonably
required with respect to any Tax audit. Within twenty (20) days following notice
of any proposed adjustment which could give rise to a claim for indemnification
under Section 3.3, WordPerfect shall notify the Stockholder Representative of
such proposed adjustment and thereafter, the Stockholders' Representatives shall
have the right to control any proceedings relating to such proposed adjustment
and to determine when, whether and to what extent to settle any such claim,
assessment or dispute; provided, however, that WordPerfect shall have the right
to control the conduct of any such audit or proceeding for which WordPerfect
waives its rights to indemnification under Section 3.3 hereof.
(b) Within twenty (20) days following notice of any proposed adjustment
that would not adversely affect Novell, WordPerfect or any of the Subsidiaries
(as determined in good faith by WordPerfect) but that could have the effect of
increasing the Stockholders' Tax liability for any period, WordPerfect shall
notify the Stockholder Representative of such proposed adjustment and thereafter
the Stockholders' Representatives
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shall have the right to control any proceedings relating to such proposed
adjustment and to determine when, whether and to what extent to settle any such
claim, assessment or dispute. The Stockholders' Representative shall notify
Novell within twenty (20) days with respect to the Stockholders intent to assume
control of such proceeding. If the Stockholders elect not to assume control of
such proceeding or fail to respond by written notice within such twenty (20) day
period, the provisions of Section 3.4(c) shall apply.
(c)(i) Except as provided in section 3.4(c)(iii), below, neither Novell nor
WordPerfect nor any Subsidiary shall make any election, take any Tax Return
position, or agree to any Tax adjustment or adjustments that would have the
effect of increasing the Stockholders' Tax liability with respect to any period
ending on or prior to December 31, 1993 ("Company Action"), without first
obtaining the prior written consent of the Stockholders' Agent, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, the affected
company may take the Company Action without the consent of the Stockholders'
Agent provided the affected company indemnifies the Stockholders against any
increase in the Stockholders' Tax liability resulting from the Company Action.
(ii) A company desiring to take a Company Action shall notify the
Stockholders' Agent in writing of the proposed Company Action, and shall provide
an estimate to the Stockholders' Agent of the aggregate increase in the
Stockholders' taxable income arising out of the Company Action. The
Stockholders' Agent shall have sixty (60) days from the date of the request for
consent in which to notify the affected company in writing whether the
Stockholders' Agent consents to the Company Action. If the Stockholders' Agent
does not respond within the sixty (60) day period the Stockholders' Agent shall
be conclusively deemed to have consented to the Company Action.
(iii) The action of the Stockholders' Agent to withhold consent with
respect to any proposed Tax Return position or adjustment shall be conclusively
presumed to be reasonable if the aggregate increase in the Stockholders' taxable
income resulting therefrom, when added to any prior approved adjustment or Tax
Return positions subject to this section 3.4, would be to increase the
Stockholders' aggregate taxable income by $10 million; provided, however, if
Novell provides to the Stockholders' Agent a written opinion of tax counsel
(approved by the Stockholders' Agent which approval shall not be unreasonably
withheld) that is more likely than not that such Company Action is required by
law, then the Stockholders' Agent shall be conclusively presumed to have given
consent to such adjustment or Tax Return position, notwithstanding the
Stockholders' Agent prior disapproval, if any. However, if the aggregate
increase in the Stockholders' taxable income, when added to any prior Company
Actions, would be to increase the such taxable income by less than $10 million,
then consent shall not be withheld in the absence of delivery to Novell, within
sixty (60) days of the date of the request for such consent, of a written
opinion of tax counsel (approved by Novell which approval shall not be
unreasonably withheld) to the effect that it is more likely than not that such
Tax Return position or adjustment is not required by law. The sixty (60) day
period provided in section 3.4(c)(ii) for action by the Stockholders' Agent
shall be extended as necessary so that the Stockholders' Agent have no less than
fourteen (14) days after receipt of the tax opinion to review and approve the
form of the tax opinion. If a proposed adjustment is not consented to pursuant
to this Section 3.4(c)(iii), then Novell shall be obligated to pursue the
proceedings in a manner consistent with the Stockholders' best interest and the
Stockholders shall reimburse Novell for all reasonable fees and costs associated
with such proceedings. Solely with respect to an election, the action of a
Stockholders' Agent to withhold consent shall be conclusively presumed to be
reasonable absent Novell providing to the Stockholders' Agent a written opinion
of tax counsel (approved by the Stockholders' Agent which approval will not be
unreasonably withheld) to the effect that it is more likely than not that the
proposed election is required by law. No action by Novell pursuant to this
Section 3.4(c)(iii) shall preclude the Stockholders from contesting any proposed
audit adjustment affecting their individual returns under Sections 6241-6245 of
the Code.
(d) For purposes of this Section 3.4, an adjustment shall be deemed to be
proposed (and WordPerfect and Novell shall be deemed to have received notice of
such proposal) as of the first date that WordPerfect or Novell receives written
advice from an applicable Taxing authority (or agent thereof) to the effect that
such Taxing authority is proposing to make an adjustment to the Tax liability or
Tax Return of WordPerfect or any Stockholder.
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(e) In the event of a conflict between the provisions of subsections 3.4(a)
or 3.4(b), on the one hand, and subsection 3.4(c) on the other, the provisions
of subsection 3.4(a) or (b), as applicable, shall control.
3.5 Payments. The Party or Parties required to make any payment under
Section 3.2 or Section 3.3 shall make such payment within thirty (30) days after
the Final Determination of any Tax liability resulting in a claim for
indemnification hereunder.
ARTICLE IV
STOCKHOLDERS' REPRESENTATIVES
4.1 Stockholders' Representatives. In order to facilitate the resolution
of any Tax audit issues between WordPerfect or Novell on the one hand, and the
Stockholders, on the other, each Stockholder hereby designates and appoints Alan
C. Ashton and Bruce W. Bastian, acting jointly, as his or her representatives
hereunder (acting jointly, the "Stockholders' Representatives") and authorizes
them to take all actions on his or her behalf under this Agreement including the
appointment of an agent ("Stockholders' Agent") to represent the Stockholders on
a day to day basis in connection with any and all Tax audits. The Stockholders'
Agent shall be . The Stockholders' Representative may change the
Stockholders' Agent upon ten (10) days written notice to Novell's Tax Director.
Novell and WordPerfect shall be entitled to rely on all unanimous actions,
decisions, representations and promises of the Stockholders' Representatives and
Stockholders' Agent as if the same had been made by each Stockholder personally,
without any obligation to verify, authenticate or seek confirmation of any other
facts from the Stockholders or from any other person. Upon the death or legal
incapacity of either of the individuals named above, the executor or guardian of
the estate of such individual shall succeed him as a Stockholders'
Representative.
4.2 Stockholder Vote. If the Stockholders' Representatives are unable to
agree with respect to an action to be taken under Section 3.4 of this Agreement,
they shall so notify Novell, WordPerfect and the Stockholders in writing.
Thereafter, any action to be taken by the Stockholders' Representatives or
Stockholders' Agent under Section 3.4 with respect to any such action shall be
decided by a majority vote of the Stockholders who would be liable for any
resulting Tax under Section 3.3, with each such Stockholder having a vote equal
to his or her Sharing Percentage.
ARTICLE V
MISCELLANEOUS
5.1 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which counterparts
collectively shall constitute one instrument representing the Agreement between
the parties hereto.
5.2 Construction of Terms. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, from or
corporation, other than the parties hereto or their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
5.3 Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the
substantive laws of the State of Utah without regard to the Utah choice of law
rules.
5.4 Amendment and Modification. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, nor is this Agreement intended to confer upon any other person except
the parties any rights or remedies hereunder.
5.5 Interpretation. The title, article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
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5.6 Severability. In the event that any one or more of the provisions of
this Agreement shall be held to illegal, invalid or unenforceable in any
respect, the same shall not in any respect affect the validity, legality or
enforceability of the remainder of this Agreement, and the parties shall use
their best efforts to replace such illegal, invalid or unenforceable provisions
with an enforceable provision approximating, to the extent possible, the
original intent of the parties.
5.7 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no representations, promises, warranties, covenants, or
undertakings with respect to the subject matter contained herein, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
5.8 Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of and be binding upon each party and such parties' heirs,
devises, legatees, personal representatives, successors and assigns.
5.9 Advice of Counsel. Each party hereto represents that they have
consulted with, or had the opportunity to consult with, legal counsel with
respect to this Agreement.
5.10 Effective Date. This Agreement shall become effective at the
Effective Date of the Merger.
5.11 Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to Novell: Novell, Inc.
122 East, 1700 South
Provo, Utah 84606
Attn: Tax Director
Telecopy No.: (801) 429-3951
Telephone No.: (801) 429-7000
If to Stockholders' Representatives:
Alan C. Ashton
Bruce W. Bastian
With a copy to: Stockholders' Agent
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
NOVELL INC.,
a Delaware corporation
By:
David C. Bradford
Senior Vice President and
General Counsel
WORDPERFECT CORPORATION,
a Utah corporation
By:
Adriaan Rietveld, President
and Chief Executive Officer
By:
R. Duff Thompson, Secretary
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<PAGE> 184
STOCKHOLDERS' SIGNATURE PAGE
<TABLE>
<S> <C>
R. Duff Thompson as custodian for:
Allison R. Ashton
Samuel L. Ashton
Eliza K. Ashton
Adam C. Ashton
Stephen D. Ashton
Rebekah R. Ashton
Charles R. Bastian
Darren B. Bastian
Jeffrey H. Bastian
Robert A. Bastian
Alan C. Ashton Spencer C. Ashton, as
Attorney-in-fact for Morgan A. Ashton
Karen Ashton Brigham M. Ashton
Emily A. Eddington Bruce W. Bastian
Amy J. Young Melanie Bastian
Spencer C. Ashton
</TABLE>
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<PAGE> 185
APPENDIX B
UTAH REVISED BUSINESS CORPORATION ACT
PART 13
DISSENTERS' RIGHTS
16-10A-1301. DEFINITIONS.
For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share, exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 16-10a-1302 and who exercises that right
when and in the manner required by Sections 16-10a-1320 through
16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the statutory rate set forth in
Section 15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares that are registered in the name of a nominee to the extent the
beneficial owner is recognized by the corporation as the shareholder as
provided in Section 16-10a-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
16-10A-1302. RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
from, and obtain payment of the fair value of shares held by him in the event
any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a
party if:
(i) shareholder approval is required for the merger by Section
16-10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
(c) consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under Subsection 16-10a-1202(1), but not
including a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale; and
(d) consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to
Subsection 16-10a-1202(2).
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(2) A shareholder is entitled to dissent and obtain payment of the fair
value his shares in the event of any other corporate action to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors so
provides.
(3) Notwithstanding the other provisions of this part, except to the extent
otherwise provided in the articles of incorporation, bylaws, or a resolution of
the board of directors, and subject to the limitations set forth in Subsection
(4), a shareholder is not entitled to dissent and obtain payment under
Subsection (1) of the fair value of the shares of any class or series of shares
which either were listed on a national securities exchange registered under the
federal Securities Exchange Act of 1934, as amended, or on the National Market
System of the National Association of Securities Dealers Automated Quotation
System, or were held of record by more than 2,000 shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his shares, pursuant to the corporate action,
anything except:
(a) shares of the corporation surviving the consummation of the plan
of merger or share exchange;
(b) shares of a corporation which at the effective date of the plan of
merger or share exchange either will be listed on a national securities
exchange registered under the federal Securities Exchange Act of 1934, as
amended, or on the National Market System of the National Association of
Securities Dealers Automated Quotation System, or will be held of record by
more than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or cash
in lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this part may not challenge the corporate action creating the entitlement
unless the action is unlawful or fraudulent with respect to him or to the
corporation.
16-10A-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if the shareholder dissents with respect
to all shares beneficially owned by any one person and causes the corporation to
receive written notice which states the dissent and the name and address of each
person on whose behalf dissenters' rights are being asserted. The rights of a
partial dissenter under this subsection are determined as if the shares as to
which the shareholder dissents and the other shares held of record by him were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) the beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) the beneficial shareholder dissents with respect to all shares of
which he is the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
beneficial shareholder must certify to the corporation that both he and the
record shareholders of all shares owned beneficially by him have asserted, or
will timely assert,
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dissenters' rights. The certification requirement must be stated in the
dissenters' notice given pursuant to Section 16-10a-1322.
16-10A-1320. NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must be sent to all shareholders of the corporation as of the
applicable record date, whether or not they are entitled to vote at the meeting.
The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this part. The notice must be accompanied by a copy of
this part and the materials, if any, that under this chapter are required to be
given the shareholders entitled to vote on the proposed action at the meeting.
Failure to give notice as required by this subsection does not affect any action
taken at the shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, any written or oral solicitation of a shareholder to execute
a Written consent to the action contemplated by Section 16-10a-704 must be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this part, by a copy of this
part, and by the materials, if any, that under this chapter would have been
required to be given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders' meeting. Failure
to give written notice as provided by this subsection does not affect any action
taken pursuant to Section 16-10a-704 for which the notice was to have been
given.
16-10A-1321. DEMAND FOR PAYMENT -- ELIGIBILITY AND NOTICE OF INTENT.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken,
written notice of his intent to demand payment for shares if the proposed
action is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, a shareholder who wishes to assert dissenters' rights may
not execute a writing consenting to the proposed corporate action.
(3) In order, to be entitled to payment for shares under this part, unless
otherwise provided in the articles of incorporation, bylaws, or a resolution
adopted by the board of directors, a shareholder must have been a shareholder
with respect to the shares for which payment is demanded as of the date the
proposed corporate action creating dissenters' rights under Section 16-10a-1302
is approved by the shareholders if shareholder approved is required, or as of
the effective date of the corporate action if the corporate action is authorized
other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections (1)
through (3) is not entitled to payment for shares under this part.
16-10A-1322. DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized, the corporation shall give a written dissenters'
notice to all shareholders who are entitled to demand payment for their shares
under this part.
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<PAGE> 188
(2) The dissenters' notice required by Subsection (1) must be sent no later
than ten days after the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the effective
date or proposed effective date of the corporate action;
(b) state an address at which the corporation will receive payment
demands and an address at which certificates for certificated shares must
be deposited;
(c) inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form requests a
dissenter to state an address to which payment is to be made;
(e) set a date by which the corporation must receive the payment
demand and by which certificates for certificated shares must be deposited
at the address indicated in the dissenters' notice, which dates may not be
fewer than 30 nor more than 70 days after the date the dissenters' notice
required by Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10a-1303(3),
if the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10A-1323. PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice described in Section
16-10a-1322, who meets the requirements of Section 16-10a-1321, and wishes to
assert dissenters' rights must, in accordance with the terms of the dissenters'
notice:
(a) cause the corporation to receive a payment demand, which may be
the payment demand form contemplated in Subsection 16-10a-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance
with the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described
in Section 16-10a-1322, as contemplated by Section 16-10a-1327, certify in
writing, in or with the payment demand, whether or not he or the person on
whose behalf he asserts dissenters' rights acquired beneficial ownership of
the shares before the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302.
(2) A shareholder who demands payment in accordance with Subsection (1)
retains all rights of a shareholder except the right to transfer the shares
until the effective date of the proposed corporate action giving rise to the
exercise of dissenters' rights and has only the right to receive payment for the
shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share
certificates as required, by the date or dates set in the dissenters' notice, is
not entitled to payment for shares under this part.
16-10A-1324. UNCERTIFICATED SHARES.
(1) Upon receipt of a demand for payment under Section 16-10a-1323 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
of the shares until the proposed corporate action is taken or the restrictions
are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323 apply to
shareholders who own uncertificated shares.
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<PAGE> 189
16-10A-1325. PAYMENT.
(1) Except as provided in Section 16-10a-1327, upon the later of the
effective date of the corporate action creating dissenters' rights under Section
16-10a-1302, and receipt by the corporation of each payment demand pursuant to
Section 16-10a-1323, the corporation shall pay the amount the corporation
estimates to be the fair value of the dissenter's shares, plus interest to each
dissenter who has complied with Section 16-10a-1323, and who meets the
requirements of Section 16-10a-1321, and who has not yet received payment.
(2) Each payment made pursuant to Subsection (1) must be accompanied by:
(a) (i)(A) the corporation's balance sheet as of the end of its most
recent fiscal year, or if not available, a fiscal year ending not more than
16 months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year
and a statement of cash flow for that year, if the corporation
customarily provides such statements to shareholders; and
(D) the latest available interim financial statements, if any;
(ii) the balance sheet and statements referred to in Subsection (i)
must be audited if the corporation customarily provides audited financial
statements to shareholders;
(b) a statement of the corporation's estimate of the fair value of the
shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under
Section 16-10a-1328; and
(d) a copy of this part.
16-10A-1326. FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302 does not occur within 60 days after the date
set by the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, the corporation shall return all
deposited certificates and release the transfer restrictions imposed on
uncertificated shares, and all shareholders who submitted a demand for payment
pursuant to Section 16-10a-1323 shall thereafter have all rights of a
shareholder as if no demand for payment had been made.
(2) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1322 occurs more than 60 days after the date set by
the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, then the corporation shall send a
new dissenters' notice, as provided in Section 16-10a-1322, and the provisions
of Sections 16-10a-1323 through 16-10a-1328 shall again be applicable.
16-10A-1327. SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT
OF PROPOSED CORPORATE ACTION.
(1) A corporation may, with the dissenters' notice given pursuant to
Section 16-10a-1322, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302 and state that a shareholder who
asserts dissenters' rights must certify in writing, in or with the payment
demand, whether or not he or the person on whose behalf he asserts dissenters'
rights acquired beneficial ownership of the shares before that date. With
respect to any dissenter who does not certify in writing, in or with the payment
demand that he or the person on whose behalf the dissenters' rights are being
asserted, acquired beneficial ownership of the shares before that date, the
corporation may, in lieu of making the payment provided in Section 16-10a-1325,
offer to make payment if the dissenter agrees to accept it in full satisfaction
of his demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10a-1325(2).
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<PAGE> 190
16-10A-1328. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter who has not accepted an offer made by a corporation under
Section 16-10a-1327 may notify the corporation in writing of his own estimate of
the fair value of his shares and demand payment of the estimated amount, plus
interest, less any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the amount paid under Section
16-10a-1325 or offered under Section 16-10a-1327 is less than the fair
value of the shares;
(b) the corporation fails to make payment under Section 16-10a-1325
within 60 days after the date set by the corporation as the date by which
it must receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate
action creating dissenters' rights, does not return the deposited
certificates or release the transfer restrictions imposed on uncertificated
shares as required by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this section
unless he causes the corporation to receive the notice required by Subsection
(1) within 30 days after the corporation made or offered payment for his shares.
16-10A-1330. JUDICIAL APPRAISAL OF SHARES -- COURT ACTION.
(1) If a demand for payment under Section 16-10a-1328 remains unresolved,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand contemplated by Section 16-10a-1328, and petition the court to
determine the fair value of the shares and the amount of interest. If the
corporation does not commence the proceeding within the 60-day period, it shall
pay each dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in Subsection
(1) in the district court of the county in this state where the corporation's
principal office, or if it has no principal office in this state, the county
where its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10a-1321, 16-10a-1323, and 16-10a-1328, whether or
not they are residents of this state whose demands remain unresolved, parties to
the proceeding commenced under Subsection (2) as an action against their shares.
All such dissenters who are named as parties must be served with a copy of the
petition. Service on each dissenter may be by registered or certified mail to
the address stated in his payment demand made pursuant to Section 16-10a-1328.
If no address is stated in the payment demand, service may be made at the
address stated in the payment demand given pursuant to Section 16-10a-1323. If
no address is stated in the payment demand, service may be made at the address
shown on the corporation's current record of shareholders for the record
shareholder holding the dissenter's shares. Service may also be made otherwise
as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under Subsection (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair
value of his shares, plus interest, exceeds the amount paid by the
corporation pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under Section 16-10a-1327.
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16-10A-1331. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under Section
16-10a-1330 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds that the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section 16-10a-
1328.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to those counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefitted.
B-7
APPENDIX C
1993 FORM 10-K
<PAGE> 1
EXHIBIT 2.6
AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT (the "Amendment") to that certain Agreement and Plan of
Reorganization, dated as of March 21, 1994 (the "Agreement"), by and among
Novell, Inc., a Delaware corporation ("Novell"), Novell Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Novell ("Sub"), and
WordPerfect Corporation, a Utah corporation ("WordPerfect"), and for purposes of
Section 5.3 of the Agreement only, Alan C. Ashton ("Ashton"), Bruce W. Bastian
("Mr. Bastian") and Melanie L. Bastian ("Ms. Bastian"), is entered into as of
the 31st day of May, 1994 by the parties to the Agreement. All capitalized terms
used in this Amendment shall have the same meanings set forth for them in the
Agreement, unless otherwise defined in this Amendment.
RECITALS
WHEREAS, Novell, Sub, WordPerfect, Ashton, Mr. Bastian and Ms. Bastian
entered into the Agreement providing for the combination of Novell and
WordPerfect (together, the "Combined Company") by means of the merger of Sub
with and into WordPerfect, pursuant to which WordPerfect would become a wholly
owned subsidiary of Novell; and
WHEREAS, the parties have determined that it is in their best interests
that the combination of Novell and WordPerfect be effected by a merger of
WordPerfect directly into Novell;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree
as follows:
1. Merger Agreement. The Agreement is hereby amended as set forth below:
(a) All references in the Agreement to "Novell and Sub" shall be deemed to
be references to "Novell"; all references to "each of Novell and Sub" shall be
deemed references to "Novell" only; all references to "Novell or Sub" shall be
deemed to be references to "Novell" only; and all other references to Sub shall
be deemed deleted. Furthermore, all language indicating the separate existence
of Novell and Sub, such as "as the case may be," or attribution to two separate
entities, such as "respectively," shall be similarly deemed deleted along with
any punctuation with respect thereto.
(b) The first paragraph of Section 1.1 of the Agreement is amended to read
in its entirety as follows:
1.1 Merger; Effective Time. Subject to the terms and conditions of
this Agreement and of the Articles of Merger attached as Exhibit 1.1 (the
"Articles of Merger"), WordPerfect will be merged with and into Novell (the
"Merger") in accordance with the Utah Revised Business Corporation Act (the
"URBCA"). The Articles of Merger provide, among other things, the mode of
effecting the Merger and the manner and basis of converting each issued and
outstanding share of capital stock of WordPerfect into shares of Common
Stock of Novell ("Novell Common Stock").
(c) Section 1.3 of the Agreement is amended to read in its entirety as
follows:
1.3 Effects of the Merger. At the Effective Time, (i) the separate
existence of WordPerfect shall cease and WordPerfect shall be merged with
and into Novell (WordPerfect and Novell are sometimes referred to as the
"Constituent Corporations" and Novell after the Merger is sometimes
referred to as the "Surviving Corporation"), (ii) the Articles of
Incorporation of Novell shall be the Articles of Incorporation of the
Surviving Corporation, (iii) the Bylaws of Novell shall be the Bylaws of
the Surviving Corporation and (iv) the directors of Novell shall be the
directors of the Surviving Corporation, (v) the officers of Novell shall be
the officers of the Surviving Corporation, and (vi) the Merger shall, from
and after the Effective Time, have all the effects provided by applicable
law, this Agreement and the Articles of Merger.
(d) Section 2.1(a) of the Agreement is deleted in its entirety.
<PAGE> 2
(e) Section 2.2(a) of the Agreement is amended to read in its entirety as
follows:
(a) Exchange Agent. Novell shall act as exchange agent (the "Exchange
Agent") in the Merger.
(f) Sections 4.1, 4.2 and 4.3 of the Agreement are amended to read in their
entirety as follows:
4.1 Organization; Standing and Power. Novell is a corporation validly
existing and in good standing under the laws of its state of incorporation
and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its businesses as now being
conducted. Novell has delivered to WordPerfect complete and correct copies
of the Certificate of Incorporation and Bylaws of Novell as amended to the
date hereof.
4.2 Capital Structure. As of the date hereof the authorized capital
stock of Novell consists of 400,000,000 shares of Novell Common Stock, $.10
par value and 500,000 shares of Novell Preferred Stock, $.10 par value. At
the close of business on January 29, 1994, 309,021,297 shares of Novell
Common Stock were outstanding, 27,978,621 shares of Novell Common Stock
were reserved for issuance upon the exercise of outstanding stock options
("Novell Options"), no shares of Novell Common Stock were held by Novell in
its treasury, and no shares of Novell Preferred Stock were outstanding. All
the outstanding shares of Novell Common Stock are validly issued, fully
paid, nonassessable and free of preemptive rights except pursuant to rights
issued under Novell's Stockholder Rights Plan. The shares of Novell Common
Stock issuable in connection with the Merger are duly authorized and
reserved for issuance and, when issued in accordance with the terms of this
Agreement and the Articles of Merger, will be validly issued, fully paid,
nonassessable and free of preemptive rights (other than any rights which
may be issued pursuant to Novell's Stockholder Rights Plan). Except for the
shares listed above issuable pursuant to Novell Options, there are not any
options, warrants, calls, conversion rights, commitments or agreements of
any character to which Novell or any Subsidiary of Novell is a party or by
which any of them may be bound obligating Novell or any Subsidiary of
Novell to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of Novell or of any Subsidiary of
Novell or obligating Novell or any Subsidiary of Novell to grant, extend or
enter into any such option, warrant, call, conversion right, commitment or
agreement.
4.3 Authority. Novell has all requisite corporate power and authority
to enter into this Agreement and the Articles of Merger, subject to any
required stockholder approval, to consummate the transactions contemplated
hereby and by the Articles of Merger. The execution and delivery by Novell
of this Agreement and the Articles of Merger and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Novell. This Agreement and
the Articles of Merger have been duly executed and delivered by Novell and
constitute valid and binding obligations of Novell enforceable in
accordance with their terms, except as enforcement may be limited by
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any
proceeding therefor may be brought. Subject to satisfaction of the
conditions set forth in Article VI, the execution and delivery of this
Agreement and the Articles of Merger and the consummation of the
transactions contemplated hereby and thereby will not conflict with or
result in any violation of any material statute, law, rule, regulation,
judgment, order, decree or ordinance applicable to Novell or any Subsidiary
of Novell or their respective properties or assets, or conflict with or
result in any breach or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit, under (i)
any provision of the Certificate of Incorporation or Bylaws of Novell or
any of its Subsidiaries or (ii) any material agreement, contract, note,
mortgage, indenture, lease, instrument, permit, concession, franchise or
license to which Novell or any of its Subsidiaries is a party or by which
Novell or any of its Subsidiaries or their respective properties or assets
may be bound or affected. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is
required by or with respect to Novell in connection with the execution and
delivery of this Agreement and the Articles of Merger or the consummation
by Novell of the transactions contemplated hereby or thereby, except for
(i) the filing of a premerger notification report by Novell under the HSR
Act, (ii) the filing of the S-4
2
<PAGE> 3
and such other documents with, and the obtaining of such orders from,
the SEC and various state securities or "blue sky" authorities, and the
making of such reports under the Exchange Act, as are required in
connection with the transactions contemplated by this Agreement, (iii)
the filing of the Articles of Merger with the Utah Division of
Corporations and Commercial Code and the Secretary of State of the
State of Delaware and appropriate documents with the relevant
authorities of other states in which Novell is qualified to do
business, (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the
laws of any foreign country which if not obtained or made would not
have a Material Adverse Effect and (v) such other consents,
authorizations, filings, approvals and registrations which if not
obtained or made would not have a Material Adverse Effect.
(g) Section 5.14 of the Agreement is amended to read in its entirety as
follows:
5.14 Indemnification. From and after the Effective Time, Novell shall
(to the fullest extent permitted by applicable law) indemnify, defend and
hold harmless each person who is now, or has been at any time prior to the
date hereof or who becomes prior to the Effective Time, an officer or
director of WordPerfect or any of its Subsidiaries (the "Indemnified
Parties") against any and all losses, damages, costs, expenses, liabilities
or judgments, or amounts that are paid in settlement of, or in connection
with, any claim, action, suit, proceeding or investigation based on or
arising out of the fact that such person is or was a director or officer of
WordPerfect or any Subsidiary of WordPerfect, whether pertaining to any
matter existing or occurring at or prior to the Effective Time
("Indemnified Liabilities"). Without limiting the foregoing, in the event
any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Party (whether arising before or after the
Effective Time), (i) any counsel retained by the Indemnified Parties for
any period after the Effective Time shall be reasonably satisfactory to
Novell (ii) after the Effective Time, Novell shall pay all reasonable fees
and expenses of counsel for the Indemnified Parties promptly as statements
therefor are received; and (iii) after the Effective Time, Novell shall use
all reasonable efforts to assist in the defense of any such matter,
provided that Novell shall not be liable for any settlement of any claim
effected without its written consent, which consent, however, shall not be
unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section upon learning of any such claim, action,
suit, proceeding or investigation, shall notify Novell (but the failure so
to notify Novell shall not relieve it from any liability which it may have
under this Section except to the extent such failure materially prejudices
Novell). The Indemnified Parties as a group may retain only one law firm to
represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a potential conflict on any
issue between the positions of any two or more Indemnified Parties.
(h) Section 6.2(i) of the Agreement is deleted in its entirety.
2. Mutual Covenant. The parties hereto shall take all steps necessary to
effectuate the intent of this Amendment, and shall use all reasonable efforts to
effect such steps, including but not limited to the assignment of contracts,
that may be necessary or desirable to effect the intent of this Amendment prior
to the Closing.
3. Sub No Longer a Party to the Agreement. After the date hereof, the
parties acknowledge and agree that Sub is no longer a party to the Agreement,
and all rights and obligations with respect to Sub contained in the Agreement
shall be extinguished without in any way affecting the rights and obligations of
the other parties thereto. All of the terms of the Agreement shall remain
unchanged and in full force and effect. In the event of any inconsistency
between the Agreement and this Amendment, this Amendment shall govern.
4. Effectiveness. This Amendment in its entirety shall be effective upon
its execution by Novell, WordPerfect, Sub, Ashton, Mr. Bastian and Ms. Bastian.
5. Miscellaneous.
(a) Governing Law. This Amendment shall be governed in all respects by the
internal laws of the State of Delaware (without giving effect to is choice of
law principles).
3
<PAGE> 4
(b) Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which,
together, shall constitute one and the same instrument.
(c) Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
(d) Entire Agreement. The Agreement, as amended hereby, constitutes the
full and entire understanding and agreement among the parties with full regard
to the subjects hereof.
(e) Titles and Subtitles. The titles and subtitles used in this Amendment
are for convenience only and are not to be considered in construing or
interpreting this Amendment.
IN WITNESS WHEREOF, Novell, Sub and WordPerfect have caused this Amendment
to be signed by their respective officers thereunto duly authorized, and Ashton,
Mr. Bastian and Ms. Bastian have signed this Agreement, all as of the date first
written above.
NOVELL, INC.
By:
James R. Tolonen, Chief Financial
Officer
WORDPERFECT CORPORATION
By:
R. Duff Thompson, Executive
Vice-President
NOVELL ACQUISITION CORP.
By:
James R. Tolonen, President
Alan C. Ashton
Bruce W. Bastian
Melanie L. Bastian
4
<PAGE> 1
EXHIBIT 8.1
June , 1994
Novell, Inc.
122 East 1700 South
Provo, Utah 84606
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 6.1 of the
Agreement and Plan of Reorganization (the "Agreement") between Novell, Inc., a
Delaware corporation ("Novell"), and WordPerfect Corporation, a Utah corporation
("WordPerfect"), dated March 21, 1994 and amended May 30, 1994. Pursuant to the
Agreement and the related Articles of Merger (collectively, the "Merger
Agreements"), WordPerfect will merge with and into Novell (the "Merger").
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Merger Agreements. All sections references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as legal counsel to WordPerfect in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have examined
(or will examine on or prior to the Effective Time of the Merger) and are
relying (or will rely) upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times, of the statements,
covenants, representations and warranties contained in the following documents:
1. The Merger Agreements;
2. Representations made to us by Novell in a letter reproduced as Exhibit A
hereto (the "Novell Letter");
3. Representations made to us by WordPerfect in a letter reproduced as
Exhibit B hereto (the "WordPerfect Letter");
4. Representations made by certain shareholders of WordPerfect in the
Affiliates Agreement.
5. The Registration Statement on Form S-4 and Proxy Statement filed with
the Securities and Exchange Commission by Novell in connection with the Merger;
6. An opinion of counsel, received by WordPerfect from Brobeck, Phleger &
Harrison, substantially identical in form and substance to this opinion (the
"BPH Tax Opinion"); and
7. Such instruments and documents related to the formation, organization
and operation of Novell and WordPerfect or to the consummation of the Merger and
the transactions contemplated thereby as we have deemed necessary or
appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon; without any independent investigation
or review thereof) that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
(or will be by the Effective Time of the Merger) due execution and delivery of
all documents where due execution and delivery are prerequisites to
effectiveness thereof;
2. The Merger will be effective under the laws of the States of Utah and
Delaware;
3. The shareholders of WordPerfect do not, and will not on or before the
Effective Time of the Merger, have an existing plan or intent to dispose of an
amount of Novell Common Stock to be received in the Merger (or to dispose of
WordPerfect capital stock in anticipation of the Merger) such that the
shareholders of WordPerfect will not receive and retain a meaningful continuing
equity ownership in Novell that is sufficient
<PAGE> 2
to satisfy the continuity of interest requirements as specified in Treasury
Regulation sec.1.368-1(b) and as interpreted in certain Internal Revenue Service
rulings and federal judicial decisions;
2
<PAGE> 3
4. To the extent any expenses relating to the Merger (or the "plan of
reorganization" within the meaning of Treasury Regulation sec.1.368-1(c) with
respect to the Merger) are funded directly or indirectly by a party other than
the incurring party, such expenses will be within the guidelines established in
Revenue Ruling 73-54, 1973-1 C.B. 187; any expenses paid on behalf of
WordPerfect shareholders will not exceed one percent (1%) of the total
consideration that will be issued in the Merger to WordPerfect shareholders in
exchange for their shares of WordPerfect stock;
5. No WordPerfect shareholder guaranteed any WordPerfect indebtedness
outstanding during the Pre-Merger Period (as defined in the WordPerfect Letter),
and at all relevant times, including as of the Effective Time of the Merger, (i)
no outstanding indebtedness of WordPerfect or Novell has or will represent
equity for tax purposes and (ii) no outstanding equity of WordPerfect or Novell
has or will represent indebtedness for tax purposes;
6. As to all matters in the Novell Letter or the WordPerfect Letter in
which a signatory thereto has represented that such signatory either is not a
party to, does not have, or is not aware of, any plan, intention, understanding
or agreement, there is in fact no such plan, intention, understanding or
agreement; and
7. The BPH Tax Opinion has been delivered and not withdrawn.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, for federal income tax purposes, the Merger will be a
"reorganization" as defined in Section 368(a) of the Code.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment regarding
the application of federal income tax laws arising under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or the
courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
2. This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal, state, local or foreign tax consequences that may result from the
Merger or any other transaction (including any transaction undertaken in
connection with the Merger). In particular, we express no opinion regarding (i)
whether and the extent to which any WordPerfect shareholder who has provided or
will provide services to WordPerfect or Novell will have compensation income
under any provision of the Code; (ii) the effects of such compensation income,
including, but not limited to, the effect upon the basis and holding period of
the Novell stock received by any such shareholder in the Merger; (iii) the
potential application of the "golden parachute" provisions (Sections 280G,
3121(v)(2) and 4999) of the Code, the alternative minimum tax provisions
(Sections 55, 56 and 57) promulgated thereunder; (iv) the corporate level tax
consequences of the Merger to Novell or WordPerfect, including, without
limitation, the recognition of any gain and the survival and/or availability,
after the Merger, of any of the federal income tax attributes or elections of
WordPerfect or Novell, after application of any provision of the Code, as well
as the regulations promulgated thereunder and judicial interpretations thereof;
(v) the tax consequences of any transaction in which WordPerfect stock or a
right to acquire WordPerfect stock was received; and (vi) the tax consequences
of the Merger (including their opinion set forth above) as applied to
shareholders of WordPerfect and/or holders of options or warrants for
WordPerfect stock or that may be relevant to particular classes of WordPerfect
shareholders and/or holders of options or warrants for WordPerfect stock such as
dealers in securities, corporate shareholders subject to the alternative minimum
tax, foreign persons, and holders of shares acquired upon exercise of stock
options or in other compensatory transactions.
3
<PAGE> 4
3. No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreements or to any transaction whatsoever, including
the Merger, if any of the transactions described in the Merger Agreements are
not consummated in accordance with the terms of such Merger Agreements and
without waiver or breach of any material provision thereof or if any of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
4. This opinion has been delivered to you for the purpose of satisfying the
conditions set forth in Section 6.1 of the Agreement and is intended solely for
your benefit; it may not be relied upon for any purpose or by any other person
or entity, and may not be made available to any other person or entity without
our prior written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
3
<PAGE> 1
EXHIBIT 8.2
June , 1994
WordPerfect Corporation
1555 North Technology Way
Orem, Utah
Dear Gentlemen:
This opinion is being delivered to you pursuant to Section 6.1 of the
Agreement and Plan of Reorganization (the "Agreement") among Novell, Inc., a
Delaware corporation ("Novell"), Novell Acquisition Corp., a Delaware
corporation, and WordPerfect Corporation, a Utah corporation ("WordPerfect"),
dated as of March 21, 1994 and amended as of May 31, 1994. Pursuant to the
Agreement and the related Articles of Merger (collectively, the "Merger
Agreements"), WordPerfect will merge with and into Novell (the "Merger").
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Merger Agreements. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as legal counsel to WordPerfect in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have examined
(or will examine on or prior to the Effective Time of the Merger) and are
relying (or will rely) upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times, of the statements,
covenants, representations and warranties contained in the following documents:
1. The Merger Agreements;
2. Representations made to us by Novell in a letter reproduced as
Exhibit A hereto (the "Novell Letter");
3. Representations made to us by WordPerfect in a letter reproduced as
Exhibit B hereto (the "WordPerfect Letter");
4. Representations made by certain shareholders of WordPerfect in the
WordPerfect Corporation Affiliates Agreement;
5. The S-4 and Proxy Statement filed with the Securities and Exchange
Commission by Novell in connection with the Merger;
6. An opinion of counsel, received by Novell from Wilson, Sonsini,
Goodrich & Rosati, substantially identical in form and substance to this
opinion (the "WSG&R Tax Opinion"); and
7. Such other instruments and documents related to the formation,
organization and operation of Novell and WordPerfect or to the consummation
of the Merger and the transactions contemplated thereby as we have deemed
necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has
been (or will be by the Effective Time of the Merger) due execution and
delivery of all documents where due execution and delivery are
prerequisites to effectiveness thereof;
2. The Merger will be effective under the laws of the State of
Delaware and Utah;
<PAGE> 2
WordPerfect Corporation June , 1994
Page 2
3. The shareholders of WordPerfect do not, and will not on or before
the Effective Time of the Merger, have an existing plan or intent to
dispose of an amount of Novell Common Stock to be received in the Merger
(or to dispose of WordPerfect capital stock in anticipation of the Merger)
such that the shareholders of WordPerfect will not receive and retain a
meaningful continuing equity ownership in Novell that is sufficient to
satisfy the continuity of interest requirements as specified in Treasury
Regulation sec.1.368-1(b) and as interpreted in certain Internal Revenue
Service rulings and federal judicial decisions;
4. To the extent any expenses relating to the Merger (or the "plan of
reorganization" within the meaning of Treasury Regulation sec.1.368-1(c)
with respect to the Merger) are funded directly or indirectly by a party
other than the incurring party, such expenses will be within the guidelines
established in Revenue Ruling 73-54, 1973-1 C.B. 187; any expenses paid on
behalf of WordPerfect shareholders will not exceed one percent (1%) of the
total consideration that will be issued in the Merger to WordPerfect
shareholders in exchange for their shares of WordPerfect stock;
5. No WordPerfect shareholder guaranteed any WordPerfect indebtedness
outstanding during the Pre-Merger Period (as defined in the WordPerfect
Letter), and at all relevant times, including as of the Effective Time of
the Merger, (i) no outstanding indebtedness of WordPerfect or Novell has or
will represent equity for tax purposes and (ii) no outstanding equity of
WordPerfect or Novell has or will represent indebtedness for tax purposes;
6. As to all matters in the Novell Letter or the WordPerfect Letter in
which a signatory thereto has represented that such signatory either is not
a party to, does not have, or is not aware of, any plan, intention,
understanding or agreement, there is in fact no such plan, intention,
understanding or agreement; and
7. The WSG&R Tax Opinion has been delivered and not withdrawn.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, for federal income tax purposes, the Merger will be a
"reorganization" as defined in Section 368(a) of the Code.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment regarding
the application of federal income tax laws arising under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or the
courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
2. This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal, state, local or foreign tax consequences that may result from the
Merger or any other transaction (including any transaction undertaken in
connection with the Merger). In particular, we express no opinion regarding (i)
whether and the extent to which any WordPerfect shareholder who has provided or
will provide services to WordPerfect or Novell will have compensation income
under any provision of the Code; (ii) the effects of such compensation income,
including, but not limited to, the effect upon the basis and holding period of
the Novell stock received by any such shareholder in the Merger; (iii) the
potential application of the "golden parachute" provisions (Sections 280G,
3121(v)(2) and 4999) of the Code, the alternative minimum tax provisions
(Sections 55, 56 and 57) of the Code or
<PAGE> 3
WordPerfect Corporation June , 1994
Page 3
Sections 305, 306, 357, 424, and 708 of the Code, or the regulations promulgated
thereunder; (iv) the corporate level tax consequences of the Merger to Novell or
WordPerfect, including, without limitation, the recognition of any gain and the
survival and/or availability, after the Merger, of any of the federal income tax
attributes or elections of WordPerfect or Novell, after application of any
provision of the Code, as well as the regulations promulgated thereunder and
judicial interpretations thereof; (v) the tax consequences of any transaction in
which WordPerfect stock or a right to acquire WordPerfect stock was received;
and (vi) the tax consequences of the Merger (including the opinion set forth
above) as applied to shareholders of WordPerfect and/or holders of options or
warrants for WordPerfect stock or that may be relevant to particular classes of
WordPerfect shareholders and/or holders of options or warrants for WordPerfect
stock such as dealers in securities, corporate shareholders subject to the
alternative minimum tax, foreign persons, and holders of shares acquired upon
exercise of stock options or in other compensatory transactions.
3. No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreements or to any transaction whatsoever, including
the Merger, if any of the transactions described in the Merger Agreements are
not consummated in accordance with the terms of such Merger Agreements and
without waiver or breach of any material provision thereof or if any of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
4. This opinion has been delivered to you for the purpose of satisfying the
conditions set forth in Section 6.1 of the Agreement and is intended solely for
your benefit; it may not be relied upon for any other purpose or by any other
person or entity, and may not be made available to any other person or entity
without our prior written consent.
Very truly yours,
BROBECK, PHLEGER & HARRISON
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-4 No. 33-53215) and
related Prospectus of Novell, Inc. for the registration of 51,380,100 shares of
its common stock and to the incorporation by reference therein of our reports
dated December 7, 1993, with respect to the consolidated financial statements of
Novell, Inc. incorporated by reference in its Annual Report (Form 10-K) for the
fiscal year ended October 30, 1993 and the related financial statement schedules
included therein, filed with the Securities and Exchange Commission.
ERNST & YOUNG
San Jose, California
June 8, 1994
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Novell, Inc. of our report dated March 22,
1994 relating to the financial statements of WordPerfect Corporation which
appears in such Prospectus. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
PRICE WATERHOUSE
Salt Lake City, Utah
June 8, 1994
<PAGE> 1
EXHIBIT 99.1
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF
WORDPERFECT CORPORATION
SPECIAL MEETING OF SHAREHOLDERS -- JUNE , 1994
The undersigned holder of stock of WordPerfect Corporation hereby appoints
each of Karen J. Ashton and Melanie L. Bastian as his or her true and lawful
agent and proxy, each with full power of substitution, to represent the
undersigned at the Special Meeting of Shareholders of WordPerfect Corporation to
be held on June , 1994 a.m. local time at 1555 North Technology Way, Orem,
Utah 84057 and any adjournment(s) thereof, to vote all of his or her shares of
stock of Wordperfect Corporation as designated below:
To approve and adopt the Agreement and Plan of Reorganization dated as of
March 21, 1994 among Novell, Inc. ("Novell"), WordPerfect Corporation, Novell
Acquisition Corp. ("Sub"), Alan C. Ashton, Bruce Bastian, and Melanie L.
Bastian, and the transactions contemplated therein including any amendments
thereto (the "Reorganization Agreement") and as the Reorganization Agreement is
described in the Prospectus/Proxy Statement of Novell and WordPerfect
Corporation.
/ / Vote FOR / / Vote AGAINST / / ABSTAIN
THIS PROXY WILL BE VOTED AS YOU SPECIFY ABOVE AND AS TO OTHER MATTERS THE
UNDERSIGNED HEREBY CONFERS DISCRETIONARY AUTHORITY UPON SAID PROXIES. IF NO
SPECIFICATION IS MADE, IT WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE
AGREEMENT AND PLAN OF REORGANIZATION AND THE TRANSACTIONS CONTEMPLATED THEREIN.
DATED AS OF MARCH 21, 1994.
The undersigned hereby revokes any proxy to vote said shares heretofore
given.
Name:
Signature of Shareholder(s)
Title, if applicable
Dated: , 1994
(Month) (Day)
NOTE: Please sign this proxy exactly as your name appears hereon. Joint owners
should each sign personally. If signing as Attorney, Executor,
Administrator, Custodian, Guardian or Trustee, please give full title and
evidence of authority to act.
